Nike Inc Case Study

SHORT CASE SUMMARY Nike, Inc. (503-671-6453, www.nike.com) is the worlds #1 athletic shoe and apparel seller. Nike currently employs 20,700 employees, with total sales of $8.78 billion. Nike and the athletic shoe industry have evolved into one of the most competitive market in recent years. But, analysts believe that athletic shoe sales will slow down over the next few years. The slowdown will come with the change in consumer trends. For instance, the younger market is beginning to buy more casual shoes and work boots. Another reason for the slowdown is that people are buying more medium priced athletic shoes and not going for the high price brand name shoes. As a result, this is bringing Nike a lot more competition to surpass. In order for Nike to remain on top of the athletic shoe industry they must establish an exceptional global strategy. If Nike penetrates the global market successfully than this will give the company an overall competitive advantage. Nike doesn't only sell athletic shoes, but a wide variety of sporting goods and clothing. They also design, develop, and market high quality active sports apparel, equipment, and accessory products. Their huge lines of products are designed for just about every sport in existence. Their products are made for men, women, and children of all ages. Nike has 20,000 retail accounts throughout the U. S. using independent distributors and also has contracts with 110 other countries. The company also has agreements with Internet companies and subsidiaries. Nike, Inc. has many retail outlets around the world, including their famous outlet "NIKETOWN" located in major cities. "NIKETOWN" gives customers the experience to become more educated on the company's goals and objectives for their products. The store educates its customer while at same time entertaining them too. This store gives customers a chance to become more brand loyal to Nike, Inc. Over the years Nike has gained an enormous amount of consumer awareness that they have eliminated the company name from all other products. The "swoosh" logo is automatically associated with the company name by just about anyone in the world. The meaning for Nike has lived up to the company's expectations. Nike means "the goddess of victory," which is exactly what the company has had since its creation. HISTORY A competitive runner, Phil Knight, incorporated Blue Ribbon Sports in Oregon in 1968. Blue Ribbon Sports was the first to receive the "swoosh" logo, but changed its name to Nike in 1978. Nike's research and development department used technological expertise to produce several different athletic shoes, which changed the whole outlook on the industry. After being in business for five years Nike, Inc. had a 44% annual growth. Shortly after Nike didn't pay attention to the sale of aerobic shoes, which hurt them slightly. International operations were the main focus for Nike, Inc. in the early 1980's. An excess of inventory in 1985 caused Nike to reduce prices and lose manufacturing contract in the Far East. This pushed Nike from the top spot in the market. As a result, Nike had to lay off 350 employees in 1986. Nike began their climb back in 1988 with the introduction new advertising strategies and the development of the new footwear. The main focus was on the customer's wants and needs their purchase of Nike's athletic shoes. In 1988, Nike bought a subsidiary called Cole Haan based in New Hampshire. The company Cole Haan cost Nike $64 million, but was worth every cent. The Cole Haan subsidiary manufactures casual footwear, something Nike was lacking for years. This purchase helped Nike's casual footwear operations grow 16% within the year. In 1990, Nike, Inc. purchased Cole Haan Company Accessories, which distributes top quality braces, belts, and small leather goods. As Nike grew in 1990 they opened their first retail store "NIKETOWN." In 1991, the company purchased Tetra Plastics, which was used for the development of the air sole shoes. In 1993, they then bought a cap-making company named Sports Specialties. Then in 1994, Nike introduced a new line of air sandals called "Air Mada." Nike acquired Canstar Sports, Inc. the world largest hockey equipment manufacture in 1995. Throughout Nike's history their international sales have lagged due to strong overseas competition. COMPETITION Nike's major competitor is Reebok, which also designs and develops athletic shoes and apparel. These two companies compete in the U.S. and internationally. Each company uses their own type of advertising strategy to reach their target customers. Many of the advertisements feature athletic stars and commercials that relate to the customers. Nike and Reebok are major competitors, but also have to worry other national and international competitors. Nike's other competitors are Callaway Golf, Converse, Deckers Outdoor, FUBU, Fila, Fortune Brands, Fruit of the Loom, Hi-Tec Sports, Levi Strauss, Nautica, New Balance, Polo, Puma, Rawlings, Rollerblade, Russell Corp., Sara Lee, Skechers, Spalding, Stride Rite, Timberland, Tommy Hilfiger, Wolverine, and Adidas. In Europe the competition is growing and is a major area for Nike to strike. Nike is second in sales in Europe, just behind Adidas. International sales for Nike have been increasing but are losing other opportunities by competitors signing large contracts with sports figures and teams. These contracts are giving competitors an edge nationally and internationally. In 1998, 1,200 jobs were cut due to falling sales and the reduction of costs in Asia. CHANGES IN THE ATHLETIC SHOE INDUSTRY The growth of athletic shoe and apparel industry is the direct result from consumer changes for the better. The baby boomer generation is becoming more health conscious and living much more active lifestyles. Along with Generation X's interest in living a healthy life. Also, there is more women playing sports than ever, which means more shoes to buy. The more sports these kids and young adults play throughout their life the more accessories and equipment they will need to compete. Nike gives their customers the feeling of self-confidence and the advantage over their competition. The only problem Nike has is the aging adults who do not participate in any sports or fitness programs. Adults aged 25-55 only one in five exercise up to two times a week. Also, the growing obesity problem that is affecting Americans more and more each year. Nike