Case 2: Nike, Inc.

– 2009
Case Notes Prepared by: Dr. Mernoush Banton
Case Author: Randy Harris

A. Case Abstract

Nike, Inc. (www.nike.com) is a comprehensive strategic management case that

includes the company’s fiscal May 31st, 2009 financial statements, competitor
information and more. The case time setting is the year 2009. Sufficient internal and
external data are provided to enable students to evaluate current strategies and
recommend a three-year strategic plan for the company. Headquartered in
Beaverton in the U.S. state of Oregon, Nike is traded on the New York Stock
Exchange under ticker symbol NKE.

B. Vision Statement (Actual)

“Bring inspiration and innovation to every athlete in the world.”

C. Mission Statement (Actual)

“To be the leading sports brand in the world.”

Mission Statement (Proposed)

As the largest seller of athletic footwear and athletic apparel in the world (2, 3), we
create products for consumers and athletes (1) who enjoy having quality products
that are high performance and reliable, such as shoes, apparel, and technologically
advanced equipment) (4). Our dedicated employees (9) continuously work on
developing new products, price, and product identity through marketing and
promotion (7). The company aims to lead in corporate citizenship (8) through
proactive programs that reflect caring for the world family of Nike (6) and by
ensuring continuous growth and profitability to our investors and stakeholders (5).

1. Customer
2. Products or services
3. Markets
4. Technology
5. Concern for survival, profitability, growth
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees

Copyright © 2011 Pearson Education Limited

D. External Audit

CPM – Competitive Profile Matrix

Nike Adidas Puma

Critical Success Weighted Weighted Weighted
Factors Weight Rating Score Rating Score Rating Score
Price competitiveness 0.10 3 0.30 2 0.20 1 0.10
Global Expansion 0.07 4 0.28 3 0.21 2 0.14
Organizational Structure 0.04 3 0.12 1 0.04 1 0.04
Technology 0.09 3 0.27 1 0.09 2 0.18
Product Safety 0.15 2 0.30 3 0.45 4 0.60
Customer Loyalty 0.09 4 0.36 3 0.27 2 0.18
Market Share 0.09 4 0.36 3 0.27 2 0.18
Advertising 0.12 4 0.48 3 0.36 2 0.24
Product Quality 0.12 3 0.36 2 0.24 1 0.12
Product Image 0.07 4 0.28 3 0.21 2 0.14
Financial Position 0.06 4 0.24 3 0.18 2 0.12
Total 1.00 3.35 2.52 2.04

Opportunities

1. Younger consumers are less price sensitive and generally spend more on
casual and athletic footwear than older consumers
2. Most footwear companies have outsourced their production abroad in order to
maintain lower cost and R&D expenses
3. U.S. footwear imports totaled 2.36 billion pairs in 2007, or roughly 7.9 pairs
per capita which was up 0.4 percent from 2006
4. North American Free Trade Agreement (NAFTA) and the World Trade
Organization (WTO), both helped eliminate quotas and tariff barriers for
foreign footwear manufacturers to ship their goods
5. The Internet allows footwear companies to pursue a direct to consumer sales
channel
6. Sales of apparel, accessories, and footwear on the Internet has been growing
at a double digit pace, considerably faster than more traditional sales models
such as retail stores
7. Internet sales of apparel, accessories, and footwear could reach 18 percent of
category sales by 2012
8. Companies that added a web-based sales strategy are able to customize
footwear and other merchandise directly to the customer’s needs and taste,
are able to achieve considerably better pricing, as well as “deepening” the
emotional bond consumers have with the brand

Copyright © 2011 Pearson Education Limited

 Threats

1. After the age of 40, the typical consumer is not willing to pay more than
US$35 to $40 per pair for athletic footwear
2. Competition is strong among athletic footwear and apparel from off brand
companies
3. Fluctuation of foreign currency impacts the cost of importing goods to the
U.S.
4. Increase in unemployment has impacted the household income which may
result in spending less on brand name
5. Barrier to entry is low
6. Level of inventory is increasing in many retail stores due to weak economy

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted

Score

Opportunities
1. Younger consumers are less price sensitive and 0.08 3 0.24
generally spend more on casual and athletic
footwear than older consumers
2. Most footwear companies have outsourced their 0.07 4 0.28
production abroad in order to maintain lower cost
and R&D expenses
3. U.S. footwear imports totaled 2.36 billion pairs in 0.07 3 0.21
2007, or roughly 7.9 pairs per capita which was
up 0.4 percent from 2006
4. North American Free Trade Agreement (NAFTA) 0.06 4 0.24
and the World Trade Organization (WTO), both
helped eliminate quotas and tariff barriers for
foreign footwear manufacturers to ship their
goods
5. The Internet allows footwear companies to 0.07 4 0.28
pursue a direct to consumer sales channel

6. Sales of apparel, accessories, and footwear on 0.08 3 0.24

the Internet has been growing at a double digit
pace, considerably faster than more traditional
sales models such as retail stores
7. Internet sales of apparel, accessories, and 0.07 4 0.28
footwear could reach 18 percent of category
sales by 2012
8. Companies that added a web-based sales 0.06 3 0.18
strategy are able to customize footwear and
other merchandise directly to the customer's
needs and taste, are able to achieve considerably

Copyright © 2011 Pearson Education Limited

 better pricing, as well as "deepening" the
emotional bond consumers have with the brand

Threats
1. After the age of 40, the typical consumer is not 0.07 3 0.21
willing to pay more than US$35 to $40 per pair
for athletic footwear
2. Competition is strong among athletic footwear 0.08 2 0.16
and apparel from off brand companies
3. Fluctuation of foreign currency impacts the cost 0.06 2 0.12
of importing goods to the U.S.
4. Increase in unemployment has impacted the 0.09 3 0.27
household income which may result in spending
less on brand name
5. Barrier to entry is low 0.06 2 0.12

6. Level of inventory is increasing in many retail 0.08 2 0.16

stores due weak economy

Total 1.00 2.99

Positioning Map

Copyright © 2011 Pearson Education Limited

 Customer Loyalty
(High)

Nike

Adidas

Puma

Price (low) Price (High)

Customer Loyalty
(Low)

E. Internal Audit

Strengths

1. Nike is the dominant competitor for athletic footwear priced above US$60 per
pair, holding better than a 50 percent market share for athletic footwear
priced $85 per pair or higher
2. Nike characterizes its organization as a collaborative matrix organization
3. The Jordan brand has a 10.8 percent share of the overall U.S. shoe market,
which makes it the second biggest brand in the country and more than twice
the size of Adidas’ share
4. Three out of every four pairs of basketball shoes sold in the United States are
Jordan, while 86.5 percent of all basketball shoes sold over US$100 are
Jordan
5. Nike’s 2009 revenues increased 2.9 percent to US$19.1 billion
6. Inside the United States, Nike has three significant distribution and customer
service facilities
7. Nike estimates that they sell products to more than 25,000 retail accounts in
the United States and more than 27,000 retail accounts, including Nike-
owned stores and a mix of independent distributors and licensees outside the
United States
8. The company’s website, www.nikebiz.com, allows customers to design and
purchase Nike products directly from the company
9. Nike has five wholly-owned subsidiaries: Cole Haan, Converse, Hurley
International, NIKE Golf, and Umbro Ltd

Copyright © 2011 Pearson Education Limited

 Weaknesses

1. Nike’s 2009 net income decreased 21 percent to US$1.48 billion

2. Almost all of Nike’s footwear is manufactured outside the United States by
independent contractors
3. In fiscal 2008, contract manufacturers in China, Vietnam, Indonesia, and
Thailand manufactured 99 percent of Nike’s footwear worldwide
4. Because Nike competes primarily in athletic footwear, apparel and related
sporting equipment, its sales are heavily concentrated in the youth and young
adult market
5. Accounts payable has increased by almost US$1.0 billion in 2009
6. Negative publicity and boycotting of the Nike products due to outsourcing jobs
overseas and the use of child labor in such factories

Financial Ratio Analysis (December 2009)

Growth Rates % Nike Industry S&P 500

Sales (Qtr vs year ago qtr) -4.00 -2.10 -4.80
Net Income (YTD vs YTD) -1.50 -2.00 -6.00
Net Income (Qtr vs year ago qtr) -4.00 -1.60 26.80
Sales (5-Year Annual Avg.) 9.37 14.53 12.99
Net Income (5-Year Annual Avg.) 9.47 11.78 12.69
Dividends (5-Year Annual Avg.) 21.51 14.72 11.83

Price Ratios Nike Industry S&P 500

Current P/E Ratio 22.0 25.7 26.7
P/E Ratio 5-Year High 23.5 0.9 16.6
P/E Ratio 5-Year Low 10.7 0.2 2.6
Price/Sales Ratio 1.75 2.10 2.25
Price/Book Value 3.49 3.96 3.48
Price/Cash Flow Ratio 17.50 17.70 13.70

Profit Margins % Nike Industry S&P 500

Gross Margin 44.5 49.2 38.9
Pre-Tax Margin 10.3 14.4 10.3

Copyright © 2011 Pearson Education Limited

Net Profit Margin 8.0 10.1 7.1
5Yr Gross Margin (5-Year Avg.) 44.5 51.7 38.6
5Yr PreTax Margin (5-Year Avg.) 12.9 18.2 16.6
5Yr Net Profit Margin (5-Year Avg.) 9.0 12.1 11.5

Financial Condition Nike Industry S&P 500

Debt/Equity Ratio 0.06 0.06 1.09
Current Ratio 3.5 3.5 1.5
Quick Ratio 2.7 2.6 1.3
Interest Coverage 223.8 139.0 23.7
Leverage Ratio 1.4 1.4 3.4
Book Value/Share 18.94 15.21 21.63
Adapted from www.moneycentral.msn.com

Net Profit
Avg P/E Price/ Sales Price/ Book
Margin (%)
05/09 17.80 1.46 3.19 7.8
05/08 16.40 1.85 4.29 10.1
05/07 16.10 1.77 4.05 9.1
05/06 16.00 1.42 3.27 9.3
05/05 18.00 1.62 3.80 8.8
05/04 18.40 1.57 3.91 7.7
05/03 17.20 1.40 3.70 6.9
05/02 21.30 1.48 3.73 6.8
05/01 20.10 1.18 3.16 6.2
05/00 23.00 1.33 3.69 6.4

Book Value/ Debt/ Return on Return on Interest

Share Equity Equity (%) Assets (%) Coverage
05/09 $17.91 0.09 17.1 11.2 NA
05/08 $15.93 0.08 24.1 15.1 NA
05/07 $14.00 0.08 21.2 14.0 NA
05/06 $12.28 0.11 22.1 14.1 NA
05/05 $10.81 0.14 21.5 13.8 NA
05/04 $9.09 0.17 19.8 12.0 36.6
05/03 $7.57 0.21 18.5 10.9 26.8
05/02 $7.21 0.29 17.4 10.4 22.1
05/01 $6.51 0.37 16.9 10.1 15.7
05/00 $5.82 0.46 18.5 9.9 20.4

Copyright © 2011 Pearson Education Limited

Adapted from www.moneycentral.msn.com

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weight Rating Weighted

Score

Strengths
1. Nike is the dominant competitor for athletic 0.08 4 0.32
footwear priced above US$60 per pair, holding
better than a 50 percent market share for
athletic footwear priced $85 per pair or higher
2. Nike characterizes its organization as a 0.02 3 0.06
collaborative matrix organization
3. The Jordan brand has a 10.8 percent share of 0.06 4 0.24
the overall U.S. shoe market, which makes it
the second biggest brand in the country and
more than twice the size of Adidas' share
4. Three out of every four pairs of basketball 0.08 4 0.32
shoes sold in the United States are Jordan,
while 86.5 percent of all basketball shoes sold
over US$100 are Jordan
5. Nike's 2009 revenues increased 2.9 percent to 0.09 4 0.36
US$19.1 billion

6. Inside the United States, Nike has three 0.05 3 0.15

significant distribution and customer service
facilities
7. Nike estimates that they sell products to more 0.04 3 0.12
than 25,000 retail accounts in the United
States and more than 27,000 retail accounts,
including Nike-owned stores and a mix of
independent distributors and licensees outside
the United States
8. The company's website, www.nikebiz.com, 0.07 4 0.28
allows customers to design and purchase Nike
products directly from the company
9. Nike has five wholly-owned subsidiaries: Cole 0.07 3 0.21
Haan, Converse, Hurley International, NIKE
Golf, and Umbro Ltd
Weaknesses
1. Nike's 2009 net income decreased 21 percent 0.07 2 0.14
to US$1.48 billion

2. Almost all of Nike's footwear is manufactured 0.08 1 0.08

outside the United States by independent
contractors
3. In fiscal 2008, contract manufacturers in 0.06 1 0.06
China, Vietnam, Indonesia, and Thailand
manufactured 99 percent of Nike's footwear
worldwide

Copyright © 2011 Pearson Education Limited

4. Because Nike competes primarily in athletic 0.08 1 0.08
footwear, apparel and related sporting
equipment, its sales are heavily concentrated
in the youth and young adult market
5. Accounts payable has increased by almost 0.08 2 0.16
US$1.0 billion in 2009

6. Negative publicity and boycotting of the Nike 0.07 1 0.07

products due to outsourcing jobs overseas and
the use of child labor in such factories
Total 1.00 2.65

F. SWOT Strategies

Strengths Weaknesses
1. Nike is the dominant 1. Nike’s 2009 net income
competitor for athletic decreased 21 percent
footwear priced above to US$1.48 billion
US$60 per pair, 2. Almost all of Nike’s
holding better than a footwear is
50 percent market manufactured outside
share for athletic the United States by
footwear priced $85 independent
per pair or higher contractors
2. Nike characterizes its 3. In fiscal 2008, contract
organization as a manufacturers in
collaborative matrix China, Vietnam,
organization Indonesia, and
3. The Jordan brand has a Thailand manufactured
10.8 percent share of 99 percent of Nike’s
the overall U.S. shoe footwear worldwide
market, which makes it 4. Because Nike competes
the second biggest primarily in athletic
brand in the country footwear, apparel and
and more than twice related sporting
the size of Adidas’ equipment, its sales
share are heavily
4. Three out of every four concentrated in the
pairs of basketball youth and young adult
shoes sold in the market
United States are 5. Accounts payable has
Jordan, while 86.5 increased by almost
percent of all US$1.0 billion in 2009
basketball shoes sold 6. Negative publicity and
over US$100 are boycotting of the Nike
Jordan products due to
5. Nike’s 2009 revenues outsourcing jobs
increased 2.9 percent overseas and the use
to US$19.1 billion of child labor in such

Copyright © 2011 Pearson Education Limited

 6. Inside the United factories
States, Nike has three
significant distribution
and customer service
facilities
7. Nike estimates that
they sell products to
more than 25,000
retail accounts in the
United States and
more than 27,000
retail accounts,
including Nike-owned
stores and a mix of
independent
distributors and
licensees outside the
United States
8. The company’s
website,
www.nikebiz.com,
allows customers to
design and purchase
Nike products directly
from the company
9. Nike has five wholly-
owned subsidiaries:
Cole Haan, Converse,
Hurley International,
NIKE Golf, and Umbro
Ltd

Opportunities S-O Strategies W-O Strategies

1. Younger consumers 1. Expand into 1. Develop new products
are less price sensitive international market for small kids based on
and generally spend more where the cartoon characters
more on casual and economy is stronger (W4, O1, O3)
athletic footwear than (S1, S3, S4, S7, O1) 2. Sponsor more athletics
older consumers 2. Increase advertising programs, mostly for
2. Most footwear and promotion through young generation (W1,
companies have social networking such W4, W6, O1, O2, O3)
outsourced their as Twitter and
production abroad in Facebook (S8, O1, O5,
order to maintain lower O7)
cost and R&D expenses
3. U.S. footwear imports
totaled 2.36 billion
pairs in 2007, or
roughly 7.9 pairs per
capita which was up
0.4 percent from 2006

Copyright © 2011 Pearson Education Limited

4. North American Free
Trade Agreement
(NAFTA) and the World
Trade Organization
(WTO), both helped
eliminate quotas and
tariff barriers for
foreign footwear
manufacturers to ship
their goods
5. The Internet allows
footwear companies to
pursue a direct to
consumer sales
channel
6. Sales of apparel,
accessories, and
footwear on the
Internet has been
growing at a double
digit pace,
considerably faster
than more traditional
sales models such as
retail stores
7. Internet sales of
apparel, accessories,
and footwear could
reach 18 percent of
category sales by 2012
8. Companies that added
a web-based sales
strategy are able to
customize footwear
and other merchandise
directly to the
customer’s needs and
taste, are able to
achieve considerably
better pricing, as well
as “deepening” the
emotional bond
consumers have with
the brand

Threats S-T Strategies W-T Strategies

1. After the age of 40, the 1. Develop a new 1. Make low priced
typical consumer is not moderately priced footwear made in the
willing to pay more product line (S1, S2, U.S. and promote it as
than US$35 to $40 per S3, S4, T2, T4, T6) “Made in America”
pair for athletic 2. Expand distribution by (W2, W6, T2, T3, T4,
footwear selling to stores other T6)

Copyright © 2011 Pearson Education Limited

2. Competition is strong than their own retailers 2. Acquire a less
among athletic (S7, T2) expensive brand of
footwear and apparel accessories and
from off brand sportswear and
companies promote them as an off
3. Fluctuation of foreign brand of Nike (W4, W6,
currency impacts the T1, T4, T6)
cost of importing goods
to the U.S.
4. Increase in
unemployment has
impacted household
incomes which may
result in spending less
on brand name
5. Barrier to entry is low
6. Level of inventory
increasing in many
retail stores due to
weak economy

G. SPACE Matrix

FS
Conservative Aggressive
7

CS IS
-7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7

-1

-2

-3

-4

-5

-6

-7
Defensive Competitive

ES

Copyright © 2011 Pearson Education Limited

Financial Stability (FS) Environmental Stability (ES)
Return on Investment 4 Unemployment -4
Leverage 5 Technological Changes -4
Liquidity 3 Price Elasticity of Demand -5
Working Capital 3 Competitive Pressure -5
Cash Flow 4 Barriers to Entry -5

Financial Stability (FS) Average 3.8 Environmental Stability (ES) -4.6

Average

Competitive Stability (CS) Industry Stability (IS)

Market Share -1 Growth Potential 5
Product Quality -2 Financial Stability 4
Customer Loyalty -3 Ease of Market Entry 1
Competition’s Capacity Utilization -1 Resource Utilization 3
Technological Know-How -4 Profit Potential 4

Competitive Stability (CS) -2.2 Industry Stability (IS) Average 3.4

Average

Y-axis: FS + ES = 3.8 + (-4.6) = - 0.8

X-axis: CS + IS = (-2.2) + (3.4) = 1.2

Copyright © 2011 Pearson Education Limited

H. Grand Strategy Matrix

Rapid Market Growth

Quadrant I
Quadrant II

Strong
Weak
Competitive
Competitive
Position
Position

Quadrant IV
Quadrant III Slow Market Growth

1. Market development
2. Market penetration
3. Product development
4. Forward integration
5. Backward integration
6. Horizontal integration
7. Related diversification

Copyright © 2011 Pearson Education Limited

 I. The Internal-External (IE) Matrix

The IFE Total Weighted Score

Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
I II III

High
3.0 to 3.99

IV IV VI

The EFE Nike, Inc.

Total
Weighted Medium
Score 2.0 to 2.99

VII VIII IX

Low
1.0 to 1.99

Copyright © 2011 Pearson Education Limited

J. QSPM

Acquire a
Increase less
advertising expensive
and brand of
promotion accessories
through and
social sportswear
networking and promote
such as them as an
Twitter and off brand of
Facebook Nike
Key Factors Weight AS TAS AS TAS

Opportunities
1. Younger consumers are less price 0.08 1 0.08 4 0.32
sensitive and generally spend more on
casual and athletic footwear than older
consumers
2. Most footwear companies have 0.07 --- --- --- ---
outsourced their production abroad in
order to maintain lower cost and R&D
expenses
3. U.S. footwear imports totaled 2.36 billion 0.07 --- --- --- ---
pairs in 2007, or roughly 7.9 pairs per
capita which is was up 0.4 percent from
2006
4. North American Free Trade Agreement 0.06 2 0.12 3 0.18
(NAFTA) and the World Trade
Organization (WTO), both helped
eliminate quotas and tariff barriers for
foreign footwear manufacturers to ship
their goods
5. The Internet allows footwear companies 0.07 --- --- --- ---
to pursue a direct to consumer sales
channel
6. Sales of apparel, accessories, and 0.08 2 0.16 4 0.32
footwear on the Internet has been
growing at a double digit pace,
considerably faster than more traditional
sales models such as retail stores
7. Internet sales of apparel, accessories, 0.07 4 0.28 1 0.07
and footwear could reach 18 percent of
category sales by 2012
8. Companies that added a web-based sales 0.06 4 0.24 1 0.06
strategy are able to customize footwear
and other merchandise directly to the
customer's needs and taste, are able to
achieve considerably better pricing, as
well as "deepening" the emotional bond
consumers have with the brand

Copyright © 2011 Pearson Education Limited

Threats
1. After the age of 40, the typical consumer 0.07 1 0.07 4 0.28
is not willing to pay more than US$35 to
$40 per pair for athletic footwear
2. Competition is strong among athletic 0.08 --- --- --- ---
footwear and apparel from off brand
companies
3. Fluctuation of foreign currency impacts 0.06 --- --- --- ---
the cost of importing goods to the U.S.
4. Increase in unemployment has impacted 0.09 1 0.09 3 0.27
the household income which may result
in spending less on brand name
5. Barrier to entry is low 0.06 --- --- --- ---
6. Level of inventory is increasing in many 0.08 4 0.32 2 0.16
retail stores due to weak economy
TOTAL 1.00 1.36 1.66
Strengths
1. Nike is the dominant competitor for 0.08 --- --- --- ---
athletic footwear priced above US$60 per
pair, holding better than a 50 percent
market share for athletic footwear priced
$85 per pair or higher
2. Nike characterizes its organization as a 0.02 --- --- --- ---
collaborative matrix organization
3. The Jordan brand has a 10.8 percent 0.06 3 0.18 1 0.06
share of the overall U.S. shoe market,
which makes it the second biggest brand
in the country and more than twice the
size of Adidas' share
4. Three out of every four pairs of 0.08 3 0.24 1 0.08
basketball shoes sold in the United States
are Jordan, while 86.5 percent of all
basketball shoes sold over US$100 are
Jordan
5. Nike's 2009 revenues increased 2.9 0.09 --- --- --- ---
percent to US$19.1 billion
6. Inside the United States, Nike has three 0.05 --- --- --- ---
significant distribution and customer
service facilities
7. Nike estimates that they sell products to 0.04 3 0.12 4 0.16
more than 25,000 retail accounts in the
United States and more than 27,000
retail accounts, including Nike-owned
stores and a mix of independent
distributors and licensees outside the
United States
8. The company's website www.nikebiz.com 0.07 4 0.28 1 0.07
allows customers to design and purchase
Nike products directly from the company
9. Nike has five wholly-owned subsidiaries: 0.07 1 0.07 3 0.21
Cole Haan, Converse, Hurley
International, NIKE Golf, and Umbro Ltd

Copyright © 2011 Pearson Education Limited

Weaknesses
1. Nike's 2009 net income decreased 21 0.07 1 0.07 3 0.21
percent to US$1.48 billion
2. Almost all of Nike's footwear is 0.08 --- --- --- ---
manufactured outside the United States
by independent contractors
3. In fiscal 2008, contract manufacturers in 0.06 --- --- --- ---
China, Vietnam, Indonesia, and Thailand
manufactured 99 percent of Nike's
footwear worldwide
4. Because Nike competes primarily in 0.08 1 0.08 3 0.24
athletic footwear, apparel and related
sporting equipment, its sales are heavily
concentrated in the youth and young
adult market
5. Accounts payable has increased by 0.08 --- --- --- ---
almost US$1.0 billion in 2009
6. Negative publicity and boycotting of the 0.07 --- --- --- ---
Nike products due to outsourcing jobs
overseas and the use of child labor in
such factories
SUBTOTAL 1.00 1.04 1.03
SUM TOTAL ATTRACTIVENESS SCORE 2.4 2.69

K. Recommendations

Acquire a company who manufactures and sells less expensive products than Nike.
The company should have established distribution and retail shelf space with non-
competing product lines. It would be ideal if the company is a U.S.-based
corporation with domestic manufacturing facilities.

Copyright © 2011 Pearson Education Limited

L. EPS/EBIT Analysis

US$ Amount Needed: $350 million

Stock Price: US$65.65
Tax Rate: 24%
Interest Rate: 4.75% (Estimated)
# Shares Outstanding: 487 Million

Common Stock Financing Debt Financing

Recession Normal Boom Recession Normal B
$1,800,000,00 $2,500,000,00 $3,500,000,00 $1,800,000,00 $2,500,000,00
EBIT 0 0 0 0 0 $3
Interest 0 0 0 16,625,000 16,625,000 16
EBT 1,800,000,000 2,500,000,000 3,500,000,000 1,783,375,000 2,483,375,000 3,
Taxes 432,000,000 600,000,000 840,000,000 428,010,000 596,010,000 83
EAT 1,368,000,000 1,900,000,000 2,660,000,000 1,355,365,000 1,887,365,000 2,
#
Shares 492,331,302 492,331,302 492,331,302 487,000,000 487,000,000 48
EPS 2.78 3.86 5.40 2.78 3.88 5.

70 Percent Stock - 30 Percent Debt 70 Percent Debt - 30 Percent Stoc

Recession Normal Boom Recession Normal B
$1,800,000,00 $2,500,000,00 $3,500,000,00 $1,800,000,00 $2,500,000,00
EBIT 0 0 0 0 0 $3
Interest 13,300,000 13,300,000 13,300,000 3,325,000 3,325,000 3,
EBT 1,786,700,000 2,486,700,000 3,486,700,000 1,796,675,000 2,496,675,000 3,
Taxes 428,808,000 596,808,000 836,808,000 431,202,000 599,202,000 83
EAT 1,357,892,000 1,889,892,000 2,649,892,000 1,365,473,000 1,897,473,000 2,
#
Shares 490,731,912 490,731,912 490,731,912 488,599,391 488,599,391 48
EPS 2.77 3.85 5.40 2.79 3.88 5.

Copyright © 2011 Pearson Education Limited

M. Epilogue

Analysts expect that Nike will be able to boast of its strong earnings, growing gross
margins, lean inventories and all-important futures orders. The company has
booming international business, especially its China expansion plans, as well as the
2010 World Cup, where Nike is sponsoring nine teams. And investors may find out
what management has planned for that US$7 a share in net cash on the balance
sheets. (www.CNBC.com)

Nike unveiled its supercharged Nike Elite Series football boots providing new levels of
performance. Nike’s Mercurial Vapor SuperFly II, CTR360 Maestri, Total90 Laser III
and Tiempo Legend III all feature new performance uppers to improve on-field
visibility and a reengineered outsole to deliver lightweight performance for every
style of player. Nike designers have reduced the weight of each boot so players can
perform at their best. Lightweight construction, intricate engineering, carbon-
enforced strength and high contrast colors distinguish the boots. The high contrast
colors (Metallic Mach Purple and Total Orange) are engineered together for enhanced
visibility. For a footballer this unique combination is designed to increase visual
performance enabling them to quickly spot their teammates and execute a game-
changing pass. (www.finance.yahoo.com)

Copyright © 2011 Pearson Education Limited