Nike Inc. Business Analysis: Athletic Footwear
Submitted By
AJ Sutton
TABLE OF CONTENTS History…………………………..…………………………………………………………………..p.1 Industry Profile………………….…………………………………………………………………..p.2 Brand Positioning………….…………………………………………………………………….....p.3 Target Audience…………………………………………………………………………………..…p.4 Market Strategy……………………………………………………………………………….........p.7 Financial Data…………………………………………………………………………………........p.7 Brand Social Status………………………………………………………………………….........p.8
I. History Nike was cofounded by legendary track and field coach of Oregon University, Bill Bowerman and Phil Knight, a University of Oregon runner. The two formed a friendship over sharing the same passion of developing a lighter, more efficient running shoe. The men started a company called, Blue Ribbon Sports and called their footwear Tiger shoes. Both Bowerman and Knight had full time jobs and needed to hire someone
to help with management. Enter Jeff Johnson, a runner himself, who helped market the company and came up with the name Nike. The three men selected the brand mark today known as the swoosh and debuted the new line of Nike footwear in 1972. Through time, dedication, and athletic celebrity endorsements from legendary sports athletes, Nike quickly grew to become unparalleled by any other sports apparel manufacturer in the world. Today, Nike employs over 35,000 employees across six continents, and the company has established a strong brand portfolio including Cole Haan, Converse Inc., Hurley International LLC, Nike Golf and Umbro Ltd. Nike’s world headquarters is located near Beaverton, Oregon and the company donates millions of dollars annually towards the Nike Foundation, which is striving to improve the lives of adolescent girls in third world countries. Nike’s mission: to bring inspiration and innovation to every athlete in the world.
II. Industry Profile Athletic footwear, or footwear produced for the purposes of sporting activities, accounts for over 44% of all footwearrelated purchases. Of this, Nike commands over 30% of the athletic footwear market share as of 2008 and has approximately 600 contract factories with over 800,000 workers in 46 countries around the world dedicated
to sustaining this competitive advantage. While there are many makers of footwear, only Nike and Adidas continually report above $5 billion annually in sales. Total Nike company footwear sales, which include Cole Haan,Converse, Hurley, Nike Golf, and Umbro brands, reached $10.9 billion for the 12month period ending November 30, 2008. Within the athletic footwear industry, Nike is clearly perched at the top, with more opportunities for growth available as burgeoning consumer markets in China and India expand.
III. Brand Positioning Nike is a global company that has stayed true to its mission statement throughout the years. Nike strives “...to bring inspiration and innovation to every athlete in the world.” Companies like Reebok, Adidas, and Puma are the only things standing in
Nike’s way of completely fulfilling that mission statement. Although Nike is the world’s leading athletic shoe company, it is not the only company. Its competitors are constantly trying to improve their products in an attempt to keep up with Nike, and as expected, Nike is constantly improving their products as well. A logo is an extremely important part of a company’s image. The “swoosh” is known worldwide and is automatically associated with Nike. The powerful logo connects the image to the brand and lets everyone know that it is a Nike product. Nike’s slogan is also extremely well known, “Just Do It”. The slogan has received positive feedback over the years because it is inspiring to young athletes and sends an extremely positive message. Nike products are offered in 99 stores throughout the United States, and in over 48 countries outside of the United States. Nike sponsors numerous athletic events in order to stay true to their mission statement, along with expanding brand awareness. In 2009, Nike hosted the world’s largest running event with close to 780,000 participants. Nike hosted these runs in 30+ cities around the world. The races are a celebration of runners and the sport of running, and serve to connect the athletes with each other. These types of advertising and marketing initiatives further increase Nike’s brand awareness, helping to sustain their competitive advantage.
IV. Target Audience As a global sports brand, Nike identified its target audience as the youth market.
They are active people who enjoy highquality sporting goods, especially footwear, and tend to buy Nike more than any other brand. Specifically focusing on shoes, their target audience is males and females between 18 and 35 years old. According to the MRI data of 2010, males and females ages 18 through 44 consumed the most footwear from Nike.
VI. Financial Data
Nike currently holds 58% of the global market share for footwear, while Adidas holds 23%,and Under Armour holds 9% respectively. Nike owns 80% of the U.S.’s 2.6billion athletic footwear market share as of 2010. A. Stocks Nike stock is currently valued at $105.22 a share, while Adidas trails behind with $37.67, and Sketchers with $14.14. The only athletic footwear stock priced higher than Nike is Puma, valued at $286.50. B. Revenue
Nike Annual Revenue
Year
Amount (in Millions)
% Increase vs Previous Year
2008
$18,627
2009
$19,176
2.9
2010
$19,014
(0.85)
2011
$20,862
9.7
As shown above, Nike’s operating margins seem fairly steady with the exception of 2009. C. Annual sales and Assets Nike Total annual sales in 2011 was greater than $20M. Nike current assets based on reports from 8312011 are $11,039M. As of 5312001 their total was $11,297M. As you can see their total has been slowing increasing since the first quarter of 2011. D. Ranking Nike is ranked 10th among America’s Best Corporate Citizens. This was based on financials as well as policies in six areas: environmental, climate change, human rights, employee relations, corporate governance and philanthropy. Nike ranked 5th amongst World’s Most Valuable Personal Goods Companies.
In 2010, ranked 40th in domestic company advertising spending. Nike is ranked 2nd amongst most Valuable U.S. Personal Goods Companies, solidifying their dominance in the athletic footwear market.
VI. Market Strategy Nike has a circulation around the world with many of their products reaching inner city youth the most. With advertising and marketing playing a major role in this in order to sell to the urban basketball player who depends on an athletic shoe to support his performance. Does the price fit the value of this product? This can be seen as a positive question, the total equity of Nike at the end of 2010 was an estimated $9.7 billion. Nike seems to be doing quite well Increasing sells and profiting from majority of the revenue through specific lines such as Jordan’s which is they’re most popular and lucrative shoe. They offer a specific style that will draw consumers in whether the price
be low or high. They appeal to an athletic demographic with they’re copy “Just Do It” they manage to entice the consumer with energy as well as determination proving that Nike is not simply a brand but also a motivational tool for athletic individuals.Nike has a wide variety of price ranges for all of their shoes, separating the prices depending on the class of shoe and the sport the consumer may play. Prices of Nike fluctuate from 50200 dollars suggested retail. The most popular shoe of the moment is Nike Total Air Foamposite Max, priced at $225. The shoe has sold out online as well as in stores at an amazing rate. This is perfect example of the value exceeding the cost. Nike has had many lines of shoes that branch a wide variety of sports, however no shoe has been quite as successful as the Air Jordan’s. released in 1985 Jordan’s have become Nike’s top seller. Most being priced at or around the $100 mark the brand has successfully created a brand within a brand which makes Nike an even bigger powerhouse than before.
VII. Social Status Nike is a brand that has dominated the athletic market for almost 40 years. Nike is fashionable, innovative, stylish, and classic. These adjectives best describe this famous brand. Nike has a social status that is of high regard. The demographic for Nike is primarily young adults ages 1834. This is the primary audience that Nike appeals to. The purpose of this information is to gauge how specific individuals in this age range feel about the product, whether they feel as though the price is worth the value, how the specific individual feels about the brand, and finally sponsors and spokespeople for the
brand that make Nike so irresistible to the young consumer.
VIII. Nike has had a wide range of sponsorships. Sponsorships are important because they soon become the face of the brand or that specific product. These individuals are often sports figures that have risen above athletic excellence and are now being asked to represent a brand. This will generate revenue for both Nike as well as the endorsed party. This adds to the social status in a way that the others lack. By offering a recognizable face to young consumers you are giving them someone to identify with, someone they can easily look up to; when they wear Nike they are wearing the shoes of their favorite athlete. This becomes a sensation all consumers must have a pair no matter what the cost may be. The thought that a simple individual you have never met before has such an impact on the consumers’ life enough to buy something that they endorse is most interesting. Nike has a long list of sponsorships including: Michael Jordan, Serena Williams, Tiger Woods, and Charles Barkley. Nike is excellence. Nike is performance. Nike is stylish. These qualities best fit Nike and have for nearly 40 years. Nike is a brand that is in its own league offering athletic apparel, shoes, and bags. It is because of these qualities that Nike has, and will continue to dominate the athletic market for the foreseeable future.
Nike Global Marketing 1. Majority of people would recommend Nike shoes to friends and family 2. Nike is favored amongst the majority 3. Just Do it is the favored slogan 4. Comfort is a huge factor when purchasing shoes 5. Majority of people would like to customize their shoes more with Nike ID 6. Aesthetics are important 7. Nike gives the feeling of active lifestyle (Nike=athletic) 8. Nike swoosh is well recognized 9. The Majority of the people are Brand Loyal 10. Little to no improvements are necessary