Nowadays, the Footwear Industry is highly globalized and competitive. According to “Industry Profile: Global Footwear” (2012), the global footwear market produced about $243.1 billion in 2011. The U.S. market occupies the leading position by imports, and large internal manufacturers, wholesalers, and retailers who outsourcing to countries which have large amount of low-cost labors, especially in Asia, such as China, Indonesia, Thailand, India, and Vietnam. And the US footwear industry probably involves 100 manufacturers. And Nike is the bellwether of Footwear Industry today.
However, due to fashion-related and seasonal fluctuations, the demand of shoes is rapidly changing. The highly unstable demand controls the footwear market. Customers want more diversity in footwear, so the strategy of the companies must cater to customers demand. Therefore, the purpose of this study is to show you Nike’s current situation, and its market position.
Background of Nike
Nike is the world's leading designer, maker and distributor of athletic footwear, apparel, equipment and accessories for a series of sports and healthy activities. The company’s target market is in Americas, Europe, Middle East, Africa and Asia Pacific. Its headquarters is in Beaverton, Oregon and Its employees are around 38,000 people (“NIKE, Inc.:Company Profile”, 2012).
The company produces footwear for running, training, basketball and soccer use. It also produces and sells sports-inspired civic shoes and children's shoes. The company also sells tennis, golf, baseball, football, bicycling, volleyball, wrestling, cheerleading, aquatic activities, hiking, outdoor activities and other athletic shoes. The company provides these products for men, women and children (“Industry Profile: Global Footwear”, 2012).
However, Nike has some problems, such as the use of sweatshops in poorer countries to make their clothes cheaply. They have been charged of treating their employees badly and paying them very little money for working long time. The cheap clothes are sold in more economically developed countries for lots of money. This makes Nike get a big profit (“What are the problem of Nike”, 2012).
Investor Guide & Financial Analysis
Financial analysis of Nike
The company produces about $20,862 million in the financial year end of May 2011; its revenue increased 9.7% compared to financial 2010. The increase in revenue was primarily due to higher contribution from the NIKE Brand and the company’s other businesses. The company’s operating profit was $2,815 million in 2011; it increased 13.8% compared to 2010. Its net income was $2,133 million in financial 2011, however, its preceding net income was $1,883 million (“Industry Profile: Global Footwear”, 2012).
Figure 1 below shows the key financials for Nike company as of recently years. NIKE, Inc.: key financials ($)
Figure 1: Industry Profile: Global Footwear (2012, February). Datamonitor USA. Retrieved from http://www.datamonitor.com/
If companies want to be financially strong, they must be able to pay their bills on time, and they must have enough cash to take advantage of opportunities as they come up. We can assess the financial strength of Nike Company by looking at current ratio here. The current ratio measures its ability to meet current obligations. Here is the relevant figure: Current Ratio = Current assets/Total liabilities = 14,998/ 5,155 =2.91
We generally look for a current ratio of about 2; a number below that usually signals a short-term liquidity problem. As we can see, Nike has a perfect current ratio. And we also can find out that the revenues of Nike increase stable in recent years.
Data & Graph Analysis
Market Demand & Supply Analysis
According to “Managerial Economics and Business Strategy” (2010), Variables other than the price of a good that influence demand are known as demand shifters. And they include consumer income, prices of...