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COMPANY PROFILE

NIKE, Inc.

REFERENCE CODE: 8E563969-FC1C-4D3A-8EEE-F9D79F81F0C3


PUBLICATION DATE: 25 Feb 2013
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NIKE, Inc.
TABLE OF CONTENTS

TABLE OF CONTENTS

Company Overview..............................................................................................3
Key Facts...............................................................................................................3
SWOT Analysis.....................................................................................................4

NIKE, Inc. Page 2


MarketLine
NIKE, Inc.
Company Overview

COMPANY OVERVIEW

NIKE, Inc. (Nike or the company) is a leading designer, marketer and distributor of athletic footwear,
apparel, equipment and accessories for a range of sports and fitness activities.The company primarily
operates in the Americas, Europe, the Middle East, Africa and Asia Pacific. It is headquartered in
Beaverton, Oregon, and employed about 44,000 people as of May 31, 2012.

The company recorded revenues of $24,128 million during the financial year ended May 2012
(FY2012), an increase of 15.7% over FY2011. The operating profit of the company was $3,040
million in FY2012, an increase of 8% over FY2011. The net profit was $2,223 million in FY2012, an
increase of 4.2% over FY2011.

KEY FACTS

Head Office NIKE, Inc.


One Bowerman Drive
Beaverton
Oregon 97005 6453
USA
Phone 1 503 671 6453
Fax
Web Address http://www.nike.com
Revenue / turnover 24,128.0
(USD Mn)
Financial Year End May
Employees 44,000
New York Ticker NKE

NIKE, Inc. Page 3


MarketLine
NIKE, Inc.
SWOT Analysis

SWOT ANALYSIS

NIKE, Inc. (Nike or the company) is a leading designer, marketer and distributor of athletic footwear,
apparel, equipment and accessories for a range of sports and fitness activities. The company enjoys
a strong market position in most of its product segments. Widening product lines coupled with strong
marketing and innovation has contributed to Nike's rising market share in the global footwear market.
However, intense competition could affect Nikes market share.

Strengths Weaknesses

Robust market position bolstered by strong Dependence on third-party manufacturers


brand equity Limited control over contract manufacturers
Competent technical innovation in products
enhancing Nike's competitive advantage
and brand equity
Broad distribution network

Opportunities Threats

Association with NFL would consolidate Intense competition


Nikes leadership position in the US Growing counterfeit goods market
Growth opportunities in India
Brand reorganization initiative
Growth in global footwear market

Strengths

Robust market position bolstered by strong brand equity

Nike is one of the leading players in the global athletic footwear and apparels market. The company
enjoys a strong market position in most of its product segments. Widening product lines coupled
with strong marketing and innovation have contributed to Nike's rising market share from almost
14% in 2006 to around 16% in 2009. In addition to the robust market position, the company has built
strong brand equity over the years. According to a leading global branding consultancy firm, in 2011,
Nike was ranked 25th overall with its brand value increasing 6% year-on-year to $14,528 million.
The robust market position coupled with strong brand equity imparts significant competitive edge to
Nike in terms of scale and recognition, which in turn augers well for the company's expansion plans.

Competent technical innovation in products enhancing Nike's competitive advantage and brand
equity

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MarketLine
NIKE, Inc.
SWOT Analysis

Continued emphasis on technical innovations in the design of footwear, apparel, and athletic
equipment has been the key for Nike's leadership position in the athletics footwear and apparel
market. The company employs own staff specialists in the areas of biomechanics, chemistry, exercise
physiology, engineering, industrial design, and related fields, for the development of products best
suited to athletic needs. Nike also utilizes research committees and advisory boards made up of
athletes, coaches, trainers, equipment managers, orthopedists, podiatrists, and other experts for
consultations on designs, materials, and concepts for product improvement. Furthermore, the
company employs the services of athletes, either employed with the company or engaged under
sports marketing contracts, to evaluate products during the design and development process.
Additionally, the company collaborates with other companies in order to design new products. For
instance, the company launched Nike+ GPS App on the App Store in 2010. The new Nike+ GPS
App includes several features which allow runners to use their iPhone to map every run while tracking
pace, distance, time and calories-burned. It also provides instant feedback during and after each
run from athletes including Paula Radcliffe. Earlier, Nike partnered with Apple to develop a shoe
with embedded chip that communicates data on speed and distance covered to the runner's iPod.
The popularity and customer penetration of iPods and other mobile devices that runners often use
during exercise showcases Nike's competency in innovative product design. Increased emphasis
on R&D and innovation enables Nike to cater to changing preferences and requirements with ease,
which in turn enhances the companys competitive advantage and brand equity.

Broad distribution network

Nike offers its products through a wide distribution channel across the globe. In the US, the company
distributes footwear through its distribution centers located in Tennessee and Memphis. Nike
distributes apparel and equipment from centers located in Memphis, Tennessee and Foothill ranch,
and California. Cole Haan products are distributed primarily from Greenland, New Hampshire, and
Converse and Hurley products are shipped primarily from Ontario, California.

The distribution channel of the company comprises 384 retail outlets across the US. Of these 156
are Nike factory stores which carry primarily overstock and closeout merchandise, 28 Nike in-line
stores including Nike Towns which are designed to shelf Nike branded products and employee-only
stores. Also, the company operates 109 Cole Haan stores, 62 Converse factory stores, and 29
Hurely stores in the US. Internationally, Nike offers its products through Nike-owned retail stores
and through a mix of independent distributors and licensees. International branch offices and
subsidiaries of Nike are located in Argentina, Australia, Austria, Belgium, Bermuda, Brazil, Canada,
Chile, China, Croatia, Cyprus, the Czech Republic, Denmark, Finland, France.The company operates
16 distribution centers outside of the US. In international markets, the company offers its products
through 308 Nike factory stores, 65 Nike in-line stores including Nike Towns and Nike employee-only
stores. Additionally, the company operates 69 Cole Haan stores.

Thus, the wide distribution channel helps in on-time delivery of the products across the countries,
which in turn, helps Nike in managing its inventories in a better way.

Weaknesses

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MarketLine
NIKE, Inc.
SWOT Analysis

Dependence on third-party manufacturers

To minimize production costs, Nike outsources almost all of its footwear production to independent
third-party suppliers, primarily located in Asia. In FY2012, contract factories in Vietnam, China and
Indonesia manufactured approximately 41%, 32%, and 25% of total Nike Brand footwear, respectively.
The company also has manufacturing agreements with independent factories in Argentina, Brazil,
India, and Mexico to manufacture footwear for sale primarily within those countries. Almost all of
Nike Brand apparel is manufactured outside of the US by independent contract manufacturers located
in 28 countries. Most of this apparel production occurs in China, Thailand, Vietnam, Malaysia, Sri
Lanka, Indonesia, Turkey, Cambodia, El Salvador, and Mexico.

As Nike procures its merchandise from foreign manufacturers, it has little control over the product
quality. For instance, there have always been concerns over unsafe Chinese consumer products.
The Consumer Product Safety Commission has issued alerts and announced voluntary recalls by
US companies on numerous products made in China and other Asian countries. For example, in
2010, the US consumer product safety commission and Health Canada recalled youth and junior
hockey sticks, shafts, and blades of about 67,000 units in the US and 60,000 units in Canada
respectively, which have been manufactured in China. Few of them are Nike branded products. In
addition, in 2007, Nike recalled football helmet chin straps of about 235,000 units manufactured in
China under Nike's brand. Further in 2004, CPSC, Nike recalled about 9,000 units of Nike Get-Go
and Little Get-Go children's athletic shoes manufactured in Indonesia.

Any failure on the part of vendor and manufacturer to achieve and maintain high manufacturing
standards could result in manufacturing errors resulting in product recalls or withdrawals, delays or
interruptions of production, cost overruns or other problems that could affect Nike's brand image
and business. Thus, over-reliance on third-party vendors and manufacturers makes Nike prone to
dependency risks.

Limited control over contract manufacturers

The contract manufacturers of Nike have been criticized for the violation of labor laws in countries
such as China, Vietnam, Indonesia and Mexico, in recent past. For instance, in 2008, the Australian
Channel 7 News found a large number of cases involving forced labor in one of the biggest Nike
apparel factories in Malaysia. Furthermore, Vietnam Labor Watch, an activist group, has documented
that factories contracted by Nike violated minimum wage and overtime laws in Vietnam as late as
1996. Additionally, during the 1990s, Nike was criticized for the use of child labor in Cambodia and
Pakistan in factories it contracted to manufacture soccer balls. Many colleges and universities,
especially anti-globalization groups as well as several anti-sweatshop groups such as the United
Students Against Sweatshops, took campaigns against Nike. These kinds of instances show that
Nike has limited control over its contract manufacturers. Thus, any future instances like these could
damage the company's reputation.

Opportunities

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MarketLine
NIKE, Inc.
SWOT Analysis

Association with NFL would consolidate Nikes leadership position in the US

During 2010, Nike was named the US National Football League's (NFL) licensed partner for on-field
apparels including uniforms, clothing worn on the sidelines and fan gears. The company replaced
Reebok as the NFL's licensed partner during 201216. In FY2012, the company expanded NIKE+
into basketball and training and launched a new digital technology called the NIKE FuelBand. In
addition, Nike launched 32 new uniforms for the NFL.

The license is expected to increase Nike's earnings per share in the near future. The association
with popular events like NFL would give the company exposure and recognition, as the events are
broadcast to millions of fans across the world. Also, the sponsorship increases the brand recall
among the consumer groups who watch these events. Thus, Nike could further leverage on this
identity to target consumers of such events and further consolidate its market share in the US.

Growth opportunities in India

In September 2012, the Indian government removed restrictions on foreign direct investment in its
single-brand retail sector, paving the way for global store chains like Nike to have full ownership of
its Indian operations. Previously, the FDI limit in single brand retail was capped to 51% in 2006.
However, the government allowed foreign investment of up to 100% with riders that FDI beyond
51% there should be mandatory sourcing of at least 30% of the total value of the products sold from
small industries. Also, the products sold by the foreign retailers should be under 'single brand' and
these products should be sold under the same brand internationally. With the opening up of single
brand retailing in India, foreign retailers can own the stores entirely and they don't need to collaborate
with an Indian partner, which facilitates greater control over the operations and flexibility in projection
of their brands.

Nike operates in India through NIKE India Private Limited and NIKE Sourcing India Private Limited.
In FY2011, contract factories in India manufactured approximately 2% of total Nike Branded footwear.
In addition, the company has manufacturing agreements with independent factories in India to
manufacture footwear for sale primarily within the country. As Nike has contract factories in India,
the company can source the output from those factories and meet the 30% sourcing clause to a
certain extent.

According to MarketLine estimates, the Indian footwear market is expected to generate total revenue
of $2.5 billion in 2011, representing a compound annual growth rate (CAGR) of 10.3% between 2007
and 2011. In comparison, the Chinese market is expected to increase with a CAGR of 5.5%, and
the Japanese market will decline with a CARC of -1.1%, over the same period, to reach respective
values of $13.7 billion and $13.9 billion in 2011. The Indian footwear market is forecast to accelerate,
with an anticipated CAGR of 15.1% for the five-year period 201116, which is expected to drive the
market to a value of $5.1 billion by the end of 2016. Comparatively, the Chinese and Japanese
markets will grow with CAGRs of 7.8% and 0.3% respectively, to reach respective values of $20
billion and $14.1 billion in 2016. Sales generated through clothing, footwear, sportswear and
accessories retailers were the most lucrative for the Indian footwear market in 2011, with total
revenues of $2,314.9 million, equivalent to 91.5% of the market's overall value.

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MarketLine
NIKE, Inc.
SWOT Analysis

Nike can cash in on India's growing urban middle class and strong demand for international brands
and lifestyle products. As the company already has operations in India, it has a competitive advantage
to take quicker business decisions and make more investments to expand its market presence in
the rapidly growing Indian footwear market.

Brand reorganization initiative

Nike undertook a new reorganization strategy in 2009. As per the strategy, the company reorganized
its Nike brand into a new model consisting of six geographies with reduced management layer. The
new model had six geographies: North America, Western Europe, Eastern/Central Europe, Greater
China, Japan and emerging Markets. The Nike Brand had been organized by four regions: the US,
Asia Pacific, Americas and EMEA (Europe, Middle East and Africa). This organizational change was
part of a wider company restructuring that would result in an overall reduction of up to 4% of the
company's workforce. Initiatives like this would help Nike increase its focus on core category business
areas and drive greater efficiencies and stronger consumer connections.

Growth in global footwear market

The global footwear market has shown positive growth in recent years. According to the MarketLine
estimates, the global footwear market grew by 5% in 2011 to reach a value of $241,294.3 million.
In 2016, the global footwear market is forecast to have a value of $311,132.2 million, an increase
of 28.9% since 2011. Clothing, footwear, sportswear and accessories constitute the largest segment
of the global footwear market, accounting for 67.2% of the market's total value. Nike is a specialty
retailer offering athletic footwear to various customer segments. The company offers its products
through Nike-owned stores, franchises and licenses. It supplies footwear to retailers, who in turn
sell to consumers. The company also offers its products through its websites, nikestore.com and
Nike.com. As Nike derived 55.6% of its revenues from the footwear segment in FY2012 and has a
significance presence in the global footwear market, it could capitalize on the growing market to
further consolidate its leadership position.

Threats

Intense competition

The market for sporting goods is intensely competitive in the US and across geographies. Nike
competes internationally with a large number of athletic and leisure shoe companies, athletic and
leisure apparel companies, sports equipment companies and companies with diversified lines of
athletic and leisure footwear and apparel and equipment. The company faces competition from
Adidas and Puma in international markets. In the US market, the company also faces competition
from regional players such as Dick's Sporting Goods and Finish Line. The company also faces
competition from cheaper imported footwear from Asian countries such as China. Thus, intense
competition and availability of cheaper products could put pressure on the price of products and
therefore affect the company's margins.

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MarketLine
NIKE, Inc.
SWOT Analysis

Growing counterfeit goods market

The counterfeit products market has been growing in the recent years driven by the internet counterfeit
market. The abundance of counterfeit goods and accessories is adversely affecting the sales of
branded products. According to estimates by the Counterfeiting Intelligence Bureau (CIB) of the
International Chamber of Commerce (ICC), counterfeit goods make up 5% to 7% of world trade.
With the advent of digital channels, there has been a surge in the sale of counterfeit products through
online sales. According to an estimate, the sales of counterfeit goods online from illegitimate retailers
reached $135 billion in 2010. In addition, the US economy is suffering an estimated loss of $200
billion in revenue due to sale of counterfeit goods. In Europe, the market for counterfeit products is
estimated to be worth $8.2 billion.

In 2009, the US Immigration and Customs Enforcement (ICE) agents seized more than 17,000
counterfeit items worth an estimated $643,000 from 21 businesses in the Minneapolis-Saint Paul
twin cities region in the US and the consignment included 3,524 bottles of perfume. Geographically,
over half of the fake goods confiscated at EU borders came from China. The personal care category
is among those that recorded the highest increases in registered intellectual property rights (IPR)
infringement cases. Low quality counterfeits reduce consumer confidence in branded products. Also,
what differentiates the offerings of companies such as Nike from its competitors is exclusivity;
widespread counterfeits reduce this exclusivity. Counterfeits not only deprive revenues for Nike but
also dilute its brand image.

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