Nike final project
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Nike is the largest seller of athletic footwear and apparel in the world. It designs products for consumers and athletes in categories like running, basketball, soccer, and other sports. Nike sells its products to over 18,000 retail accounts globally through subsidiaries and distributors. While Nike has strong brand recognition and market share in athletic shoes, it faces threats from competition and economic challenges. Its SWOT analysis identified opportunities to expand into growing international markets and increase online and social media marketing to engage younger consumers.
Nike final project
- 1. NIKE INTRODUCTION: Nike is engaged in the design, development and worldwide marketing of footwear, apparel, equipment and accessory products. It sells its products to around 18000 retail accounts in the United States and through a mix of independent distributors, licenses and subsidiaries in nearly 200 countries. Nike is the largest seller of athletic footwear and athletic apparel in the world. The company creates designs for men, women and children. The top selling product category includes running, basketball, children’s, cross-training and women’s shoes. It also designs shoes for outdoor activities like tennis, golf, soccer, baseball, football, hiking and other athletic and recreational uses. VISION: “Bring inspiration and innovation to every athlete in the world.” MISSION: As the largest seller of athletic footwear and athletic apparel in the world (2, 3), we create products for consumers and athletics (1) who enjoy having quality products that are high performance and reliable such as shoes, apparel, and technologically advanced equipment) (4). Our dedicated employees (9) continuously work on developing new products, price, and product identity through marketing and promotion (7). The company aims to lead in corporate citizenship (8) through proactive programs that reflect caring for the world family of Nike (6) and by ensuring continuous growth and profitability to our investors and stakeholders (5). 1. Customer 2. Products or services 3. Markets 4. Technology 5. Concern for survival, profitability, growth 6. Philosophy 7. Self-concept 8. Concern for public image 9. Concern for employees
- 2. SWOT ANALYSIS: OPPORTUNITIES: 1. Younger consumers are less price sensitive and generally spend more on casual and athletic footwear than older consumers 2. Most footwear companies have outsourced their production abroad in order to maintain lower cost and R&D expenses 3. 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 4. 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 5. The Internet allows footwear companies to pursue a direct to consumer sales channel 6. 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 7. Internet sales of apparel, accessories, and footwear could reach 18 percent of category sales by 2012 8. Companies that added a Web-based sales strategy are able to customize footwear and other merchandise directly to the customer’s needs and taste, are enable to achieve considerably better pricing as well as “deepening” the emotional bond consumers have with the brand THREATS: 1. After the age of 40, the typical consumer is not willing to pay more than $35 to $40 per pair for athletic footwear
- 3. 2. Competition is strong among athletic footwear and apparel from off brand companies 3. Fluctuation of foreign currency impacts the cost of importing goods to the U.S. 4. Increase in unemployment has impacted the household income which may result in spending less on brand name 5. Barrier to entry is low 6. Level of inventory is increasing in many retail stores due weak economy STRENGTHS: 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. Nike’s 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 company’s Internet Web site, www.nikebiz.com, allows customers to design and purchase Nike products directly from the company
- 4. 9. Nike has five wholly owned subsidiaries: Cole Haan, Converse, Hurley International, NIKE Golf, and Umbro Ltd WEAKNESS: 1. Nike’s 2009 net income decreased 21 percent to $1.48 billion 2. Almost all of Nike’s 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 Nike’s 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
- 5. STAGE I: THE INPUT STAGE EXTERNAL FACTOR MATRIX (EFE) MATRIX: EFE (External Factor Evaluation) matrix is the strategic tool used to evaluate external environment or macro environment of the firm include economic, social, technological, government, political, legal and competitive information. The organization we selected is a leading Footwear brand “Nike”. Matrix is as follows Key External Factors Weight Rating Weighted Score Opportunities 1. Younger consumers are less price sensitive and generally spend more on casual and athletic footwear than older consumers 0.08 3 0.24 2. Most footwear companies have outsourced their production abroad in order to maintain lower cost and R&D expenses 0.07 4 0.28 3. 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 0.07 3 0.21 4. 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 0.06 4 0.24 5. The Internet allows footwear companies to pursue a direct to consumer sales channel 0.07 4 0.28 6. 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 0.08 3 0.24 7. Internet sales of apparel, accessories, and footwear could reach 18 percent of category sales by 2012 0.07 4 0.28 8. Companies that added a Web-based sales strategy are able to customize footwear and other merchandise directly to the customer's needs and taste, are enable to achieve considerably better pricing as well as "deepening" the emotional bond consumers have with the brand 0.06 3 0.18
- 6. Threats 1. After the age of 40, the typical consumer is not willing to pay more than $35 to $40 per pair for athletic footwear 0.07 3 0.21 2. Competition is strong among athletic footwear and apparel from off brand companies 0.08 2 0.16 3. Fluctuation of foreign currency impacts the cost of importing goods to the U.S. 0.06 2 0.12 4. Increase in unemployment has impacted the household income which may result in spending less on brand name 0.09 3 0.27 5. Barrier to entry is low 0.06 2 0.12 6. Level of inventory is increasing in many retail stores due weak economy 0.08 2 0.16 Total 1.00 2.99 The total of EFE matrix is 2.99, which is more than average. So, it shows that Nike performing up to the mark to avail the opportunities and avoid the threats from the market.
- 7. INTERNAL FACTOR EVALUATION (IFE) MATRIX: IFE (Internal Factor Evaluation) matrix is the strategic tool used to evaluate the company’s internal strength and weakness to identify the company’s abilities against the competitors to win the business game. The organization we selected is a leading Footwear brand “Nike”. Matrix is as follows Key Internal Factors Weight Rating Weighted Score Strengths 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 0.08 4 0.32 2. Nike characterizes its organization as a collaborative matrix organization 0.02 3 0.06 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 0.06 4 0.24 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 0.08 4 0.32 5. Nike's 2009 revenues increased 2.9 percent to $19.1 billion 0.09 4 0.36 6. Inside the United States, Nike has three significant distribution and customer service facilities 0.05 3 0.15 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 0.04 3 0.12 8. The company's Internet Web site, www.nikebiz.com, allows customers to design and purchase Nike products directly from the company 0.07 4 0.28 9. Nike has five wholly owned subsidiaries: Cole Haan, Converse, Hurley International, NIKE Golf, and Umbro Ltd 0.07 3 0.21
- 8. Weaknesses 1. Nike's 2009 net income decreased 21 percent to $1.48 billion 0.07 2 0.14 2. Almost all of Nike's footwear is manufactured outside the United States by independent contractors 0.08 1 0.08 3. In fiscal 2008, contract manufacturers in China, Vietnam, Indonesia, and Thailand manufactured 99 percent of Nike's footwear worldwide 0.06 1 0.06 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. 0.08 1 0.08 5. Accounts payable has increased by almost $1.0 billion in 2009 0.08 2 0.16 6. Negative publicity and boycotting of the Nike products due to outsourcing jobs overseas and the use of child labor in such factories 0.07 1 0.07 Total 1.00 2.65 The total score for IFE matrix is greater than average score which indicate that the company has major focuses on its strengths and is in ability to overcome the weakness
- 9. COMPETITIVE PROFILE MATRIX (CPM): CRITICAL SUCCESS FACTOR: Following are some critical Success factors Price Competitiveness Global Expansion Organizational Structure Technology Product Safety Advertisement Product Quality Product Image Financial Position
- 10. Nike Adidas Puma Critical Success Factors Weight Rating Weighted Score Rating Weighted Score Rating Weighted Score Price competitiveness 0.10 3 0.30 2 0.20 1 0.10 Global Expansion 0.07 4 0.28 3 0.21 2 0.14 Organizational Structure 0.04 3 0.12 1 0.04 1 0.04 Technology 0.09 3 0.27 1 0.09 2 0.18 Product Safety 0.15 2 0.30 3 0.45 4 0.60 Customer Loyalty 0.09 4 0.36 3 0.27 2 0.18 Market Share 0.09 4 0.36 3 0.27 2 0.18 Advertising 0.12 4 0.48 3 0.36 2 0.24 Product Quality 0.12 3 0.36 2 0.24 1 0.12 Product Image 0.07 4 0.28 3 0.21 2 0.14 Financial Position 0.06 4 0.24 3 0.18 2 0.12 Total 1.00 3.35 2.52 2.04
- 11. STAGE II: THE MATCHING STAGE SWOT Matrix: Strengths Weaknesses 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. Nike’s 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 1. Nike’s 2009 net income decreased 21 percent to $1.48 billion 2. Almost all of Nike’s 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 Nike’s 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
- 12. and licensees outside the United States 8. The company’s 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 Opportunities S-O Strategies W-O Strategies 1. Younger consumers are less price sensitive and generally spend more on casual and athletic footwear than older consumers 2. Most footwear companies have outsourced their production abroad in order to maintain lower cost and R&D expenses 3. 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 4. 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 5. The Internet allows footwear companies to pursue a direct to consumer sales channel 6. Sales of apparel, accessories, and footwear on the Internet has been 1. Expand into international market more where the economy is stronger (S1, S3, S4, S7, O1) 2. Increase advertising and promotion through social networking such as Twitter and Facebook (S8, O1, O5, O7) 1. Develop new products for small kids based on cartoon characters (W4, O1, O3) 2. Sponsor more athletics programs, mostly for young generation (W1, W4, W6, O1, O2, O3)
- 13. growing at a double digit pace, considerably faster than more traditional sales models such as retail stores 7. Internet sales of apparel, accessories, and footwear could reach 18 percent of category sales by 2012 8. Companies that added a Web-based sales strategy are able to customize footwear and other merchandise directly to the customer’s needs and taste, are enable to achieve considerably better pricing as well as “deepening” the emotional bond consumers have with the brand Threats S-T Strategies W-T Strategies 1. After the age of 40, the typical consumer is not willing to pay more than $35 to $40 per pair for athletic footwear 2. Competition is strong among athletic footwear and apparel from off brand companies 3. Fluctuation of foreign currency impacts the cost of importing goods to the U.S. 4. Increase in unemployment has impacted the household income which may result in spending less on brand name 5. Barrier to entry is low 6. Level of inventory is increasing in many retail stores due weak economy 1. Develop a new moderately priced product line (S1, S2, S3, S4, T2, T4, T6) 2. Expand distribution by selling to stores other than their own retailers (S7, T2) 1. Make low priced footwear made in the US and promote it as “Made in America” (W2, W6, T2, T3, T4, T6) 2. Acquire a less expensive brand of accessories and sportswear and promote them as an off brand of Nike (W4, W6, T1, T4, T6)
- 14. SPACE MATRIX: Financial Stability (FS) Environmental Stability (ES) Return on Investment 4 Unemployment -4 Leverage 5 Technological Changes -4 Liquidity 3 Price Elasticity of Demand -5 Working Capital 3 Competitive Pressure -5 Cash Flow 4 Barriers to Entry -5 Financial Stability (FS) Average 3.8 Environmental Stability (ES) Average -4.6 Competitive Stability (CS) Industry Stability (IS) Market Share -1 Growth Potential 5 Product Quality -2 Financial Stability 4 Customer Loyalty -3 Ease of Market Entry 1 Competition’s Capacity Utilization -1 Resource Utilization 3 Technological Know-How -4 Profit Potential 4 Competitive Stability (CS) Average -2.2 Industry Stability (IS) Average 3.4
- 15. X-axis; IS+CA= (3.4) + (-2.2) = 1.4 Y-axis: FS + ES= (3.8) + (-4.6) = -0.8 FS CS ES IS 654321 Conservative Aggressive CompetitiveDefensive 1 2 3 4 5 6 7-2-3-4-5-7 -1-6 7 -7 -6 -5 -4 -3 -2 -1
- 16. BCG MATRIX: 1. Market development 2. Market penetration 3. Product development 4. Forward integration 5. Backward integration 6. Horizontal integration NIKE
- 17. INTERNAL EXTERNAL MATRIX: Strong 3.0 to 4.0 Average 2.0 to 2.99 Weak 1.0 to 1.99 High 3.0 to 3.99 I II III Medium 2.0 to 2.99 IV IV Nike, Inc VI Low 1.0 to 1.99 VII VIII IX The EFE Total Weighted Score
- 18. GRAND STRATEGY MATRIX: 1. Market development 2. Market penetration 3. Product development 4. Forward integration 5. Backward integration 6. Horizontal integration 7. Related diversification Weak Competitive Position Quadrant II Quadrant I Quadrant IV Quadrant III Strong Competitive Position Rapid Market Growth Slow Market Growth
- 19. STAGE III: DECISION STAGE QSPM: Key Factors Weight AS TAS AS TAS Opportunities 1. Younger consumers are less price sensitive and generally spend more on casual and athletic footwear than older consumers 0.08 1 0.08 4 0.32 2. Most footwear companies have outsourced their production abroad in order to maintain lower cost and R&D expenses 0.07 --- --- --- --- 3. 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 0.07 --- --- --- --- 4. 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 0.06 2 0.12 3 0.18 5. The Internet allows footwear companies to pursue a direct to consumer sales channel 0.07 --- --- --- --- 6. 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 0.08 2 0.16 4 0.32 7. Internet sales of apparel, accessories, and footwear could reach 18 percent of category sales by 2012 0.07 4 0.28 1 0.07 8. Companies that added a Web-based sales strategy are able to customize footwear and other merchandise directly to the customer's needs and taste, are enable to achieve considerably better pricing as well as "deepening" the emotional bond consumers have with the brand 0.06 4 0.24 1 0.06 Threats 1. After the age of 40, the typical consumer is not willing to pay more than $35 to $40 per pair for athletic footwear 0.07 1 0.07 4 0.28 2. Competition is strong among athletic footwear and apparel from off brand companies 0.08 --- --- --- --- 3. Fluctuation of foreign currency impacts the cost of importing goods to the U.S. 0.06 --- --- --- ---
- 20. 4. Increase in unemployment has impacted the household income which may result in spending less on brand name 0.09 1 0.09 3 0.27 5. Barrier to entry is low 0.06 --- --- --- --- 6. Level of inventory is increasing in many retail stores due weak economy 0.08 4 0.32 2 0.16 TOTAL 1.00 1.36 1.66 Strengths 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 0.08 --- --- --- --- 2. Nike characterizes its organization as a collaborative matrix organization 0.02 --- --- --- --- 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 0.06 3 0.18 1 0.06 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 0.08 3 0.24 1 0.08 5. Nike's 2009 revenues increased 2.9 percent to $19.1 billion 0.09 --- --- --- --- 6. Inside the United States, Nike has three significant distribution and customer service facilities 0.05 --- --- --- --- 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 0.04 3 0.12 4 0.16 8. The company's Internet Web site, www.nikebiz.com, allows customers to design and purchase Nike products directly from the company 0.07 4 0.28 1 0.07 9. Nike has five wholly owned subsidiaries: Cole Haan, Converse, Hurley International, NIKE Golf, and Umbro Ltd 0.07 1 0.07 3 0.21 Weaknesses
- 21. 1. Nike's 2009 net income decreased 21 percent to $1.48 billion 0.07 1 0.07 3 0.21 2. Almost all of Nike's footwear is manufactured outside the United States by independent contractors 0.08 --- --- --- --- 3. In fiscal 2008, contract manufacturers in China, Vietnam, Indonesia, and Thailand manufactured 99 percent of Nike's footwear worldwide 0.06 --- --- --- --- 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 0.08 1 0.08 3 0.24 5. Accounts payable has increased by almost $1.0 billion in 2009 0.08 --- --- --- --- 6. Negative publicity and boycotting of the Nike products due to outsourcing jobs overseas and the use of child labor in such factories 0.07 --- --- --- --- SUBTOTAL 1.00 1.04 1.03 SUM TOTAL ATTRACTIVENESS SCORE 2.4 2.69 Recommendations Acquire a company who manufactures and sells less expensive products than Nike. The company should have established distribution and retail shelf space with non-competing product lines. It would be ideal if the company is a U.S. based corporation with domestic manufacturing facilities.