AN ECONOMIC PROFILE OF NIKE
Nike Inc. (NKE) is one of the best known and heavily advertised brands in the world. Nike designs, develops and markets footwear, apparel, equipment and accessory products. Nike principally targets athletic footwear and athletic apparel. Nike’s product categories include running, cross training, basketball, soccer, sport-inspired urban shoes, and children's shoes. It also makes shoes designed for football, golf, baseball, tennis, walking, skateboarding, bicycling, volleyball, wrestling, hiking, outdoor activities, cheerleading, aquatic activities, and other athletic and recreational uses. Nike’s athletic apparel includes sports apparel and accessories covering sports inspired lifestyle apparel, as well as athletic bags and accessory items (http://www.nyse.com/listed/nke.html). Nike’s products are specifically designed for athletes, however many consumers who wear Nike products do not always participate in sport. Amongst the youth culture especially, Nike has become a fashion brand. This makes Nike a luxury product rather than a necessity.
The SEC (U.S. Securities and Exchange Commission) reports that the fiscal year for Nike ends on May 31. The Central Index Key (CIK) for Nike Inc is 0000320187, and the Standard Industrial Classification (SIC) is 3021 - Rubber & Plastics Footwear (http://www.sec.gov). Nike reported a gross revenue of 14.9549 billion dollars for the May 2006 fiscal year (http://moneycentral.msn.com/investor/invsub/results/hilite.asp?Symbol=US%3aNKE). On the basis of the research done for this paper, it can be said that Nike has never claimed bankruptcy. See figure 1 below for the stock values over the past three years.
Figure 1 – Nike stock fluctuations over the past three years (http://moneycentral.msn.com/home.asp). See Appendix 1 for the full table of values from which this graph is derived.
Nike has competition from every sports and sports fashion brand, since it produces goods for such a wide range of activities. However, Nike has two major competitors, Reebok and Adidas, who can directly compete with Nike’s range of sports gear. Internationally, Adidas and Nike stood fairly even with regards to market share (http://moneycentral.msn.com/content/P125034.asp). Nike has a thirty six percent market share of the U.S. athletic footwear market, which is triple Reebok's and quadruple Adidas' (Sporting Goods Manufacturers Association International, 2005).
Figure 2 – A graphical representation of the market shares of the major players in the U.S. athletic footwear market.
Athletes who use Nike’s specially designed shoes for their specific sport could choose to substitute with Reebok or Adidas, or other less popular brands. There are numerous other substitutes available from companies who are trying to promote their shoes in this extremely competitive business. On the other hand, consumers who wear Nike gear for casual use or fashion purposes could easily substitute with lesser known brands, another form of footwear such as sandals, or instead go barefoot. There are no real complementary products that go together with Nike products, except in the rare case where one may purchase a Nike sports top and wish to complement it with a Nike brand of shorts or track pants. The market structure consists of monopolistic competition, since there are many competing companies who offer similar products to that of Nike. The availability of substitutes is the primary factor which determines elasticity, and this makes the market elastic. Nike has acquired quite a few companies along the way, since its beginnings in 1972. In 1988 Nike acquired Cole Haan (men and women’s dress and casual footwear, apparel and accessories), in 2003 Converse Corp (casual and athletic footwear, apparel and accessories), in 2004 Official Starter L.L.C, and in 2004 Nike acquired Official Starter Properties L.L.C. Also in 2004 Nike created the Exeter Brands Group, a subsidiary company which manufactures...
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