Nike, Inc.

Strategic
Analysis 2010

Presented to:
Dr. Imran Hameed
Presented By:
Muhammad Saqib
Mubasher Ali
Muhammad Naseem
Saima Batool
2

HISTORY

CURRENT VISION STATEMENT

"To bring inspiration and innovation to every athlete in
the world"

If you have a body, you are an athlete.

Nike co-founder Bill
Bowerman

CURRENT MISSION STATEMENT

To be the leading sports brand in the world.

OBJECTIVES
To continue being the world leader in sports equipment
and apparel.
To complete brand reorganization within market regions
that will lower cost of sales.
To create sportswear that would incorporate recycled
material.
To develop new alliances with companies who are well
respected regarding social responsibility.
To invest in additional marketing of existing products that
will appeal to new demographic groups.
To promote products as fashion wear, not just
sportswear.

NIKE Strategy

NIKE Strategy

NIKE Strategy, structure, & culture

NIKE core competencies

10

EXTERNAL
ASSESSMENT
11

General environment faced by the industry

INDUSTRY
ENVIRONMENT
ANALYSIS

Global Economy

Technology

THREATS

OPPORTUNITIES

Economic recession/ Consumer purchases International expansion, building upon its strong
slowing down/ Falling international economy; global brand recognition; strong economic
fluctuation in foreign currency & exchange rates conditions in other countries

Use of IT in marketing information system;

Scientific research in products quality &
innovation like Motion Analysis (kinematics),
Foot- pressure Measurement, Ankle Range of
Motion etc

Government/Politics

Macroeconomic stability, low interest rates, stable

Increased legislation/Higher price of products,
currency conditions and the international
Customer right
competitiveness of the tax system

Natural Environment

Natural disasters like earthquake in Japan

Cold/Rainy climatic condition creates a demand
resulted in loss of lives, resulting in customer
for shoes.
loss

Demographic

Baby boomers pushed into late forties are less

Young generation inclination in sports & fitness;
inclined for sporty activities like running; lower
large population more customers; high income
income of customers; ethnic mix of some
customer buying at premium price
countries

Socio-Cultural

12

Inclination towards fitness leading to demand for

fitness products particularly exercise apparel,
shoes and equipment

Strategic groups in industry

High Performance

Low Price

High Price

Low Performance

13

Porters five forces model

14

CPM MATRIX
Nike
Critical Success Factors

Weight

Rating

Adidas

Weighted Score

Rating

Puma

Weighted Score

Rating

Weighted Score

Pricing

0.10

0.30

0.20

0.20

Global Expansion

0.07

0.28

0.21

0.21

Diversification

0.10

0.30

0.30

0.20

Technology

0.10

0.30

0.20

0.20

Customer Loyalty

0.08

0.24

0.24

0.16

Market Share

0.10

0.40

0.30

0.20

Advertising

0.12

0.48

0.36

0.24

Product Quality

0.12

0.36

0.24

0.24

Research and Development

0.08

0.24

0.24

0.16

Organizational Culture

0.07

0.21

0.21

0.14

Financial Position

0.06

0.24

0.18

0.12

Total

1.00

15

3.35

2.68

2.07

OPPORTUNITIES
Younger customers are less prices sensitive
Promotion as a fashionable wear, not just sportswear

1.
2.
3.
4.
5.

6.
7.

8.
9.

companies have outsourced their production abroad to lower cost and R&D expenses
US footwear imports totaled 2.36 billion pairs in 2007, or roughly 7.9 pairs per capita
which is was up 0.4 percent from 2006
North American Free Trade Agreement (NAFTA) and the World Trade Organization
(WTO), both helped eliminate quotas and tariff barriers for foreign footwear
manufacturers to ship their goods
The Internet allows footwear companies to pursue a direct to consumer sales channel
Sales of apparel, accessories, and footwear on the Internet has been growing at a
double digit pace, considerably faster than more traditional sales models such as retail
stores
Internet sales of apparel, accessories, and footwear could reach 18 percent of category
sales by 2012
Companies that added a Web-based sales strategy are able to customize footwear and
other merchandise directly to the customers needs and taste, are enable to achieve
considerably better pricing as well as deepening the emotional bond consumers have
with the brand

16

THREATS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

After the age of 40, the typical consumer is not willing to pay more than $35
to $40 per pair for athletic footwear
Competition is strong among athletic footwear and apparel from off brand
companies
Fluctuation of foreign currency impacts the cost of importing goods to the
U.S.
Increase in unemployment has impacted the household income which may
result in spending less on brand name
Barrier to entry is low
Level of inventory is increasing in many retail stores due weak economy
Changes in society (Healthy Lifestyle)
Sports gaining popularity/Sports events/Tournaments
Growth through Athletes Sponsorships
Increasing manufacturing costs: The basic raw material for most of the athletic
footwear is rubber. Price increase in raw material poses a negative impact on
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industry attractiveness.

EFE MATRIX
Key External Factors
Opportunities
Younger consumers are willing to pay for fashionable and athletic footwear (willing to pay more)
Most footwear companies have outsourced their production to reduce cost

Weight Rating Weighted Score

0.08
0.07

3
4

0.24
0.28

US footwear imports totaled 2.36 billion pairs in 2007, up 0.4 percent from 2006

0.07

0.21

(NAFTA) and (WTO), both helped eliminate quotas for foreign footwear manufacturers

0.06

0.24

The Internet allows footwear companies to pursue a direct to consumer sales channel

0.07

0.28

Sales of apparel, accessories, and footwear on the Internet has been growing at a double digit pace,

0.08

0.24

considerably faster than more traditional sales models such as retail stores

Internet sales of apparel, accessories, and footwear could reach 18 percent of category sales by 2012

0.07

0.28

Companies that added a Web-based sales strategy are able to customize footwear and other

0.06

0.18

0.07

0.21

athletic footwear
Competition is strong among athletic footwear and apparel from off brand companies

0.08

0.16

Fluctuation of foreign currency impacts the cost of importing goods to the U.S.

0.06

0.12

Increase in unemployment has impacted the household income which may result in spending less

0.09

0.27

on brand name
Barrier to entry is low
Level of inventory is increasing in many retail stores due weak economy

0.06
0.08

2
2

0.12
0.16

merchandise directly to the customer's needs and taste,.

Threats
After the age of 40, the typical consumer is not willing to pay more than $35 to $40 per pair for

Total

18

1.00

2.99

INTERNAL
ASSESSMENT
19

Value Chain Analysis

20

Value Chain Analysis

21

I. FINANCIAL ANALYSIS: LIQUIDITY

Key Ratio: Net Working
Capital
6000

5696.25

5000

4842.75

4119.75

4000

4138.5

3000
2000
1522

1000

2007

1290

2008

1649

2009

1972

2010

Working capital
Nike
Working capital
Adidas

II. FINANCIAL ANALYSIS: LIQUIDITY

Key Ratio: Long Term Debt
Ratio
70.00%
60.00%

64.64%
58.42%

50.00%
Long Term Debt
Ratio Nike
Long Term Debt
Ratio Adidas

40.00%
30.00%
24.17%

20.00%
10.00%5.84%
0.00%
2007

5.64%

5.03%

4.78%

2008

2009

2010

4.57%

INDUSTRY
INDUSTRY
10.58%
10.58%

II. FINANCIAL ANALYSIS: EFFICIENCY

Key Ratio: Total Asset
Turnover
1.80
1.601.53
1.40
1.201.23
1.00
0.80
0.60
0.40
0.20
0.00
2007

1.50

1.45

1.32
1.21

1.23
1.13

Total asset
turnover
Nike

Industry:
Industry: 0.56
0.56
2008

2009

2010

II. FINANCIAL ANALYSIS: EFFICIENCY

Key Ratio: Inventory Turnover
5
4.4

4.5

4.6
4.4

3.5

33.3

3.1

3.3

2
1
0

2007

Inventory
turns Nike
Inventory
turns Adidas
Industry
Industry 1.76
1.76

2008

2009

2010

II. FINANCIAL ANALYSIS:

PROFITABILITY
Key Ratio: ROA

25.0%
20.0%19.6%
15.0%

19.0%
15.2%

16.3%

14.5%

11.6%

10.0%

13.8%

8.1%

Return on
assets Nike
Return on
assets Adidas

5.0%
0.0%
2007

2008

2009

2010

Industry
Industry 4.9%
4.9%

II. FINANCIAL ANALYSIS:

PROFITABILITY
Key Ratio: Gross Profit Margin
48.7

47.89

47.4
45.82

45.4
44.9

46.3

Gross margin
Adidas

43.78

2007

Gross margin
Nike

2008

2009

2010

Industry
Industry 17.55
17.55

II. FINANCIAL ANALYSIS: ROE

30.00%
25.00%
22.40%

24.50%
20.70%

20.00%
18.20%
18.90%

18.00%

Return on equity
Nike

15.00%
12.30%

10.00%
5.00%
0.00%
2007

6.50%

Industry
Industry 7.36
7.36
2008

2009

2010

III. STOCK CHART AND PRICE

TRENDS

4 year chart
2007
Basic earning
per common
share

2008

2,71 3,25

2009

2010

1,25

2,71

III. STOCK CHART AND PRICE

TRENDS

4 year chart
2007
Basic earning
per common
share

2008

2,96 $ 3,8 $

2009

2010

3,07 $

3,93 $

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors

Weight Rating Weighted Score

Strengths
Nike is the dominant competitor for athletic footwear priced above $60 per pair, holding better than 0.08

0.32

0.02

0.06

The Jordan brand has a 10.8 percent share of the overall U.S. shoe market, which makes it the 0.06

0.24

0.32

a 50 percent market share for athletic footwear priced $85 per pair or higher
Nike characterizes its organization as a collaborative matrix organization
second biggest brand in the country and more than twice the size of Adidas' share
Three out of every four pairs of basketball shoes sold in this country are Jordan, while 86.5 percent 0.08
of all basketball shoes sold over $100 are Jordan
Nike's 2009 revenues increased 2.9 percent to $19.1 billion

0.09

0.36

Inside the United States, Nike has three significant distribution and customer service facilities

0.05

0.15

Nike estimates that they sell products to more than 25,000 retail accounts in the United States and 0.04

0.12

0.28

0.21

more than 27,000 retail accounts, including Nike-owned stores and a mix of independent
distributors and licensees outside the United States
The company's Internet Web site, www.nikebiz.com, allows customers to design and purchase Nike 0.07
products directly from the company
Nike has five wholly owned subsidiaries: Cole Haan, Converse, Hurley International, NIKE Golf, 0.07
and Umbro Ltd

31

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors

Weight Rating Weighted Score

Weaknesses

Nike's 2009 net income decreased 21 percent to $1.48 billion

0.07

0.14

Almost all of Nike's footwear is manufactured outside the United States by 0.08

0.08

independent contractors
In fiscal 2008, contract manufacturers in China, Vietnam, Indonesia, and 0.06

0.06

0.08

Thailand manufactured 99 percent of Nike's footwear worldwide

Because Nike competes primarily in athletic footwear, apparel and related 0.08
sporting equipment, its sales are heavily concentrated in the youth and young
adult market.

Accounts payable has increased by almost $1.0 billion in 2009

0.08

0.16

Negative publicity and boycotting of the Nike products due to outsourcing jobs 0.07

0.07

overseas and the use of child labor in such factories

Total

32

1.00

2.65

SPACE Matrix

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STRATEGIC
ASSESSMENT
34

Strength
1. Nike is the dominant competitor for athletic footwear priced above $60 per pair, holding
better than a 50 percent market share for athletic footwear priced $85 per pair or higher
2. Nike characterizes its organization as a collaborative matrix organization
3. The Jordan brand has a 10.8 percent share of the overall U.S. shoe market, which makes it
the second biggest brand in the country and more than twice the size of Adidas share
4. Three out of every four pairs of basketball shoes sold in this country are Jordan, while
86.5 percent of all basketball shoes sold over $100 are Jordan
5. Nikes 2009 revenues increased 2.9 percent to $19.1 billion
6. Inside the United States, Nike has three significant distribution and customer service
facilities
7. Nike estimates that they sell products to more than 25,000 retail accounts in the United
States and more than 27,000 retail accounts, including Nike-owned stores and a mix of
independent distributors and licensees outside the United States
8. The companys Internet Web site, www.nikebiz.com, allows customers to design and
purchase Nike products directly from the company
9. Nike has five wholly owned subsidiaries: Cole Haan, Converse, Hurley International,
NIKE Golf, and Umbro Ltd
35

Weakness
1. Nikes 2009 net income decreased 21 percent to $1.48 billion
2. Almost all of Nikes footwear is manufactured outside the United States by independent
contractors
3. In fiscal 2008, contract manufacturers in China, Vietnam, Indonesia, and Thailand
manufactured 99 percent of Nikes footwear worldwide
4. Because Nike competes primarily in athletic footwear, apparel and related sporting
equipment, its sales are heavily concentrated in the youth and young adult market
5. Accounts payable has increased by almost $1.0 billion in 2009
6. Negative publicity and boycotting of the Nike products due to outsourcing jobs overseas
and the use of child labor in such factories

36

Major Strategic issues

37

TOWS MATRIX
SO Strategy
- Expand into international market more
where the economy is stronger
- Increase advertising and promotion through
social networking such as Twitter and
Facebook

WO Strategy
- Develop new products for small kids
based on cartoon characters
- Sponsor more athletics programs, mostly
for young generation

ST Strategy
- Develop a new moderately priced product
line
- Expand distribution by selling to stores
other than their own retailers

WT Strategy
- Make low priced footwear made in the US
and promote it as Made in America
- Acquire a less expensive brand of
accessories and sportswear and promote
them as an off brand of Nike

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Three Suitable Startegies

39

RECOMMENDED STRATEGY
Market Expansion:
The United States is the largest and most saturated
market for NIKE. This is a threat for the company.
Thus the Company has to direct efforts on expanding
into emerging markets which offer growth
opportunities. It has a huge market in Asian countries
like India and China. India and China are the fastest
growing economies today
40

STRATEGIC
IMPLEMENTATION
41

implement the expansion strategy

Nike has to expand its global retail foothold by
opening new stores all over the world.
NIKEs expansion plan may include a mix of discountminded NIKE Factory Stores in outlet malls
NIKE town stores, which sell newer and exclusive
items and are often found in upscale shopping centers.
Company has to attract both the segment of customers
i.e. price sensitive and premium class.
NIKEs should take advantage of distinctive marketing
capabilities, innovation and distribution capability.

42

Long term (Three year ) objective

Nike has set revenue target of $27 Billion by the end of 2015.
NIKE goal for next three years should be on getting maximum exposure
from London 2012 Olympics.
Nike can also boast its apparel business by replacing Adidas division
Reebok as the leagues official uniform provider, giving the company even
more exposure among local consumers.
NIKE has been the best when it comes to advertising. Some of the
celebrities who will advertise for NIKE during the Olympics will be USA
Basketball NBA stars like Kobe Bryant, LeBron James, and Carmelo
Anthony. In this scenario NIKE will embrace the key success factor of its
distinctive marketing capabilities, innovation and distribution capability.
NIKE is also coming up with the new automatic self-lacing sneakers. Thus
NIKE will embrace the key success factor of extensive research and
development effort to design premium concert athletic products for
customers and product differentiation.

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SOURCES

http://investors.nikeinc.com/Investors/Financial-Reports-and-Filings/Annual-Reports/default.aspx

http://investors.nikeinc.com/Theme/Nike/files/doc_financials/AnnualReports/2009/docs/Nike_2009
_10-K.pdf
http://investors.nikeinc.com/Theme/Nike/files/doc_financials/AnnualReports/2006/docs/10k.pdf

http://
investing.businessweek.com/research/stocks/financials/financials.asp?ticker=NKE:US&dataset=
incomeStatement&period=A&currency=native
http://finance.yahoo.com/q/is?s=NKE+Income+Statement&annual

http://www.nike.com/nikeos/p/nike/en_US/?&ref

Datamonitor.com UMFK library sites

http://en.wikipedia.org/wiki/List_of_most_populous_cities_in_India

www.yahoofinance.com

https://materials.proxyvote.com/Approved/654106/20090724/AR_44240/HTML2/default.htm

http://en.wikipedia.org/wiki/Nike_timeline

http://nikeinc.com/pages/history-heritage

http://investing.money.msn.com/investments/financial-statements?symbol=NKE

http://www.nike.com/nikeos/p/nike/en_IN/store_locator

Strategic Management Concepts and Cases 13 th Edition. Fred R. David.

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