Nike Case Study

Nike History

Phil Knight, a graduate from Stanford University along side a former head coach Bill Bowerman, together formed Nike. 1964 they came together to form Blue Ribbon Sports. In 1971 they earned there "SWOOSH" and the first NIKE brand was introduced. Shortly after in 1978 Blue Ribbon became Nike for good and since then they have been dominating the shoe apparel industry. Shortly after Blue Ribbon became Nike, Nikes concentration in casual shoes in the 1980's caused them to missed the trend to aerobic shoes and fell behind allowing Reebok to control the market. Due to poor management Nike was in the hole for a few more years which allowed Reebok to stay on top. Phil Knight reestablished and repositioned Nike management. In 1988 Nike purchased Cole Haan for $64 million which allowed them to increase casual footwear sales by 16%, they also purchased the accessories company in 1990. Nike even expanded by opening their own retail store "Nike Town" in 1990. Nike distributes to 123 retail stores in the US and also in 52 retail stores in countries such as, the UK, Japan, France, Italy, Spain, Germany, and Canada.

SWOT Analysis

Strengths:

Ð'* Brand name recognition, because Nike has been around so long, the brand is recognized and respected both internationally and domestically.

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

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

Ð'* Strong international presence, in the event that U.S. sales continue to slack off or the economy continues to worsen, they have their international investments that consistently turns a profit. 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.

Ð'* Nike is constantly trying to increase their international presence.

Ð'* Good financial standing, in the year ending May 31, 2004 their Net Income was $5,251,700.

Ð'* Large advertising budget.

Ð'* Nike has an on-line store where custom shoes may be purchased; they believe it is essential to run an on-line operation.

Ð'* In such a competitive environment Nike steps it up by investing a large portion of their income into R&D, 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 ensure that Nike has new shoe styles and are constantly developing new products.

Ð'* Nike despite popular belief is a very aware of its social responsibility, and has donated over $34 million 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 Ð'-world countries in which it produces.

Ð'* 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 really have a heart.

Weaknesses:

Ð'* Competition is stiff making it difficult to get a larger piece of the market share.

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

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

Opportunities:

Ð'* Product Diversification, with new technology and increased earnings they should be able to invest even more into R & D.

Ð'* 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.

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

Ð'* Increase marketing to the female consumer.

Ð'* Increase manufacturing of products that the new generation is interested, specifically boots and sandals.

Threats:

Ð'* Stiff competition both domestically and internationally.

Ð'* Increased European competition and US competition.

Ð'* Sluggish US economy, recession and war.

Ð'* Change in the young consumer to sandals and boots.

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

Ð'* Some countries due to the high return on investment in technological ventures are straying away from shoe manufacturing and into more profitable ventures.

Ð'* The fluctuation of foreign currency and interest rate may pose a threat to earnings.

Ð'* Import and export regulations.

Competitive/ Financial / Operation Analysis

INTRADAY PERFORMANCE SUMMARY

Name Ticker Change

Nike