Marketing Audit - Nike, Inc.

Biography page 1

Personal Biography

My name is Jimmy Chao and I am 32 years old. I presently live in Scarborough, Ontario where I have been for the past ten years. Compared to Phoenix, Arizona where I came from, this place is very quiet and peaceful.

Having an interest in technology, I studied computer science in Melbourne, Australia from 1990 to 1993.

However when I first came to Canada, I had difficulty finding a job in my related field, so I sold life insurance for two years. While selling life insurance, I continued to take additional computer science courses. In 1997, I was hired by a small multimedia firm, Healthlink Communication Inc., that produces websites & CD ROMS. Here is where I did web programming and touch up photos. In 2001, I was hired by the Town of Richmond Hill as the Online Services Coordinator in the Information Technology & Resource Services Division. In this job I have completed many projects, for example an electronic budget request form and a new website, all of which utilizes my technical knowledge and skills, and also allows me to develop effective customer relations.

By applying and getting accepted into the MBA program at the University of Phoenix Online, this will better prepare me for a position in management, my career goal, while also learning more about technology and business.

Executive Summary

Company Background

NIKE, Inc. is founded by Bill‚, the legendary University of Oregon track & field coach, and Phil Knight, a University of Oregon business student and middle-distance runner under Bowerman. The business partnership began in 1962 as Blue Ribbon Sports (BRS). First-year sales totaled $8,000. In ÿ1972 BRS changed its name to Nike, named for the Greek winged goddess of victory

Company Circumstances

NIKE, Inc. is engaged in the design, development and worldwide marketing of footwear, apparel, equipment and accessory products. It sells products to approximately 18,000 retail accounts in the United States and through a mix of independent distributors, licensees and subsidiaries in nearly 200 countries. It employs approximately 23,000 people worldwide, from its World Headquarters in Oregon and European Headquarters in The Netherlands, to nearly every region around the globe. Including manufacturers, shippers, retailers and service providers.

Nike reported revenues of $10.7 billion an 8 percent increase from Fiscal year '02 and it is the best year of the company's 31-year history. However, the shaky economy of 2001-2002 has been forcing consumers and businesses to tighten their belts and move in new directions. For shoppers that means heading to discount chains; for designers and department stores, it's reworking strategy to go where shoppers are spending money; and for manufacturers, it means moving production overseas where labor is cheaper. However, contract manufacturing of shoes to low-wage factories in the Far East makes Nike susceptible to laws, natural disasters, and economic problems abroad.

Although Nike is still leading the industry in market share, but this advantage is fading away since the competition in the industry is getting tougher and tougher to make it very difficult to maintain its leading position in the market.

Some recent good news:

Table of Contents (required for final Marketing Audit)

Environmental Aspects

Economics

Shown in the table directly below are some selected financial data from the recent past. Nike is a very financially healthy company which has been very steady over the last 10 years. This steadiness is best exemplified by their somewhat constant Gross Margin which fluctuates slightly around 39%. It should also be noted that they have a reasonably strong control of their supply chain as exemplified by the fact that their inventory turns are also regularly between 4.0 and 5.0. In the future, they will continue to grow and maintain a dominant share of the footwear market.

Year 2003 2002 2001 2000 1999

Revenue $10.69 B $9.89 B $9.48 B $8.99 B $8.77 B

Gross Margin % 41% 39.3% 39.0% 39.9% 37.4%

Net Income $474.0 M $663.3 M $589.3 M $579.1 M $451.4 M

Cash & Cash Eq.

(5/31) $634.0 M $575.5 M $304.0 M $254.3 M $198.1 M

However, the US athletic footwear market is likely to grow slowly during 2003-07, characterised by good volume sales and falling prices according to a recently published report from Mintel International.

It projects annual growth of 2 per cent, before inflation, rising from $13.5 billion in 2002 to $14.9 billion in 2007. This is due to factors such as overly complex manufacturer/retailer relationships which sap brand loyalty and foster excessive bargain hunting, a slow growth economy, and competition from brown shoe manufacturers as the previously distinct line between athletic and brown shoes becomes blurred.

Demographics

The industry is realizing the influx of womenÐŽ¦s sport players and leisure fitness participants, and is preparing to accommodate such an increase in female consumers. Also as women increase their consumption the younger generation is decreasing due to the popularity of boots and sandals. Additionally because of the increase and profitability of technological industries some countries are deciding not to manufacture shoes in hopes of making more money in other industries.

Markets

Consider some of the curve balls we saw as a company this year in the USA: a temporary closure of West Coast ports, the war in the Middle East, and a sluggish economy around the world. And there were internal issues to manage, like the ongoing global supply chain implementation, a recon- figured U.S. distribution strategy, and a stagnant golf industry ßooded with excess inventory. Despite these challenges, the U.S. region delivered its highest pretax profits in Nike history.

Our international business exceeded that of the U.S. for the first time, delivering 16 percent revenue growth over last year. In NikeÐŽ¦s Europe/Middle