Nike Inc. Strategy And Financial Analysis

Mission statement

Nike Inc. promotes the culture for invention. They create the experiences, services and products for the athletes and at the same time solve the issues for next generation of athletes. Research lab of the company is the integral part of Nike Explore team and the mission of the team is driving the product innovation for the athletes all over the world (Nike.com/us/en_us, 2017).

Their mission statement is – “Bring innovation and inspiration to every athlete in the world and you are an athlete provided you have a body”. 

• strategy description

Value proposition for consumers of Nike is based upon the product that is technically superior, made with the latest available technologies and from the best quality materials, positioned as most fashionable in industry and is endorsed by the top sport stars and athletes. The value proposition for Nike is to become successful in the industry with respect to driving the image and marketing aspect. Though the core competencies of Nike with regard to marketing and design can be matched with the competitors, they are generating strong advantage with regard to the image field.  Further, the retailing operations are supported by the usages of the information technologies ((Nike.com/us/en_us, 2017).

• Differentiation of products or services

The differentiation strategy of Nike is establishing the entity as standard with respect to the athletic wear. Through focusing on the product line, the company is able to manufacture the product of high quality to meet the expectations of customers. The product line of the company is not wide and they offer workout clothes, athletic shoes and few additional products. The focus of the company is very clear and the focus is to provide the athletes with their required equipment for success. This single-minded focus enabled the company to develop the efficient manufacturers and supplier’s network that can deliver the materials with high quality ((Nike.com/us/en_us, 2017).

• Operation

The company is exceptionally good in the supply chain management that facilitates the efficient production for supporting the global equipment business, sports shoes and apparel. Main objective under this strategic decision of operation management area is aligning supply chain with the overall strategic goal of the company.

Looking at the above ratio table it is identified that almost all the ratios of the company is in increasing trend over the past 3 years. The gross profit ratio of the company though has been decreased slightly during 2017, it seems sufficient to cover up the operational expenses and generate profit. The efficiency ratio of the company indicates that the company is efficient in collecting its debt however; the better ratio is always preferable. Further, the inventory turnover ratio of 27.78 is representing that the company is earning good on its investment. Moreover, the debt-equity ratio of 28% is indicating that the company is less leveraged as the bigger part of finance is raised through equity instead of debt (Nike.com/us/en_us, 2017). 

Business model

Industry, Trends and Major Competitors:

Nike, Inc., founded in 1964, belong to the industry dealing in apparel, accessories and sports equipment. The recent trends in this market include the emergence of the online marketing which sky rockets the sales. However, increasing number of competitors and demand for customized and eco-friendly products has affected the company adversely. The major competitors of Nike include Adidas, Reebok, Puma, Fila, Converse and others.

Critical Success Factors of Nike:

The key factors of success of Nike includes the robust marketing strategies including promotional activities and sponsorships of sports and other events, market research about competitors’ actions and consumers behavioral patterns and changes. The company also offers a huge variety of products and enjoys huge privilege in distribution facilities.

However, in face of the recent competition and emergence of new and innovative competitors, the company needs to focus more on constructing customized services, venturing into newer types of products and innovations in the technologies such that they remain upgraded and stay ahead in competition.

Strengths and Weaknesses:

The strengths of Nike include the following:

• High quality of product
• Recognition of the brand across the world
• Innovation capacity and adequate infrastructure
• Efficient marketing strategies
• Robust research and development
• Brand loyal huge clientele (GÜREL & TAT, 2017)

The weaknesses of the company, though not as many as their strengths are as follows:

• Decreasing share in the market of the USA due to new competitors
• Adidas is more cost effective than Nike
• Dependency on other units for overseas manufacturing
• Medium presence in retail
• Currency exposure

Competitive Threats:

The threats experienced by the enterprise are as follows:

• High level of competition in the industry
• Currency fluctuations having negative implications on the global sales of the company
• Few companies like Adidas having higher market shares and cost effectiveness then Nike
• The revenue of the company depends upon the incomes and taste and preferences of the customers.

Opportunities for Competitive Advantage:

The enterprise has different potential opportunities in the aspect of Comparative Advantage which are as follows:

• Venturing in new markets
• New increased demand due to increasing popularity of sports among women
• Development of the enterprise as a fashion brand
• Product innovation demand continuously increasing

Ethical and Social Responsibility Issues:

The major ethical issues in Nike involves the accusations against the company regarding child labor, degrading job and working conditions, exploitations of the workers which went to the extent of setting up immense negative reputation of the company of running a sweatshops. Apart from this the enterprise also is accused of carrying out production activities hampering the environmental conditions extensively. The company has also failed in last few years in terms of many social aspects like that of child labor and overall welfare and economic and health conditions of the workers attached to them (Kingsley, Gray & Suri, 2014).

Major Business Risks of Nike:

The enterprise has been facing several concerning risks in its business operations, both internally as well as externally:

• The major business risk for the company is the decrease in the overall demand of sports apparel, which is affecting the overall industry adversely.
• The apparel industry, on the other hand, is getting heavily congested and there are too many new entrants, especially in the women’s apparel producers, which may pose as a concerning risk for the enterprise.
• The most popular products of the company are going out of style and with the entry of new companies and newer innovative products (Winn & Pogutz, 2013).

Customer Value Proposition:

The Consumer Value Proposition of Nike proves to be succeeding in a highly image driven industry. The company emphasizes on the building of a global branding and image, which is the main driver, apart from the provision of superior and high quality products and a sustainable production and loyal client base (Dawes, 2012).

Financial statement analysis

Customers of Nike:

Though the clientele of Nike consists of customers from different age groups, socio-economic and cultural strata across the world, there are several specified groups of customers who are loyal demanders for their products and who are also targeted by the company themselves. These groups include:

Athletes- Athletes, especially youth athletes across the world are fascinated by the products of this company and constitutes of the primary clients of Nike.

Runners- Specializing in sport shoes, the company targets the runners, both professional and others, across the globe as one of their primary clients.

Women- With the increase in the popularity of women’s sport and more and more women taking it up as a profession, the company also have a significant and increasing number of women in their clientele (Angioni, Cabiddu & Di Guardo, 2012).

The marketing strategies of Nike include gaining a sustained position in the athletic market in a global framework. The company advertises in a way so as to increase the idea of an athletic lifestyle among their potential customers. To do the same the company takes a value based pricing strategy and a continuous market expansion strategy along with proper and trustworthy channels for outsourcing their manufacturing and delivery of their products across the globe (Gamble & Thompson, 2014).

The company follows a mixture of demographic segmentation (Clientele within the age range of 15 to 55), behavioral segmentation (athletic and lifestyle oriented) and geographic segmentation (with more customers in the USA, Europe and Asia-Pacific and also expanding domain of operations in Japan, China and also North America) (Brohi et al. 2016).

Globally, in footwear market, Nike enjoys a dominating position and enjoys a global market share of nearly 31%, whereas its nearest competitor Adidas enjoys a market share of 18% in the international foot wear market.

The overall apparel market share of Nike and other companies are shown in the following graph:

Figure 1: Shares of different companies in global athlete market

(Source: Dawes, 2012)

However, the share of Nike has been decreasing in face of global competition while Adidas and newer companies are taking more control of the global athletic apparel market.

Keeping up pace with the recent requirements of the relevant customers, Nike has launched and has planned to launched several highly innovative products and services which are as follows:

• Vapor Track and Field Kit – For the Rio Games Nike has specially designed attractive tracks and kits, which is targeted to enhance the running abilities of the athletes.
• Nike App – Nike has launched a personalized mobile app for the users which gives facilities like Running and training club and is highly personalized according to the demand of the users.
• Air VaporMax – This new product of the company, being a renewed version of the original one, is much more light and is immensely efficient in augmenting the running capacities of the athletes.

Apart from these, the enterprise also aims to make their services more personalized and explore the new and emerging markets of the developing countries with customized products which will be preferred by the residents of these countries (Luo & Du, 2012).

Every firm has several key drivers, which have significant implications on the operations, sales and the growth of the concerned firms:

The primary value drivers of Nike are as follows:

• Interconnected global marketplace- The Company enjoys an extensive and interconnected supply and production network across the eminent economies of the world and is constantly increasing its domain of operations.
• Sustainable production- Adapting new technologies and cost reducing methods of production which in long term may help the company to attain sustainable production and increasing economies of scale in production (Haggège et al., 2017).
• Growth in emerging markets- The new developing countries are also becoming new markets for these commodities and Nike is taking this opportunity and is not keeping any stone unturned to explore their scopes and prospects in the new emerging markets.

The above-mentioned drivers of the company play significant roles in keeping the company floating in face of the steep global competition under the international market and also help the enterprise to achieve sustainability and increase their revenues and future prospects and long term goals (Patala et al., 2016).

References

Angioni, E., Cabiddu, F., & Di Guardo, M. C. (2012). Value-co-creation through multichannels distributions: The Nike ID case. In Information systems: crossroads for organization, management, accounting and engineering (pp. 259-266). Physica, Heidelberg.

Brohi, H., Prithiani, J., Abbas, Z., Bhutto, A. H., & Chawla, S. K. (2016). Strategic Marketing Plan of Nike.

Dawes, J. G. (2012). Brand loyalty in the UK sportswear Market.

Gamble, J. E., & Thompson, A. A. (2014). Essentials of strategic management. Irwin Mcgraw-Hill.

GÜREL, E., & TAT, M. (2017). SWOT ANALYSIS: A THEORETICAL REVIEW. Journal of International Social Research, 10(51).

Haggège, M., Haggège, M., Gauthier, C., Gauthier, C., Rüling, C. C., & Rüling, C. C. (2017). Business model performance: five key drivers. Journal of Business Strategy, 38(2), 6-15.

Kingsley, S. C., Gray, M. L., & Suri, S. (2014). Monopsony and the crowd: Labor for lemons. IPP2014: Crowdsourcing for Politics and Policy-Oxford Internet Institute, University of Oxford.

Luo, X., & Du, S. (2012). Good” companies launch more new products. Harvard Business Review, 90(4), 28.

Nike.com/us/en_us. (2017). https://www.nike.com/us/en_us/. Retrieved 15 October 2017, from https://www.nike.com/us/en_us/

Patala, S., Jalkala, A., Keränen, J., Väisänen, S., Tuominen, V., & Soukka, R. (2016). Sustainable value propositions: Framework and implications for technology suppliers. Industrial Marketing Management, 59, 144-156.

Winn, M. I., & Pogutz, S. (2013). Business, ecosystems, and biodiversity: New horizons for management research. Organization & Environment, 26(2), 203-229.

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