Nike Busisness Analysis

Business Analysis

Market Research 54-2500 (02) October 9, 2012 Kadee Ellis Anja Harris Kathleen McEntire Quincy Mugg Corey Wallace

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Table of Contents Brand Description……………………….…………………3 Product Life Cycle…………………………………………4 Competitors……………………………………………...…5 Sales by key Distribution…………………………………..6 Sales Volume per key Item…………………..………….....7 Revenue compared to competitors…………..……………..8 Brand Positioning…………………………………...………9 Distribution Channels………………………...…………….9 Growth History……………………………………………..10 Stock Prices…………………………………………………11 Product category revenues…………….………...…………11 Share of Market and Rank………………………...……….12 Demographics…………………………………………….…15 Creative Strategy…………………………..………………..16 Marketing Strategy………………………………………….16 Allocation of advertising dollars………………..…..………17 Target audience……………………...……………………....17 Psychographic profiles………………………………...….…17

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Brand Description Nike is at the cutting edge of what it takes to keep consumers talking about a brand- and they are most certainly at the top of the food chain in the world of athletic apparel and equipment. Consumers are so loyal that the release of a new line of shoes has sparked riots.

They have branded themselves with not only a strong tag line –‘Just Do It,’ but also by having their finger on the pulse of new technological advancements.

The first incarnation of Nike began in 1964, under the name Blue Ribbon Sports. In 1971, Nike incorporated, and began with the mission statement “To bring inspiration and innovation to every athlete in the world.” Their mission was to help athletes get moving, but also to be a brand for those who did not consider themselves athletes. Originally, Nike specialized in athletic shoes, (Where the bulk of their revenue still comes from) but has since expanded their product line to include apparel, sports equipment, and other accessories in over 170 countries.

Subsidiaries include Umbro, Cole Haan, Converse, and Hurley International.

Nike personifies itself as a “hip” brand, as they are always innovating and always attempting to incorporate technology into their brand’s image. Most recently, the Nike+ FuelBand has hit their market with huge success. The band uses state of the art accelerometer technology to track your daily physical activity. A USB drive then plugs into your computer to “grade” the consumer on their physical activity for the day, helping not only to track your progress, but to make you want to challenge yourself. A partnership with Apple has served the brand well, as the iPhone comes loaded with Nike+ automatically which increased awareness when the technology was new.

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Nike’s athletic equipment target market is men and women interested in active lifestyles between the ages of 20-40. Nike’s non-athletic (fashnion) apparel has a broader target market, including men and women from toddlers up into their 40s. Their incredible product breadth has been introduced slowly enough over the company’s history that consumers are not overwhelmed by choices. The clothing is available at most major retailers, as well as Nike Town, the Nike exclusive store located in larger cities across the world.

While Nike’s headquarters is located in Oregon, their manufacturing is global, with locations in 45 countries, including primarily Asian countries. The company has been under public scrutiny for years because of their human rights conditions in sweatshops. This occurs because Nike will allow whoever can provide the cheapest manufacturing to do so (So they switch around when necessary, to get the job done cheap) and in many cases child labor laws are unregulated. This could be a problem not only from a humanitarian point of view, but also because manufacturing in third world countries with unstable economies brings about the threat of currency fluxuations.

Product life cycle Nike is currently in the growth cycle of their brands total life cycle. They have evolved to become global, and as such, they have high brand power and an internationally recognized logo.

The primary aspect in which the company is currently growing is their research and development. With technology at the forefront of every move they’re making, the company is sure to have consumers’ attention (at least until they refresh their Twitter feed).

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Competitors According to Nike, their key competitors are Puma, Adidas, New Balance and sketchers.

Nike is number one in the market when looking at revenue compared to their key competitors.

Adidas in close behind, and Puma is the least threat to Nike.

Nike’s annual report shows that Nike’s Sales have increased from the last five years. This could be due to new products and new technology to go with the products. From 2009 to 2010 Nike lost 162,000 dollars in revenue. This could have been from the exposure of the third world party’s manufacture workforce.

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Sales by key distribution

North America Greater China

West Europe Central and East Europe

6%

Emerging Markets Japan

4%

12% 42%

15%

21%

North America (42.1%) Western Europe (21.2%) Emerging Markets (15.2%) Greater China (11.5%) Central and East Europe (5.7%) Japan (4.3%)

These numbers reveal that our distribution is inferior in eastern countries, and therefore we have to develop plans to increase the product flow within the distribution chain.

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Sales volume per key item

Footwear - $11.493 Billion Apparel - $5.475 Billion

Footwear ($11.5 Billion)

Apparel ($5.5 Billion)

Equipment ($1.01Billion)

Other Products ($2.9 Billion)

14% 5%

55% 26%

Equipment - $1.013 Billion Other products - $2.881 Billion

These numbers convey how significantly uneven Nike’s revenue is divided among their product line. This could present a problem if the footwear market should ever see a decline in sales, leaving their total business vulnerable to a fluctuating market.

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Revenue compared to competitors

This is the revenue by company per year. It shows that Nike is at the top of the list based on earnings per year, followed by; Adidas, Reebok, Skechers and Asics. Nike continues to grow as a company.

Earnings from 1990-2012

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Nike’s revenue has increased greatly since established in 1964 by co-founder Bill Bowerman. Now Nike holds its spot as number one in the athletic apparel and shoe company.

Nike shares sprinted to a new all-time high, $114.81, in early May. The stock then promptly stumbled. So far, it has fallen 7.5% in June. A surprise to the upside in its quarterly report Nike could send shares back to the starting block. There's some precedence for this: Nike has surprised four out of the last five years when reporting fiscal fourth-quarter figures. Analysts expect quarterly earnings of $838.3 million, $1.37 a share, on $6.5 billion in sales; for the year, $3.1 billion, $4.93 a share, in profit on $24 billion in sales. For sure, Nike is richly priced, trading at 20 times 2012 profit.

Brand Positioning Nike has many ways in which they position themselves. Nike associates with high level athletes, providing them with innovative and high performance athletic equipment. Nike is number one in performance and number one in its industry of fine sporting equipment. Nike overtakes some of the other major brands such as Reebok, Adidas, UnderArmor and Puma. The distribution channel of the company comprises 346 retail outlets across the US. Of these, 145 are Nike factory stores which carry primarily overstock and closeout merchandise, 12 Nike stores which also house Nike Women stores, 11 are Nike Towns which are designed to shelf Nike branded products and three stores are Nike employee-only stores. Also, the company operates 106 Cole Haan stores, 51 Converse factory stores, and 18 Hurley stores in the US.

Distribution channels Nike’s current brand marketing strategy is to sell their products to retail stores, and through independent licensed stores. They also sell their products on their website. In addition to brick

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and mortar stores, the company also offers its products across various countries through the websites, Nike.com, nikestore.com and nikewomen.com. Nike Inc. also has many subsidiaries; Converse, Cole Haan, Hurely, Nike Bauer Hockey, Nike Golf and Jordan Brand.

Nike is always trying to have a current up to date brand image. Evolving with the changing times in technology and what society is demanding for. They partner up with some of the most aspired athletes in the world to promote and endorse their products. Product differentiation, the company is always trying to stand out from the rest, from their running shoes to their Nike swoocsh logo.

Growth history

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Stock Prices

Nike’s within the last 3 years have had its stock increase and decrease steadily. This could have been from the work force scandal and new technology release. Nike’s current stock is 96.52 dollars and is down .21%

Product category revenues

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Nike is in the growth stage when it comes to their category life cycle. Their main categories those including footwear, apparel, equipment, and global brand divisions have been steadily increasing from previous years. Nike is always inventing new technology coincide with their new products or a new line of footwear. Nike‘s annual sales total to be about 24,128 million dollars, which concludes that Nike has earned at 16 percent increase from the previous year.

Share of Market & Rank Share of market for the top athletic footwear makers worldwide -2009 35% 30% 25% 20% 15% 10% 5% 0%

Nike has continued to excel in the athletic footwear market over the competitors. The introduction of new technology and designs has increased their sales and market share as a whole. Nike also caters to specific needs in the athletic footwear markets such as football cleats and soccer shoes widening their product mix and increasing their market share.

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Running shoe market – 2008 70% 60% 50% 40% 30% 20% 10% 0% Nike

Asics

New Balance

Other

A couple years before 2008 in 2006 Nike introduced Nike+. The advanced technology was able to track running statistics from a shoe to an iPod device. It later expanded to other devices and there was also an addition of an online community to share goals, stats and analyze your personal data. This technology was not available from Asics or New Balance at this time, giving Nike a competitive advantage in the running shoe market Athletic shoe brands bought in the last 12 months – Fall 2010-2011 Brand

Sales past 12 months

% of Total Industry

Nike

$44,505,000

19.3%

New Balance

$26,304,000

11.4%

Adidas

$16,802,000

7.3%

Sketchers

$12,977,000

5.6%

Puma

$5,402,000

2.3%

Other

$124,426,000

54.1%

Total Industry

$230,416,000

100%

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Out of the total money spent on the athletic shoe industry, 19.3% of the market was spent towards Nike followed by New Balance and Adidas. Nike as a whole competes in many markets beyond athletic footwear but Nike’s high percentage proves that out of the all segments of products, their athletic footwear is the strongest selling. It is important to notice that Nike has the largest percent gap at 7.9% more sales then the next leading brand (excluding other).

Demographics Demographics Men Race: White Graduated college No college Age 25-34 (non-gender specific) Age 35-44 (non-gender specific) Occupation: Professional and related Occupation: Sales & Office House Hold Income $75,000-$149,999 House Hold Income $30,000-$39,999 Census region: South Now married Have children 12-17 years old Have children <6 years old Home owners Value of home $200,000-$499,999

% of 100 52 68.7 29.9 38.7 25.2 22.4 16.5 17.3 9.9 8.9 36.6 50.7 26.5 24.7 64.7 25.9

The demographic of Nike products are white males between the age of 25-34 years old.

Some have graduated college, a larger percentage have not. Their occupation ranges between professional to sales and office jobs. Their average house hold income is between $75,000$149,999, and are located in the southern region of the United States. They are married with children and own their home that values between $200,000-$499,999.

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Marketing Strategy The current marketing strategy for Nike has switched from print and television to online.

Nike does not see the benefit of expensive television advertising when social media is so relevant to their target customer. Since the launch of Nike+ and Nike Fuel Band consumers have been able to interact with their fitness products through digital means. Nike’s marketing strategy is largely in the digital realm. Online communities let Nike follower customers and create tighter relationships than ever before. “We want to inspire consumers to seek out our content,” says Simon Pestridge, UK Marketing Chief.

Creative Strategy

Nike’s current creative strategy is to introduce interactive digital elements so the company can communicate directly with its’ customers. Nike+, Nike Fuel Band (performance tracking wristband) enables immediate interaction with consumers. Nike launched an interactive 30 story billboard in Johannesburg, South Africa that let customers post messages via Facebook

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and Twitter that was broadcasted to the whole city. In May 23, 2010 Nike launched a commercial shot by Oscar-nominated director and aired via Nike Football’s Facebook page, reaching 8 million viewers in a week, a viral-video record! The commercial features soccer players sponsored by Nike that would be playing in the upcoming FIFA World Cup. Nike utilizes their Facebook page to hold contest, post information and give news to their consumers they would get nowhere else. The According to a former Nike Executive Nike is “less about hero worship and more about consumer-driven conversation.”

Allocation of advertising dollars Nike has had a significant change in the allocation of advertising dollars in the past decade. In 2000, advertising was split up from Wieden + Kennedy to include other agencies that specialize in new technology and increase their social and digital media efforts. In the past 3 years Nike’s print and television advertising spending has dropped 40%. In 2010, Nike spent close to $800 million on ‘nontraditional’ advertising and growing in years to come.

Target audience Nike’s target audience is older teenagers 16-19 years old who utilize their products as multi-purpose; fitness and fashion. The older teenager is a very active in online communities and engages in digital media daily. Not only is it important for the target audience to be aware of digital media but is crucial that they are heavy participants.

Psychographic profiles The Nike consumer is concerned with health, fitness and their overall wellbeing. Many want to improve their physical condition. Their free time is spent on internet communities such

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as; fitness forums, Facebook and online magazines verses watching television. They like to achieve goals and overcome challenges especially during their workouts and as athletes.

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Kadee Ellis - Anja Harris - Kathleen McEntire - Quincy Mugg - Corey Wallace