Full version Nike Analysis

Nike Analysis

This print version free essay Nike Analysis.

Category: Business

Autor: reviewessays 20 March 2011

Words: 3753 | Pages: 16

Nike Analysis

Table of Contents

Company history…Pages 3-5

Environmental issues…Pages 5-6

Marketing Objective…Pages 6-7

Strategy Control…Page 7

R and D…Page 8

SWOT…Pages 9-11

Competition Strategy…Page 11

Political/Legal…Page 12

Cultures …Page 12

Demographics…Page 13

Economic Strategy…Page 13

Global Strategy…Page 14

Environmental Strategy…Page 15-16

Long Term Objectives…Page 16

Specific recommendations…Page 17

Conclusion…. Page 17

Financials …Page 18-19

References…Page 20

Company History

I have chosen Nike to produce an analysis on. It is important for a company as large as Nike to keep abreast of their strategies and to remain competitive. Here is some background information on one of the most successful apparel/shoe companies in the world. The Nike story begins with its founder, running buff Phil Knight. In 1962, Knight started Blue Ribbon Sports, the precursor to Nike. At the time, the athletic shoe industry was conquered by two German companies, Adidas and Puma. Knight recognized a neglected segment of serious athletes whose specialized needs were not being addressed. The concept was simple: Provide high-quality running shoes designed especially for athletes by athletes. Knight believed that "high-tech" shoes for runners could be manufactured at competitive prices if imported from abroad. Knight decided to speak to athletes in their language and on their level; sharing their true passion for running; and listening to their feedback about his products and the sport. Every single weekend Knight would travel from track meet to track meet – both high school and collegiate competitions--talking with athletes and selling Tiger shoes from the trunk of his green Plymouth Valiant.

By 1980, after just under two decades in the business, Nike had become the number one athletic shoe company in the United States. Unfortunately for the company, this wave of success was soon to crest as rival companies positioned themselves to take advantage of the aerobics craze, which Nike largely ignored. Companies like Reebok and L.A. Gear developed innovative and comfortable products aimed at women fitness enthusiasts that sold extremely well.

Nike refused to join a market it saw as low in quality and heavy on cosmetic properties and continued making durable, performance-oriented products. The company lost millions in sales and allowed Reebok to gain basically uncontested market share points. By 1987, Reebok had nearly doubled Nike's market share, with 30 percentage points compared to Nike's 18. Fortunately for Nike, the company chose to fight back with product innovations and persuasive marketing. The company's "Air" technology revitalized the company with the additional aid of successful advertising campaigns such as the 1987 "Revolution in Motion" spot for the new Air Max shoes and the "Air Jordan" commercials. When Nike unveiled its now-famous "Just Do It" campaign in 1988, just as Reebok developed the "Reeboks Let U.B.U" slogan, the company was on its way to a full recovery. By 1989, Nike had regained the market leader position in America as market share rose three points above Reebok to 25 percent that year. In the 1990s, Nike continued its consumer focus. Nike's "Brand Strength Monitor" formally tracked consumer perceptions three times a year to identify marketplace trends. In areas where it felt less knowledgeable, e.g., outside of track and basketball, Nike was more likely to commission customized research studies. Nike's inventory control system, called "Futures," also helped it better gauge consumer response and plan production accordingly.

Innovative product development had always been a cornerstone of the company. By 1998, Nike was unveiling a new shoe style, on average, every day. Though the company had become a household name throughout the world and, more important, achieved the position of global sportswear leader, Nike was still $3 billion shy of reaching the goal of $12 billion that Phil Knight initially intended the company to reach by 2000. In a letter in Nike's 2000 annual report, Knight addressed the issue of how to jumpstart his company's slowed growth and offered the following formula: "We need to expand our connection to new categories and toward new consumers." This quotation is indicative of Nike's relentless drive to build its brand with a strong consumer focus.

Today in 2006, Nike Inc. not only manufactures and distributes athletic shoes at every marketable price point to a global market, but over 40% of sales come from athletic apparel, sports equipment, and subsidiary ventures. Nike maintains traditional and non-traditional distribution channels in more than 100 countries targeting its primary market regions: United States, Europe, Asia Pacific, and the Americas. Nike dominates sales in the athletic footwear industry with a 33% global market share. Nike has very straight forward mission statement. It is as follows, “To bring inspiration and innovation to every athlete in the world. If you have a body, you are an athlete. (nikebiz.com)” This quote comes from an athlete himself. Bill Bowerman was a track and field coach at the University of Oregon. This man single handedly brought jogging to America. He taught his athletes to believe in themselves, seek competitive advantage in everything they do, and have passion to keep them motivated.

Environmental Aspects

With an organization employing over 24,000 people and existing for over 33 years it is no surprise that Nike has been able to stand the test of time. Through the downward slopes in the economy to the record highs in the late 90’s stock market, Nike has maintained being the universal language for sports all across the world. The market of Nike has expanded greatly over the last few decades with the acquisition of Converse. Nike’s management analyzes its internal environment and makes decisions based on that analysis. As a result of product and pricing research, Nike has decided to continue to focus on the high end market while increasing its market share in the middle and low price ranges in an attempt to broaden Nike’s product spectrum.

Marketing Objectives

In 1971 the “swoosh “symbol was created and to this day is one of the most recognized symbols in the world. Nike’s brand images, including the Nike name and the trademark Swoosh, are considered to represent one of the most recognizable brands in the world. This brand power translates into bottom-line revenues. A graphic student named Carolyn Davis was actually the person that created the trademark. They offered her a few hundred dollars to come in a few hours a week to help come up with a design symbol. Just recently out of school with a design degree, and eager for a job, Davidson submitted her bill for $35 for the Swoosh design. She continued to design for the newly renamed company Nike, including ads, brochures, posters and catalogues. The company's growth was exponential, and there came a point when her one-person design shop was too small to handle Nike's advertising needs. Nike and Davidson agreed it was time for a full-service ad agency.

Davidson got a telephone call back in September 1983, inviting her to have lunch and discuss with a few of the people she used to work with at Nike, including Knight. When she arrived, she was greeted with a catered lunch and was presented with a gold Swoosh ring embedded with a diamond. She also received a certificate from Knight and an envelope containing Nike stock. To this day we do not exactly how much stock she acquired. Her quote was "The stock has split three times since I received it, so I can definitely say that I have been well compensated for my design," she says. "You must remember too, that this was something rather special for Phil to do, because I originally billed him and he paid that invoice” (Nikebiz.com). The Nike name and associated trademarks have appeared everywhere from players' shirts, pants, and hats to stadium banners and walls. Forceful advertising campaigns, celebrity endorsements, and quality products enhance the brand. Nike demonstrated an example of Nike’s brand presence at the 1999 NCAA Basketball tournament when 42 of the 64 teams participating wore shoes provided.

Strategy Controls

A complete establishment of profitability standards has assisted Nike in the assessment of individual performance as well as a comparison to other competitors. Nike utilizes standards such as net profit, earnings per share, return on investment, and return on equity, sales growth and asset growth. Performance standards are also established and analyzed. Some of the areas in which the company has established standards are productivity of productions sites, competitive position in the United States relative to the global market, technological leadership in comparison to competitors and the public’s insight.

Research and Development

Nike is innovative and prides itself on being an opening provider of high quality sports footwear and apparel. Innovation has been the key to aiding Nike in securing its position as the leader in the market. Due to the lead Nike possesses in the industry, they can afford to look long-term and place a greater emphasis on innovation as opposed to other companies with a short-term outlook attempting to improve upon existing products and services. With product availability now offered online at www.nike.com , Nike is able to keep sales up worldwide with the convenience of online shopping. In 2006 Nike has come up with a unique specifically designed dance shoe. It is called the Nike Zoom Danzante. This show provides full support for professional dancers and at the same time offers more flexibility than any other shoe they offer. Also new in 2006 is the World of Football shoe. This new line was inspired for the national team collection. The shoe actually keeps the athletes feet dry. This helps relieve excess sweat and slipping in the shoe. Not only in the shoe department is Nike excelling. They have also invented Nike Sphere React, this clothing breathes with the athlete. When the athlete sweats, the materials instinctively open up, becoming more breathable to permit increased airflow across the skin. The fabric reacts to the body’s moisture, becoming as twice as breathable in the gym or on the field. This openness creates a cooler personal atmosphere between the body and the fabric, while still affording the athlete freedom to perform more comfortably. The main focus is for the materials to mimic nature -- reacting to the body temperature. Nike Sphere React Cool material is engineered for zones of the body using Nike’s patent-pending Zoned Venting Technology, where Nike research has shown a considerable benefit. I use these products personally and they really do help trap sweat and odor. This technology is a way of the future, I have seen other companies try and mimic the product as well.

SWOT Analysis

Strengths:

Brand name recognition, Nike has been around many years and the brand is recognized and respected both internationally and domestically.

Brand loyalty, Nike has consistently produced quality products that appeal to its consumers both internationally and domestically.

Nike carries a wide arrangement of products with a large amount of options for personal preference.

Strong international presence. They are the number one footwear manufacturer in nine international countries; with distribution centers both internationally and domestically. The ad agency that they contract out to has opened three offices in three different countries in order to reach their target audience on a local level.

Nike is always increasing their international presence.

Nike has an on-line store where custom shoes may be purchased; it is essential to run an on-line operation with many web based companies as their competition.

In such a competitive environment Nike stands out by investing a large portion of their income into Research and Development, with the formation of the Nike Sport Research Laboratory in 1980, and the introduction of the Advance Product Engineering department; Nike is making sure that they stay in control of their market share. These two departments help guarantee Nike has new shoe styles and are constantly developing new products.

Nike is aware of its social responsibility, and has donated millions in cash and products to different charitable organizations. In addition to their contributions they have also developed a labor practices department, which pays close attention to the labor practice of third –world countries in which it produces.

Even though they are a charitable organization they have not forgotten to be environmentally aware, with the introduction of the Nike Environmental Action Team (NEAT) in 1993 they are showing consumers that they care about the environment.

Weaknesses:

Competition makes it difficult to get a larger piece of the market share.

Decline in U.S. profits, a steady decrease of 2 to 3 percent every year.

Contract manufacturing of shoes to low-wage factories in the Far East makes Nike susceptible to laws, natural disasters, and economic problems abroad.

Opportunities:

Product Diversification, with new technology and increased earnings they should be able to invest even more into Research and Development.

Increase their global presence by expanding their services to other countries with large populations.

More advertising, encourage all people to purchase Nike’s even if they are not sport’ players.

Focus more on marketing to the female consumer.

Increase manufacturing of products that the new generation is interested in.

Threats:

Competition both domestically and internationally.

Increased European competition and US competition.

Sluggish US economy, including current war.

High inflation and unemployment in Asia and Pacific Rim, Latin America, and Russia may cause a decline in shoe sales.

The fluctuation of foreign currency and rising interest rates may pose a threat to earnings.

Import and export regulations.

Competition

Reebok Int’l, Inc. Reebok produces and markets, sports, fitness, and casual footwear, apparel and accessories as well as sport and fitness related products. Reebok also owns the Rockport Company, Ralph Lauren and Polo brands, and the Greg Norman brand; they also manufacture Weebok (for children). They distribute through athletic specialty stores, “urban” athletic outlets, sporting goods stores, and independent specialty shops. Each brand name owned serves a different market. Reebok also markets their products internationally. Skechers USA, Inc. produces foot wear for both men and women including six types: casuals, utility, steel toe, classics, and outdoor and comfort. They sell their products through department stores, specialty stores, a network of retail stores, and an e-commerce website. The company’s product line includes: Skechers USA, Skechers Sport, Skechers Collection, Skechers kids, Somethin’ else from Skechers, Skechers by Michelle K and 4 Wheelers. They offer a wide assortment of seasonal foot wear such as sandal, shower sandals, beach sandals, slides, and even water sport sandals. They offer different boots such as steel toe and fashion boots, in addition to the styles listed above the also carry career oriented shoes. Their shoes are sold in over 100 countries.

Political/Legal Changes

Due to the industry’s strong global presence, there are many legal restraints that must be taken into consideration. There are positive aspects such as those provided by NAFTA and GATT such as, reduced import/export duties when operating in Mexico and Canada, and access to international markets and tariff cutbacks as provided by GATT. However with the new formation of the European Union and the introduction of the Euro, has increased European influence on import controls, but it has also created one European market. The U.S.’s diplomatic relations with countries such as China and Vietnam is critical for shoe manufacturers who want to produce in those countries. In addition to these changes, there are also laws that vary from country to country which may provide opportunities or impose restrictions.

Cultural

The most influential cultural change would be how to approach the changing youth markets who are more interested in sandals than sneakers. Even though these young consumers in the footwear industry have become more brand conscious; it does not mean they will purchase more of the Nike brand. The industry was experiencing a decrease in health and fitness awareness and practices, but over the pat decade things have started to look up.

Demographic

The industry is realizing the potential growth of women’s sport players and leisure fitness participants, and is preparing to provide accommodation such as an increase in female consumers. However, as women increase their consumption the younger generation is decreasing; due to the popularity of sandals and the various options out there for this younger generation. Additionally, because of the increase and profitability of technological industries some countries are deciding to limit the production of shoes in an effort of making more money in other industries.

Economic

Nike as well as all other industries around the world are preparing for a decrease in revenue due to a sluggish economies and the current war in Iraq. These factors alone around the world are preparing themselves for a decline in sales and stock prices. Due to the organization of the European Union and the disbursement of the Euro some economic discomfort in participating countries may be felt. In addition to those listed above other economic changes may be felt through the increase of inflation and unemployment in Asia and the Pacific Rim, Latin America, and Russia, consequently having a negative effect on shoe sales. Also, the fluctuation of foreign currency and the consistent rise of interest rates may also have negative effects on Nike.

Global

Slow-moving international economies especially in countries where manufacturing occurs may decrease in international profits. In addition with the war on a global level, as well as terrorist alerts, people are generally spending less in an effort to prepare for the uncertain future.

Environmental

Environmental issues are part of the mix of considerations Nike, as a company, makes every day. Their strategy is to lead this work through innovation in product – what they call Sustainable Product Innovation. If it is possible to link it to Nike’s heritage of innovation, it can start to embed it in our culture. If it is possible to combine the best athletic products and, generate big revenues then what else can they ask for? The innovation drives toward two long-term aspirations:

Eliminate waste

Eliminate toxic substances

The footwear teams use a Sustainability Index to assess progress toward reaching these goals. Reviewing the Index is now standard operating procedure; they regularly gauge the progress and, compete and work with each other on environmental issues. It is this kind of work that has led to important changes:

They are looking to eliminate PVC from Nike branded footwear products. So far they have removed materials containing PVC from their approved material list. Nike is also trying to reduce petroleum-based adhesives in footwear, and hosted an industry forum to help competitors do the same. By using water-based adhesives instead, they have reduced the use of chemical organic solvents by about 95 percent. Working with contract factories making Nike branded footwear; Nike has developed waste management programs so that about 60% of manufacturing waste is abstracted from the landfill. The program includes closed loop materials (factory waste from one product is collected and reprocessed into the same material), elimination of all on-site incineration and extensive waste recycling programs. Working in the waste management industry myself, this progress is huge for both Nike and the environment. Nike has also come up with an environmentally preferred rubber that reduces toxics 96% by weight. The rubber is a direct substitute for one of Nike’s most common rubber formulations that comprises approximately 50% of Nike branded footwear’s rubber usage. These ideas and solutions are a huge plus fore the way people view Nike today. They are integrating themselves to part of the environment and people like that. They view these ideas as respectful and hoping many other competitors will follow in their footsteps. (Nike.com)

Long Term Objectives

What is the future outlook for Nike and this overall industry?

I believe that the future outlook for this industry is positive, once the country has had an opportunity to recover from the current uncertainties; the industry will only have more growth potential. This industry has a solid product for which there aren’t any suitable substitutes. Nike knows that people will always need sneakers no matter what the current trends are.

Is it a growing or is it a mature industry?

I think that this is still a growing industry, because new advances in shoe technology and athletic wear are made on a daily basis. Also, with the influx of clothing designers into the athletic shoe market, the industry cannot be mature. Singers and entertainers are also coming up with their own shoe lines so there is a constant evolution. No single company within the shoe industry has really lived up to its true potential yet.

What are the key success factors in this industry?

A rock-solid marketing and business plan, as well as an appealing brand name and logo. That is the key for the continuing success of Nike.

Does the company have the tangible resources to be successful?

Nike has had increasing profits, strong international presence, and stable leadership, which means it, has all the resources necessary to grow far beyond any reasonable expectations.

Critical Success Factors

Nike needs to concentrate on the changes in consumer preferences.

They need to be prepared to take a decrease in profits for this year due to economic conditions and the war.

Increase product diversification, with new technology and increased earnings they should be able to invest even more into

More research and development

Increase their global presence by expanding their services to countries such as, Chile, Peru, Bolivia, India, Mexico, and South Africa in an attempt to serve those with the largest populations.

The key is more advertising, encourage young people to purchase Nike’s even if they are not sport’ players.

Increase marketing to the female consumer.

Increase manufacturing of products that the new generation is interested

Conclusion

Overall, I was impressed while creating this analysis. The perception of being a role model for other athletic companies is promising. The have proved to be innovative, smart, environmentally friendly, and consistent with their product effectiveness. For a company to continue to grow and stand the test of time it is essential to keep developing new products that meet the consumer’s needs and wants. I personally find Nike to be both stylish, comfortable, and a reliable product. The most informative part of this assignment was learning about all the new products that they are offering and how they continue to grow their marketing campaign. Every year or so Nike has a different spokesperson to launch or promote their products. This year a pop singer named Rihana is the spokeswoman. For those not familiar with her, she is a pop singer with strong vocal skills and promotes strong youthful women. It is smart on Nikes part to keep that image and be “hip” with their younger audience. We know many young athletes main concern is style and using a pop icon will help sell that Nike is “cool’. I do have faith that in over the next five to 10 years they will keep growing and increasing their revenues. This class has taught me with the right marketing, the right product, and the right advertising that anything is possible.