Analysis of Nike Inc.

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The Bucharest Academy of Economic Studies
Master in International Project Management

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Corporate Strategy: Analysis of Nike, Inc.

Students:
Bodea Irina Paula Miu Alina
Petrisoaia Dan
Popa Andrei
Ticmeanu Andrada

2012
The brand name “Nike” is one of the most recognized around the globe. The name is synonymous with high-quality athletic shoes, apparel, and accessories in the minds of many people worldwide. Perhaps it is the compelling marketing that commands attention. Or maybe it is the association between the brand name and its famous endorsers, such as Tiger Woods and Michael Jordan. Alternatively, it may be Nike’s cutting-edge sporting vision and technology that entrances multitudes of consumers. Quite conceivably, it is a combination of these factors that has propelled Nike to the top of its industry.

However, not the entire of Nike’s story is ideal. In recent years, the company has faced criticism in connection with its use of contract labor in developing nations. The purpose of this case is to provide an understanding of the company’s background, its general business strategy, and its use of contract labor.

The Athletic Apparel and Footwear Industry

The athletic apparel and footwear industry experienced steady growth for more than two decades, beginning in the early 1980’s. For example, the volume sales in the footwear market are projected to reach 13.3 billion pairs by the end of 2012, and by the year 2015, the world footwear market is forecast to reach $195 billion. Consumers were not just professional athletes, but ordinary men, women, and children who wore athletic apparel for both sports and leisure. The industry became more fashion-oriented, resulting in higher levels of innovation and cutting-edge technology. As a result of the emphasis on style and fashion and customers’ demands for improving performance and comfort, the industry experienced short life-cycles for individual products.

The industry was characterized by fierce competition in global markets. Industry leaders jousted for supremacy in the professional, female, and youth segments. By 2005, the U.S. market was considered to be mature, and global markets were likewise rapidly approaching maturity, resulting in intensified competition for market share.

There also was heated competition for advertising and promotional licenses, particularly between the two industry giants, Nike and Adidas. For instance, Adidas sponsored one of the world’s premiere soccer clubs, Real Madrid, while Nike sponsored Manchester United, also a world class soccer club in Great Britain. Adidas was also the Official Supporter of the Athens 2004 Olympic Games and the Germany 2006 World Cup in soccer. However, Nike’s presence was very evident in the World Cup: many teams in this tournament wore uniforms emblazoned with the unmistakable swoosh.

The athletic footwear and apparel industry has enjoyed a measure of stability beginning in the 1980’s, due in part to the high barriers to entry that new firms faced. There were high start-up costs due to expensive raw materials; costly innovation, technology, and advertising; and the high market share held by the industry’s leaders. Existing companies achieved economies of scale that were not available to potential new entrants. In addition, established companies had distinct identities and brand-loyal customers. New entrants would have needed to match these companies in research and development and advertising expenditures to win over customers loyal to the other brands.

The world economic recession has affected the world footwear market with sales witnessing erosions in developed countries and growth slowing down considerably in developing countries. The decline in income levels have reduced the spending on...
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