Norma EspinosaJon HutchensTeresita Ibarra UriarteKenneth TuttleMichael Venegas

Strategic Analysis for Nike, Inc.

Group 5

Table of Contents1.0 EXECUTIVE SUMMARY........................................................................................................................... 3

2.0 COMPANY HISTORY................................................................................................................................ 3

2.1 BACKGROUND....................................................................................................................................................32.2 PURPOSE OF THIS STUDY....................................................................................................................................4

3.0 EXTERNAL ANALYSIS............................................................................................................................. 5

3.1 GENERAL ENVIRONMENTAL ANALYSIS.............................................................................................................53.1.1 Political and Legal Segment......................................................................................................................53.1.2 Economic Segment.....................................................................................................................................63.1.3 Socio-Cultural and Demographic Segment................................................................................................63.1.4 Technological Segment..............................................................................................................................73.1.5 Global Segment.........................................................................................................................................83.1.6 External Environment Driving Forces.......................................................................................................8

3.2 INDUSTRY DESCRIPTION....................................................................................................................................93.3 FIVE FORCES ANALYSIS...................................................................................................................................10

3.3.1 Threat of New Entrants............................................................................................................................113.3.2 Power of Suppliers...................................................................................................................................123.3.3 Power of Buyers......................................................................................................................................133.3.4 Power of Substitutes................................................................................................................................143.3.5 Intensity of Rivalry...................................................................................................................................143.3.6 Summary of Five Forces Analysis............................................................................................................14

3.4 INDUSTRY COMPETITORS ANALYSIS AND ANALYSIS OF THEIR ANTICIPATED STRATEGIC MOVES..................153.5 INDUSTRY KEY SUCCESS FACTORS..................................................................................................................17

4.0 INTERNAL ANALYSIS............................................................................................................................ 18

4.1 ORGANIZATIONAL STRATEGY ANALYSIS.........................................................................................................194.1.1 Corporate Mission...................................................................................................................................194.1.2 Products and Services..............................................................................................................................194.1.3 Strategy (Corporate Level and Business Level).......................................................................................204.1.4 Organizational Culture and Core Values................................................................................................214.1.5 Leadership...............................................................................................................................................22

4.2 FINANCIAL ANALYSIS......................................................................................................................................224.2.1 Valuation Analysis...................................................................................................................................234.2.2 Growth Analysis......................................................................................................................................244.2.3 Profitability Analysis...............................................................................................................................244.2.4 Management Efficiency Analysis.............................................................................................................254.2.5 Summary of Financial Analysis...............................................................................................................25

4.3 VALUE CHAIN ANALYSIS.................................................................................................................................264.3.1 Support Activities.....................................................................................................................................264.3.2 Primary Activities....................................................................................................................................28

5.0 SWOT ANALYSIS..................................................................................................................................... 30

5.1 CRITICAL STRATEGIC CHALLENGES.................................................................................................................305.2 CORE COMPETENCIES/CAPABILITIES...............................................................................................................37

1 | P a g e

Group 5

5.3 STRATEGIC FIT (SWOT) ANALYSIS.................................................................................................................41

REFERENCES................................................................................................................................................ 44

APPENDIX...................................................................................................................................................... 51

2 | P a g e

Group 5

1.0 Executive Summary

When a consumer is looking for footwear or athletic apparel, the first place many people turn to

Nike, Inc. Nike, (NYSE: NKE) is the largest manufacturer of shoes, apparel and other

accessories in the world. Nike is an American-based multinational company, which designs and

manufactures a broad range of athletic apparel, equipment, and other accessories for golf,

baseball, football and other sports. (Nike, Inc., 2014) The purpose of this study is to provide a

detailed internal and external analysis of Nike, Inc. The project study begins with the company

history of Nike followed by a detailed internal and external environmental analysis and

concludes with a value chain analysis.

In the external analysis, the general environment will be carefully examined to determine the

driving forces affecting the athletic apparel industry. The external review will discuss the current

industry situation and major players competing in the industry, follow by a conclusion

summarizing the critical factors that Nike must employ to be successful. Throughout the pages to

follow, recommendations will be provided, and implementation strategies reviewed as potential

solutions to current Nike strategic issues. Overall, the details of this company analysis will shed

more light into the strategic health of Nike resulting in a clear competitive analysis of the

enterprise.

2.0 Company History

2.1 BackgroundOne of the most well-known brands in the world, Nike was founded in January of 1964 as Blue

Ribbon Sports, with dual $500 investments from Phil Knight and Bill Bowerman. Bowerman

and Knight formed the company in hopes of selling quality Japanese shoes in the United States.

3 | P a g e

Group 5

After a brief working relationship with the Japanese fizzled in 1971, Blue Ribbon Sports

launched their line of footwear and changed the company name to Nike, named after the Greek

Goddess of Victory. (Wikipedia, 2015)

More than just shoes, Nike has blossomed into an industry leader paving the way through

innovative designs, global marketing campaigns, second-to-none manufacturing and distribution

techniques. Nike manufactures footwear and apparel mostly outside of the United States, but

reaches consumers all over the world through thousands of retail stores as well as their online

site.

Over the past decade, Nike has established itself as a major player within the sports apparel

industry. The company has consistently grown their global market share year over year and

spends strongly on both marketing and technology to enhance their brand and numerous product

lines. Today, Nike is the world’s largest manufacturer of footwear, apparel, and accessories.

Company revenues were in excess of $27 billion dollars for fiscal year 2014. Nike sells products

under Nike, Converse, and Hurley with a majority of the company’s revenues coming from

footwear and apparel. (Nike, Inc., 2014)

2.2 Purpose of this studyThe purpose of this study is to provide a detailed external analysis of Nike, Inc. The project

study begins with the company history of Nike followed by a detailed external environmental

analysis. In the external analysis, the general environment will be carefully examined to

determine the driving forces affecting the apparel footwear and accessory industry. The

following industry analysis will discuss the current industry situation and major competitors in

the industry, follow by a conclusion, to summarize, the key factors that Nike must employ to be

successful. Throughout the pages to follow, recommendations will be provided, and

4 | P a g e

Group 5

implementation strategies reviewed as potential solutions to current Nike strategic issues.

Overall, the details of this mid-term project analysis will shed more light into the strategic health

of Nike resulting in a clear competitive analysis of the company.

3.0 External Analysis

3.1 General Environmental AnalysisThe general environmental analysis is necessary to evaluate a company's strengths, weaknesses,

opportunities, and threats. A thorough external analysis allows a company to adapt its direction

and strategy as needed. The critical components of an external analysis include the political,

economic, social and technological segments. As part of this study, each of these areas will be

analyzed to provide a precise strategic external analysis of Nike, Inc.

3.1.1 Political and Legal SegmentGlobal companies within any industry must stay apprised of the political and legal segments

within those countries in which they operate. Monitoring this section will help ensure a business

remains ahead of changes in laws or governmental regulations. There can be several benefits to

operating within countries that have favorable tax systems and stable currencies, including

gaining financial flexibility to grow the business and taking advantage of certain economic

policies. Stability within country should allow the company to thrive once established, but if the

company is not monitoring changes, the seemingly smallest change can bring negative

ramifications to any business. (Makos, 2013)

The United States, while slowly recovering from a recession, has seen relatively stable

conditions over the last several years. A multinational company that maintains headquarters in

the United States has been able to take advantage of these circumstances. While conditions may

be stable currently, it is important that a company stay focused on the ever-changing laws and

5 | P a g e

Group 5

regulations that might negatively affect the way a company does business. Whether tax changes,

worker rights, child labor laws, added or increased manufacturing controls, the way a company

does business can quickly change and require adaptation to continuing operating profitably.

Failure to adapt can bring penalties, fines or even lawsuits, costing the company significant

money in legal fees or fines. (Makos, 2013)

3.1.2 Economic SegmentThe U.S and global economies can have a significant effect on the textile industry. A world

recession has resulted in decrease consumer spending, currency exchange rates, and interest rates

can also have an impact on economies and the industry. The U.S. economy is recovering from a

recession, and the retail industry has certainly felt the effects. Companies should benefit as the

economy continues to recover, and consumers find increases in the amount of disposable income

available to spend on sporting goods and accessories. An economic turn-around should have a

positive effect on the retail industry. According to the US Bureau of Labor Statistics, the

unemployment rate is in steady decline, reflecting 5.7 percent at the end of January 2015. (U.S.

Department of Commerce, 2015) As more of the unemployed find work, there should be a

natural increase in spending within the retail segment. (Wagner, 2014)

Another economic factor a large global manufacturer is the benefit from the lower cost of labor

in other countries, where companies can comfortably outsource and pay lower wages. Lower

priced labor can create a competitive advantage for a business, through lower cost to

manufacture goods for sale. (Strange, 2015)

3.1.3 Socio-Cultural and Demographic SegmentSociocultural, the part of the internal environment, is focused on the attitudes and values of the

society such as workplace diversity and environmental concerns. The demographic segment

6 | P a g e

Group 5

concentrates on target market characteristics, such as gender, age, income distribution,

geographic distribution, and occupation. (Makos, 2013) Target market characteristics are some

of the most important factors to any industry but have extreme importance within the consumer

cyclical sector. (Ken Research, 2012) The socio-cultural segment is a major driver for a

consumer products company. The typical consumer pays very close attention to what celebrities

do, and if a celebrity is to purchase a particular brand, consumer demand for that product or

brand naturally rises. Apparel manufacturers must stay close to the cultural climate in order to

adjust for the increase in the application for a particular type of clothing. In the US, people of all

ages are getting more serious about taking care of themselves. Increases in health-conscious

consumers are paying off for athletic apparel companies who are experiencing higher demand for

fitness products, shoes and other equipment. (Trefis, 2013)

3.1.4 Technological SegmentThe technological segment examines innovative enhancements, and other activities focused on

the creation of knowledge or implementation of systems that are translated into new processes,

products, or other items for sale. (Makos, 2013) Examples of technological enhancements that

help with the process enrichment are the implementation of more efficient distribution

mechanisms and backend computing platforms. These systems help retailers sustain demand

surges along with planning for the consumer needs regionally and ensure manufacturers can

track applications of specific products and adjust the output to meet those requirements. (Internal

Revenue Service, 2014) Companies such as Wal-Mart spend a significant amount of their

technology budget tracking consumer spending habits. Understanding consumer habits and

trends allows the retailer to position the most appropriate products and services within their

stores along with streamlining costs and distribution.

7 | P a g e

Group 5

Aside from supply and demand benefits, the consumer often requires technologically advanced

products and the inherent technology within the product must evolve as fitness evolves, in order

to give athletes a competitive advantage. Excellent products must be readily accessible to the

consumer and technology is often used to sell and market products. Products are often made

available through direct to consumer capabilities such as internet websites giving companies a

significant advantage when moving into emerging markets.

3.1.5 Global SegmentAs discussed in the political section above, there are ever changing laws and restrictions that will

play a significant role in the way companies do business globally. The world economy may

provide an entry for a company with which they might expand further, through cheaper labor and

manufacturing costs. The global segment lends insight into the part of the environment which

includes global market expansion opportunities, changes within existing markets, international

events and other cultural considerations to expansion into world markets.

It will prove important for the company’s executives to stay close to the global segment in order

to take advantage of emerging markets. If a corporation is successful at establishing a brand

within emerging markets, competition will struggle to enter and sell goods and services within

these same markets.

3.1.6 External Environment Driving ForcesThe major driving forces within the apparel and accessories industry are:

Sociocultural Trends – The effect of lifestyle changes and attitudes of society seem to be ever-

evolving and can have an acute effect on the apparel industry. As discussed previously, the

sports apparel industry has a profound reflection of society and vice versa. When a celebrity

chooses to wear a brand, society takes notice and will often follow suit, which builds brand

8 | P a g e

Group 5

loyalty. Sports are heavily corkscrewed into the attitudes, beliefs and followings of a large

number sports fans across society. Even those individuals who are not sports fans are influenced

by the biggest celebrities in sports. The cultural climate can drive the demand for a particular

type of clothing especially when it comes to the health-conscious consumer.

Globalization –The impact of sports can be felt around the globe, and the company must take

advantage of their worldwide brand to increase their sales globally. Whether it be through

sponsorship of Olympic Games or sponsorships of athletes with global name recognition,

companies can surely increase sales by focusing on the global customer marketplace. There are

risks associated with global expansion, including fluctuation of currency, improper cultural

considerations and in-country political unrest that can do irreparable harm to a company or

brand.

3.2 Industry DescriptionIn fiscal year 2014, Nike achieved nearly 27 billion dollars in revenues from an industry that

consists of companies designing and selling clothing, footwear and accessories. Nike

manufactures and sells through traditional stores as well as their brand of Nike brick and mortar

stores called, Niketown. While clothing and shoes are to most a basic necessity, purchases are

often made less often and when consumers need to update their wardrobes. Rare purchases leave

the industry susceptible to economic uncertainty and downturns, leaving consumers with the

need to cut their budgets to pay for higher necessity items such as food and gas.

The textiles and apparel industry consists of companies that manufacture clothing and

accessories from yarn and other knit fabrics. There is a broad array of product lines created

through the manufacturing process, including fashion clothing, outerwear, active wear, camping

products, hats, gloves and foundation garments.9 | P a g e

Group 5

According to Forbes, the market for the global sporting apparel has a value of more than 140

billion dollars. This figure takes into account the consumer purchases of many different product

types such as athletic footwear, exercise equipment, and athletic apparel, all of which Nike and

its competitors are looking to grab market share. (Statista, 2014)

The Unites States Census Bureau estimates that the population of the United States is current 318

million people and is growing at over 3% annually. (U.S. Department of Commerce, 2015) As

the global population continues to grow, the market size should continue to grow as well.

An increasing fitness conscious consumer base, searching for comfortable, yet stylish footwear

and apparel, should result in a growth rate of 4% over the next few years, reaching nearly 180

billion dollars by 2019. (Trefis, 2013) Nike is uniquely positioned to take advantage of the

footwear and apparel industry, through their wide variety of offerings. A stated above, consumer

demand is expected to continue to increase given the health conscious consumer and more

Americans paying close attention to their health that includes regular workouts to achieve

desired weight and health goals.

Nike is the clear leader in the US athletic apparel market and has continued to gain competitive

edge with innovative marketing techniques that place the company’s brand in front of millions of

people each year.

3.3 Five Forces AnalysisThe five forces model of competition is the creation of Michael Porter of the Harvard Business

School. His framework implies that an industry is influenced by five forces, and the risk-adjusted

rates of return should be constant across firms and industries. These five forces consist of those

forces close to a company that affects its ability to serve its customers and make a profit. A

10 | P a g e

Group 5

change in any of the forces normally requires a company to re-assess the marketplace. (Peng,

2014, p. 35)

Nike can use the understanding of the five forces to develop an edge over rival firms and better

to understand the industry in which they operate. Nike product offerings fall into three broad

categories, which include athletic footwear, sports apparel, and performance equipment.

A breakdown of each of these five forces in relation to Nike follows.

Summary of Five Forces Analysis

Summary of Five Forces AnalysisAthletic Footwear Sports Apparel Performance EquipmentNow Future Now Future Now Future

Buyer Leverage L L L M M MSupplier Leverage VL VL L L M MThreat of New Entrants M M H VH VH VHThreat of Substitutes L VL VH H H HIntensity of Rivalry H VH VH VH VH VHProfit Potential H VH H H M HRating Key: VL = Very Low; L = Low; M = Medium; H = High; VH = Very High; N/A = Not Applicable

3.3.1 Threat of New EntrantsThe competitive pressure associated with the threat of new entrants into the market is something

all industries must consider. When a product or service is, successful others want to reap the

benefits, thus look to enter the market. The threat of new entrants into the footwear and apparel

industry is low. A substantial capital investment is required for entry into the marketplace, and

established companies have achieved the benefit of economies of scale necessary to fend off

potential new entrants. Footwear and apparel companies face trade protectionism due to

uncertain global economic conditions. (Ken Research, 2012) If trade laws are implemented the

result could be higher product costs and lower industry profits, which deters new entrants.

Another area that Nike and their competitors have done an excellent job of establishing is 11 | P a g e

Group 5

product differentiation. Nike has a well-established brand, and consumers now expect the brand

to deliver high-quality products. Thus, new entrants struggle to create product differentiation to

the point Nike has maintained. However, the low entry barriers of online competitors and

‘untapped’ emerging markets are areas of concern for Nike. Thus, Nike needs to improve their

business continually to stay ahead of the competition and keep barriers to entry high.

3.3.2 Power of SuppliersUnderstanding power of suppliers is to understand how strong the competitive pressures

stemming from supplier bargaining power and seller-supplier collaboration are within the

industry. The bargaining power of vendors in Nike’s case is relatively low. Nike has a large

number of vendors, with which the company has developed strategic partnerships. (Nike, Inc.,

2014) The company has about 150 footwear suppliers located in 14 countries and 430 apparel

suppliers located in 41 countries. (Nike, Inc., 2014) Nike is an important customer of these

suppliers, thus lowers the bargaining power of industry suppliers.

Nike faces the risk of disrupted operations if future events prevent it from acquiring products

from suppliers. In particular countries, however; due to Nike’s large number of providers, this

would only create a short-term operational disruption. Their agreements with suppliers give Nike

the right to offer a product that is only available in their stores or online marketplace. These

advantages provide leverage when competing, especially when consumers find a branded

product so well liked. Suppliers are highly unlikely to integrate vertically and become a rival of

Nike. The company’s brand is very strong globally. Therefore, a company attempting to build a

brand from the ground up will encounter a significant financial commitment.

Nike needs to consider how many suppliers exist for a particular product and how costly seller

switching costs might be for their offerings. When Nike builds brand loyalty, it puts the supplier

12 | P a g e

Group 5

at a disadvantage to switching to another apparel company because the consumer demand will

decrease initially over the confusion as to where to purchase the product. If Nike can continually

meet the revenue needs for a particular supplier, there is less chance that increased supplier

bargaining would occur. The products Nike providers are not overly complex in nature, thus the

opportunity for additional providers stays consistent and more could come at any time.

3.3.3 Power of BuyersThe buyer’s bargaining position is something that Nike needs to stay close to, but not spend

much time worrying about their position, considering their industry domination. Nike products

provide a quality of life enhancement for many athletes and have established a brand that many

consumers have built loyalties. (Nike, Inc., 2014) While the buyer switching costs are low, and

the company must stay focused on the overall value and brand of their offerings. Nike should

continue to utilize marketing to increase buyer awareness and ensure brand loyalty is

unsurpassed.

The company has taken strides to train their workforce in hopes that better overall industry

knowledge will result in increased revenues. (Nike, Inc., 2014) Training their workforce to

understand how to cross-sell will allow employees to position the overall benefits of the

company’s offerings to each buyer. Nike sells its products to thousands of retail accounts,

independent distributors, licensees, and directly to consumers in various regions including North

America, Latin America, Europe, and Asia. Although Nike has a large number of buyers, no

single customer accounted for more than 10% of worldwide net sales in 2014. (Nike, Inc., 2014)

Also, Nike’s high brand recognition lowers the bargaining power of buyers.

13 | P a g e

Group 5

3.3.4 Power of SubstitutesAlong with the threat of new entrants, the power of substitutes is one of the most important

factors Nike must consider when doing business. Companies can offer substitutes at lower

prices, but Nike has and must continue to differentiate their products and services and understand

the external environment. Differentiation will position the company to improve continually and

stay ahead of substitute offerings. Counterfeit goods are and will continue to be Nike’s biggest

concern. When Nike finds counterfeit products, the company challenges these products on the

basis of trademark, design patent, and intellectual property infringement. (Nike, Inc., 2014) The

overall threat of substitute products is low for Nike, because, as discussed previously, Nike has a

well-established global brand and substitute products, especially counterfeit goods, are typically

inferior in quality.

3.3.5 Intensity of RivalryNike operates within the global footwear, apparel, and equipment industry, which is highly

competitive on a global basis. Nike is a market leader that produces all of the products that fall

within this industry and, therefore, competes with a large number of athletic footwear and

apparel companies on an international level. Adidas has been Nike’s primary competitor, but

more recently Under Armour has passed Adidas as the number two brand in the sports apparel

industry. (Mirabella, 2014) New Balance, Crocs, and Puma are secondary competitors. While the

competitive rivalry within the industry is high, Nike can address rivalries by changing prices,

improving product differentiation, enhancing the use of channels of distribution and exploiting

relationships with suppliers. (Mbalectures, 2011)

3.3.6 Summary of Five Forces AnalysisThe sports apparel industry offers a low barrier to entry and a seemingly ever-increasing buyer

demand. Nike is uniquely positioned to take advantage in an industry that is relatively stable and

14 | P a g e

Group 5

contains a limited number of genuine rivals, but with a constant threat of new entrants, the

company must stay focused. Nike has over 150 footwear suppliers in 14 countries and an even

larger number of apparel providers, which lowers the bargaining position of any one supplier. A

wide variety of associated products, gives Nike an advantage of rivals, in that the company can

weather the storm if demand decreases for any one product line. A strong brand presence has

positioned Nike for long term sustainable revenue growth. Therefore, Nike must continue to

extinguish counterfeit goods when they surface to prevent harming the brand.

3.4 Industry Competitors Analysis and Analysis of their Anticipated Strategic MovesA competition analysis is important in that it lays the groundwork for the focus areas a company

might look to address as part of their overall strategy. Nike must thoroughly understand their

competition to position themselves better to continue their dominant position and to adjust when

necessary, to the moves of their rivals.

Nike is firmly in the pole position as the industry leader in the sportswear apparel, the leading

competitors in the industry are Adidas, Under Armour and Crocs providing footwear to compete

with Nike. (Ken Research, 2012) Nike’s primary competition is as follows:

Adidas

Adidas is a German multinational company based in Bavaria, Germany. The company consists

of the Reebok sportswear company, Taylor Made Golf Company, along with Rockport. Adidas is

considered the largest competitor for Nike and produces many of the same products, including

watches, clothing and footwear. (Adidas Group, Inc., 2014, p. 46)

Under Armour

15 | P a g e

Group 5

Under Armour, Inc. is an American sports clothing and accessories company, based in

Baltimore, Maryland. The company is a supplier of sportswear and casual apparel and began

offering footwear in 2006. Under Armour’s, growth trajectory is something Nike needs to

monitor as Under Armour is looking to take market share. (Under Armour, 2014)

Crocs, Inc.

Crocs, Inc., provides casual footwear for men, women and children. The company has

established sort of a cult following and had scores of fans all over the globe. According to the

company’s website, Crocs has sold more than 200 million pairs of shoes, including their famous

clog, sneakers, sandals and boots, in more than 90 countries. As a footwear provider, Crocs, is

eating away at profits Nike could gain through a more casual line of footwear. (Crocs Company |

All things Crocs, 2015)

While Nike continues to position themselves to fend off competition, their most formidable

competitors will be positioning themselves to take on the mega-company, hoping to grab a bit of

market share. Adidas will continue attempts at signing the biggest names in sports to their brand

in an effort to keep the company at the forefront of the sports apparel industry. If one of Adidas’

big name sports stars runs into trouble or get injured, the company will look to replace that

athlete with another. As Nike’s biggest pure competitor, Adidas is sure to expand operations in

the United States in an attempt to take market share.

Under Armour is a viable competitor and seems to be gaining more brand recognition. The

company is signing talented young superstars in hopes of reaching a younger audience, which

will help the company grow over the long term. These competitors as a whole will look at areas

where Nike is not as strong, such as hunting apparel, baseball, wrestling and lacrosse to take

advantage of untapped markets.

16 | P a g e

Group 5

The data within the external analysis above shows Nike has a substantial advantage over other

competitors with their extremely strong brand name and recognition in sports apparel and

footwear. Nike is continuing to show signs of revenue growth and make acquisitions where

necessary to fend off competition or add to their portfolio. The company must stay focused and

continually improve in the advancement of footwear technology as rivals will be lurking and

looking to take advantage if Nike slips.

3.5 Industry Key Success FactorsKey success factors (KSFs) are those competitive factors that most affect industry members’

ability to prosper in the marketplace. Key success factors may include specific product attributes,

resources, competencies, competitive capabilities, or intangible assets with the greatest impact on

future success in the marketplace. (Mbalectures, 2011)

Within the sports apparel industry, three key success factors stand out as most impactful to a

company’s success. Firstly, marketing to create a supreme brand image can benefit a business

over the long term. A strong, notable name allows for a sustainable advantage over current rivals

and heightens the barrier to entry for new competitors looking to enter the industry. Companies

often look to the world’s most well-known and influential celebrities to wear their products and

build brand awareness. Marketing through influential celebrities develops a recognizable,

premium brand and results in increased revenues. (Mbalectures, 2011)

Secondly, a company that offers a broad range of related products can sustain downturns in the

market or lessening of demand for a particular product line. When a corporation offers a wide

array of related products, they can couple products to provide more value for the consumer. For

example, in the sportswear and apparel industry, a vendor can offer discounts on accessories

upon purchase of a shirt/shorts combo, or throw in free socks with the acquisition of shoes. The 17 | P a g e

Group 5

perceived value-add for the customer is greater, which also leads to increased bottom line

revenues. (Mbalectures, 2011)

The third-way companies can also gain competitive advantage is by addressing research and

development and manufacturing to ensure they can adjust quickly to market demands. Adjusting

to consumer preferences by quickly making the proper adjustment to the company’s product

offering, lends a distinct advantage over the competition. If a business can make it to market first

and even set an industry trend that the company will consistently establish themselves as a

market trendsetter and leader. Tightly aligning R&D with manufacturing, grants a company with

the ability to develop new products and even influence buyer preferences through marketing

campaigns. As discussed earlier, there has been a recent rise in the number of fitness conscious

consumers in the United States. A nimble and aggressive company is in a position to exploit this

trend and maximize profits in the short term. (Mbalectures, 2011)

4.0 Internal Analysis

This section focuses on the microenvironment or the internal analysis of Nike, Inc. The internal

analysis helps identify the core competency of the company along with aligning value

proposition to the marketplace. A proper analysis helps business analysts understand the

competitive advantages and create a good market position. Exploiting core competencies, allows

firms to develop value-creating strategies superior to their competitors and position themselves

to obtain a foothold on the leadership position or better aligns with the methods necessary to

reach leadership capacity. (WebFinance, Inc., 2014)

18 | P a g e

Group 5

4.1 Organizational Strategy AnalysisNike is an American-based multinational company and the largest manufacturer of shoes,

apparel and other accessories in the world. The company designs and manufactures a broad

range of athletic apparel, equipment, and other accessories for golf, baseball, football and other

sports. (Nike, Inc., 2014, p. 47)

4.1.1 Corporate MissionNike’s mission statement is "To bring inspiration and innovation to every athlete in the world."

This mission statement shows the clear, concise direction the company is going. Nike simply

wants to be the preferred provider of inspiration for every athlete. The company’s strategy is to

attract and keep customers by becoming the preferred provider for every athlete in the world. As

part of this strategy, they focus on delighting customers, operating their business efficiently, and

growing their business. (Nike, Inc., 2014, p. 1)

4.1.2 Products and ServicesBringing inspiration to every athlete in the world is serious business for Nike. Nike sells its

athletic footwear and apparel globally and focuses on eight key categories, including running,

action sports, basketball, soccer, men’s and women’s training, action sports, golf, and

sportswear. Nike sells its products through retail affiliates, through their wholly owned Niketown

stores as well as online through Nike.com. The company offers its products to men, women and

children across all the main global sports, with operations in Japan, Europe, China and emerging

markets. (Reuters, 2015)

Nike has built a unique and profitable way of doing business. Nike wants bring inspiration to

every athlete, no matter their demographic. Nike accomplishes this by offering a wide array of

athletic apparel and accessories that can be worn as athletic wear or casually. The company

19 | P a g e

Group 5

generates a majority of revenue from their footwear sales, followed by apparel and equipment.

(Nike, Inc., 2014, p. 47)

4.1.3 Strategy (Corporate Level and Business Level)Nike Corporate Level Strategy. Nike pursues an international diversification strategy. Its

geographic market scope is extensive; “substantial presence beyond geographically and

culturally neighboring countries”. In fiscal 2014, US sales accounted 46% of total revenues; the

other 54% of sales came from international markets. Nike’s operating geographic segments are:

North America, Western Europe, Central & Eastern Europe, Greater China, Japan, Emerging

Markets, and Global Brand Divisions. Revenues in 2014 (millions): $12,299 (44.2%), $4,979

(17.9%), $1,387 (5.0%), $2,602 (9.4%), $771(2.8%), $3,949 (14.2%), and $125 (0.4%)

respectively; Converse $1,684 (6.1%) (Nike, Inc., 2014a).

International branch offices and subsidiaries of NIKE are located in Argentina, Australia,

Austria, Belgium, Bermuda, Brazil, Canada, Chile, China, Costa Rica, Croatia, Cyprus, the

Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, India,

Indonesia, Ireland, Israel, Italy, Japan, Korea, Malaysia, Mexico, New Zealand, the Netherlands,

Norway, Panama, the Philippines, Poland, Portugal, Russia, Singapore, Slovakia, Slovenia,

South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, the United

Arab Emirates, the United Kingdom, Uruguay, and Vietnam.

Nike Business Level Strategy. Nike targets customers with enough disposable income to afford

its branded products and all the benefits perceived with having the brand. The company makes

emphasis and uses diversification as a tool to support its product differentiation. Through its

“Affiliation” dimension, Nike is constantly improving its products to delight customers and

reinforce their relationship (Sioridze, 2011). In order to enhance its brand and build brand

20 | P a g e

Group 5

loyalty, Nike follows a differentiation strategy; its team focuses on designing and delivering

unique products perceived as valuable (Sioridze, 2011). Under this competitive strategy the

company’s key functional areas are: R&D, marketing, and sales. Nike assigns a great amount of

resources to support the design and manufacture of innovative high-quality products and market

and distribute them using creative communication channels (Nike, Inc., 2014a).

Nike segments its market geographically: the Americas, Europe, the Middle East, Africa, and

Asia (Nike, Inc., 2014a), and then by demographics: men, women, and children. Also, these

demographics are examined and analyzed “in term of physical capabilities, sociological needs,

and design preferences” to further segment the market, offering both footwear and apparel, in the

sport categories: running, football (soccer), baseball, basketball, tennis, and more (Sioridze,

2011).

4.1.4 Organizational Culture and Core ValuesNike has built a very strong culture over time and has done a wonderful job maintaining the

foundational views developed by Knight and Bowerman back in the late sixties. Just like the

company’s mission statement, discussed earlier, leadership has tried to instill those same values

in the company. Nike asks their 56,000 employees to strive to tap into their innovative nature and

develop innovative, yet easy to use products that inspire those who use them. (Farfan, 2015)

Nike also asks their leadership team to lead with excellence using the core principles of Lead,

Coach, Drive, and Inspire. This leadership focus drives values to their global workforce.

The company does not seem to have an explicit list of core values, but does focus heavily on

sustainability and innovation. Sustainable innovation is referenced heavily on the company’s

website and through nikeresponsibility.com. Nike understands that the enterprise must

21 | P a g e

Group 5

understand impacts, risks and opportunities of doing business. (Nike, Inc., 2013) Whether it is

the environment or business challenges, Nike has proven the company understands where risk lie

and seems focused on delivering sustainable and safe products and services.

4.1.5 Leadership“The brightest leaders create opportunity and inspire other to do their best work” (Nike, Inc.,

2014b). Nike’s leadership is represented through its corporate governance board of directors. The

chairman, Philip Knight, is a co-founder and director since 1968 and his work is key in the

creation and global leadership of Nike brand. Knight’s strategic leadership has facilitated the

growth of the company; he has built a brand identity culture to fully engage the organization

members with the brand. “The bridge from organizational brand image to external brand image

was readily and tactfully assembled through Nike’s methodical use of athletes in working to

mainstream and assimilate the brand within the global society” (Neiderhauser, 2013).

Nike’s leadership and success have also been achieved through the implementation of its “Code

of Business Conduct & Ethics”. This code provides the principles and guidelines to the entire

organization for how to conduct business (Nike, Inc., 2014b).

As of May 31, 2014, Nike had 56,500 employees worldwide. The company identifies the

relationship with its employees as excellent with no unions, except for some employees in

emergent markets where it is required by law. Also, in some European nations it is required to

comply with “national collective bargaining agreements”; Nike’s operations have never been

interrupted for a labor disagreement (Nike, Inc., 2014b).

4.2 Financial AnalysisIn the financial evaluation section, analysis of the company’s performance for the past three

years will be conducted. This performance will be compared to their nearest competitor, as well

22 | P a g e

Group 5

as the industry and the S&P 500 when applicable and/or available. The information was gathered

from various sources, including the company 10Ks, competition 10Ks, and other finance

resources. The analysis includes four categories: Valuation, Growth, Profitability, and

Management Efficiency.

4.2.1 Valuation AnalysisValuation is an attempt to estimate the market value of a firm or its financial assets. In order to

perform a valuation analysis, price to earnings, price to sales ratios, and price to book will be

used. We will evaluate the effect of Nike’s stock and revenue on their ability to compete and

hold an overall value. Nike’s common stock trades on the New York Stock Exchange under the

symbol NKE. Table 1.2 in the appendix indicates the intra-day quarterly high and low price per

share of NKE common stock over the past two fiscal years. When comparing Nike’s stock to

industry competition the company indeed holds their own. Graphic 2.1 in the appendix shows

Nike’s stock in comparison with Adidas and Under Armour. Under Armour is outpacing Nike as

far as stock growth and will prove a formidable competitor in the near term.

The price to earnings (P/E) ratio reflects the price investors are willing to pay for every dollar of

company revenues. (Dow Jones & Company, Inc., 2012) Just put, investors are paying a dollar

amount for every $1 of the business's earnings. P/E ratios are also known as the stock multiple.

In Graphic 2.8 and 2.9, Nike’s P/E ratio for FY14 was 28.53 while Under Armour’s was 80.05.

Another way to look at a company’s valuation is to evaluate the price to sales ratio. The sales to

price ratio are a firm's stock price divided by its sales revenues. For FY14, Nike shows a

Price/Sales ratio of 2.82 while Under Armour reflects 5.32 in Graphic 2.8 and 2.9. Lastly, the

price to book ratio, which the ratio of a company’s share price over its book value, is a great way

23 | P a g e

Group 5

to gauge value. In FY14, Nike has a 7.17 while Under Armour has a 12.15, which might tell an

investor that Nike is a better value, considering current stock price. (McClure, 2015)

An investment decision should be made in combination with other indicators. The P/E ratio for

Nike is in line with the industry average while Under Armour is much higher and should be

investigated further. Both Nike and Under Armour calculate price-to-sales ratios, significantly

greater than the industry average. High ratios suggest that both companies are active industry

players.

4.2.2 Growth AnalysisNike and Under Armour alike, have performed very well over the past three years. Total

Revenue, Gross Margin and Net Income have all grown substantially. Nike’s results from

operations over the past three years if reflected in Graphic 2.3. Under Armour shows a strongly

in Graphic 2.8 amongst all three categories. While Nike is dominating as far as total revenues,

Under Armour has almost doubled revenues in the past three years and is proving to be a

considerable threat to take market share. From 2012 to 2013, Under Armour grew by 27%, while

Nike, during the same time frame grew 8%.

4.2.3 Profitability AnalysisA profitability analysis shows how well a company performs in relation to its income. In order to

gain better insight into a corporation’s profitability, an investor can consider a company’s Profit

Margin and Operating Margin. In Graphic 2.2, the margins for Nike are shown for the trailing

twelve months. Nike has improved each year since 2012 and outperformed its competitors in this

area. A company’s operating margin is a measurement of what proportion of an enterprise’s

revenue is left after paying production costs. (Investopedia, 2015) For the trailing twelve months,

Nike has a 13.45% operating margin while Under Armour is keeping pace with 11.48%

24 | P a g e

Group 5

Profit Margin measures how much out of every dollar a company keeps as earnings.

(Investopedia, 2015). For the same period, Nike returned a 10.07% while Under Armour finished

with a 6.75%. Even with higher revenues and operating costs, Nike has been able to return

higher margins that its competitors.

4.2.4 Management Efficiency AnalysisThe management efficiency analysis shows how much money the managers can obtain from

their assets. In other words, this analysis shows how well a company is using its assets to

generate sales. Management efficiency ratios include Return on Equity and Return on Assets.

For FY14, Nike has a Return on Assets of 13.52% and a Return on Equity of 26.01% while

Under Armour returned a 12.05% and 17.31% respectively.

4.2.5 Summary of Financial AnalysisThe financial analysis conducted for Nike reveals that the company is in a strong and healthy

financial state.  Revenue has nearly doubled for Nike over the last 10 years (Nike, Strategy.

2014).  The corporation’s return on invested capital, and diluted EPS performance have

increased over the last five years. Particularly, Nike’s strong performance over the last three

years has been a result of increased sales throughout all divisions within the company (Nike,

Strategy. 2014).  Nike’s above average net profit margin shows that the company is more

profitable than the average firm within the sporting goods industry. The increase in product types

and steady flow of sales came from all regions of the world that Nike operates in.  Most notably

however, is Nike’s footwear division contributing to a significant portion of company’s revenues

(Nike. 2014).

Nike’s financials demonstrate management’s ability operate with high efficiency.  The

company’s ROA provides support that management is using its assets efficiently to generate

25 | P a g e

Group 5

earnings.  The company’s low asset turnover figure gives evidence that high profit margins are in

part, due to management’s ability to efficiently run the operations of the company.  Nike’s higher

ROE (higher than the industry average), demonstrates that management has made wise decisions

with the money reinvested back into the company (Yahoo. 2015).   Furthermore, evidenced by

the ROIC figure earned at the end of the fiscal 2014 year, management is utilizing well, the

capital it has invested into its business (MorningStar, Nike Inc Class B. 2015).

4.3 Value Chain AnalysisUnderstanding a firm’s value chain grants a stakeholder with a view of how a company uses its

resources and capabilities to add value. (Peng, 2014, p. 67) A value chain is typically divided

into primary and support activities. Primary activities involved with a products’ creation, sale

and distribution to buyers, along with service after the sale. Support activities provide the

abutment for the primary activities. After a company has identified all of the components of its

value chain, the analysis provides a comprehensive overview of activities. A reliable analysis

allows the appropriate elimination of certain activities that may be detrimental and the further

development of activities that are advantageous to the business. (Mbalecture, 2011)

4.3.1 Support ActivitiesSupport Activities include firm infrastructure, human resource management, research and

development, and procurement. An evaluation of a company’s infrastructure evaluates processes

such as general management, planning, financing, and accounting of the organization

(Hoskisson, Hitt, & Ireland, 2006).

4.3.1.1 Structure (organizational chart, communication system, etc.)The foundation at Nike has been installed since the company’s incorporation in the early 70’s.

Phil Knight has empowered his management team and employees through a simple yet powerful

26 | P a g e

Group 5

mission statement that makes a statement about bringing inspiration and innovation to every

athlete in the world. The statement contains an asterisk that references back to the co-founder

Bill Bowerman, and his beliefs that anyone with a body is an athlete. (Nike, Inc., 2014) This

deep rooted foundation is still in place and rings true with Nike’s more than 56,000 employees.

Nike’s organizational structure if flat. (See Table 1.1) Flat organizations can be described as an

organization within which employees report to teams led by a manager, which ultimately reports

up to a department manager. Nike is broken up into departments by brand. Each department

makes decisions independent of the CEO. (Chestnut, 2015) A matrix organization allows the

company to adjust quickly to market demands, independent of what other brands are

experiencing. Flat organizations are empowered by company leadership to make calculated

decisions without consulting the CEO.

As discussed in the financial analysis section of this report, Nike is financially strong with very

low debt. The company has shown the ability to achieve single digit revenue growth over the

past several years.

4.3.1.2 Design, Research and Development (R&D)Nike places significant time and effort into their research design and development of their entire

products line. The company’s stated in its annual report, “We believe our research, design, and

development efforts are key factors in our success”. (Nike, Inc., 2014) Not only has Nike

established a brand that continues to excel through design, but also provides comfort and

enhanced athletic performance for athletes of all ages. The company’s dedication to producing

innovative, technological shoes and apparel.

Nike has a staff of specialists, made up of scientists, athletes, podiatrists and other experts that

focus on the science of exercise and sports to produce superior products. (Nike, Inc., 2014, p. 49)

27 | P a g e

Group 5

These experts not only review and modify designs, but also suggest improvements to the

company’s manufacturing processes to ensure a high quality products enters the distribution

stream ever time. Superior products, keep the customer happy and the brand untarnished.

Aside from design and development, Nike prides itself on the use of market research to ensure

they stay close to what the consumer expects in an innovative product line.

Technology has been and will continue as a driving force behind everything Nike manufacturers.

Excellent products, build a great brand and Nike has cornered the market on sports apparel with

one of the biggest brand names in the world.

4.3.2 Primary Activities

4.3.2.1 Input (tangible and intangible resources)Tangible assets include manufacturing facilities, raw materials, and financial resources.

Intangible assets are those that cannot be seen or touched, such as patents and brands. (Peng,

2014, p. 65) One of Nike’s biggest strengths is its brand. According to Forbes Fab 40 from 2014,

Nike’s brand is worth nearly 16 billion dollars. (Forbes, 2015) This intangible resource has the

company ranked consistently at or near the top of Forbes annual list of most valuable brand

names.

Nike’s supply chain is another competitive advantage over rivals. Nike employs a just in time

manufacturing strategy, which means goods are shipped as soon as they are ready for sale. Nike

does not rely on any one select supplier yet leverages numerous suppliers all around the globe to

ensure that supplier power is never too high. Through good supplier relations, Nike assures these

suppliers are dedicated to helping Nike produce the highest quality products with the best raw

materials possible.

28 | P a g e

Group 5

4.3.2.2 Operation Processes (e.g. production, logistics, product/service cost structure)Nike manufactures just about all of its footwear outside of the United States, which allows the

company to take advantage of lower labor costs in other countries. What is unique about Nike is

that they rely on 150 footwear factories in 14 countries, operated by independent manufacturers

of which not one is responsible for more than 5% of production. (Nike, Inc., 2014) A limited

number of supplier allows Nike to stay in control of the supplier manufacturer relationship.

Most of Nike’s apparel manufacturing occurs in Vietnam, China, Indonesia, and Malaysia.

(Nike, Inc., 2014) A very similar operation to that of the footwear manufacturing has been

constructed for apparel as well. Nike has over 400 factories located in more than 40 countries

handling the production of the company’s apparel. Just like with the footwear side of the

business, this keeps manufacturing costs low and allows Nike to take advantage of

manufacturing economies of scale.

Nike maintains firm control over their distribution channel and sells to thousands of retail stores

throughout the world. (Nike, 2014, p 48) The company maintains nearly 20 distribution centers

globally to ensure customers can receive the products in a timely manner. High-quality products

along with many choices in complimentary products, allow Nike to charge a premium for their

products lines.

4.3.3.3 Marketing and Customer ServiceNike has been able to sign some of the biggest names in sports to lend celebrity endorsement to

the company’s brand and reputation. The biggest name the company has even signed is Michael

Jordan. His celebrity has single-handedly generated billions of dollars in sales for the business

and his Jordan brand is synonymous with Nike. Nike seems to have weathered the storms that

surfaced with some of its sponsor athletes, such as Lance Armstrong, Michael Vick, and Tiger

29 | P a g e

Group 5

Woods, without missing a beat. The company has been able to overcome controversies due to the

vast array of offerings maintained within their portfolio of products. It seems as if Nike has been

able to elevate the brand successfully above any one athlete or sport.

Another one of Nike’s strengths is the diversity of products that are offered to consumers.

Whether a new pair of shoes, a track jumpsuit, sunglasses or socks are the list, consumers can

buy from third party retailers or Nike’s branded store called Niketown. Nike also has

partnerships with the likes of Apple, and the companies have come together to develop a running

sensor that communicates wirelessly, via Bluetooth, to Apple products. This technology tracks

running speed and distance and automatically uploads to Nike’s website so that users can

monitor their performance through a web browser and share with friends. Gathering data from

users of Nike technology is a marketer's dream. Consumer data allows Nike to build a better

relationship with its customers and increase sales revenues through direct marketing of new

products to a group of known users.

Another avenue that has allowed Nike to get closer to its customers is their online capabilities.

Through Nike.com, customers can not only bundle goods, but they can also custom design shoes

and have the newly minted shoes shipped directly to their homes, giving them a one-of-a-kind,

personalized item.

5.0 SWOT Analysis

5.1 Critical Strategic Challenges

5.1.1 OpportunitiesHow will economic changes affect industry growth? The recovering economy discussed in

the PEST analysis has brought favorable economic conditions that are expected to lead to global

30 | P a g e

Group 5

industry growth opportunities. Lucintel (2012) is a market research firm that analyzed the

sporting goods industry’s future potential. Lucintel concludes that by 2017, the global market is

expected to be valued at $266 billion with a compound annual growth rate of 4% between the

years of 2012 and 2017. According to the Trefis team (2013), the global athletic footwear market

alone is expected to grow at a compound annual growth rate of 1.8% to $84.4 billion by 2018.

Although the market is currently dominated by North America, emerging markets have favorable

growth potential. In the Asia-Pacific region, the industry’s compound annual growth rate is

estimated at 3.3% (Kumar, 2014). In India, the sporting goods industry is also expected to grow

at an annual compound growth rate of 10.6% between 2013 and 2018 (Kumar, 2014). GDP,

disposable income, and consumer spending are factors that make this issue a fundamental

challenge because they determine the growth or decline state of the industry. Industry growth

opportunities in domestic and emerging markets offer organizations the chance to expand,

however; failure to address this issue will cause Nike to forgo expansion opportunities. Industry

growth resulting from economic changes creates a strategic issue because Nike must ensure that

its development efforts support its corporate mission and values.

How will marketing towards women affect sales? Athletic goods, especially footwear, are

mainly marketed towards men. This implies that male adults make up the highest demographic

group of product sales. Consistent with this implication, the 2013 sales breakdown of athletic

footwear for men, women, and kids was 59%, 22%, and 20% respectively (Powell, 2014).

However, women’s footwear does make up the second largest consumer category. Limited

marketing efforts are employed in the industry to target specifically women. This creates a

marketing opportunity for Nike to increase sales by calling all women to wear Nike products.

The availability of products that satisfy women’s needs is a factor that makes the issue a

31 | P a g e

Group 5

fundamental challenge. This becomes a strategic issue because Nike must determine how to

utilize its brand reputation, innovation, and other strengths to effectively market products that

target women and strengthen their customer loyalty. Eventually, other companies will realize the

existence of this marketing opportunity and will take steps to capitalize on it. If Nike does not

address this issue, the company may lose sales of women’s products to competitors.

How will health consciousness affect profitability? The current social trend is a rise in health

awareness. Members of society have begun taking measures towards healthier living by

improving their diets and increasing their fitness levels. Participation in physical activity is a

factor that makes this issue a fundamental challenge because fitness levels have a direct

relationship with the demand for sports goods. In this case, rising participation in fitness

activities such as exercising and playing sports, results in an increase in demand for athletic

goods. The level of physical activity is represented by the number of gym memberships that have

increased “from 36.3 million in 2002 to more than 42.8 million by 2011” (IBISWorld, 2011). 

The rise in health consciousness creates the opportunity for Nike to increase its profitability. This

becomes a strategic issue because Nike must effectively utilize its internal strengths to increase

sales to health conscious consumers. However, failure to address this issue will prevent Nike

from maximizing profitability and capitalizing on the health trend.

What are the Top Two Strategic Issues? Favorable industry growth and the rise in health

consciousness are the top two strategic issues that confront Nike as it heads into the future. Each

issue was evaluated on the basis of potential impact; the issues with the greatest perceived

favorable impact are regarded as the most important. Global industry growth is perceived to have

a significant impact on Nike because the possibility of expansion may allow the company to

increase market share, profitability, and brand awareness. The rise in health consciousness is

32 | P a g e

Group 5

perceived to have a significant impact on Nike because it allows the company to capitalize on

this trend and increase revenues across all product lines including men’s and women’s footwear,

apparel, and sporting equipment. However, marketing Nike’s products towards women may only

result in a revenue increase among women’s categories rather than across all categories. This

illustrates that the potential benefits of industry growth and health consciousness exceed the

benefit of marketing Nike’s products towards women.

5.1.2 ThreatsWill the Projected Global Economic Conditions affect Nike’s Performance?

The projected conditions of the global economy will challenge Nike’s ability to maintain market

shares within the industry that it operates in. With the global financial crisis behind us,

worldwide economies are recovering at different rates. According to the United Nations, the

growth of the world’s gross product is projected to increase over the next two years. Interest

rates worldwide are expected to make a gradual increase during the upcoming years. The

dollar/euro exchange rate is assumed to depreciate over the next two years, dropping from 1.34

in 2014 to 1.21 in 2016. The appreciation of the dollar over the next two years is expected to

place a restraint on US export growth. (United Nations New York, 2015, 2015, p. 3)

While most economies around the world have seen recovery, there remains much room for

improvement. Mainly, the unemployment rate has either gotten worse or remained below

satisfactory for many nations. Of primary importance are the extremely high unemployment

rates in the European nations and the significantly high unemployment rate in the U.S (5.5%

unemployment rate with approximately 8.6 million unemployed) (United States Department of

Labor, 2015). In the United States, much of the unemployment results have been due to the

baby-boomers reaching retirement age, a higher number of discouraged workers, and an increase

33 | P a g e

Group 5

in skills upgrade. Over the next two years, the unemployment rate is not projected to make a

significant change for the better. (United Nations New York, 2015, 2015, p. 3)

The increase in a nation’s labor cost can implicate different economic conditions. During a

recession, labor costs can be greatly influenced by the increase in labor wages and/or

commissions. Confirmed by the Bureau of Labor Statistics, such was the case in 2013 and 2014

when the average compensation costs for workers increased in the US as the national labor

productivity decreased (United States Department of Labor, 2015). With the US economy

growing, the national labor cost over the next two years is expected to increase, resulting in an

increase of labor costs. Subsequently, to offset labor costs, corporations within the US will most

likely increase product prices to maintain financial goals (Keythman, 2013).

As previously mentioned, Nike will be faced with increased global interest rates, the appreciation

of the US dollar and depreciation of the dollar/euro exchange rate. Furthermore, Nike will be

faced with significantly high global unemployment rates. Finally, Nike will be faced with an

increase in the cost of labor. The question is whether Nike has the resources to combat these

threats while delivering a product that is of equal quality and affordable to many.

As highlighted throughout this report, Nike is utilizing its strong financial portfolio,

organizational design, technologically advanced equipment, and healthy relationships with other

companies to provide a product that is innovative and affordable. Furthermore, Nike has a

plethora of suppliers and manufacturers that are producing products at already very low costs.

Additionally, Nike has little influence on the cost of raw materials. Finally, Nike has little

influence on the unemployment rate in the countries in which Nike’s target market resides. It

appears that Nike may have no choice but to increase its product prices. Thus adding to the

population of people who already cannot afford to purchase Nike’s goods. The consequence of

34 | P a g e

Group 5

not attempting to meet the challenges of the global economic conditions could result in a loss of

profit for the company.

Does the Production of Counterfeit Products Pose a Significant Threat to Nike?

Nike faces the challenge of combating counterfeit products. One well-known threat to the

athletic footwear industry is the never-ending supply of counterfeit products. In 2013, the global

volume of counterfeit goods amounted to roughly $210 billion (The European Confederation of

the Footwear Industry, 2013). Over $1.7 billion worth of imitation goods was confiscated at the

US borders alone (The International AntiCounterfeiting Coalition, 2014). Additionally, three

percent of the total replica items confiscated at the American borders belonged to the footwear

industry (roughly $55 million MSRP). Less than one percent (roughly $3 million) belonged to

sporting goods, and roughly seven percent belonged to wearing apparel/accessories. Twenty-nine

percent of all replica items seized were made up of sports jerseys. (The International

AntiCounterfeiting Coalition, 2014)

Replicated products are mostly produced in developing countries, where people manufacture

counterfeit products as a source of income. (International Labour Organization, 1996)

According to the Department of Homeland Security, China remains the primary source for

manufacturing replica goods and pirated materials (The International AntiCounterfeiting

Coalition, 2014). As long as there is a consumer demand, there will most likely be a supply.

Companies that maintain strong brand images, commonly fall prey to the underground market,

because of the demand for their products.

According to the International AntiCounterfeiting Coalition, the number of counterfeit items is

growing with no sign of slowing down. Between 2005 and 2012, footwear was part of the top

five items seized at the US borders. The Coalition projects that in 2015, global trade in replica

35 | P a g e

Group 5

goods and pirated materials will reach $177 trillion. (The International AntiCounterfeiting

Coalition, 2014)

What are the Top Two Strategic Issues? The overwhelming number of producers of

counterfeit items is an immense challenge to Nike. The company is very limited in its capability

to directly challenge every counterfeit production agency. Instead, Nike is forced to support

financial organizations that combat the manufacturing of replica items or engage in example

lawsuits against such entities. Individuals demonstrating their demand for replica items do so

primarily because of financial constraints. (The International AntiCounterfeiting Coalition, 2014)

For Nike, adhering to its corporate values of producing innovative and quality products means

doing so at the expense of providing relatively cost efficient products. Thus, many people

concerned with owning a particular brand while not worrying about the quality will express more

interest in the counterfeit product due to the cheaper cost. Not attempting to meet this challenge

provides an opportunity for the illegal underground market to take shares away from Nike.

The two threats previously described were chosen based on Nike’s inability to control the

external factors. Furthermore, out of the many threats that Nike is faced with, Nike is least

capable to combat these two distinct challenges given the company’s strengths, weaknesses,

values, and mission. The projected global economic conditions and ongoing production of

replica items will significantly influence people to seek substitute items based on financial

reasons.

5.2 Core Competencies/Capabilities

5.2.1 StrengthsA MOST (Mission, Objectives, Strategy, Tactics) analysis perspective is utilized to identify the

strengths that make Nike the global leader competitor in the sporting goods industry.

36 | P a g e

Group 5

Strong R&D resources and capabilitiesIt is the mission of Nike “To bring inspiration and innovation to every athlete in the world”

which has been firmly embedded in the entire organization. Therefore, the company has focused

on building R&D capabilities that are key to maintain a leadership position in the athletic

footwear market (Nike, Inc., 2014). Through technical innovation, Nike designs, and

manufactures high-quality products that “help reduce injury, enhance athletic performance, and

maximize comfort” (Marketline, 2014). The company has an “explore team sports research lab”

which is dedicated to providing knowledge and insights to create performance innovations across

Nike’s product offerings. This team focuses on four disciplines: biomechanics, physiology,

perception, and data science and uses a variety of advanced test methods for the capture of

motion: 3D motion analysis, foot pressure measurement, accelerometers, foot morphology, and

others (Nike, Inc., 2014). Nike’s strong R&D capabilities help the company to build brand

loyalty and revenue growth.

Strong Brand PortfolioNike has maintained a global market dominance trough a strong brand portfolio and an extensive

international diversification strategy. It is the largest seller of athletic footwear and apparel is the

world; holds more than 14% global market share. “The company's dominant market position is

built on its portfolio of strong brands like NIKE, Jordan, Converse, and Hurley” (Marketline,

2014).

Strong Financial PositionNike can enhance shareholders value because of its healthy financial performance; it generates

plenty of free cash flow. This cash flow is used to “fund an aggressive buyback program” which

allows the company to invest aggressively in R&D in order to outperform competitors and raise

barriers for new entrants (Hellman, 2014).

Efficient Global Supply Chain Management

37 | P a g e

Group 5

Nike “creates value through the configuration and coordination” of its marketing, design,

procurement, manufacturing, and multi-channel distribution activities. The integration of

diversified and innovative resources and capabilities of the company allow Nike to have a very

strong and interdisciplinary infrastructure base. Some of these resources and capabilities are a

reliable IT system in all the supply-chain activities, e-commerce, top management

empowerment, strong financial position, effective compliance processes, and others (Alqararah,

2014).

VRIO Analysis for Nike’s Resources and CapabilitiesNike’s most relevant strengths are assessed in this section using VRIO framework analysis.

(Table 1.2 in Appendix) The company creates value through a highly reliable and well-

developed supply chain management. The firm’s ability to purchase raw materials in bulk,

establish long-term relationships with local suppliers, use different distribution channels to reach

and serve domestic and international markets, overcoming liability of foreigners, is considered

highly valuable in the sporting goods industry and lead to competitive advantages.

Nike’s R&D capabilities can be classified as rare. Nike has built some of the most cutting-edge

products in its industry (Alqararah, 2014). The company is continuously investing in new

technologies to design quality products with high functionality and sustainable operation

processes (Nike, Inc., 2014) which builds a sustainable competitive advantage.

It is very hard and costly for competitors, or potential new entrants try to imitate Nike’s

resources and capabilities. Its strong financial performance allows the firm to reinvest in its core

competencies: innovation and marketing. Also, according to Forbes, its brand name is among

‘The World’s Most Valuable Sports Brands 2014’; in that year, was estimated to be at $19

38 | P a g e

Group 5

billion. The efficient global supply chain management and the innovative R&D and marketing

activities are also hard to imitate because of the intangible capabilities implicit.

Nike’s valuable and hard-to-imitate assets are exploited by the organization thanks to its ability

to permeate the company’s business and corporate strategies throughout the whole organization.

Knight’s strategic leadership has facilitated the growth of the company; he has built a brand

identity culture fully to engage the organization members with the brand. “The bridge from

organizational brand image to external brand image was readily and tactfully assembled through

Nike’s methodical use of athletes in working to mainstream and assimilate the brand within the

global society” (Neiderhauser, 2013).

5.2.2 WeaknessesLack of Revenue DiversityNike is heavily dependent on footwear sales as the primary source of revenue. As a dominant

brand, with a stranglehold on the worldwide market of athletic shoe sales, Nike has clearly

established itself as a leader in the athletic apparel space. The quandary Nike faces is how to

dominate all aspects of athletic apparel as it has shoes. During the fiscal year 2014, Nike

revenues reached nearly 28 billion US dollars (Graphic 1.7). Of the revenues generated during

fiscal 2014, 16 billion dollars came from footwear (Graphic 1.8).

The company states in its 2014 Annual Report, “Our new products may not receive consumer

acceptance as consumer preferences could shift rapidly to different types of performance

products or away from these types of products altogether.” (Nike, Inc., 2014) Lack of sales

strength over a broad, diversified product set, leaves the company vulnerable to a sagging

market. If the market erodes and consumer spending on higher priced shoes declines, Nike will

39 | P a g e

Group 5

need to react. A broad and deep product portfolio will assist in not only responding to trends, but

also in generating revenues is sales in other areas slump.

It is almost impossible for a company to predict consumer preferences. Attempting to predict

these choices entails a high level of risk and can often have an adverse effect on a company’s

financials. Nike can combat any slumps and lessen the burden of lagging sales by implementing

a product diversification strategy.

High Priced BrandEndorsing superstars such as Michael Jordan, Kobe Bryant, and LeBron James, generates an

enormous global demand for Nike branded products. As a result, Nike charges premium prices

for their brand, which put many of their products out of reach for many consumers. There have

been countless reports of robberies for Nike shoes, and when new versions hit the markets, stores

have been broken into before the shoes even go on sale. The brand dilemma that comes with the

negative press regarding their shoes and other accessories is something that Nike needs to

consider. Price conscious consumers could look to other brands as lower cost alternatives.

The company could look to differentiate themselves further by offering their brand exclusively

through Nike branded stores and online outlets. This would lessen the risk that consumers may

opt for the other brand based solely on price. Nike should look to manufacture and sell less

expensive shoes without sacrificing quality.

5.3 Strategic Fit (SWOT) AnalysisNike has been in business for over 40 years and has shown the ability to adapt to the changing

landscape of sports apparel. The company’s passion for serving athletes is evident is the way

they develop the most innovative products and services to help athletes of all ages reach their full

40 | P a g e

Group 5

potential. The relentless focus on the needs of the athlete fuels growth and powers the company’s

ability to deliver long-term values for shareholders.

The company offers a broad range of products complemented by several services which provides

the unique advantage of cross selling and increasing the average customer spend. With the

following SWOT analysis, Nike’s strengths, weaknesses, opportunities, and threats will be

outlined.

Summary of Nike SWOT AnalysisStrengths (Internal) Weaknesses (Internal)

Global Brand Awareness Efficient Distribution Chain Strong R&D Strong Financial Position

Lack of Revenue Diversity High Priced Brand

Opportunities (External) Threats (External)

Sales in Emerging Markets Women’s Athletic Sector Health Conscious Consumer

Counterfeit Products Aggressive Global Competitors Global Economic Conditions

Strategic Recommendations

(Based on Threat) Catering to higher competition: Nike faces tough competition from

footwear brands such as Reebok, Adidas, Puma, Converse and Fila. In order to deal with these

tough competitors in the market, the organization should be able to reveal itself as valuable

(Andreassen et al. 2008). The competition in the footwear market is tough, but the prevalence of

a highly acknowledged brand value based organization will help the company to re-define itself

in the ever dynamic and globalized world.

(Based on Threat) Global Patent program: Nike needs to adopt further a prominent step in

order to stop imitation of its products. Imitations have caused immense damage to the strength

and brand value of the company. The company can adopt a patent based strategy.

41 | P a g e

Group 5

(Based on Threat) Utilizing free cash flow for adoption to technological advancements: The

Company is a large footwear based brand with free flow cash. The company should utilize it for

establishing more market power through distributors. Retailers mostly have the chief power of

buying from most footwear companies. However, most of these large companies forget that

doing this possesses an immense trouble to the prospects and state of growth for a company.

(Based On Opportunity) Nike should also consider the production of its products in

regionally based laboratories in all the nations where Nike distributes its products. This in

turn will help the company to elongate its opportunities and keep its distribution channels near to

its inventories in turn leading to sustainable supply chain management and efficient production.

This would also imply that the company needs to identify the complete opportunities available in

the market without which the value of the company will not be apprehended.

(Based On Opportunity) Catering to women based products: The industry of athletic

equipment, has an ever evolving and dynamic nature with constant push in the possible

boundaries. Sports no longer have been determined from a classical perspective with two teams

involved but now sports have become personal for people. Today, women and men are both

involved in games with an ever increasing rise in women footwear sales. It will be further

apprehensive for Nike if it provides a chance for segmentation of customers such as women and

small children and differentiate its products in this way further in order to strengthen its

marketing strategy.

(Based on Opportunity) Using brand value to advertise rather than celebrity based

advertisements that involve higher investment: This should be used by Nike while promoting

its products as the company spends more on its advertisements (Ballantyne 2006). Furthermore,

42 | P a g e

Group 5

Nike should embrace the growth that it enjoys in Asian nations, UK, and Australia. These areas

are a hub for Nike’s considerable growth. Nike, therefore, needs to consider the ever-changing

needs of the customers and diversify their shoes or footwear. More opportunities should be

seized by the company in the domain of social media for engaging with broad base of customers

enormously in order to make sure that new high technology gadgets are linked with the platforms

of social media (Berry 2008). Such customer contact has power of phenomenal nature because it

helps in gaining a single click visibility, generating enhanced customer based interaction and

hence helping Nike to collect data on choices of the customers and their further preferences as

well.

43 | P a g e

Group 5

References

Adidas Group, Inc. (2014). adidas Group - 2014 Annual Report. Retrieved from

http://www.adidas-group.com/en/investors/financial-reports/

Andreassen, TW. & Olsen, LL., pp. 309–28,2008, The impact of customers' perception of

varying degrees of customer service on commitment and perceived relative

attractiveness, Managing Service Quality, vol. 18, no. 4

Ballantyne, D., pp. 3–6, 2006, Guest editorial: Getting your way in business, Asia-Australia

Marketing Journal, vol. 4, no. 1

Berry, LL., 2008, pp. 6–8, Guiding and inspiring performance through a service strategy,

Customer Service Management Magazine, no. 12

Chestnut, D. (2015). Nike's Flat Organizational Structure | eHow. Retrieved March 10, 2015,

from http://www.ehow.com/facts_6887850_nike_s-flat-organizational-structure.html

Crocs Company | All things Crocs. (2015). Retrieved March 10, 2015, from

http://company.crocs.com/

Dow Jones & Company, Inc. (2012). Valuation Ratios: Price/Earnings - Knowledge Center.

Retrieved from

http://content.sharebuilder.com/mgdcon/knowledgecenter/research_guidance/valuation/

valuation-ratios-price-earning.htm#.VQSXfPnF98E

Farfan, B. (2015). Nike Company Mission Statement - About Inspiration, Innovation & World

Athletes. Retrieved March 10, 2015, from

http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/

Nike-Company-Mission-Statement.htm#step-heading

44 | P a g e

Group 5

Forbes. (2015). Nike -Forbes Fab 40: The Most Valuable Brands In Sports. Retrieved from

http://www.forbes.com/pictures/mli45jmjm/1-nike/

Gunderson, A. (2009, November 4). The Great Leaders Series: Phil Knight of Nike. Retrieved

from http://www.inc.com/30years/articles/phil-knight.html

Hellman, J. (2014, March 10). NIKE: A Short SWOT Analysis [Supplemental material]. Value

Line: Educational Articles. Retrieved February 21, 2015 from

http://www.valueline.com/Stocks/Highlight.aspx?id=15623#.VQTiSM3-_8L

Hoskisson, R. E., Hitt, M. A., & Ireland, R. D. (2006). Strategic management: competitiveness

and globalization (6th ed.). Mason, OH: Thomson/South-Western.

IBISWorld. (2011). Gym, Health & Fitness Clubs Market Research Report.

http://www.prweb.com/releases/2011/10/prweb8894650.htm

Internal Revenue Service. (2014, October 15). Retail Industry ATG - Chapter 1: Description of

the Retail Industry. Retrieved from http://www.irs.gov/Businesses/Small-Businesses-&-

Self-Employed/Retail-Industry-ATG-Chapter1-Description-of-the-Retail-Industry

International Labour Organization. (1996, October 28). Globalization Changes the Face of

Textile, Clothing and Footwear Industries. Retrieved from

http://www.ilo.org/global/about-the-ilo/media-centre/press-releases/WCMS_008075/

lang--en/index.htm

Investopedia. (2015, February 20). Operating Margin Definition. Retrieved from

http://www.investopedia.com/terms/o/operatingmargin.asp

Ken Research. (2012, February 1). The US Athletic Apparel and Footwear Industry Outlook to

2015. Retrieved from http://www.marketresearch.com/Ken-Research-v3771/Athletic-

Apparel-Footwear-Outlook-Evolving-6846675/

45 | P a g e

Group 5

Keythman, B. (2013). What Does an Increase in Unit Labor Cost Mean? | Chron.com. Retrieved

from http://smallbusiness.chron.com/increase-unit-labor-cost-mean-38104.html

Kumar, K. (2014). Podium Position for Sporting Goods. China Daily Asia.

http://www.chinadailyasia.com/asiaweekly/2014-04/18/content_15131196.html

Lucintel. (2012). Global Retail Sporting Goods Industry Analysis 2012-2017: Industry Trends,

Profit and Forecast Analysis.

http://www.researchandmarkets.com/reports/2078477/global_retail_sporting_goods_indu

stry_analysisMakos, J. (2013, December 31). Understanding Pest Analysis with

Definitions and Examples. Retrieved from http://pestleanalysis.com/pest-analysis/

MarketLine. (2014, May). Global Footwear, Industry Profile. Retrieved February 26, 2015,

from Business Source Complete/EBSCO database.

MarketLine. (2014, May). Sports Equipment in the United States, Industry Profile. Retrieved

February 26, 2015, from Business Source Complete/EBSCO database.

MarketLine. (2014, May). Nike, Inc., Company Profile. Retrieved March 5, 2015, from

Business Source Complete/EBSCO database.

Marketwatch. (20015). Nike Inc. CI B. Marketwatch. Retrieved March 14, 20015 from

http://www.marketwatch.com/investing/stock/nke/profile

Neiderhauser, J. (2013). How Nike’s Leadership Affects Brand Image Internally and Externally

[Abstract]. UW-L Journal of Undergraduate Research XV. Retrieved March 14,

2015 from http://www.uwlax.edu/urc/JUR-

online/PDF/2013/Neiderhauser.James.Marketing.pdfMbalectures. (2011, January

46 | P a g e

Group 5

7). Key success factors of Nike. Retrieved from

http://mba-lectures.com/management/strategic-management/1178/key-success-factors-of-

nike.html

McClure, B. (2015, February). Using The Price-To-Book Ratio To Evaluate Companies.

Retrieved from http://www.investopedia.com/articles/fundamental/03/112603.asp

Mirabella, L. (2014, September 8). Under Armour surpasses Adidas to become No. 2 sports

brand - Baltimore Sun. Retrieved from

http://articles.baltimoresun.com/2014-09-08/business/bs-bz-under-armour-beats-adidas-

20140908_1_armour-ceo-kevin-plank-market-leader-nike

Nike, Inc. (2013, February 15). Nike CR Report. Retrieved from

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

Nike, Inc. (2014). NIKE FY2014 Annual Report. Retrieved from

http://investors.nike.com/files/doc_financials/2014/index.html#mark_parker_letter

Nike News - The official news website for NIKE, Inc. (n.d.). Retrieved from

http://news.nike.com/investors

Peng, M. W. (2014). Global strategy (3rd ed.). Mason, OH: South-Western.

Powell, M. (2014, April 28). Sneakernomics: Who Will Be The Next Nike? - Forbes. Retrieved

from http://www.forbes.com/sites/mattpowell/2014/04/28/sneakernomics-who-will-be-

the-next-nike/

Reuters. (2015). Nike Inc (NKE) Company Profile | Reuters.com. Retrieved March 5, 2015, from

http://www.reuters.com/finance/stocks/companyProfile?symbol=NKE

47 | P a g e

Group 5

Sioridze, D. (2011, February 28). Strategic Management Issues: Nike Business Level Strategy.

Retrieved from http://davitsioridze.blogspot.com/2011/02/nike-business-level-

strategy.html

Statista. (n.d.). Sporting Goods Industry - Statistics & Facts. Retrieved March 10, 2015, from

http://www.statista.com/topics/961/sporting-goods/

Strange, M. (2015). Advantages and Disadvantages of Outsourcing Production. Retrieved from

http://smallbusiness.chron.com/advantages-disadvantages-outsourcing-production-

18244.html

Nike, Inc. (2014). “About Nike”. Retrieved March 14, 2015 from http://about.nike.com/Powell,

M. (2014). Sneakernomics: Marketing Sneakers to Women. Forbes.

http://www.forbes.com/sites/mattpowell/2014/06/24/sneakernomics-marketing-sneakers-

to-women/

The European Confederation of the Footwear Industry. (2013, November 6). CEC - News.

Retrieved from http://cec-footwearindustry.eu/news/2/63/Too-good-to-be-true-The-real-

price-of-fake-products-The-European-Commission-initiative-on-fighting-

counterfeiting/d,news

The International AntiCounterfeiting Coalition. (2014). Counterfeiting Statistics. Retrieved from

http://www.iacc.org/counterfeiting-statistics.html

Trefis. (2013). Nike Shares Can Find Some Zip On Emerging Market Sales. Forbes.

http://www.forbes.com/sites/greatspeculations/2013/04/11/nike-shares-can-find-some-

zip-on-emerging-market-sales/

48 | P a g e

Group 5

Trefis Team. (2013, May 13). Why Nike Will Outpace The Sports Apparel Market's Growth -

Forbes. Retrieved from http://www.forbes.com/sites/greatspeculations/2013/05/13/why-

nikes-growth-will-outpace-the-sports-apparel-markets/

United Nations New York, 2015. (2015). World Economic Situation and Prospects 2015.

Retrieved from United Nations Department of Economic and Social Affairs website:

http://www.un.org/en/development/desa/policy/wesp/wesp_archive/2015wesp_chap1.pd

f

United States Department of Labor. (2015, March). Productivity and Costs, Fourth Quarter and

Annual Averages 2014, Revised. Retrieved from

http://www.bls.gov/news.release/prod2.nr0.htm

United States Department of Labor. (2015, March). Employment Situation Summary. Retrieved

from http://www.bls.gov/news.release/empsit.nr0.htm

US Department of Homeland Security. (2014). Intellectual Property Rights Seizures Statistics

Fiscal Year 2013. Retrieved from US Department of Homeland Security website:

http://www.iacc.org/2013%20DHS%20IPR%20Seizure%20Stats.pdf

U.S. Department of Commerce. (2015, March 3). New Census Bureau Report Analyzes U.S.

Population Projections. Retrieved March 10, 2015, from

http://www.census.gov/newsroom/press-releases/2015/cb15-tps16.html

Under Armour. (2014). Under Armour, Inc. - Annual Report & Proxy. Retrieved from

http://investor.underarmour.com/annuals.cfm

Under Armour. (2015). Under Armour Sports Clothing, Athletic Shoes & Accessories.

Retrieved March 12, 2015, from https://www.underarmour.com/en-us/

49 | P a g e

Group 5

Wagner, N. (n.d.). Analysis of the Retail Apparel Industry | Chron.com. Retrieved from

http://smallbusiness.chron.com/analysis-retail-apparel-industry-70514.html

WebFinance, Inc. (n.d.). What is internal analysis? definition and meaning. Retrieved from

http://www.businessdictionary.com/definition/internal-analysis.html

Wikipedia. (2015). Nike - Wikipedia, the free encyclopedia. Retrieved March 15, 2015, from

http://en.wikipedia.org/wiki/Nike

50 | P a g e

Group 5

Appendix

Table 1.1- Executive Corporate Officers

Name Age PositionPhilip H. Knight 76 Chairman of the Board of DirectorsMark G. Parker 58 President and Chief Executive

OfficerDavid J. Ayre 54 Executive Vice President, Global

Human ResourcesDonald W. Blair 56 Executive Vice President and Chief

Financial OfficerTrevor A. Edwards 51 President, NIKE BrandJeanne P. Jackson 62 President, Product and

MerchandisingHilary K. Krane 50 Executive Vice President, Chief

Administrative Officer andGeneral Counsel

Bernard F. Pliska 52 Vice President, Corporate ControllerJohn F. Slusher 45 Executive Vice President, Global

Sports MarketingEric D. Sprunk 50 Chief Operating Officer

The information in Table 1.1 was obtained from Nike’s 2014 Annual Report

Table 1.2- VRIO Framework for Nike, Inc.

Graphic 1.0- Organizational Chart

51 | P a g e

Group 5

Graphic 1.1

Fiscal 2014 High Low Dividends DeclaredFirst Quarter 66.85 59.11 0.21

Second Quarter 79.87 63.50 0.24

Third Quarter 80.26 69.85 0.24

Fourth Quarter 80.09 70.60 0.24

Fiscal 2013 High Low Dividends DeclaredFirst Quarter 54.32 43.89 0.18

Second Quarter 50.42 45.30 0.21

Third Quarter 55.55 48.46 0.21

Fourth Quarter 65.91 53.49 0.21

The information in Table 1.2 was obtained from Nike’s 2014 Annual Report

Graphic 1.2- Nike Annual Revenue Growth (previous 10 years)

52 | P a g e

Group 5

Graphic 1.3- Nike Annual Net Income (previous 10 years)

53 | P a g e

Group 5

Graphic 1.3- Nike Key Ratios (previous 10 years)

Graphic 1.4- Comparison of 5 yr Cumulative Return

Graphic 1.5- 5-year stock comparison

54 | P a g e

Group 5

Graphic 1.6- Nike Key Statistics

Graphic 1.7- NKE 3 yr Historical Look-Back

55 | P a g e

Group 5

Graphic 1.8- NKE Global Revenue Breakdown

Graphic 1.9- Textile (Apparel) Competitive Landscape

56 | P a g e

Group 5

Graphic 2.0- Under Armour Income Statement

57 | P a g e

Group 5

Graphic 2.1- Adidas Income Statement

Graphic 2.2- Under Armour Results of Operations

58 | P a g e

Group 5

Graphic 2.3- Under Armour Key Statistics

59 | P a g e