Group 4 - Performance Measurement in Decentralized Organization
Case Analysis #2: Nike Corporation
I. Introduction
Despite changes in the market environments, Nike has stuck to its decentralized
and networked organization structure. Each business center of the company
focuses on their operations like research, marketing, or production. The company
has subcontracted its most crucial operation, which is manufacturing itself.
Besides this, it had also outsourced several back office and non-executive jobs.
II. Full Text of the Case
1950-59: Bill Bowerman, a track coach at the University of Oregon was always
seeking ways to give his athletes a competitive advantage. He experimented with
track surfaces, re hydration but most importantly, running shoes. Phil Knight was
one of the athletes performing for Bowerman on the track team and used his
knowledge from his MBA in finance to take a proposal of running shoes to
Onitsuka, manufacturing of Tiger shoes and to make him a distributor. Knight
took the shoe samples to Bowerman hoping to sell, but instead Bowerman asked
him to become a partner and initiate footwear designs to send to Tiger; and the
partnership began.
1960-69: In 1964, Bowerman and Knight shook hands with Blue Ribbon Sports
where they sold their innovative shoes of Tiger, while Bowerman was ripping
them apart trying to see how they could make them lighter and better. As
Bowerman and Knight each had full time jobs, they decided to hire Jeff Johnson
as their first employee in 1965 and the company was starting to work up.
1970-79: Johnson became a very useful man as he overlooked marketing, mail
order system, opening up another branch as well as coming up for the name Nike
in 1971. At this time, BRS and Onitsuka wanted to part as Nike was ready to
become a manufacturer of shoes and not just a distributor. They started with a
new innovative shoe from a sole and a waffle iron that seemed to make a great
Impression. Around this time, the “swoosh‟ originated and Nike was off to flying
start. All they needed was someone to endorse their shoes. That person was
Steve Prefontaine who electrified the stands from 1969 to 1973 during his college
career. With exposure over Sports Illustrated and becoming an Ambassador of
the company, he distributed the new creative news to many top track athletes
with personal notes of encouragement. He was a great asset to the company and
known as the “Soul of Nike‟ .
1980-89: In late 1980, Nike offered its IPO, however this transition phase was
hindered as some of the early pioneers decided to move on elsewhere. Even Phil
Knight removed himself as President and become the CEO and chairman of the
board. In the mid 80’s, Nike slipped as the industry leader, luckily however, they
decided to endorse Michael Jordan, which was a huge boost for Nike. In 1987,
Nike’s marketing revolution began with their new Air Max shoes and their
memorable TV ad featuring the Beatles song Revolution with the tag line “ Just do
it‟ coming shortly after. By 1989, Nike had regained its position as industry
leader and never let it go since.
1990-99: Nike opened their headquarters in Oregon, with soccer and golf being
their desired sports to excel in. They signed some magnificent players from the
Brazilian national team and then decided to sign the whole team in 1995. More
importantly, they signed arguably one of the best athletes of all time in any sport
in 1996, Tiger Woods. Competitors laughed at Nike for signing him for $5
million dollars until he won the masters by 12 stroked in 1997.
2000-present: Nike opened up the millennium with Nike Shox resulting in
cushioning and stability which landed them a gold standard in the industry. Just
as Nike’s products have evolved, so has Nike’s approach to marketing. The 2002
“Secret Tournament” campaign was Nike’s first truly integrated, global
marketing effort. Departing from the traditional “big athlete, big ad, big product”
formula, Nike created a multi-faceted consumer experience in support of the
World Cup.
At an investor meeting at its world headquarters in June 2011, NIKE, Inc.
announced an increase to its fiscal 2015 revenue target to a new range of $28-30
billion, up from its previous target of $27 billion announced in May 2010. The
company also increased its fiscal 2015 revenue target for the NIKE Brand to $2425 billion, up from its previous target of $23 billion.
III. Summary of the Case (Background)
Nike is a US sports and fitness company that is the largest supplier of athletic
footwear in the world based in Beaverton, Oregon. It was founded in 1964 as a
footwear distributor of Blue Ribbon Sports by Bill Bowerman and Phil Knight
(middle-distance runner from Portland). Initially, the company operated as a
distributor for Onitsuka Tiger, the Japanese shoe maker. In 1972 the jump was
made to manufacturing company’s own brand of athletic shoes and the “Swoosh”
brand mark was created. The first self-manufactured company’s shoes used
Bowerman’s “waffle” design.
Nike became an international company when it opened an office in Taiwan in 1975.
In 1979 Nike Air technology was successfully launched and by 1980 the company
already attained 50% of national athletic shoe market. In 1982 Nike started to
cooperate with Portland-based advertising agency Wieden+Kennedy. Many
successful advertising campaigns were mutually launched and agency’s cofounder Dan designed even Nike’s famous slogan “Just Do It”.
Almost all of Nike shoes are made outside the US, in Asia and Latin America. Nike
does not make the shoes themselves, they contract production out to other
companies. Manufacturing footwear is very labour intensive, and involves cutting,
stitching, shaping and packing of up to 200 components per pair. The main raw
materials used in making the shoes are natural and synthetic rubber, vinyl and
plastic compounds, foam cushioning materials, nylon, leather and canvas.
Now, it has branch offices all over the world. The company operates in more than
160 countries and employs over 44000 people across six continents. It spends US
$1 billion on marketing the brand each year, this is equal to 10% of the brand’s total
revenue.
Oxfam Australia has been campaigning for 13 years to get Nike and to make sure
workers are paid enough to feed themselves and their families, to protect
workers in the factory from injury or being exposed to poisons, to allow workers
to form unions, and to respect their Human Rights. They argue that if a company
can afford to sponsor an individual athlete like Tiger Woods for US $100 million,
they can afford to make sure people making their shoes are paid enough to meet
their basic needs. This campaign has had some success and is continuing to meet
with Nike to push for more change. They monitor conditions in factories and talk
to workers regularly.
Nike’s revenue has a total of $20.862 billion in 2011 and with a total equity of
$9.843 billion. Today, Nike is considered the world’s leading supplier of athletic
shoes and apparel and one of the world’s most famous and strongest brands.
IV. Definition of the issues
The Nike case study has presented the company in different angles with all
aspects having different concerns. The purpose of this study is to analyze the
theories of management applied to Nike Corporation. The emphasis is made on
company’s strategic planning, organization peculiarities, leadership, management,
innovation and change. Among the main tasks are: defining company’s core
competencies, inner strengths and weaknesses, opportunities and threats that
the company’s environment poses; identifying how the company is organized,
showing its structure and decision-making process; defining the company’s
leadership style and communication environment; analyzing managerial controls
and the role of Information Technology within the company; describing
innovative management processes and concerns on corporate responsibility.
These issues are what we think are going to affect Nike’s performance in the
coming years.
V. Objectives
 To come up with a more efficient strategic planning without losing its
performance edge in terms of continually coming up with innovative, high
quality, top-design shoes
 To provide a S.W.O.T Analysis to help strengthen the strategy’s defenses and
enables the company to predict and anticipate future issues.
 To stay ahead in the global sportswear market
 To maintain product development level
A. Strategy and Planning
Nike’s core competencies are innovation, research and development, marketing
and effective exploitation of globalization processes. Company’s target audience
are males and females between 18 and 35 years old who prefer active lifestyle and
goods of high quality.
Nike’s main competitors in the footwear industry are Reebok and Adidas. These
companies also use international approach to management and business; they are
very profitable and have similar problems with publicity. At the same time Nike
remains the market leader due to its cost efficient marketing, effective advertising
and research and development. Nike’s competitors are less successful in these
key factors.
Nike uses strategic planning and various planning techniques in its activity. The
main peculiarity of company’s strategy is to start their marketing and promotion
with selling innovative items to professional athletes and teams and by this means
deliver the news and fashion of new products to particular customers. Nike’s
strategy also focuses on diversity in the workplace. This strategy corresponds to
company’s vision and mission statement. Among the planning techniques that
Nike uses are: contingency planning, bench marking, scenario planning and others.

S.W.O.T Analysis
SWOT analysis is an established instrument that helps to analyze company’s
internal and external environment. According to this method, company’s strategy
is formulated on the basis of internal strengths and weaknesses and external
opportunities and threats. SWOT analysis is an extremely powerful tool because it
helps to identify priorities and create a common vision of achieving the goals set.
Also, only by taking into consideration the components of general environment:
economic environment, social environment, political environment, legislation and
pressure groups, a company will be able to adopt the particular way of action,
which will assure its performance and advantages on present and potential
competitors (Gasparotti, 2009).
Below is the SWOT analysis for Nike Corporation:
 Strengths
- Nike has several strengths that enabled them to be one of the largest and
one of the most famous brands in the athletic footwear industry in the world. The
first strength is the product’s strong brand recognition. Almost all people know
the brand Nike and its logo, and usually even without the brand name the
customer can still recognize the brand by looking at the check or “swoosh” logo.
- The second strength could definitely be contributed by its distribution. In
the U.S. alone, there are around 18,000 retail accounts and outside the U.S. there
are around 30,000 international retail outlets that sell Nike products. Nike also
operates a “futures” program, wherein retailers can order up to six months in
advance. They sell there products through independent distributors in 200
countries around the world. It possesses no physical factories and can move its
production to any location that is more cost effective.
- The next strength could be attributed to its research and development.
They have a team which observes athletes in order to provide them with the
latest technologies in footwear and apparel. Since Nike contracts with foreign
manufacturers to produce their shoes, the company does not really require a
huge investment in machines and equipments, which is a strength because they
have fewer expenses. Having a broad range of products also contribute to Nike’s
success, because it gives the consumers a chance to choose what they want. They
have Nike performance focusing on athletes, Nike active which includes “gym to
street” wear, and Nike Fusion stylish clothing made of high performance fabrics
etc.
- With regards with the company itself, they have good marketing. Nike
has online stores where people can buy or browse for new designs etc. They
market their product as high-performance products designed with hightechnology features.
- Lastly, another strength is their strong management style and culture.
Nike is a very professional and competitive company with strong management.
Their founder created a strong culture based on loyalty and camaraderie, he
trusts these employees to “Just Do It”. They continue to follow their founder’s
philosophy which is Play by the rules, but be ferocious. It’s all right to be Goliath,
but always act like David.
 Weaknesses
- Nike’s main weakness is their lack of focus on one main product. This is
because of Nike’s commitment on having diversified products for athletes,
meaning having too many different products available to sell to their customers.
Due to this, they tend to have divided attention on each product line. Although
having many different products might be advantageous (increased sales,
additional market penetration, fall back in case one product fails), Nike should
also consider the time & resources spent in maintaining each product.
- Another weakness that we could identify, although not as great as the
first, would be Nike’s pricing strategy. Compared to their competitors, Nike’s
products tend to be more expensive than those of their competitors. But this may
be due to their products reputation, being made from the highest quality
materials, extensively researched and developed and tested by extraordinary
athletes around the world.
 Opportunities
- One of the opportunities that we quickly saw is the company’s efforts in
penetrating the market. Nike is currently focusing on Generation Y market (age
category) and women (gender category). Due to the strong increase in demand
for clothing & footwear for leisure activities by Generation Y representing a large
sum (of about 60 million people) of potential consumers, Nike addresses this by
acquiring Converse, increasing its offering in the currently popular retro and
classic shoes.
- Besides from acquiring Converse to address the issue on Generation Y,
Nike has begun marketing towards women more aggressively by creating Nike
Goddess stores and introducing women’s yoga shoes in an attempt to appeal to
health conscious women.
- Lately, buyers have become more brand conscious giving Nike an edge
over their competitors. Nike’s name and logo present high consumer awareness
that the company does not need to include their name on each product that they
produce. The “swoosh” logo is all that is needed. Also, some legal/regulatory
issues provide many opportunities not only for Nike, but for international
operations because of easier access to different countries.
 Threats
- As said in the article, Footlocker has decided to lessen the purchases of
Nike shoes because they want to sell low priced shoes and Nike shoes are quite
high priced. This poses as a threat to Nike because Footlocker accounts for 10.9%
of Nike’s revenue. They lost millions of dollars because of this and if not
addressed right away might cost them further loss of revenue.
- Future occurrence of terrorism and disease also is a threat to Nike
because it is something that they cannot control. An example is the September 11
attacks which slowed down the economy. It affected not only the shoe
manufacturing industry but the whole country and the whole world as
well. Diseases like SARS also threatened Nike’s sales as shoes were coming from
Asia where SARS was reported to have come from.
- Likewise, the economic and political condition of the countries
manufacturing Nike shoes also is something that they have no hold of which
poses as a threat to Nike because shipments of products may be delayed which
would cause loss of sales and revenue.
- Because Nike has a strong brand name, controversies affect the company
in a negative way. Some Nike followers may be turned off by controversies about
Nike not being ethical, which may or may not be true. This causes loss of sales for
the company.
- High level competition of Nike with Reebok and Adidas also is a threat to
the company as all of these companies have almost the same product line and
target the same market. This is why strategies are very important for Nike.
- Limited exports of Nike products due to legal restrictions also pose as a
threat to Nike as the supply of the products internationally is limited as well. They
cannot sell to other countries as much as they would want to because of the
limitation set by the government which decreases their potential for more sales
and revenues.

Additional Strategies
Upon careful analysis of Nike’s strengths, weaknesses, opportunities and threats,
we focused on developing strategies that would strengthen Nike in terms of
marketing, distribution, and management.
Distribution
1) Strengthen distribution in regions where Nike is currently losing sales, these
include footwear in the U.S. Region; and footwear, apparel, and equipment in
Americas region. Along with these, a strategy of penetrating emerging markets in
developing countries (e.g China) is also to be implemented. Easy access to Nike
products would result in higher sales and revenues.
2) Build more specialty stores or consignment with other existing local specialty
stores catering to specific sporting needs like Stoked, Inc. for skating/
wakeboarding/ snowboarding. Surfworld Co. for surfing and other water sports,
Golfer’s Choice for golf, etc. Providing for different sports needs increases Nike’s
followers.
3) Give a more aggressive take on online stores and allow consignments with
other existing specialty stores in this industry. Going into e-commerce can
increase also sales because of increasing internet users.
Marketing
1) Develop marketing strategies that would further push its products to its diverse
target market.
a) Sponsorship of kid-friendly programs to widen the customer base of the target
market of kids-adolescent like after school programs and summer/winter
programs. Target children and youth to make them life long Nike followers.
b) Internet users have continuously increased due to advancements in technology.
Nike has to be more aggressive in advertising through the internet and music
videos that would cater to the target markets of each division especially to the
emerging fashion scene and the rise of more active women.
c) Sponsor women empowerment programs to widen the customer base of
active women since Nike is currently concentrating on women.
Management
1) Strengthen office relations by offering after office programs and family social
gatherings for the employees (picnics, out of towns, etc) to develop network and
good relations among employees.
2) Closer observance in manufacturing managements (sweatshops) especially on
foreign contract manufacturing. Frequently review the employees’ code of
conduct and quickly respond to any change needed by the evolving company
culture. This is to ensure that the company is following ethical standards to avoid
controversies.
3) A quicker response to emerging social, economic, legal, and environment issues.
This is to be able to be flexible to issues or problems and adapt to an environment
that the company cannot control.
B. Organizing for Action
Nike’s organizational structure is divisional but it has functional departments.
Converse and Jordan brands are examples of divisions created around specific
products while Nike design is a functional department. Each department has subdepartments, responsible for handling particular tasks. On the top of company’s
hierarchy are CEO Mark Parker and a board of directors chaired by Phil Knight. In
Nike, employees report to divisional managers and divisional managers report to
the CEO. Operations department is used to provide proper communication
between divisions.
Nike is an innovative company and such organizational structure helps it to handle
research and development measures. Also, because of the global competition
Nike has to react to changes quickly and make rapid decisions. Carrying most of
the features of matrix structure, Nikes organizational structure facilitates timely
and quality decision making.
C. Leadership
Leadership involves a social influence process whereby intentional influence is
exerted by one person or group over other people or groups to structure the
activities and relationships in a group or organization” (Yukl, 2002,p3). Leadership
and management are different categories and not always can a single person
carry two of the roles simultaneously. “A leader can be anyone on the team who
has a particular talent, who is creatively thinking out of the box and has a great
idea, who has experience in a certain aspect of the business or project that can
prove useful to the manager and the team” (Benincasa, 2012).
Leadership style is a certain manner of implementing plans, influencing and
motivating people. From 4 to 6 leadership styles are usually differentiated by the
scientists. Most widespread classification includes: democratic, authoritarian,
laissez- faire and transactional leadership styles. On the top levels of Nike
Corporation laissez- faire leadership style is applied as separate departments get
relatively much freedom in their decision-making process while top management
motivates and transfers the vision of the company to ensure keeping to mission
and goals. At lowers levels of the organization various leadership styles are used
depending on the cultural peculiarities of the population that lives on a particular
territory.
Nike’s communication environment is very effective. All Nike managers are
required to communicate in a similar style across the company. The company has
a powerful digital intranet to provide effective communication between Nike
headquarters in Beaverton and the international offices. To get relevant feedback
from the customers Nike actively uses social media means. To communicate its
values to the target audience Nike uses designated spokespersons that often
base their speeches on inspirational stories and motivate the listeners.
D. Managerial Controls
Management is relatively decentralized in Nike. It means that much freedom in
decision-making is delegated to lower levels of management. The benefits of such
approach are: lower-level managers provide relevant information concerning local
conditions, they are better motivated and strong leadership is ensured
throughout the company. Nike’s managerial controls are tightly connected with
the usage of Informational technologies. Feedforward, concurrent and feedback
controls are made using the specially designed software.
Nike has a powerful digital intranet to ensure proper communication between
headquarters and international offices. At fist Nike had a developed ERP
(Enterprise Resource Planning) System, Supply Chain and CRM (Customer
Relationship Management) Software implemented into a single SAP Platform.
Later i2’s software was implemented that helped to get control over strategic
planning, demand management, supply planning and production. In 1998 Nike
purchased SAP Apparel and Footwear Solutions (AFS) that provided better
financial management, helped to decrease inventory level, improved decision
making and provided a holistic view on the whole business. Today Nike’s AFS and
Retail modules together with other SAP applications including Supply Chain
management (SCM) and Business Information Warehouse (B/W) are implemented
globally.
For example, SAP AFS Solution provides the right tools to manage the entire
supply chain from the initial purchasing of raw material to the final delivery of the
finished product (Suren, 2007). Provided with such software, Nike’s managers can
maintain coordination with local suppliers and customers and control whether the
financial goals are met. The Funds Management / Budget Control solution in the
Business Warehouse software that Nike uses helps to check revenues and
expenditures, hold budgetary control and to control the financial equilibrium of
business.
Also Nike actively uses social media (social networks, blogs, and media portals) to
promote their marketing efforts and get feedback from their customers.
E. Innovation and Change
Nike implements a lot of innovative approaches to handling business. Historically,
Nike shoes became successful due to innovative design, created specially for
athletes. Since then the company continues to invent new things and surprise the
world community with non-standard approaches to business.
First of all, the company was one of the first to sell the trade mark only, having no
physical production facilities and concentrating on marketing and promotion only.
This allowed Nike to minimize risks and maximize profits. Among other innovative
ideas of the company are: 225 Forest (storefront in California where
wakeboarders, BMX-ers, and skaters can customize Chuck Taylor All Stars and
Hurley board shorts with their favourite artwork); Women's Nike Training Club
(Possibility for women to create a personal virtual trainer using an iPhone app);
Total90 Laser III Boot (Soccer players submit a unique user code that comes with
the boot into Nike's Soccer+ Web site to receive an online coaching session from
Italy's Juventus FC). Also Nike became famous for its open-source approach
allowing them to collaborate with virtually everyone. For example, special Nike’s
R&D laboratory provides the green technologies that can be accessed by various
social entrepreneurs and manufacturers. With Nike’s decentralized management
and encouraged innovation, innovative ideas come from various international
offices. These and other innovations allowed Fast Company journal to call Nike #13
of most innovative companies in the world (Sacks, 2012). At the same time,
technological innovations are no more so necessary in the case of Nike
Corporation.
Nike’s organizational structure and peculiarities of management allow the
company to remain sensitive to changing consumer and social trends. Nike is
always ready for change and changes the world itself simultaneously. A good
example from Nike’s history is the time when the company, feeling the shifting
consumer trends, decided to get involved into world’s most popular sports soccer. While soccer was not particularly popular in the USA, for Nike it became a
wonderful opportunity to go global and become a leader in this market.
Nike is a social responsible company. In its CSR report they say: “Nike sees
corporate responsibility as a catalyst for growth and innovation, an integral part
of how we can use the power of our brand, the energy and passion of our people,
and the scale of our business to create meaningful change. The company focuses
its efforts on core impact areas tied to its long-term growth and innovation
strategies: improving conditions in contract factories, designing for a better world,
achieving climate neutrality and unleashing potential through sport”. At the same
time Nike is often accused of violating the human rights of its workforce in the
developing countries and providing unsatisfactory working conditions. This ethical
issue negatively influences company’s publicity and forces Nike to constantly look
for the solutions to this problem.
VI. Summary
Nike is a good example of an innovative contemporary company that I would
really like to join. Nike provides clear career paths and wonderful opportunity to
expose your potential. Company’s management is extremely effective and
because of decentralized approach combined with encouraging all sorts of
innovation, innovative ideas come from everywhere, allowing low-level managers
to become a part of the history.
Nike is a very successful company, a true market leader. Company’s approach to
marketing, advertising and getting feedback from the customers provides an
effective model on which others can learn. Also, Nike is a very flexible company
that feels and reacts to all shifting trends in its market. Though the company has
certain ethical issues to resolve, it is still a socially responsible company with
strong image.
VII. Conclusion and Recommendation
By catering to the target market’s specific needs in fields of sports, fashion, and
lifestyle, Nike will be able to widen its consumer base and generate more revenue.
This is done by closely monitoring the implementation of the proposed marketing
and development strategies. There have also been management issues in the past,
and Nike should strive to face these issues and prevent the occurrence of such. As
a company being socially responsible, a quick response to emerging issues should
also be consistently done.
The factors that drive Nike’s decision to stick with its current organizational
structure include its well-established brand name in the industry. The product
quality has not compromised the company. The company released the data in
conjunction with a comprehensive corporate responsibility report summarizing the
environmental impact and the labor situations of its contract factories.
Nike’s Sustainable Business & Innovation Lab funds outside startups focused on
alternative energies, more efficient approaches to manufacturing, and the
promotion of healthy lifestyles.
The company has so far balanced size and pressure to remain successful by
leveraging a decentralized and networked organization structure.
Sources and References:
Nike official website, http://nikeinc.com/ Peggy Kataveli, CMA, “Nike boss outlines
new ambitious financial goals”,
https://www.studocu.com/row/document/hebron-university/marketingmanagement/analysis-of-nike-case-study/7549015
https://predicate.wordpress.com/2009/06/17/nike-marketing-case-study/
https://fourweekmba.com/nike-organizational-structure/
Business 2.0 Press, May 5, 2010 Carmen Gasparotti, “The internal and external
environment analysis
industry with swot model”
Dun rea de Jos”, University of Gala i,
anagement &
arketing (2009) Vol. 4,
No. 3, pp. 97-110. Market Research World, “SWOT Analysis Nike, Inc.”,
http://www.marketing-research.com/marketing/swot-analysis-nike-inc Nancy E. Landrum and David M.
Boje, “Kairos: Strategies just in time in the Asian
athletic footwear industry”
Pre-publication Draft of Chapter 6, To appear in Book titled: Asian Post-crisis
Management Edited by Usha Haley, expected publication date 2001. Dwight
Chestnut, “Nike's Flat Organizational Structure”, e-how,
http://www.ehow.com/facts_6887850_nike_s-flat-organizational-structure.html
S.Suren ,” SAP AFS – Intro”
SAP blog, http://www.sapafs.net/2007/08/sap-afs-intro.html, 16 Aug, 2007 “Funds
management [FM] & Budget Control Systems [BCS]”, Business Information
Warehouse, University of Kentucky, BW Web Reporting – Funds Management /
Budget Control, October 1 2005. Danielle Sacks, “Most Innovative Companies
2010”,
Fast Company, July 12, 20