TABLE OF CONTENTS
Executive Summary
.
History
.
Profile of CEO
.
Competitors Profile
.
Industry Profile
.
Company Analysis
p.
Industry Analysis
.
Top Competitor Analysis
.
Other External Forces
.
Key Opportunity
.
Key Threat
p.
Major and Subordinate Problems
.
Strategic Match
Primary Strategic Match Position
.
Strategic Plan
.
Conclusion
.
EXECUTIVE SUMMARY
Nike Inc. was founded in 1962 by Bill Bowerman and Phil Knight as a partnership under
the name, Blue Ribbon Sports. Our modest goal then was to distribute low-cost,
high-quality Japanese athletic shoes to American consumers in an attempt to break
Germanys domination of the domestic industry. Today in 2000, Nike Inc. not only
manufactures and distributes athletic shoes at every marketable price point to a global
market, but over 40% of our sales come from athletic apparel, sports equipment, and
subsidiary ventures. Nike maintains traditional and non-traditional distribution channels in
more than 100 countries targeting its primary market regions: United States, Europe, Asia
Pacific, and the Americas (not including the United States). We utilize over 20,000
retailers, Nike factory stores, Nike stores, NikeTowns, Cole Haan stores, and
internet-based Web sites to sell our sports and leisure products. We dominate sales in the
athletic footwear industry with a 33% global market share. Nike Inc. has been able to
attain this premier position through “quality production, innovative products, and
aggressive marketing.” As a result, for the fiscal year end 1999, Nikes 20,700 employees
generated almost $8.8 billion in revenue.1
Products
Our primary product focus is athletic footwear designed for specific-sport and/or leisure
use(s). We also sell athletic apparelcarrying the same trademarks and brand names as many
of our footwear lines. Among our newer product offerings, we sell a line of performance
equipment under the Nike brand name that includes sport balls, timepieces, eyewear,
skates, bats, and other equipment designed for sports activities. In addition, we utilize the
following wholly-owned subsidiaries to sell additional sports-related merchandise and raw
materials: Cole Haan Holdings Inc., Nike Team Sports, Inc., Nike IHM, Inc., and Bauer
Nike Hockey Inc. Our most popular product categories include the following:
Running
Basketball
Cross-Training
Outdoor Activities
Tennis
Golf
Soccer
Baseball
Football
Bicycling
Volleyball
Wrestling
Cheerleading
Aquatic Activities
Auto Racing
Other athletic and recreational uses
Sales and Income Trends
Revenues in the fiscal year ended May 31, 1999, declined by 8% over the prior year to
$8.777 billion. As illustrated in the graph below, this marked the first time since 1994 that
revenues have declined. Regardless of this years decline, Nike Inc. achieved 300% revenue
growth over a 10-year period, rising from 1990 sales of $2.235 billion.
Exhibit 1
* Obtained from Nike, Inc. 1999 Annual Report
Although revenues declined in 1999, net income increased by 13% over the prior year. As
the graph below illustrates, net income has been volatile in the latter half of the 90s. Sharp
decreases in 1998 and 1999 net income were due to restructuring charges. If these charges
had not been incurred, income would have been flat for
both years. Efficiency in cost control and inventory management has allowed net income
to increase while revenues decreased in 1999. Note that the largest growth rate was 43% in
1997 over the prior year with net income of $795.8 million.
Exhibit 2
* Obtained from Nike, Inc. 1999 Annual Report
Challenges
Our greatest challenge in 2000 will be to maintain the operational and financial initiatives
we worked so hard to implement in 1998 and 1999. We must maintain our inventory levels
low enough that will allow us to adapt to quickly changing market trends. Financially, we
must remain conservative in our cost structure. Cuts to operating expenses of almost $200
million this past year demonstrated that we are in a position to be nimble in light of our
industry-dominating size. With the gradual economic recovery in the Asia Pacific region,
we can capitalize on customers who are financially stronger. Our sponsorship of the 2000
Olympic Games in Sydney, Australia, and the 2002 World Cup in Japan and Korea will be
the start of many opportunities to bring sports events into the mainstream for regional and
global markets. With added exposure, we are challenged to respond to a market demand
for fashionable athletic footwear and apparel. In this quest, we will succeed if we keep
quality and performance at the core of our business.
The Internet is a rapidly changing medium. As the first company in our industry to offer
e-commerce capabilities, we must proceed with caution and stealth in order to select an
enduring strategy that will complement our existing distribution channels.
HISTORY
BillBowerman and Phil Knight founded Nike Inc. as Blue Ribbon Sports in 1962. The
partners began their relationship at the University of Oregon where Bowerman was
Knights track and field coach. While attending Stanford University, Knight wrote a paper
about breaking the German dominance of the U.S. athletic shoe industry with low-priced
Japanese shoes. In an attempt to realize his theory, Knight visited Japan and engineered an
agreement with the Onitsuka Tiger company, a manufacturer of quality athletic shoes, to be
their sole distributor in the United States.
In 1962, Knight received the first shipment of 200 pairs of Tiger shoes to his parents
garage in Oregon. The shoes were bought by Blue Ribbon Sports (BRS), the name of the
partnership between Knight and Bowerman that they formed with only $1,000 in capital.
Knight peddled Tigers shoes at local track meets grossing $8,000 of sales in their first year.
In 1966, Bowerman, who had previously designed shoes for his university athletes, worked
with Tiger to design the Cortez running shoe. The shoe was a worldwide success for the
Onitsuka Tiger Company and was sold at the first BRS store. In 1971, BRS, with creditor
support, started manufacturing their own line of shoes. Later that year, the first BRS shoe
was introduced. The shoe was a soccer shoe that bore the Nike brand name, referring to the
Greek Goddess of Victory, and the Swoosh trademark. A student designed the Swoosh
trademark for a paltry fee of $35. The Swoosh was meant to symbolize a wing of the
Greek Goddess.
1972 marked the breakup of the BRS/Tiger relationship. BRS soon changed its name to
Nike, Inc. and debuted itself at the 1972 Olympic trials. In 1973, Steve Prefontaine was the
first prominent track star to wear Nike shoes. The late 70s and early 80s also saw John
McEnroe, Carl Lewis, and Joan Benoit sporting Nike shoes. Nike popularity grew so much
that in 1979 they claimed 50% of the U.S. running market. A year later with 2,700
employees, Nike went public selling 2 million shares on the New York Stock Exchange.
The 1980s were marked by the signing of Michael Jordan as a product spokesperson,
revenues in excess of $1 billion, the formation of Nike International Ltd., and the “Just Do
It” campaign. Nike also expanded its product line to include specialty apparel for a variety
of sports. In 1990, Nike surpassed the $2 billion mark in consolidated revenue with 5,300
employees worldwide. In addition, we opened the Nike World Campus in Beaverton,
Oregon.
In 1991, Nike pushed revenues to $3 billion, up from $2 billion the prior year. This mark
would continue to grow throughout the 90s, with revenues in 1999 reaching $8.8 billion.
These revenues grew based on improvements in shoe technology and successful marketing
campaigns. International revenues fueled a great portion of this growth with an 80%
increase in 1991 from the prior year. In 1992 international revenues topped $1 billion for
the first time and accounted for over one-third of our total revenues. Such growth
continued throughout the 1990s as we continued to focus our marketing efforts on major
sporting events like the World Cup, and the next generation of celebrity endorsers, such as
TigerWoods, Lance Armstrong, and the players of womens professional basketball
(WNBA). At the end of the 90s, Nikes goal, as stated in our company web site, is to
become a truly global brand.
PROFILE OF THE CEO
Phillip H. Knight, Chairman and Chief Executive Officer, is the co-founder of Nike, Inc.
He has been the driving force behind our companys success since its inception in 1964
under the name Blue Ribbon Sports. Knight is 61 years of age and holds an undergraduate
degree from the University of Oregon and an MBA from Stanford University. Knight
practiced as a CPA and taught at Portland State University prior to founding the company
known today as Nike. He has been an innovative visionary in the industry of athletic
footwear and apparel. His efforts have helped to establish Nike as an industry leader in
both national and international markets. Knights managerial mode is one that is
characterized by strategic planning. This mode is representative of an open-minded CEO,
one willing to take calculated risks and make conservative decisions based on careful
analysis of external and internal environments. Knights decision-making style favors the
participative approach. He is not hesitant to make unilateral decisions, but prefers to look
to his trusted management team for their insight and ideas before choosing a course of
action.
PROFILE OF THE COMPETITOR
Reebok, in terms of their products, is not entirely different from Nike. Reebok is involved
in the design and marketing of both athletic and non-athletic footwear and apparel, as well
as other various fitness projects.
