Financial and Non-Financial Justifications
Nike is the largest seller of athletic footwear and apparel in the world that selling products primarily through a combination of retail accounts.Nike itself owned a retail, including independent distributors, stores and e-commerce ,franchisees and licensees worldwide. Build a profitable global portfolio of branded footwear, apparel, equipment and accessories businesses is a goal of the company while their strategy is to achieve long-term revenue growth by producing an innovative technology products. Based on the history, revenues in the first and fourth fiscal quarters have slightly exceeded with the second and third quarters. The changes of season and geographic demand for certain types of footware, apparel and equipment could make the mix of product sales looks quite considerably. Because of the Nike is a company of consumer products, the relative popularity of various sports and fitness activities and changing design trends will affect the demand for the product. Failure to respond in a timely, efficiency and effectively could have a material adverse effect on sales and profitability.Nike has reported it’s brand operations based on the internal geographic organization. Each NIKE brand geography operates especially in one industry which are the design, production, marketing and selling the products. Nike’s has long-term of financial goal to be achieve which are high single-digit revenue growth, mid-teens earnings per share growth, increased return on invested capital and accelerated cash flows, and consistent results through effective management of Nike diversified portfolio of businesses. This long-term strategy had been adopted since 2001 and as a result, Nike’s revenues and earnings per share have grown 9% and 14% respectively. At the same time, the company return on invested capital also increased from 14% to 18%. On 2009, revenues of the company grew 3% to $19.2 billion while net income had decreased 21% to $1.5 billion. During fiscal 2009, the company took prudent and necessary steps to identify and manage potential exposures which are to ensure the position are sustainable and profitable long-term growth. In the fourth quarter of fiscal 2009, company execute a plan of restructuring their organization, enhance consumer focus, drive innovation more quickly to market, and establish a more scalable cost structure. This action had reduce the global workforce by approximately 5% and incurred pre-tax restructuring charges of $195 million, primarily consisting of cash charges related to severance costs. Besides, there is another step taken in fiscal 2009 which include reductions in planned selling and administrative expenses, including the implementation of a hiring freeze, reductions in planned spending for travel, meetings and demand creation, as well as tighter inventory purchasing and working capital management. Nike always believes that their company is well positioned from business and financial perspective. However, the company does not immune to current challenging global economic condition which is could continue to affect their business either directly or indirectly, including lower revenue from slowing customer demand for products, reduced profit margins and increased costs, changes in interest and currency exchange rates, lack of credit availability and business disruptions due to difficulties experiences by suppliers and customers.
Investment strategy using Porter’s five market forces and value chain analysis frameworks Threat of Substitutes
Besides Nike, there are also other brands out there such as Adidas which is second to Nike and follow by Reebok in third. But after Nike ran into trouble in the 90s, many customers decided to strike against Nike and not buy its products anymore. When people saw Nike’s bad practices in 1998, the company’s revenue fell by 69%; not only was it a huge loss but it was also Nike’s first loss in sales in 13 years. Threat of New...
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