Nike Case Study

COMPANY INTRODUCTION Company History 1950-59: Bill Bowerman, a track coach at the University of Oregon was always seeking ways to give his athletes a competitive advantage. He experimented with track surfaces, re hydration but most importantly, running shoes. Phil knight was a one of the athletes performing for Bowerman on the track team and used his knowledge from his MBA in finance to take a proposal of running shoes to Onitsuka, manufacturing of Tiger shoes and to make him a distribute. Knight took the shoe samples to Bowerman hoping to sell, but instead Bowerman asked him to become a partner and initiate footwear designs to send to Tiger; and the partnership began. 1960-69: In 1964, Bowerman and Knight shook hands with Blue Ribbon Sports where they sold their innovative shoes of Tiger, whilst Bowerman was ripping them apart trying to see how they could make them lighter and better. As Bowerman and Knight each had full time jobs, they decided to hire Jeff Johnson as their first employee in 1965 and the company was starting to work up. 1970-79: Johnson became a very useful man as he overlooked marketing, mail order system, opening up another branch as well as coming up for the name Nike in 1971. At this time, BRS and Onitsuka wanted to part as Nike was ready to become a manufacturer of shoes and not just a distributor. They started with a new innovative shoe from a sole and a waffle iron that seemed to make a great impression, Around this time, the „swoosh‟ originated and Nike was off to flying start. All they needed was someone to endorse their shoes. That person was Steve Prefontaine who electrified the stands from 1969 to 1973 during his college career. With exposure over Sports Illustrated and becoming an Ambassador of the company, he distributed the new creative news to many top track athletes with personal notes of encouragement. He was a great asset to the company and known as the „Soul of Nike‟. 1980-89: In late 1980, Nike offered its IPO, however this transition phase was hindered as some of the early pioneers decided to move on elsewhere. Even Phil Knight removed himself as President and become the CEO and chairman of the board. In the mid 80‟s, Nike slipped as the industry leader, luckily however, they decided to endorse Michael Jordan, which was a huge boost for Nike. In 1987, Nike‟s marketing revolution began with their new Air Max shoes and their memorable TV ad featuring the Beatles song Revolution with the tag line „Just do 1 it‟ coming shortly after. By 1989, Nike had regained its position as industry leader and never let it go since. 1990-99: Nike opened their headquarters in Oregon, with soccer and golf being their desired sports to excel in. They signed some magnificent players from the Brazilian national team and then decided to sign the whole team in 1995. More importantly, they signed arguably one of the best athletes of all time in any sport in 1996, Tiger Woods. Competitors laughed at Nike for signing him for $5 million dollars until he won the masters by 12 stroked in 1997. 2000-present: Nike opened up the millennium with Nike Shox resulting in cushioning and stability which landed them a gold standard in the industry. Just as Nike‟s products have evolved, so has Nike‟s approach to marketing. The 2002 “Secret Tournament” campaign was Nike‟s first truly integrated, global marketing effort. Departing from the traditional “big athlete, big ad, big product” formula, Nike created a multi-faceted consumer experience in support of the World Cup. At an investor meeting at its world headquarters in June 2011, NIKE, Inc. announced an increase to its fiscal 2015 revenue target to a new range of $28-30 billion, up from its previous target of $27 billion announced in May 2010. The company also increased its fiscal 2015 revenue target for the NIKE Brand to $2425 billion, up from its previous target of $23 billion. Mission: Vision: ways we will achieve this goal is to find avenues to reach our long-term vision of decoupling profitable growth from constrained resources.” Objectives obal sportswear market 2 -digit revenue growth (average annual rate), Mid-teens Earnings Per Share growth (average annual rate), Return on Invested Capital of 25%, Increasing dividends within a target calendar year payout range of 25-35% of trailing four quarter earnings per share Appendix A - External Analysis The industry I will be analyzing is the men‟s and women‟s sportswear industry. 1. Strategically Relevant Factors in the Macro-Environment (PESTEL Analysis) 1.1 Political -Globalization makes it easier for consumers to seek products from international markets and companies to enter new geographic markets Diversification of production plants reduces the risk that a firm will greatly be affected by a problem in any particular country 1.2 Economic -Sportswear is more concentrated than the overall apparel and footwear market. -This trend strengthened over the review period, and the combined share of the top 10 global players rose from 33% in 2008 to 37% in 2013. -State of the economy greatly impacts leisure goods such as sportswear 1.3 Socioeconomic -Consumers are looking to buy products that allow for exercise and healthy living -Consumers are becoming more and more aware of unethical practices of manufacturers including practices such as child labour and sweatshop usage 1.4 Technological -New technology is constantly being developed to improve products, top companies employs many specialists including engineers, athletes, biomechanics, and industrial designers to work together in the design process -Ecommerce and online shopping continues to allow the industry to grow 1.5 Environmental -Environmentally friendly products are becoming of increasing importance to consumers, -Many of the products are being manufactured in China, Singapore and Thailand using large factories, that are very damaging for the environment 1.6 Legal -Players in this industry outsource to third-party contractors in countries including China, Indonesia, and Vietnam. Government legislation regulating factories or an increase in input costs, especially labor costs 3 Implications: The industry is continuing to grow internationally. This tool indicates that this industry will remain profitable for all its major market share holders for the next several years. Globalization is helps the international brands expand worldwide, and this combined with the general trend towards healthy living looks to be very favourable for this industry‟s key players. 2. Industry Economic Traits 2.1 Market Size and Growth Rate ion in US alone. 2.2 Number of Buyers accounts for a significant fraction of overall market demand. All ages and genders are buyers in this industry. 2.3 Buyer Needs and Requirements Nike, Under Armour and Adidas to maintain competitive advantage over smaller competitors 2.4 Numbers of Rivals players are Nike, Under Armour and Reebok, there are also smaller independent rivals such as ASICS and counterfeiters. 2.5 Degree of Product Differentiation becoming less differentiated. “Look-alike” products or rivals are causing heightened price competition. 2.6 Product innovation 4 improve their products and make them make they more adaptable to the different sports and overall health and exercise 2.7 Pace of Technological Change efficiency in their production process while ensuring that they are respecting human rights which has become more of an issue as human rights violations surface. 2.8 Vertical Integration of the developing world to take advantage of the cheap labour costs. 2.9 Economies of Scale are the major activities as the products, especially athletic shoes are manufactured using very cheap labour and sold for much higher prices, getting very high margins per shoe. Implications: The industry is looking very strong and conducive to continued growth for the major industry players. Globalization makes potential for economic growth in this industry enormous and the number of buyers remains plentiful. 3. Key Success Factors 3.1 Ability to make new and innovative products o Without this, companies will lose repeat customers and lose market share to more innovative competitors 3.2 Brand recognition and reputation o Crucial for customers to be willing to pay high price for product 3.3 Expansion into global markets o Key determinant for growth as North America is already very saturated 5 3.4 Ability to market effectively in DTC platforms o Needed to bind the customer to the brand or will lose customers to competitors 4. 4.1 Threat of New Entrants Low -In order to pose a real threat to the industry‟s main players, there would need to be significant capital investment in order to establish distribution and supply chain management internationally 4.2 Threat of Substitute Products Low to medium -Only real threat comes from counterfeit products which has been improving steadily over the years and has threatened to dilute brands and have consumers with no desire to find the authentic 4.3 Competition From Rival Sellers Medium to High -The global market for athletic footwear, apparel and equipment has intense competition, the main competitors are Adidas, Under Armour and Nike. -Constant changes in consumer preference forces companies to adapt quickly or risk losing market share 4.4 Bargaining Power of Suppliers Low -Sportswear and athletic shoes are manufactured by third-party contract manufacturers.in developing countries, including Vietnam, China, Bangladesh and Indonesia -Costs of changing suppliers is significant. 4.5 Buyer Bargaining Power Low to Medium -Companies in just industry use wholesale and direct-to-consumer channels -Major competitors have strong brand reputation which keeps customers intrigued -Customers do have the choice between elite brands and could switch between top recognized brands if price, style Implications: This tool indicates that this industry is conducive to high profitability. For the foreseeable future, competition will remain among the top industry players. 6 5 Driving Forces 5.1 Changing societal concerns, attitudes and lifestyles o People are choosing healthier lifestyles o Women particularly are now buying sportswear 5.2 Product and marketing innovation o Constant battle among competitors to have the most innovative gear o Use of athlete sponsorship becoming prominent- battle for top athletes 5.3 Increasing globalization o International markets are becoming more and more appealing and barriers to entry are getting less and less and there is a growing middle class in places like China As a whole, these driving factors are causing the demand for the industry‟s product to increase. The combined impacts of the driving forces are leading to higher profitability for industry competitors. Strategies of industry players need to continue to take advantage of the consumer interest being active and wearing the most innovative sportswear. 6. Strategic Group Map Strategic Map Analysis Where is the best spot? The best spot on the map to be is the top right section because the company that is closest to that area will be able to demand the highest price for their product and as a result, have the best margins. Which companies are destined to prosper? Due to the current industry outlook, all companies are able to prosper. The most profitable will be the industries that are able maintain a high quality of their product. 7 Which companies are destined to struggle? Under Armour will struggle unless it is able to increase their brand awareness and convince consumers that it is able to deliver as high quality and trustworthy product as Nike and Adidas What accounts for why some sections of the map are better than others? The bottom right section of the map may be better because companies in that section of the strategic map will likely be able to sell a higher volume of their product because they are piggybacking off the established brand names but charging a much lower price. 7. Framework for Competitor Analysis Implications: Competitors pose a strong threat to profitability of Nike. With the global market opening up more and more, and with a growing middle class in markets such as India and China, there will be much room for growth by top industry players. 8 Current Strategy Nike -Nike is the leader in value share of the market (15%) -Competitive advantage lies in their brand recognition and awareness Nike Invests significantly in product innovation Objectives Focused on maintaining their high rate of product development and increasing their DTC sales Capabilities Strengths – Nike has an incredibly strong brand and tech reputation that justify high price of products Weaknesses- Highly dependent on third party sellers Assumptions Will be able to extend into China, Nike is currently struggle to get into Chinese market but are trying Adidas Adidas has a significant value share of the market (10.8% ) global brand key marketing sport in most global markets. It has strong ties throughout the sport, notably with world governing body FIFA. Investing heavily in more retail space and innovation Key objectives are to maintain segmented position, grow retail share, keep up innovation pace Extremely strong brand portfolio, strong multi-brand strategy which allows is to operate at almost any point in the market Weaknessesextremely dependent on third party retailers, Will be able to create such high quality products that it will not be threatened by counterfeiting Under Armour Under Armour has 1.1% value share of the market Looking to make strong gains in women‟s sportswear, have invested heavily into its creative talent with women‟s product Currently meeting their objectives and growing in terms of sales, but they still need to improve their brand awareness considerably Strengths- perceived as an athlete-oriented producer. Has a high level of credibility Weakness- Lacks the scale that Nike and Adidas have in manufacturing will be able to maintain their quality that gives them such a great reputation as they expand 9 8. Industry Outlook This industry outlook is conducive to high profitability. The macro-environment shows that companies in this industry are subject to the legal constraints of the countries in which they outsource to but overall the socioeconomic factor that is causing people to value their health and living a healthy lifestyle is conducive to great overall profitability. This industry is extremely saturated with competition but it is not squeezing profitability, instead it is increasing because consumers are not very price sensitive and rival companies are pushing each other to constantly create innovative products which can command a high price. The industries‟ profitability will be favorably impacted by the driving forces because there can be significant growth expected as companies are able to expand into new markets across in the world that have disposable income. This will continue to be a challenge for companies, but as technology advances, products will be more difficult to knockoff. Nike occupies the strongest market position in the industry because their brand awareness and reputation for high quality products is unmatched. This position is not likely to change because Nike has developed this reputation over decades and it is difficult to replicate. The threat of new entry is weak because of the tremendous capital investment that is required to set up the distribution and manufacturing channels necessary to compete in this industry. Nike has been able to deliver on the key success factors considerably with the exception of their ability to get into foreign markets, they are currently having much more difficulty than their competitors in getting into China and other major markets in Asia. Appendix B- Internal Analysis 9. Financial Analysis 10 US$ in millions 12 months ended Revenues Cost of sales Gross profit Demand creation expense Operating overhead expense Selling and administrative expense Operating income Interest income Interest expense Interest income (expense), net Other income (expense), net Income before income taxes Income tax expense Net income May 31, 2019 May 31, 2018 39,117 36,397 (21,643) (20,441) 17,474 15,956 (3,753) (3,577) (8,949) (7,934) (12,702) (11,511) 4,772 4,445 82 70 (131) (124) (49) (54) 78 (66) 4,801 4,325 (772) (2,392) 4,029 1,933 May 31, 2017 May 31, 2016 34,350 32,376 (19,038) (17,405) 15,312 14,971 (3,341) (3,278) (7,222) (7,191) (10,563) (10,469) 4,749 4,502 27 12 (86) (31) (59) (19) 196 140 4,886 4,623 (646) (863) 4,240 3,760 May 31, 2015 30,601 (16,534) 14,067 (3,213) (6,679) (9,892) 4,175 6 (34) (28) 58 4,205 (932) 3,273 May 31, 2014 27,799 (15,353) 12,446 (3,031) (5,735) (8,766) 3,680 5 (38) (33) (103) 3,544 (851) 2,693 Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25). 11 Income statement item Revenues Description Amount, including tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value-added and excise. Operating income The net result for the period of deducting operating expenses from operating revenues. Income taxes before income The company Nike Inc.‟s revenues increased from 2017 to 2018 and from 2018 to 2019. Nike Inc.‟s operating income decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level. Amount of income (loss) from continuing operations, Nike Inc.‟s income before income taxes decreased from including income (loss) from equity method investments, 2017 to 2018 but then increased from 2018 to 2019 not before deduction of income tax expense (benefit), and reaching 2017 level. income (loss) attributable to no controlling interest. Nike Inc., short-term (operating) activity ratios Net income The portion of profit or loss for the period, net of income taxes, which is attributable to the parent. Inventory turnover An activity ratio calculated as cost of goods sold divided by inventory. Receivables turnover An activity ratio equal to revenue divided by receivables. Payables turnover An activity ratio calculated as cost of goods sold divided by payables. An activity ratio calculated as revenue divided by working capital. Working capital turnover Nike Inc.‟s net income decreased from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level. Nike Inc.‟s inventory turnover ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019. Nike Inc.‟s receivables turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. Nike Inc.‟s payables turnover ratio decreased from 2017 to 2018 and from 2018 to 2019. Nike Inc.‟s working capital turnover ratio improved from 2017 to 2018 and from 2018 to 2019. 12 Figure 1: Nike Inc., consolidated income statement, US$ in millions Figure 2: Nike Inc., consolidated income statement, US$ in millions 13 Figure 3: Nike Inc., short-term (operating) activity ratios Figure 4: Nike Inc., short-term (operating) activity ratios Source of (Figure 1-4) : Stock Analyses on Net, Financial statements analysis and common stock valuation, link: https://www.stock-analysis-on.net. 14 Period Ending: Nov 30, 2019 Aug 31, 2019 May 31, 2019 Feb 28, 2019 Period Length: 0 Months 0 Months 0 Months 0 Months Cash From Operating Activities Cash From Investing Activities 1306 394 5903 3893 -788 -348 -264 -121 Cash From Financing Activities -1868 -1010 -5293 -4267 Net Change in Cash -1396 -1020 217 -554 * In Millions of USD (except for per share items) Table 2: Quarter Nike report May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 0 Months 0 Months 12 Months 12 Months Cash From Operating Activities 5903 4955 3846 3399 Cash From Investing Activities -264 276 -1008 -1034 Cash From Financing Activities -5293 -4835 -2148 -2974 217 441 670 -714 Period Ending: Period Length: Net Change in Cash * In Millions of USD (except for per share items) Table 3: Annual Nike report Source (Table 1, Table2): Investing.com, link: https://www.investing.com/equities/nike-financial-summary. Nike Financial Summary 2019 For the six months ended 30 November 2019, Nike Inc revenues increased 9% to $20.99B. Net income increased 28% to $2.48B. Revenues reflect Greater China segment increase of 21% to $3.53B, North America segment increase of 100% to $8.28B, Comparable Store Sales (Growth- %), NA increase from -2.5 to 0%, Online Sales - North America increase of 27% to $1.43B. Net income benefited from Merchandise Margins, Total - % increase of 2% to 44.9%. 15 10. 10.1 Introduction Developing an effective strategy that aligns with the company vision is vital to success. There are internal and external aspects to consider when designing and implementing strategies. Customers, competitors, the culture within the company, and the employees are a combination of internal and external factors, and all are important to business strategy (Lofgren, 2018). A strategy is a plan that requires examining areas of potential risk and opportunity. With every opportunity, there is a potential risk, but it is crucial for a company to assess whether the chance to grow outweighs the risk. Strategies are not meant to be perfect and will need to be designed to adapt to the changing environment. Companies that are looking for new innovative ways to improve their strategy are on the path to long-term success (Porter, 1996). Several business strategies exist, and executives have the opportunity to utilize these strategies to gain a competitive advantage in their industry. There are different components to consider before selecting and implementing a business strategy 10.2 Business Strategies at Nike Cost-leadership and Differentiation are generic strategies that define the strategic position of an organization, but each strategy consists of different elements. Organizations that utilize a differentiation strategy compete based on what makes them unique from the other competitors. Also, with a differentiation strategy value is created for the customer base by introducing new innovative products, which allows a company to set higher prices. The cost-leadership strategy creates same or similar value for customers and leads to lower prices on products. When deciding which plan to implement it is essential for a company to identify the competition as well as the potential trade-offs (Rothaermel, 2017). Nike uses a cost leadership strategy combined with a differentiation strategy from their model to gain and sustain a competitive advantage (Gregory, 2017). Nike minimizes the cost of production for their products thus increasing their revenue, and this allows them to deliver 16 high-quality gear and equipment to athletes around the globe. Keeping the costs and consumer in mind when making decisions enables Nike to stay competitive and thrive as a business. Combining this strategy with the differentiation strategy creates value. Nike's ability to develop unique products that provide value to the customer is essential to their model. Nike's brand, marketing ability, innovative approach, and diverse culture are key elements that have led to their success in the business world (Pysh, 2017; Gregory, 2017). Combining these elements with their business model enables Nike to have unmatched performance in its industry and will keep them at a competitive advantage long-term. It is important to mention that several businesses are unable to combine two different strategies and make it work successfully. Nike's primary generic business strategy is product differentiation. Nike's ability to utilize a cost-leadership strategy comes from minimizing production costs, which allows them to maximize revenue. An organization that has a clear focus on the type of strategy to pursue can lead to them developing a competitive advantage in their market 10.3The Business Strategy Nike Uses in Its Marketplace Approach Nike uses a product differentiation approach focused on growth and development. Creating value for the customer and believing in their dreams no matter how crazy they seem sets Nike apart from Adidas, Under Armour, Puma, and Lululemon. Nike's differentiation strategy incorporates product development, marketing, diversification, and most importantly the customer (Gregory, 2017). Nike is focused on diversity and uniting all athletes globally no matter the gender, race, or age. Nike's product diversity is another component that has contributed to their success and competitive edge in the marketplace. Offering products outside of shoes like apparel, sports equipment, electronics, and backpacks creates value and shows they are unique outside of athletic shoes. The marketing techniques used by Nike connects their customer base with the brand and allows them to understand the changing consumer trends. Successful marketing tactics start with emotion by appealing to 17 the consumers on a personal level. Nike's draws attention to ideas that are bigger than the brand itself, and they show the importance of forming a connecting. Developing new innovative products is a customer need that will never fade away, and as the market continues to introduce new technology companies will need to re-invent themselves to stay competitive. As long as Nike continues to bring high quality products to the customers and considers them in the decision-making process, then the focus will be on the Nike brand for years to come. The differentiation strategy allows Nike to position itself into the competitive environment and bring consistent value to the consumer. 10.4 Analysis of Nike's Business Model Four interconnecting elements comprise the Nike business model, and these elements create value for the shareholders and the consumer. Tangible and intangible resources, profit formula, customer value proposition, and key processes are four elements essential to Nike's business model (Mishra, 2011). Core Products The core products at Nike include shoes for a variety of lifestyle and sports activities, clothing, sports equipment, athletic bags, backpacks, and accessory items. Nike has acquired other companies such as Hurley, Converse, Cole Haan, and Chuck Taylor which allows them to reach new markets outside of the athletic shoes, apparel, and equipment. Profit Formula Nike's diversity, acquisitions, and innovative approach contribute heavily to generating revenue for this organization. Developing new innovative products and appealing to the consumer needs keeps the swoosh logo thriving worldwide. Investing in research and development as well as marketing consistently provides Nike with the opportunity to explore new markets, and ensure they are connecting with their customer base on a personal level. Low manufacturing and distribution costs is another area that allows Nike to make money. Lower production costs give Nike a competitive advantage and keeps their revenue 18 growing at an exponential rate. Outlet stores is another aspect that adds to Nike's diversity since these types of stores have reduced prices. Lowering the prices can bring in more customers, thus increasing profit and offering lower prices also allows Nike to appeal to the price perspective that consumers keep in mind when shopping. Knowing their strengths and how to leverage them in the marketplace is vital to their success and profits. Customer Value Proposition The customer value proposition (CVP) explains to the customer why they should purchase a particular product or service from a company. Nike's CVP is comprised of marketing, technologically advanced products, accessibility, and the brand. Offering innovative shoes, apparel, and equipment as well as unique marketing shows the customer the value of investing in Nike's products. Accessibility involves Nike's acquisitions of Converse and Hurley, which provides the customer with a variety of different products. The Nike brand is well known, and many top athletes use their products to excel in their profession. Consumers that see well-known athletes wearing the brand will feel confident purchasing anything with the iconic Nike brand on it (Mishra, 2011). Profit Proposition On top of athletic footwear, apparel, and equipment Nike has found different ways of generating profit from various acquisitions and partnerships all the way to lowering the manufacturing and distribution costs. Hurley, Converse, Chuck Taylor are companies that Nike has purchased and it has opened new areas of opportunity outside the sports realm. The low manufacturing cost and distribution costs have led to a competitive advantage. Logistics is a vital company to any operation, and developing new techniques to save money in this area is essential moving forward. As labor costs increase, Nike will need to remain agile in their production and distribution strategy to ensure profit margin continues to grow (From Factory to Footwear, 2018). 10.5 Nike's Corporate Strategy The corporate strategy consists of business units that operate under the same roof but are grouped into their own categories. These different 19 business units may work differently, but overall, they make revenue for the organization as a whole. Footwear is a business unit within Nike that requires its own type of marketing and innovative design. The demographic for these shoes is anyone who is an athlete, and Nike considers everyone to be an athlete. With this type of customer base, it is essential to design shoes that appeal to everyone. This business unit contributes about 60% to Nike's total revenue, and it is important to keep this unit growing (Nike Inc's Business Segments Description, 2018). Another essential business unit is apparel, and it is another aspect that requires unique marketing and design. Apparel contributes close to 28% to the total revenue and it the second highest following shoes. These business units have a close relationship since they are intended to complement each other. Both business units operate independently, but they work to advance the company forward. Nike's corporate strategy is designed to promote collaboration of these units to ensure the long-term success of the organization. The geographical regions where Nike operates includes North America, Western Europe, Eastern/Central Europe, Greater China, and Japan. There are emerging markets that Nike is focused on as well, and continuing to expand into new markets is vital to the growth of the organization (Cheng, 2009). Nike is a vertically integrated organization in that it controls its distribution, marketing, and retail aspect. However, an opportunity that could be pursued by Nike is in their manufacturing. If Nike can start to gain more control of its manufacturing and establish more factories in the North America geographical region, then they can become even more vertically integrated. 11. SWOT Analysis 11.1 Strengths: – the Nike brand enjoys massive levels of consumer awareness and brand equity. - outstanding reputation for highly innovative product development. 20 price positions 121.2 Weaknesses: – more than 80% of Nike brand sales are via third party retailers who return lower margins and risk compromising brand equity. – Nike has poor marketing in China which has caused them great difficulty in successfully entering the Chinese 11.3 Opportunities: - Through social media and development of direct-to consumer business will help consumers feel closer to the brand and develop a more personal relationship r products are showing significant growth revenue opportunities. Nike has just employed several high end women‟s fashion designers to gain to tap into this revenue stream players, Nike has the opportunity to secure that partnership and have access the millions of NBA fans around the world 11.4 Threats: – Adidas closed in on some of the market share through their larger store network - the brand was hurt by allegations that they were involved in child labour and sweatshop usage. Brand was also hurt by poor behavior of their celebrity endorsers. and has threatened to dilute brands and have consumers with no desire to find the authentic product Implications: Nike looks to grow considerably over the next few years as the industry becomes even more profitable and their strengths are so strong that they should be able to seize the opportunities relatively easily. The threats to their brand can be easily overcome by consistently 21 putting safeguards in place to prevent further unethical engagement. Opportunities and strengths outweigh the threats and weaknesses. 12. Value Chain Analysis PRIMARY ACTIVITIES 12.1 Supply Chain Management wasted time therefore achieving more efficiency in their supply chain. Amongst these improvements are: 50% reduction in defect rates, 40% faster lead times, 20% improvement in productivity, 30% reduction in time taken to introduce a new model. while eliminating all kinds of waste, including lost time and material by empowering its employees with the skills and knowledge required to manage production and issues related to process or quality improvements quickly chain 12.2 Operations -party contractors in countries including China, Indonesia, and Vietnam. Government legislation regulating factories or an increase in input costs, especially labor costs, third party contractors outside the US. manufactured approximately 42%, 30%, and 26% of total Nike brand footwear, respectively 12.4 Distribution in Memphis, Tennessee for the Nike brand, as well as Nike Golf. 22 countries and regions including Canada, Asia, some Latin American countries and Europe. Beaverton. 12.5 Service consumers to the brand, and attempt to second-guess what the consumer wants. Nike has collated vast amounts of data on consumer search and purchase history via its internet sales, and can use it develop products and marketing. products, make suggestions, alert the consumer to events and sales, and underline the brand‟s image as tech-led and youthful a direct line to consumers to handle and questions, comments or complaints. specific color for each element of the shoe SUPPORT ACTIVITES 12.6 Human Resource Management d training that taught employees the importance of many HR issues and approaches among factory management low tech and low skilled employees with employees with much more skill and knowledge that put employees closer to the decision making process 23 12.7 Sales & Marketing Footwear-interested of corporate and consumer groups -commerce allows Nike to follow them consumers, build an online community for them, and forge a tighter relationship Brand three years, yet its total continues to increase, as it spends more on social media and other forms of marketing, hitting a record of $2.4 billion in 2013 12.8 Product R&D “Flynit Roche Runs” Sport, a new division the company launched in 2010 which allows Nike to develop devices and technologies that allow users to track their personal statistics in any sport in which they participate. Digital Sport created the Nike+ running sensor. y released the Fuel Band which is wristband that tracks energy output athletic shoes 24 Implications: This tool shows that Nike will continue to be profitable. The constant development of new and innovative products is unmatched in the industry and it is so central to the organizations objectives that it will continue to receive significant funding and resources. Nike is constantly retooling their marketing approach and staying ahead of the curve in terms of how to maximize efficiency in their value chain. 13. Issue Facing Nike Management Competitive Strength Assessment Global Expansion Ability to market effectively in DTC platforms Competition from Rival Sellers Increasing globalization Current Strategy Financial Analysis Opportunities Threats Sales and Marketing TiGer Shireen . I.Q 25