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Analyse their strategic choices with their options- why they made the choices that they did and
recommendations. Has their strategic focus changed? Analyse areas where Nike went wrong, why
did they go wrong, and what are the solutions? Look for critical success factors, matches and
mismatches. Identify any key areas that have affected Nike.

Use the following tools of analysis e.g. swot analysis, pestle, value chain, porter's 5 forces,
shareholder matrix, resource view, 4 p's, BCG matrix.etc and others to come to your answer.
Nike operates within the sports footwear and apparel market. Originally designing and producing
running shoes, their portfolio has broadened to include a wide range of sports and leisure wear.
This is all endorsed by top sporting personalities.
This environment is fairly stable although terrorism and Sars has affected consumer confidence
and supply networks.
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In its mission statement Nike expresses that it requires doing business in a responsible way,
leading to sustainable financial growth. With the advances in technology, HR practices, the well
informed and trained work force, there is very little left to differentiate organisations. Being seen
to go further than the minimum required on social issues can attract and retain customers. This
green cleansing attracts attention to the organisation; they are viewed as caring and social
responsible (Mullins, L. 2005).
A report, on the business practices of Nike through its supply chain accused the organisation of
being involved in poor working conditions, violations of labour rights, low wages and harassment
of its workforce. Nike takes these reports seriously. On the basis of the research findings the
company has intensified the monitoring of its suppliers (Hummels, H and Timmer, D.2004)
è Êÿ To build its business with all of its partners based on trust, teamwork, honesty and
mutual respect; this is expected to be returned, expecting business partners to operate on the
same principles.
   ÿ Nike does not want to only do what is required by law, but also do what is expected of
a leader

 Ê ÿ Review and monitor closer the actions of business partners


   ÿ To prevent bad publicity, which can damage the organisation
  Ê  Ê
 ÿ To demonstrate to consumers the high value within the organisation to
CSR.
  ÊÊ
 ÿ
  ÿ Hummels, H and Timmer, D.2004 agreed that these reports were needed, Although
Mullin, L. 2005 stated that it could be just green washing
Nikes Function
è Êÿ The company focus on design and development
   ÿ This reduces long term debt has the benefit of not tying capital up in plant and
equipment

 Ê ÿ
   ÿ
  Ê  Ê
 ÿ Reduced size of premises therefore reduced costs. Vital to have
innovative employees. Products are viewed as innovative
  ÊÊ
 ÿ
  ÿ Johnson, G & Scholes J 2004 agreed that this was a cost effective method of production
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Within several of these countries there have been problems with production, distribution and
political problems. With the change in relationship between the USA and Vietnam and China, these
are new production venues that Nike could explore.
è Êÿ Produce goods in the Far east
   ÿ Keeps costs down

 Ê ÿ Vietnam and China


   ÿ New trade agreements, present sites are switching manufacturing to electrical goods
  Ê  Ê
 ÿ Maintaining current standards, closer working relationships, retaining
customer loyalty by guaranteed standard of product
  ÊÊ
 ÿ A shift to a more managed production
  ÿ All organisation need to watch changes in political and economical factors in their
outsourcing. Johnson, G & Scholes J 2004,
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Surrounding all organisations are stakeholders, all with varied levels of authority, power and
interest towards the organisation Mendelow (1991) considered a matrix that classifies the level of
power and interest a stakeholder has in an organisation. Although once each group of
stakeholders is recognised, it cannot be assumed that their level of interest will remain the same
(Mendelow (1991) cited in Scholes, K. & Johnson, J 1997ÿ198). Jones (1995) argue that the
³stakeholder framework is practical for considering business and society issues, because it
identifies the sources of a corporation's social obligations and its set of stakeholders´ (Jones
(1995) cited in Rowley, T. 1998ÿ28).
Therefore by Nike concentrating on their stakeholders it has placed Corporate Social responsibility
high on their agenda. The organisation has to demonstrate transparency in all actions and
reporting. This can cause conflict with the shareholders. Common in stakeholder theory is
compromises on both sides that can obviously haze over differences; this primary characteristic is
accepted as contra-distinctiveness from the shareholder value. This was discussed by Friedman,
(1993) that ³the ultimate purpose of a company should be serving the interests of its
shareholders´ (Friedman, (1993)
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Nike's supply chain provides a clear view of the extent of the global nature of the company. Nike's
headquarters are in America; however, virtually all of its production takes place outside of the
United States.
Nike's supply chain upstream begins with the materials used in the production of its products.
Many of these materials used in production are available in the locations which the manufacturing
takes place, but some specialised materials have to be imported to the manufacturing company.
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è Êÿ Outsourcing of all production
   ÿ Reduced costs

 Ê ÿ Outsource with stronger control


   ÿ Speed up reporting of any problems in production, the supply chain, the greater the
distance the slower the reporting of problems
  Ê  Ê
 ÿ Reduce problems associated with distance, i.e. quality, consistency and
value
  ÊÊ
 ÿ Although still outsourcing, they would gain more control over production.
  ÿ Johnson, G & Scholes J 2004, agreed that Nike can be too far from the site of
production
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è Êÿ Target USA
   ÿ Demand and growth for footwear in the US was rapid.

 Ê ÿ Future option is to enter EU markets


   ÿ To expand into growing markets as US is near saturation.
  Ê  Ê
 ÿ Organic growth as well as by acquisition, also brand name, goodwill-
therefore there is a match is CSF to succeed
  ÊÊ
 ÿ Maybe have to target marketing in a different way
  ÿ When markets are reaching saturation, new markets need to be identified to prevent
decline in sales. Johnson, G & Scholes J 2004,
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Nike has a strong network of retailers in 200 coutries world wide through distributors, licensees
and sudsiduaries. Within the USA there are 18000 stores that retail nike products. These are well
established channels.
Nike made itself heavily dependant on one retailer Footlocker, representing 10% of their revenue.
When Footlocker reduced their purchasing form Nike, it created a reduction in turnover in the
short term. Organisations that are over dependant on one retailer are open to cash flow problems,
if the retailer switches suppliers, reduces purchasing or ceases trading (Johnson, G & Scholes J
2004).
è Êÿ Although they have numerous retailers, they were heavily dependant on one out
let chain
   ÿ To sell top of the range products

 Ê ÿ To negotiate partnerships deals that allow for the choice of product for the
retailer
   ÿ To prevent sudden withdrawal of products
  Ê  Ê
 ÿ Customer being able to rely on source of product. If withdrawn they
may find an alternative product
  ÊÊ
 ÿ Closer working partnerships
  ÿ Organisations that are over dependant on one retailer are open to cash flow problems,
if the retailer switches suppliers, reduces purchasing or ceases trading. Johnson, G & Scholes J
2004
Nike has a ³futures´, but can also ship overnight when needed. Although the ³futures´ method is
currently working for Nike,
è Êÿ Futures ordering system
   ÿ A 6 month lead time for product orders, always knowing what is needed in production

 Ê ÿ
   ÿ
  Ê  Ê
 ÿ This is responsive to the market trends, but can also help retailers plan
stock.
  ÊÊ
 ÿ
  ÿ Any change or threats within the markets could leave them overstocked (Groucutt, J. et
al 2004)
Sales
In addition, consumer sales outside of the United States exceeded sales in the United States in
2003 with only 43% of the company's sales coming from the US In Europe there are difficulties in
entering the market, the single currency and the trade rules make entry difficult for large
organisations.
è Êÿ Target the US
   ÿ Growing market, but is now reaching saturation

 Ê ÿ Target new markets, including e-commerce


   ÿ To avoid a reduction in sales
  Ê  Ê
 ÿ Entry to the markets, by advertising and targeting the audience.
Ensuring accurate and quick picking of the customers order
  ÊÊ
 ÿ Shift to global marketing, selling world wide from the web targeting
Generation Y.
  ÿ By tailoring marketing to the customer needs Nike has been successful in the past and
continues to be today (Johnson, G & Scholes J 2004)
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è Êÿ Global brand
   ÿ Consumers are willing to pay a premium price for; as they imply credibility, high
quality and up-to-date global trend.

 Ê ÿ When companies are bought trade under their name


   ÿ Moving into a new market with a brand that is already global you can reduce cost of
introductory and follow-up marketing programs.
  Ê  Ê
 ÿ Ensures customer loyalty and to widen portfolio
  ÊÊ
 ÿ Concentrating on core products as Nike, allowing growth in new diverse
markets
  ÿ significant scales of economy are achieved Aaker 2000, this is in terms of brand
development, packaging and manufacturing
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Sports personalities have endorsed the Nike product, although with numerous different sports and
countries targeted this has been costly. The amount each personality has received is considered
high. This forces the competitors to market their products in the same way. Trends within the
industry have increased the number of female consumers. With advertising Nike has targeted
segments of the market, this costly. Nike should review their advertising policies (Groucutt, J. et al
2004).
è Êÿ Sports personalities have endorsed the Nike product, although with numerous
different sports and countries targeted
   ÿ To target all types of sport by choosing personalities which are at the top of their
sports.

 Ê ÿ To chose personalities that appeal to a wider audience


   ÿ To reduce advertising costs
  Ê  Ê
 ÿ
  ÊÊ
 ÿ
  ÿ Groucutt, J. et al 2004

4ps
The athletic shoe industry is highly competitive as well as a demanding market where fierce
competition, price conscience consumers, and constant changing market trends and fads have all
been attributing factors in how a manufacturer responds.
Highly focused brand includes Nike, Adidas, and Reebok, they target a precise market. However,
there is evidence that a brand will widen its target market as it reaches a greater level of maturity.
In the case of Nike, for example, there was a move into new sports areas away from the running
heritage. Nike's target audience has moved from more masculine towards female and Generation
Y.
Price is related to Product, through the characteristics of the brand, it's packaging and overall
image. People are buying into an ideal, not just the item. Consumers believe that there is a link
between quality of a product and the price. Consumers question what they are getting for their
money. Brand Management, customer awareness and loyalty, is directly linked to the price,
therefore maintenance of the relationship between brand images; quality and price have to be
consistent (Johnson, G & Scholes J 2004).
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This analysis will summarise key issues from the business environment and the strategic capacity
of Nike. This can be used to judge future strategic options.
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Product Range
Capacity for innovation
Distribution expertise
Single Brand
Stars endorsement
Contract manufacturing
Large portfolio of products
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Single Brand
Too many stars endorsement
Contract manufacturing
Spread portfolio of products
Reliant on retailers
Reduction of target market
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New Markets
E commerce
Research and development
Increase product line
Product diversification
Change target market
New manufacturing countries
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Competition
Fashion Trends
Contract manufacturing and copying of product (intellectual property)
Consumer lifestyle changes
Competition
Bad press associated with Nike
Outlets cancelling orders
Sars
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This will consider environmental influences on the organisation, both in the past and with future
strategic plans.
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Striking dock workers
Political unrest in the production countries
Terrorism in the home country
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Slow down in the economy
Reduction in consumer confidence
Barriers of entry to the EU
Contract manufacturing
ÿÿÊ  Ê
Brand conscious consumers
Change in buying habits in younger people
Generation Y prefers other types of footwear
Increase in the female share of the market
Corporate social responsibility
ÿÿÊ  
Speed of change of product
Design Ability
Speed of News reporting
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Re use a shoe
Sustainability philosophy
Climate impact
ÿÿÊ  
Threaten action by underage workforce
Poor employment record
Corporate social responsibility
Contract manufacturing and copying of product (intellectual property)
Trade agreements
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Like every large IT undertaking, the team responsible for the implementation of Nike Supply Chain
(NSC) began with a set of specific, stated goalsÿ
Enhancing Nike¶s ability to respond to changing conditions;
Reducing inventory and capital investment risk;
Improving service to meet customer/consumer needs;
Improving process, information and product quality; and
Providing an efficient global supply chain with local implementation
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This model is used to identify the sources of competition, and how to gain advantage over them.
è  Ê 
Other sportswear manufacturers expanding their portfolio
Cheap copies from the Far East
ÿÿÊ  
The buyers of sports footwear have changed in the past decade. There has been and increase in
women purchasing the shoes, Generation Y has a different tastes and purchasing methods.
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When required for professional use there is no substitute goods, but as a fashion item there are
many other goods that could be purchased.
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Using production facilities in the Far East has give Nike economies of scale. Although there are
now problems arising from these factories, they are switching to making there own goods, labour
and political unrest causes delays in manufacturing and shipping of the goods,
ÿÿÊ  Ê  
Reebok, offering more choice of shoe, introducing endorsement by sports personalities, sponsoring
sporting leagues
Adidas have recovered from the problems that plagued them, and have a good product mix,
covering a wide range of sports.
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Nike is established within its markets, benefiting from economies of scale. This places them in the
Cash Cows category on the Matrix. Cash cows market growth has slowed, and the products hold a
fairly stable market share.
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Aaker, D. (2000) Brand leadership Free Press, New York
Doyle, P. (1998) Innovation in marketing Butterworth-Heinemann, Oxford
Drawbaugh, K. (2001) Brands in the balance meeting the challenges to commercial identity
Pearson Education, London
Groucutt, J. et al (2004) Marketing Essential Principals and New realities Kogan & Page, Great
Britain
Johnson J & Scholes K (1997)(4th Edition)Exploring Corporate Strategy Prentice Hall, Hemmel
Hempstead
Johnson, G & Scholes J (2004) (6th Edition) Exploring Corporate Strategy Prentice Hall, Hemmel
Hempstead
Mullins, L. (2005) (7th Edition) Management and Organisational Behaviour Prentice Hall, Pearson,
Harlow
Hummels,H and Timmer, D.(2004) Investors in Need of Social, Ethical, and Environmental
Information Journal of Business Ethics Jun 2004Vol.52, Iss. 1
Kaler, J. (2003) Differentiating Stakeholder Theories Journal of Business Ethics Aug 2003.Vol.46
Rowley, T (1998) A normative justification for stakeholder theory Business and Society. Mar 1998
Welch, J. (1997) Business ethics in theory and practiceÿ Diagnostic notes. A prescription for value
Journal of Business Ethics, Feb 1997.Vol.16,
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