Nike Inc.: Study of Value Chain Functions and How They Contribute to the Success of Nike.

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Nike Inc.: Study of value chain functions and how they contribute to the success of Nike.

Prepared by
Helgi Frimannsson

MBA 640A
Dr. Norcio

When Bill Bowerman, a former track-and-field coach at University of Oregon and co-founder of Nike Inc, once said "if you have a body, you are an athlete", his words marked the foundation for a future business venture. Built on this quote is Nike´s mission statement that states: bring inspiration and innovation to every athlete in the world. In reality it means supporting all athletic activities regardless of anything else. This simple and ambitious yet humble objective has led Nike to the top of multi-billion dollar business category that is selling athletic footwear and apparel worldwide. Nike was founded in 1968 by two entrepreneurs who used innovation to inspire their athletic footwear design. The inspiration for Nike´s business model came from Bowerman who taught his athletes, Phil Knight among them, to seek competitive advantage everywhere, especially in their bodies, their gear and their passion. Today, Nike has the same core value installed. Knight, a co-founder of Nike and now Chairman of the Board, has witnessed an initial idea from his days as middle distance runners for Coach Bill Bowerman, evolve over the years and constantly grow into a global athletic empire. Knight and Bowerman are credited as some of the world's most celebrated businessmen. (Heritage, 2006) In the fiscal year 2006 Nike Inc. and its five wholly-owned subsidiaries (Cole Haan, Converse, Exeter Brands Group, Hurley, Nike Bauer Hockey, and Nike Golf) brought in just short of fifteen billion in revenue, its highest figure ever. The net income for the same year registered at approximately fourteen hundred million dollars. Earnings per share also came in at its all time high rate and growing some eighteen percentages from 2005. (Nike 10-K form, 2006, p.46) An interesting part to examine is how Nike has reached these incredible figures by globally managing all categories of the value chain: research and development, design, production, marketing, distribution, and customer service. The respective categories function within each other to add worth to the product for the final consumer. The reasons why Nike has been so successful are found in every aspect of the value chain.

Research and Development
Nike strives to produce products that help athletes in terms of reducing injury, enhance performance, and maximize comfort. To achieve these standards Nike employs a staff of specialists in the areas of biomechanics, exercise physiology, engineering, and industrial design, who all contribute their respective areas of expertise to the development of products. Additionally, Nike´s development division relies on advisory boards made up of athletes, coaches, trainers, equipment managers, and medical experts, to give their industry specific input. Nike also utilizes its own employee athletes for wear-testing and evaluating products at various levels of usage. These are all factors that help to fully satisfy consumer demands by offering top quality products. Nike recognizes these efforts as one of the key success factors in the company's past and future success. (Nike sports research lab, 2007) The Nike Sport Research Lab is located at its World Campus in Oregon in a state-of-the-art facility named after U.S. women´s national team soccer legend Mia Hamm. The work of the researchers falls into three primary areas. First is biomechanics, the study of the human movement and related forces. Second area is physiology, which studies the integration of the body's energy systems and responses to environmental stresses. Third research area studies sensory and perception which is an evaluation of product attributes, effectiveness, and durability. For each of the three areas there are four consumer variables that are incorporated into the product development: geographical location, gender, age, and skill...
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