Nike: company analysis

Executive Summary

The famous shoe Company with the swoosh logo has gone from strength to strength, since its inception in 1962, headquartered at Beaverton, Oregon  to emerge as an industry leader – the most competitive sports and fitness company(www.nike.com). However of late, there has been some drop in sales because Adidas has teamed up with Reebok and has also managed to win the bid to outfit all athletes of the Australian team for the next three years which is a substantial contract worth over 20 million Australian dollars (Pullen 2005).

Company Profile

The Company was founded by Bill Bowerman and Phil Knight and the first shoe with the Nike Swoosh was introduced in 1972. The swoosh on the Nike shoe embodies the wing of the Greek goddess Ni-Key who is the goddess of victory sitting beside Zeus, inspiring the most courageous warriors on to victory(www.trizera.com). The Company started out manufacturing running shoes with cushioned mid soles and expanded into a wide range of products including sporting goods and T shirts. Branch offices are located at New York city, Yarmouth Maine, Montreal Canada, Costa Mesa California and various locations all over the world. As of May 31, 2005, the Company operated 184 stores in the United States and 190 stores internationally (Gale Database).

The Company’s Mission statement is “To maximize profits to shareholders through products and services that enrich peoples’ lives” while their value statement is  “To bring inspiration and innovation to every athlete in the world.” John McEnroe, Joan Benoit, Shane Warne and Andre Agassi became some of the famous athletes who promoted Nike products. The Company Objectives are (a) to provide a supportive work environment to help employees maximize their contribution to Nike (b)provide quality and innovative services internally and externally (c) identify focused customer segment opportunities and (d) establish ties with those customer segments to (e) maximize profits.(www.trizera.com)

Nike currently employs about 24,667 employees worldwide and its annual sales as of May 2005 were $13,739.70 M. Total assets as of May 2005 were 8793.5 million dollars and total liabilities 3149.3 million dollars and revenue rise was slow during the last quarter. Shares are currently being traded at about $80 per share.(Gale Database), As of September 20^th, quarterly profits had jumped   by 32% and pushed up the value of its stock up to $83.45.(Sage 2005: C1). The company earned 432.3 million dollars in the last quarter.

Company culture and growth/marketing strategy

Nike corporate culture remains close knit, as if it is a small company although it operate on a global scale in association with its partners. As a global company, the organization works on the principle of diversity, enjoying a close relationship with its shareholders, suppliers, distributors and partner companies.(www.nike.com). However, in terms of social sustainability reports, Nike was unable to qualify in terms of its social index, because since 2001, there were concerns expressed about the labor practices of its sub contractors, such as low wages, forced overtime, using military to suppress protests and unsafe working conditions. However as of July 2005, the Company has been included in the social responsibility index because there have been significant efforts within the organization to address the concerns of the critics and take action on the corporate shortcomings (www.nike.com)

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While the Company started out as a part time venture for its founders, the incorporation of the swoosh logo literally lent wings to the growth of the Company. The Nike brand was launched at the U.S. Olympic trials in 1972 and Steve Prefontaine became the first athlete to wear Nike shoes and advertise them(www.trizera.com). This has been the keynote of the Company’s growth strategy. Celebrity endorsements have helped boost the sales of the Company, and the volume of its business has expanded through its alliances with various subsidiary sports goods manufacturers such as Hurley International Exeter Brands group(www.nike.com). During the 1970s Nike developed a variety of sophisticated sports shoes for various markets which were so successful that the Company was able to go public in 1980 with 2 million shares of common stock.

The Company has also remained at the forefront through the superiority of its sports  product and the introduction of new technology in their manufacture. Nike has remained the most consistently popular brand of athletic footwear, with the closest competition coming from Reebok. Its consistently superior product has made it the preferred brand and made the Nike family expand internationally as well, with a European, Asian and Australian division. In the U.S. markets, Nike has remained the industry leader in the athletic shoe market. According to Charlie Denson, the President of Nike, the success of Nike has a great deal to do with the power of the human spirit and through the establishment of an emotional connection with the customer. (Baugh, 2005). The Company’s strategic alliance with NBA and its celebrity promotions through the NBA star Michael Jordan have also reaped rich rewards for the company in the marketplace.

SWOT Analysis

Strengths:

• Strong, sustained brand name and image
• Superior quality of its products
• Celebrity endorsements of its athletic products
• Consistent profits over the last several years
• Profitable collaborations with strategic partners worldwide
• Outsourcing through its international subsidiaries and Diversity of products

Weaknesses:

• Price of Nike products generally perceived as pricey
• Allegations of labor abuse by Nike corporate subsidiaries

Opportunities:

• Expansion into sporting goods and general merchandise sales(Sage 2005)
• Innovative new campaign on running bare feet as sales generator (Lees 2005)
• Acquisition of starter brand of low priced shoes to expand market (Sage 2005)
• New strategy and logo for Bauer and Nike Hockey brand (New Strategy, 2005)

Threats:

• Rising oil process pinching consumer spending for pricey shoes
• Acquisition of Reebok by Adidas-Saloman poses potent competitive threat (Carr 2005)

Conclusion

Nike has been enjoying a steady consistent profitability due to its superior sports shoes, diversification of its products and its good relationship with its suppliers and distributors. However, the merger of Adidas and Reebok poses a potent competitive threat for Nike’s future profitability, as also rising gas prices which could impact upon consumer spending. Therefore Nike needs to focus more on expanding its market through its lower priced range of products in order to maintain its lead position in the industry.

APPENDIX 1: NIKE FINANCIAL STATEMENTS

NIKE INC CL B
Company Financials