Table of Context
The company was founded in 1964 by a student of Phil Knight, middle-distance runner at the University of Oregon team, and his coach Bill Bowerman. Initially it was called Blue Ribbon Sports and specialized in the order of athletic footwear in Asian countries and resell them in the U.S. market. Upon graduating Knight wrote a paper that proposed quality running shoes could be manufactured in Japan. But his letters to manufacturers in Japan and Asia have gone unanswered. In January 1964 Knight and Bowerman having invested in the business by $ 500, ordered 300 pairs of running shoes from a Japanese company Onitsuka Co. The first retail Nike location was opened in 1966, in Santa Monica, California. Nike officially became a hit and went public in 1978. Nowdays Nike's main headquarters is located in Beaverton, Oregon. Footwear and apparel products are produced outside the United States, while equipment products are produced both in the United States and abroad. (Nike Annual Report 2009) The research draw intention that Nike already gained 31% market share globally from their annual report on 2011 (Bloomberg.com, 2011). From that report Nike also expected higher number of total market share globally. the company also boosting forecast of the revenues in some specific area like China, Russia, and also North America. Nike use the strategies like celebrity endorsement by using some iconic athletes to be the icon or brand ambassador of their current product, for example, in 1985 when Nike signed up Nike signed up then-rookie guard Michael Jordan as a spokesperson. Jordan was still an up-and comer, but he personified superior performance. Nike’s bet paid off—the Air Jordan line of basketball shoes flew off the shelves and revenues hit over $100 million in the first year alone (CNBC.com, 2010).
Porter five forces analysis
Industries differ widely in their business makeup, competitive situation, and growth potential. There is need for different sport management strategies in different areas. Michael Porter uses the idea of five competitive forces to analyze the competitive environments which are: •
Threat of substitutes: Buyers propensity in this industry was relatively low. Because of there are little alternatives to substitute the basketball shoes like slippers, boots, dress shoes, etc. But consumers don’t likely to substitute the goods due to performance specification. A real basketballs athlete will not be use boots when they are playing in the match. There are no real substitute goods to basketball shoes that they produce. Therefore, the threat of substitutes is low. •
Threat of new entrants: due to the large scale Nike relatively can control the market share (by predatory pricing for example). The Nike brand is well known globally and plays a major role in consumer decision making by favoring internet and E-commerce. The company have invest millions dollar to construct their online shopping. By these strategies new firms also have to spent lot of money to gained customer attention. Therefore, the barrier of entry by new firms was low. •
Bargaining power of suppliers: Nike uses to controlling the suppliers to make sure they are not depending on them by turning to another manufacturer company if there are anything problems with their product so they can press the faith from customer by retaining the loyalty because of the goods stock. The company is using private contractor to produce their goods. There are some issues with the factories laborer for example that binding with the good quality of their product. But they try to avoiding the issues by transparency of giving license to their manufacturer as seen from their website. •
Bargaining power of buyers: there a large number of buyers that continuously buying basketball shoes according to upgrading the performance specification and also the current style of the shoes itself....
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