Nike - 2000

Prentice Hall, 2001

Vision Statement
To become the worlds leading sports and fitness company

Mission Statement Components

1. Customers 2. Products or services 3. Markets 4. Technology 5. Concern for survival, profitability, growth 6. Philosophy 7. Self-concept 8. Concern for public image 9. Concern for employees
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Mission Statement
Nike strives to provide the most technologically (4) advanced athletic footwear and apparel (2) to all ages an sizes of individuals (1) worldwide (3). We believe good ethics is good business (6,7). Our historical growth, future growth and profitability results (5) from motivated employees (9) and satisfied customers. We strive to improve all communities where we have operations worldwide (8).

Opportunities
There are increasing international competitive opportunities in the Unified European market as well as in Asia and the former Russian republics Buyers are brand conscious A generation that rivals the baby boomers in size (generation Y) is a good future market The U.S. economy has been good since the early 1990s People are living longer The peak earning years are 45-54 and the baby boomers are moving into this age group Two wage earner families can more easily afford higher priced athletic shoes

Threats
The industry is very competitive Most people do not exercise at the levels that are suggested by experts Overseas production is vulnerable to political and governmental unrest The major competitors are seen by mean consumers as providing very similar products Economic conditions negatively affect spending for higher priced athletic wear The youth market is demanding other types of casual shoes instead of athletic shoes Economics in international markets are often very volatile
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Competitive Profile Matrix

Nike Weighted Rating Score 4 0.60 4 0.56 3 0.39 4 0.40 3 0.10 4 0.48 4 0.20 4 0.44 2 0.20 3.37 Adidas Weighted Rating Score 4 0.60 2 0.28 2 0.26 2 0.20 3 0.30 3 0.36 1 0.05 3 0.33 3 0.30 2.68 Reebok Weighted Rating Score 4 0.60 3 0.42 2 0.26 3 0.30 3 0.30 4 0.48 3 0.15 3 0.33 2 0.20 3.04

Critical Success Factors Brand Recognition Market Share Financial Strength R&D Product Quality Advertising Number of Retail Outlets Product Mix Depend on Suppliers for Quality Total

Weight 0.15 0.14 0.13 0.10 0.10 0.12 0.05 0.11 0.10 1.00

EFE Matrix
Key External Factors Opportunities International competitive opportunities Brand conscious buyers Future market generation Y Good U.S. economy People are living longer Large number of people at peak earning years Two wage earner families Threats Competitive industry People exercise less than suggested Overseas production Competitors are seen as similar by consumers Economic conditions Youth market demands other types of casual shoes Volatile international economies Total Weight 0.10 0.04 0.10 0.10 0.02 0.08 0.06 0.10 0.05 0.07 0.10 0.04 0.04 0.10 1.00 Rating 3 3 4 4 3 2 2 4 2 3 2 3 2 2 Weighted Score 0.30 0.12 0.40 0.40 0.06 0.16 0.12 0.40 0.10 0.21 0.20 0.12 0.08 0.20 2.87

Strengths
Net income increased 13 percent in 1999 The company sells casual shoes in addition to athletic shoes Research and development represents only a small proportion of profits, but this is enough to keep the companys products on the cutting edge Television ads are creative and use celebrity spokespersons effectively The accessories are very fashionable and take advantage of the Nike logo and name The Swoosh logo is very recognizable The company offers a wild variety of models and styles for 25 different sports The strategy of contracting production to foreign manufactures keeps capital investment costs low The company is building a competitive advantage in Europe, the Asia/Pacific region, and Latin America The company has advertising offices in international markets to take advantage of local talent
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Weaknesses
Research and development costs increase the selling price of shoes Contracting the manufacture of shoes lengthens the channel of distribution and the final price of shoes is higher Research and development efforts focus on five years in the future Sports stars who become injured or retire from competition could negatively affect the companys sales Quality of supply is dependent on the contract manufacturer Response to social issues such as production shoes outside the U.S. and concern about working conditions in some foreign factories could negatively impact the companys image Net income decreased 50 percent in 1998, in large part due to sales problems in international markets Sales declined significantly in both U.S. and international markets in 1998 and 1999
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IFE Matrix
Key Internal Factors Strengths Net income increases in 1999 Varied product mix Small percent of profit is R&D Creativity in TV advertising Fashionable accessories Recognizable Swoosh logo Variety of athletic shore models Manufacturing strategy Building of international competitive advantage Advertising agencies opened in international markets Weaknesses R&D cost increase shoe price Lengthened distribution channel increase final price of shoes Five year focus of R&D Injuries of spokesperson Quality dependent on supplier Potential for negative image Net income decrease in 1998 Significant sales declines in 1998 and 1999 TOTAL Weight Rating Weighted Score 0.06 0.21 0.32 0.40 0.15 0.21 0.15 0.24 0.12 0.18 0.12 0.07 0.04 0.04 0.05 0.04 0.07 0.07 2.54 0.02 0.07 0.08 0.10 0.05 0.07 0.05 0.08 0.04 0.06 0.06 0.07 0.02 0.02 0.05 0.04 0.07 0.07 1.00 3 3 4 4 3 3 3 3 3 3 2 1 2 2 1 1 1 1

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TOWS Analysis

Strengths 1. Net income increased 13 percent in 1999 2. The company sells casual shoes in addition to athletic shoes 3. Research and development represents only a small proportion of profits, but this is enough to keep the companys products on the cutting edge 4. Television ads are creative and use celebrity spokespersons effectively 5. The accessories are very fashionable and take advantage of the Nike logo and name 6. The Swoosh logo is very recognizable 7. The company offers a wild variety of models and styles for 25 different sports 8. The strategy of contracting production to foreign manufactures keeps capital investment costs low 9. The company is building a competitive advantage in Europe, the Asia/Pacific region, and Latin America 10. The company has advertising offices in international markets to take advantage of local talent

Weaknesses 1. Research and development costs increase the selling price of shoes 2. Contracting the manufacture of shoes lengthens the channel of distribution and the final price of shoes is higher 3. Research and development efforts focus on five years in the future 4. Sports stars who become injured or retire from competition could negatively affect the companys sales 5. Quality of supply is dependent on the contract manufacturer 6. Response to social issues such as production shoes outside the U.S. and concern about working conditions in some foreign factories could negatively impact the companys image 7. Net income decreased 50 percent in 1998, in large part due to sales problems in international markets 8. Sales declined significantly in both U.S. and international markets in 1998 and 1999

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TOWS Analysis continued

Opportunities 1. There are increasing international competitive opportunities in the Unified European market as well as in Asia and the former Russian republics 2. Buyers are brand conscious 3. A generation that rivals the baby boomers in size (generation Y) is a good future market 4. The U.S. economy has been good since the early 1990s 5. People are living longer 6. The peak earning years are 4554 and the baby boomers are moving into this age group 7. Two wage earner families can more easily afford higher priced athletic shoes S-O Strategies 1. Expand more into international markets by concentrating on the European Community countries, Asia, Latin America, and the former Russian Republics (S9, O1) 2. Continue extensive advertising campaigns ((S4, O2, O3) 3. Acquire other brands of casual/dress shoes for men and women (S2, O2) W-O Strategies 1. Develop more advertising campaigns for the youth market (W4, W6, O2-4)

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TOWS Analysis continued

Threats 1. The industry is very competitive 2. Most people do not exercise at the levels that are suggested by experts 3. Overseas production is vulnerable to political and governmental unrest 4. The major competitors are seen by mean consumers as providing very similar products 5. Economic conditions negatively affect spending for higher priced athletic wear 6. The youth market is demanding other types of casual shoes instead of athletic shoes 7. Economics in international markets are often very volatile S-T Strategies 1. Develop a line of moderately priced athletic shoes (S2, S7, T2, T6) 2. Continue to develop new technology advanced athletic shoe models (S3, T1) 3. Open more Nike Athletic Shoe stores in malls (S2, S5, S6, T4, T6) W-T Strategies 1. Begin offering products through a company catalog (W7, W8, T1, T4) 2. Acquire a less expensive brand of accessories and sports wear (W8, T5) 3. Manufacture some of its own athletic shoes and accessories (W5, T2) 4. Stop celebrity endorsements (W4, T4)

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SPACE Matrix
Internal strategic position Financial strength Environmental stability External strategic position Competitive advantage Industry strength +4 -3 +1 best to +6 worst -6 worst to 1 best -6 unstable to 1 stable +1 best to +6 worst FS Y axis: 4 + (-3) = 1 -2 +3 Conservative X axis: 3 + (-2) = 1

Aggressive

CA

IS

Defensive

ES

Competitive

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Grand Strategy Matrix

RAPID MARKET GROWTH Quadrant II Quadrant I

Nike
COMPETITIVE POSITION STRONG COMPETITIVE POSITION

Quadrant III SLOW MARKET GROWTH 1. Market development 2. Market penetration 3. Product development 4. Forward integration 5. Backward integration 6. Horizontal integration 7. Concentric diversification

Quadrant IV

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The Internal-External (IE) Matrix

The IFE Total Weighted Score Strong 3.0 to 4.0 High 3.0 to 3.99 I Average 2.0 to 2.99 II Weak 1.0 to 1.99 III

Medium The EFE Total 2.0 to 2.99 Weighted Score

IV

VI

Nike

Low 1.0 to 1.99

VII

VIII

IX

HOLD AND MAINTAIN

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QSPM
Strategic Alternatives Develop a Line of Moderately Priced Athletic Shoes Expand into Asia, Latin America, and the Former Russian Republics AS TAS 3.00 0.06 3.00 0.21 --------1.00 0.05 3.00 0.21 3.00 0.15 ----4.00 0.16 4.00 0.24 2.00 ----------4.00 4.00 0.12 ----------0.28 0.28 1.76

Key Internal Factors Strengths Net income increases in 1999 Va ried product mix Small percent of profit is R&D Creativity in TV advertising Fashionable accessories Recognizable Swoosh logo Va riety of athletic shore models Manufacturing strategy Building of international competitive advantage Advertising agencies opened in international markets Weaknesses R&D cost increase shoe price Lengthened distribution channel increase final price of shoes Five year focus of R&D Injuries of spokesperson Quality dependent on supplier Potential for negative image Net income decrease in 1998 Significant sales declines in 1998 and 1999 SUBTOTAL

Weight

AS
0.02 0.07 0.08 0.10 0.05 0.07 0.05 0.08 0.04 0.06 0.06 0.07 0.02 0.02 0.05 0.04 0.07 0.07 1.00 2.00 4.00 ----2.00 1.00 4.00 --2.00 1.00 4.00 ----------3.00 3.00

TAS 0.04 0.28 ----0.10 0.07 0.20 --0.08 0.06 0.24 ----------0.21 0.21 1.49

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QSPM continued
Develop a Line of Moderately Priced Athletic Shoes Key External Factors Opportunities International competitive opportunities Brand conscious buyers Future market generation Y Good U.S. economy People are living longer Large number of people at peak earning years Two wage earner families Threats Competitive industry People exercise less than suggested Overseas production Competitors are seen as similar by consumers Economic conditions You th market demands other types of casual shoes Vo latile international economies SUBTOTAL SUM TOTA L ATTRACTIVENESS SCORE Weight 0.10 0.04 0.10 0.10 0.02 0.08 0.06 0.10 0.05 0.07 0.10 0.04 0.04 0.10 1.00 AS 2.00 3.00 --3.00 ------3.00 --2.00 3.00 2.00 --2.00 TA S 0.20 0.12 --0.30 ------0.30 --0.14 0.30 0.08 --0.20 1.64 3.13 Expand into Asia, Latin America, and the Former Russian Republics AS TA S 4.00 0.40 1.00 0.04 ----1.00 0.10 ------------4.00 --4.00 4.00 3.00 --4.00 0.40 --0.28 0.40 0.12 --0.40 2.14 3.90 19