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NIKE INC

NIKE INC. Chris Kaiser Rodrigo Quintanar Naomi Robinson Caitlin Schneider Natalie Welch. History of Nike. Bill Bowerman and Philip Knight Knight’s project at Stanford High quality/low costs  Japan. History of Nike. Tiger - running shoe manufacturer Blue Ribbon Sports

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NIKE INC

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  1. NIKE INC Chris Kaiser Rodrigo Quintanar Naomi Robinson Caitlin Schneider Natalie Welch

  2. History of Nike • Bill Bowerman and Philip Knight • Knight’s project at Stanford • High quality/low costs  Japan

  3. History of Nike • Tiger - running shoe manufacturer • Blue Ribbon Sports • Became Nike and the Swoosh born (1971) • Late 70’s: from $10M to $270M in sales.

  4. Strengths Global leader in footwear Nationally recognized brand with “swoosh” symbol High-valued stock Endorsed by top athletes Excellent supply chain management SWOT Analysis Weaknesses • Recent controversial advertisements • Public dissent over us of sweatshops

  5. SWOT Analysis Opportunities • Growth through subsidiaries • Future innovative products • Rumored buyout of Puma Threats • Slowing growth in U.S. economy • Rapid changes in customer tastes • Adidas’ pending acquisition of Reebok

  6. Herfindahl-Hirschman Index Nike: 1,339.56 Adidas-Reebok: 449.44 New Balance: 59.29 Puma: 1.21 HHI Index:1,849.5

  7. Markets, Demand & Elasticity Products are cyclical “As Nike grows internationally, that seasonality becomes less of a factor. There is much more cyclicality in footwear than you are going to find in the Disney business.” Seasonality during the spring, back-to-school season, and Christmas holiday.

  8. Markets, Demand & Elasticity • Products • Normal • Elastic • Substitutes - Adidas, Reebok, Under Armour, New Balance • Complements • Apple

  9. Markets, Demand & Elasticity • However with Nike brands such as… • Brand Jordan • L3 (LeBron James) • NikeiD • NikePlus They have created luxury items that are inelastic and other companies can’t compete with

  10. Advertising “Just Do It” • Endorsements • Nike has invested 11%-13% of revenue into their marketing efforts • Print and television ads

  11. Production “Our business model in 1964 is essentially the same as our model today: We grow by investing our money in design, development, marketing and sales and then contract with other companies to manufacture our products.”

  12. Production • Nike outsources nearly all production to outside manufacturers • Allows Nike to achieve huge economies of scale • More focus on product development and innovation (Source: Nike, Corporate Responsibility Report, FY 2006 as of May 31, 2006)

  13. ProductionNike’s Contract Factory Footprint (Source: Nike, Corporate Responsibility Report, FY 2006 As of Feb. 28, 2007)

  14. Production • Apparel - labor intensive • Footwear - capital intensive • Training provided to employees differs among sectors • Development programs for MBA graduates • International preparation for current employees • Trying to implement educational training for workers in factories

  15. Production • Controversy with the labor standards • Underpayment • Child labor • Working conditions

  16. Production • Retail Sales • Stores • Factory Outlets • NIKETOWNs • Online • Distributors/Licensees

  17. Costs • Research and Development • Marketing • Endorsements • Global costs

  18. Government Policy • Sustainability • Legal Issues • Patents

  19. Extent of Market & Market Structure • Global Market • 2008 Olympics • Monopolistic Competition • No barriers to entry • Each brand produces own brand or version of differentiated product

  20. Pricing Strategies Intertemporal Price Discrimination High initial price Price drops over time Willing to pay higher prices because products seen as status symbol among athletes

  21. Pricing Strategies Peak-Load Pricing Seasonality Sport-specific demand

  22. Non-pricing Strategies Adjusting mix of specific product offerings Trends Demand New, innovative products Research and development Patents

  23. Non-pricing Strategies Aggressive Marketing Endorsers Large volume TV ads Cause-related marketing Outsourcing China, Vietnam, Indonesia

  24. Strategies/Games • First-mover advantage • Extensive research and development • E-commerce

  25. Barriers to Entry • Free entry and exit • Nike and others have created legal barriers • Patents • “Air Technology” • Economies of scale • Start-up price

  26. Our Recommendation HOLD

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