THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

A Project report submitted in partial fulfillment of the requirements for the course curriculum of the subject Power Business Strategies

By:
RADHIKA SHANKAR FAISAL TUMBI SUNIL SETHIA SIDDHARTH SHRIVASTAV MURTUZA ALI KHAN VIVEKANANDA RAO

PGP/SS/2007-09/FINANCE

UNDER THE GUIDANCE OF PROF. NANDAKUMAR

Nike, Inc. is a major publicly traded sportswear and equipment supplier based in the United States. The company is headquartered in the Portland metropolitan area of Oregon, near Beaverton. It is the world's leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment with revenue in excess of $16 billion USD in 2007. As of 2008, it employed over 30,000 people world-wide. Nike and Precision Castparts are the only Fortune 500 companies headquartered in the state of Oregon. The company was founded in 1962 as Blue Ribbon Sports by Bill Bowerman and Philip Knight, and officially became Nike, Inc. in 1978. The company takes its name from Nike, the Greek goddess of victory. Nike markets its products under its own brand as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Skateboarding, Team Starter, and subsidiaries including Cole Haan, Hurley International, Umbro and Converse. Nike also owned Bauer Hockey (later renamed Nike Bauer) between 1995 and 2008. In addition to manufacturing sportswear and equipment, the company operates retail stores under the name Niketown. Nike sponsors many high profile athletes and sports teams around the world, with the highly recognized trademarks of "Just do it" and the Swoosh logo.

STRATEGIC THINKING

PURPOSE: is to carry on his legacy of innovative thinking, whether to develop products that
help athletes of every level of ability reach their potential, or to create business opportunities that set Nike apart from the competition and provide value for our shareholders.

MISSION: To bring inspiration and innovation to every athlete in the world

VISION: Innovate for better world

Unleashing potential through sport. In the last two years, Nike has invested $100 million worldwide in community-based sports initiatives. By 2011, NIKE is expected to invest another $315 million. These investments will be used to give excluded youth around the world the chance to play because as access to sport can enhance their lives. Nike will provide products, resurface playing fields, support community-based programs, and help young people create their own communities. This is all will be the NIKE Let Me Play commitment.

VALUE: Three core values of the company are honesty, competitiveness, and teamwork.
Despite its size, Nike operates with a minimum of hierarchy. As a result, there is a lot of collaboration and consensus decision-making. Commonly held values are imperative in such a matrix organization.

STRATEGIC PLANNING
INTERNAL ENVIRONMENTS STRENGTHS
Strong management team and good corporate strategy in both North American and overseas markets. First mover advantage in e-commerce. Brand recognition and reputation. Diversity and variety in products offered on the web (footwear, apparel, sporting equipment, etc.) Strong control over its own distribution channel. Strong customer base. Strong financial position with minimal long term debts . Innovative designs in footwear enabling consumers to design their own shoes online. Diversity and variety in products offered on the web. Emerging brand name.

WEAKNESSES
Negative image portrayed by poor working conditions in its overseas factories . E-commerce is limited to USA. The direct sale to consumers is creating conflicts with its own resellers . Currently available supply chain, manufacturing, and fulfillment technologies aren't known for its research easily integrated with online build-to-order systems and development leading to innovative designs. The e-commerce is limited to USA, however, has planned to expand to Canada and international in the near future. Online customer service not "helpful" or easy to find.

ALIGNING THE 7 S

STRUCTURE:
Matrix-structure. Balances creative with structure and discipline.

STAFFING:
Mix of new hires and promotions. Promotions = consistency/company knowledge. New-hire employees = business minded. Socializing.

SHARED VALUES:
Balance of individualistic atmosphere and structure of matrix. Calculated risk taking.

SYSTEMS:
Encourages work ethics. State of the art computer systems.

SKILLS:
Financially disciplined.

STYLE:
Empowerment of top management.

STRATEGY:
Diversify business portfolio with new acquisitions.

EXTERNAL ENVIRONMENTS
OPPORTUNITIES
Increasing demand in the industry for products available online. Increase female participation in athletics. E-commerce will reduce the cost of goods sold thus improving the "bottom line". New technology and innovation to stay on top of market needs . Expand e-commerce to global markets. Possibility of outsourcing the web development and e-commerce to a third party developer. Growing interest in the sport of Basketball. Partnering up with other retailers to sell basketball footwear and apparel. Growing reputation in non-basketball sports will boost e-business. E-commerce will reduce the cost of goods sold thus improving the "bottom line". Expand e-commerce to global markets. Collaborate with other online retailers to offer Adidas products .

THREATS
Negative image due to "sweatshops". Economic downturn in North America and Asian Countries . Increase in the price of providing technological solutions (e-commerce). Strong competition from some of its major challengers in all branches of the business. Continuing challenges in import/export duties. Increase in the Price of Raw materials. Nike's strong reputation in the footwear and apparel industry. Continuing challenges in import/export duties. Threats to free trade and foreign currency fluctuations. Possibility of distress from growing beyond its capabilities .

PORTER'S FIVE FORCES

BARGAINING POWER OF BUYERS - HIGH

Consumers participation in improving conditions in LDCs. Segmented buyers High price points surveys show people are willing to pay more. People do not usually do what they say.

BARGAINING POWER OF SUPPLIERS - LOW

Really powerful suppliers. One company is producing 40% of worldwide shoes. How can you impose your standards on them? What about the other companies? They can forward integrate, they have the technology

BARRIERS TO ENTRY - LOW (NEW ENTRANTS)

Competing shoes and new companies coming in.

RIVALRY AMONG EXISTING COMPETITORS - HIGH

Competitors are doing the same thing. Low production cost / High marketing .

THREATS OF SUBSTITUTES LOW

VIRTUAL VALUE CHAIN

PHYSICAL

COSTS
Outsource non-core activities Allows Nike to focus on their core competencies of: Product Design Marketing AIR SOLE Technology Having a virtual relationship with suppliers and the companies who assemble Nike products allows them to: Reduce administrative costs Payroll costs. Switch to companies that provide low labor costs and a quality product.

SPEED
Having a virtual supply chain, Nike can increase the speed their product flows through the supply chain. Send new designs to suppliers who produce shoe parts. Suppliers send these shoe parts to the assembly companies . Ship the finished products to distributors worldwide. This allows them cut down on the amount of time required from the initial design, to production and then distribution.

DIVERSITY OF SUPPLIERS
A VSC allows a company to search for and use a wider range of suppliers . Although geography may separate them they can still communicate electronically. Having multiple suppliers that you can trust allows you to avoid emergencies in your supply chain. With more suppliers available a company is more flexible.

NIKE'S WORLDWIDE SUPPLY-CHAIN PROJECT

Nike is using HP servers, software, and consulting services to run their new supply-chain project. Nike chose to work with HP for several reasons such as HPs single platform capable of running both UNIX and Microsoft Windows NT systems and HPs clear understanding of what Nike needs to run a successful business. The goals of the project included: Enhancing Nike's ability to respond to changing conditions. Reducing inventory and capital investment risk.

Improving service to meet customer/consumer needs. Improving process, information, and product quality. Providing an efficient global supply chain with local implementation.

ADDING VALUE FOR THE CUSTOMER

Nike now provides customized shoes for customers. A company called Planar has installed touch-screen systems in Nike Stores to allow customers to build their own shoes. Nike also allows customers to order customized shoes online through their company website. By combining technology with customized service Nike has created an instant ordering system while providing more services for their customers.

PEST ANALYSIS

POLITICAL FORCES
World is entering global trade climate with NAFTA and GATT There is anti-dumping regulation existed in EU.

ECONOMIC FORCES
EU has changed into one currency. USA economic growth is in slow growth because of WTC. Contract manufacturing is chosen by many athletic shoes company.

SOCIAL FORCES
Since 70-s, customer is more brand-minded. Sports Consumer preferences are changing into more fashion-oriented. Young consumer is believed much in advertising promotion and use internet as the primary sources of information. Buying motives of young consumer is dominated for leisure activity. Since 90-s, womans consumer dominated the athletic shoe market because of the changing lifestyle.

TECHNOLOGY FORCES
Nike has integrated technology system to develop their product. Nike always adopted latest technology for their product and matched with their vision.

GENERIC STRATEGIES
Nike uses network structure. Nike implemented Differentiation Strategies.

DETAIL STRATEGIES
Finance: Keep the financial ratio in standard

Marketing:

Use endorser in every sport Higher allocation of marketing budget

Operation:

Centralization of R&D in Oregon Application of NSRL

HR:

Network Structure Athlete management