Nike, Inc.

A Brand Equity Perspective

Submitted to:
Prof. Ashish Sadh

Submitted by:
Group 5

Members:
Abhishek Gade (PGP/0007/04)
Anurag Rastogi (PGP/0015/04)
Vatsal Thaker (PGP/0055/04)
Shubham Motiwale (PGP/0060/04)
Rishabh Sharma (PGP/0067/04)
1. NIKE – THE BRAND & ITS STRENGTHS
NIKE, named for the Greek goddess of victory, is the world's #1 shoe and apparel company. It
designs, develops, and sells a variety of products to help in playing basketball and soccer (football),
as well as in running, men's and women's training, and other action sports. Under its namesake
brand, NIKE also markets sports-inspired products for children and various competitive and
recreational activities; it also sells sportswear under the Converse and Hurley brands. The
company, which generates some 60% of sales outside the US, has a distribution network of more
than 1,100-owned retail stores worldwide and an e-commerce site, and thousands of retail
accounts, independent distributors, and licensees.

1.1. OPERATIONS

NIKE-branded products, which account for about 95% of total revenue, are focused on six key
categories: Running, NIKE Basketball, the Jordan Brand, Football (Soccer), Training, and
Sportswear (sports-inspired lifestyle products).

The company's leading product offering, NIKE Footwear, brings in more than 60% of sales and is
led by the iconic brands like Air Jordan, Air Zoom Yorker and other collections. The other product
lines are NIKE Apparel, which accounts for about 30% of sales and NIKE Equipment (bags, sport
balls, timepieces, digital devices, bats, protective equipment) which adds another 5%.

The remainder of the revenue is generated from brands such as Converse, Hurley, etc.

1.2. GEOGRAPHIC REACH

NIKE is based out of Beaverton, Oregon, where it has a 400-acre site with more than 40 buildings.
It also has regional headquarters in Hilversum, the Netherlands (for the EMEA region)
and Shanghai, China (for the Greater China region) and branch offices and subsidiaries in more
than 50 other countries.

In the US NIKE owns half a dozen significant distribution centres, which include four in Memphis,
Tennessee, one in Dayton, Tennessee, and one in Indianapolis, Indiana. Outside the US, it owns
significant distribution facilities in Laakdal, Belgium; Taicang, China; Tomisato, Japan; and
Incheon, Korea.

The company generates maximum sales revenue (nearly 45%) from North America while another
major chunk (about 25%) quarter in Europe, the Middle East, and Africa. Greater China and the
rest of the Asia-Pacific region and Latin America each account for about 15% of revenue.

1.3. SALES AND MARKETING

NIKE generates about two-thirds of sales from wholesale customers such as retail accounts
(footwear and sporting goods stores; athletic specialty stores; department stores; skate, tennis, and
golf shops), independent distributors, and licensees. It also sells directly to consumers through a
strong global network of company-owned stores and its growing ecommerce site.
NIKE markets its footwear and other products globally through diverse advertising and
promotional programs and campaigns, including print, social media, online advertising, and
endorsement contracts with celebrity athletes. Total advertising and promotion expenses were
about $3.8 billion, $3.6 billion, and $3.3 billion for fiscal years 2019, 2018, and 2017, respectively.

1.4. FINANCIAL PERFORMANCE

NIKE has shown continuous revenue growth over the past five years with sales up to nearly 30%
since fiscal 2015. Net income has generally been on an upward trend, except in fiscal 2018 when
it was impacted by the 2017 Tax Act; overall, profit is up about 25% over the past five years.

In fiscal 2019, up to May, the company reported revenue of $39.1 billion which was close to 7%
more from the previous year year. It saw growth in both the NIKE and Converse brands and across
all geographies, particularly powered by the sportswear category. NIKE's smaller direct-to-
consumer operations contributed as much to overall results as the much-larger wholesale
operations, driven by year-over-year ecommerce sales growth of 35%.

Net income that year was $4 billion, more than double the $1.9 billion from fiscal 2018 when the
company was hit with a substantial income tax expense as a result of the 2017 Tax Act.

Cash at the end of fiscal 2019 was $4.5 billion, an increase of $217 million from the prior year.
Cash from operations contributed $5.9 billion to the coffers, while investing activities used $264
million, mainly for capital expenditures. Another $5.3 billion were being used in financing
activities for dividends to stockholders and stock repurchase.

1.5. STRATEGY

NIKE has embarked on a transformation due to slowing revenue growth and intense competition
from top rival Adidas, among others. It cut about 2% of its workforce (about 1,400 workers),
consolidated six operating segments into four, and sharpened its focus on 12 key global cities
(including New York, Beijing, London and Shanghai) which Nike thinks will power its growth
through 2020. In addition, NIKE's transformation includes the Triple Double Strategy which aims
at doubling the impact of innovation, the speed to market, and the direct connection to consumers.

NIKE is trying to build a more direct connection with its customers by focusing on its NIKE Direct
organization, which includes direct-to-consumer retail operations such as Nike.com and Nike+
apps along with other digital products. The company's goal is to double its digital sales up to 30%
of total revenue. In addition to its digital focus, it is innovating within its product portfolio to better
compete. NIKE has reduced its styles by 25% in order to more quickly offer new lines to customers
and has already seen a positive response to newer platforms such as the Air VaporMax Flyknit
(air-cushioned sneaker), Air Max 270 (air-cushioned lifestyle shoe), and Epic React (running
shoe).

Till date NIKE’s wholesale business accounts for the largest portion of its sales and hence it needs
to strengthen their wholesale operations as sporting goods companies and mall retailers (traditional
homes for NIKE products) are continuously struggling with falling foot traffic and online
competition. Keeping that in mind, NIKE has shortlisted a group of favoured retailers (those that
attract target customers and deliver exceptional customer experience) who would be responsible
for receiving exclusive products and provide better marketing support.

2. BRAND EQUITY
Brand equity is a term used to describe the value of having a recognized brand, based on the idea
that firmly established and reputable brands are more successful. More specifically, it’s a set of
brand assets and liabilities linked to a brand name and symbol, which add to or subtract from the
value provided by a product or service. Brand equity has four dimensions—brand loyalty, brand
awareness, brand associations, and perceived quality. Each of these dimensions create value for the firm in
multiple ways.

2.1. BRAND ASSOCIATION

Brand association is anything which is deeply seeded in the customer’s mind about the brand.
Brand association plays the role of a measurable characteristic of brand in equity in the market.
This is because what a customer thinks and feels about a brand, leads to his or her brand association
toward the performance of the brand equity in the marketplace. As a result, brand association and
brand equity are deeply related, which helps brand maintainers to improve the brand relationship
between the brand and customers. Thus, it is favourable for the brand to have a positive brand
association amongst its customers.

2.2. BRAND AWARENESS

Brand awareness is a measure of the consumer’s consciousness about the existence of a company
or a brand. It measures a potential customer’s ability to recognize a brand image, and to relate it
with the brand’s product or service. Brand awareness is best spread through both inbound and
outbound marketing efforts. In a highly competitive industry, brand awareness is a key asset for a
company or a brand. Brand awareness builds brand equity by playing the following roles:

 Anchor to which other associations can be attached

 Familiarity which leads to liking
 Visibility that helps gain consideration
 Signal of substance/commitment

2.3. PERCEIVED QUALITY

Perceived quality is usually the reason why a customer buys a certain brand’s offerings, and in that
sense, it is the true measure of the impact of a brand equity. More interesting, though, perceived
quality reflects a measure of “goodness” that spreads over all elements of the brand equity like a
thick syrup. Perceived quality can lead to brand awareness, associations and loyalty, in a long-
term perspective. Brand identity and perceptions are closely knit around the perceived quality of
the brand. When perceived quality improves, so generally do other elements of customers”
perception of the brand.
2.4. BRAND LOYALTY

Brand loyalty is seen in product brand equity discussions as an element of brand equity referring
to the loyalty of stakeholders for the organization and its brand. In other words, traditionally loyalty
is seen as a component of brand equity and some of recent studies support this view. However,
many researchers are now saying that loyalty is an outcome of brand equity. It is argued that brand
equity has a strong impact on customers‟ loyalty intentions and it is likely to influence a customer’s
willingness to stay, repurchase, and recommend the brand.

3. NIKE AND ITS BRAND EQUITY

First, Nike has a well-established and strong brand identity with a well-recognized and
distinguished brand name and brand log, the swoosh. The brand name is easily memorized by
costumers.
3.1. BRAND ASSOCIATION
The core of building the brand equity for Nike brand equity is brand association. Core associations
for Nike include: innovative technology, high quality/stylish products, joy and celebration of
sports, maximum performance, self-empowerment and inspiring, locally and regionally involved,
and globally responsible. What has to be mentioned is that Nike is associating its brand with
famous athletic celebrities that have similar personality as the brand; they are achievers, winners,
determinant, and accomplishment oriented, non-traditional. Nike is capitalizing on the idolized
view of American for their athletic heroes, especially the youth the main target of NIKE. The most
famous example for brand association ever was the collaboration between Nike and Jordan, the
association that personified Nike as a superior, achiever, successful and amazing top performing
brand.
3.2. BRAND AWARENESS
Three vivid channels that Nike has applied for enhancing its brand image & awareness are
Sponsorship, advertising & experience focused retailing. In these above-mentioned strategies,
endorsement of the athlete can be considered as the most significant success of Nike brand.
In order to associate their associate their brand names with easily recognizable athletes, Nike has
been investing millions of dollars aiming to build the brand image. For E.g.: The annual sales of
Nike Golf have exceeded to nearly $500 million dollars with an estimated growth of 24 percent
per year within first five years, since Tiger Woods & Nike partnered.
3.3. PERCEIVED QUALITY
The high perceived quality is one of the most important sources of Nike’s brand equity not only
among the athletes but also between the public. Nike’s market comprises of mostly the public that
use their shoes for walking around, yet Nike has the highest level of commitment in designing
their shoes at professional standards. Nike actually listen to the athletes & design the shoes which
in order satisfy their need for durability & high performance. Apart from this, they didn’t follow
the trends with the likes of Reebok who use garments in their fabrication instead of leather which
just because of fashion quotient although being less durable. In order to fulfil their commitment to
quality, Nike stick to using leather.
3.4. BRAND LOYALTY
The relationship of Nike is very good with their customers. This relationship started with the
beginning of the company when the founder used to speak with the athletes using their suggestions
& listening their feedbacks. He used to connect with them in high schools & even in colleges
which created attachment among the customers along with some sort of brand loyalty. Nike when
expanded, used a “Finger on the pulse” strategy where they asked few of their employees to hit
the street & learn more about what is in the customer’s mind. Till now, Nike’s website is an
amazing way to have a two-way conversation with their customers. The customer gets the
information which helps them in their fitness regime & in turn Nike gets the valuable information
as of how their customers are using their product