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PREPARED BY:
SHALINI CYNTHIA A/P GNANA SELVA KUMAR
(860703385614)
S. SRIVITYA A/P SREERAMAMOORTH
(4072012471)
THAVAMALAR A/P J A BALAN
(850315-05-5286)
VINOTHINI A/P RAMACHANDRAN
(861215-38-5898)
PREPARED FOR:
PN SHARIFAH HILMI BINTI SYED ABDULLAH
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Philip Knight, a dedicated long distances runner, developed a plan to make low- cost running shoes inJapan and to sell them in United States as part of his work toward an MBA degree at StanfordUniversity. Knight teamed up with Bill Bowerman.
Then, he starts his plan by starting Blue Ribbon Sports in 1964. In 1971, Blue Ribbon Sports receiveda trademark on its swoosh logo and the Nike brand name was also introduced. Blue Ribbon Sportsofficially changed its name to Nike in 1978. In the late 1970 1nd 1980, Nike researches used theirtechnological expertise to develop several types of athletic shoes that revolutionized the industry.
In 1988, Nike purchased New Hampshire- based Cole Hoan for $64 million. The subsidiary currentlyhas several brand names including CH, Gseries, by Cole Haan, Bragano, and Cole Haan. Haan. Nikescasual footwear bushes grew 16 percent the following year. Nike acquired the Cole- Hoan Accessoriescompany in 1990.
Nike opened its first retail store, called Nike town, in Portugal Oregon, it purchased a cap- makingcompany called Sports Specialties (now called Nike Team Sports Inc.) In 1993 and 1994, the outdoordivision added new shoes called Air Mada and the Nike Sport sandal became the top seller in themarket.
In 1995, Nike acquired Canstar Sports. Inc (the world largest hockey equipment maker) for $ 409million. Canstar, now called Bauer Nike Hockey Inc, manufactures in- line roller skates, ice skates,and
blades, protective gear, hockey sticks, and hockey jersey.
The micheal Jordan collection of basketball clothing was launched in1998. Randy Mass and DerekJeter were hired to promote the Jordan brand in 1999.
Two Nike Goddess stores, geared toward the sell of womens clothing and footwear, were opened inLos Angeles in 2001. Nike purchased Impact Golf Technologies in 2002. In September 2003, Nikeacquired Converse for $305 million The Companys Hurley Brand acquired in 2002.
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COMPANY VISION
To bring inspiration and innovation to every athlete in the world.
COMPANY OBJECTIVES
1. Nike wanted an innovative solution to be able to deliver an effective
campaign simply across multiple markets. The main objective was todrive awareness of the Nike themes.
2. Provide an environment which develops people to maximize their
contribution to NIKE.
3. Provide quality and innovative services and products internally and
externally.
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Nike is the largest seller (3) of athletic footwearand athletic apparel (2) in the world (2).Performance and reliability of shoes, appareland equipment(2), new productdevelopment(4),price, product identity through
marketing and promotion(8) and customersupport and service are important aspects ofcompetition in the athletic footwear, appareland equipment industry(2). We believe we arecompetitive in all of these areas (6,7). The
company aims to lead in corporate citizenship(7) through proactive programs that reflectscaring for the world family of Nike, ourteammates (9) our consumers (1) and those whoprovide services to Nike.
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Nike strives to be the global leader in the sportinggoods (2) industry with sports brands built on apassion for sports and a sporting lifestyle. Nike isconsumer focused. (1) We continuously improve thequality, look, feel and image (8) of our products andour organizational structures to match and exceed
consumer expectations (1) and to provide them withthe highest value. (4) (7) We are global organization(3) that is socially and environmentally responsible,creation and financially rewarding for our employees(9) and shareholders. We are producing in order tofulfill customer needs and satisfaction for new
generation. We believe that our product will beoutstanding from competitors in Sports industries. (6)Profit maximization (5) and quantity of products isgiven priority.
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General
environment
Analysis Opportunity Threats
Demographic 1. About 40% of the 33million increases in the
size of the U.S. population
during the 1990s are
directly attributable to the
increases in demand.
2. The share of whites and
males in the labor force
will continue to
fall min the 21st century.
Social 1. In mid 1990s women havepurchased more athletic
shoes than men have,
therefore demand
increases.
2. Athletic shoe companies
began having some
difficulty selling their
product to the youth
market in 1977 due toyouth market shift.
Political/ Legal 1. Stable politic condition inUS before 2001.
2. September 11, 2001 attack
in US destroys the market
and low demand.
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General
Environment
Analysis Opportunity Threats
Economic 1. Positive global GDPgrowth and low
unemployment rate.
GDP was 7.8% in 2003
and 3.8 % of
unemployment rate.
2. Olympic game in 2004
give good market profit.
3. Many restrictions suchas NAFTA and GATT
which control imports
Technology 1. Electronic datainterchange (EDI)
technology used in an
attempt to achieve just-
in-time inventory.
2. Conduct seminars and
workshops forsupervisors in factories
so that they may
improve their
production and
management skills.
3. High cost in using
technology in
production.
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PORTES 5FORCES
DETAIL INDUSTRY
PROFIT
Rivalry among
competing firm
HIGH The major competitors inthe athletic shoe industry
are Nike and Reebok.
Some of the other
competitors in the
industry include Adidas-
Salomon AG, New
Balance, K- Swiss, FilaAsics, and Ked.
LOW
Potential of new
competitors
HIGH Reebok designs anddevelops athletic shoes
and clothing for sale
worldwide. It develops
marketing campaigns
around sports stars in an
effort to increase its
market share
LOW
Potential
development of
substitute
product
HIGH The price differentialbetween manufacturers is
not bug and consumer can
easily change from one
product to another
HIGH
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PORTES 5FORCES
DETAIL INDUSTRY
PROFIT
Bargaining
power of supplier
HIGH Nike makescontract with
famous athlete or
team to promote
and advertise itsproduct
LOW
Bargaining
power of
consumers
HIGH Switching cost aweare typically very
low and may due
switch to rivals
products if the rivalof trendier
HIGH
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NIKE ADIDAS REEBOK
Rating Weighted
ScoreWeight Weighted
ScoreWeighted
ScoreRatingRating
Domestic
marketpositioning
0.1 2 0.2 4 0.4 3 0.3
Internation
al market
positioning
0.1 3 0.3 4 0.4 3 0.3
Consumer
loyalty
0.8 3 0.24 3 0.24 3 0.24
Brandrecognition
0.1 4 0.4 4 0.4 4 0.4
Pricecompetitiveness
0.09 3 0.27 3 0.27 4 0.36
Productquality
0.07 4 0.28 4 0.28 3 0.21
Relationshipithanufacturer
& Supplier
0.07 4 0.28 3 0.21 3 0.21
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NIKE ADIDAS REEBOK
Weight Rating Weighted
Score
Rating Weighted
Score
Rating Weighte
d Score
Product
research
development
0.1 4 0.4 4 0.4 3 0.3
Productdiversity
0.1 3 0.3 4 0.4 2 0.2
Financial
position
0.07 3 0.21 3 0.21 2 0.14
Marketing 0.08 4 0.32 4 0.32 3 0.24
Organizationalstructure 0.04 3 0.12 3 0.12 3 0.12
TOTAL 1.00 2.72 2.85 2.42
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ADIDAS is in the first rank among the competitors followed by NIKEand finally REEBOK.
There are same rating for NIKE and competitors such as ADIDAS andREEBOK in term of consumer loyalty, organizational structure and brandrecognition.
NIKE has high weighted score in term of relationship with manufacturersupplier. It also has the lowest ranking in domestic market positioning
compare to ADIDAS REEBOK.
ADIDAS has the highest ranking in term of product diversity, domestic
marketing positioning and product research development.
REEBOK have a lowest rank in product diversity. In term of pricecompetitiveness it is in the highest rank compare to ADIDAS NIKE.
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OPPORTUNITIES WEIGHT
0.0-1.0
RATING
1-4
WEIGHTED
SCORE
(WxR)
1. Attract generation Y
which is the biggest
population in an
organization.
0.06 3 0.18
2. Awareness of health
among people makesthem involve in sports
activities.
0.10 3 0.30
3. Government
encourages women to
involve in sports.0.11 4 0.44
4. Strong economic
condition and annual
growth in GDP.0.09 3 0.27
5. Nike using high
technology and
research to design their
product.
0.14 3 0.42
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THREATS WEIGHT
0.0-1.0
RATING
1-4
WEIGHTED
SCORE
(WxR)
1 . Consumer preference
changes 0.06 3 0.18
2. Amount of competitors is
increasing 0.0 0. 2
3. Many legal restriction bygovernment limited the
import quantity.
0.0 1 0.0
. Slow general economic
growth and economic crisis
makes product demand
decreases.
0.12 2 0.2
5. Long term productdevelopment. 0.16 1 0.16
TOTAL(OPPORTUNIT
IES & THREATS)
1.00 2.98
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The WEIGHTS are industry based and RATINGSrepresent the effectiveness of firms strategy. Thus, the
2.98 weighted score in NIKEs EFE Matrix represents
NIKE is excellent way in responding to its
opportunities and threats in the industry. In other words we can conclude that NIKEs strategies
efficiently and effectively take advantage of its
opportunities and take serious steps to minimize
potential threats.
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(IN MILLION)ENDED 31 MAY
2002
$
DIFFERENCE 2003
$
TOTAL CURRENTASSETS
4154.7 525.2
12,64%
4679.9
TOTAL
NONCURRENT
ASSETS
2285.3 251.3
-11%
2034
TOTAL CURRENT
LIABILITIES
1833.2 182
9.93%
2015.2
TOTAL
NONCURRENT
LIABILITIES
766.8 58.8
-7.67%
708
TOTAL
SHAREHOLDERS
EQUITY
3839.0 151.7
3.95%
3990.7
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It can be concluded that NIKE performed better in
2003 compared to 2002. This can be seen through
the increase in total current asset, total current
liabilities and total shareholders equity.
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DESCRIPTION 2002($MILLION)
2003($MILLION)
DIFFERENCES
REVENUE 9893.0 10697.0 o804
8.13%
6004.7 6313.6 o308.9
5.14%
GR M RGIN 3888.3 4383.4 o495.1
12.73%
ING
DMINI R IV
2820.4 3137.6 o317.2
11.25%
IN R
XP N
47.6 42.9 q4.7
- 9.87%
H R IN M 3.0 79.9 q76.9
25.63%
IN M R
X
1017.3 1123.0 o 105.7
10.39%
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INCOME
TAXES
349.0 382.9 o33.9
9.71%
INCOME
AFTER TAX
668.3 740.1 o 71.8
10.74%
NET INCOME 663.3 474.0 q189.3
28.54%
A IC E 2.50 2.80 o0.30
12%
DILUTED E 2.46 2.77 o0.31
12.6%
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It can be conclude that Revenue has increase because of the
product development in the market. Net Income has decrease
because of the payment of tax is high. Overall, it can be said that
the Nike company has performed well in year 2003 when
compared with previous year.
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NO RATIO FORMULA YEAR 2002 YEAR 2003
1CURRENT RATIO
CURRENT ASSET / CURRENT
LIABILITIES
4154.7/1833.2
=2.27
4679.9/2015.2
=2.32
2QUICK RATIO
(CURRENT ASSET- INVENTORY) /CURRENT LIABILITIES
(4154.7-1373.8)/
1833.2
=1.52
(4679.9-1514.9)/
2015.2
=1.57
3DEBT RATIO
TOTAL LIABILITIES / TOTAL ASSET
2601/6440.0
=0.40
2723.3/6713.9
=0.41
4 INVENTORY TURNOVER
COST OF GOODS SOLD / INVENTORY
6004.7/1373.8
=4.37
6313.6/1514.9
=4.17
5 NET PROFIT MARGIN
NET INCOME/SALES
663.3/6004.7
=0.11
474.0/6313.6
=0.08
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NO RATIO FORMULA YEAR 2002 YEAR 20036. RETURN ON ASSETS
NET INCOME/TOTAL ASSETS
663.3/6440.0
=0.10
474.0/6713.9
=0.07
7. RETURN ON INVESMENTNET INCOME/ TOTAL
INVESTMENT
8. TIME INTEREST EARNED
EBIT/INTEREST
1017.3/47.6
=21.4
1123.0/42.9
=26.2
. AVERAGE ECTIERI
SALES/( EBTOR/ )
. /
( . / )
=1215.5
. /
( . / )
=1096.1
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STRENGTH WEIGHT
0.0- 1.0
RATING
1-4
WEIGHTED
SCORE
(WxR)1) Revenue has increased
by 8.13% over 2002
shows a good
indicator of financial
health.
0.13 4 0.52
2) 30,000 international
retail outlets
location.
0.09 3 0.27
3) Nike holds 39% of
market share in
athletic shoe industry.
0.10 3 0.30
4) Using foreign contract
manufacturing
requires no capital
investment.
0.11 4 0.44
5) Strong innovation and
does not require a
large investment in
equipment.
0.06 3 0.18
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WEAKNESSES
WEIGHT RATING
1-4
WEIGHTED
SCORE
(WxR)
1) R D time spending 0.08 2 0.16
2) Issues with Foot Locker 0.08 1 0.08
3) Main suppliers China
and Indonesia subject tohigh EU duties
increasing costs and
reducing profit.
0.05 1 0.05
4) Heavy dependency on
footwear sales.
0.05 2 0.10
5) Online activities
limited.0.13 2 0.26
TOTAL 1.00 2.84
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The WEIGHTS are industry based and RATINGS
represent the effectiveness of firms strategy. Thus, the
2.84 weighted score in NIKEs IFE Matrix representsNIKE is excellent way in responding to its strength
and weaknesses in the industry. In other words we can
conclude that NIKEs strategies efficiently and
effectively take advantage of its strength and take
serious steps to minimize potential weaknesses.
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Y axis: - Financial Strength: +4.00
- Environmental Stability: - 2.57
X axis: - Competitive Advantage: - 2.33
- Industry Strength: + 4.40
=>Y coordinate: + 1.43
=> X coordinate: +2.07
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INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
Financial strength(FS) Environmental stability(ES)
1.Return on investment 1.Technology changes - 22.Leverage +4 2.Rate of inflation - 2
3.Liquidity +6 3.Demand variability - 3
4.Working capital +2 4.Price range of competing - 2
5.Cash flow 5. Barrier to entry into markets - 3
6.Competition pressure - 4
7.Easeof exit in Market
8.Risk involved in business - 2
TOTAL +4.00 TOTAL -2.57
Competitive Advantage(CA) Industry strength
1.Market share - 2 1.Growth Potential + 5
2.Product Quality - 4 2.Profit Potential + 4
3.Product life cycle - 1 3.Financial Stability + 5
4.Customer loyalty - 3 4.Technological know-how + 4
5.Competitors capacity utilization - 1 5.Resource utilization + 4
6.Technological know-how - 3 6.Ease of entry into market
7.Control per supplier and distributors 7.Productivity capacity utilization
TOTAL -2.33 TOTAL +4.40
Average
Financial Strength (FS) = +4.00 Industry Strength (IS) = + 4.40
Environmental Stability (ES) = -2.57 Competitive Advantage (CA) = - 2.33
+1.43 + 2.07
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Strength
1)Revenue has increased by 8.13%
over 2002
2)30,000 international retail outlets
location
3) Market share holds 39%
4) Foreign contract
5)Strong innovation
6)Purchase Impact Golf Technology
Weaknesses
1)R&D time spending
2)Issues with Foot Locker3)Main suppliers China and
Indonesia
4)Heavy dependency on Footwear
5)Online activities limited
1) Gen Y
2) Baby boomers
3) Women in sports
4) Online footwear/Apparel sales
5) European Union (EU)
6) High technology and research to
design their product
SO Strategy
1) Use youthful ads, to promote sales
and develop fashionable sportswear or
footwear to Gen Y (S1,O1,O6)
2)Make women ads to promote sales of
sports products to women in sports
(S1,O3)
3) Expand further into Europe (S3,O5)
4)Acquire European company to
support further penetration into EU
(S4,O5)
WO Strategy
1) Increased R D expenditures to
support producing new
innovations to meet future
market segment needs (W5,O6)
2) Expand further into Europe
partnering with Adidas by taking
advantage of their distribution
channels (W4,O5)
3) Sell youth oriented products
online since Gen Y are Internet
Savvy (W5,O1)
4) Acquire an outsourcing Web
services computer company to
direct sell online (W5,O1)
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Threat
1. Consumer preference changes
2. Intense competition
3. Competitor breakthrough
4. Poor economy
5. EU quotas/duties
6. Political instability
ST strategy
1. Develop products to match the
casual shift (S1,T1)
2. Develop product for different
market segments (fitness,
performance, lifestyle, sports) and
to stay ahead of competitors
(S1,S5,TI,T3)
3. Develop new accessory Golf
products. The exclusive
relationship minimizes
competition. (S6,T2)
WT Strategy
1. Use production from stable countries with
low labor costs possibly not subject to EUquotas and possible lower duties imposed
(W3,T5,T6)
2. Promote Nike town and develop more of
an online presence to overcome obstacles
such as Foot Locker and other online
footwear stores. (W2,T2)
3. Provide a more diversified product mix to
appeal to more of the population. (W4,T1)
4. Pause strategy where no risky new
strategies are employed allowing focus on
increasing sales (W1,T4)
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CORPORATE LEVEL
ISSUES WITH FOOT LOCKER
Foot Locker canceled millions of dollars in Nike orders in protest of high wholesale prices,
and Nike retaliated by stopping shipments of its most popular shoes to Foot Locker stores.
This disagreement will be a significant cost to Nike in the short run.
BUSINESS LEVEL
COMPETITION IN EUROPE
Competition is increasing in Europe. Adidas-Salomon AG, a German company, is the
number one seller of athletic shoes in Europe and number two worldwide. Adidas, the top
European-owned competitor, will be fighting to maintain its percent worldwide share of the
competitive market for athletic shoes.
FUNCTIONAL LEVEL
EXPLOITIVE PRACTICES OF MANAGER
There are exploitive practices of managers in Some Asian countries. Indonesian factory
managers making Nike products were charged with sexual harassment, physical and verbal
abuse, restrictions in health services, and forced overtime. Some of these managers were
charged with requiring employees who misbehave or are late for work to run laps or clean
toilets.
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CORPORATE LEVEL
ISSUES WITH FOOT LOCKER
According to the issues with Foot Locker who had cancelled the order, Nike should able to develop
their market. Market development strategy should be imposed and new market for Nike should be
created. In addition, horizontal acquisition should be implemented to increase a firms market power
by exploiting cost-based and revenue based synergies. As examples, Adidas and Nike can merge
together to integrate their operations and increase their market power.
BUSINESS LEVELCOMPETITION IN EUROPE
Nike should implement the focused on differentiation strategy in terms of their product uniqueness.
As examples, Nike should focus on womens yoga shoe in an attempt to appeal to health conscious
women who do not see themselves as an athletic. Nike also must focus on their goddess stores and
began marketing more toward women. Nike must be able to complete various primary and support
activities in a competitively superior manner to develop in sustain a competitive advantage and earn
above average returns. Developing product for different market segments as fitness, performance,
lifestyle, sports and to stay ahead of competitors must be focused.
FUNCTIONAL LEVEL
EXPLOITIVE PRACTICES OF MANAGER
Nike must create code of leadership in order to prevent sexual harassment, physical and verbal abuse,
restriction in health services, and forced overtime. Besides that, Nike must provide suitable professional
ethics code and update existing code to prevent exploitive practices.
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