NIKE INC.

Retail Marketing Project

Group 4 | Section A

Anshul | Arnab | Gauri | Hersh | Sakshi | Saurabh

NIKE: THE STORY

Profile & Background - Design, development & worldwide marketing of footwear, apparel and accessories - 18000 retail accounts in the US, mixture of independent distributors, licenses and subsidiaries in other countries
The Journey 1960s-Phillip Knight(ceo) & William Bowerman partnered to sell running shoes to athletes 1970s- cash in on Americas running craze: 1)1972- $ 3 million 2)1980- $ 270 million 3)1986- $ 1 billion Problems in mid 1980s: 1. Demographic changes - baby boomers pushed into their late forties & felt less like running. Market for running shoes become highly segmented (mature market) -many different models for every nuisance of customer need. Competition -Reebok create new market orientations to sell sneakers based on fashion rather than performance

Mission

Vision

2. 3.

Focus Dedication & effort needed to excel in sports & satisfaction Personal benefit associated using its product and the values satisfied by the product used. Creates an image of performance, competition, achievement, & doing your personal best

Results from the problem 1. 1984- Nikes unit sales decreased 17% - market share declined 31% to 24% 2. 1987- have only 18.6 % share of shoes market Action taken 1. Introduced technological features to enhance shoes performance. 2. Use of celebrities as spokesperson. Air Jordan was a major hit. 3. Using advertising as marketing strategy

NIKE INC.
The largest seller of athletic footwear and apparel in the world Employs more than 33,000 people globally Sells products in more than 180 countries around the globe Revenues of $19.2 billion reported for the fiscal year ending May 31, 2009

Affiliate Businesses

Nike Footwear
Running Cross-Training Soccer Basketball Casual

Apparel
T-shirts Shorts Sweatpants Licensed Apparel

Equipment

Cole Haan, which designs, markets and distributes luxury shoes, handbags, accessories and coats Converse Inc., which designs, markets and distributes athletic footwear, apparel and accessories Hurley International LLC, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories Umbro Ltd., a leading United Kingdom-based global football (soccer) brand

Balls Golf-Clubs

54 % Revenue

27 % Revenue

6% Revenue

CORPORATE STRATEGY
Innovation is at the heart of NIKE, Inc.s business growth strategy.
Vision:
1. Innovate to deliver enterprise-level sustainability solutions 2. Integrate sustainability into the heart of the NIKE, Inc. business model 3. Mobilize key constituents (civil society, employees, consumers, government and industry) to partner in scaling solutions

Closed Loop Business Model:

The future demands closed-loop business models that move closer to achieving zero waste by completely reusing, recycling or composting all materials The work of Nike includes up-front design of products that can be manufactured using materials reclaimed throughout the manufacturing process and at the end of a products life.

Recent Ambitious Goals: Lanch the GreenXchange as a platform for enabling the sharing of intellectual property to fast track changes efficiently Fast track innovation through investment and collaboration

NIKES COMPETITORS
Nike Share Sales Net Margin Competitive Strength 2.2% $ 24.128 billion 9.21% Very strong brand equity Technical innovation in products Broad Distribution Network Strong Usage of Technology online retail (Apple, Jabong etc) Adidas 1.8% $ 19.14 billion 11.52% Wide geographical footprint with increasing focus on emerging markets (High Market Penetration ) Robust retail footprint Focus on R&D Puma 0.32% $ 3.57 billion 7.47% Very innovative (first screw boots , brush soles Strong and diverse presence in Team Sponsorship (Cricket (DC & RR), Football (Germany) , Rugby (Irish ruby), Golf) Emphasis on Event promotion and Team Sponsorship rather than individual sponsorship

Relies on Global Sports Icons Less emphasis on event sponsorships, more individual sponsorship

More regionalized promotion, regional Stars. Less dependence on Global sponsorship

Sponsorship Strategy

Ex : Michael Jordon globally.

Ex: Tendulkar in India

Ex : FIFA World Cup 2006

Adidas The Real Threat to Nikes Position Multi Brand Strategy with Reebok acquisition Higher Penetration in Emerging Markets like India

Ref : Datamonitor, Euromonitor, Capitalline

Nikes primary target markets

Athletes of all ages and

Teens Demographics (18-40 [largest are teens], M/F, social class AB, single/ married) Lifestyle (active teens, athletic/ sporty individuals, casual lifestyle with fashionable taste) Behavior (sneakers as fashion statement, fitness craze, multipurpose shoes, hip,)

We may also classify the Primary markets as

Experiencers
Young and impulsive
Spend good deal of time on sports and exercise Nike targets them by marketing to the athlete. Just Do It

Makers
Practical constructive people that enjoy physical recreation
Interested in the quality and functional purpose of Nike products Relate to this segment through the commercials that depict people trying their hardest to reach goals

Strivers
Trendy, fun loving and motivated by achievement
Concerned about the approval of others Nike grabs this segment through endorsing their products with professional athletes Placement and Name

Believers
Motivated by Ideals
Predictable purchasers Tend to only consume products that are familiar and established Attracted to Nikes proven quality, familiarity, and established name

BRAND ASSOCAITION MAP

Nielsen BuzzMetrics Brand Association Map provides an intuitive map, giving you a deep understanding of how your brand is perceived, discussed and understood among consumers online.

COMPETITIVE ANALYSIS
NIKE ADIDAS/REEBOK
Sponsoring Sports events Endorsing Athletes Themes on improving performance of every athlete in the world

PUMA
Mixing influence of sports, lifestyle & fashion Puma concept retail stores Puma fashion shows New stuff advertising campaigns Building seasonal momentum during holiday seasons

OTHERS
Minimal or less advertising based on stores

Advertising Strategy

Endorsing Athletes Sponsoring Sports events City based advertisements Banners & Billboards Themes on bringing inspiration and innovation to every athlete in world

NIKE

ADIDAS/REEBOK
Clear, orderly, Practical, hi tech, Sophisticated, Sincere Conservative European style To improve performance of every athlete in the world Associated with elite soccer players/teams, NBA stars, Hip hop artists

PUMA
Elegant, colorful, fresh, spontaneous, individual, metropolitan, international Mixing influence of sports, lifestyle & fashion Fashion brand, performance & casual footwear, fringe, extreme sports

OTHERS
Based on their product lines. Generally not a strong brand message

Branding Strategy

Athletic, Influential, Outgoing, Aggressive, hi tech, futuristic, retro cool American way of living Associated with Athletes at top of their sport To bring inspiration and innovation to every athlete in world

NIKE AND TECHNOLOGY

Nike has always looked to integrated technology to develop their product in an innovative manner
Product Technology Nike Ground Zoom Air Description Nike Air is the most basic cushioning material used by Nike; it is made out of a polyurethane bladder and filled with air. It provides adequate cushioning for the casual wearer Zoom Air is among the more technologically advanced (and expensive) cushioning systems used by Nike. It essentially is a thin bag of pressurized air that, when inflated, has a thickness of 8 mm Nike Shox is a cushioning system developed by Nike that is comprised of polyurethane -foam columns that provide cushioning in a way that keeps the foot parallel to the ground

Nike Shox

E-PLATFORM PRESENCE
NIKEiD NIKEiD gives customers the chance to express their own style by personalizing select Nike apparel, footwear or gear. They can customize products with a range of different colors, materials and even a Personalized iD (PiD).

INFORMATION SYSTEMS
Siemens IT solutions and Services 5 year contract to provide end-user outsourcing services. Siemens supplied infrastructure outsourcing services SAP R/3

SUPPLY CHAIN

In May 2004, Nike started with SAP R/3, SAP Business intelligence, mySAP Supply Chain Management.

Nikes concept for its supply chain management are process innovation (do it different), continuous improvement (do it better ), and execution discipline (do it right) Nikes supply chain consist of all the activities, functions and facilities directly and indirectly involved in the flow and transformation of goods and services from the raw material stage, manufacturers, parts suppliers, assembly, warehouse and distribution to the end-user

NIKE GLOBAL PRESENCE AND STRATEGY

The companys increased focus on Sustainable Business and Innovation (SB&I) is more seamlessly integrated across its business strategies, creating a more sustainable approach aimed at providing greater returns to its business, communities, factory workers, consumers and the planet. Considered Design GreenXchange (GX) Lean & Human Resource Management Sport for Social Change It combines sustainability principles and innovative performance products for athletes by reducing toxics and increasing the use of environmentally preferred materials. A web-based marketplace to share intellectual property which can lead to new sustainability business models and innovation. Nike has been working with contract factories to train them in the implementation of specialized Lean manufacturing and HRM. Lean principles put the decision making closer to the worker Nike has furthered its strategy of using sport as a powerful movement for social change.

The Company has a revenue target of $27 billion by the end of fiscal 2015 based on growth expectations across its portfolio, which includes the NIKE Brand, Cole Haan, Converse, Hurley, Jordan Brand, NIKE Golf and Umbro

GLOBAL PRESENCE
Nike sells products in 170 countries, employs over 30,000 people worldwide, competes in over 30 major sports with 12 brands, and works with over 600 factories.

Existing Diversification Strategy Related diversification. Builds upon or extend its core competency and resources/capabilities to create value. Objectives of Diversification Strategy Reduce the companies dependence on the Swoosh brand. Internal incentive- lower the firms risk. External incentive- greater profits.
*Source: http://www.businesswire.com/news/home/20100122005661/en/Nike-Outlines-Global-Strategy-Creating-Sustainable Business

In Holland Bleed Orange Strategy & In India Bleed Blue Strategy.

PRICING STRATEGIES
NIKE uses Price Leadership strategy and value based pricing. Customers buy the product for the NIKE symbol and are willing to pay high prices regardless of the products actual value. Nike also uses "psychological pricing Most of the products price end in XX95 or XX99 NIKE also utilizes is "segmented pricing". Depends on the type of customer targeted, the specific product they are trying to market, and the location their products are found. E.g. Shoes for adults and children are priced differently

Nike uses vertical integration strategy

a relationship oriented approach in coming up with effective and efficient ways of managing its supply chain. * The strategy is used in pricing its commodities where they have participants at different channel levels For example, there are tier 1 suppliers and tier 2 suppliers where the former are firms with a stronger relationship with Nike who act as more of a strategic alliance than having a pure contractual relationship with Nike. Tier 2 suppliers are associated with pricing and may be managed by tier 1 firms or more closely related firms.

Merchandizing Strategy
Nike derives revenues from a product mix of approximately 65% athletic footwear, 29% apparel and 6% equipment. Since its creation, Nike has proven itself as a popular brand and it has created niches by selling products such as footwear, apparels and various types of sports equipment. Nike currently focuses on soccer, basketball, running, athletics, combat sports, baseball, & eyewear. Company also sells shoes for outdoor activities such as tennis, golf, skateboarding, cycling, volleyball, wrestling, aquatic activities and other athletic and recreational uses.
Nike teamed up with Apple Inc. to produce the Nike+ product which monitors a runner's performance via a radio device in the shoe which links to the iPod nano. The products of Nike usually stick with an image of a famous athlete e.g. Michael Jordan in basketball(the legendary Air Jordan shoes), Tiger Wood in golf or Ronaldo in soccer

* This is achieved through forming alliances and relationships rather than using pricing strategy with an aim of purchasing stuff as cheap as possible (Frisch, 2008).

NIKE RETAIL
Lays a lot of focus on creating high quality retail outlets for its customers
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HUMAN RESOURCE MANAGEMENT AT NIKE INC.

Native American Employee Network Mission To increase awareness and continue to educate Nike employees about the Native American culture. Latino Employee Network Mission: To increase awareness of the Hispanic/Latino culture at Nike, explore diversity in the Nike workplace, 1

Designed Employee Networks to separate them from their competition Employee Networks promote diversity within the organization Role of the network Enhance work performance, Identify mentors, Assist in recruiting diverse professionals, Develop community interaction and Encourage increased teamwork

ADEVRTISING AND SALES PROMOTION

Nike uses a number of famous athletes that serve as brand ambassadors such as, the Brazilian soccer team, Lebron James for basketball, CR7 from football and Rory McIlroy for golf. Nike utilizes personal selling techniques in all of their retail stores. Associates in the store are suppose to be knowledgeable of the brand

Nike not having enough stores around its consumers they have franchisee stores like footlocker and other sports stores to sell them their products. Nike presents a lot of coupons when there is a season starting to come

During major Holidays, Nike sometimes give out Coupons that can be used on their online store. The "Black Friday" Event is when Nike mostly gives out coupons

The "I Got This" contest was held in promotion of Kobe Bryant new "Aston Martin Hyperdunk+Kobe IV" sneaker package. This contest made a lucky 200 contestants win a free pair of this package and 20 other lucky contestants win free tickets to a NBA Staple Center game.

NIKE FINANCIAL ANALYSIS

The turnover ratios have been quite stable except in FY09 and FY10. The inventory turnover ratio has decreased for FY12 which may indicate lower efficiency

Current ratio is above 2 which is a sign of healthy liquidity. The ratios have been on a decline post FY09 but still comfortable

NIKE FINANCIAL ANALYSIS

The investment activity ratios have been stable, increasing in FY12 which shows long-term assets and equity are being utilized efficiently

Profit margins have declined marginally in FY12 but the company is still doing well compared to competitors

NIKE FINANCIAL ANALYSIS

ROE and ROA have increased post FY10, showing greater profitability. ROE declined marginally in FY12

The company has reduced the debt component in its financial structure, thus increasing solvency

NIKE PEER COMPARISON

Parameters Revenue Growth Rate (5 yr) Liquidity Current Ratio Quick Ratio Solvency Debt to Equity Interest Coverage Profitability Gross Profit Margin Operating Profit Margin Net Profit Margin ROA ROI ROE Efficiency Inventory Turnover Asset Turnover Sales/Employee Nike 8.13% 3.01 2.14 3.28% 427.14 43.18% 12.22% 8.95% 14.90% 19.83% 22.31% 4.43 1.66 5,48,364 Adidas 5.76% 1.7 1.12 28.21% 10.55 47.30% 8.10% 5.51% 7.14% 10.75% 14.84% 3.35 1.3 4,35,800 Puma 4.90% 2.21 1.37 3.39% 61.35 48.83% 6.80% 4.80% 6.11% 8.87% 9.12% 2.77 1.27 3,59,400 Crocs 23.06% 3.42 2.49 0.00% -54.58% 14.29% 12.75% 17.61% 22.98% 24.72% 2.96 1.38 2,40,558 Industry 14.85% 0.86 0.65 2.02% 56.52 16.07% 3.25% 2.32% 2.49% 3.33% 3.80% 1.13 0.32 Sector 8.36% 1.58 1.21 55.88% 34.48 28.99% 9.51% 7.77% 8.35% 12.18% 14.18% 9.53 0.97

Nike has maintained good margins due to premium brands, low cost manufacturing and increased direct selling. Inventory turnover is highest when compared to competitors. Nike has high ROA due to higher asset turnover than net profit margin whereas Crocs has high ROA due to higher net profit margin. Sales/employee is highest for Nike, showing high productivity. Same store sales growth is 13%

CONCLUSION
Strengths Brand recognition High quality Effective marketing Strong distribution system Innovation Strong R&D and CRM

Weaknesses Dependent on overseas manufacturing Decreasing US share

High price compared to some competitors,

Currency exposure Medium retail presence

NIKE

Opportunities Expansion into emerging markets Growing segment of women athletes Increased direct selling Increased demand for innovation

Threats Fierce competition Revenue relies on discretionary income Economic recession Fluctuation in currency

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