Transcript Nike

Competitive/Industry Analysis
External Analysis Industry/Competition – Porters
5 forces
 Current Rivalry Opportunities/Threats
 Potential/Recent Entrant Opportunities/Threats
 Bargaining Power of Buyer Opportunities/Threats
 Bargaining Power of Supplier Opportunities/Threats
 Substitute/Alternative Product Opportunities/Threats
Current Rivalry Opportunities
 Acquisitions – in 2007, Adidas, already Nike’s largest
competitor, purchased Reebok immediately increasing
its market share 6%.
 Marketing – Adidas has harnessed the Nike marketing
engine. Notice the similarities.
In the first two quarters of 2010 alone, Adidas has seen a
jump in sales of 26% from same period one year ago.
Current Rivalry Threats  Numerous equally balanced competitor
 Nike has seen its market share decrease by 15% since
 Adidas has taken a dominant lead in the soccer market
and is poised to expand this lead with sponsorship of the
world cup.
Current Rivalry Threats  High Strategic Stakes/High Exit Barriers – The
footwear industry is similar to the automobile industry
in the fact that the established firms have the upper
hand. It is a red ocean, and these firms spend millions
in marketing efforts
 Fixed capital investment is too high for a competitor to
exit, even in the case of K-Swiss who’s stock has devalued
some 66% since 2006.
Current Rivalry Threats  Diverse Competition
 Each brand listed as main competition has a niche
New Balance – Superior walking shoes
K-Swiss – Specialize in the tennis shoe market
Adidas Group(Reebok + Adidas) – Worlds best technology in
soccer cleats
Potential/Recent Entrant
 Recent entrant Under Armour Inc. has seen its stock
increase 30% since announcement of its new shoe line
which released in first quarter 2009.
 Under Armour Inc. footwear department specializes in
football and baseball, two of Nike’s bigger revenue areas.
 Under Armour continues to expand its territory,
becoming a prominent sponsor of universities
Bargaining Power of
 A benefit of the industry is the power lies with the
suppliers. Demand for shoes stays consistent since the
stone ages, cavemen even needed shoes. A factor
helping the suppliers is the profit margins realized
from the sale of a pair of shoes. Average cost of raw
materials to make a pair of shoes is around $10
Substitute/Alternative Threats
 Substitutes for athletic shoes are shoes in another
category. Recently, TOMS shoes have become a
popular commodity. Although this is likely not a
direct threat, the loss of disposable income which
could have been spent on athletic shoes is a factor.
Economic Opportunities/Threats
 Opportunity - The economy has been in recession
since late 2008, but analysist predict the recession will
officially be declared over within the next year.
 The world cup also serves as an opportunity for
immediate increases in revenue, as overall expenditures
are expected to be $3.4 billion dollars.
 Threats – The recession of late means consumers
have less disposable income. In turn, this effects the
consumer by placing more emphasis on physiological,
or basic needs, as opposed to the need for vanity
products. Translated – Wal-mart shoes replace Nike,
Adidas, etc.
 Targeted market segments for firms specializing in
athletic footwear range from pre-teens all the way to
middle aged adults, with specific regards to the 14-20
range. Hispanic and Latino Americans accounted for
almost half (1.4 million) of the national population
growth of 2.9 million between July 1, 2005, and July 1,
2006. Several footwear organizations have seen this
population growth as an opportunity and acted upon it
creating specialized shoes for certain demographics.
 College students, late twenties, and early thirties are a
targeted demographic for athletic footwear industries.
The looming debt crisis and the housing market crash
have created overwhelming debt in recent years. Cost
of tuition has tripled over the last 30 years even
accounting for inflation. This will cause consumers to
be more thrifty, buying the less expensive brand, or
resorting to wearing really thick socks.
Socio cultural Opportunities
 VALS indicates four main types of consumers
 Innovator – Consumers interested in the newest products which are
cutting edge, who have the highest incomes. – trophy wives, retired
 Achievers – Usually consistent of upper middle class social beings.
Favor established brands and products. - neighborhood dads,
soccer moms.
 Strivers – These are the lower income segment susceptible to the
influence of role models and celebrities alike. - lower class who
want to “be like mike”
 Experiencers – This is the largest target segment of the footwear
industry. This group is characterized by casual athletes with ample
energy and an inherent need to look and feel good through exercise
Socio cultural Opportunities
 Health and fitness are no longer considered a
“Fad,” they are here to stay. The changing pattern
of socially acceptable behaviors has tilted in the
favor of the fitness industry over the years and
those avid runners need specialized shoes.
 Going Green – Several footwear organizations
have seen the opportunity for CSR and in an
attempt to gain better public relations have
enacted recycling programs. Nike has recently
released a shoe made from 100% recycled
materials. Consumers want to see more
responsibility like this and further green
opportunities await.
Socio cultural Threats
 Labor regulations in the United States are so
fierce that it is no wonder why the Auto
industry collapsed. The opposite is true
abroad. There is almost no labor regulation,
and child labor has run rampant. This poses a
threat to the purchasing habits of moral
individuals. The average pay in India, China,
and Pakistan where the majority of Nike and
Adidas are made is less in a week than what
Americans make in a day.
Political/Legal Opportunities
 American textile factories are almost a thing of the
past, but not yet. Textiles play a large fart in the
shoemaking process. Politicians can only lobby so
much before laws governing textiles abroad are wiped
out. This poses an opportunity for shoemakers to
forgo some profit in the case of PR and bring a factory
home. The political support a firm stands to gain from
a bold move would be applauded, however uneconomic it may be.
Political/Legal Threats
 Child labor - With continuing trends leaning towards
fair treatment and human rights, it would not surpass
logic to think that domestic regulation on foreign
labor practices could be looming.
 Patent – Acquiring design patents across
industrialized nations can cost in excess of $100,000
for a patent in the 143 countries Nike does business in.
 New technologies allow for lighter weight materials
which are more durable and easier to design with. If
the rate of innovation continues in the shoe industry
as it has, in the next fifteen years we will have shoes
that weigh less than air.
 Recent partnering of Nike and Apple have seen the
creation of Nike + I-pod. This technology is currently
in its infancy and is bound only to get better.
Technological Threats
 An unfortunate truth in the footwear industry is the
fact that all of the main players are virtually neck and
neck. Adidas is available in over 110 countries already
and poised for additional growth with the internet
lending a hand in sales.
 The technology used in the shoemaking process is
easily copied through reverse engineering. Nike
released a 7oz soccer cleat in January only to have
Adidas release a 5.8oz cleat 6 months later.
Internal Analysis
 Value Chain Analysis-Systematic way of examining
all the organizations functional activities and how well
they create customer value.
 Organizational Capabilities Profile- An in-depth
evaluation of an organizations abilities.
 Internal Audit-Thorough assessment of an
organizations internal areas.
Internal Audit
 Research and Development
 Human Resource Management
 Production Operations
 Strategic Management and Corporate Culture
Management Roots and Corporate
 Nike Founded in 1968
 Formally Known as Blue Ribbon Sports
 Nike “Swoosh” was created in 1971
 Nikes Rise to the top generated by marketing expertise
 Currently Dominate in market share in the global shoe
Research and Development
 “The Oven”- is where Nike Golf designs, prototypes, tests, and
builds the golf clubs and balls that their PGA Tour players use, but also
make the final versions that are sent out to be mass produced and sold
to consumers
 “The Kitchen”-Nike's 175-acre headquarters campus in Beaverton,
Ore., the Kitchen is where Nike cooked up the shoes that made it the
star of the $35 billion athletic footwear industry
Human Resource Management
 Starts with the roots
 Nike is people
 Changing the world one factory at a time
Production Operations
 strong team of machine operators,
 industrial maintenance technicians,
 quality assurance specialists and leadership roles for
each area.
 have engineering opportunities in the fields of Quality
Assurance, Manufacturing, Design, and Development
Organizational Capabilities
 Financial
 Human
 Intangible
 Physical
Three Questions
 Can it be used in a variety of ways?
 Does it contribute to superior customer value?
 Is it difficult for competitors to imitate?
Primary Activities in the Value
 Inbound Logistics
 Outbound Logistics
 Marketing and Sales
 Firm Infrastructure
Inbound and Outbound Logistics
Marketing and Sales
 Nike’s brand image is powerful
 2009 Sales (mil.) $19,176.1
 Approximatly 32% of market share
 Adidas group made only 22%
Nike's IT organization:
 Brand, Product, & Marketplace Solutions Delivery &
 Retail & eCommerce Solutions Delivery & Support
 Business Connectivity & Strategic Planning
 Enterprise Architecture & Tools
 Fulfillment Solution Delivery & Support
 IT Infrastructure Operations & Support
Financial Ratios
 Current Ratio
 Quick Ratio
 Gross Profit Margin
 Operating Expense
 Accounts Receivable
 Net Profit Margin
Ratio Cont.
 Asset Turnover
 Inventory Turnover
 Return on Assets
 Return on Equity
 Debt-to-Equity Ratio
 Working Capital Turnover
 P/E Ratio
 P/B Ratio
 Final Recommendation