Group 3
Due Date: October 28, 2017
Bulaong, Angelique S.
Salas, Isaiah Justine C.
Daligdig, Kimberly Joy S.
Sumalinog, Angela Joyce P.
De Guia, Ann Caroline M.
I.
Executive Summary
Nike,founded in 1964 as Blue Ribbon Sports by Bill Bowerman and Phil Knight, is the
world’s largest designer, marketer, and distributor of athletic footwear and athletic apparel. It
also designs, markets, and distributes sports-related apparel, equipment, and accessories. Its
flagship product is Nike brand footwear, but it also has Nike Golf, Cole Haan, Converse, Hurley
International, and Umbro Ltd.
Even though the competition in footwear and apparel industry is extremely fierce, Nike is
the leader in athletic footwear with estimated 37% of worldwide sales. Currently, most of Nike’s
production is outsourced, like the other competitors.
II.
Statement of the Problem
Nike needs an effective strategic plan in order to remain in the industry given the current
economic condition, fierce competition and the emerging market online.
III.
Causes of the Problem
Strengths
Weaknesses
1
·
As a sports brand, Nike has well-
·
Nike’s net income decreased 21%
known athlete as endorsers such as
to $1.48 billion.
Michael Jordan, LeBron James, and
·
Tiger Woods.
popularity of aerobics boom of that
·
time period. In effect, the company
The Jordan brand makes up
In 1980, Nike miscalculated the
roughly 5% of Nike’s overall revenue.
trailed the rest of the athletic footwear
·
industry.
Nike’s revenue in 2009 is 2.9%
·
higher.
·
Nike is the world’s largest
Almost all of Nike’s footwear is
manufactured
designer, marketer, and distributor of
United
athletic footwear and apparel, and
contractors.
sports-related apparel, equipment and
·
in
States
countries
by
outside
independent
accessories.
·
Nike has diversified brands, Cole
Haan shoes, Bauer, Hurley, Converse,
Starter, and Umbro Ltd.
·
Nike estimates that they sell more
than 25,000 retail accounts in the
United States; 43% of total company
revenues for fiscal 2008 came from
United States.
·
Nike products are found in a wide
variety of retail locations.
2
·
Nike uses independent sales
representatives to sell the company’s
specialty products.
·
www.nikebiz.com provides the
customers the ability to design and
purchase Nike products from the
company itself.
·
Nike sells more than 27,000 retails
accounts outside the United States.
·
Nike sells apparel products with
licensed college or professional team
logos, athletic bags, and accessories.
·
composed
Nike’s key executives are
of
individuals
with
established backgrounds.
3
Opportunities
·
Threats
Nike’s primary target market, 12 to
·
Raw materials for Nike products
24-year-old age bracket, is less price
are typically sourced in the countries
sensitive.
where production takes place thus
·
quality varies from country to country.
The footwear industry is globally in
scale and scope.
·
·
region the company operates.
The implementation of North
American
Free
Trade
Agreement
·
Tax policies are different in every
Customers after the age of 40 are
(NAFTA) and the entry of China into
not willing to pay more than $35 to $40
the World Trade Organization (WTO)
per pair for athletic footwear.
helped eliminate quotas and tariff
barriers
for
foreign
footwear
manufacturers to ship their goods into
the United States.
·
The advancement of technology
allows footwear companies to pursue a
direct to consumer sales channel.
·
Web-based sales strategy enables
customers to customize footwear and
other merchandise to fit their needs.
4
Competitor Analysis
Adidas
Rank in the Market
Puma
Number 2 competitor in the Number 3 competitor in the
athletic footwear market
athletic footwear market
Sales
22% of worldwide sales
2.5 billion euros
Products offered
Athletic footwear, apparel, Broad range of athletic and
and sporting equipment
lifestyle articles, including
footwear,
apparel,
and
accessories
Mission
“To be the leading sports “To be the most desirable
brand in the world”
Revenue
sport lifestyle company”
As of 2008, 10.8 billion
euros
Number of employees
23,000
10,000
5
Adidas was the Official Usain Bolt, a well-known
Strengths
Sportswear Partner for the athlete, wore a gold Puma
Beijing
2008
Olympic Theseus II spikes in 2008
Games.
Yao
Ming,
Beijing Olympics.
a
basketball
Chinese
superstar,
endorses a line of Reebok
basketball
shoes
contributed
to
that
Adidas’
position as a market leader
in both Europe and China.
Failing sales in Europe and
Weakness
the United States.
PESTLE Analysis
Political
·
Tax policies differ from region by region.
·
There was a global recession during 2009.
·
Higher sales growth was seen in Brazil, Eastern Europe, India, and China.
Economic
Social
6
·
Consumers’ buying preferences are affected by the marketing icons of a brand
or product.
·
Young consumers, ages 12- to 24- year old, are less price sensitive in buying
casual and athletic footwear.
·
Athletic footwear brands market their products through sponsoring major
sports events such as the 2008 Beijing Olympics.
Technological
·
Outsourcing of production to other countries has been a trend for big
companies.
·
·
Research and development are done in the companies’ home locations.
Internet plays a vital role in aiding footwear companies to have a direct
consumer sales channel.
·
Web-based sales strategies are equipped to customize footwear and other
merchandise directly to the customer’s needs and taste.
Legal
·
North American Free Trade Agreement (NAFTA) and the entry of China in
World Trade Organization (WTO) helped eliminate quotas and tariff barriers
for international footwear manufacturers to ship their goods into the United
States.
Environmental
There is no environmental factor mentioned in the case.
IV. Alternatives
7
The table below is the decision criteria used to evaluate the alternative courses of actions
below. The decision criteria are ranked as to 5 being the highest, and 1 being the lowest.
Decision Criteria
5
4
3
2
1
Remarks
1. Time for Implementation
2. Tangible Costs
3.
Ease
of
modification/scalability/flexibility
4. Risk levels
5. Cost savings
6. Increase in sales or market share
7. Return on investment
8. Similarity to existing organization
products
9. Increase in customer satisfaction
10. Acceptability to Management
8
11. Marketing Improvements
12.
Distribution
Strategy
Improvements
1.
Consider
other
market
of
the
company’s
products
Currently, Nike products focus more on products for men. In this alternative, Nike would
target other market for its products like the women and children. Women nowadays are
becoming more athletic than before. They want to stay physically fit and are interested in some
sports men do. Targeting women for its products will let women switch to Nike since the
company is known for offering reputable quality to its customers. According to the case study,
sales of the company are concentrated in the youth and young adults. Looking this as an
opportunity, Nike should provide products with the same quality to children. Targeting children
for its products is necessary since most children nowadays idolize some endorsers of Nike. A
research will be conducted to determine the possible designs the new markets prefer and also the
price they are willing to pay. By doing this alternative, the company will capture a larger market
for
its
products.
Thus,
sustainability
of
the
business
will
be
ensured.
Pros:
This alternative will capture a larger market and increase the profitability of the company.
Cons:
If the company will not have a good research study of the new markets, entering in these
new markets will not be successful.
9
Decision Criteria
5
4
3
2
1
Remarks
Expanding
in
new
would
take
because
the
markets
time
company needs a welldone market research of
the
1. Time for Implementation
prospective
customers.
The company will incur
a cost in doing the
2. Tangible Costs
market research
This
flexible
alternative
is
because
the
company has a control
3.
Ease
modification/scalability/flexibility
of
on which market to
enter.
10
If the market research
was not properly done,
the
company
vulnerable
is
to
risks
associated with entering
the
4. Risk levels
wrong
market
segment.
There
5. Cost savings
is
little
cost
savings.
There
will
be
an
increase in market share
if the company captured
6. Increase in sales or market share
the right market.
Return on investment
will be high if the
company captured the
7. Return on investment
right market.
Other companies are
8.
Similarity to
products
existing
organization
also
entering
new
markets.
11
There would be an
increase
in
customer
satisfaction
9. Increase in customer satisfaction
in
market tapped.
This
alternative
moderately
10. Acceptability to Management
the
is
acceptable.
Entering new markets
would
mean
improvement
11. Marketing Improvements
in
marketing.
Distribution
would
improve in tapping new
12. Distribution Strategy Improvements
2.
markets.
Diversification
Significant percentage of Nike customers wear its products for leisure or as a fashion
accessory. This product focus on providing on a new product line that has an emphasis on both
quality and fashion essence. Although it will have an emphasis on fashion, this new product line
will not eliminate the “Nike experience” the customers feel when wearing Nike products. The
company will not sacrifice the quality of the product in focusing with the fashion side. This
alternative will enable customers wear their Nike footwear anywhere they want depending on the
12
style
of
the
footwear.
Pros:
Customers will have an option to wear Nike products on any occasion depending on the
style of the footwear. Also, the company will have an increase in profit since a significant
percentage of the Nike footwear customers prefer in wearing Nike footwear for leisure and not
for
athletic
purposes.
Cons:
This alternative is costly since it needs a lot of research on the market of the new product
line.
Decision Criteria
5
4
3
2
1
Remarks
Diversification
would
not
easily
be
implemented.
The
company needs to go
through new products
1. Time for Implementation
development.
The company will incur
a cost in new products
2. Tangible Costs
development.
13
This alternative can be
modified because the
company has control on
3.
Ease
modification/scalability/flexibility
of
how to diversify the
products.
Diversification
has
little risk levels as long
as the new product line
4. Risk levels
is innovative enough.
There
5. Cost savings
is
little
cost
savings.
Diversification
will
lead to high increase of
market share because
different
6. Increase in sales or market share
needs
of
customers were tapped.
Return on investment
will be high because
customers of Nike also
use their products for
7. Return on investment
leisure.
14
Other companies are
8.
Similarity to
existing
organization
also diversifying their
products
products.
There would be an
increase
in
satisfaction
customer
because
different needs of the
9. Increase in customer satisfaction
customers are provided.
This alternative highly
is acceptable to the
10. Acceptability to Management
management.
Diversifying
would
mean improvement in
marketing
11. Marketing Improvements
especially
with the new products.
Distribution would also
improve especially with
12. Distribution Strategy Improvements
3.
Strengthen
the new products.
advertising
strategy
This alternative is composed of two strategies: continue to have superstar endorsers and
sponsor athletic programs. Nike is known for famous athletic endorsers. This strategy helps in
15
the profitability of the company as shown in the case study. This alternative suggests that the
company should acquire different athletic endorsers to boost the sales of the products and
increase brand awareness. Often, products became famous because of the endorsers of these
products especially if the endorsers are known on their respective fields. The job of endorsers is
to
make
people
buy
the
products
because
they
are
also
using
the
products.
Pros:
By implementing this alternative, brand awareness and sales would increase. Endorsers
will
encourage
people
buy
Nike
products.
Cons:
Fees for endorsers especially if they are famous are expensive since these endorsers are in
demand
in
the
public.
On the other hand, sponsoring athletic programs will increase brand awareness on the
products of Nike. This alternative suggests that Nike should consider sponsoring some athletic
programs like Olympics. By doing this, athletes would be able to experience Nike products and
might consider buying its products if they would be satisfied with the quality and comfort it
offers. Also, Nike’s sales will be expected to increase in doing this alternative since people
watching athletic programs will become aware of the products due to the sponsorship.
Pros:
This alternative will increase brand awareness and sales of the company.
Cons:
Sponsorship is expensive depending on the size of the different athletic programs.
16
Decision Criteria
5
4
3
2
1
Remarks
Strengthening
the
advertising
strategy
would take time. Nike
needs to decide who
would be its athlete
endorsers
1. Time for Implementation
and
what
athletic programs.
The company will incur
a cost in strengthening
2. Tangible Costs
the advertising strategy
The
company
can
strengthen
its
advertising
company
but it has little control
3.
Ease
modification/scalability/flexibility
of
on how the customers
would be affected by it.
This
4. Risk levels
alternative
has
moderate risk level.
17
There
5. Cost savings
is
little
cost
savings.
This alternative would
increase
brand
awareness
which
in
effect has the potential
for a high increase in
6. Increase in sales or market share
sales.
This alternative would
have a high return on
7. Return on investment
investment.
Other companies are
8.
Similarity to
existing
organization
products
also strengthening their
marketing strategies.
There would be an
increase
in
customer
satisfaction especially in
customers who are a
fanatic of a specific
9. Increase in customer satisfaction
athlete endorser.
18
This alternative highly
is acceptable to the
10. Acceptability to Management
management.
Strengthening
advertising
would
the
strategy
mean
improvement
11. Marketing Improvements
an
in
marketing in general.
This alternative to be
effective also needs an
improved
12. Distribution Strategy Improvements
4.
distribution
stategy.
Technological advancements
This alternative is using technology as an opportunity to increase the profitability of the
company. Nike should create a webpage that will showcase the company and the products of the
company. Since studies show that e-commerce is booming in the business industry, entering the
e-commerce will be an advantage of Nike against it competitors. Nike’s webpage will provide
customers an option to customize footwear and other merchandise that suits the customers’
needs. In addition, the company should also create social media accounts to reach wider
audience. Through social media, the company and customers can communicate faster on
launching new products or on queries of customers.
19
Pros:
Entering e-commerce and using social media accounts will let Nike reach a wider
audience. Also, the customization option will let customers create what the products based on
their needs and taste.
Cons:
People might not be encouraged to purchase in the webstore since some websites on the
internet are found not legitimate.
Decision Criteria
5
4
3
2
1
Remarks
Entering
e-
commerce and putting
up a webpage is not
hard with the help of
1. Time for Implementation
professionals.
The
company
will incur an initial cost
in
2. Tangible Costs
putting
up
a
webpage.
20
The
company
would have control over
its
3.
Ease
of
modification/scalability/flexibility
webpage
and
presence in the internet
would be globally.
This alternative
has
low
risk
level
especially
4. Risk levels
the
technology is booming.
Once
the
webstore is operated,
there would be a lot of
5. Cost savings
cost savings.
This alternative
would increase market
share because it can
6. Increase in sales or market share
reach a wider audience.
This alternative
would
7. Return on investment
have
a
high
return on investment.
21
Other
8. Similarity to existing organization
products
companies
are
also
entering e commerce.
There would be
an increase in customer
satisfaction
especially
communicating
with
customers can be done
9. Increase in customer satisfaction
easier and faster.
This alternative
is acceptable to the
10. Acceptability to Management
management.
The
company
can take advantage of
social
media
in
improving its marketing
11. Marketing Improvements
strategy.
Through
e-
commerce, the company
12.
Improvements
Distribution
Strategy
can
sell
products
globally.
22
V. Recommendations
1. Diversification
Since Nike has alot of capital surplus and low long-term debt, the company has a lot of
funds to accept and explore investment opportunities. The company should consider adding new
business segments like Nike for women, accessories, kids, teens, etc. Through this, Nike would
be able to expand its market share and would be able to cater more customers. This will also
increase the company’s revenue and profitability instead of incurring a lot of opportunity costs
due to unexploited business opportunities.
2. Put up a webstore
The company should embrace e-commerce and put up a webpage. Through setting up an
online store, Nike would be able to have a stronger customer commitment and be able to reach a
larger market share. Moreover, through the internet, the company would be able to update its
valued customers of the latest trends in the company. Furthermore, Nike could provide
customized shoes services to its customers to provide the utmost satisfaction for each consumer
type.
3. Advertise in the internet, especially in social media
With the advancement of technology, Nike should utilize advertising its product through
the internet. The company can endorse in the social media to expand its market share. Through
the additional advertising tool, Nike would be able to reach a larger market share and be able to
increase its revenues. Plus, advertising in the internet is cheaper compared to other type of
advertising but it has the widest market reach.
23