OVERVIEW, DESCRIPTION, HISTORY
Nike's purpose is to design, develop, and market footwear, equipment, apparel, and other accessories. This includes the market of apparel affiliated with professional athletes and college teams.
In 1963-1964 University of Portland track coach Bill Bowerman and Phil Knight, a track star, joined forces to import and provide a low cost running shoe from Japan in order to compete with the German-dominated athletic shoe market. Starting out with the name Blue Ribbon Sports, Bowerman and Knight began to sell the Japanese Onitsuke Tiger running shoes. In 1967 Blue Ribbon Sports was officially incorporated. It was 1970 when Bowerman’s desire to improve the design and do more than simply import running shoes came into full swing. That year was the year they introduced the Nike Waffle Outsole and also the year they officially changed their name to Nike, after the Greek goddess of victory. Nike’s swoosh logo was created in 1971 by the graphic designer at University of Portland, Carolyn Davis. It was 1984 when Nike signed Michael Jordan to an endorsement deal and released the first model of the Air Jordan. Two years later Nike’s revenue reached $1 billion for the first time.
The “Just Do It” slogan was originally introduced in 1988 and is still the company’s slogan today. In 1993, Nike introduced an innovative sustainability program called Reuse-a-shoe, which collects the old athletic shoes and grinds them up to make athletic courts, tracks and fields. December 24, 1999, Co-founder of Nike, Bill Bowerman, dies at the age of 88. The next year Nike introduced it’s Shox athletic shoe technology.
The year 2003 was a big year for Nike, not only did they buy out bankrupt rival Converse for $305 million, but for the first time in the company’s history did their international sales beat out their USA sales making Nike a global company. Also that year, Nike signed high school basketball star Lebron James, while their Jordan brand shoe signed Syracuse basketball star Carmelo Anthony. In 2004 Nike’s revenue exceeds the $13 billion mark. In 2004 Nike’s revenue exceeds the $13 billion mark.
In 1963-1964 University of Portland track coach Bill Bowerman and Phil Knight, a track star, joined forces to import and provide a low cost running shoe from Japan in order to compete with the German-dominated athletic shoe market. Starting out with the name Blue Ribbon Sports, Bowerman and Knight began to sell the Japanese Onitsuke Tiger running shoes. In 1967 Blue Ribbon Sports was officially incorporated. It was 1970 when Bowerman’s desire to improve the design and do more than simply import running shoes came into full swing. That year was the year they introduced the Nike Waffle Outsole and also the year they officially changed their name to Nike, after the Greek goddess of victory. Nike’s swoosh logo was created in 1971 by the graphic designer at University of Portland, Carolyn Davis. It was 1984 when Nike signed Michael Jordan to an endorsement deal and released the first model of the Air Jordan. Two years later Nike’s revenue reached $1 billion for the first time.
The “Just Do It” slogan was originally introduced in 1988 and is still the company’s slogan today. In 1993, Nike introduced an innovative sustainability program called Reuse-a-shoe, which collects the old athletic shoes and grinds them up to make athletic courts, tracks and fields. December 24, 1999, Co-founder of Nike, Bill Bowerman, dies at the age of 88. The next year Nike introduced it’s Shox athletic shoe technology.
The year 2003 was a big year for Nike, not only did they buy out bankrupt rival Converse for $305 million, but for the first time in the company’s history did their international sales beat out their USA sales making Nike a global company. Also that year, Nike signed high school basketball star Lebron James, while their Jordan brand shoe signed Syracuse basketball star Carmelo Anthony. In 2004 Nike’s revenue exceeds the $13 billion mark. In 2004 Nike’s revenue exceeds the $13 billion mark.
BRANDS, MAJOR PRODUCTS AND SERVICES
Nike is a divisional company but
retains some functional departments as well. The brands Nike sells comprise
many of the divisions of the company. Apparel for Nike brand, Converse, and
Jordan brands are examples of some divisions created around specific products.
Functional departments such as Nike design and investor relations are also part
of Nike’s organizational structure. Nike, employees report to the
divisional manager and the president of each division reports directly to the
CEO. Nike’s continued product innovation and successful marketing are due to
the combination of functional and divisional organization using an operations
department to insure communication between divisions.
Nike, like a lot of companies, has a
lot of expenses that occur on an annual basis, but the most significant
expenses Nike experiences is the cost of materials and labor, as well as their
increased spending in advertising. The most significant source of revenue for
Nike is really no surprise; it’s footwear. Footwear makes up 60% of Nike’s
global revenue. Athletic footwear is by far the most profitable segment of the
company and will forever stay that way as long as there are sports.
Over the years technology in
basketball shoes has evolved the look and fit of the basketball shoe industry.
Shoemakers like Nike have developed lighter, yet stronger shoes that provide
support and breathability. The Nike Zoom Hyperfuse basketball shoe, for
example, uses a blend of synthetic leather, mesh and TPU film to keep your feet
cool.
Basketball shoes have evolved from
heavy, one-colored, canvas, high top Converse models to lightweight, synthetic
sneakers in a variety of styles. Technology in shoe cushioning and durability
paved the wave for big companies to sell their shoes at higher prices, while
endorsements from NBA stars have pushed shoe prices even higher. The result is
a highly competitive industry where new technology is highly valued. Technology
impacts the production function of Nike by ordering stocks of raw materials,
planning production schedules, checking the quality of the product, and packing
and storing the final products before distribution.
Nike’s international operations
are always subject to the usual risks of doing business abroad, such as
possible adjustment of currencies, export and import duties, anti-dumping
measures, quotas, safeguard measures, trade restrictions, and in certain parts
of the world, political instability and terrorism. Nike is a seller of athletic
footwear and athletic apparel worldwide.
The Company focuses its product
offerings in seven key categories: Running, Basketball, Football (Soccer),
Men's Training, Women's Training, NIKE Sportswear and Action Sports. Nike sells
sports apparel and accessories, as well as athletic bags and accessory items.
It also markets apparel with licensed college and professional team, and league
logos.
Being the maker and seller of athletic
footwear and athletic apparel, Nike is able to help people worldwide who want
to be and stay active, or just look stylish. It’s pretty obvious how Nike
solves the problems of its customers with the manufacturing of shoes, but it
also helps its customers by creating products such as Nike Fuel Band. Nike Fuel
Band is a bracelet you wear and can sync up with your phone to keep track of
how many steps or calories you have burned in a day.
Nike's once loyal market is currently
aging. This means that their customers are not as athletic as they may have
been in the past. However, this poses as an opportunity for Nike because they
have the ability to influence the next generation of Nike customers. Therefore,
older generation of Nike customers have the power to influence their children.
In addition, by marketing different types of shoes to this market, these
existing customers will continue to be loyal to Nike.
Unfortunately, despite million dollar
promotional and advertising campaigns, Nike’s products remain unavailable to
most people worldwide. The price for their products are rather high and so
overwhelming that the majority of purchasers buy franchise copies holding
Nike’s logo. However, this is one of the justified and reasonable business
strategies applied under the conditions of globalization.
Nike uses
the law of supply and demand in marketing by only producing so much of a
certain product. Resellers boost the sale, which in turn boosts the demand,
which in turn boosts the supply. The
reason why they do this is so they don’t have excess inventory because they pay
the manufacturers for the goods produced, even though there is no demand for
them. This will ultimately save them money on materials needed for the goods
and on labor.
KEY PEOPLE
The
key people for Nike are ones who have helped to shape the company into being one of the today's leading players of the athletic gear and footwear industry. Listed below some are not only executives but also are
on the board of directors.
Board of
Directors
NIKE,
Inc.
| |
NIKE,
Inc., The Walt Disney Co.
| |
NIKE,
Inc., National Association of Basketball Coaches
| |
Laika
LLC, NIKE, Inc., Apogee Enterprises, Inc.
| |
TechnoServe,
Inc., Gilt Groupe, Inc., Pembroke College Foundation, Inc., Christa House,
NIKE, Inc.
| |
Duke
University, Apple, Inc., The National Football Foundation & College Hall
of Fame, Inc., NIKE, Inc.
| |
Indiana
University Foundation, Federal Express Corp., Mid-America Apartments LP,
Methodist Le Bonheur Healthcare, Mid-America Apartment Communities, Inc.,
NIKE, Inc., The Methodist Hospitals, Inc.
| |
NIKE,
Inc., Quirky, Inc., Cooper-Hewitt National Design Museum
| |
University
of California, Berkeley, Comcast Corp., NIKE, Inc.
| |
John G. Connors,
56 Independent Director
|
Parse,
Inc., Motif Investing, Inc., AppSense, Inc., Scout Analytics, Inc., Xamarin,
Inc., Splunk, Inc., NIKE, Inc., Washington Policy Center, DataSphere
Technologies, Inc., Tempered Networks, Inc., Rim Tec, Inc., Tier 3, Inc.
(Washington), Chef Software, Inc., INRIX, Inc., The Tyee Club
|
NIKE,
Inc., PayPal Holdings, Inc., Intel Corp., Skype SARL, Skype Technologies SA,
Dartmouth College
| |
John C. Lechleiter,
62 Independent Director
|
Eli
Lilly & Co., Fairbanks Institute, Xavier University, United Way
Worldwide, The U.S.-Japan Business Council, Inc., NIKE, Inc., The Central
Indiana Corporate Partnership, Ford Motor Co., 2012 Indianapolis Super Bowl
Host Committee, Chemical Heritage Foundation, Indianapolis Downtown, Inc.,
The Life Sciences Foundation
|
Phyllis Mary Wise,
71 Independent Director
|
First
Busey Corp., NIKE, Inc., RAND Healt
|
CORPORATE VISION
The
corporate vision of Nike is to enable the company and its consumers to thrive
in a sustainable economy where people profit, and the planet is in balance. It is with this vision that the company surrounds its goals around. With that vision always at the forefront of Nike's mind, the company is able to plan accordingly in order to achieve the vision of their company. This is where strategic marketing and planning really come into play to turn that vision into a reality.
CORPORATE MISSION
Bring inspiration and innovation to every Athlete* in the world
*If you have a body, you are an Athlete
Nike's mission is for every person, no matter their physical condition and limitations, to feel inspired to be the athlete they are on the inside. They want people to move and be active in any way, and to not let life's obstacles stop them of achieving their personal athletic goals. Don't let your mind or other influences stop you. Do it for yourself. Do it for you mind and body. Do it just because. Find strength from within and leave the weakness behind... and JUST DO IT.
MEDIA EXPENDITURE
Nike
is a global marketing powerhouse that has been moving to more digital and
social media marketing. Nike is full aware of the scope of digital, personal
data, and social media and the recent moves are on the direction of
establishing new solutions for users and sports people worldwide conscious of
the importance of social analytics and personal tracking data systems (Guarda, 2013) .
LOCATION AND SUBSIDIARIES
· The company's
headquarters are located near Beaverton, Oregon and under these headquarters
are several other footwear and apparel companies such as Cole Haan, Bauer
Hockey, Converse, Hurley International, Starter and Umbro (Statista,
2015) .
· The number of Nike
stores has increased from 674 stores in 2009 to 931 stores in 2015 (Statista, 2015) .
· Nike employed
approximately 57,000 people and operated more than 850 retail stores worldwide
in 2014 (Statista, 2015) .
· With so many
subsidiaries, Nike is able to reach more customers that are interested in multiple
different sports, lifestyle categories, and price points.
PRODUCT SALES HISTORY
Since the product launch in 1985,
there have been 30 different designs of the Jordan shoe and Nike was in a
struggle to get away from being known as the “running shoe company” which was a
phenomenon that was slowly dying Looking
for a way to reinvent themselves and appeal to a new segment of the market,
Nike turned to an NBA rookie named Michael Jordan, who was already endorsing
several other products ) .
Jordan was interested in getting an endorsement from other companies at the
time and wasn’t interested in Nike’s offer, but his agent at the time saw a
great opportunity with Nike by creating a brand new line of shoes called Air
Jordans (Air
Jordan Shoes HQ, 2016) .
In 2014 during a court case, Michael
Jordan’s financials were made public and that is when we found out that he made
just over $94 million from contracts in his NBA career; last year, his ties
from Jordan Brand netted him $100 million. Jordan and Nike redefined the shoe
industry which Jordan can attribute much of his wealth to, and also in the aide
of transforming Nike into the most powerful athletic wear company on the
planet. In April of 2015, a pair of shoes Jordan wore in his early career sold
at auction for over $71,000, and a different pair sold at auction in 2013 for
$105,000. These numbers seem huge, but are only minor when compared to how much
Jordan-brand products produce for the Nike brand; it is reported that Jordan
brand products make an estimated $2.5 billion a year.
Air Jordans started selling in 1985
and sold $70 million worth in the first two months; fast-forward 30 years, and
the Jordan brand now controls nearly 60% of the U.S. basketball -shoe market,
which is just part of Nike's total basketball shoe empire that controls around
95% of the market.
Nike made over $3.7 billion in basketball segment sales in 2015, a 19% increase
over 2014 sales, which was another 19% increase from 2013 sales.
Nike is also growing its basketball presence outside the United States, they
co-hosted the Quai 54 World Streetball Championship in Paris in 2015, releasing
special-edition shoes for the occasion with Jordan himself in Paris to
introduce the event (McNew,
2015) .
CURRENT PROMOTIONAL STRATEGY
Nike
is currently using a few different promotional strategies to reel customers in.
Some of these strategies are used constantly, and some are used more often
depending on which point a certain Nike product is on its product demand life
cycle. Some of the most notable promotion strategies include:
Advertising
Nike advertises to a target audience. They do so in ways that ensure their product will reach the eyes and ears of those they are targeting. With effective advertising, Nike is able to elicit important consumer responses, such as:
Attention - company is able to grab attention of your audience through all other competing advertisements
Interest - arouses interest and delivers sufficient impact in the message or offering
Desire - desire creates a craving for ownership of the product
Action - advertisement prompts potential customers to go out and buy the product
Attention - company is able to grab attention of your audience through all other competing advertisements
Interest - arouses interest and delivers sufficient impact in the message or offering
Desire - desire creates a craving for ownership of the product
Action - advertisement prompts potential customers to go out and buy the product
Social Media
Nike has taken to social media to be where their audience is at. This is a great promotional strategy because Nike is able to get word of their new products out where they know their audience will see it. You can find Nike on social media sites such as Twitter, Facebook, YouTube, and Instagram. By adapting to new social medias, Nike's strategies are constantly evolving for the better. They are continually capturing their audience in new ways, and growing with them. When Nike is on social media, it adds a presence that cannot be achieved through other marketing mediums. It's more personal. Customers can feel more connected to a company they choose to be loyal to. They feel like they aren't interacting with an entity, but more so an actual person. Promotional strategies on social media can really go a long way. Nike knows this which is why they have chosen to get with it and be interactive with their audience.
Selling
Those selling Nike products through Nike and other various retail stores need to know specifics of the product in order to effectively make sales. If those selling and representing the product aren't properly informed of what they are selling, Nike sales will suffer in the long run. It is very important for Nike to employ those that will learn the product inside and out to maximize its selling potential. Sometime the products sell themselves, but those selling can often make the difference between a potential sale or pass.
Celebrity Endorsements
Nike is infamous for endorsing very popular athletic celebrities. The celebrity endorsements go outside just basketball, and include others figures from many different sports that their audience may be into. Some of the most popular celebrities include: Michael Jordan, Kobe Bryant, LeBron James, Tiger Woods, Maria Sharapova, Cristiano Ronaldo, etc. "With collaboration of famous athletes, teams, coaches, and organizations throughout the world, Nike has become the face of sports across the board through brand-player grouping and recognition," (Ross 2013).
Loyalty Program
Nike has their loyalty Nike+
program where members gain access and benefits that nonmembers are not offered.
Some of these perks include the Nike+ Apps, training club access, news about
events, promotional codes, and more. In addition, members are offered free
shipping on purchases and returns. 
Provide Retailers With Promotions of Products and Other Giveaways
When a potential customer
walks into a footwear store and sees a Nike promotional display, that is
provided by Nike in hopes that retailers will promote their new products and
give them adequate shelf space. When people see this, it will hopefully induce
those 4 responses mentioned earlier with the customer: attention, interest,
desire, and action.
CURRENT MARKETING OBJECTIVES
Nike's marketing objectives include goals set by the company when promoting its products or service to potential customers. These goals are set to be achieved within a given time frame. The objectives must never be lost when promoting products and services. Losing sight of objectives can make for an ineffective promotion. These are just a few of the marketing objectives Nike keeps in mind during all times when doing promotions.
Put Customer Interests First
Potential customers are more
easily able to justify a purchase if they feel it will personally benefit them
and fulfill their needs and interests. That is why when Nike makes a new
product, they make it with customer interests in mind. Ever wonder why Nike
sells products for so many different types of sports? Well, they are
considering the interests of many different athletes and trying to accommodate
all of said interests.
Provide Quality Products With Low Prices In Order to Gain More Market Share
Making quality products is an
absolute must for Nike. Those products must be made of quality materials to
make the products last, while also making the products affordable. With more
people able to purchase Nike's products,
the market share of Nike will continue to grow substantially.
Market BENEFITS of the Product
Selling the benefits of a product rather than selling just the product itself has proven to be the key that has gained Nike great respect in the athletic communities. For example, when co-founder and track and field coach of Nike, Bill Bowerman, was looking to make a new jogging shoe, he made it with benefits in mind. "His goal was to make the world’s most light–weight running shoe. He believed that this factor alone could dramatically improve the speed of a distance runner," (Moon 2016).
Sustainability
Sustainability is a powerful opportunity to innovate. Nike hopes to create maximum performance products with minimal impact on the environment. This also includes manufacturing efforts. Nike believes that business must be conducted in ethical ways. To ensure ethical practices are being performed, Nike makes it a point to work with business partners and suppliers that have a commitment to engaging workers, providing safe working environments, and recognize their own environmental responsibilities.
SWOT ANALYSIS
Strengths
Strong Global
Brand: Nike is the most valuable
sports brand in the world. Its “Swoosh” logo is instantly recognizable around
the globe. Its long partnership with legendary basketball player Michael Jordan
has driven strong sales of the company’s basketball sneakers, including the
retro business, which makes up about half of the Jordan shoe business.
In fact, one of every two basketball shoes in the U.S. last year carried that Jordan
brand. Nike’s ability to maintain and enhance its iconic brands has allowed
it to enjoy continued success for decades.
Low Cost
Manufacturing: Virtually all of
Nike’s footwear is manufactured outside of the United States by independent
contract manufacturers who operate multiple factories. In fiscal 2014, Vietnam,
China, and Indonesia manufactured roughly 43%, 28%, and 25% of total Nike
Branded footwear. It also has operations in Argentina, Brazil, India, and
Mexico. The low cost of producing products in these countries continues to
boost the bottom line.
Strong Research
and Development: Nike takes its
research, design, and development efforts very seriously, and it believes this
is one of the key factors for its success. Technical innovation in both the
design and manufacturing process of its footwear, apparel, and athletic
equipment has helped the company continue to produce better products, which
have enhanced athletic performance and reduced injuries. The company has its
own staff of specialists in the areas of biomechanics, chemistry, exercise
physiology, and related fields, and also uses advisory boards made up of
athletes, coaches, trainers, orthopedists, and other experts who consult with
Nike about designs, materials, and concepts for products and improvements.
Weaknesses
Ongoing Perception
of Poor Labor Practices: It wasn’t
long ago that Nike was facing intense criticism of its labor practices and work
conditions. However, over the past 20 years, it has undertaken efforts to
improve conditions for its roughly one million contract workers. While
conditions have improved, many of its factories in developing countries still
do not meet Nike’s own standards. The company itself has acknowledged that the
low wages for some of its workers remains a concern. Safety issues at certain
locations are also an issue. If some type of disaster were to occur at one of
its facilities, this would no doubt hurt the company’s image.
High Prices: Due to its strong brand, Nike can typically command
a premium on the products it sells, which in turn supports higher margins and
profitability. However, the cost of its footwear is higher than most of its
competitors, which make its products out of reach for many customers around the
globe, particularly in emerging markets. There is also the risk of declining
demand when an economy falls into recession, as consumers have lower
discretionary spending for non-essential items.
Opportunities
Emerging Markets: While Nike already has a presence in many emerging
markets, we believe that there is still significant growth potential there.
Rapidly growing economies like China, along with other emerging markets like
India and Brazil, have the potential to drive future earnings growth. While
China accounted for roughly 9% of 2014 revenues, the company believes this
figure will rise as it continues to enhance its brand image there. It is also
realigning its product portfolio to better appeal to Chinese customers’ tastes
and preferences. All told, we think Nike should be able to increase its share
of the global footwear market by continuing to grow its base in these regions,
which have been reporting higher growth rates than developed markets for the
past few years.
Innovative
Products: Given Nike’s focus on
R&D, as mentioned in the strengths section of this analysis, the company is
typically on the forefront on product innovation. While products like FuelBand,
a wearable technology that monitors physical activity, may not have been as
successful as hoped, Nike still has its eye on the next “big thing”. The
company’s brand strength, coupled with its focus on R&D, should allow it to
remain at the forefront of new technologies in the footwear and wearable
technology space.
Threats
Competition: The athletic footwear, apparel, and equipment
industry is highly competitive, both in the United States and around the globe.
There are several significant athletic and leisure footwear companies and
sports equipment firms that produce similar products. Some of the primary ones
are Puma and adidas. Other large companies have diversified their product lines
to include athletic and leisure footwear, sports and lifestyle apparel, and
equipment, including Under Armour
and Lululemon. The rapid changes
in technology and consumer preferences constitute significant risk factors for
Nike. Too, demand for Nike’s products depends on the relative popularity of
various sports and fitness activities, as well as changing design trends, so
any major shifts in these trends could temper business results. If competitors
have more success attracting customers with more appealing footwear or apparel,
this would also hurt business prospects.
Currency
Volatility: Since the majority of
Nike’s sales are generated outside of the United States, the company is exposed
to significant currency fluctuations. The recent strengthening of the U.S.
Dollar has hurt reported results, due to the foreign amounts being translated
into U.S. dollars for reporting purposes. While the company does have certain
hedges in place, they are designed to lessen the impact of unfavorable exchange
rates, not fully eliminate the risk. The Dollar is expected to continue to
strengthen in the coming months, so this will remain a concern for the near
term.
Nike remains the dominant force in the global footwear market. The company continues to report solid demand in both developed and developing markets. Further penetration of its products in emerging markets could lead to strong growth for years to come. The company’s commitment to R&D and integration of emerging technologies into its products could also open up new opportunities for growth. All told, we think Nike’s strengths and opportunities outweigh its weaknesses and threats.
References
Air Jordan Shoes HQ.
(2016). Air Jordan Brand History. Retrieved from Air Jordan Shoes HQ:
http://airjordanshoeshq.com/air-jordan-brand-history/
Guarda, D. (2013, May
1). Intelligent HQ. Retrieved from Nike Takes Digital Data and Social
Media Marketing Seriously:
http://www.intelligenthq.com/social-media-business/nike-takes-digital-data-and-social-media-marketing-seriously/
McNew, B. S. (2015, July
25). Why Michael Jordan Deserves to Make $100 Million a Year From Nike.
Retrieved from Fool.com:
http://www.fool.com/investing/general/2015/07/25/long-after-retirement-nike-still-makes-millions-on.aspx
Moon, G. (2016, January 13). How To Succeed With The Secret Nike
Marketing Strategy. Retrieved February 29, 2016, from
http://coschedule.com/blog/nike-marketing-strategy/
Ross, B. (2013, April 28). Nike Marketing Plan - BUS100bross.
Retrieved February 29, 2016, from
https://sites.google.com/a/email.vccs.edu/bus100bross/nike-marketing-plan
SBDC. (2015). Smallbusiness.wa.gov.au. Retrieved February 29,
2016, from
https://www.smallbusiness.wa.gov.au/business-in-wa/corporate-publications/business-guides/marketing-promotion-strategy/
Statista. (2015). Total
number of Nike retail stores worldwide from 2009 to 2015 . Retrieved from
Statista:
http://www.statista.com/statistics/250287/total-number-of-nike-retail-stores-worldwide/
Sustainability. (n.d.). Retrieved February 29, 2016, from http://about.nike.com/sustainability
The Wall Street
Journal. (2016). Nike Inc. Retrieved from The Wall Street Journal:
http://quotes.wsj.com/NKE/company-people
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