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Company History

In 1962 Phil Knight, developed a plan to make low-cost running shoes in Japan and sell them in
the United States as part of his work toward an MBA degree at Stanford. After graduation, he
teamed up with Bill Bowerman, his track coach at the University of Oregon, to realize his
dreams.
In 1964 with $500 each, they started the Blue Ribbon Sports Company.
In 1972, Blue Ribbon Sports received a trademark on its Swoosh logo and introduced the Nike
Brand name.
In the 1970’s and 1980’s used their technological expertise to develop athletic shoes that
revolutionized the industry. Nike grew more successful every year with profits increasing
steadily during this time.
In 1980 Nike goes public, offering 2 million shares of stock. The company continued its growth
in sales. In just 12 years company revenues went from $1.96 million to $919 million.
Critical Issues Being faced by CEO of Nike, Inc.
➢ In 1984, 29% Decrease in net income from Previous year
➢ The athletic-footwear industry had become competitive.
➢ Another major issue is Maintaining its competitive edge through innovative methods of
Marketing
➢ Domestic Market for athletic shoes was decreasing.
➢ Consumer Preferences: Consumers were changing their preference from the athletic
shoes to a more fashionable and traditional style.
➢ Because of foreign operations some risks occurs like revaluation of currency, export
duties, political instability.
➢ There are 50 companies worldwide that produce athletic footware, which is becoming
increasingly competitive.

SWOT Analysis
Strengths
1. Brand Name
2. Financially Strong
3. Strong Competitive Position
4. Sells variety of models
5. Effective Research and Development Department
6. Effective promotional Activities
7. Successful experience being competitive
8. International Marketing Efforts

Weaknesses
1. Use of Contract manufacturers makes it difficult to control quality of production
2. Use of sports stars who fail to perform, retire or become injured could adversly effect
Nike image and consequently sales.
3. Heavy dependency on footwear sales
4. Use of contract manufacturing in foreign countries has the potential to create financial
problems due to foreign currency fluctuations and interest rate changes.

Opportunities
1. Nike must focus on Growing e-commerce, it will have positive effect
2. Can grow in new and emerging markets
3. Women demand for athletic footwear and clothing is increasing significantly
4. Customer use of company’s products change from athletic purpose to a fashion item

Threats
1. Strong Competitors
2. Consumer Preferences
3. Currency Fluctuation
4. Piracy of footwear and apparel designs could decrease sales and adversly impact image.
5. Political unrest in the suppliers countries

SWOT Matrix

Strengths Weaknesses
1. Brand Name 1. Use of Contract
2. Financially Strong manufacturers makes it
3. Strong Competitive difficult to control
Position quality of production
4. Sells variety of models
5. Effective Research and 2. Use of sports stars who
Development fail to perform, retire
6. Effective promotional or become injured
Activities could adversly effect
7. Successful experience Nike image and
being competitive consequently sales.

8. International 3. Heavy dependency on


Marketing Efforts athletic footwear sales

4. Use of contract
manufacturing in
foreign countries has
the potential to create
financial problems due
to foreign currency
fluctuations and interest
rate changes.

Opportunities SO Strategies WO Strategies


1. Nike must focus on ➢ With the help of brand ➢ Product Development
Growing e- image and effective (W3,W4)
commerce, it will R&D Nike can focus
have positive effect on Growing E-
2. Can grow in new commerce (S1,S5,O1)
and emerging
markets ➢ Market Development
3. Women demand (S2,S3,S7,O2)
for athletic
footwear and
clothing is
increasing
significantly
4. Customer use of
company’s
products change
from athletic
purpose to a
fashion item

Threats ST Strategies WT Strategies


1. Strong Competitors ➢ Alternative Brands ➢ Innovative
2. Consumer Preferences (S1,S2,S5,T1) products(W3,T1,T2)
3. Currency Fluctuation
4. Piracy of footwear and ➢ Market
apparel designs could Penetration(S6,S2)
decrease sales and
adversly impact image. ➢ Backward
5. Political unrest in the Integration(S2,T5)
suppliers countries

SPACE Matrix
According to my analysis about this case study of Nike, Inc. Company lies in the Aggressive
Quadrant of SPACE Matrix.
Grand Strategy Matrix
Potential strategies are:
➢ Market Development
➢ Market Penetration
➢ Product Development
➢ Backward Integration
➢ Forward Integration
➢ Horizontal Integration
➢ Related Diversification

The Quantitative Strategic Planning Matrix

Market Alternate Strategies


KEY FACTORS Market Development Product Development

WEIGHT AS TAS AS TAS


Opportunities
5 2 10 3 15
 Focus on E-
commerece 15 4 60 2 30
 New and
emerging
markets. 3 45 4 60
 Women
15
demand
3 45 4 60
increasing
 Fashionable
15
footwears
THREATS

 Strong 20 3 60 2 40
Competitors
 Consumer 10 2 20 3 30
Preferences

 Piracy of footwear 10 - - - -
and apparel
designs could
decrease sales and
adversly impact
image.
 Political unrest in 10 - - - -
the suppliers
countries

1.00

STRENGTHS

 Brand Image 15 4 60 4 60
15 4 60 4 60
 Financially Strong 10 3 30 2 20

 Strong Competitive
Position 10 2 20 3 30
 Sells variety of
models
 Effective Research 10 1 10 2 20
and Development
5 2 10 3 15
 Effective promotional
Activities
5 3 15 3 15

 Successful experience
being competitive

WEAKNESSES
5 - - - -
 Use of Contract
manufacturers makes
it difficult to control
quality of production
10 1 10 2 20
 Use of sports stars
who fail to perform,
retire or become
injured could adversly
effect Nike image and
consequently sales.
 Heavy dependency on 5 2 10 3 15
athletic footwear sales

 Use of contract
manufacturing in -
10 -
foreign countries has
the potential to create
financial problems due
to foreign currency
fluctuations and
interest rate changes.

TOTAL 1 4 4.9
.65

Above the two alternatives Product Development is the best one.

Financial Analysis
Current Ratio: 1.45(1982) 1.82(1983)
That’s means company has enough cash to make more investments.
Earning per Share: 1.37(1982) 1.53(1983)
Other expenses: Percentage of other expenses is increasing rapidly
Recommendations

➢ According to overall analysis company should introduce more products or improve


current ones to satisfy potential increase in demand.
➢ Should develop product lines in both fashionwear and sportswear.
➢ Keep expanding into current and future foreign markets by being aggressive and the
worldwide leader of the footwear industry.
➢ Should continue to focus on technology
➢ Research in international market to find out what are the new trends related with women
and kids products.
➢ Should enhance Nike online Market
➢ Should develop better methods to control quality of contract manufacturers.
➢ Nike should control over extra other expenses.
➢ Need to consolidate US sales compared to international sales and international
competitors.

Projected Income Statement


(Year ended 1984)

(in thousands)
Revenues 1144720
Costs & expenses
Cost of sales 766982
Selling and administrative 188008
Interest 26928
Other expenses 1130
(983048)
Income before income tax 161672
Provision for income tax (74325)
Income before minority interest 87347
Minority interest (197)
Net income 87150