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Strategic Plan: Nike Incorporation Report


Company Overview

Nike, Inc. is a multinational corporation that was established in 1964. Phil Knight and Bill Bowerman founded the firm that was initially known as Blue Ribbon Sports. However, it changed its name to Nike Incorporation in 1971. Its head office is located at Beaverton, Oregon. Since its inception, Nike, Inc. has successfully penetrated the apparel and accessories industry.

The firm specializes in designing, developing, and manufacturing apparel, footwear, and accessory products. Independent contractors, most of whom are located outside the US, produce its products. Nike primarily designs it products for athletic purposes. However, a significant proportion of its products are worn for leisure and casual reasons (Nike Incorporation, 2013).

Currently, Nike, Inc. is renowned as the largest manufacturer and supplier of athletic shoes and sports equipment in the world. The firm distributes its products through independent distributors, retail accounts, and company-owned retail stores. The firm has also adopted the concept of online marketing.

Nike’s success over the past decades has arisen from new product development and commitment towards marketing. Between 1990 and 1999, Nike extended its market reach by venturing into the sports industry. The firm started designing customized sports apparel for specific teams such as the Brazilian National Team and the United States men and female national soccer teams.

Moreover, the firm adopted the concept of product endorsement by contracting sports celebrities. In 1995, Nike contracted Eldrick ‘Tiger’ Woods to be its marketing ambassador (Nike Incorporation, 2013).

By the end of 2013, Nike had a human resource base of over 48,000 employees in all its stores that are located in different parts of the world. The firm considers human capital one of the most valuable aspects in achieving operational efficiency. Subsequently, the firm has nurtured an effective employee relationship.

Mission

Nike, Inc. intends to provide athletes around the world with innovative and inspiring products.

Corporate Values

Nike’s operations are based on a number of principles, which are commonly referred to as the 11 maxims as illustrated below.

Competitiveness

The firm ensures that all its operations are focused on sustaining its competitiveness in a market that is characterized by a high rate of change. It urges its employees to act like leaders while executing their responsibilities.

Innovation

The firm perceives innovation as the core component in achieving organizational competency.

Profit maximization

Nike, Inc. is a business. Subsequently, its operations are profit oriented.

Nike is a brand

The firm is committed towards ensuring that its products achieve global market recognition. To achieve this goal, the firm is focusing on fostering brand recognition through effective brand management practices such as developing brand identity.

Its ‘swoosh’ logo, which indicates speed, has gained remarkable market recognition around the world. The firm perceives its logo (‘swoosh’ symbol) as a mark of global leadership. Therefore, Nike only penetrates markets that it believes it can attain market leadership (Nike Incorporation, 2013).

Simplify and go

Nike specializes in designing and producing products that have short life cycles with regard to fashion and technology. Consequently, the firm appreciates the importance of effective decision making to attain market success.

Customer focus

Nike appreciates the complexity that is associated with meeting customers’ needs. Subsequently, the firm ensures that its products are aligned with such needs, tastes, and preferences. The firm considers customers one of its stakeholders.

‘Be a sponge’

The firm encourages its employees to be flexible in terms of executing their duties. Its commitment towards flexibility arises from recognition of the importance of listening to new ideas in its new and continuous product development processes.

Evolve immediately

Nike Incorporation focuses on positioning itself as the market leader in the sports apparel, footwear, and accessories market. Thus, the firm perceives change as a fundamental source of innovation. The firm’s broad product portfolio evidences its commitment towards innovation.

Corporate responsibility

Nike considers itself a global citizen. Thus, it adheres to social responsible business operations. Moreover, Nike, Inc. encourages other stakeholders to observe the element of diversity, sustainability, transparency, and honesty in their operations.

Mastering the fundamentals

Nike views its ability to refine its current organizational performance as key component in its future success. Thus, the firm undertakes constant evaluation of its performance to identify the fundamental elements.

Organizational culture

Nike understands the significance of fostering a strong organizational culture to achieve long-term success. For example, the firm continues to uphold late Bill Bowerman’s values of innovation, understanding, and respecting customers’ needs.

Products

Nike focuses on producing seven main categories of the Brand Jordan and Nike Brand products. These categories include:

  1. Basketball
  2. Football
  3. Men’s Training
  4. Women’s Training
  5. Running
  6. Action Sports
  7. Nike Sportswear

In addition to the above product categories, Nike designs different recreational and kids’ products. In an effort to develop a rich product portfolio, Nike, Inc. has diversified its product offering by designing goods for various sports such as lacrosse, wrestling, walking, tennis, outdoor activities, football, golf, baseball, and cricket (Nike Incorporation, 2013).

In an effort to gain substantial market share, Nike, Inc. has appreciated the emergence of a trend whereby consumers are increasingly appreciating sports apparel and footwear as part of their casual and leisurewear. Currently, the firm’s running, basketball, Nike sportswear, soccer, and children’s products are the top-selling products. Nike projects this trend to be sustained in the future.

SWOT Analysis

Advantages

Market recognition

The firm has gained significant market recognition because of its effective brand management practices. For example, the adoption of the ‘swoosh’ as the firm’s trademark has made Nike one of the widely recognized companies in the world.

Cost management

Nike’s production processes are undertaken by independent factories, which are selected from the global market. The firm mainly outsources its production activities to low-cost companies that are mainly located in the emerging Asian economies such as China, Thailand, Taiwan, Malaysia, Sri Lanka, Vietnam, and Indonesia. Because of outsourcing, Nike has succeeded in minimizing the cost of operation (Nike Incorporation, 2013).

Competitiveness

Nike has succeeded in fostering competitiveness in the global market. One of the sources of its competitiveness includes effective marketing. The firm has adopted effective marketing strategies, which have enhanced the rate of product penetration in the global market. For example, it has adopted product endorsement by superstar athletes as one of its marketing strategies. Consequently, Nike has been able to enter diverse markets.

Product research and development

The firm considers research and development a fundamental element of achieving market success. Thus, the firm invests a substantial amount of resources in its market research processes. This plan has played a remarkable role in identifying the prevailing market trends. Additionally, investment in research and development enables Nike to align its products with the prevailing market needs.

The firm’s research and development activities are undertaken by a qualified research and development team, which comprises experts in different areas such as chemistry, industrial design, exercise physiology, biomechanics, and engineers amongst other experts. The firm’s research and development activities are also undertaken in collaboration with experienced advisory boards and research committees.

The committees comprise podiatrists, coaches, trainers, equipment managers, and orthopedists. The collaboration between experts enables the firm to successfully identify areas of improvement. Therefore, the firm’s commitment towards research and development has significantly minimized injury amongst athletes whilst improving their performance.

Corporate social responsibility

A survey conducted to assess adherence to social responsible business practices in 2010 ranks Nike, Inc. 3rd amongst the most responsible firms in the world. The firm’s success in CSR is evidenced by its adoption of concepts of reducing, recycling, and re-using its products. Subsequently, the firm has been able to minimize environmental pollution.

Weaknesses

Labor practices

Nike has extensively been criticized for its unlawful and unfair labor practices. First, the firm is criticized for contracting companies from Mexico, China, Indonesia, and Vietnam to undertake its production processes. The criticism arises from the contracted companies’ violation of the best labor practices such as adherence to minimum wage and paying employees’ overtime.

For example, in 2011, the firm was accused of abusing its employees and paying them unfair wages in Indonesia (Taibi, 2013). In addition to the above issues, Nike is also criticized for its failure to curb child labor. Some of the countries in which Nike is accused of exploiting child labor in its production processes include Bangladesh and Pakistan.

Working environment

The firm has also been criticized for subjecting employees to unhealthy working environment. In 2001, the British Broadcasting Corporation released a documentary showing poor working conditions in a Cambodian factory that had been outsourced by Nike, Inc. The documentary showed that most of the employees worked for over 16 hours per day for seven days. Such practices adversely affected the firm’s image and sales.

Opportunities

The ability of an organization to attain competitive advantage is influenced by the extent to which it exploits opportunities that are available in the business environment. Consequently, it is essential for organizations to undertake broad market research to identify viable business opportunities.

Pearce and Robinson (2014) assert that market research enables an organization to identify new ideas and market gaps that it can exploit. Nike faces numerous opportunities that it can exploit in order to improve its competitiveness. Some of the opportunities are illustrated below.

Product development

Nike can achieve long-term success by investing in new and continuous product development. Despite the fact that Nike specializes in designing sports footwear and apparel, most of its customers do not participate in sports. Therefore, the firm can invest in new product development to satisfy the market demands.

Nike has established adequate capacity in developing new products because of its well-experienced research and development team. Nike should also consider diversifying its product portfolio by venturing into new market segments. One of the categories that the firm should consider includes the high-value products such as jewelries and sunglasses. High-value products enable organizations to maximize their profitability.

Internationalization

Most economies around the world have experienced significant economic growth, despite the recent global financial crisis. The economic growth has emanated from implementation of effective economic stimulus packages. Consequently, most households have experienced an increment in their purchasing power. Nike should consider exploiting the emerging market opportunities.

However, it should undertake a comprehensive market research to identify the most viable market to enter. Some of the markets that the firm should consider include the emerging economies such as countries in the Gulf Region. By venturing into new markets, there is a high probability of Nike increasing its sales revenue and hence its profitability.

Marketing

The sports apparel, footwear, and accessories market is experiencing significant transformation, which is evidenced by increment in the intensity of competition. Some of the firm’s core competitors include Addidas-Reebok, Under Armor, New Balance Athletic, Fila, and Puma. These firms have successfully penetrated the global sportswear market. However, Nike continues to be the market leader.

To sustain its market, Nike should invest in aggressive marketing to nurture adequate brand recognition, especially in its new markets. One of the aspects that the firm should consider includes sports sponsorship and product endorsement.

The firm should consider adopting the concept of product sponsorship and endorsement. Nike should identify different sports celebrities, prominent personalities, and sports team that it can include in its sponsorship and product endorsement processes. This plan will enable the firm to create sufficient awareness amongst diverse customer groups.

Technology

Nike should consider enhancing its competitiveness by investing in the emerging technologies in its production process. Leveraging on technology will enhance the firm’s ability to develop high quality and safe products. Consequently, the firm will be able to appeal a large number of potential customers.

Threats

Firms face different issues that might threaten their long-term competitiveness and survival. Thus, it is imperative for business leaders to be cognizant of the possible threats in their operations. Some of the core threats to Nike’s operations are evaluated below.

Competition

The firm’s competitiveness may be affected by increment in the intensity of competition within the athletic, equipment, and footwear industry. Some of the old industry players such as Addidas-Reebok, Li Ning, V.F Corp, and Puma have sustained their competitiveness. Moreover, newer companies such as Under Armor have gained significant market share, which was previously controlled by Nike.

The firm is also competing with different vertical retailers, for example Uniqlo and Lululmon. Currently, firms in the apparel industry are increasingly diversifying their product portfolio through product line extension. Additionally, the industry is experiencing an increment in the number of new entrants in an effort to exploit the available market opportunities.

Change in consumer tastes

Satisfying consumers’ demand is a complex undertaking that organizations encounter in their pursuit of competitiveness. The complexity arises from the fact that consumer tastes and preferences are subject to change. Therefore, rapid change in consumer tastes and preference is one of the major risks that the firm faces in its operation.

Economic changes

Occurrence of economic changes such as the recent global financial crisis and the sovereign debt crisis in the Euro Zone may pose a threat to the firm’s ability to maximize its profitability. Melicher and Norton (2013) assert that such economic changes adversely affect consumers’ purchasing power because of economic uncertainty.

Additionally, during such economic periods, consumers reduce their consumption expenditure. Subsequently, the firm may experience a reduction in its market share.

Business objectives

Nike, Inc. focuses on maximizing its shareholders’ wealth. To achieve this goal, Nike intends to achieve a substantial rate of market growth. In 2014, Nike announced its intention to increase its sales revenue to over US$36 billion by 2017.

This goal represents a 42% increment in its sales revenue from US$ 25.31 billion fiscal revenue in 2013. Nike’s management team projects its sales to reach $30 billion during its 2015 fiscal year (Lulu, 2013).

Nike also intends to continue developing unique and high quality sports apparel, footwear, and equipment to sustain its market dominance. According to the firm, achieving market dominance will enable it attain an optimal market position. In addition to the above objectives, Nike intends to sustain its annual capital expenditure within a range of 3%-4% of its total annual revenues (Saintvilus, 2014).

Nike has managed to sustain its financial performance over the past years. For example, the firm’s net income between 2011 and 2013 increased from $ 2,172 million to $ 2,464 million. The chart below illustrates the trend in the firm’s financial performance.

Amount in million $
2013 2012 2011
Sales revenues 25,313 23,331 20,117
Cost of sales 14,279 13,183 10915
Gross profit 11,034 10,148 9,202
Demand creation expense 2,745 2,607 2,344
Operating overheads 5,035 4,458 4,017
Selling and administration expense 7,780 7,065 6,361
Earnings before tax 3,272 3,025 2,862
Tax expense 808 756 690
Effective tax rate 24.70% 25% 24.10%
Net income 2,464 2,269 2,172

Source: (Nike Incorporation, 2013)

Key strategies

To achieve the above business objectives, it is critical for the firm to formulate effective strategies. Some of the strategies that the firm’s management team should take into account are illustrated herein.

Geographical market expansion

The firm should consider expanding into the international market to maximize its sales revenue.

Leveraging on emerging technologies

Nike, Inc. should consider exploiting the marketing capabilities that are presented by the emerging web-based technologies. This move will enhance the firm’s ability to increase its customer base.

Product quality

Consumers are increasingly demanding quality and unique products in their consumption process. According to Yee and Sidek (2008), clients are progressively basing their brand loyalty decisions on product quality. This trend has arisen from the intensity of competition within the sportswear industry, which has significantly increased consumers’ choice whilst reducing the cost of switching to competing products.

Strategy implementation

Market expansion

Nike intends to increase its sales revenue to US$36 billion. However, this goal can only be achieved if the firm increases its customer base. Subsequently, it is vital for the firm to invest in an aggressive internationalization strategy. The firm should consider entering the emerging markets in China and other countries in Eastern and Central Europe. Moreover, Nike should consider expanding into North America and Japan.

Currently, these markets are experiencing a high rate of economic growth, which has arisen from their commitment towards economic transformation. Venturing into these markets will increase Nike’s likelihood of maximizing its sales revenue because of their high population growth rate (Leonard, 2014).

Previously, Nike experienced challenges in its quest to market its products in the Chinese market because of the strong currency headwinds and/or the existence of inventory build-up. However, the firm is committed towards succeeding in the Chinese market by developing products that are aligned with the customer tastes and preferences.

Apart from venturing into new markets, Nike should consider increasing its market reach by opening new stores in its existing markets. This strategy will improve product accessibility and hence the firm’s ability to increase its customer base (Pearce & Robinson, 2014).

In its market expansion efforts, the firm should consider contracting renowned sports athletes to endorse its products. Effective product endorsement will aid in establishing product authenticity, hence developing a high level of customer loyalty (Lussier & Kimball, 2009).

Product differentiation

In its quest to succeed in the international market, Nike should consider investing in continuous and new product development to enhance the level of its product differentiation. However, the firm’s success in differentiating its products will depend on how well it understands market dynamics. Therefore, the firm will be required to undertake extensive competitor and consumer market research.

In its competitor market research, Nike should focus on understanding its core competitors’ products in order to identify the prevailing gaps with regard to product quality. Yee and Sidek (2008) define product quality as product features and characteristics that lead to satisfaction of the consumers’ implied or stated needs.

Consumers may switch to competition products if they perceive that they are not achieving the desired level of utility by consuming a particular brand.

The consumer market research will enable the firm to understand consumer tastes and preferences towards sports apparel, equipment, and footwear. In the course of its operation, Nike recognizes that its success may be affected by the changing consumer tastes, which cannot be forecasted with a 100% degree of certainty (Nike Incorporation, 2013).

One of the issues that the firm should take into account in its product development includes enhancing its products’ functional attributes. For example, the firm should ensure that its products are odor-resistant, durable, waterproof, lightweight, breathable, and anti-microbial. These aspects will enhance the functionality of its sportswear products. Subsequently, the firm will be able to undertake effective product design.

In order to succeed in developing new products, Nike should consider expanding its brand by establishing new product categories. Some of the products that the firm should consider include jewelries. Venturing into new market segments will boost the firm’s sales revenues.

E-commerce

Consumers are increasingly using various web-based technologies in their purchasing process. This trend has emanated from the high rate of technological developments such as internet penetration. Morrison (2006) asserts, “the rapid adoption of digital technologies and evolving shopping behaviors are transforming e-commerce into an essential marketing element” (p.65).

Therefore, Nike must consider investing in e-commerce to attract the emerging digital consumers. Currently, the firm has implemented the ‘Direct-to-Consumer’ strategy in an effort to reach a large number of consumers.

Nike should consider improving its e-commerce capability by investing in effective online technologies. One of the issues that the firm should consider entails designing an online platform or applications that will enable it interact with its customers.

Therefore, the firm will be able to gain adequate market intelligence, which can be utilized in building the brand. Egol, Rajagopalan, and Sayer (2012) confirm, “online direct-to-consumer sites are valuable tools for building stronger, more loyal consumer relationships, creating category growth, and when retailer consolidation is a concern, sustaining sales in the face of declining reach” (p.14).

Additionally, the platform should provide customers with an opportunity to purchase goods online. Investing in e-commerce technologies will enhance the firm’s ability to customize its operations, hence developing a strong brand loyalty.

Measurement and control

Nike should formulate a comprehensive measurement and control plan. The measurement and control plan should take into account a number of issues. First, the firm should continuously evaluate its annual sales revenue to identify the trend.

The analysis of the sales revenue should be undertaken geographically to determine the contribution of each geographic market that the firm has ventured into in relation to its overall sales revenue.

Conducting geographical assessment will provide the firm with sufficient insight on whether it is adequately exploiting the market potential. Subsequently, the firm will be able to identify the prevailing market gaps and make the necessary adjustments in its marketing processes.

In addition to the above aspects, Nike should evaluate the size of its customer base and market share to determine the likelihood of achieving the set objectives. By increasing its customer base, the firm will be able to maximize its sales revenue. Gaining additional market share will enhance its level of market dominance.

Conclusion

Nike has managed to achieve an optimal market position in the global sports apparel and footwear industry. Its success has arisen from its adoption of effective strategic management practices, which are aimed at maximizing the shareholders’ wealth and fostering a high level of customer satisfaction. One of the strategic management practices that the firm has considered in its operation entails effective brand management.

The firm is committed towards positioning itself as one of the widely recognized brands in the sports apparel, footwear, and equipment market in order to maximize the shareholders’ wealth.

However, the likelihood of achieving this goal will depend on the firm’s commitment in implementing effective strategic management practices. Some of the strategies that it should consider include investing in market expansion, product differentiation, and e-commerce.

In its market expansion process, Nike should exploit opportunities that are available in the emerging economies in Europe and Asia. Examples of such economies include India and China. The firm should ensure that its products are optimally positioned in the global market through effective product differentiation.

One of the ways through which the firm can achieve this goal is by investing in effective product research and design. Additionally, it should invest in the emerging web-based technologies such as e-commerce to exploit the emerging consumer trends. By leveraging on technology, Nike will be able to enhance its competitive advantage by developing a strong relationship with its customers.

Any organization that wishes to remain on top of competition should devise strategies that will drive it towards realizing this objective. One of the strategies is coming up with a team of experts whose role is to steer the organization’s marketing plan. As such, Nike should set aside a management team to carry out this task. Nike’s selected team should continuously evaluate its performance in the local and international market.

Evaluation of international market performance should be undertaken geographically to determine its regional performance. Moreover, geographical evaluation will enable it formulate strategies that are specific to the respective markets, hence improving their effectiveness.

Based on the expositions made in the paper, it is clear that Nike has made significant strides since its inception. However, based on the evident competition from the emerging companies in addition to the changing customer demands and preferences, the firm has to formulate techniques that will sustain its performance in the market.

Reference List

Egol, M., Rajagopalan, A., & Sayer, A. (2012). E-commerce and consumer goods; a Strategy for omnichannell success. London: Sage.

Leonard, K. (2014). Nike Incorporation announces target for FY17; revenues of $36 Billion. Web.

Lulu, U. (2013). . Web.

Lussier, R., & Kimball, D. (2009). Applied sport management skills. New York, NY: Human Kinetics.

Melicher, R., & Norton, E. (2013). Introduction to finance; markets, investments, and Financial management. New York, NY: John Wiley & Sons.

Morrison, J. (2006). International business environment: global and local marketplaces in a changing world: the international business environment. London: Palgrave Macmillan.

Nike Incorporation. (2013). Form 10-K. Web.

Pearce, J., & Robinson, R. (2014). Strategic management. New York, NY: McGraw-Hill Publishers.

Saintvilus, R. (2014). Nike’s long term goals are better than anything kicked in the world cup. Web.

Taibi, C. (2013). . Web.

Yee, W., & Sidek, Y. (2008). Influence of brand loyalty on consumers sportswear. International Journal of Economics and Management, 2(2), 221-236.

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