Nike Strategic Plan

Concordia University
Nike, Inc.
Nike, Inc.: Strategic Assessment Prepared by Learning Team 3: Dawn Ackerman, Brian Claar, Angelica Jackson Presented to: Dr. Alain Gracianette, MBA 507 Concordia University November 15, 2013
Nike, Inc.
Special Note Efforts were made to research legal and fair use of the Nike logo. Based upon the information provide in the following statement found on Nikes website: "Thank you for your interest in Nike. Nike does not grant permission to use or modify our trademarks, logos, images, advertising or similar materials. It is your responsibility to determine whether your proposed use is legally permissible. For example, some uses of our logos in a textbook may be considered fair use. Hence, the Nike logo is being used for this school project under fair use conditions.
Source: Nike, Inc. http://nikeinc.com/pages/contact-nike-inc
Nike, Inc.
A brand is something that has a clear-cut identity among consumers, which a company creates by sending out a clear, consistent message over a period of years until it achieves a critical mass of marketing. -Phil Knight
Ultimately, we wanted Nike to be the worlds best sports and fitness company. Once you say that, you have a focus. You dont end up making wing tips or sponsoring the next Rolling Stones world tour. -Phil Knight
Nike is a marketing-oriented company, and the product is our most important marketing tool. -Phil Knight
Concordia University Table of Contents
Nike, Inc.
Executive Summary...5 Module 1: Overview of Companys Fundamentals7 Module 2: Internal Assessment Part 1: Qualitative Analysis14 Part 2: Quantitative/Financial Analysis.28 Module 3: External Assessment Part 1: General Environment Analysis..36 Part 2: Industry, Market, and Competitive Analysis...46 Module 4: Situational Analysis...62 Module 5: Strategic Plan.74 References.76 Appendices81
Concordia University Executive Summary
Nike, Inc.
The consulting team of DBA Consulting, LLC was established with a specific mission: intensely analyze the market, operating conditions, and current strategy in use by worldwide powerhouse Nike, Inc. in order to present a solid strategic assessment that both presents the findings as well as showcases two alternative strategies for Nike, Inc. Internal and external environments were also assessed as well as every aspect of the financial environment so that a key recommendation for implementation of an alternative strategy to senior management could be made. The findings are presented herein. Nike, Inc. is an organization that has created an uncontested successful international business. Nike, Inc. designs and sells athletic footwear, apparel, equipment, accessories and services worldwide, employing approximately 44,000 employees. Essentially, Nike, Inc. has established themselves as a successful company with a strong focus on innovation and operations based on the establishment of a strong business model, key executives, a clear vision, mission, and stated objectives. This document is composed of five modules beginning with an overview of the company and ending with specific recommendations by DBA Consulting, LLC for Nike, Inc. Module 1 begins with an overview of the fundamentals of Nike, Inc., clearly states a brief history, business model, size, key activities and product lines, executive team, vision, mission, and values, and company objectives. Nike, Inc.s CEO Mark Parker leads the company with the belief that a shared vision and strong supportive company culture, product innovation will be fostered. Module 2 furthers the analysis of Nike, Inc. with an internal assessment that includes both a qualitative and quantitative approach. The examination of resources, capabilities, core competencies, value chain, strategic intent and mission, key result areas, and long-term objectives assisted in creating the qualitative section of the analysis. While a thorough financial assessment aided in the creation of the quantitative section. Results show numerous strengths associated with innovative approaches that drive disruptive outcomes, a company culture that encourages collaboration and sustainability in both business and lifestyle practices, and global brand recognition that is apparent worldwide. Quantitative results indicate a strong company profile with consistent revenue growth, strong cash flow, and highly effective return on assets. Although Nike, Inc. maintains a strong internal capacity, a few areas of concern exist. These concerns include reliance on an extended global supply chain, and low gross profit margins when compared to the industry norms. Moving forward, Module 3 assesses the external environment and the impact on Nike, Inc. A general environmental assessment consisting of seven areas of focus; geographic, demographic, economic, political and legal, socio-cultural, global and technological was conducted. Combined with an industry, market, and competitive environment assessment, this fully encompassing environmental analysis helped illustrate a clear understanding of the opportunities and threats presented to Nike, Inc. Among these environments key opportunities were addressed, including opportunities to capitalize on the 20% increase in emerging markets and the significant increase in income in foreign countries. Trends associated with increase in fitness devices and an increase in healthy living offer key opportunities for Nike, Inc. In addition, the expansion of sports 5
Nike, Inc.
internationally provides security in the sportswear industry. Key threats were also assessed with areas to be aware of. The sportswear industry is highly competitive with new entrants emerging both locally and globally in new innovative ways (despite barriers to entry). The importance of brand image makes this industry competitive not only with the products offered but in the marketing strategy between competitors. In addition, consumer preferences are in a constant state of change and require constant adaptability. A synthesis of the internal and external environment was conducting by DBA Consulting, LLC for the purpose to determine the situational analysis. Module 4 represents a consolidation of the findings and presents a general problem statement as a means to construct strategic alternatives. In Module 4, two strategic alternatives were produced in conjunction with the current strategy. Each option was compiled and the pros and cons weighed. The final module, Module 5, presents the specific strategy recommendation made by DBA Consulting, LLC, to Senior Executives at Nike, Inc. The recommended strategy, coined Focused Differentiation-International takes into consideration Nike, Inc.s core competencies, strategic objections, and current market presence so that alignment of suggested recommendations and mission and intent is achieved. A rationale and critical steps are stated. The full Strategic Assessment presents the thorough analysis and explanation of relevant findings.
Concordia University Module 1: Overview of Companys Fundamentals
Nike, Inc.
Company Name Nike, Inc. Location One Bowerman Drive Beaverton, OR 97005 Brief History and Years In Business Nike, Inc. was originally founded on January 25, 1964 under the name, Blue Ribbon Sports by Bill Bowerman and Phil Knight. Blue Ribbon Sports did not officially become Nike, Inc. until May 30, 19781. In 1964 Bill Bowerman, a well-known track and field coach offered a partnership to Phil Knight, a middle distance runner to start a business to distribute the Japanese running shoe, Tiger Shoes. Around 1971 the relationship with Tiger Shoes began to fall apart. As a result Knight and Bowerman decided to make the jump from being a footwear distributor to designing and manufacturing their own athletic shoes2. Bowerman gathered inspiration from his family waffle iron and made a shoe with the waffle impression sole. BRS honed its designs and created the Swoosh. In 1972 the Nike line of footwear debut. Shortly after, the company became Nike, Inc. (taking its name from the Greek goddess of victory, Nike). On December 2, 1980 Nike completed an initial public offering of 2,377,000 shares3. Over the years, Nike, Inc. has leveraged athletes to endorse their products in a very successful way. Among these athletes are; Steve Prefontaine, Michael Jordan, Bo Jackson, Tiger Woods, Lebron James, Carmelo Anthony and many more. Nike, Inc. is well known for the popular slogan, Just Do It. Some of Nike, Inc.s subsidiaries include Hurley International and Converse4. In 1999 Bill Bowerman passed away. In 2004 Phil Knight stepped down from CEO and was replaced by Mark Parker, the current President and CEO. In 2003 for the first time Nike, Inc.s international sales exceeded U.S. sales, this supports the idea of Nike, Inc. being a truly global company. Business Model Nike, Inc. has created a business model that supports innovation, sustainability and transparency. In more recent years, Nike, Inc. has aimed to create breakthroughs that will improve the world
1
Nike, Inc. (2013). Nike.com. Retrieved September 27, 2013, from History and Heritage: http://nikeinc.com/pages/history-heritage 2 Ibid 3 Unknown. (2013). History of Nike. Retrieved September 27, 2013, from Kicks On Fire: http://www.kicksonfire.com/history-of-nike/ 4 Nike, Inc. (2013). Nike.com. Retrieved September 27, 2013, from http://www.nikeresponsibility.com/report/content/chapter/business-overview
Nike, Inc.
and that are better for athletes as well as investors. By maintaining focus on sustainability, Nike, Inc. expects to deliver profitable growth while leveraging efficiencies in lean manufacturing. They do this by minimizing environmental impact and using the tools available to bring about positive change across the entire supply chain. Nike, Inc. takes a holistic approach to their sustainability strategy and fully integrates that approach into the business to create value, not just through risk mitigation, but also through top-line growth, cost avoidance and better access to capital. Nike, Inc.s business model includes their web-like value chain that offers seven fundamental stages: Plan, Design, Make, Sell, Use, and Reuse5. This system allows Nike, Inc. to better track, measure and report where they have influence, or control, and how the decisions they make can impact energy and climate, labor, chemistry, water, wastes and community.
Vision/Mission/Company Values Company Mission Statement: To Bring Inspiration and Innovation to Every Athlete in the World (if you have a body, you are an athlete). 6 Nike, Inc. focus and company vision to serve the athlete began with the inception of the company. Phil Knights focus on providing superior products for athletes provided the niche market Nike, Inc. needed in order to become an incredible success in the marketplace. Nike Inc. strives to bring products to the marketplace with an intense focus on what an athlete desires, from a product with a specific functionality, to a product to the market that would suit the general population7. Nike believes that a strong company culture and shared vision leads to product innovation. In order to achieve company goals Nike believes that the company must do so through creation and perpetuation of shared values within the company ranks as well as a strong company culture. The following 11 principles guide Nike employees:8
5
It is our nature to innovate Nike is a company Nike is a brand Simplify and go The consumer decides Be a sponge Evolve immediately Do the right thing Master the fundamentals We are on the offense-always
Nike Inc. (2012). Nike, inc.-sustainable business report iii. impact areas; people and culture . Retrieved from http://www.nikeresponsibility.com/report/content/chapter/people-and-culture
6 7
http://help-en-us.nike.com/app/answers/detail/a_id/113/p/3897 Nike Inc. (2012). Nike, inc.-sustainable business report iii. impact areas; people and culture . Retrieved from http://www.nikeresponsibility.com/report/content/chapter/people-and-culture
8
http://www.nikeresponsibility.com/report/content/chapter/people-and-culture
Concordia University Remember the man (The late Bill Bowerman, Nike co-founder)
Nike, Inc.
Through this shared valued systems Nike employees are empowered to respond quickly in scenarios in a way that validates the collective consciousness of the company. This in turn creates a certain ownership mindset of employees as guardians of the Nike brand itself. The companies guiding principles also lay the groundwork for the overall business model itself. The cultural and the business thus become mirror images conveying and reinforcing the ideas of becoming the leader of emerging markets as well as current ones, viewing the company itself as a member of the international community, and quick responsive product innovation that caters to the athletes of the world 9.
Leadership PHILIP H KNIGHT Chairman of the Board of Directors Mr. Knight, 75, director since 1968, is Chairman of the Board of Directors of Nike, Inc... Mr. Knight is a co-founder of the Company and, except for the period from June 1983 through September 1984, served as its President from 1968 to 1990, and from June 2000 to 2004. Prior to 1968, Mr. Knight was a certified public accountant with Price Waterhouse and Coopers & Lybrand and was an Assistant Professor of Business Administration at Portland State University. Mr. Knight led Nike, Inc. from a small partnership founded on a handshake to the worlds largest footwear, apparel, and equipment company.10 MARK PARKER President & Chief Executive Officer, NIKE, Inc. Mr. Parker, 57, has been President and Chief Executive Officer and a director since 2006. He has been employed by Nike, Inc. since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. Mr. Parker was appointed divisional Vice President in charge of development in 1987, corporate Vice President in 1989, General Manager in 1993, Vice President of Global Footwear in 1998, and President of the Nike, Inc. brand in 200111. In addition to helping lead the continued growth of the Nike brand, Parker is responsible for the growth of Nike, Inc.'s global business portfolio, which includes Converse Inc., and Hurley International LLC. DON BLAIR EVP & Chief Financial Officer For more than 10 years, Don Blair has been Nike, Inc.s Chief Financial Officer and a principal architect of the companys strategies for delivering sustainable, profitable growth. He is responsible for the companys finance, investor relations and strategic planning functions and for
9
Pearson Education. (2010). About nike case 1.1: Vision, initiative, mission & commitment-nike-origins of a sports industry giant. Retrieved from http://wps.pearsoncustom.com/pcp_collins_explorebus_1/68/17645/4517174.cw/content/index.html 10 NIKE, Inc. (2013). Annual Report 2013. Retrieved from http://investors.nikeinc.com/Investors/Financial-Reportsand-Filings/Annual-Reports/default.aspx 11 Ibid
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the last several years was named one of the best CFOs in the U.S. by a leading investment community publication. Before joining Nike, Inc. Blair held a series of U.S. and Asia-based finance and strategic planning positions over a 15-year career at PepsiCo.12 ERIC SPRUNK Chief Operating Officer Eric Sprunk is Nike, Inc.s Chief Operating Officer leading all manufacturing, sourcing, IT and procurement for the company. Sprunk also oversees the company's efforts to drive innovation in the supply chain. Sprunk was previously Executive Vice President of Merchandising & Product where he was responsible for all Nike Brand products across the companys footwear, equipment and apparel engines from design and development to manufacturing and sourcing, delivering compelling stories to Nike consumers.13 Sprunk joined Nike, Inc. in 1993 and has worked in senior financial, product and global management roles. His most recent position was Vice President of Global Footwear where he drove the footwear creation process developing new concepts, driving innovation and ensuring supply chain management across the product categories. Before Nike, Inc. Eric was an executive at Price Waterhouse managing the Nike, Inc. account.14 Key Markets Nike, Inc. designs, develops, markets and sells athletic footwear, apparel, equipment, accessories and services worldwide. It is the largest seller of athletic footwear and apparel in the world. It sells products to retail accounts, through Nike-owned retail stores and internet websites, which Nike refers to as its Direct to Consumer operations, and through a mix of independent distributors, licensees and sales representatives in virtually all countries around the world.15 Nike, Inc. reports its Nike Brand operations based on its internal geographic organization. Each Nike Brand geographically operates predominantly in one industry: the design, development, marketing and selling of athletic footwear, apparel, equipment, accessories, and services. The reportable operating segments for the Nike Brand are: North America, Western Europe, Central & Eastern Europe, Greater China, Japan, and Emerging Markets.16 The NIKE Brand Direct to Consumer operations is managed within each geographic segment. Products Nike, Inc. focuses on Nike Brand and Brand Jordan product offerings in seven key categories: Running, Basketball, Football (Soccer), Mens Training, Womens Training, Nike Sportswear (our sports-inspired lifestyle products), and Action Sports. It also markets products designed for kids, as well as for other athletic and recreational uses such as baseball, cricket, golf, lacrosse, outdoor activities, football, tennis, volleyball, walking, and wrestling.
12
NIKE, Inc. (2013). Annual Report 2013. Retrieved from http://investors.nikeinc.com/Investors/Financial-Reportsand-Filings/Annual-Reports/default.aspx 13 Ibid 14 Ibid 15 Ibid 16 Ibid
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Nike, Inc.
Footwear Nikes athletic footwear products are designed primarily for specific athletic use, although a large percentage of the products are worn for casual or leisure purposes. It places considerable emphasis on high quality construction and innovation in its products. Nike Sportswear, Running, Basketball, Football (Soccer), and kids shoes are currently Nikes top-selling footwear categories and it expects them to continue to lead in product sales in the near future.17 Apparel Nike sells sports apparel and accessories covering most of the above mentioned categories, which feature the same trademarks and are sold predominantly through the same marketing and distribution channels as athletic footwear. Nike often markets footwear, apparel and accessories in collections of similar use or by category. It also markets apparel with licensed college and professional team and league logos.18 Equipment & Accessories Nike sells a line of performance equipment under the Nike Brand name, including bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment, golf clubs, and other equipment designed for sports activities. It also sells small amounts of various plastic products to other manufacturers through its whollyowned subsidiary, Nike IHM, Inc.19
Stated Objectives The stated objectives of Nike, Inc. are a direct reflection of a clear and well-articulated mission statement. A major movement within Nike, Inc. is a shift to entirely sustainable practices both in terms of operations and business structure. The company recognizes that innovation will be what spurs the shift to sustainability. That movement has aided in the development of three stated objectives that seamlessly fall in line with Nike, Inc.s. overall vision20: Innovation to serve the athlete Innovation to grow the company Innovation to inspire the world Size 21 Table 1: Size Year
17
Fiscal Year Revenue (in millions)
NIKE, Inc. (2013). Annual Report 2013. Retrieved from http://investors.nikeinc.com/Investors/Financial-Reportsand-Filings/Annual-Reports/default.aspx 18 Ibid 19 Ibid 20 Strategy: Business Overview. http://www.nikeresponsibility.com/report/content/chapter/business-overview 21 Nike, Inc. Revenue Performance. http://investors.nikeinc.com/files/doc_financials/AnnualReports/2013/index.html#select_financials
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Nike, Inc.
2009 2010 2011 2012 2013
$18,528 $18,324 $20,117 $23,331 $25,313
2012
Source: Yahoo! Finance. (2013). Nike, Inc. Key Statistics.
$24,128
Table 2 - Financial Brief for Nike, Inc. (NKEnyse) as of May 31, 2013 Number of Employees (Full Time) Number of Facilities Revenue (Fiscal Year Ends: May 31) Profit Margin Return on Assets Gross Profit EBITDA Net Income Total Cash Total Debt Total Debt/Equity Current Ratio
Source: Yahoo! Finance. (2013). Nike, Inc. Key Statistics.
48,000 645 DTC Stores (Direct to Consumers, stores and websites) 25.31 Billion 9.82% 12.31% 11.03 Billion 3.71 Billion 2.46 Billion 5.96 Billion 1.39 Billion 12.44 3.47
United States Facilities
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Nike Brand Products has three significant distribution centers in the United States located in Memphis, Tennessee. A separate facility is operated and leased for Nike Brand Product returns. Another facility in Foothill Ranch, California also ships Nike Brand Apparel and equipment. In total, there are 156 Nike factory stores, and 28 Nike in-line stores (including Niketowns and employee-only stores in the United States). International Facilities 16 distribution centers are operated outside the US in regions like Canada, Asia, Latin America, and Europe. There are 308 Non-US Nike factory stores and 65 Non-US Nike in-line stores (including Niketowns and employee-only stores). Employees As of May 31, 2012, Nike employed nearly 44,000 employees worldwide including retail and part-time employees22. No employees are represented by a union, unless required by law, meaning operations have never been interrupted because of labor disputes.
The overview of Nike, Inc. fundamentals illustrates a solid company structure that shares clear goals created from roughly fifty years of dedication to inspire athletes. Nike, Inc. is a successful company with complex international channels that positively impact the lives of consumers, vendors, employees, and athletes. With a better understanding of these fundamentals DBA Consulting, LLC will now address the internal factors responsible for the development of Nike, Inc. as the company it is today.
22
Labor. http://www.nikeresponsibility.com/report/content/chapter/targets-and-performance#Labor
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Concordia University Module 2: Internal Assessment Part 1: Qualitative Analysis Abstract:
Nike, Inc.
After an initial assessment of Nike, Inc.s company fundamentals, DBA Consulting, LLC set out to assess the internal environment of the company. Everything from tangible and intangible resources to value chain to a balanced scorecard is presented. A specific area of focus and intent was placed on the current state of Nike, Inc. including the objectives that go along with their present strategy. The results show that Nike, Inc.s efforts regarding all aspects of operations are in harmony with one unified mission of sustainability. A. Resources Resources are defined as assets of a company that help create value. Categorized generally in three sections; physical, human, and organizational, resources can be tangible as well as intangible. Resources are valuable because they are the components that allow a company to actualize their capabilities.23 Tangible resources include four sub-categories, financial, organizational, physical, and technological. Intangible resources include three subcategories, human resources, innovation resources and reputational resources. Tangible Resources: Tangible resources are described as resources that are physical and easy to quantify. 24 These resources are important because they illustrate the financial, organizational, physical and technological assets that a company has. The list below describes the tangible resources of Nike, Inc. -Financial Net income for Nike, Inc. at FYE 2013 was approximately 2.4 billion. Cash Flow at FYE 2013 was $3.3 billion. Total assets listed were $17.6 billion at FYE 2013.
This data shows a strong financial position. Nike, Inc. has a steady increase in revenues over the past five years. Cash flow increased significantly mostly due to the increase in net income from the previous year.25 -Organizational Nike, Inc. employs 40,000+ people Nike, Inc. has a matrix structure of organization that requires each employee two executives to report to.
23 24
Strategic Management, 2013 Ibid 25 Nike, Inc. 2013 Annual Report
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Nike, Inc.
Executive Structure includes: CEO, EVP of Global Human Resources, Chief Financial Officer, President of Nike Brand, President of Product & Merchandising, EVP Administrative Officer & General Counsel, EVP of Global Sports Marketing, and Chief Operating Officer.26
The strategic implications of Nike, Inc.s organizational structure are the ability to receive feedback from two different departments that an employee is required to report to. In addition, such a structure allows two separate departments to be aware of the functions and production of specific employees. -Physical: Property, Plant and Equipment Nike, Inc. owns locations worldwide including, World Headquarters in Beaverton, OR, two distribution centers in Memphis, TN, Tomisato, Japan, Laakdal, Belgium, Taicang, China, manufacturing facilities in Beaverton, OR and St. Charles, Missouri27. Net property, plant and equipment at FYE 2013 are 2.4 billion28.
The strategic implications of this data suggest Nike, Inc.s strength of physical assets. In addition to owned facilities, Nike, Inc. has multiple leased facilities that make up the majority of their locations. Having owned and leased buildings allow for less risk (lease) and more control (owned). -Technological World-class R&D department committed to constant innovation in shoe, apparel, and equipment design and manufacturing. Multiple patents registered in multiple countries Patent on air technology. Efficient distribution technology for inbound and outbound logistics.
Strategic implications of technological resources are Nike, Inc.s ability to develop, recognize and protect their innovation. Intangible Intangible resources are resources that also hold value but are more difficult to quantify. Although both tangible and intangible resources are valuable, most companies typically rely on intangible resources as the foundation for their capabilities because they are more difficult for competitors to imitate or substitute.29
26 27
http://nikeinc.com/pages/executives Nike, Inc. 2013 Annual Report 28 Ibid 29 Strategic Management, 2013
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Concordia University -Human Resources
Nike, Inc.
Nikes jocks culture shows a strong homogeneity through a common passion for sports and the betterment of athletes. Nike, Inc. has created employee networks to help facilitate relationships and awareness regarding internal diversity. The Diversity & Inclusion team creates inclusive environments by sharing the fundamentals of diversity, uses diversity and inclusion to inspire new ideas, and encourages connections between unlikely players. Nike, Inc. has never had interruptions in operations due to employee disagreements. 30
The strategic implications of the successful human resources allow Nike, Inc. to have strong employee loyalty, which, in turn can create a decrease in costs of employee turnover. -Innovation Nike, Inc. initiated the formation of Business for Innovation Climate and Energy Policy (BICEP) and SB&I Lab for sustainable innovation through external partnerships in 2009 thus creating an atmosphere and presence of being truly innovative.31 Nike, Inc. was created on a foundation of innovation starting with the waffle iron inspired sole. This allowed traction with less material, resulting in a lighter weight shoe. Nike Sports Research Lab (NSRL), designed to encompass the innovative ideas from athletes, designers, engineers and scientists, this team was created to develop solutions based on biomechanics, physiology, perception and athletic performance.32
Strategic implications of successful innovation for Nike, Inc. will create resiliency when problems occur. The creation of innovative solutions can further strengthen internal teams and in turn, have developed as a core competency. -Reputation Globally recognized brand worth $16+ billion.33 Brand Names-Nike Golf, Hurley International LLC, Converse, Inc., Jordan Brand.34 Nike, Inc. tagline, Just Do It and their mission, To bring inspiration and innovation to every athlete and describing an athlete as If you have a body you are an athlete are all the foundations of developing their reputation and brand.
30 31
Nike, Inc. 2013 Annual Report http://nikeinc.com/news/nike-bicep-partner-to-work-on-climate-change-and-energy-issues-call-for-congressionalaction 32 http://nikeinc.com/news/nike-sport-research-lab-incubates-innovation

33
http://www.forbes.com/sites/mikeozanian/2012/10/17/the-forbes-fab-40-the-worlds-mostvaluable-sports-brands-4/
34
http://nikeinc.com/pages/our-portfolio-of-brands
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A strong reputation further encourages and supports Nike, Inc.s strategy of global exposure. Reputation of a brand and a company creates customer loyalty and customer lifetime value. B. Capabilities Capabilities are the behaviors and tasks that a company performs with the resources they have available. Some capabilities can develop into core competencies. Such capabilities can, in turn become competitive advantages that create above average returns for the company.35 A firms capabilities span across many areas of an organization; Distributions capabilities, Human resource capabilities, and so on. Listed below are capabilities that are unique to Nike, Inc. Leadership & Management Leadership at Nike has been created on the foundation of transparency. Employees are encouraged to offer feedback to create a better work environment. Research and Development Innovative ideas and patented technology allows for Nike, Inc. to stay on top of the competition. Nike, Inc. has chosen to move from incremental innovation to disruptive innovation in hopes to create better solutions Global Marketing & Branding Nike, Inc. has created a highly successful brand recognition approach by sponsoring successful athletes. Nike, Inc. has more than 700 stores worldwide.36 Their success is in part due to their ability to market towards everyone by stating, If you have a body you are an athlete. Globally-integrated Manufacturing & Supply Chain Nike, Inc. has a commitment to transparency with regarding to manufacturing which allows the disclosure of more than 800 factories worldwide that produce Nike, Inc. products. They encourage and support new manufacturing models where skilled and empowered workers are recognized as a competitive strength. Global Distribution Effective distribution channels including, 3 product lines shipped to 143 different locations worldwide. Nike, Inc. manages their own logistics by creating an efficiently run logistics department. Nike distributes through multiple channels. The bulk of distribution occurs through wholesale sales to thousands of well-selected retailers such as large chains like Footlocker and The Sports Authority, and countless independent sporting goods stores. In addition, Nike engages in direct sales through three primary channels: hundreds of company-owned outlets in North America, showrooms like Niketown, and the ability for consumers to buy directly from Nike.com. Human Resources
35 36
Strategic Management, 2013 http://nikebrandanalysis.blogspot.com/2013/05/brand-awareness.html
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Nike, Inc.
Nike, Inc. employs 40,000+ people of diverse groups that strive to promote inclusion by the composition of their leadership teams. Their goal is to capture unfiltered employee feedback by replacing traditional census surveys with social technology that engages their workforce.37 Information Systems Nike, Inc. added 400 patents to Green Xchange, an internet marketplace where companies share intellectual property to support sustainability and innovation for the purpose of community collaborate.38 C. Core Competencies Core competencies are created from a companys capabilities that offer a competitive advantage. They are considered the elements of a company that set them apart from their competition.39 The criteria needed for capabilities to become core competencies are their ability to be rare and valuable to a customer. To obtain a sustainable competitive advantage those rare and value assets must also be costly to imitate and non-substitutable by competitors.40 Listed below are capabilities of Nike, Inc. and their ability to be rare, valuable, costly to imitate, and non-substitutable. Table 3: Nike, Inc. Core Competencies Capabilities Rare Costly to Imitate Y Y Valuable NonSubstitutable Y Sustainable Competitive Advantage Y
Efficient Distribution Channels Global Brand Recognition Success with Diverse Teams Information Systems Strong Research & Development Manufacturing Standards
Y Y N N N
Y Y N Y Y
Y Y Y Y Y
Y Y Y Y Y
Y Y N N N
37 38
http://www.nikeresponsibility.com/report/content/chapter/targets-and-performance#PeopleAndCulture http://nikeinc.com/news/nike-releases-environmental-design-tool-to-industry 39 Strategic Mangement, 2013 40 Ibid
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Table 4: Nike, Inc. Comparison, Capabilities and Core Competence Functional Areas Leadership & Management Distribution Innovation Across Multiple Departments Information Systems Marketing Manufacturing Human Resources Capabilities Strong and experienced leadership Efficient Logistics and Distribution Strong R&D, Matrix Management System, Innovative Technology Effectively Share Information Global Brand Management Globally-integrated supply chain Successful Inclusion of Diverse Teams Core Competence Yes Yes Yes
No
Yes Yes Yes
D. Value Chain A value chain illustrates the system of tasks a company participates in to create value for their customers. This process can includes, operations, distribution, marketing, and follow-up.41 An analysis of the value chain helps companies to determine which areas of the process creates value for their customers. After a thorough evaluation of a value chain a company can find strategic methods to improve their system. Nike, Inc.s value chain consists of seven fundamental components that help create value for their customers. In addition, their value chain promotes sustainability by viewing their chain as an intricate web as oppose to a linear chain. Each decision made influences the decisions of other components, creating an environment of constant iteration. As an example, the knowledge gathered through the Use phase helps to create new innovative solutions in their next Design phase. Each decision impacts the choices discovered in subsequent phases. This interconnectedness helps identify areas of improvement and allows dialog between each phase of the value chain, resulting in better value for their customers. The key tool Nike, Inc. utilizes helps to increase efficiencies as well as create better working conditions throughout the system.42
41 42
Strategic Management, 2013 http://www.nikeresponsibility.com/report/content/chapter/business-overview
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Nike, Inc.
Figure 1: Nike, Inc. Value Chain
Plan Reuse Design
Use
Make
Sell
Move
Source: DBA Consulting, LLC
Listed below are descriptions of the phases and how they create value for customers of Nike, Inc. Plan-This phase starts with development of a plan based on the mission and value Nike, Inc. promotes. Their resources and capabilities drive the production of this phase. Value is created due to the commitment to uphold the standards of innovation that is passed on to the customer. This phase is the foundation of everything that is created at Nike, Inc., the intentions of management, the passion for innovation and sustainability and the commitment to create an environment that supports diversity and ingenuity that Nike, Inc. is known for. Design-The design phase is committed to finding innovative designs that include, form, function, superior performance with the least amount of impact.43 Make-Nike, Inc. contracts with over 900 factories worldwide that offer the right knowledge and skills required to maintain high standards. Move-Nike, Inc. utilizes all forms of transportation to consistently and successfully move their products around the world. Nike, Inc. had scheduled delivery of Nike Brand athletic footwear
43
Nike, Inc. http://www.nikeresponsibility.com/report/content/chapter/business-overview
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Nike, Inc.
and apparel reaching approximately $12 billion.44 Distribution channels include143 different locations worldwide that are managed by Nike, Inc. Sell-This phase of the value chain is comprised of 750 retail stores worldwide, direct sales through their website and wholesale45. Nike, Inc. focuses on the experience created for customers who visit their stores either physical or online. Value to the customer is created by their commitment to make the buying experience pleasurable. Use-Products purchased from Nike, Inc. hold a reputation of superior performance. Nike, Inc. focuses on the customer experience of their products by offering a 30-day return policy for any reason.46 Reuse-Nike, Inc. shows their commitment to minimizing their environmental impact by making running tracks, sport courts and new products from recycled products.47 Figure 2: Nike, Inc. Customer Value
Design superior products with a holistic approach to address multiple solutions
Successful solutions to miniimize environmental impact and to reuse product materials
Customer Value
Control of quality distribution and inbound l logistics
Commitment to high starndards of treatment of workers worldwide
44 45
Nike, Inc. 2013 Annual Report http://www.nikeresponsibility.com/report/content/chapter/business-overview 46 http://help-en-us.nike.com/app/answers/detail/article/returns-policy/a_id/29785/p/3897 47 http://www.nikeresponsibility.com/report/content/chapter/business-overview
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Nike, Inc.
Nike, Inc. chooses to minimize their outsourcing when possible so that they can maintain control of standards of the supply chain and value chain. Manufacturing is one significant area they outsource. They utilize 900 factories worldwide that make over 500,000 different Nike products. As a way to mitigate issues that arise from a lack of control of work environment standards, Nike, Inc. developed a new approach. Their approach encourages continuous improvement of factories rather than a focus on solely discouraging negative behavior.48 Strategically, finding a successful way to support worker rights through positive reinforcement as opposed to monitoring for minimum compliance of a code of conduct illustrates a leadership mentality instead of an effort to only manage behaviors. In time this strategy will strengthen their reputation. The support functions of a value chain describe the activities the company engages in to successfully research, develop, produce, sell, distribute and service their products. Nike, Inc. has four support functions; financial, human resources, technology, and management structure. Figure 3: Nike, Inc. Support Functions
FinancialManagement of financial resources for all phases of the value chain.
HRManagement of human capital, training, and retaining workers
TechnologyProvide innovative technology for inbound and outbound logistics.
ManagementSupport staff at all levels to plan, design, make, move, sell, use and reuse Nike, Inc. products.
E. Strategic Intent
48
http://www.nikeresponsibility.com/report/content/chapter/manufacturing
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Nike, Inc.
The strategic intent of a company is the internal strategy unique to a company that drives the company in every decision they make. Described in a Harvard Business Review article from Hamel and Prahalad, On the one hand, strategic intent envisions a desired leadership position and establishes the criterion the organization will use to chart its progressAt the same time, strategic intent is more than simply unfettered ambition.49 Nike, Inc.s [Proposed] strategic intent is clear and direct; to control the largest market share of every market they choose to penetrate. They will continue to move in the direction of this strategy by implementing strategic goals:50 Expand profit margins by reducing product costs through innovative design, globallyintegrated sourcing, manufacturing and distribution, and utmost efficiency. Minimize administrative expenses by leveraging existing infrastructure across all brands and subsidiaries Improve efficiency in working capital Increase brand awareness
F. Strategic Mission Solid and effective strategic management ultimately lead to a higher degree of competitiveness and above average returns. A strategic mission is key in the realization of such possibilities. For Nike, Inc., their clear, concise, and effective mission statement, To bring inspiration and innovation to every athlete in the world51 sets the groundwork for developing a strategic mission that is equally compelling and focused. The key components of Nike, Inc.s strategic mission are: Growth that is consumer-focused Growth through increased market place capacity and penetration52 Growth through all six geographic areas (North America, Western Europe, Japan, Greater China, Central & Eastern Europe, and Emerging Markets)53 Focused partnerships with retail locations to differentiate consumer experiences
Ultimately, Nike, Inc.s strategic mission is one centered on growth in nearly all aspects of the business. Despite being the market leader and having realized almost unbelievable levels of growth, Nike, Inc. is still positioning itself to achieve high growth rates through differentiation, global/geographic operations, and market penetration. Most importantly for the company, however, is for the growth to be long term and sustainable. G. Key Result Areas
49 50
Strategic Intent, 1989 P. 64 Nike, Inc. 2013 Annual Report 51 About Nike, Inc. http://nikeinc.com/pages/about-nike-inc 52 Nike, Inc. Introduces 2015 Global Growth Strategy. http://nikeinc.com/news/nike-inc-introduces-2015-globalgrowth-strategy#/inline/3560 53 Ibid.
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Nike, Inc.
Having equilibrium between financial and strategic controls is an essential function in order to achieve a balanced outcome of performance. A balanced scorecard is a framework firms can use to verify that they have established both strategic and financial controls to assess performance.54 The framework provides the opportunity to select a balanced set of criteria for both strategic and financial controls which will ultimately produce higher levels of performance. Below is a balanced scorecard, based on the preliminary analysis, for Nike, Inc.: Figure 4: Nike, Inc. Balanced Scorecard
Financial
Positive Free Cash Flow Growth in earnings per share Growth in returns on capital
Customer
Develop consumer connections through differentiation Focus on Direct to Consumer program Provide a premium product at a price value
Internal Business Processes

Learning and Growth
Source: DBA Consulting, LLC H. Long Term Objectives
Improve employee envolvment and buy-in Leverage competitive advantages
Improvements in innovation/disruptive innovation Implementation of sustainable practices Protect brand equity through innovation
Nike, Inc. would not be the success story they are today without a strong emphasis on strategy development and implementation. Along with the development of a structured strategy comes the development of long term goals and objectives. Nike, Inc. has numerous long term objectives that are developed based on past performance that they are currently working towards.55 The framework below highlights the most crucial long term objectives for the
54
Hitt, M., Ireland, R. D., & Hoskisson, R. E. (2013). Competitiveness & globalization: Strategic management. (10th ed.). Mason, OH: Cengage Learning. 55 Targets and Performance. http://www.nikeresponsibility.com/report/content/chapter/targets-and-performance
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Nike, Inc.
company followed by more specific and centralized objectives all adapted from the Targets and Performance section of the 2013 CR Report.56 Figure 5: Nike, Inc. Long Term Objectives
"Profitable growth decoupled from constrained natural resources"

Moves to accomplish this objective: Push to move from incremental to disruptive innovation; innovation and collaboration across government, industry, social influencers, and consumers; placing sustainability at the heart of innovation
"Balance people, profit, and planet"

Moves to accomplish this objective: in FY10 a new business unit called Sustainable Business and Innovation, and a sub-unit called Sustainable Manufacturing and Sourcing were launched; FY11 Nike Better World was launched to engage consumers in the sustainability vision
"Build a sustainable business and create value for Nike and our stakeholders"
Moves to accomplish this objective: Leverage competitive advantages (authentic, emotional connections with consumers, innovative product and retail experiences that lead the industry, strong Nike, Inc portfolio that gives tremendous opportunties for growth and profitability)
"Through other initiatives, we hope to go much further, helping our supply chain become leaner, greener, more equitable, and empowered"
Moves to accomplish this objective: In 2010 Nike, Inc designed jerseys for the World Cup made out of recycled bottles; built tools like the Nike Materials Sustainability Index (Nike MSI) (helps designers create products with lower environmental impacts Source: DBA Consulting, LLC 2013 CR Nike Report
During an investor meeting on May 5, 2010, Nike, Inc. unveiled the following long-term objectives for the company to achieve by 2015: Realized growth in the Nike Brand to $23 billion by end of fiscal year 201557 Open 250-300 Nike Brand stores worldwide over next five years58 Mid-teen growth in Direct to Consumer Business (contribute an additional $2.2-2.6 billion by 2015)59
56 57
Targets and Performance. 2013 CR Report. Nike, Inc. Introduces 2015 Global Growth Strategy. http://nikeinc.com/news/nike-inc-introduces-2015-globalgrowth-strategy#/inline/3560 58 Ibid. 59 Nike, Inc. Introduces 2015 Global Growth Strategy. http://nikeinc.com/news/nike-inc-introduces-2015-globalgrowth-strategy#/inline/3560
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Nike, Inc.
Invest roughly $500-600 million in capital over the next five years60 Return on Invested Capital of 25%61 Increasing dividends within a target calendar year payout range of 25-35% of trailing fourth quarter earnings per share62
Current Strategies: Presently, for Nike, Inc. the existing recognized successes of the company allow for a more specialized and articulate strategy. Nike, Inc. prides itself on being able to employ a strategy where sustainability meets business model. Where business strategy and sustainability meet as and function as one. For Nike, Inc. sustainability is not just another trending idea, it is, and should be, a key driver of success for any forward-thinking company.63 A key component of Nike, Inc.s sustainability strategy revolves around driving disruptive innovation (through materials, sourcing and manufacturing, market transformation, and digital services), optimize to deliver positive impact (through energy, labor, chemistry, water, and waste), and deliver value (through new products and markets, operating leverage, mitigating earnings risks, and protecting brand equity).63 It is also imperative that Nike, Inc. employs its sustainable competitive advantages (innovative and compelling products, brands that are distinct and relevant to their consumers, and the worlds greatest athletes and teams)64 and leverage those above the competition. Interestingly enough, at the core of the strategy is the idea that Nike, Inc. will play a role in transforming the way industry, government, and citizens work together to improve transparency and accountability. The sustainability strategy itself is made up of many of the long-term objectives from above. The push to unite sustainability with business strategy becomes more evident when strategy and objectives are viewed simultaneously. C. Strategic Synthesis Strengths Nike, Inc. has numerous strengths all working seamlessly to produce the high functioning company Nike, Inc. is. Strengths like their ability to generate positive cash flow through the efficient use of assets to their ability to acquire capital to aid cash flow. Strengths like a determined, focused strategy encouraging innovation and driving disruptive outcomes. Strengths like a cross-company culture that fosters development and not only sustainable business practices but also sustainable lifestyles. Nike, Inc. has also been able to develop a positive global brand reputation and brand value. The fact that they are an industry leader successfully globallyintegrating sourcing, manufacturing and distribution operations is just another item to add to Nike, Inc. strengths portfolio.
60
Nike, Inc. Introduces 2015 Global Growth Strategy. http://nikeinc.com/news/nike-inc-introduces-2015-globalgrowth-strategy#/inline/3560. 61 Ibid. 62 Ibid. 63 Our Sustainability Strategy. http://www.nikeresponsibility.com/report/content/chapter/our-sustainabilitystrategy 64 Nike, Inc. Introduces 2015 Global Growth Strategy. http://nikeinc.com/news/nike-inc-introduces-2015-globalgrowth-strategy#/inline/3560
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Nike, Inc.
Weaknesses It is difficult to pinpoint weaknesses within such a strong company. However, weaknesses exist in nearly every organization across the planet. For Nike, Inc. one weakness is the reliance on an extended global supply chain. The ability to integrate a global system like Nike, Inc. has been able to do is impressive; however, the lack of a visible contingency plan is worrisome. Another weakness revolves around employee buy-in to the sustainable ideas of business and resources. That lack of buy-in can be directly relayed to consumers negatively affecting the vision Nike, Inc. has for a unified world where government, consumers, and business all work seamlessly as one. Constraints With the hope that Nike, Inc. will see e-commerce sales grow to $2 billion by year end 2015, comes the constraint of inter-brand competition through various retail outlets. Nike Factory competes with in-line stores while all compete with e-commerce opportunities. In order for Nike, Inc. to overcome this, the company needs to determine how strategic growth in geographic locations will impact e-commerce sales. Uncertainties Nike, Inc. faces many uncertainties. Will the strength of the portfolio continue? Can competitive advantages be leverage to develop sustainable competitive advantages? What will the competition do, will they out-innovate Nike? Can Nike align its strategic mission to perpetuate the ideal of sustainability across boundaries? Nike, Inc. is no different in the sense that operating in a global market lends itself to risk and being on top of a market lends itself to failure (at some point). How long can Nike hold on?
27
Concordia University Module 2: Internal Assessment Part 2: Quantitative/Financial Analysis Abstract:
Nike, Inc.
In order to conduct a complete review of Nikes internal environment, DBA Consulting, LLC will also complete an examination of Nikes relevant financial performance. This analysis will include a review of the companys performance over the previous five years of operations. In addition, a comparative analysis will be done against Nikes competitors to determine the companys strengths, weaknesses, constraints, and uncertainties. A. Financial Trends & Quick Financial Overlook
Table 5: Nike, Inc. Balance Sheet Balance Sheet ($ in millions) Cash and cash equivalents Total current assets Total assets Total current liabilities Total liabilities Total stockholders' equity Total liabilities and stockholders' equity
2009 $2,291 9,734 13,250 3,277 4,557 8,693 13,250
2010 $3,079 10,959 14,419 3,364 4,666 9,754 14,419
2011 $1,955 11,297 14,998 3,958 5,155 9,843 14,998
2012 $2,317 11,531 15,465 3,865 5,084 10,381 15,465
2013 $3,337 13,626 17,584 3,926 6,428 11,156 17,584
Source: http://financials.morningstar.com/balance-sheet/bs.html?t=NKE&region=USA&culture=en-US
Table 6: Nike, Inc. Income Statement Income Statement ($ in millions) Revenue Cost of revenue Gross profit Total operating expenses Operating income Net income
2009 $19,176 10,572 8,604 6,746 1,858 1,487
2010 $19,014 10,214 8,800 6,326 2,474 1,907
2011 $20,862 11,354 9,508 6,693 2,815 2,133
2012 $24,128 13,657 10,471 7,431 3,040 2,223
2013 $25,313 14,279 11,034 7,780 3,254 2,485
Source: http://financials.morningstar.com/income-statement/is.html?t=NKE&region=USA&culture=en-US
Sales / Revenue Nikes sales for 2013 were $25.3B which is an increase of 5% from FY 2012. Nikes average annual revenue growth over the past 5 years has been 6.33%.
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Nike, Inc.
2013 US Sales comprised 45% of total revenue compared to 42% in 2012; Non-US sales comprised 55% of revenue. 65 Revenue growth was driven by all Nike Brand categories (Footwear, Apparel, and Equipment). In FY 2013, unit sales of Nike footwear increased by 7% and the average selling price increased nearly 4%. Unit sales and price for apparel increased by 7% and 3%, respectively.66
Cost Structure / Profit Margins Gross Margin has decreased slowly over the past four years from 46.3% at FYE 2010 to 43.6% at FYE 2013. Nike has seen significant shifts in the mix of revenues from higher to lower margin segments of its business. While growth in these lower gross margin segments delivers incremental revenue and profits, it has a negative effect on its consolidated gross margin.67 Nikes gross margins did improve slightly in 2013 due to the positive impact of higher average selling prices as mentioned above. Selling and administrative expenses increased from $7.4B to $7.8B between FY 2012 and 2013. Nikes largest selling expense is marketing which increased 8% in order to support key product initiatives, including Nike Fuel band and its NFL product launch.68 Even though Nike has increased its administrative costs on a dollar basis, the company has continued to shrink selling and administrative expenses, as a percentage of sales, over the past 4 years. Earnings before interest, taxes, depreciation, and amortization (EBITDA) has grown consistently over the past 5 years and reached its highest level in 2013 at $3.7B. This is a direct result of Nike growing its revenue, controlling costs, and maintaining its profit margins.
Stock Valuation Stock price has risen from $35.59 at May 31, 2010 to $61.66 at May 31, 2013.69 Nikes board has adopted a new $8B stock repurchase program that started this past fiscal year. However, Nike has had a history of buying back its stock each year and has bought back $1.7B, $1.8B, and $1.9B worth of stock during 2011, 2012, and 2013, respectively.70 The stock repurchase program has been a major factor in Nikes share price increasing 73% from FYE 2010 to FYE 2013. With the combination of net income growth and share buybacks Nike has increased earnings per share (EPS) from $1.94 at FYE 2010 to $2.77 at FYE 2013.
65
Nike 2013 Annual Report; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-and-Filings/Annual-
Reports/default.aspx
66 67
Ibid, pg. 68 Ibid, pg. 69 68 Ibid, pg. 69 69 Yahoo Finance, Retrieved from
http://finance.yahoo.com/echarts?s=NKE+Interactive#symbol=nke;range=20100429,20130531;compare=;indicator =volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined ; 70 Nike 2013 Annual Report, pg. 92; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-andFilings/Annual-Reports/default.aspx
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Nike, Inc.
B. Financial Ratios
Graph 1: Balance Sheet Ratios

4 3.5 3 2.5 2 1.5 1 0.5 0 NIKE Adidas Under Armour VF Corp Industry Current Ratio Quick Ratio Financial Leverage Debt/Equity
Source: http://financials.morningstar.com/ratios/r.html?t=NKE&region=USA&culture=en-US
Current Ratio Current ratio is very strong at 3.47:1, the highest it has been in 5 years. Essentially, Nike has $3.47 in current assets for every dollar in current liabilities. Regardless of the industry this is a very strong balance sheet position and one of the reasons that Nike has an A+ credit rating. 71 Nikes current ratio is better than the industry average and only Under Armour has a better current ratio at 3.58:1. Quick Ratio When taking out inventory and calculating quick ratio, Nike has the best in the industry at 2.31:1. Their next closest competitor is Under Armour with a quick ratio of 2.05:1. Working Capital Because Nike has such strong cash flow from operations it has been able to produce working capital of $9.7B at FYE 2013, including $3.3B in cash72. Working capital has grown year over year for the past 5 years and is at the highest point in Nikes history. In addition, Nike
71
Nike raises $1 Billion; Retrieved from http://www.bloomberg.com/news/2013-04-23/nike-said-to-plan-1-billion-bondsale-in-first-issue-since-2003.html 72 Nike 2013 Annual Report, pg. 91; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-andFilings/Annual-Reports/default.aspx
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Nike, Inc.
has the strongest working capital in the industry, beating the industry average of $3.8B and their next closest competitor, Adidas, which has working capital of $3.3B. Leverage Ratio Debt to Equity is favorable at 0.58:1 at FYE 2013, better than the industry average and second best behind Under Armour. In 2013, Nike was able to procure $1.0B in debt facilities with expiration dates of 2023 and 2043.73 Having a low leverage ratio, adequate working capital, and strong cash flow, Nike was able to procure these debt instruments with very low interest rates of 2.25% and 3.6%, respectively.
Graph 2: Income Statement Ratios

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% NIKE Adidas Under Armour VF Corp Industry Gross Margin % Operating Margin % Net Margin %
Gross Margin As previously mentioned, Nikes gross margin had been slipping between 2009 and 2012, but the Company was able to reverse this trend in 2013 and improved their gross margin slightly to 43.6% of total sales. Nike is below the industry average for gross profit margin of 46.4% and Nike has the lowest gross profit margin in the footwear and apparel industry. Adidas and Under Armour have the best gross profit margin in the industry at 47.7%, and 47.9%, respectively. Net Profit Margin
73
Nike 2013 Annual Report, pg. 79; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-and-
Filings/Annual-Reports/default.aspx
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Nike, Inc.
Nikes net profit margin is one of the best in the footwear and apparel industry at 9.82% of sales. Even though Nike was behind its competitors in regards to gross profit margin, it is able to make up the difference by having less selling and administrative costs, as a percentage of sales, than its competitors. Nike has been able to improve selling and administrative productivity by focusing on investments that improve revenue and gross margin along with using existing assets to eliminate duplicate costs.74
Graph 3: Turnover Ratios

140 120 100 80 60 40 20 0 NIKE Adidas Under Armour VF Corp Industry Days Sales Outstanding Days Inventory Payables Period
Inventory Turnover Ratio Inventory turnover days have increased over the past 4 years and have risen from 78 days at FYE 2010 to 87 days at FYE 2013. Nikes results in Greater China have been adversely impacted by sluggish macroeconomic growth and slow product sell-through at retail, leading to high levels of inventory in the marketplace.75 Accounts Receivable Turnover A/R days have gone from 54 days in 2009 to 46 days in 2013. This means that Nike has been able to collect payments from its customers 8 days faster since 2009. Faster collection of receivables also reduces borrowing needs as Nike is able to collect its cash faster. According to
74
Nike 2013 Annual Report, pg. 65; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-andNike 2013 Annual Report, pg. 74; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-and-
75
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Nike, Inc.
Nike, the reduction in accounts receivable days was primarily driven by the collection of receivables related to discontinued operations.76
Graph 4: Management Ratios

25.00% 20.00% 15.00% Return on Assets % 10.00% 5.00% 0.00% NIKE Adidas Under Armour VF Corp Industry Return on Equity %
Return on Assets (ROA) Nikes management team has done well to leverage its existing assets to improve sales and decrease operating expenses. Nikes ROA has steadily increased year over year for the past 5 years and ended FYE 2013 with a ROA of 15.4%. This is the highest return on assets in the industry with the next closest competitor being Under Armour at 12.4%. Return on Equity (ROE) Just like its return on assets, Nikes ROE has been steadily increasing over the past five years and is at its highest point of 23.1%. Again, Nike is providing the best return on equity in the industry and its next closest competitor in this category is VF Corp at 22.5%. For a stable, mature company in a well-established industry, getting a 23.1% return is extraordinary. The combination of revenue growth and well-managed margins with stock buybacks has provided a tremendous return for Nike investors during 2013 to go with strong returns over the previous five years. C. Strategic Synthesis Strengths
76
Nike 2013 Annual Report, pg. 79; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-and-
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Nike, Inc.
Overall, Nike is a very strong company with consistent revenue growth, consistent margins, and return on equity. With their strong sales growth, Nike, Inc. has the best Net Profit Margin, Cash Flow, ROA / ROE in the athletic footwear and apparel industry.
Weaknesses Expanding gross margin by: Making our supply chain a competitive advantage; Reducing product costs through a continued focus on manufacturing efficiency, product design and innovation; and Delivering innovative, premium products that command higher prices while maintaining a strong consumer price-to-value proposition. Constraints The main constraint that Nike has at the moment is cash held in foreign currencies. At FYE 2013, Nike had $6.0B in cash and cash equivalents on its balance sheet. Of this $6.0B, 58% or $3.5B was held in foreign currencies. While 55% of Nikes sales come from outside of the United States, the corporate sales tax environment in the U.S. constrains Nikes ability to repatriate its cash into its home currency.77 Uncertainties The biggest uncertainty for Nike right now is the slowdown in the Chinese economy. Nike is able to determine its future product growth and inventory needs based on futures orders by its customers. The future orders from Chinese customers have dropped over the past year which has led to decrease margins along with hurting demand and the overall Nike brand.78 In addition, Nike has had to discount merchandise in China to clear inventory. China is the second largest economy in the world and Nike has had the most market share in China for the past 5 years.79 In its annual review for 2013 Nike commented on its struggles in China and stated that it is increasing its efforts to improve the brand: Our results in Greater China have been adversely impacted by sluggish macroeconomic growth and slow product sell-through at retail, leading to high levels of inventory in the marketplace. Our strategy to return to sustained, profitable growth in Greater China focuses on extending our brand leadership position with consumers; expanding the offering of product styles and fits
77
New York Times, 10/3/2012; Retrieved from http://dealbook.nytimes.com/2012/10/03/overseas-cash-and-the-tax-gamesBloomberg, 09/12/12; Retrieved from http://www.bloomberg.com/news/2012-09-27/nike-futures-orders-trail-estimatesWall Street Journal, 03/07/13; Retrieved from
multinationals-play/
78
on-weak-china-demand.html
79
http://online.wsj.com/news/articles/SB10001424127887324034804578345741263753994
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Nike, Inc.
designed for the Chinese consumer; and working with our retail partners to create more differentiated, productive, and profitable retail stores.80 In addition, Nike made remarks that its increased efforts in China are starting to take hold; Despite the challenges we have seen in China, there are indications that our strategies are taking hold in the marketplace. Comparable store sales are growing in our NIKE-owned Direct to Consumer doors and our wholesale customers are reporting comparable store growth and declining inventory levels.81
Further assessment of Nike, Inc. will be done with a focus on the External Factors associated with development of Nike, Inc. Specific topics of interest are the general environment, industry, and market. A competitive analysis is also presented to deepen understanding.
80
Nike 2013 Annual Report, pg. 74; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-andNike 2013 Annual Report, pg. 74; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-and-
81
35
Concordia University Module 3: External Assessment Part 1: General Environmental Analysis Abstract:
Nike, Inc.
After an Internal Assessment of Nike, Inc., DBA Consulting LLC, has conducted a thorough assessment of the External Environment. This section will address three main areas of analysis, general environment, industry environment, and competitive environment. This analysis will provide a better understanding of Nike, Inc.s opportunities, threats and trends associated within the industry. Through the process of scanning, monitoring, forecasting, and assessing these environments Nike, Inc. will be able to create an action plan to achieve strategic competitiveness.82 When combined with the assessment of the Internal Environment created in Module 2, Nike, Inc. will be better equipped to implement a strategic plan based on the strengths, weakness, opportunity and threats identify in the industry. A. General Environment The general environment is comprised of seven segments that influence an industry. Listed below are descriptions of each segments trends, opportunities and threats that are relative to Nike, Inc. The seven segments are geographic or natural environments, demographic environments, economic environments, political or legal environments, socio-cultural environments, global environments, and technology environments.83 The figure below illustrates the seven segments that make up the external environment and how all seven environments influence both the industry environment and the competitor environment.
82 83
Strategic Management, 2013 Ibid
36
Nike, Inc.
Figure 1: Nike, Inc. External Environment
Source: DBA Consulting LLC B. Geographic/Natural Environment Trends Awareness of a lack of natural resources. By 2030 the world population will demand twice as many resources as the planet can supply.84 Concerns regarding business environmental impact has risen.
Opportunities Nike, Inc.s focus on sustainability and steps to decrease their environmental impact has a positive effect on their reputation. Consumers are becoming more environmentally conscious and tend to purchase from companies that try to support environmental sustainability. Threats The concept of buying locally is a threat to large companies such as Nike, Inc. because local markets may steer away from a multinational company and choose to purchase from a mom and pop style store or local companies that create their own apparel.
84
http://www.economist.com/blogs/theworldin2013/2012/11/global-trends-2013
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Nike, Inc.
Growing concerns for sustainable practices could ask people to question the very validity of technical apparel (i.e., Patagonias involvement in organic cotton). Strategic implication Nike, Inc. can utilize this data strategically by developing further awareness of environmental issues to create stronger relationships with consumers that support environmentally-conscious companies. C. Demographic Environment Trends The Baby Boomer generation (people born between 1946 and 1964) is considered the largest group with the highest population in the workforce, making them an important group target. In the UK, over-50s are currently 20 million strong, growing fast, and hold 80% of the nation's wealth and the estimated annual spending power of baby boomers is more than USD 2 trillion. Boomers spend approximately 12% more than the average on apparel.85 Women are continuing to have more purchasing power and currently make up 85% of the consumer purchasing decisions.86 Expanding U.S. Hispanic population has increase from 14.6 million in 1980, to nearly 52 million in 2011. Latinos now constitute the fastest-growing segment of the U.S. population.87 Fast rising global population
Opportunities Considering the purchasing power of women Nike, Inc. would benefit from focusing the majority of their marketing efforts toward women. Women purchase not only for themselves but for the men and children in their lives so products made for men can also be marketed toward women. In addition, due to a large part of the population being Baby Boomers, Nike, Inc. can take the opportunity to create a product line for active, mature consumers. The increase in Hispanic population can create growing opportunities in soccer. Threats The aging population making up the baby boomer generation is a significant portion of the American population. The threat to Nike, Inc. is that the activity level of this
85 86
http://www.trendwatching.com/trends/boomingbusiness.htm http://www.gingerminneapolis.com/sites/www.gingerminneapolis.com /files/SurveyResultsAlpha51913_FINAL.pdf 87 http://www.theatlanticcities.com/neighborhoods/2013/08/extraordinary-growth-americas-hispanicpopulation/6733/
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Nike, Inc.
population will decrease and may not find the same amount of value in the sports apparel industry. Strategic implication Strategically, Nike, Inc. can maintain a competitive advantage by successfully adjusting to the ever-changing trends of the environment. As a result of the strong purchase power of the Baby Boomer generation, Nike, Inc. can Once aware of the significant impact the baby boomer generation has on consumer purchases, Nike, Inc. can create a product line geared to the needs of this market segment. D. Economic Environment Trends Unemployment rates have continued to stay high in the U.S.88 Purchases of American made products are on the rise. Based on the 2012 survey by Perception Research Service International, 76% of responders said they would be more likely to buy something made in the U.S.89 Continued lack of economic stability in the U.S. as well as many other countries. Fluctuating exchange rates have a continuing impact on global businesses. Inflation rates continue to drop from 3.5 in January 2012 to 1.2 in July 2013, affecting the strength of the dollar.90 Oil prices on the rise.
Opportunities The negative impact of an unstable environment allows companies to flex their innovation and efficiency muscles by creating new ways to minimize costs or create more value in the face of stronger competition. Nike, Inc. has been successful at maintaining increases in net income over the economic downturn over the past five years.91 The opportunities available to Nike, Inc. are to further hone their skills of working efficiently and creating new innovative ideas. The high value of the Euro has greatly contributed to Nikes profitability in recent years. As a global company, Nike is in a position to shift cost and revenue centers wherever and whenever needed. 92
Threats
88 89
FSOC 2013 Annual Report http://www.centerforfinancialstability.org/fsr/us_fsr_201306.pdf http://industryedge.nationalhardwareshow.com/2013/06/the-rising-demand-for-made-in-the-usa-products 90 http://www.tradingeconomics.com/united-states/inflation-cpi 91 Nike, Inc. 2013 Annual Report 92 Statement from Alain Gracianette D. Mgt.
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Nike, Inc.
Nike, Inc. has only 8% of their factories in the United States. Companies that contract with factories in the U.S. will have a strategic advantage among consumers that choose to purchase products made in the U.S. of products that are not. High unemployment rates and a lack of stability in the economic environment affect purchasing power and tend to hinder the consumption of more expensive brands. A study done by Pew Research shows 71% of their responders cut back on spending of more expensive brands.93 Exchange rates create a significant threat to the profits incurred by Nike, Inc. in other countries. This is a constant threat due to the volatility of exchange rates. As a global brand, with global distribution and supply chain, Nike, Inc. is continually affected by global economic fluctuations, rising oil prices and transportation costs. Inflation rates rising can also create a threat to the strength of the dollar. The increase in the cost of labor in China can also have significant negative consequences to Nike, Inc.s profit margins. Strategic implication In the midst of economic challenges companies show their strengths by creating strategic solutions by successfully adjusting to the instability of the market. By maintaining success, Nike, Inc. has proved their ability to weather the storm which further strengthens their reputation to be a reliable and sustaining company. A strategy to implement regarding exchange rate volatility is for Nike, Inc. to lock into an exchange rate for a fixed period of time by setting up a forward contract on materials, also known as hedging. If the exposure estimates are correct, this can be a beneficial approach to controlling of the rate fluctuations.94 E. Political/Legal Environment Trends Increase in government regulations Taxation policies have decreased in 2013 but are still considered the highest among developed nations.95 High priority set on upholding legal contracts in other countries including intellectual property (IP) rights.96 Tax minimization strategies
Opportunities Corporate taxes are high for U.S. businesses but due to the foreign tax laws, Nike, Inc. can continue to leverage the foreign tax laws of foreign profits. The ongoing struggle regarding IP rights create challenges for Nike, Inc. The opportunity is created for Nike, Inc. to help with the initiative to battle these challenges for the benefits of all U.S.
93 94
http://www.forbes.com/2010/07/08/recession-spending-pew-opinions-columnists-john-zogby.html http://www.euroinvestor.com/ei-news/2012/07/17/how-exchange-rate-fluctuations-affect-companies/19796 95 http://www.forbes.com/sites/joeharpaz/2013/09/16/will-the-proposed-lower-corporate-tax-rate-really-be-lower/ 96 http://www.uspto.gov/news/speeches/2009/2009Dec9.jsp
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companies. This will help strengthen their reputation and commitment to support innovation. Threats Regulations provide a standard for companies to adhere to but in many cases government regulations hinder companies to exist in a truly competitive environment.97 A threat for Nike, Inc. will be the limitations created by over regulations of their industry. Intellectual property rights can be challenging in other countries due to the differences in laws and ability to uphold legal repercussions of violating such laws. These challenges also include copyright infringements and the threats associated with protection or brands and patents98. Potential lawsuits against Nike, Inc. is an additional area of concern. Growing indirect tax rates from governments as a way to raise revenue is a threat to any global company, Nike, Inc. being no exception. Strategic implication Nike, Inc.s political strategy associated with the impact of government regulations will offer additional insight into what effect certain regulations have on the company. Nike, Inc.s ability to be prepared for these tax and policy regulations will better prepare the company. Taking an active role in the protection of IP rights will help further growth of innovation and ultimately help Nike, Inc.s global business practices. Nike, Inc. ability to establish successful tax minimization strategies associated with foreign revenues will further strengthen their overall profits. Development of secure copyright and practices will also minimize future costs associated with protection of patents and copyright infringement in foreign countries. F. Socio-cultural Environment Trends Consumers are shifting their perception about value added to include participation in the value added aspect of purchasing through customization/personalization of products Communication through social media has become the new and most impactful way to engage with customers and potential customers.99 Obesity concerns in the U.S. due to 68% of Americans being over-weight or obese.100 Changing trends toward a greater role in sustainability.
Opportunities
97 98
Strategic Management, 2013 Ibid 99 http://www.economist.com/blogs/theworldin2013/2012/11/global-trends-2013 100 http://fasinfat.org/obesity-rates-trends-overview/
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The social expectations of consumers are helping recreate business as more agile networks.101 As a result, the opportunities to engage with large groups of people through social networks such as Facebook, Instagram and Twitter allow an increase in connectedness and ultimately in customer relationships that create communities in their industry. Increased concerns about obesity throughout the world, but particularly in the U.S. Sports and active lifestyles represent strong opportunities for companies like Nike to help reduce the national rate of obesity. Further development of the value chain for Nike, Inc. will create more opportunities for customer engagement in sustainable practices. Threats There are limitations to customization of products is the increase in cost associated with the individual product production instead of the mass production of a certain product. These additional costs may not be as easy for a company as large as Nike, Inc. to incur due to the value of purchases. In addition, threats associated with increase in social networking with customers can be created with a decrease in control of users comments and negative publicity coupled with the rate at which information can spread. Growing concerns for social justice could resurrect the portraying of Nike as sweat shop profiteer.102 Strategic implication As a response to the threats associated with bad publicity and lack of social media controls, Nike, Inc. can develop additional transparency of their company. This allows the company to embrace their strengths and weaknesses instead of fear what the negative impact can do to their reputation. In addition, the trend toward customization of products allows Nike, Inc. to have more engagement with customers through offering customization of specific products. Nike, Inc.s focus on customer relationships is a way to stay competitive. G. Global Environment Trends Global population increase. Growing consumer affluence among Chinese and other Asian (e.g. South Korea) consumers. Global market trends for performance apparel have increased each year. Global market size is currently $6.4 billion, and is expected to increase another 18.75% to US$ 7.6bn by 2014.103 Global concerns related to increased populations struggling with obesity have created a sense of urgency toward solutions. The rate of obesity has nearly doubled worldwide since 1980.104
101 102
Ibid Statement from Alain Gracianette D. Mgt. 103 http://www.teonline.com/knowledge-centre/performance-apparel-global-market.html
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Opportunities The increase in the performance apparel market allows Nike, Inc. to increase market share in emerging markets. The concern regarding obesity offers Nike, Inc. the opportunity to satisfy a continuing need of sports and fitness apparel for the populations that are addressing the fitness and exercise goals related to obesity. Rising affluence of Chinese consumers creates a increase in market size. Threats The threats presented to Nike, Inc. in the global environment come from uncertainty in the emerging markets. Learning what customers want in these emerging markets may come with challenges. New competitors of other economies can enter emerging markets and impact Nike, Inc.s success.105 New powerful Asian competitors could enter the market, with similar (or better) technical shoes, apparel and accessories produced at a lower cost. Strategic implication Further development of initiatives to fight the increase in obesity will be a strategic position for Nike, Inc. To apply their mission, To bring inspiration and innovation to every athlete in the world, and if you have a body, you are an athlete, Nike, Inc. can leverage the epidemic of obesity by applying their strength of innovation and commitment to health and fitness to create worldwide solutions. H. Technology Environment Trends Increase in development of smart technology and robotics.106 Desire for companies to continue to innovate and find new materials to use in manufacturing. Data mining as a new resource. An increase in mobile devices that utilize applications has created a new market of health and fitness capabilities. Estimated users of mobile health and fitness devices will increase from 15 million to 96 million in 2018.107
Opportunities Nike, Inc.s ability to capture data through technology such as website data collecting can create a more efficient way to optimize their marketing efforts online and through
104 105
http://www.hsph.harvard.edu/obesity-prevention-source/?page_id=111350557003 Strategic Management, 2013 106 http://www.economist.com/blogs/theworldin2013/2012/11/global-trends-2013 107 http://netcaststudio.com/current-sports-tech-news-and-trends/
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traditional marketing channels. To better understand the buying behaviors of their customers Nike, Inc. can create more customized targeting of specific market segments. As an example, A-B testing helps capitalize on the differences in online marketing endeavors. Smart technology and robotics can decrease labor costs in algorithmic tasks such as production. Trends toward a mobile world will allow Nike, Inc. to create value at every moment of a mobile device users day. Continued focus on research and development to bring innovative products to the market, and maintain technological leadership in targeted categories. In addition, an increased co-operation with key (and new) vendors will provide Nike, Inc. with opportunities to further develop strong relationships.
Threats Threats created by the current technology trends are an increase in competition of innovation. Technology impacts consumer trends and keeps the business world in a state of constant change. For example, if one of Nike, Inc.s competitors discovered an innovative way to utilize a new technology consumers will naturally gravitate to the new product. The discovery of better technical fabrics at a lower cost by Asian competitors can also present a threat. Strategic implication Nike, Inc. can strategically leverage the behaviors of consumers by increasing their presences on mobile devices. As an example, Nike, Inc. could create additional running applications, health and fitness education and training, and further develop their mobile application of their store for purchases. Strategic Synthesis Nike, Inc. can utilize data presented from the seven segments of the general environment to create a strategically successful approach. By developing further awareness of environmental issues and trends Nike, Inc. can create stronger relationships with consumers, maintain a competitive advantage by successfully adjusting to the ever-changing trends of the environment, and express their strengths by creating solutions to the challenges presented in the markets they exist in. Listed below are the specific strategic actions and areas of focus that Nike, Inc. can implement to effectively address the opportunity and threats of the general environment: Prepare reports of environmental concerns that Nike, Inc. can impact through their business practices. Practice flexibility on ever-changing environments by making company policy to encourage resiliency by embracing change. Expand product lines to reach growing demands of specific segmented markets. Create constant improvements to exchange rate volatility challenges through continuous solution exploration. Focus on transparency, environmental impact and social concern of justice. 44
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Create additional engagement of customers and users through social media channels. Become a strong voice of solutions for worldwide issues such as obesity. Be aware of challenges associated with rates of inflation in global markets Focus on changing demands of consumers in different demographic segments Develop protective measures to address copyright infringements, imposters and intellectual property rights in foreign countries. Awareness of the impact of significant global population growth and increases in rising income level of populations in emerging markets. Impact of mobile devices on consumer trends, especially addressing direct to consumer sales and customer engagement. Technological advancements and competition in new materials from low labor cost countries such as China.
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Concordia University Module 3: External Assessment Part 2: Industry, Market, and Competitive Analysis Abstract:
Nike, Inc.
Part 2 is a continuation of the external assessment for Nike, Inc. Items that are specifically addressed include the market size, growth rate, scope of rivalries, and economies of scale. Each item addressed directly relates to the current market that Nike, Inc. operates within; sports apparel. Porters Five Forces and the competitive environment are also dissected. The facts presented within this section will prove to be valuable as a new strategic plan is drafted for Nike, Inc. moving forward. A. Industry/Market Analysis 1. Market Size: Nike, Inc. operates within the consumer goods sector and the textile (apparel footwear and accessories) industry (as listed on the stock exchange). The market itself is more precisely known as technical sports apparel. Within this global market, Nike, Inc. has seen a steady increase in market share. The article Why Nike Will Outpace the Sports Apparel Markets Growth explains, its market share in the global sports apparel market has historically increased from 3.9% in 2007 to 4.9% in 2012 as its apparel sales grew at a pace above industry average during the period.108 Estimates also put Nike, Inc.s market share in the global sports apparel industry as high as 6.5% by 2019. 109 In 2012, the overall global sports apparel market was worth roughly $135 billion and very well may be worth as much as $178 billion by 2019.110 Since Nike, Inc. operates Nike Golf the market size of the sporting goods industry is worth noting (especially since it serves as a potential opportunity for Nike, Inc. to penetrate). The worldwide sporting goods industry is doing very well and seeing steady growth. According to the article Sporting Goods Industry: Market Research Reports, Statistics and Analysis, the industry is forecast to reach $303 billion by 2015.111 2. Stage of Life Cycle: The sports apparel industry is very much in a growth stage. With seasoned global competitors like Adidas, Reebok, Puma, and Asics, and new comers to the market like Under Armour and Lululemon Athletica continued growth is inevitable. Some of the factors driving growth in the market include; increased fitness consciousness, rising income levels in developing countries, the growing popularity of sportswear for women, the trend of stylish and comfortable sportswear, and rising
108
Why Nike Will Outpace The Sports Apparel Markets Growth. http://www.forbes.com/sites/greatspeculations/2013/05/13/why-nikes-growth-will-outpace-the-sports-apparelmarkets/ 109 Ibid. 110 Ibid. 111 Sporting Goods Industry: Market Research Reports, Statistics and Analysis. http://www.reportlinker.com/ci02221/Sporting-Goods.html
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demand in Asia and Latin America.112 The sports apparel industry will also see continued growth because of the growing global population: 7 billion people in the world equals 7 billion potential consumers. On a smaller scale, the 222,459,737 youth in China are also all going to contribute to the growth in the sports apparel industry as youth, especially in Asian countries, becomes more affluent and focused on western fashion and ideas. 113 3. Growth Rate: The sports apparel industry, like nearly every other global industry, was negatively affected by the global recession of 2008. The market had noticeable declines in the period 2008-2009, yet began to see improvements in 2010.114 For the period 20122019 the global sports apparel market is expected to grow at a CAGR (compound annual growth rate) of 4%.115 Speaking in terms of dollar amounts, the article Sport Clothing and Accessories Industry: Market Research Reports, Statistics and Analysis suggests the world sports apparel industry is expected to exceed $126 billion by 2015.116 4. Scope of Rivalry: The rivalry in the industry is extremely intense, yet insulated, with a strong market presence from both local and global brands. A high level of competition results as all companies vie for increased market share. Adding to the intensity of rivalries is the fact that consumers in this segment tend to be loyal purchasers which means consumers price sensitivity is decreased. This is where the insulted competitive rivalries result. The most significant rivalry is one between Nike and Adidas. Both companies are essentially in a struggle to capture the industry leader position, capture new sales, and increase market share. Currently, between Nike and Adidas, the two companies represent 11% of the global sports apparel market.117 The following figure, adapted from Why Nike Will Outpace the Sports Apparel Markets Growth, shows the sales of some of the industry leaders and demonstrates how tight the race is. Notice that Adidas is winning the sales race yet Nike has a better estimated growth rate (CAGR).
112
Why Nike Will Outpace The Sports Apparel Markets Growth. http://www.forbes.com/sites/greatspeculations/2013/05/13/why-nikes-growth-will-outpace-the-sports-apparelmarkets/ 113 China vs. India, the Population Numbers. http://blogs.wsj.com/indiarealtime/2011/04/30/china-vs-india-thepopulation-numbers/ 114 Sports and Fitness Clothing-Global Strategic Business Report. http://www.researchandmarkets.com/research/p9zn6f/sports_and 115 Why Nike Will Outpace The Sports Apparel Markets Growth. http://www.forbes.com/sites/greatspeculations/2013/05/13/why-nikes-growth-will-outpace-the-sports-apparelmarkets/
116
Sport Clothing and Accessories Industry: Market Research Reports, Statistics and Analysis. http://www.reportlinker.com/ci02121/Sport-Clothing-and-Accessories.html 117 Why Nike Will Outpace The Sports Apparel Markets Growth. http://www.forbes.com/sites/greatspeculations/2013/05/13/why-nikes-growth-will-outpace-the-sports-apparelmarkets/
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Table 7: Apparel Sales of Some of the Leading Players in the Market (in 118 millions) Company Adidas (includes Reebok) Nike Puma Under Armour Lululemon athletica Asics Fiscal 2010 $7,023 (5,380) $5,026 $1,229 (941.3) $853 $712 $427 (42,576) Fiscal 2011 Fiscal 2012 CAGR (20102012) 8.1% 12.3% 10.6% 27.4% 38.7% 4.9%
$7,484 (5,733) $8,211 (6,290) $5,513 $1,352 (1,035.6) $1,122 $1,001 $439 (43,685) $6,333 $1,504 (1,151.9) $1,385 $1,370 $470 (46,838)
Source: Why Nike Will Outpace the Sports Apparel Markets Growth. 5. Rival Concentration: The sports apparel industry is fragmented. With numerous brands, both local and global and high end and discount, all competing within the same industry leads to a highly fragmented industry. Despite the fragmentation, the industry is dominated by a few powerful global players such as Nike, Inc., Adidas, Puma, and Asics. Newcomers such as Under Armour and Lululemon Athletica are also beginning to become dominant players. 6. Vertical Integration: Vertical integration is important for companies within the industry. It allows companies to integrate processes like global supply chain and distribution. Even manufacturing can be integrated. For the sports apparel industry where operations are being outsourced, vertical integration results from the ownership of the plants. 7. Pace of Change: The pace of change for the sports apparel industry has remained fairly constant. The drivers of change now revolve around technology, innovation, and brand loyalty. The standard cycle market functions with competitors who seek large market shares, to gain loyalty through brand names, and to carefully control a firms operations in order to consistently provide the same positive experience for customers.119 8. Product/Service Differentiation: Because the industry itself is so centered around innovation, innovation and product differentiation strategy are a natural fit for the market. Each company within the market is producing nonstandardized products in an attempt to appeal to each consumer. Historically, the market would be using a focused differentiation strategy as each company was attempting to appeal to an athletic audience. However, given changing trends and tastes, the market has become broader and now revolves around numerous target markets.
118 119
Ibid. Strategic Management. Hitt, Ireland, Hoskisson. Pg 153.
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9. Economy of Scale: Since the market is fragmented with local and global competitors, economies of scale are crucial in the sports apparel market, especially for the companies in a mature phase of the life cycle. Economies of scale from effective supply chain management to manufacturing large volumes all end up being a barrier to entry for a new entrant because of the lack of experience and costs associated with replicating the processes. The economies of scale are what are going to keep the industry leaders in the leadership position. 10. Barriers to Entry: Many companies compete, earning high returns, in the sports apparel industry. This leads to economies of scale that make market entry difficult. Effective and efficient Supply Chain management can lead to decreased costs and ultimately increased margins. This is difficult to duplicate, resulting in an economy of scale and a barrier to entry. For Nike, Inc., the economies of scale that result from supply chain, manufacturing quantities/capabilities, and ability to acquire capital, all protect Nike, Inc. from new entrants. Nike, Inc. is very protected within the market. Strategic Synthesis Trends A growing trend within the industry is to target countries with growing income levels. Nike, Inc. has found success in the Asian markets and now other companies are following suite. Opportunities Significant opportunities exist within the sports apparel market to innovate and be first to market with the next big product. Adidas and Nike, Inc. are essentially in an ongoing race to do just that. For any company that is able to innovate, especially in a disruptive manner, they will see significant gains in market share and an increased level of brand loyalty among consumers. Opportunities also exist for companies to increase and add value through economies of scale. Market experience and operations management provide measurable opportunity for companies themselves and in the market as a whole. The fragmented sports apparel market also poses an opportunity for new entrants to easily penetrate the local markets. Threats One potentially devastating threat that exists to all competitors in the sports apparel market is the threat of imposters. Counterfeit items that look authentic yet sell for significantly less than authentic items have the possibility to drastically impact the market. Sales decreasing, the market size decreasing, and the loss of consumers are all potential ramifications of the counterfeit industry. Companies need to be especially cautious when expanding sales and operations to countries like China where legal rules and regulations vary greatly from that of the US. The import/export market in China is also very risky and the prevalence of an unregulated, underground, gray market is high. As Nike, Inc. expands sales regions and targets Asian markets, significant attention will have to be paid to make sure products are protected. Another threat to retail stores in the 49
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market is the growing success of online retail sites. Many companies within the sports apparel market may find that the negative effect of online retail for sports apparel is a decrease in customer satisfaction and difficulty meeting sales forecasts at retail locations to sustain operations. B. Porters Five Forces The leading expert in competitive dynamics, Michael Porter originally brought forth the idea that there are five forces that affect how companys behave and react in regards to competition. Porters five forces govern the profit structure of an industry by determining how the economic value it creates is disseminated. That value may be drained away through the rivalry among existing competitors, of course, but it can also be bargained away through the power of suppliers or the power of customers or be constrained by the threat of new entrants or the threat of substitutes. Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation.120 Figure 7: Porters Five Forces
Source: http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1
11. Buyer Power: Threat: Low

120
(Porter, 1998)
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Buyer power is relatively weak. There are no major buyers who purchase a large portion of the industrys total output.121 No customer accounted for more than 10% of Nikes sales in 2013.122 Large companies in the athletic footwear and apparel industry set price points for their products. The power and attractiveness of the brand ensure that demand is great than supply, which preserves Nikes vending power. Few retailers control large market shares, making it difficult for small vendors to enter the market.123 On a global basis, Nikes sales were diverse: 45% U.S. and 55% Non-US124 Worldwide futures orders for Nike footwear and apparel scheduled for delivery between June and November 2013 were $12.1B.125
12. Suppliers: Threat: Low Supplier power is really low in this industry. Any supplier that meets quality standards for the company will be able to supply these commodity goods. Major firms can switch suppliers quickly without worry of a significant decrease in quality. The largest single footwear factory with which Nike has contracted accounted for approximately 6% of total fiscal 2013 Nike brand footwear production.126 In fiscal 2013, Nike has contract factories in multiple countries including Vietnam, China and Indonesia. In addition, Nike also has manufacturing agreements with independent factories in Argentina, Brazil, India, and Mexico to manufacture footwear for sale primarily within those countries.127 This being said, a handful of manufacturers like Gore, Milliken (research technical textiles industry) can produce technical textiles.
13. Competitive Rivalry: Threat: High There is intense competition and rapid changes in technology and consumer preferences in the markets for athletic and leisure footwear and apparel, and athletic equipment.128 Tremendous amount of capital and resources are used in sales and marketing efforts: Following are the selling and marketing expenses for the top three competitors in the athletic footwear and apparel industry in 2012;
121 122
(Hitt, Ireland, & Hoskisson, 2013) (Nike, Inc., 2013) 123 (Gracianette, 2013) 124 (Nike, Inc., 2013) 125 (Nike, Inc., 2013) 126 (Nike, Inc., 2013) 127 (Nike, Inc., 2013) 128 (Nike, Inc., 2013)
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Concordia University o Nike = $2.7B129 o Adidas = $2.0B130 o Under Armour = $0.3B131
Nike, Inc.
High strategic stakes132 Competitors in this industry are constantly looking for strategic advantages on geographic and category basis. Currently, Nike is going after Adidas dominant market share in the soccer category and subsequently, Adidas has launched a counterattack on Nikes dominance in the basketball category. Brand image and customer loyalty is huge in this industry, which leads to the brands competing not only to protect their turf, but also leads to huge marketing campaigns to steal market share aware from rivals.
14. Substitute products: Threat: Low Substitutes can include boots, flip-flops, sandals, dress shoes and other non-athletic footwear. Not perfectly substituted by any other type of footwear. Would be hard to replace. Innovative technology and specific use of athletic footwear and apparel reduce the threat of substitute products.
15. Threat of new entrants: Threat: Low/Moderate Large capital costs are required for branding, advertising and creating product demand, and this limits the entry of newer players in the athletic footwear and apparel market. High entry barriers exist due to strong brand loyalty and economies of scale and scope.133 Easy to get the material but hard to gain popularity in an industry where consumers are conscious about image. Access to distribution opportunities is limited because the top brands have already signed agreements with teams, athletes, and retailers. Indirect competitors such as VF Corp could use its existing capital, supply chain, and manufacturing capabilities to compete directly in the athletic footwear and apparel industry. However, it would require a large investment in R&D in order to compete with Nike and Adidas in terms of brand recognition and marketing.
16. Forces of change: There are many microeconomic and macroeconomic factors that can impact Nike and the athletic footwear and apparel industry. Below we have
129 130
(Nike, Inc., 2013) (Adidas Group, 2012) 131 (Under Armour, Inc., 2012) 132 (Hitt, Ireland, & Hoskisson, 2013) 133 (Hitt, Ireland, & Hoskisson, 2013)
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identified the top three factors that will likely cause change or have the possibility of transforming the athletic footwear and apparel industry. Table 8: Forces of Change Obesity Opportunities Threats Nearly 2 billion people world If government education 134 wide are obese or overweight. programs take hold and there is National governments are a marked shift to health creating tasks forces and conscience of overweight providing grants to fight growing population this will induce obesity epidemic.135 competitive pressure and new Best way to fight obesity is market entrants. physical activity and healthy eating, which directly benefits Nike and the athletic footwear and apparel industry. Global population is expected to Growing population, income, grow to 9 billion people by and market size will likely 2050.136 attract capital and new market Rising real incomes and growing entrants. middle class in emerging Uncertain global and regional markets economic conditions can affect New markets are opening on a international trade and can result regular basis with the elimination in protectionist actions by of legislative and regulatory government agencies. barriers.137 Rising economic power of All of these factors will lead to China an increase in sports Potential market entrance of participation and global Chinese or other Asian brands, consumer base. with high quality and lower Rising affluence of Chinese and prices other Asian customers Strong growth is anticipated in Consumer demand can be the Direct to Consumer segment sudden and unexpected, whereby end users will be using particularly in fashion-related Nikes website and retail stores industries which includes to purchase footwear and apparel athletic apparel.
Globalization
Consumer Demand
134 135
(Adidas Group, 2012) (Adidas Group, 2012) 136 (Adidas Group, 2012) 137 (Adidas Group, 2012)
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Concordia University directly from Nike. Improved profit margins from Direct to Consumer operations.138
Nike, Inc. Product procurement cycles average 12-18 months and can result in short-term loss if Nike is unable to respond quickly to consumer preferences.139
17. Key Success/Survival factors: Innovation Nikes success depends on its ability to identify, originate, and define consumer demands as well as anticipate changing consumer demands in a timely manner.140 As a result, research and development efforts are key success factors in the athletic footwear and apparel industry. Innovation in design and manufacturing process of footwear, apparel, and equipment are the number one focus at Nike. To that extent, Nike has hired top level talent in the areas of biomechanics, chemistry, exercise physiology, engineering, and industrial design to create the most dynamic footwear and apparel that will enhance athletic performance, maximize comfort, and reduce injury.141 Brand Identity and Recognition Nike uses trademarks on nearly all of its products including distinctive marks that are readily identifiable. This is an important factor in marketing and brand recognition and helps Nike to distinguish itself from competitors offerings. The Nike and Swoosh logos are among Nikes most valuable assets and Nike has registered these trademarks in nearly 170 different countries and jurisdictions.142 Consumer connection and affinity for brands and products is crucial in the athletic footwear and apparel industry. To that end, Nike spends over $2.7B annually on endorsements, marketing, and advertising to create this connection and affinity. Nike has been able to sign some of the worlds famous athletes including Michael Jordan, Tiger Woods, and LeBron James. In the case of Michael Jordan and Tiger Woods, Nike has created all new brands including Air Jordan and Nike Golf, respectively. These efforts have been successful as Nike has been able to increase sales 5% over the most recent quarter compared to a 5% decrease in sales by Adidas.143
138 139
(Nike, Inc., 2013) (Adidas Group, 2012) 140 (Nike, Inc., 2013) 141 (Nike, Inc., 2013) 142 (Nike, Inc., 2013) 143 (Seeking Alpha, 2013)
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Concordia University Globally-Integrated Supply Chain & Distribution
Nike, Inc.
As of FYE 2011, Nike had over 900 contract factories across 50 different countries.144 In addition, Nike has 3 distribution centers in the United States and 16 distribution centers internationally.145 Effective distribution of products, with attractive merchandising and presentation at retail, in store and online is critical to Nikes success. Nikes ability to meet customer expectations, manage inventory along with achieving objectives for operating efficiencies and growth will be key success factors for Nike going forward.146 The companys effective management and growth of its supply chain in emerging markets will be a key success factor in controlling market share in this growing geographical segment.147 Marketing/Endorsements In order to stay competitive in the athletic footwear, apparel, and equipment industry a company has to spend a tremendous amount of capital on marketing to develop brand recognition. In 2012, Nike and Adidas spent over $4B combined on sales and marketing efforts to deepen its brand recognition and attract new customers.148 149 A large part of Nikes marketing campaign is the use of professional athletes as endorsers of Nike products. Oftentimes, Nike will build specific products (i.e. shoes) or brands (i.e. Jordan) around a particular athlete. Nike has done an excellent job of acquiring and retaining some of the top names in the world of sports including Michael Jordan, LeBron James, and Tiger Woods to name a few. These athletes are extremely high profile and influential in the world of sport. In order for Nike to remain the top athletic footwear and apparel company in the world, they will need to recruit and obtain the next generation of high profile athletes. 18. Industry attractiveness: Overall, the athletic shoe industry is very profitable and also an attractive industry. Both buyer power and supplier power are relatively weak, which makes it easier for the companies to succeed and be profitable. Also, the substitutes that exist are not directly comparable to athletic footwear, which is another plus for the companies in the industry. However, consumers are very conscious about image and brand loyalty is relatively high. This makes it difficult for new entrants to try and enter the industry. Global appeal for sports has increased significantly over the past 25 years with the advent of globalization, television, and the internet. The NBA and NFL are putting tremendous
144 145
(Nike, Inc., 2013) (Nike, Inc., 2013) 146 (Nike, Inc., 2013) 147 (Nike, Inc., 2013) 148 (Nike, Inc., 2013) 149 (Adidas Group, 2012)
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amounts of effort and capital into marketing their brand globally and it has paid off with the increase in sports participation.150 In addition, the players at the highest level of professional sports are superstars and oftentimes considered national heroes; i.e. Michael Jordan, Kobe Bryant, and Yao Ming. Nikes Air Jordan brand had $100 million in sales in 1985. For FY 2012, the Jordan brand sold $2.5 billion worth of shoes and Air Jordans made up 58% of all basketball shoes bought in the U.S. and 77% of all kids basketball shoes.151
Strategic Implication: As Nike is the leading innovator and driver of technology in the athletic footwear and apparel industry, it is best positioned to stay in this industry and leverage its resources, capabilities, and core competencies to maintain above average returns.152 By staying in the athletic footwear and apparel industry, Nike will be able to capture market share in the fastest growing geography called emerging markets. By leveraging its core competencies in innovation, supply chain, and marketing, Nike is well positioned to build brand awareness in developing countries and maintain customer loyalty in existing markets.
C. Competitive Environment The athletic footwear, apparel, and equipment industry is highly competitive in the United States and on a worldwide basis. Nike competes internationally with a significant number of athletic and leisure footwear companies, athletic and leisure apparel companies, sports equipment companies, and large companies having diversified lines of athletic and leisure footwear, apparel, and equipment. It also competes with other companies for the production capacity of independent manufacturers that produce its products and for import quota capacity.153 Current strategies: Adidas Adidas is the 2nd largest athletic footwear and apparel manufacturer in the world behind Nike. In addition to the Adidas brand, the Company acquired the then 3rd largest athletic manufacturing company, Reebok, in 2005. Together, Adidas uses their brands to compete on a global basis in multiple categories and geographies. Adidas primary category and strategy revolves around soccer and being the dominate brand in soccer worldwide. Being the most popular sport worldwide, soccer is one
150 151
(Riches, 2013) (Rovell, 2013) 152 (Hitt, Ireland, & Hoskisson, 2013) 153 (Nike, Inc., 2013)
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Adidas key strategic priorities. Adidas has been one of the leading innovators in regards to shoe, ball, and apparel technologies focused on soccer.154 Adidas will be looking to increase its strong market position in soccer by leveraging its existing technologies along with using its portfolio of sports marketing partners. Some prominent Adidas partners include; Soccer Federations (FIFA, UEFA) Events (FIFA World Cup, EURO Championship) National Federations (Spain, Germany, France (Rugby, Basketball), Russia, Mexico, China, Japan) Leagues (Major League Soccer) Clubs (Real Madrid, AC Milan, Chelsea FC, FC Bayern Munich)
Under Armour Under Armour is the 3rd leading manufacturer of athletic apparel and footwear in the United States behind Nike and Adidas. Under Armours marketing and promotion strategy has focused on providing and selling its products to athletes and teams on the high school, college, and professional level.155 To this degree, Under Armour has focused its strategic efforts predominately on popular American sporting categories such as football, basketball, and baseball. Currently, Under Armour is the official supplier of footwear and gloves to the National Football League (NFL).156 In addition, in 2011 Under Armour became the official footwear supplier of Major League Baseball (MLB) and a partner with the National Basketball Association (NBA).157 Capabilities: Adidas Adidas has very similar capabilities as Nike including research & development, supply chain, and marketing. However, Adidas has not executed as well on its capabilities as Nike and has started to lose ground in certain categories including soccer. In addition, since 2012, Nike has initiated 300 product patents to Adidas 35 patents.158 Under Armour Under Armour does not have the same capabilities as Nike and Adidas in terms of supply chain and manufacturing. However, Under Armour has used significant resources to
154 155
(Adidas Group, 2012) (Under Armour, Inc., 2012) 156 (Under Armour, Inc., 2012) 157 (Under Armour, Inc., 2012) 158 (Parker, 2013)
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create new athletic technologies and have used innovation in compression and sweatwicking products to drive its growth.159 Future objectives: Adidas Based on Adidas current actions and tone of their annual reports their future objectives and strategies lie in three different areas; basketball, emerging markets, and lifestyle fitness activities. Basketball Due to Nikes aggression in pursuing the soccer category, Adidas has put into motion a full phased counterattack in the basketball category. Basketball has historically been the strongest category for Nike and soccer has been the strongest category for Adidas. Adidas has been very aggressive in signing top-flight talent including superstars Derrick Rose and Dwight Howard to endorse its basketball shoes.160 Like Nike, Adidas has created specific shoe designs for these athletes to further raise brand awareness. Emerging Markets In the athletic footwear and apparel industry, emerging markets is considered to be any country, region, or continent outside of North America, Europe, China, or Japan. These countries and regions are the fastest growing in the world and represent the best place to gain market share. Consequently, this has been a large strategic focus for both Nike and Adidas. Adidas is using its strong soccer branding as a strategy to gain market share in these emerging markets as soccer is the most prominent sport. Lifestyle and Fitness Activities According to the International Obesity Task Force, more than 600 million adults are currently considered obese. An additional one billion adults are considered to be overweight. Furthermore, up to 200 million school-aged children are considered to be overweight or obese.161 Because of these staggering numbers of overweight populations, national governments such as the United States and United Kingdom have launched efforts to promote fitness and healthy living.
159 160
(Chang, 2013) (Adidas Group, 2012) 161 (Adidas Group, 2012)
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Nike, Inc.
Adidas believes these actions taken by these governments regarding education could lead increases in sports participation, in particular in categories considered suitable for weight loss such as training, running, and walking.162 In response to this expanding marketplace, Adidas has put in motion a strategy to market to these individuals and has been working with governments on their fitness education efforts. In addition, Adidas is repositioning its Reebok brand solely as a fitness and activity brand.163 Under Armour With its most recent agreement and partnership with the NBA, Under Armour is looking to take market share in the basketball category and will likely pursue athletes to sign sponsorship deals. The dominate marketing strategy in basketball in America is signing a key or top level talent as a product endorser. Nike did this with Michael Jordan and currently with LeBron James. Adidas has signed Derek Rose as its top-level athlete. LeBron James and Derek Rose are the only winners the Most Valuable Player (MVP) award in the NBA for the past 5 years. Under Armour is likely to seek a top-level talent to endorse a shoe or apparel in order to gain exposure and market share in the basketball category. In addition to pursuing market share in the basketball category, Under Armour is also pursuing a strategy of gaining market share internationally by providing its products to European soccer and rugby teams.164 Beginning in 2012, Under Armour became the official sponsor of an English Premier League soccer team, Tottenham Hotspurs and will provide them with official game kits and training wear. In addition, Under Armour became the official supplier of the Welsh Rugby Union and has exclusive rights on the leagues replica products.165 Strategic Implication: Nikes competitors product offerings, technologies, marketing expenditures (including expenditures for advertising and endorsements), pricing, costs of production, and customer service are areas of intense competition. This, in addition to rapid changes in technology and consumer preferences in the markets for athletic and leisure footwear and apparel, and athletic equipment, constitute significant risk factors to Nikes operations.166 If the company does not adequately and timely anticipate and respond to its competitors, its costs may increase or the consumer demand for its products may decline significantly.167
162 163
(Adidas Group, 2012) (Adidas Group, 2012) 164 (Under Armour, Inc., 2012) 165 (Under Armour, Inc., 2012) 166 (Nike, Inc., 2013) 167 (Nike, Inc., 2013)
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Concordia University Strategic Synthesis Trends
Nike, Inc.
Soccer category is growing especially in emerging markets. Nike and Adidas are spending over $100 million for the rights to endorse certain soccer teams and associations.168 As of 2012, Nikes efforts to gain market share in soccer have been effective as they now have 36% market share compared to Adidas 38%. The World Cup in 2014 will be Nikes opportunity to overtake Adidas in the soccer category. Emerging Markets is where the industry players are focusing because the income growth and population growth will be the largest in these markets. Both Nike and Adidas are expecting double digit revenue growth in emerging markets and are spending considerable amount of capital and resources to build market shares and efficient supply chains.169 170
Opportunities Direct to consumer channel is expanding and Nike plans to grow this segment to $5 billion by 2015 and $8 billion in 2017.171 This is highly profitable as it cuts out retailers and increases gross margins. Obesity has become an epidemic across the world as nearly one-third of the worlds population is considered overweight or obese.172 Because of this, many national governments are taking steps to educate its citizens about the dangers of obesity. There is effectively two ways to reduce obesity; healthy eating and exercise. This is a huge market and Nike should be involved with these education programs including holding clinics that educate people on exercising. These clinics are a win-win as consumers get education on exercise and healthy lifestyle and Nike can build brand awareness and customers for life. Soccer is the largest sport in the world and the World Cup in 2014 is expected to draw over a billion viewers across the world.173 Nike has been very aggressive in targeting Adidas position as the leader in the soccer category and should use the World Cup as venue to further expand its brand. Basketball is expanding rapidly around the world especially in China. According to the Chinese Basketball Association, approximately 300 million people play basketball in China.174 In addition, basketball is the second fastest growing sport in India, behind soccer.175
168 169
(Bhattacharjee, 2013) (Nike, Inc., 2013) 170 (Adidas Group, 2012) 171 (Nike, Inc., 2013) 172 (Adidas Group, 2012) 173 (Bhattacharjee, 2013) 174 (Riches, 2013) 175 (Riches, 2013)
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Threats The athletic footwear and apparel industry is an extremely competitive industry and the big players spend billions of dollars to protect their territory. Nike needs to use its core competencies of innovation and marketing to hold its ground and gain market share in emerging markets. Adidas is attacking Nikes stronghold in the basketball category including signing high profile athlete Derrick Rose to an endorsement and shoe contract.176 Basketball is one of Nikes top categories and the second largest sport in the world with 1.2 billion fans.177 Nike will need to focus marketing efforts into this category including building relationships with up and coming athletes to build its stable of athlete endorsers.
To summarize Module 3, the external assessment indicates that Nike, Inc. is operating within a highly competitive market and faces a direct rivalry with Adidas. This section also looks at the strategies of the competition. The next phase of our strategic assessment will aggregate all identified factors into a SWOTT analysis which leads to a situational analysis. Then, all of the components are narrowed down into a general problem statement, followed by a presentation of meaningful strategic alternatives to be proposed to Nike, Inc.s Senior Management.
176 177
(Adidas Group, 2012) (Bhattacharjee, 2013)
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Concordia University Module 4: Situational Analysis Abstract
Nike, Inc.
This section is a culmination of the data gathered and presented in the Internal Assessment and the External Assessment. The information is reanalyzed in an attempt to clearly identify how the strengths, weaknesses, opportunities, and threats associated with Nike, Inc. affect the strategic plan of the company. The following, provided by DBA Consulting, LLC, is a clear summary of the strategic approach that will best suit Nike, Inc. moving forward. Included herein is a SWOTT Analysis, Situational Analysis, and General Problem Statement as a means to eventually propose the best Strategic Alternatives for Nike, Inc. A. SWOTT Analysis The Internal Assessment in the earlier section addressed the strengths and weakness present for Nike, Inc. based on their resources and capabilities. As a result, core competencies were identified and Sustainable Competitive Advantages were determined based on their ability to be inimitable and non-substitutable by their competition.178 The External Assessment in the last section addressed the opportunities and threats presented to Nike, Inc. through their general environment, their market environment and their competitive environment based on their industry. Listed below is a detailed table illustrating the five components of the SWOTT analysis.
Figure 8: Nike, Inc. SWOTT

178
Strategic Management 2013
Analysis 62
Strengths -Efficient use of assets to aid cash flow -Innovation - Implement disruptive innovation initiatives -Global brand recognition due to $2.5B annual marketing campaign. -Strong diverse company culture -Supply Chain - Strong company owned logistics dept for multiple distribution channels -Consistent revenue growth -Industry leading net profit margins due to efficient management of SG&A costs -Minimal A/R days (46 days) -Size of company-Advantage due to economy of scale -Value chain that incorporates customer value in 7 phases -Strong reputation for superior performance Weaknesses
Nike, Inc.
-Lowest gross profit margin in the industry -Lack of control of all factories and their workplace standards -Lack of complete vertical integration -Majority of products manufacured overseas -Lack of visible contingency plans
Opportunities -Increase in direct to consumer channels can increase gross margins -Increase in Soccer interest worldwide creates more valuable market to expand in -Further develop a strong position on minimizing Nike, Inc. environmental impact -Market toward baby boomer generation that is comprised of 15%of U.S. pop. -Market men and women products toward women (make up 85% of purchase decisions) -Leverage the strengths in efficiency and innovation to out perform the competition in economic challenging time -Maximze social media channels to better develop customer relationships worldwide -Capitalize on the 20% increase in emerging markets worldwide Utilize increase in mobile device uses to create possible value at every moment
SWOTT
Threats -Exchange rate of profits in foreign currencies -Uncertainty of the Chinese economy -Trend toward American made products can hinder U.S. sales -Highly competitive industry, rapid changes in technology and consumer preferences -Threat of imposters/unregulated "gray markets" -Competition in Basketball Market is threatening Nike, Inc postion - strong endorsers are contracting with competitors -Economic instability affects consumer purchasing power, especially more expensive brands -Government regulations and high corporate tax rates in the U.S. and other countries -Advancement in technology had increase the rate that information can spread such asd negative publicity -Threat of new entrants in emerging markets
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Concordia University Trends Environmental impact concern (i.e. shift toward sustainability) Concern regarding environmental resources Women control the majority of the purchasing power Corporate taxes in U.S. are some of the highest of the developed nations Priority to address intellectual property rights worldwide has increased Concern regarding obesity has increased Popularity of robotics and smart technology has changed business operations Rising middle class worldwide Soccer & Basketball categories are growing worldwide
Nike, Inc.
Unemployment continues to be high and effecting purchases Challenges regarding exchange rates affect global businesses Interest in purchasing American made products Increase in government regulations Mobile device use has increased Social media has become the most impactful way to reach audiences Global market trends for performance apparel have increased 20% in the past four years Use of health and fitness applications are on the rise Increase in emerging markets Rise in affluent Chinese population Significant population growth worldwide Source: DBA Consulting, LLC
Situational Analysis & Discussion Strengths Nike has numerous strengths including innovation, highly recognized global brand, industry best cash flow, and a world class supply chain. All of these strengths have allowed Nike to separate itself from lesser competitors and, in recent months from its largest competitor, Adidas. During the most recent quarter, Nike had a sales increase of 5% and Adidas saw sales decrease by 5%.179 Innovation Innovative ideas and patented technology allows for Nike, Inc. to stay on top of the competition. Nike, Inc. has chosen to move from incremental innovation to disruptive innovation in hopes to create better solutions.
179
(Seeking Alpha, 2013)
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Nike, Inc.
Nike, Inc. initiated the formation of Business for Innovation Climate and Energy Policy (BICEP) and SB&I Lab for sustainable innovation through external partnerships in 2009 thus creating an atmosphere and presence of being truly innovative.180 Nike, Inc. was created on a foundation of innovation starting with the waffle iron inspired sole. This allowed traction with less material, resulting in a lighter weight shoe.
Branding/Marketing Nike, Inc. has created a highly successful brand recognition approach by sponsoring successful athletes. In addition, Nike, Inc. has more than 700 stores worldwide.181 Their branding success is also due to their ability to market towards everyone by stating, If you have a body you are an athlete. Spent over $2.5B in sales and marketing to support and increase its global brand awareness. Net Profit & Cash Flow Growth Nikes sales for 2013 were $25.3B which is an increase of 5% from FY 2012. Nikes average annual revenue growth over the past 5 years has been 6.33%. Earnings before interest, taxes, depreciation, and amortization (EBITDA) has grown consistently over the past 5 years and reached its highest level in 2013 at $3.7B. This is a direct result of Nike growing its revenue, controlling costs, and maintaining its profit margins. Nikes net profit margin is one of the best in the footwear and apparel industry at 9.82% of sales. Even though Nike was behind its competitors in regards to gross profit margin, it is able to make up the difference by having less selling and administrative costs, as a percentage of sales, than its competitors. Because Nike has such strong cash flow from operations it has been able to produce working capital of $9.7B at FYE 2013, including $3.3B in cash182. Working capital has grown year over year for the past 5 years and is at the highest point in Nikes history. In addition, Nike has the strongest working capital in the industry, beating the industry average of $3.8B and their next closest competitor, Adidas, which has working capital of $3.3B. Supply Chain Nike, Inc. has a commitment to transparency with regarding to manufacturing which allows the disclosure of more than 800 factories worldwide that produce Nike, Inc. products. Effective distribution channels including 3 product categories (footwear, apparel, and equipment) shipped to 143 different locations worldwide. Nike, Inc. manages their own logistics by creating an efficiently run logistics department.
180
http://nikeinc.com/news/nike-bicep-partner-to-work-on-climate-change-and-energy-issues-call-for-congressionalaction 181 http://nikebrandanalysis.blogspot.com/2013/05/brand-awareness.html 182 Nike 2013 Annual Report, pg. 91; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-andFilings/Annual-Reports/default.aspx
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Concordia University Weaknesses
Nike, Inc.
Nikes primary weakness has been a deterioration of its gross profit margin. Nikes gross margin has decreased slowly over the past four years from 46.3% at FYE 2010 to 43.6% at FYE 2013. Nike has seen significant shifts in the mix of revenues from higher to lower margin segments of its business. While growth in these lower gross margin segments delivers incremental revenue and profits, it has a negative effect on its consolidated gross margin.183 Nike has taken steps, including raising prices, to improve its gross margins and saw a slight improvement between FYE 2012 and 2013, but margins are still down compared to 2009. However, Nike is below the industry average for gross profit margin of 46.4% and Nike has the lowest gross profit margin in the footwear and apparel industry. Adidas and Under Armour have the best gross profit margin in the industry at 47.7%, and 47.9%, respectively. Opportunities There are multiple attractive opportunities that Nike could pursue. However, we feel that the following areas take advantage of Nikes core competencies and will allow the company to create a sustainable competitive advantage. Direct to consumer market Strong growth is anticipated in the Direct to Consumer segment whereby end users will be using Nikes website and retail stores to purchase footwear and apparel directly from Nike. By selling directly to consumers, Nike can cut out its wholesale buyers and increase the companys profit margins. The social expectations of consumers are helping recreate business as more agile networks.184 As a result, the opportunities to engage with large groups of people through social networks and e-commerce allow an increase in connectedness and ultimately brand awareness. Emerging markets China has an $84 billion apparel market, which is the third largest in the world.185 Chinese young adults between the ages of 18 and 25 place a premium on international brands. Brazil is the 5th largest apparel market in the world. Brazilians are very fashion conscious and passionate about their clothing and spend more of their income on clothing the any other staple.186 Both Nike and Adidas are expecting double digit revenue growth in emerging markets and are spending considerable amount of capital and resources to build market shares and efficient supply chains.187 188
183
Ibid, pg. 69
184 185
Ibid (Wai-Chan, Cheung, & Tse, 2007) 186 (Sheth & Vittal, 2007) 187 (Nike, Inc., 2013)
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Soccer and Basketball categories Soccer is the largest sport in the world and the World Cup in 2014 is expected to draw over a billion viewers across the world.189 Nike has been very aggressive in targeting Adidas position as the leader in the soccer category and should use the World Cup as venue to further expand its brand. As of 2007, over 11% of the worlds population played basketball. In addition, basketball has surpassed soccer in popularity in Asia and Australia.190 Basketball is the most popular sport among 14-18 year olds.191 Women Women are continuing to have more purchasing power and currently make up 85% of the consumer purchasing decisions.192 Women in emerging markets are the primary decision makers regarding apparel purchases.193
Threats There are many threats that Nike faces from the general environment, industry environment, and competitive environment. Based on our in-depth analysis of our external assessment, the biggest threats that Nike faces include operating in a highly competitive industry and uncertainty in the macroeconomic environment. Highly competitive environment There is intense competition and rapid changes in technology and consumer preferences in the markets for athletic and leisure footwear and apparel, and athletic equipment.194 Brand image and customer loyalty is huge in this industry, which leads to the brands competing not only to protect their turf, but also leads to huge marketing campaigns to steal market share away from rivals. High strategic stakes195 Competitors in this industry are constantly looking for strategic advantages on geographic and category basis. Currently, Nike is going after Adidas dominant market share in the soccer category and subsequently, Adidas has launched a counterattack on Nikes dominance in the basketball category.
188 189
(Adidas Group, 2012) (Bhattacharjee, 2013) 190 (The Sports Archive Blog, 2013) 191 (The Sports Archive Blog, 2013) 192 http://www.gingerminneapolis.com/sites/www.gingerminneapolis.com /files/SurveyResultsAlpha51913_FINAL.pdf 193 (Wai-Chan, Cheung, & Tse, 2007) 194 (Nike, Inc., 2013) 195 (Hitt, Ireland, & Hoskisson, 2013)
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Macroeconomic Conditions High unemployment rates and a lack of stability in the economic environment affect purchasing power and tend to hinder the consumption of more expensive brands. A 2010 study done by Pew Research shows 71% of their responders cut back on spending of more expensive brands.196 Nike has been impacted by the sluggish macroeconomic conditions in China in the form of slow product sell-through which has led to high levels of inventory.197 Trends Of the multiple trends we observed from our external analysis, the following trends were the most prevalent and pressing trends that Nike needs to address and take advantage of. Growing Middle Class Globally, the size of the middle class will increase from 1.8 billion people to 3.2 billion by 2020 and to 4.9 billion by 2030. Most of this growth (85%) will come from Asia.198 In dollar terms global demand from the middle class will grow from $21 trillion to $56 trillion by 2030.199 Shift towards sustainability Awareness of a lack of natural resources. By 2030 the world population will demand twice as many resources as the planet can supply.200 Consumers are becoming more environmentally conscious and tend to purchase from companies that try to support environmental sustainability. Growing obesity epidemic Nearly 2 billion people worldwide are obese or overweight.201 National governments are creating tasks forces and providing grants to fight growing obesity epidemic.202 Best way to fight obesity is physical activity and healthy eating, which directly benefits Nike and the athletic footwear and apparel industry. Synthesis The external and internal assessments solidify the ideas that DBA Consulting, LLC hold. Nike, Inc. is attempting to out-compete on an international level while leveraging competitive advantages. Nike, Inc. is also attempting to produce a greater gross profit margin while focusing on sustainable product differentiation. When looking at aspects of Nike, Inc.s strategic vision, intent, and goals it becomes obvious that Nike executives have a superior working knowledge of
196 197
http://www.forbes.com/2010/07/08/recession-spending-pew-opinions-columnists-john-zogby.html (Nike, Inc., 2013) 198 (Kharas, 2010) 199 (Kharas, 2010) 200 http://www.economist.com/blogs/theworldin2013/2012/11/global-trends-2013 201 (Adidas Group, 2012) 202 (Adidas Group, 2012)
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both the sports apparel market and where Nike, Inc. sees itself in the future. The quality of working knowledge is not unreasonable for a company with such longevity and experience within one market. The following framework takes some key components of the SWOTT analysis and situation analysis and shows weather there is a connection to the current strategic vision, mission, intent, or goals of Nike, Inc. The following framework was developed by DBA Consulting LLC.
Figure 9: Strategy Synthesis Current Nike, Inc. Objective Profitable growth decopled from constrained natural resources.203 Synthesis
Focus on disruptive innovation and development of patented technology Branding based on the vision, If you have a body you are an athlete Increased and more efficient use of working capital Transparency in manufacturing/supply chain management Focus on growth in the Direct to Consumer segment Expansion and growth into Asian markets and other emerging markets Focus on sustainability in all forms of operations and business practices
Return on Invested Capial of 25%.204 Through other initatives, we hope to go much further, helping our supply chain become leaner, greener, more equitable, and empowered.205 Mid-teen growth in Direct to Consumer Business.206 Open 250-300 Nike Brand stores worldwide over next five years.207 Balance people, profit, and planet.208
Source: DBA Consulting, LLC The framework shows that multiple aspects of the SWOTT and situational analysis are directly in-line with the current strategies in place at Nike, Inc. There is one item that we, as a team, feel does not coincide with the strategic objectives of Nike, Inc. That item is branding based on
203
Targets and Performance. 2013 CR Report. http://www.nikeresponsibility.com/report/content/chapter/targets-and-performance 204 Ibid 205 Ibid 206 Ibid 207 Ibid 208 Ibid
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vision. Another item that is not accounted for whatsoever within the current strategy of Nike, Inc. is an action plan for dealing with the threat of patent infringement, imposters, or knock-offs (especially in the Asian markets). Decrease in sales, damage to brand, and increased competition are just a few of the negative repercussions that could result from the lack of a strategy to deal with such issues. General Problem Statement Nike, Inc. operates within a highly competitive and attractive industry with above average returns. As a result, we at DBA Consulting, LLC feel Nike, Inc.'s general problem statement is: maintain and increase global dominance of the technical apparel, footwear, equipment and accessories industry, in seven targeted categories, by keeping Adidas and other existing or potential competitors at bay.
Strategic Alternatives Current Strategy At the core of the current strategy Nike, Inc. is employing is the idea of sustainability. Sustainability in terms of operations, sourcing, manufacturing, regulations, innovation, and people. Nike, Inc. has been able to successfully integrate a strategy focused on sustainability into their business model. The current strategy is one where business model and sustainability collide effectively and efficiently. Because of the uniquely focused strategy, Nike, Inc. is able to place emphasis on innovation that is disruptive which is a key objective for the company. The strategy also enables Nike, Inc. to leverage competitive advantages over the competition. Competitive advantages then become sustainable competitive advantages because of the ability to take advantage of economies of scale and highlight the successes of the manufacturing and supply chain process. Nike, Inc.s current strategy of sustainability is part of the culture of the company which is reflected in the positive growth over recent years. The strategy is effective. Following are the advantages and disadvantages of the current strategy: Pros
Proven effective track record Develops sustainable competitive advantages Drives disruptive innovation Distinguishes Nike, Inc. from new entrants Is a long term strategy with the potential for longevity in terms of use
Cons Sustainable practices can be expensive to create Strategy does not account for increased competition Doesnt necessarily address the need to acquire additional market share 70
Nike, Inc.
Alternative Strategy #1: Acquisition of Under Armour Based on Nikes core competencies of innovation, global supply chain, and branding and acquisition of its direct competitor Under Armour would be a good strategy to protect its market share in North America. Since 2003, Under Armour has gone from 0.6% of the North American apparel market to 2.6% as of 2010. Meanwhile, Nike has lost market share going from 7.4% in 2003 to 7% in 2010.209 Under Armour started in 1995 and grew to $1 billion in sales by 2010.210 The company has a similar history as Nike in that it was started by an individual who was looking for better gear in order to perform sports at a higher level. Innovation is one of Under Armours core competencies as they were one of the first companies to patent compression fitting shirts and shorts that wick away sweat and kept athletes cool. Following are the advantages and disadvantages of Nike acquiring Under Armour: Pros Similar business model Nike and Under Armour have similar business models in regards to innovation, manufacturing, and selling of their products. Both outsource the manufacturing of their products and use 3rd part retailers to sell their products. Similar core competencies Both companies were founded on innovative products that changed the footwear and apparel industry. Both have used their innovative competency to gain market share within a highly competitive footwear and apparel industry.211 Increased market Power212 - By acquiring Under Armour, Nike can gain access to Under Armours patents for performance apparel which will provide a sustainable competitive advantage over its largest rival, Adidas. Nike would gain access to another 100 high school, collegiate, and professional teams that Under Armour currently provides athletic apparel for.213 Cons Redundancy Expensive Return on equity for shareholders are typically low.214 Ultimately, acquiring Under Armour would provide a sustainable competitive advantage for Nike over larger competitors like Adidas and create further barriers to entry for new competitors. However, the acquisition will likely be extremely costly and Nike may not see a return on equity for many years.
209 210
(Roberts, 2011) (Roberts, 2011) 211 (Parker, 2013) 212 (Hitt, Ireland, & Hoskisson, 2013) 213 (Roberts, 2011) 214 (Hitt, Ireland, & Hoskisson, 2013)
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Alternative Strategy #2: Focused Differentiation: International A strategy focused on further development into the Chinese market will offer Nike, Inc. a competitive advantage in the athletic apparel and equipment industry. Our recommendation for Nike in China would be a focused differentiated approach targeting the urban Chinese population. The Chinese middle class is growing rapidly and consequently average income is rising nearly 10% per year.215 Currently, the average annual income in urban areas is nearly 2.5 times higher than rural areas.216 It is estimated that by 2022 54% of urban households in China will be upper-middle class with more purchasing power.217 China is the second largest athletic footwear and apparel market in the world behind the United States. In addition, the sportswear market in China is expected to grow by 17% annually for the next four years, reaching $32 billion in 2017.218 Nike can leverage its existing relationships with contract factories across China and Asia as a key success factor in executing this strategy. Having these factories close to the end user will cut down on transportation and distribution costs and ultimately the overall price of its footwear and apparel. In addition, Nike will need to use its innovation and technical core competencies to further develop its direct to consumer channels in China. This will not only improve margins, but allow Nike the freedom to reduce the price point of its footwear and apparel in order to gain market share. In order for Nike to successfully reach its long-term objective of growing the Nike brand to $23 billion and obtain $37 million in revenue by 2015, the company needs to execute this focused strategy in China in order to gain market share. Pros Chinese growing middle and upper-middle classes will have greater purchasing power. 2nd largest economy in the world. Distribution Centers located throughout Asia create an advantage of proximity Chinese young adults aged 18-25 favor international brands over domestic brands.219 Supply chain advantage due to already established locations in China
Cons
215 216
(Wong, 2013) (Wong, 2013) 217 http://www.mckinsey.com/insights/consumer_and_retail/mapping_chinas_middle_class 218 (De, 2013) 219 http://www.chinadaily.com.cn/bizchina/2008-02/21/content_6472265.htm
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Underdeveloped infrastructure in China will create challenges for distribution Threats of imitation or knock-offs. Economic disadvantages associated with exchange rate fluctuations can affect profits Rules and regulations in China are vastly different then the US Political relationships between the US and China can affect the operations of US companies in China
In the next module, Module 5: Strategic Plan, DBA Consulting, LLC takes the significant amount knowledge and insight gained in the previous modules and presents a strategic plan for Nike, Inc. to utilize going forward. The idea is to build upon the successful strategy already in place at Nike, Inc. and present an alternative for the company in order to help in the achievement of desired goals and objectives.
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Concordia University Module 5: Strategic Plan Table 9: Strategic Scorecard
Nike, Inc.
Key Performance Strategy 1 Current Strategy 2 Acquire Strategy 3 Indicators Strategy Under Armour International/China 4 2 4 Financial 4 3 4 Customer 3 1 4 Internal Business Processes 4 3 5 Learning & Growth TOTAL 15 9 17 5 = Superior Advantage, 4 = Advantage, 3 = Neutral, 2 = Disadvantage, 1 = Inferior We used a balanced scorecard to review the key performance indicators for each of the three strategies and assessed the viability of each indicator to come up with an aggregate score for each strategy. For each of the key performance indicators we ranked each strategy on a level of 1 to 5, with 1 being inferior and 5 being a superior advantage. The rankings for each category were based on our research of the internal and external environments at Nike including a situational analysis along with the advantages and disadvantages of each strategy. Based on our findings using the balanced scorecard, DBA Consulting, LLC is recommending that Nike move forward with a blended strategy of sustainability along with a focused expansion of differentiation into international markets, with a specific focus on China. DBA Consulting, LLC ultimately came to the conclusion that an international strategy focused on China will allow Nike to gain market share which will undoubtedly lead to increased revenue and shareholder value. Nike can use its core competencies as follows to gain and uphold a sustainable competitive advantage in China: Innovation: Create new and exciting products that appeal to Chinese consumers. Supply Chain: Nikes existing network of manufacturers and warehouse facilities in China and Asia allow the company to adjust to market conditions in real time. Branding/Marketing: By attracting and recruiting high profile athletes, and appealing to the western trend in advertising in China, Nike can use its branding and marketing prowess to gain a competitive advantage.
We are also recommending an integration of the current sustainability strategy in order to maintain its current position as the preeminent athletic footwear and apparel manufacturer in the world. By using its core competencies as follows, Nike can maintain a sustainable competitive advantage over its rivals: 74
Nike, Inc.
Innovation: Increase direct-to-consumer distribution channel in order to improve margins. Supply Chain: Use existing manufacturers to maintain quality and sustainable products. Use global logistic capabilities to move product as efficiently as possible. Branding/Marketing: Leverage high profile athletes such as LeBron James, Tiger Woods, and Michael Jordan to maintain market share.
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Concordia University References Adidas Group. (2012). Annual Report. Retrieved from http://www.adidasgroup.com/en/investors/financial-reports/
Nike, Inc.
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Harvard School of Public Health (2013). Obesity Prevention Source. Retrieved October 29, 2013, from Obesity Prevention Source: http://www.hsph.harvard.edu/obesityprevention-source Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic Management: Competitiveness & Globalization (10th ed.). Mason, OH: South-Western. International Monetary Fund. (2013, October). World Economic Outlook Data. Retrieved November 10, 2013, from GDP in Emerging Markets Report: http://www.imf.org/external/pubs/ft/weo/2013/02/weodata/weorept.aspx?sy=2011&e y=2018&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=56&pr1.y=9&c=200&s= NGDP_RPCH&grp=1&a=1 Jing, C. (2012). Chinese Prefer Foreign Brands. Retrieved November 12, 2013, from: China Daily: http://www.chinadaily.com.cn/cndy/2012-08/06/content_15645884.htm Ken Research. (2013, March 15). China Athletic Apparel and Footwear Industry to reach USD 32 billion by 2017: Ken Research. Retrieved November 10, 2013, from PRInside: http://www.pr-inside.com/china-athletic-apparel-and-footwear-industryr3613594.htm Kharas, H. (2010, 01). The emerging middle class in developing countries. Retrieved from The Organisation for Economic Co-operation and Development: http://www.oecd.org/social/poverty/44457738.pdf McKinsey and Company. (2013, June). Insights & Publications. Retrieved November 10, 2013, from Mapping China's Middle Class: http://www.mckinsey.com/insights/consumer_and_retail/mapping_chinas_middle_cla ss News Cast Studio (2013). Current Sports News Tech and Trends. Retrieved October 29, 2013, from NetCastStudio.com: http://netcaststudio.com/current-sports-tech-newsand-trends/ Nike, Inc. (2013, 10 31). Nike, Inc. announces target FY17 revenues of $36 billion. Retrieved from Nike, Inc.: http://nikeinc.com/news/nike-inc-announces-target-for-fy17revenues-of-36-billion-2nd-release Nike, Inc. (2013). Nike.com. Retrieved October 27, 2013, from History and Heritage: http://nikeinc.com/pages/history-heritage Nike, Inc. (2013). Nike, Inc. 2013 Annual Report. Retrieved October 27, 2013, from Nike, Inc. Investors Annual Reports: http://investors.nikeinc.com/Investors/FinancialReports-and-Filings/Annual-Reports/default.aspx
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NIKE, Inc. (2013). Annual Report 2013. Retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-and-Filings/AnnualReports/default.aspx Nike, Inc. (2013). Nike.com. Retrieved September 27, 2013, from History and Heritage: http://nikeinc.com/pages/history-heritage Nike, Inc. (2013). Nike.com. Retrieved September 27, 2013, from http://www.nikeresponsibility.com/report/content/chapter/business-overview Nike Inc. (2012). Nike, inc.-sustainable business report iii. impact areas; people and culture. Retrieved from http://www.nikeresponsibility.com/report/content/chapter/people-andculture Nike, Inc. (2013). Nike.com. Retrieved November 13, 2013, from People & Culture: http://www.nikeresponsibility.com/report/content/chapter/people-and-culture Parker, M. (2013, 10 09). Nike CEO on product innovation, athletes, brands. (S. Ruhle, Interviewer) Retrieved from http://www.bloomberg.com/video/nike-ceo-on-productinnovation-athletes-brands-dmOq1dMSTo6u0QEdLaEVbQ.html Pearson Education. (2010). About nike case 1.1: Vision, initiative, mission & commitmentnike-origins of a sports industry giant. Retrieved from http://wps.pearsoncustom.com/pcp_collins_explorebus_1/68/17645/4517174.cw/cont ent/index.html Porter, M. E. (1998). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York, NY: Free Press. Pew Research Center (2013). Pewsocialtrends.org. Retrieved October 27, 2013 from Social Trends: http://www.pewsocialtrends.org/files/2010/12/Boomer-Summary-ReportFINAL.pdf Riches, S. (2013, 10 07). Basketball and Globalization. Retrieved from The New Yorker: http://www.newyorker.com/online/blogs/currency/2013/10/basketball-andglobalization.html Rovell, D. (2013, 02 15). How Nike landed Michael Jordan. Retrieved from espn.com: http://espn.go.com/blog/playbook/dollars/post/_/id/2918/how-nike-landed-michaeljordan Seeking Alpha. (2013, 11 06). Market Currents. Retrieved from Seeking Alpha: http://seekingalpha.com/currents/post/1396472?source=email_rt_mc_readmore Sheth, K., & Vittal, I. (2007, 11). How half the world shops: Apparel in Brazil, China, and India. Retrieved from McKinsey & Company: 78
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http://www.mckinsey.com/insights/consumer_and_retail/how_half_the_world_shops _apparel_in_brazil_china_and_india Sports and Fitness Clothing-Global Strategic Business Report. Feb. 2013. Global Industry Analysts, Inc. http://www.researchandmarkets.com/research/p9zn6f/sports_and Sport Clothing and Accessories Industry: Market Research Reports, Statistics and Analysis. http://www.reportlinker.com/ci02121/Sport-Clothing-andAccessories.html Sporting Goods Industry: Market Research Reports, Statistics and Analysis. http://www.reportlinker.com/ci02221/Sporting-Goods.html Textile Exchange (2013). Performance Apparel and its Global Market Trends. Retrieved October 29, 2013, from Textile Exchange Online: http://www.teonline.com/knowledge-centre/performance-apparel-global-market.html The Sports Archive Blog. (2013, 03 15). How & Why Basketball is growing in popularity globally. Retrieved from The Sports Archive Blog: http://thesportsarchivesblog.com/2013/03/15/the-sports-archives-how-whybasketball-is-growing-in-popularity-globally/ Under Armour, Inc. (2012). Annual Report. Retrieved from http://investor.underarmour.com/annuals.cfm Unknown. (2013). History of Nike. Retrieved September 27, 2013, from Kicks On Fire: http://www.kicksonfire.com/history-of-nike/ Wai-Chan, C., Cheung, R. C., & Tse, A. (2007, 11). How half the world shops: Apparel in Brazil, China, and India. Retrieved from McKinsey & Company: http://www.mckinsey.com/insights/consumer_and_retail/how_half_the_world_shops _apparel_in_brazil_china_and_india Why Nike Will Outpace The Sports Apparel Markets Growth. 2013, May 13. Forbes. http://www.forbes.com/sites/greatspeculations/2013/05/13/why-nikes-growth-willoutpace-the-sports-apparel-markets/ Wong, E. (2013, 07 19). Survey of China shows a wide gap in income. Retrieved from New York Times: http://www.nytimes.com/2013/07/20/world/asia/survey-in-china-showswide-income-gap.html?_r=0 Yahoo!Finance. (2013). Nike, Inc. Key Statistics. Retrieved September 27, 2013, from http://finance.yahoo.com/q/ks?s=NKE Zogby, John (2010). How The Recession Has Changed America's Spending. Retrieved October 28, 2013, from Forbes.com: http://www.forbes.com/2010/07/08/recessionspending-pew-opinions-columnists-john-zogby.html 79
Concordia University Appendices Appendix A: A Special Thank You
Nike, Inc.
DBA Consulting, LLC would like to thank Dr. Alain Gracianette for his significant contribution as both an advisor and mentor to the team. His sincere guidance, advice, and leadership is greatly appreciated. DBA Consulting, LLC would also like to thank Buels Impressions Printing for the beautiful assembly of the project. Their level of professionalism and dedication is appreciated. Appendix B: About the Authors Dawn Ackerman is currently an Administrative Assistant for Grants Pass School District 7.She is responsible for benefits coordination for roughly 650 employees, accounts receivable for the entire district, and various functions of payroll. Dawn is also the lead assistant to the Business Director and has various responsibilities balancing GL accounts. Previously Dawn was a Car Deal Account Manager for a new car dealership where her responsibilities included reconciling bank statements, reserve statements, inventory, and assisting with payroll. Dawn also processed all car deals to ensure prompt and timely funding of contracts from numerous financial institutions as well as accurately submitting required Department of Motor Vehicle documents. Dawn presently holds a bachelors degree in Management and Operations from Washington State University and is continuing her education with a Master of Business Administration with a focus on International Business from Concordia University. Dawn will graduate from Concordia University in January 2014. Brian Claar is currently a financial analyst with Providence Health and Services and is responsible for managing the budget and ongoing operations for Providences revenue cycle. The revenue cycle department consists of 3,000 employees across 5 states and has an annual operating budget of $200 million. Brian is also a key member of the Providence capital budget and long range financial planning committee. Prior to working at Providence, Brian worked in commercial banking for 10 years as a financial analyst and relationship manager. As a relationship manager, Brian was responsible for sales and marketing to small and medium size business owners and has managed a portfolio of $100 million in commercial loans. Brian has been a trusted advisor for many business owners in financial planning and capital budgeting including large real estate projects in excess of $5 million. Brian also has experience in process improvement and was able to save a Northwest bank $1 million in operational costs through implementation of procedures and processes that improved efficiency. Brian holds a Bachelors degree in Finance from Linfield College and is currently pursuing a Masters degree in Business Administration from Concordia University. Brian will graduate from Concordia University in January 2014. Angelica Jackson currently works as a Program Manager for La DPaw LLC where she manages five new business ventures and manages eCommerce marketing strategies for multiple clients. She has a background in the field of law and has worked as a Legal Assistant for 10 years. Most 80
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of her experience has been working in small successful companies where her management roles have required an assortment of tasks from different field of business including Accounting, Human Resource Management, Training and Development, Project Management, and Research and Marketing. She received a Bachelor of Science in Psychology from the University of Oregon and is currently completing a Master of Business Administration at Concordia University. She intends to graduate in January, 2014.
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Concordia University Appendix C: Financial Statement

NIKE, INC. BALANCE SHEET USD in millions except per share data. 2009 ASSETS Cash and cash equivalents Short-term investments Total cash Receivables Inventories Deferred income taxes Prepaid expenses Total current assets Non-current assets Gross property, plant and equipment Accumulated Depreciation Net property, plant and equipment Goodwill Intangible assets Deferred income taxes Total non-current assets Total assets Liabilities and stockholders' equity Short-term debt Accounts payable Taxes payable Accrued liabilities Other current liabilities Total current liabilities Non-current liabilities Long-term debt Deferred taxes liabilities Other long-term liabilities Total non-current liabilities Total liabilities Stockholders' equity Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income Total stockholders' equity Total liabilities and stockholders' equity $ 2,291 $ 1,164 3,455 2,884 2,357 272 766 9,734 4,256 (2,298) 1,958 194 467 897 3,516 13,250 $ 375 $ 1,032 86 1,784 3,277 437 842 1 1,280 4,557 3 2,871 5,451 367 8,693 13,250 $ 2010 3,079 $ 2,067 5,146 2,650 2,041 249 874 10,959 4,390 (2,458) 1,932 188 467 874 3,460 14,419 $ 146 $ 1,254 59 1,774 131 3,364 446 855 0 1,301 4,666 3 3,441 6,096 215 9,754 14,419 $ 2011 1,955 $ 2,583 4,538 3,138 2,715 312 594 11,297 4,906 (2,791) 2,115 205 487 894 3,701 14,998 $ 387 $ 1,469 117 1,985 3,958 276 921 1,197 5,155 3 3,944 5,801 95 9,843 14,998 $ 2012
Nike, Inc.
2013
2,317 $ 3,337 1,440 2,628 3,757 5,965 3,280 3,117 3,350 3,434 274 308 870 802 11,531 13,626 5,244 (2,965) 2,279 201 535 919 3,934 15,465 $ 5,500 (3,048) 2,452 131 382 993 3,958 17,584
$ $
157 $ 178 1,588 1,646 246 290 1,654 1,572 220 240 3,865 3,926 228 991 1,219 5,084 3 4,641 5,588 149 10,381 15,465 $ 1,210 1,292 2,502 6,428 3 5,184 5,695 274 11,156 17,584
82
Nike, Inc.
NIKE, INC. INCOME STATEMENT USD in millions except per share data. Revenue Cost of revenue Gross profit Operating expenses Sales, General and administrative Restructuring, merger and acquisition Other operating expenses Total operating expenses Operating income Interest Expense Other income (expense) Income before taxes Provision for income taxes Net income from continuing operations Net income from discontinuing ops Net income Net income available to common shareholders Earnings per share Basic Diluted Weighted average shares outstanding Basic Diluted EBITDA $ 2009 19,176 $ 10,572 8,604 6,150 195 401 6,746 1,858 98 1,956 470 1,487 $ 1,487 $ 1,487 1.54 1.52 970 981 2,242 $ 2010 19,014 $ 10,214 8,800 6,326 2011 20,862 $ 11,354 9,508 6,693 2012 24,128 $ 13,657 10,471 7,431 2013 25,313 14,279 11,034 7,780
6,326 2,474 43 2,517 610 1,907 1,907 $ 1,907 1.97 1.93 971 988 2,870 $
6,693 2,815 4 33 2,844 711 2,133 2,133 $ 2,133 2.24 2.20 951 971 3,206 $
7,431 3,040 (57) 2,983 760 2,223 2,223 $ 2,223 2.42 2.37 920 940 3,445 $
7,780 3,254 18 3,272 808 2,464 21 2,485 2,485 2.77 2.71 897 916 3,767
83
Nike, Inc.
NIKE, INC. STATEMENT OF CASH FLOWS USD in millions except per share data. 2009 Cash Flows From Operating Activities Net income Depreciation & amortization Investment/asset impairment charges Deferred income taxes Stock based compensation Accounts receivable Inventory Prepaid expenses Accounts payable Other working capital Other non-cash items Net cash provided by operating activities Cash Flows From Investing Activities Investments in property, plant, and equipment Property, plant, and equipment reductions Acquisitions, net Purchases of investments Sales/Maturities of investments Other investing activities Net cash provided by (used for) investing activities Cash Flows From Financing Activities Debt issued Debt repayment Common stock repurchased Dividend paid Other financing activities Net cash provided by (used for) financing activities Effect of exchange rate changes Net change in cash Cash at beginning of period Cash at end of period Free Cash Flow Operating cash flow Capital expenditure Free cash flow
84
2010 1,907 396 8 159 182 285 (70) 298 3,164 (335) 10 (3,724) 2,788 (6) (1,268)
2011 2,133 358 (76) 105 (273) (551) (35) 151
2012 2,223 405 (60) 130 (323) (805) (141) 470
2013 2,485 513 21 174 142 (197) (28) 41 (124) 3,027 (636) 14 786 (3,702) 2,499 (28) (1,067) 986 (49) (1,674) (703) 400 (1,040) 100 1,020 2,317 3,337 3,027 (636) 2,391
1,487 383 401 (294) 171 (238) 32 14 (220) 1,736 (456) 32 (2,909) 2,581 (47) (798) 177 (7) (649) (467) 212 (734) (47) 157 2,134 2,291 1,736 (456) 1,280
1,812 (432) 1 (7,616) 7,079 (53) (1,021)
1,899 (597) 2 (2,705) 3,829 (15) 514
(32) (741) (505) 218 (1,061) (48) 788 2,291 3,079 3,164 (335) 2,829
(8) (1,859) (555) 450 (1,972) 57 (1,124) 3,079 1,955 1,812 (432) 1,380
(203) (1,814) (619) 518 (2,118) 67 362 1,955 2,317 1,899 (597) 1,302
NIKE, INC. KEY RATIOS USD in millions except per share data. Revenue USD Mil Gross Margin % Operating Income USD Mil Operating Margin % Net Income USD Mil Earnings Per Share USD Dividends USD Payout Ratio % Shares Mil Book Value Per Share USD Operating Cash Flow USD Mil Cap Spending USD Mil Free Cash Flow USD Mil Free Cash Flow Per Share USD Working Capital USD Mil Key Ratios -> Profitability Margins % of Sales Revenue COGS % Gross Margin % SG&A % R&D Other Operating Margin % Net Int Inc & Other EBT Margin Profitability Tax Rate % Net Margin % Asset Turnover (Average) Return on Assets % Financial Leverage (Average) Return on Equity % Return on Invested Capital % Interest Coverage Key Ratios -> Growth 2009 2010 2011 2012 2013 19,176 19,014 20,862 24,128 25,313 44.9 46.3 45.6 43.4 43.6 1,859 2,474 2,815 3,040 3,254 9.7 13 13.5 12.6 12.9 1,487 1,907 2,133 2,223 2,485 1.52 1.93 2.2 2.37 2.71 0.49 0.53 0.6 0.7 0.81 32.4 27.5 27.3 29.4 30.1 981 988 971 940 916 9.93 11.11 11.63 12.57 12.48 1,736 3,164 1,812 1,899 3,027 -456 -335 -432 -597 -636 1,280 2,829 1,380 1,302 2,391 1.3 2.86 1.42 1.39 2.61 6,457 7,595 7,339 7,666 9,700
Nike, Inc.
100 55.13 44.87 32.07 3.11 9.69 0.51 10.2
100 53.72 46.28 33.27
100 54.42 45.58 32.08
100 56.6 43.4 30.8
100 56.41 43.59 30.74
13.01 0.23 13.24
13.49 0.14 13.63
12.6 -0.24 12.36
12.86 0.07 12.93
24.01 7.75 1.49 11.57 1.52 18 16.56
24.24 10.03 1.37 13.78 1.48 20.67 19.21
25 10.22 1.42 14.5 1.52 21.77 20.43 712
25.48 9.21 1.58 14.59 1.49 21.98 20.9
24.69 9.82 1.53 15.04 1.58 23.08 21.32
85
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Revenue % Year over Year 3-Year Average 5-Year Average 10-Year Average Operating Income % Year over Year 3-Year Average 5-Year Average 10-Year Average Net Income % Year over Year 3-Year Average 5-Year Average 10-Year Average EPS % Year over Year 3-Year Average 5-Year Average 10-Year Average Key Ratios -> Cash Flow Cash Flow Ratios Operating Cash Flow Growth % YOY Free Cash Flow Growth % YOY Cap Ex as a % of Sales Free Cash Flow/Sales % Free Cash Flow/Net Income Key Ratios -> Financial Health Balance Sheet Items (in %) Cash & Short-Term Investments Accounts Receivable Inventory Other Current Assets Total Current Assets Net PP&E Intangibles Other Long-Term Assets Total Assets Accounts Payable Short-Term Debt
2.95 8.64 9.37 8.13 -23.63 -4.13 3.7 8.05 -21.06 2.22 9.47 12.66 -18.98 4.7 11.54 14.46
-0.85 5.21 6.71 7.77 33.12 5.09 5.49 9.65 28.25 8.53 9.49 12.66 27.39 9.62 11.5 14.07
9.72 3.85 6.88 8.2 13.78 4.97 5.94 10.75 11.87 4.24 8.91 13.72 13.73 5.49 10.71 15.05
15.66 7.96 8.13 9.33 7.99 17.82 7.36 11.03 4.22 14.35 8.31 12.86 7.74 16 10.05 14.51
4.91 10.01 6.33 9 7.04 9.57 5.98 10.08 11.79 9.23 5.7 18.02 14.59 11.98 7.7 19.87
-10.34 82.26 -13.9 120.95 2.38 1.76 6.68 14.88 0.86 1.48
-42.73 -51.22 2.07 6.61 0.65
4.8 -5.65 2.47 5.4 0.59
59.4 83.64 2.51 9.45 0.96
26.08 21.77 17.79 7.83 73.47 14.78 4.99 6.77 100 7.79 2.83
35.69 18.38 14.15 7.79 76 13.4 4.54 6.06 100 8.7 1.01
30.26 20.92 18.1 6.04 75.32 14.1 4.61 5.96 100 9.79 2.58
24.29 21.21 21.66 7.4 74.56 14.74 4.76 5.94 100 10.27 1.02
33.92 17.73 19.53 6.31 77.49 13.94 2.92 5.65 100 9.36 1.01
86
Taxes Payable Accrued Liabilities Other Short-Term Liabilities Total Current Liabilities Long-Term Debt Other Long-Term Liabilities Total Liabilities Total Stockholders' Equity Total Liabilities & Equity Liquidity/Financial Health Current Ratio Quick Ratio Financial Leverage Debt/Equity Key Ratios -> Efficiency Ratios Efficiency Days Sales Outstanding Days Inventory Payables Period Cash Conversion Cycle Receivables Turnover Inventory Turnover Fixed Assets Turnover Asset Turnover 0.65 13.46 24.73 3.3 6.36 34.39 65.61 100 0.41 12.3 0.91 23.33 3.09 5.93 32.36 67.64 100 0.78 13.24 26.39 1.84 6.14 34.37 65.63 100 1.59 10.7 1.42 24.99 1.47 6.41 32.87 67.13 100 1.65 8.94 1.36 22.33 6.88 7.35 36.56 63.44 100
Nike, Inc.
2.97 1.93 1.52 0.52
3.26 2.32 1.48 0.48
2.85 1.94 1.52 0.52
2.98 1.82 1.49 0.49
3.47 2.31 1.58 0.58
54.05 82.78 40.04 96.79 6.75 4.41 9.96 1.49
53.11 78.58 40.85 90.84 6.87 4.64 9.78 1.37
50.63 76.44 43.78 83.3 7.21 4.77 10.31 1.42
48.54 81.05 40.85 88.74 7.52 4.5 10.98 1.58
46.12 86.71 41.33 91.49 7.91 4.21 10.7 1.53
Financials
NIKE 5/31/2013 $ 25,313 43.60% 12.90% 2.71 916
Revenue USD Mil Gross Margin % Operating Margin % Earnings Per Share USD Shares Mil
Under Adidas Armour VF Corp Industry 12/31/201 12/31/201 12/31/201 12/31/201 2 2 2 2 $ $ $ $ 19,668 1,835 10,880 14,424 47.70% 47.90% 46.50% 46.43% 6.20% 11.40% 13.50% 11.00% 3.33 1.21 9.7 4 209 106 112 336
87
Book Value Per Share USD Operating Cash Flow USD Mil Cap Spending USD Mil Free Cash Flow USD Mil Free Cash Flow Per Share USD Working Capital USD Mil Key Ratios -> Profitability Margins % of Sales Revenue COGS Gross Margin Operating Margin Net Int Inc & Other EBT Margin Profitability Tax Rate % Net Margin % Asset Turnover (Average) Return on Assets % Financial Leverage (Average) Return on Equity % Return on Invested Capital % Interest Coverage Key Ratios -> Growth Revenue % Year over Year 3-Year Average 5-Year Average 10-Year Average Operating Income % Year over Year 3-Year Average 5-Year Average 10-Year Average Net Income % Year over Year 3-Year Average 5-Year Average 10-Year Average 12.48 3,027 -636 2,391 2.61 9,700 44.2 1245 -574 671 3.21 3,308 7.8 200 -51 149 1.4 651 46.51 1,275 -283 992 8.87 1,717
Nike, Inc.
28 1437 -386 1051 4 3,844
100.00% 56.41% 43.59% 12.86% 0.07% 12.93%
100.00% 52.27% 47.73% 6.18% -0.46% 5.72%
100.00% 52.08% 47.92% 11.37% -0.29% 11.09%
100.00% 53.47% 46.53% 13.47% -0.40% 13.07%
100.00% 53.56% 46.44% 10.97% -0.27% 10.70%
24.69% 9.82% 1.53 15.04% 1.58 23.08% 21.32%
38.43% 3.53% 1.29 4.57% 2.2 9.90% 9.90%
36.70% 7.02% 1.77 12.40% 1.42 17.72% 16.17%
23.61% 9.98% 1.15 11.46% 1.88 22.50% 14.91% 16.19
30.86% 7.59% 1.435 10.87% 1.77 18.30% 15.58% 4.0475
4.91% 10.01% 6.33% 9.00% 7.04% 9.57% 5.98% 10.08% 11.79% 9.23% 5.70% 18.02%
11.53% 12.76% 7.64% 8.60% -9.00% 21.89% -0.62% 6.80% -21.49% 29.01% -1.07% 8.69%
24.60% 28.92% 24.78% 43.50% 28.22% 34.76% 19.33% 47.39% 32.87% 40.15% 19.63% 46.82%
15.02% 14.65% 8.55% 7.91% 17.71% 25.75% 8.70% 8.95% 22.28% 33.03% 12.92%
14.02% 16.59% 11.83% 17.25% 0 10.99% 22.99% 8.35% 18.31% 0.00% 11.36% 27.86% 9.30% 18.38%
88
EPS % Year over Year 3-Year Average 5-Year Average 10-Year Average Key Ratios -> Cash Flow Cash Flow Ratios Operating Cash Flow Growth % YOY Free Cash Flow Growth % YOY Cap Ex as a % of Sales Free Cash Flow/Sales % Free Cash Flow/Net Income Key Ratios -> Financial Health Balance Sheet Items (in %) Cash & Short-Term Investments Accounts Receivable Inventory Other Current Assets Total Current Assets Net PP&E Intangibles Other Long-Term Assets Total Assets Accounts Payable Short-Term Debt Taxes Payable Accrued Liabilities Other Short-Term Liabilities Total Current Liabilities Long-Term Debt Other Long-Term Liabilities Total Liabilities Total Stockholders' Equity Total Liabilities & Equity Liquidity/Financial Health Current Ratio Quick Ratio Financial Leverage Debt/Equity
Nike, Inc.
0.00% 11.43% 27.58% 9.67% 16.92%
14.59% 11.98% 7.70% 19.87%
-21.25% 27.35% -0.39% 7.18%
30.81% 38.04% 18.17% 40.63%
21.55% 32.93% 13.19%
59.40% 83.64% 2.51% 9.45% 0.96
18.94% 22.12% 2.92% 3.41% 0.97
1212.66% 2.76% 8.13% 1.16
17.91% 19.22% 2.60% 9.12% 0.91
327.23% 31.25% 2.70% 7.53% 1
33.92% 17.73% 19.53% 6.31% 77.49% 13.94% 2.92% 5.65% 100.00% 9.36% 1.01% 1.65% 8.94% 1.36% 22.33% 6.88% 7.35% 36.56% 63.44% 100.00%
18.26% 14.49% 21.34% 4.94% 59.02% 9.40% 25.17% 6.41% 100.00% 15.36% 2.36% 19.82% 37.54% 17.05% 54.59% 45.41% 100.00%
29.54% 15.17% 27.59% 5.79% 78.09% 15.63% 0.39% 5.89% 100.00% 12.42% 0.79% 7.35% 1.24% 21.80% 4.56% 3.04% 29.40% 70.60% 100.00%
6.20% 12.69% 14.06% 2.86% 35.81% 8.60% 51.15% 4.45% 100.00% 5.84% 4.31% 1.61% 5.86% 0.36% 17.98% 14.84% 13.97% 46.79% 53.21% 100.00%
21.98% 15.02% 20.63% 4.98% 62.60% 11.89% 19.91% 5.60% 100.00% 10.75% 1.53% 1.41% 5.54% 5.70% 24.91% 6.57% 10.35% 41.84% 58.17% 100.00%
3.47 2.31 1.58 0.58
1.57 0.77 2.2 1.20
3.58 2.05 1.42 0.42
1.99 1.05 1.88 0.88
2.65 1.55 1.77 0.77
89
Nike, Inc.
Key Ratios -> Efficiency Ratios Efficiency Days Sales Outstanding Days Inventory Payables Period Cash Conversion Cycle Receivables Turnover Inventory Turnover Fixed Assets Turnover Asset Turnover
46.12 86.71 41.33 91.49 7.91 4.21 10.7 1.53
41.63 116.54 86.23 71.94 8.77 3.13 14.46 1.29
30.79 122.93 46.64 107.08 11.85 2.97 10.79 1.77
39.29 88.08 37.63 89.74 9.29 4.14 13.9 1.15
39.46 103.57 52.96 90.06 9.46 3.61 12.46 1.44
* Industry values are derived from an average of Nike, Inc., Adidas, Under Armour, and VF Corp.
90
Nike, Inc.
Growth Profitability and Financial Ratios for Adidas AG Financials 2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 Revenue EUR Mil 14,883 19,668 13,344 11,990 10,381 10,799 10,299 10,084 6,636 6,478 6,267 Gross Margin % 47.7 47.7 47.5 47.8 45.4 48.7 47.4 44.6 48.2 47.2 44.9 Operating Income EUR Mil 920 1215 1,011 894 508 1,070 949 881 707 580 490 Operating Margin % 6.2 6.2 7.6 7.5 4.9 9.9 9.2 8.7 10.7 9 7.8 Net Income EUR Mil 526 695 670 568 245 644 555 496 390 323 271 Earnings Per Share EUR 2.52 3.33 3.2 2.71 1.22 3.07 2.57 4.5 4.08 1.64 1.43 Dividends EUR Payout Ratio % Shares Mil 209 209 209 209 209 213 219 219 203 183 182 Book Value Per Share EUR 33.45 44.2 31.75 Operating Cash Flow EUR Mil 942 1245 792 894 1,198 497 780 762 352 573 651 Cap Spending EUR Mil -434 -574 -376 -269 -241 -376 -285 -277 -208 -160 -145 Free Cash Flow EUR Mil 508 671 416 625 957 121 495 485 144 413 506 Free Cash Flow Per Share EUR 3.21 3.21 2.58 Working Capital EUR Mil 2,503 3,308 2,154 1,972 1,649 1,289 1,709 1,733 2,576 1,348 1,433 Key Ratios -> Profitability Margins % of Sales Revenue COGS Gross Margin SG&A R&D Other Operating Margin Net Int Inc & Other EBT Margin Profitability Tax Rate % Net Margin % Asset Turnover (Average) Return on Assets % Financial Leverage (Average) Return on Equity % Return on Invested Capital % Interest Coverage Key Ratios -> Growth 2012-12 Revenue % Year over Year 3-Year Average 5-Year Average 10-Year Average Operating Income % Year over Year 3-Year Average 5-Year Average 10-Year Average Net Income % Year over Year 3-Year Average 5-Year Average 10-Year Average EPS % Year over Year 3-Year Average 5-Year Average 10-Year Average 11.53 12.76 7.64 8.6 -9 21.89 -0.62 6.8 -21.49 29.01 -1.07 8.69 -21.25 27.35 -0.39 7.18 2011-12 11.29 7.31 5.76 2010-12 15.5 5.2 12.56 2009-12 -3.87 0.97 9.89 2008-12 4.85 17.63 11.5 2007-12 2.13 16.71 9.56 2006-12 51.97 17.18 2005-12 2.43 0.57 2004-12 3.37 2003-12 -3.93
2012-12 100 52.27 47.73
43.1 6.18 -0.46 5.72 2012-12 38.43 3.53 1.29 4.57 2.2 9.9 9.9
2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 100 100 100 100 100 100 100 100 100 52.46 52.21 54.61 51.33 52.6 55.42 51.82 52.79 55.1 47.54 47.79 45.39 48.67 47.4 44.58 48.18 47.21 44.9 40.54 41.23 41.46 39.79 38.36 35.76 36.55 36.68 35.55 0.86 0.85 0.83 0.75 0.82 0.97 1.68 1.57 1.52 7.58 7.46 4.89 9.91 9.21 8.74 10.66 8.96 7.82 -0.63 -0.73 -1.44 -1.54 -1.3 -1.57 -0.79 -0.93 -0.83 6.95 6.72 3.45 8.37 7.91 7.17 9.88 8.03 6.99 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 27.72 29.53 31.56 28.76 31.9 31.4 33.71 37.81 38.05 5.03 4.73 2.36 5.95 5.35 4.79 5.77 4.85 4.15 1.21 1.23 1.13 1.21 1.23 1.43 1.3 1.5 1.48 6.1 5.82 2.66 7.19 6.6 6.84 7.52 7.3 6.16 2.13 2.3 2.35 2.8 2.74 2.95 2.14 2.72 3.09 13.48 13.5 6.83 19.96 18.77 17.5 17.75 21.06 21.34 9.57 8.62 2.46 9.61 8.22 7.62 10.33 11 8.77 9.06 8.13 3.12 5.45 5.79 4.67 7.99 10.15 9.91
13.09 -1.87 2.79
75.98 -1.97 4.79
-52.52 -16.77 -2.62
12.75 14.79 16.91
7.72 17.82 14.77
24.53 21.6
21.94 14.07
18.4
2.81
17.96 1.33 6.2
131.84 0.77 7.78
-61.96 -20.95 -5.41
16.04 18.15 18.86
11.9 19.72 19.41
27.03 22.25
20.71 19.54
19.15
18.77
18.08 1.39 -6.59
122.13 1.78 -7.87
-60.26 -35.28 -5.69
19.46 -9.06 16.51
-42.89 16.27 15.32
10.23 46.54
149.69 47.97
14.34
13.49
Key Ratios -> Cash Flow Cash Flow Ratios 2012-12 Operating Cash Flow Growth % YOY 18.94 Free Cash Flow Growth % YOY 22.12 Cap Ex as a % of Sales 2.92 Free Cash Flow/Sales % 3.41 Free Cash Flow/Net Income 0.97 Key Ratios -> Financial Health Balance Sheet Items (in %) Cash & Short-Term Investments Accounts Receivable Inventory Other Current Assets Total Current Assets Net PP&E Intangibles Other Long-Term Assets Total Assets Accounts Payable Short-Term Debt Taxes Payable Accrued Liabilities Other Short-Term Liabilities Total Current Liabilities Long-Term Debt Other Long-Term Liabilities Total Liabilities Total Stockholders' Equity Total Liabilities & Equity
2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 -11.41 -25.38 141.05 -36.28 2.36 116.44 -38.59 -11.94 21.89 -33.44 -34.69 690.91 -75.56 2.06 236.86 -65.17 -18.35 88 2.82 2.24 2.32 3.48 2.77 2.75 3.14 2.47 2.31 3.12 5.21 9.22 1.12 4.81 4.81 2.17 6.38 8.08 0.62 1.1 3.91 0.19 0.89 0.98 0.37 1.28 1.86
2012-12 18.26 14.49 21.34 4.94 59.02 9.4 25.17 6.41 100 15.36 2.36 19.82 37.54 17.05 54.59 45.41 100
2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 14.72 14.94 11.38 4.04 4.58 4.14 27.58 10.28 6.66 15 15.7 16.1 17.04 17.53 16.89 16.78 23.63 25.67 21.81 19.96 16.57 20.93 19.57 19.18 21.39 26.1 27.78 5.02 4.78 6.48 9.76 8.04 6.64 10.19 8.54 6.19 56.55 55.38 50.54 51.76 49.71 46.84 75.94 68.55 66.31 8.46 8.05 8.15 9.29 8.43 8.22 7.38 8.31 8.23 28.5 29.46 33.58 32.45 35.09 20.75 9.17 15.1 16.59 6.49 7.11 7.74 6.5 6.77 24.18 7.51 8.04 8.87 100 100 100 100 100 100 100 100 100 16.57 15.95 13.14 12.78 10.2 8.97 11.96 13.45 14.34 2.54 2.57 2.23 8.36 4.22 2.21 2.5 2.19 3.37 3.42 3.38 4.94 3.8 3.82 16.29 37.62 8.71 6.83 53.15 46.85 100 15.78 36.81 12.59 7.06 56.46 43.54 100
91 14.4
31.95 17.68 7.82 57.45 42.55 100
13.73 38.24 18.63 7.47 64.33 35.67 100
15.56 29.18 25.78 8.6 63.56 36.44 100
13.81 26.16 30.77 9.23 66.15 33.85 100
14.39 31.29 18.09 3.71 53.09 46.91 100
16.88 38.36 19.62 5 62.98 37.02 100
14.37 32.53 29.66 4.99 67.18 32.82 100
Nike, Inc.
Growth Profitability and Financial Ratios for Under Armour, Inc. Class A Financials 2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 Revenue USD Mil 1,835 1,473 1,064 856 725 607 431 281 205 115 Gross Margin % 47.9 48.4 49.9 48.2 48.9 50.3 50.1 48.3 46.5 43.9 Operating Income USD Mil 209 163 112 85 77 86 57 36 25 10 Operating Margin % 11.4 11.1 10.6 10 10.6 14.2 13.3 12.8 12.4 8.6 Net Income USD Mil 129 97 68 47 38 53 39 20 16 6 Earnings Per Share USD 1.21 0.93 0.67 0.46 0.39 0.53 0.4 0.18 0.2 0.08 Dividends USD Payout Ratio % Shares Mil 106 105 103 101 100 100 99 79 74 68 Book Value Per Share USD 7.8 6.9 5.53 4.55 3.36 2.88 2.25 1.61 Operating Cash Flow USD Mil 200 15 50 119 70 -15 11 16 -9 -10 Cap Spending USD Mil -51 -79 -30 -20 -39 -34 -15 -11 -9 -2 Free Cash Flow USD Mil 149 -64 20 99 30 -49 -4 5 -18 -12 Free Cash Flow Per Share USD 1.4 -0.61 0.19 0.98 0.3 -0.49 -0.05 0.07 Working Capital USD Mil 651 506 407 328 263 227 173 134 17 14 Key Ratios -> Profitability Margins % of Sales Revenue COGS Gross Margin SG&A R&D Other Operating Margin Net Int Inc & Other EBT Margin Profitability Tax Rate % Net Margin % Asset Turnover (Average) Return on Assets % Financial Leverage (Average) Return on Equity % Return on Invested Capital % Interest Coverage Key Ratios -> Growth 2012-12 Revenue % Year over Year 3-Year Average 5-Year Average 10-Year Average Operating Income % Year over Year 3-Year Average 5-Year Average 10-Year Average Net Income % Year over Year 3-Year Average 5-Year Average 10-Year Average EPS % Year over Year 3-Year Average 5-Year Average 10-Year Average 24.6 28.92 24.78 43.5 28.22 34.76 19.33 47.39 32.87 40.15 19.63 46.82 30.81 38.04 18.17 40.63 2011-12 38.42 26.63 27.88 53.92 44.87 28.38 23.23 47.46 41.54 36.36 19.98 41.52 38.06 33.93 18.55 31.46 2010-12 24.23 20.6 30.5 2009-12 18.09 25.75 33.08 2008-12 19.57 37.16 44.42 2007-12 40.84 43.52 65.03 2006-12 53.24 55.11 85.27 2005-12 36.98 78.34 2004-12 77.77 118.27 2003-12 132.93
2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 100 100 100 100 100 100 100 100 100 100 52.08 51.6 50.14 51.77 51.06 49.71 49.94 51.66 53.49 56.11 47.92 48.4 49.86 48.23 48.94 50.29 50.06 48.34 46.51 43.89 36.55 37.35 39.3 38.27 38.34 36.07 36.76 35.57 34.14 35.27
11.37 -0.29 11.09
11.05 -0.4 10.65
10.56 -0.32 10.24
9.96 -0.33 9.62
10.61 -0.97 9.64
14.22 0.46 14.68
13.3 0.42 13.72
12.77 -1.04 11.73
12.37 -0.63 11.74
8.62 -1.92 6.71
2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 36.7 38.21 37.13 43.23 45.31 40.97 34.03 40.2 32.26 25.73 7.02 6.58 6.44 5.46 5.27 8.66 9.05 5.13 6.98 4.57 1.77 1.85 1.74 1.66 1.65 1.78 1.75 1.79 2.48 2.74 12.4 12.16 11.22 9.06 8.71 15.46 15.81 9.16 17.29 12.52 1.42 1.44 1.36 1.36 1.47 1.39 1.35 1.35 5.23 4.61 17.72 17.1 15.27 12.8 12.5 21.24 21.35 16.75 86.57 71.78 16.17 15.41 14.37 11.36 11.39 20.39 20.52 11.1 26.85 17.96 41.84 49.24 36.16
31.76 9.21 25.64
10.85 14.19 27.43
-10.83 28.93 50.53
50.61 50.35 82.06
59.59 79.2 76.45
41.41 102.64
155 96.42
130.77
46.37 9.22 28.27
22.38 6.27 23.44
-27.26 24.69 46.07
34.84 47.67 80.2
97.67 89.28 66.92
20.81 92.46
183.96 75.72
107.81
45.65 8.47 30.07
19.48 5.21 18.73
-26.67 28.84 38.7
32.91 39.12 67.35
119.44 73.99 45.78
-7.69 65.1
160 48.12
87.5
Key Ratios -> Cash Flow Cash Flow Ratios 2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 Operating Cash Flow Growth % YOY 1212.66 -69.63 -57.9 71.24 -32.25 Free Cash Flow Growth % YOY -79.91 227.14 Cap Ex as a % of Sales 2.76 5.39 2.84 2.32 5.4 5.62 3.51 3.87 4.25 1.98 Free Cash Flow/Sales % 8.13 -4.36 1.87 11.58 4.18 -8.03 -1.02 1.75 -8.57 -10.39 Free Cash Flow/Net Income 1.16 -0.66 0.29 2.12 0.79 -0.93 -0.11 0.25 -1.08 -2.09 Key Ratios -> Financial Health Balance Sheet Items (in %) 2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 Cash & Short-Term Investments 29.54 19.08 30.19 34.33 20.93 10.39 24.42 30.92 0.98 1.22 Accounts Receivable 15.17 14.58 15.11 14.55 16.68 23.94 26.33 26.09 36.1 45.16 Inventory 27.59 35.29 31.89 27.22 37.38 42.52 28 26.32 43.3 39.93 Other Current Assets 5.79 6.07 5.12 6.02 6.33 5.65 5.91 5.93 6.54 5.76 Total Current Assets 78.09 75.03 82.3 82.11 81.31 82.5 84.65 89.25 86.92 92.07 Net PP&E 15.63 17.31 11.27 13.37 15.09 13.4 10.34 10.24 12.81 7.54 Intangibles 0.39 0.6 0.58 1.04 1.12 1.66 2.72 Other Long-Term Assets 5.89 7.06 5.85 3.48 2.48 2.45 2.29 0.51 0.27 0.39 Total Assets 100 100 100 100 100 100 100 100 100 100 Accounts Payable 12.42 10.94 12.54 12.59 14.86 14.08 14.76 15.56 18.58 19.87 Short-Term Debt 0.79 0.75 1.02 1.68 6.58 1.17 1.19 1.87 38.16 35.97 Taxes Payable 1.92 Accrued Liabilities 7.35 7.54 8.16 7.49 5.31 9.24 8.78 5.62 13.09 7.71 Other Short-Term Liabilities 1.24 0.75 0.36 0.25 0.55 0.35 2.06 1.33 Total Current Liabilities 21.8 19.97 22.08 22.02 27.3 24.5 24.73 23.4 71.88 66.81 Long-Term Debt 4.56 7.71 1.34 2.01 2.68 2.5 0.65 1.41 0.09 0.78 Other Long-Term Liabilities 3.04 3.08 2.99 2.65 2.11 1.2 0.53 1.14 8.89 10.73 Total Liabilities 29.4 30.76 26.42 26.69 32.09 28.19 25.91 25.95 80.86 78.32 Total Stockholders' Equity 70.6 69.24 73.58 73.31 67.91 71.81 74.09 74.05 19.14 21.68 Total Liabilities & Equity 100 100 100 100 100 100 100 100 100 100
92
Liquidity/Financial Health
2012-12
2011-12
2010-12
2009-12
2008-12
2007-12
2006-12
2005-12
2004-12
2003-12
Nike, Inc.
Growth Profitability and Financial Ratios for VF Corporation Financials 2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 Revenue USD Mil 10,880 9,459 7,703 7,220 7,643 7,219 6,216 6,429 6,055 5,207 Gross Margin % 46.5 45.8 46.7 44.3 43.9 43.5 43.4 41.1 39.8 38 Operating Income USD Mil 1,465 1,245 821 737 939 965 826 828 778 645 Operating Margin % 13.5 13.2 10.7 10.2 12.3 13.4 13.3 12.9 12.8 12.4 Net Income USD Mil 1,086 888 571 461 603 592 534 507 475 398 Earnings Per Share USD 9.7 7.98 5.18 4.13 5.42 5.22 4.72 4.44 4.21 3.61 Dividends USD 3.03 2.61 2.43 2.37 2.33 2.23 1.94 1.1 1.05 1.01 Payout Ratio % 31.2 32.7 46.9 57.4 43 41.2 41 24.2 24.9 28 Shares Mil 112 111 110 112 111 113 113 114 112 110 Book Value Per Share USD 46.51 40.94 35.6 34.59 32.3 32.62 29.21 25.26 22.63 18.06 Operating Cash Flow USD Mil 1,275 1,081 1,001 973 678 821 491 561 727 542 Cap Spending USD Mil -283 -249 -125 -96 -135 -120 -136 -110 -81 -87 Free Cash Flow USD Mil 992 832 876 878 544 700 355 451 646 456 Free Cash Flow Per Share USD 8.87 7.48 7.94 7.87 4.89 6.18 3.14 3.97 5.75 4.16 Working Capital USD Mil 1,717 1,522 1,717 1,537 1,641 1,511 1,563 1,213 1,006 1,337 Key Ratios -> Profitability Margins % of Sales Revenue COGS Gross Margin SG&A R&D Other Operating Margin Net Int Inc & Other EBT Margin Profitability Tax Rate % Net Margin % Asset Turnover (Average) Return on Assets % Financial Leverage (Average) Return on Equity % Return on Invested Capital % Interest Coverage Key Ratios -> Growth 2012-12 Revenue % Year over Year 3-Year Average 5-Year Average 10-Year Average Operating Income % Year over Year 3-Year Average 5-Year Average 10-Year Average Net Income % Year over Year 3-Year Average 5-Year Average 10-Year Average EPS % Year over Year 3-Year Average 5-Year Average 10-Year Average Key Ratios -> Cash Flow Cash Flow Ratios Operating Cash Flow Growth % YOY Free Cash Flow Growth % YOY Cap Ex as a % of Sales Free Cash Flow/Sales % Free Cash Flow/Net Income Key Ratios -> Financial Health Balance Sheet Items (in %) Cash & Short-Term Investments Accounts Receivable Inventory Other Current Assets Total Current Assets Net PP&E Intangibles Other Long-Term Assets Total Assets Accounts Payable Short-Term Debt Taxes Payable Accrued Liabilities Other Short-Term Liabilities Total Current Liabilities Long-Term Debt Other Long-Term Liabilities Total Liabilities Total Stockholders' Equity Total Liabilities & Equity Liquidity/Financial Health 15.02 14.65 8.55 7.91 17.71 25.75 8.7 8.95 22.28 33.03 12.92 2011-12 22.81 7.37 8.76 5.54 51.64 9.85 8.54 13.62 55.43 13.79 10.73 20.48 54.05 13.76 11.07 20.96 2010-12 6.68 2.18 3.68 2.97 11.41 -5.26 -0.18 4.87 23.87 -1.15 2.43 8.18 25.42 -0.26 3.13 8.89 2009-12 -5.53 5.12 3.58 2.66 -21.53 -3.74 -1.08 1.22 -23.47 -4.73 -0.57 2.33 -23.8 -4.35 -0.38 3.28 2008-12 5.86 5.94 7.98 3.38 -2.74 4.28 7.8 3.08 1.88 5.96 8.66 4.5 3.83 6.87 8.47 5.75 2007-12 16.15 6.04 7.27 3.29 16.86 7.47 9.19 4.77 10.89 7.62 5.36 10.59 7.43 6.81 2006-12 -3.31 6.08 2.41 1.92 -0.25 8.61 18.93 4.02 5.29 10.27 31.09 5.94 6.31 9.35 31.73 7.59 2005-12 6.18 8.14 2.26 2.42 6.48 10.02 10.18 8.89 6.74 14.25 12.41 5.46 14.97 14.12 2004-12 16.27 3.14 1.75 1.99 20.61 30.84 3.57 3.74 19.29 51.02 5.33 5.63 16.62 52.37 7.08 7.46 2003-12 2.44 -3.24 -1.01 1.89 3.69 8.14 -1.43 4.09
2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 100 100 100 100 100 100 100 100 100 100 53.47 54.22 53.3 55.75 56.05 56.52 56.56 58.88 60.19 62.04 46.53 45.78 46.7 44.25 43.95 43.48 43.44 41.12 39.81 37.96 33.06 32.62 33.43 32.36 31.66 30.11 30.15 29.38 27.69 25.58 2.62 10.66 -0.92 9.74 1.69 10.2 -1.14 9.07 -1.15 12.88 -0.89 11.99 -0.73 12.85 -1.08 11.76
13.47 -0.4 13.07
13.16 -0.85 12.31
12.29 -1.19 11.1
13.37 -0.83 12.54
13.29 -0.79 12.5
12.38 -0.89 11.49
2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 23.61 23.55 23.55 29.97 28.92 32.28 31.16 32.73 33.34 33.51 9.98 9.39 7.42 6.39 7.89 8.19 8.57 7.86 7.81 7.6 1.15 1.2 1.19 1.12 1.19 1.21 1.17 1.26 1.31 1.34 11.46 11.26 8.84 7.15 9.36 9.93 10.02 9.93 10.22 10.21 1.88 2.06 1.67 1.7 1.81 1.8 1.67 1.84 1.99 2.18 22.5 21.18 14.89 12.52 16.9 17.29 17.55 18.98 21.18 21.93 14.91 14.44 10.41 8.22 11.15 12.18 12.84 12.81 13.08 13.48 16.19 16.01 10.65 8.62
15.19 0.49 4.91
21.55 32.93 13.19
17.77 3.09 6.91
2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 17.91 8 2.86 43.5 -17.33 67.21 -12.58 -22.78 34.05 -16 19.22 -5 -0.21 61.5 -22.38 97.49 -21.38 -30.13 41.67 -21.58 2.6 2.63 1.63 1.32 1.76 1.67 2.19 1.72 1.34 1.66 9.12 8.8 11.37 12.16 7.11 9.7 5.71 7.02 10.66 8.75 0.91 0.94 1.53 1.9 0.9 1.18 0.66 0.89 1.36 1.15
2012-12 2011-12 2010-12 2009-12 2008-12 2007-12 2006-12 2005-12 2004-12 2003-12 6.2 3.66 12.27 11.31 5.93 4.99 6.28 5.73 9.7 12.13 12.69 12.03 11.97 11.99 13.23 15.06 14.81 14.78 15.02 14.93 14.06 15.61 16.58 14.82 17.9 17.66 17.53 20.91 19.45 21.98 2.86 2.93 2.94 2.52 4.17 3.31 8.54 4.32 3.36 2.99 35.81 34.23 43.76 40.64 41.24 41.03 47.17 45.74 47.53 52.02 8.6 7.92 9.34 9.49 9.99 10.11 10.85 10.91 11.44 13.94 51.15 53.49 41.83 45.5 41.65 42.91 33.84 35.61 33.39 24.02 4.45 4.36 5.07 4.38 7.12 5.95 8.15 7.74 7.64 10.03 100 100 100 100 100 100 100 100 100 100 5.84 6.84 7.91 5.77 6.77 7.91 7.06 8.74 7.39 7.42 4.31 3.05 0.61 3.84 0.88 2.1 2.88 3.34 8.87 0.83 1.61 1.2 1.28 1.47 5.86 3.61 4.87 5.44 5.9 7.57 7.09 10.2 11.15 12.15 0.36 3.18 2.52 0.37 2.18 0.02 1.54 0.14 17.98 17.89 17.18 16.89 15.73 17.6 18.57 22.28 27.42 20.54 14.84 19.67 14.49 14.5 17.74 17.76 11.62 12.53 11.12 22.53 13.97 13.84 8.53 9.65 11.26 9.16 10.07 10.89 11.23 10.98 46.79 51.4 40.21 41.04 44.73 44.52 40.26 45.69 49.78 54.04 53.21 48.6 59.79 58.96 55.27 55.48 59.74 54.31 50.22 45.96 100 100 100 100 100 100 100 100 100 100
93
2012-12
2011-12
2010-12
2009-12
2008-12
2007-12
2006-12
2005-12
2004-12
2003-12

Nike Strategic Plan

Uploaded by

Nike Strategic Plan

Uploaded by

Concordia University

Source: Nike, Inc. http://nikeinc.com/pages/contact-nike-inc

Concordia University Table of Contents

Concordia University Executive Summary

Concordia University Module 1: Overview of Companys Fundamentals

Fiscal Year Revenue (in millions)

2009 2010 2011 2012 2013

$18,528 $18,324 $20,117 $23,331 $25,313

United States Facilities

Concordia University Module 2: Internal Assessment Part 1: Qualitative Analysis Abstract:

Strategic Management, 2013 Ibid 25 Nike, Inc. 2013 Annual Report

Concordia University -Human Resources

Nike, Inc. 2013 Annual Report http://nikeinc.com/news/nike-bicep-partner-to-work-on-climate-change-and-energy-issues-call-for-congressionalaction 32 http://nikeinc.com/news/nike-sport-research-lab-incubates-innovation

Strategic Management, 2013 http://nikebrandanalysis.blogspot.com/2013/05/brand-awareness.html

http://www.nikeresponsibility.com/report/content/chapter/targets-and-performance#PeopleAndCulture http://nikeinc.com/news/nike-releases-environmental-design-tool-to-industry 39 Strategic Mangement, 2013 40 Ibid

Yes Yes Yes

Strategic Management, 2013 http://www.nikeresponsibility.com/report/content/chapter/business-overview

Figure 1: Nike, Inc. Value Chain

Plan Reuse Design

Source: DBA Consulting, LLC

Nike, Inc. http://www.nikeresponsibility.com/report/content/chapter/business-overview

Design superior products with a holistic approach to address multiple solutions

Successful solutions to miniimize environmental impact and to reuse product materials

Control of quality distribution and inbound l logistics

Commitment to high starndards of treatment of workers worldwide

Source: DBA Consulting, LLC

Nike, Inc. 2013 Annual Report http://www.nikeresponsibility.com/report/content/chapter/business-overview 46 http://help-en-us.nike.com/app/answers/detail/article/returns-policy/a_id/29785/p/3897 47 http://www.nikeresponsibility.com/report/content/chapter/business-overview

FinancialManagement of financial resources for all phases of the value chain.

HRManagement of human capital, training, and retaining workers

TechnologyProvide innovative technology for inbound and outbound logistics.

Source: DBA Consulting, LLC

Internal Business Processes

Improve employee envolvment and buy-in Leverage competitive advantages

"Profitable growth decoupled from constrained natural resources"

"Balance people, profit, and planet"

Concordia University Module 2: Internal Assessment Part 2: Quantitative/Financial Analysis Abstract:

2009 $2,291 9,734 13,250 3,277 4,557 8,693 13,250

2010 $3,079 10,959 14,419 3,364 4,666 9,754 14,419

2011 $1,955 11,297 14,998 3,958 5,155 9,843 14,998

2012 $2,317 11,531 15,465 3,865 5,084 10,381 15,465

2013 $3,337 13,626 17,584 3,926 6,428 11,156 17,584

2009 $19,176 10,572 8,604 6,746 1,858 1,487

2010 $19,014 10,214 8,800 6,326 2,474 1,907

2011 $20,862 11,354 9,508 6,693 2,815 2,133

2012 $24,128 13,657 10,471 7,431 3,040 2,223

2013 $25,313 14,279 11,034 7,780 3,254 2,485

Nike 2013 Annual Report; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-and-Filings/Annual-

Graph 1: Balance Sheet Ratios

Graph 2: Income Statement Ratios

Nike 2013 Annual Report, pg. 79; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-and-

Graph 3: Turnover Ratios

Graph 4: Management Ratios

Nike 2013 Annual Report, pg. 79; retrieved from http://investors.nikeinc.com/Investors/Financial-Reports-and-

Strategic Management, 2013 Ibid

Figure 1: Nike, Inc. External Environment

http://www.trendwatching.com/trends/boomingbusiness.htm http://www.gingerminneapolis.com/sites/www.gingerminneapolis.com /files/SurveyResultsAlpha51913_FINAL.pdf 87 http://www.theatlanticcities.com/neighborhoods/2013/08/extraordinary-growth-americas-hispanicpopulation/6733/

Strategic Management, 2013 Ibid 99 http://www.economist.com/blogs/theworldin2013/2012/11/global-trends-2013 100 http://fasinfat.org/obesity-rates-trends-overview/

Ibid Statement from Alain Gracianette D. Mgt. 103 http://www.teonline.com/knowledge-centre/performance-apparel-global-market.html

http://www.hsph.harvard.edu/obesity-prevention-source/?page_id=111350557003 Strategic Management, 2013 106 http://www.economist.com/blogs/theworldin2013/2012/11/global-trends-2013 107 http://netcaststudio.com/current-sports-tech-news-and-trends/

Ibid. Strategic Management. Hitt, Ireland, Hoskisson. Pg 153.

11. Buyer Power: Threat: Low

Concordia University o Nike = $2.7B129 o Adidas = $2.0B130 o Under Armour = $0.3B131

Concordia University Globally-Integrated Supply Chain & Distribution

(Chang, 2013) (Adidas Group, 2012) 161 (Adidas Group, 2012)

Concordia University Strategic Synthesis Trends

(Adidas Group, 2012) (Bhattacharjee, 2013)

Concordia University Module 4: Situational Analysis Abstract

Figure 8: Nike, Inc. SWOTT

Strategic Management 2013

(Seeking Alpha, 2013)

Concordia University Weaknesses

Concordia University Module 5: Strategic Plan Table 9: Strategic Scorecard

Concordia University Appendices Appendix A: A Special Thank You

Concordia University Appendix C: Financial Statement

2011 2,133 358 (76) 105 (273) (551) (35) 151

2012 2,223 405 (60) 130 (323) (805) (141) 470