Nike Inc. was founded by marathon enthusiast Phil Knight together with prominent track coach Bill Bowerman. It was first known as Blue Ribbon Sports, a company that specializes and manufactures running shoes for professional track and field athletes. Blue Ribbon Sports was manufacturing shoes at that time in order to meet the demands for efficient running shoes by track and field enthusiasts. Blue Ribbon Sports was then relaunched in 1978 as “Nike”, which was named after the Greek goddess of victory. The change in the company name was crucial for the company-wide revamp; and in order to entice more consumers to patronize the brand itself. Nike’s initial annual sales turnout garnered $8,000. In 1984, Nike reached the pinnacle of the athletic running shoe industry by overwhelming Adidas to lead all athletic shoes in terms of retailing. Total revenues for Nike reached a milestone after its dethroning of Adidas as the leading manufacturer of athletic footwear. This was a sign that Germany’s long history of domestic domination reached its vulnerable point.
Prior to being founded, Nike founder Phil Knight already came up with a company known as Blue Ribbon Sports. Knight together with renowned track coach Bill Bowerman founded Blue Ribbon Sports in order to address the clamor of athletes for efficient performance shoes. First year sales turnout garnered $8,000. And in 1971, BRS launched the concept of Nike, the Greek goddess of victory (Nike, 2008).
By the end of 2005, Nike recorded a total of $13.7 billion in revenues through the course of the fiscal year, and an 11.8% increase in 2004. Strong and consistent revenue progress and generation across its markets and a myriad of product lines all contributed to such increase. For the fiscal year of 2005, operating profit for Nike was $1.9 billion, over 2004 it ballooned to as much as 22.2%. In the fiscal year of 2004, net profit was $1.2 billion, a subsequent 28.1% over 2004. Its product distribution stretches from U.S., Asia Pacific, The Middle East, and the entirety of Europe. More than 23 people are employed in its main offices in Beaverton, Oregon alone. By the end of May 31, 2007, Nike has declared a total of revenues amounting to $16.3 billion, and a $1.3 increase prior to its present earnings (Nike, 2008).
Nike’s triad of primary product engines have employed more than 880,000 contract workers for 700 contract factories in 52 countries. Nike apparel, equipment, and footwear were constantly manufactured in these factories (Nike, 2008).
Competitive Advantage and Corporate Strategy
Nike’s competitive advantage includes worldwide competitive similarity, market barriers to penetrate, and the eclectic cultures of each target market. The company’s competitors reach Europe all the way from the United States. Among them are: Adidas, Reebok, and Puma. Nike is submerged into a saturated market, which every company rivals Nike in the production athletic performance shoes. Such companies like Adidas and Reebok have attempted to engulf Nike’s market share by manufacturing a series of shoe lines enhanced by fancy technology and fashion twists. With this in mind, international logic discrepancies emerged from such notion. Nike’s market share and expertise are apparently threatened bys such marketing moves on its competitors’ part. In addition to this, market barriers in the various segments imply that there are no secured areas within Nike’s competitive sphere. This creates opportunities for regional markets, which will be vulnerable to competitors. With this in mind, Nike is urged to adapt the cultural and distinct preference of each market segment. Nike reaches out to its market segments in order to meet the demands of these market segments’ particular taste and preference (Porter et al., 2002).
Financial Analysis and Strategic Objectives
Nike was in constant struggle in terms of sales in the U.S. due to a rampant economic letdown while it was internationally expanding in Europe. Eventually, Nike was compelled to sell licensing rights to local distributors in Europe. The company initialized such plans in order establish its market niche in Europe, while it generates the needed funds for its business operations in the U.S. Repercussions from this move were felt by Nike; the company’s marketing control and monitoring drowned in mediocrity due to the improper way of conveying the Nike message, which caused its products to gain obscurity rather than popularity. Phil Knight didn’t have penchant for advertising, with this in mind advertising budget for the company was inferior and under funded. Grassroots efforts by Knight seemed futile for Nike to generate revenues on a higher end. Eventually, as Nike embraced the sport of basketball, massive advertising has followed in order to stabilize the business. Nike launched a massive advertising campaign for its already popular basketball footwear line. Nike allocated an advertising budget of $5 million to $10 million from 1987 to 1988. Unfortunately, European consumers barely perceived Nike as both an expensive as well as an aggressive American brand. The situation alleviated due to the proliferation of middle market shoes and a unique set of distribution tactics. Revenue increased along with the advertising budget due to an efficient and apt system of distribution. Advertising increased from $10 million to $50 million in 1989 to 1992. For its European advertising, the company allocated a hefty $100 million (Porter et al., 2002).
Organizational Goals and Strategic Objectives
The company’s roots trace back to track and field events, Nike saw an opportunity to penetrate the market that covers such sport. It is the second most popular sport in Europe. Although Nike find easy way to enticed and sign up American athletes to endorse their products and bolster their sales, Nike experienced a hard time in luring European athletes to promote their products and the brand itself. Nike, being the American brand that it is, has no relative familiarity in Europe, which compelled Nike to ally itself to Europe’s largest local distributor of athletic shoe and sports apparel. Nike’s bootstrap solution only distanced itself more from potential consumers. Nike had to retrieve licenses from its distributors in order to manage and monitor its brand in Europe (Porter et al., 2002).
Operational and Environmental Analysis
Nike entered the European market in 1980, the company did not experienced major environmental ramifications. Liberal business environment has been steady. European region is regulated with apt social laws. Bull and bear markets have been relatively stable. The region adheres to a firm intellectual property protection and contract enforcement laws. Albeit the cultural differences and eclectic language, Nike has perceived Europe as a favorable market segment to conquer and market its products. A handful of European countries like Spain, Italy, France, and Germany all account for the glut of European athletic apparel and shoe sales. The company’s profit margin was hurt by the strong foreign exchange by the U. S. dollar against European currencies, due to currency inconsistencies and sporadic fluctuations. Even though the U.S. market letdown hampered Nike’s global expansion, sales and revenues recovered in the U.S. as Nike was still bent on global dominance. In order to initiate growth and progress, Nike generated marketing strategies to entice local consumers in Europe to perceive Nike as an expensive and aggressive American brand. Nike produced sports apparel and equipment for consumers to be widely exposed to the brand per se.
Nike is a global icon. It’s “Swoosh” logo is associated to success and victory. Nike’s market share is progressive because of its rapid revenue production.
Its research and development is Nike’s arguably its focal strength. Nike’s technology has progressed in order to address the demands of the professional athletes and ordinary consumers for state of the art and sophisticated sports gear and footwear.
Nike’s charismatic advertising forte is its claim to fame. Complemented with celebrity endorsements, Nike’s advertising arsenal never fails to entice new market segments. Profit margins are transcended due to its distinct and strong brand exposure.
Nike is always developing new technology for products. It also complements other companies’ products with partnerships.
Nike’s research and development has allowed its market share to transcend its conventional client base. The Nike brand is deemed a fashion brand through its variety of products and accessories.
Nike is easily imitated. It results in to the massive proliferation of counterfeit Nike products.
The retail industry is highly competitive. Consumers are very keen and are always on the lookout on buying premium products with cheap prices. Consumer price sensitivity is one imminent threat for Nike’s sales Weaknesses
Nike’s reputation as an iconic brand has its pitfalls as well. With this in mind, it’s very recognizable, it’s easily imitated
Nike’s total revenue has heavily depended on their footwear products.Nike has been passive regarding the development of its other athletic products
Since Nike does not compromise the high quality of its products, it commands a higher price compared to its competitors
Nike has a variety of athletic equipment for its diverse group of consumers. The company produces a myriad of athletic footwear and apparel, which addresses the needs of both the professional athlete and ordinary people. It has manufactured athletic footwear for basketball, training, running, women, and children. Surprisingly, each product is the retail leader in their respective categories. Nike has surpassed its reputation as a running shoe company. Furthermore, the company has engaged into the manufacturing of athletic footwear in other sports. Nike has manufactured performance footwear for sports such as: tennis, wrestling, aquatic sports, golf, soccer, baseball, cycling, and other sports. Nike bolstered their product line by complementing with the production of various Nike apparel in 1979. Every bag and accessory that Nike manufactures bears the Nike Swoosh logo, which promotes the brand even further.
Nike is always adamant on manufacturing high quality products that are complemented with their innovative technology. Nike’s benchmarking is one of its strengths as a company. It never compromises its quality standards. However, Nike commands a higher price compared to its competitors. However, Nike rationalizes such with its sophisticated technology evidently applied to its products. The company uses a pricing technique called “vertical integration”, which they operate in various channels. It also allows them to engage in alternative channel level of operations. Recently, Nike has conducted an athletic footwear market study for them to ascertain price margins. With this in mind, Nike makes a deliberate influence in pricing and moderate costs (Gemmary, 2008).
The sports market apparel has been good to Nike, and has been relatively successful. It accounts for more than 50% of revenues in Europe (Porter et al., 2002).
Nike owes much of its success to its massive advertising campaigns. Its advertising prowess is its claim to fame as the leader in the competitive athletic footwear industry. The innovative advertising tactics that Nike employs is its primary weapon to overwhelm its competitors. The company is adamant in augmenting its advertising campaign at all costs. Undoubtedly, the youth is the primary market segment of Nike. Furthermore, Nike’s promotion is enhanced by internet websites like Nike.com and Nikebasketball.com, which enables consumers to be more familiar with the brand.
Nike operates and sells its products within a network of distribution channels and country policies. Nike has more than 20,000 retail affiliates in the United States alone. It operates in more than 100 countries. It sells its products on an international scale through domestic distributors and subsidiaries. However, Nike once encountered a marketing problem in Europe with its distributors. Eventually, Nike bought the licenses of these distributors in order to promote the brand the Nike way.
Porter’s Five Forces Analysis
Nike’s suppliers have been clamoring for increased prices for raw materials used in manufacturing their products. Usually, these suppliers are responsible for the prices of raw materials to increase. Suppliers have gained the notoriety of manipulating the cost of raw materials, which generates a deliberate effect on the firm’s part. Suppliers are more manipulative whenever the number of suppliers is low. This gives the handful of suppliers to raise the price of raw materials, which in turn leaves firms line Nike no further options to purchase commodities of lower cost. An international brand like Nike is usually responsible for improving the working conditions within their factories. The firm provides the much-needed technical assistance, which help augment the performance of both factory workers and shop floor employees.
Buyer power is also considered the spending capacity of the consumer. In the athletic shoe industry, the buyer power is strong. This aspect simply states that the buyer or the consumer has always has a “say” on the price of particular good. Furthermore, buyer power is considered crucial due to the fact that it has a deliberate impact on the industry. However, athletic shoe companies like Nike has a discreet mutual arrangement regarding the aspect of buyer power. These intangible mutual contracts between the firm and its consumers have been apparent for quite some time now. Firms have been empowering consumers to augment their buyer power. Buyer power has a relationship with supplier power as well. A firm like Nike opines for the cost of raw materials it acquires from its suppliers. Buyer power is quite a delicate matter to elaborate on. The asymmetry between the buyer and the industry generates a bevy of discrepancies, which contributes to an inconsistent market condition and prevents forward integration.
Barriers and Threats of Entry
Perennial rival companies like Adidas and Reebok are not the only ones who pose a threat for the company. Neophyte athletic shoe companies both domestic and international are always attempting penetrate the industry will also have a deliberate effect in the industry. The outcome will be a fluctuation in percentage of the market share of casual clothing companies. Nike does its part through studying potential market segments to entice. Firms that tend to enter and exit a market are subjected to nominal profits.
Nike always strives to survive in a competitive industry through the aid of its competitive advantage. For the plethora of athletic shoe companies, competition always matters in order to bolster profitability. Nike augments their advertising and marketing strategy by its charismatic approach to its advertising. The global athletic shoe industry is highly competitive. The company has to compete with national and domestic retailers such as discount store chains, department stores, independent retail stores, and internet retailers that cater to a particular market segment of similar merchandise. The company has encountered stiff competition in European markets like Adidas and Puma, which range from regional to national chains.
Threat of Alternative Products & Substitutes
The apparent threat of alternative or substitute products is a common adversity for Nike. A number of athletic shoe firms have always attempted to overwhelm Nike’s market share through attempts in cheaper price movements in order for consumers to consider other brands aside from Nike. The subject of price elasticity surfaces whenever the price change of an alternative product affects as the demand for such product. The industry where Nike thrives is saturated by a bevy of substitute products, which to tend to constrained the ability of these companies to make an increase in prices. The casual apparel industry is always sporadic and innovative in terms of manufacturing products, which can draw consumers to purchase their products. The outcome is a letdown in sales for Nike Inc.
The company has always proven that no other athletic shoe company can overwhelm and dethrone Nike for overall athletic shoe company supremacy. Nike’s campaign is spearheaded by numerous its charismatic advertising campaigns coupled with its vast sophisticated technology that it incorporates in its products. Nike has always been a great aid in terms of complementing athletes with the best high quality sports gear in order to augment their performance. Nike’s financial conditions have been stable and progressing due to the upfront and massive advertising it employs to promote its brand. Founders Phil Knight and Bill Bowerman have been successful in making innovations in technology for athletic footwear. The “Swoosh” logo is almost synonymous to victory and success. Athletes and ordinary people owe a lot to Nike. The brand alone suggests that victory should be attained with impeccable performance. Nike will always continue to generate technology advances and create new advertising tactics in order to remain as the leader of the athletic footwear industry. The holistic thrust of the company is to provide professional athletes and ordinary people with athletic gears, which not only enhance their performance but to instill a lifestyle inspired by Nike.
Nike. (2008). History and Overview of Nike. Retrieved September 7, 2008, from
Porter, J., Harris,M.,Yeung,G. (2002). Nike Origins: Company and Product Analysis. Retrieved
March 22, 2008, from www.cs.ucla.edu/~gavin/pub/IntlBusMgmtNike
Gemmary. (2007). Marketing Audit for Nike. Retrieved September 7, 2008, from