This is a report on the SWOT analysis of the company prepared for the CEO for guidance in strategic decision making.
Strengths
Nike is regarded as a very a competitive organisation and as its CEO once said, We, the management of Nike have a healthy dislike for our competitors (Nike, 2013). This ensures that the company is always ahead of its competitors in all aspects. The company is also said to have a lean organisation structure as it does not employ very many employees. This is due to the fact that it does not manufacture products but outsources them.
The company is only involved in the innovation and design of new products and marketing of finished products. The fact that the brand has a worldwide presence and is recognisable everywhere serves to market the companys products at very low costs thereby ensuring that such costs do not eat into the profit margins. The strong research and development department helps the company to stay ahead of its competitors in terms of offering new and advanced products (Marketing teacher, 2013).
Weaknesses
The Company has not diversified its products to other areas and this may leave it in a difficult problem if the footwear market was to be affected. This would lead to a situation where the companys revenues reduce as this is the sector that brings in the most of its revenue. The fact that the company does not have its own retailers results in a situation where the margins of its products are reduced as the retailers also want to make their profits (Nike, 2013).
Opportunities
The fact that the company continuously engages in new product development activities ensure that they offer the best products to the athletes and therefore maintain their market share. The company can also expand into products such as jewellery and sunglasses as it is evident that athletes tend to have a preference for such high class accessories. This would add a new revenue stream for the company (Peteraf, 1993).
Threats
The retail sector is very price sensitive and this means that in case another sportswear company offers the same product at a lower price, most customers will shift to purchasing the item leading to loss of revenue and market share for Nike (Ferrier, 2001).
References
Ferrier, W.J. (2001), Navigating the competitive landscape: The drivers and consequences of competitive aggressiveness, Academy of Management Journal, 44 (1): 858-877.
Marketing Teacher (2013), Research and Markets: Analysis of Nike Inc 2012 SWOT Analysis Study. Web.
Nike (2013), About the company. Web.
Peteraf, M.A. (1993). The Cornerstones of Competitive Advantage: A Resource-Based View, Strategic Management Journal. 14 (3): 179-191.
This report is a brief overview of the weighted average cost of capital. Its main goal is showing what the weighted average cost of capital is all about, its importance and how it can be applied in a practical example. Therefore, a case has been used to bring out this. Practical lessons are examined as to why it is necessary for capital estimation. Furthermore, before an investment of any kind can be made, approximation on an estimate of a firms cost of capital is critical.
In the case study, a fund management firm called North Point Group desires to invest in Nike footwear manufacturer. This follows its history of investing in some 500 fortune companies. As a portfolio manager, Kimi Ford is forced to study and analyze the general performance of Nike footwear manufacturer now and after that in future before authorizing any form of investment. Nike is a multibillion company that is involved in the manufacturer of sports footwear and apparels but also sells other clothing and footwear. It also has its shares available to the public for investment. Kimis company mainly aims at financial security at the end of all its transactions. Ford has, therefore, to do intensive research into Nikes financial performance to ensure no loss to her own company.
After some research, Ford is not satisfied with the research that has been done by other analysts on the performance of Nike. She does her own analysis to forecast the financial destiny of Nike. Therefore, she has to use the weighted average cost of capital method to do this. This report is an analysis of the work that Fords assistant Joanna Cohen did in according to the weighted average cost of capital for Nike footwear manufacturer.
Cohens weighted average cost of capital calculation is verified in this report, and its reliability stated. The costs of equity are also computed by the use of CAPM dividend discount model while applying the earnings capitalization ratio. The advantages and disadvantages of all methods are stated. These targets are showing the limitations and gains that a firm may have when it has decided to make use of them. Thereafter, using the case study, the possible recommendation that Kimi Ford is to make regarding having an investment in Nike is outlined.
This report has different sections dealing with different things. This is in line with the weighted average cost of capital calculation using the case study of Nike share. It has the background, qualitative and quantitative analysis, the appendix, and the reference list.
Background
At this level, it is necessary to know what the Weighted Average Cost of Capital is all about and its importance. WACC is the computation of the cost of capital as in the company under consideration where all capital categories of cost are weighted proportionately. In the WACC calculation, there are inclusions of all the capital sources, which include common stock, long-term debts, internally generated funds and the preferred stock. The costs of these personal long term financing sources have to be determined to get the WACC. A firms Weighted Average Cost of Capital always escalates proportionately with the beta and the interest rate on the equity growths. This is because an increase in WACC connotes a higher risk and a valuation decrease.
The case study item in this report is Nike Inc, which is a manufacturer of footwear for athletes. In addition to these, it also manufactures a variety of different other things. Among them are sports balls, apparel, eyewear, bats, timepieces, skates, and other equipment meant for sporting activity. Nike also sales some products that are not Nike branded like casual footwear and Cole-Haan dress, skate blades, ice skates, hockey jerseys, hockey sticks, and other products that are under the trademark of Bauer. Nike has its shares in the stock exchange market which a fund management firm called NorthPoint Group desires to invest.
Kimi Ford is actively involved as a portfolio manager in this fund management firm, and she is directly involved with share investments. Unfortunately, the share price of Nikes shares has significantly declined since the start of the year a time that Ford was seriously considering making a purchase of the shares for her fund firm that she was managing. Fords firm is largely known for investing in the 500 fortune companies with the main target of value addition.
Since 1997, Nikes revenue had stagnated at around $9 billion while the net income had dropped from around $800 million to around $580 million, as shown in appendix 1. This necessitated the holding of a meeting by Nikes management board. In the meeting, revitalization strategies were discussed to ensure that the loss the company was realized had stopped and instead, an upward trend is seen in future.
The management came up with various goals, including the production of mid-sized footwear, which they had for a long time neglected. It was also agreed that the line of apparel was to be boosted since it had so far performed well while limited on the expense costs. Finally, the executives of the company set their long-term targets for revenue generation between 8 and 10 per cent. They set the growth of the earnings at above 15 per cent. These resolutions of Nike aroused different reactions from different analysts with some seeing it as being too ambitious and others seeing it as an opportunity for further growth.
The mixed reactions could not satisfy Ford after an extensive analysis. This is because they appeared confusing. Therefore, she decided to come up with her own discounted-cash-flow forecast. This was to help her come up with a clear conclusion before she could make any move of investing in Nikes shares.
Qualitative Analysis
Weighted Average Cost of Capital (WACC) is a particularly vital part of any firms financial department since it aids in the computation of the capital cost for every capital category, which is weighted proportionately. WACC is beneficial as it enables the computation of average costs of financing sources. This follows the fact that a companys assets are financed by either equity or debt. WACC aids in determining the interest amount payable by the company for every financed dollar. As the general required cost of capital, the directors of a company mostly apply the weighted average cost of capital in the internal determination of the possibilities of investment opportunities for expansion and acquisitions.
Nike, as a company, is financed by both debt and equity as per the information that Kimi obtained about the company. Therefore, WACC is the best model of use since it averages the sources of the costs of financing, which in this case are debt and equity. It is a lot easier to work with this model and get the projected financial future of Nike rather than if another model of calculation was adopted. I, therefore, agree with the calculations done by Cohen since they have accounted for both equity and debt, which are the costs of the sources of financing for Nike Shoe Manufacturer.
Quantitative analysis
Cohen averaged the debt cost at 4.3 per cent, which is a figure that is justifiable because it caters for all the ways of funding used by Nike. The funding rate through the Japanese yen notes is between 2 and 4.3 per cent besides the treasury yields. Critically examining this, there is no room whatsoever to doubt that away used for funding by Nike has been left out.
To find the cost for equity, Cohen used the Capital Asset Pricing Model (CAPM) rather than the other models, which include Dividend Discount Model (DDM) and the earnings capitalization ratio. She says that the method is superior to the other available methods present, a fact that I second. She obtained the equity cost of Nike to be approximately equal to 10.5 per cent. This can be proved by the calculations below using all the methods:
Capital Asset Pricing Model (CAPM): r = Rf + beta x (Km Rf )
Where: r is the expected return rate on security;
Rf is the rate of a risk-free investment, i.e. cash;
Km is the return rate of the appropriate asset class.
Substituting values of risk-free investment, beta and rate of return of a given asset accordingly in the formula above from the data of Nike as provided in the appendices 1, 2, 3 and 4 below, a return value of approximately 10.5 per cent is obtained.
Dividend Discount Model (DDM):
Where: Div is the Dividend PO is the Price at a given time 0 and r is the return rate.
By substituting the various values accordingly as given by the data of Nike Company in appendices, a return value of approximately 9.0 per cent is obtained.
Earnings Capitalization Ratio: this is given by the formula below
By averaging the relevant data provided in the appendices about Nike Company, a per cent value of approximately 12.0 is obtained.
The advantage of the Capital Asset Pricing Model is that it is more accurate and superior to the other models. Therefore, it gives a more accurate judgment of the financial future of the firm. However, it is tedious to work with since it needs many calculations. On the other hand, though the Dividend Discount Model is easier and faster to work with, it gives some erroneous judgment that may put a given investor at stake. The Earnings Capitalization Ratio is also extremely easy to work with once the annual net operating income has been obtained. However, it is also erroneous and gives a poor judgment of the financial prospect of a given company.
Recommendations
In accordance with the forecast done by Cohen, Fords new assistant, Ford, should recommend the adoption of an investment with Nike Company. This is because the companys growth and gain from the downward trend in the near future are promising.
International expansion is the goal of many firms because selling goods worldwide and locating productions in multiple countries simultaneously is vital for competitive advantage in most markets. Companies that adjust their strategies need to evaluate their current conditions, place at the market niche, strengths, weaknesses, opportunities, and threats they might face. Various approaches to creating blueprints and managing growth through entering other countries markets are implemented and exercised by Fortune 500 businesses (Fortune, 2021). This paper aims to use Nike as a successful companys example to study the international expansion strategy, explore it through SWOT analysis, and identify improvement opportunities.
International expansion strategy development and implementation require the executive team to analyze and evaluate opportunities and outcomes from several aspects. Indeed, they need to explore basic benefits to consider and understand if the corporate-level plan should be multi-domestic, global, or transnational (Hitt, Duane Ireland, & Hoskisson, 2017). Moreover, appropriate entry models should be selected from exporting, licensing, strategic alliances, acquisitions, or opening new subsidiaries (Hitt et al., 2017). Lastly, competitive outcomes such as improved performance or enhanced innovation are necessary to be determined for further risks evaluation and management (Hitt et al., 2017). Market analysis is also critical for clarifying the perspectives for a companys expansion. Understanding how the logistics, production, selling operations and consumers expectations work at a given segment provides a basis for adjusting the existing strategies.
Nike is the apparel and sports footwear company that started its operations in the United States in the 1960s, expanded worldwide, and is now one of the most famous and trustworthy brands. Successful strategic decisions helped Nike enter different niches, develop efficient supply chains, create sustainable production, and implement online selling (Fortune, 2021). Furthermore, international expansion performed by the company addressed the growing demand for sports teams apparel and equipment, including sponsorship and participation at global events (Kim, 2020). Consequently, Nike became a well-known brand associated with high product quality, events, experiences, and a strong mission for promoting sports.
Nike is a global brand, and it keeps expanding its production and distribution to new countries by entering their markets. The approaches the company with a significant competitive advantage, such as the brands authority uses, are the manufacturing facilities establishment, acquisitions, and subsidiary opening (Hitt et al., 2017). Besides, the pandemic led Nike to enforce its online selling and shipping strategies, making the firm a nearly 50% increase in digital sales for one fiscal year with $5,5 billion in revenue (Fortune, 2021). SWOT analysis is the appropriate analysis tool for exploring how the companys international expansion is performed.
Figure 1.Nike SWOT Analysis
Strengths
Manufacturing technologies for footwear production;
Brands authority and value among sports apparel and footwear companies;
Quality and variety of products;
Weaknesses
Labor regulations and conditions of countries of expansion;
Communication and policymaking with retailers;
Dependence on footwear market;
Opportunities
Well-built e-commerce distribution channel;
Addressing the critical human need to maintain health and look good;
Internal logistics and manufacturing improvement with the new locations integration;
Threats
High competitiveness in the industry;
Exchange rates and financial crises make products less affordable;
Difficulties with international shipping and trade regulations.
Nikes strength is the continuously developing technologies for footwear production, which allow the company to create and distribute outstanding goods for sports and lifestyles. Then, it has authority and a loyal audience that supports the brand worldwide (Kim, 2020). Lastly, apparel and footwear have hundreds of variations and technologies for various occasions so that the companys range of products maintains high revenues from year to year. Nikes weaknesses related to the international expanse are the difficulties a company can experience with labor conditions regulation which might depend on the government and disrupt proper manufacturing and distribution (Standaert, 2021). Moreover, retailing communications might severely influence the pricing policies, yet Nike distributes the products indirectly and needs to achieve balance in the value-setting strategy. It is also crucial to consider that Nike still depends mainly on the footwear market, and the changes in consumers attitudes or perceptions about this type of product might disrupt the company.
Nikes opportunity is the transnational nature of product distribution that allowed the brand to successfully implement e-commerce practices and build optimized worldwide shipping strategies. Nike also associates with a healthy lifestyle, sports, and good appearance the trends of modern society which will support the demand for the company. Expanding to new countries is an opportunity to improve logistics and production. The current worldwide situation with the COVID-19 pandemic and political instability threatens Nikes performance, distribution, and manufacturing (Standaert, 2021). Besides, the global footwear market has strong competitors like Adidas, Reebok, and Puma that also develop and integrate their innovations (Jiang, 2019). Lastly, the financial crises and unstable exchange rates put Nike at risk of becoming less affordable for millions of customers.
Based on the SWOT analysis of Nikes expansion strategies, several suggestions can be made to exploit its strong points and mitigate the weak ones. For instance, strategic alliances might be established with retailer chains owners or responsible institutions in the new countries to decrease the risk of pricing-related difficulties (Hitt et al., 2017). Besides, licensing an innovative technology for footwear production can become a valuable step for enforcing Nikes competitive advantage (Jiang, 2019). Lastly, the company can continue expanding its participation at events, collaborating with famous teams, and producing non-physical services to broaden the audience and increase its loyalty.
International expansion is a risky strategy, yet its outcomes can make a company a worldwide known and respected brand. Moreover, the current conditions of product distribution and e-commerce are the profound foundation for exploring other countries markets. Nike is an example of a successful international expansion, and its SWOT analysis revealed that although weaknesses and threats exist, the company still has options to enforce its positions.
Hitt, M. A., Duane Ireland, R., & Hoskisson, R. E. (2017). Strategic management: Competitiveness & globalization: Concepts and cases (12th ed.). Cengage.
Nike is one of the biggest players in manufacturing sports equipment field, such as shoes, clothes, etc. It has been one of the biggest names on the market since its establishment in 1964 and one of the most recognizable brands worldwide (Hsieh et al.). One of the most significant distinguishing features of the company is that it outsourced its production practices, leading to savings in labor costs. Since it does not have its manufacturing outlet, Nike can solely focus on developing its products design, features, and improvement.
Nowadays, Nike faces several challenges that can undermine its credibility and reliance on the global market. Some of them are related to supply chain issues, and some are to the broad appeal of the companys human rights concern and general perception. Improving the suppliers capabilities, meeting the required standards, and responding to consumer demands are challenges related to the supply chains of the company (Hsieh et al.). The primary issue outside the supply and distribution sector is accusations of terrible working conditions in Nike manufacturing outlets worldwide.
Nike demands from its suppliers that they have to address the environmental impact and improve their workflow concerning the issues above. Regarding the development of the suppliers capabilities, Nike demands a more initiative approach from the factories, that have resulted in an improved approach to management and production of the goods (Hsieh et al.). Facing critique and reluctance to cooperate from some of the suppliers (especially in terms of incorporating workers engagement in product development), Nike is struggling to promote their vision on all of them. Another problem for Nike is balancing cost and flexibility, which is crucial in the global sourcing equation. When comparing the costs of local and worldwide suppliers, this is especially true. Strengthening Nikes North American business becomes even more vital in this scenario.
Responding to the growing consumer demand is also challenging for Nike since suppliers capacities mostly lie far from the leading consumer base in North America (Hsieh et al.). Attempts of locating or relocating some of the additional capabilities to meet the peoples demands contain many risks and require serious considerations. Nikes supply chain issues give the company the green light to accelerate its direct-to-consumer approach, a key profit generator.
However, the most severe challenge comes from human rights activists and organizations, who are accusing Nike of not meeting the labor working standards. It is a severe issue that can severely undermine a companys credibility and image, especially in times of popularity of the so-called cancel culture. Even though Nike is struggling to ensure working standards on the suppliers facilities and manufacturers, it does not have direct control over them, thus, not being able to ensure complete overseeing of the implementing standards. It is indicative that the issue first appeared in the 1990s and has been a constant topic when talking about Nikes challenges.
The strategic recommendation for the company regarding its suppliers challenges should be viewed in the light that Nike has all the possibilities to support its leadership in sports equipment manufacturing. The strategies in several areas such as labor practices, suppliers selection, and development can be adapted (Hsieh et al.). The most significant here is the improvement of suppliers manufacturing working conditions since this issue has been prevalent since the 1990s and is still relevant. Nike can ensure the provision of average working conditions, established wages, and the end of the exploitation of unpaid workers. This must be implemented in cooperation with facilities directors, suppliers management, and different human rights organizations. In light of current developments and the desire of the company to meet the consumers demands, this issue should be resolved.
Nike stakeholders will be impacted if such policies start to take shape. It will be needed to ensure stricter control on the suppliers, and while some of them will be reluctant to engage in such developments, the company has to ensure the provision of the strategy. This can result in opposition to local management and increasing costs, but in general, it will be beneficial in the long term. Moreover, Nike will have to be considerably more strategic with its product storage. Instead of working with wholesalers, the company will most likely open its stores.
The potential downside of working out of such a strategy is the increasing attention to the suppliers manufacturers, which can divert the companys strategy to engage in development and innovation while leaving manufacturing on the outsource. This can also lead to stricter criteria when choosing suppliers and the prevalence of more developed countries, which can ensure development, working conditions, and human rights. In turn, Nikes plans to enter new markets (for instance, the Middle East) can be limited due to difficulties in ensuring the needed conditions and potential public opinion backlash.
Thus, Nike requires its suppliers to address the environmental effect and enhance their workflow concerning the challenges to meet the current demand for quality requirements. Despite Nikes efforts to ensure working standards at suppliers facilities and factories, it lacks direct control over them, making it difficult to provide complete supervision and management of the standards implementation.
Work Cited
Hsieh, Nien-hê, Michael W. Toffel, and Olivia Hull. Global Sourcing at Nike. Harvard (2019): 619-008.
There are not so many companies that may be called undoubtedly known to everyone in the world. Nike hardly needs to be represented as since its very appearance this manufacturer has been pursuing an active policy of development and attracting new partners. A virtual platform for runners Nike+ offer the goods that are the product of a big team of professionals, and all the initiatives, as a rule, find their application and are successfully implemented.
Mutually Beneficial Cooperation
The seamless connection of such a well-known brand as Nike with modern technologies has led to the continuous emergence of new devices and applications developed by the company in cooperation with other world-famous manufacturers. As Buhr (2016) notes, Nike+ Fuelband is created specifically for active people motivated by the desire for victory. However, there are always ways for improvement. One of the possible target areas of the companys development is even closer cooperation with the leaders of the digital market. Nike is already a partner of the strongest sports clubs on the planet; however, a contact with such organizations as Apple, Samsung, Sony and other teams will help develop new lines of business and strengthen positions in the global market. Digital technologies never stand still, and Nike + platform, where samples of the latest scientific thought of experts are collected, is a vivid confirmation.
According to Elowsson and Johansson (2013), Nike is one of the pioneers in the sphere of digital marketing. Goods like smart watches are likely to become familiar if appropriate advertising initiatives are taken to establish cooperation with other large companies. This direction of sales today is one of the most promising, and if Nike continues to develop in this direction, its products will be in demand and will be able to withstand competition in the market. The initiative in favor of this sphere can become a strong beginning of the transformation of the corporation from exclusively a manufacturer of quality sports equipment to also a reliable and trusted supplier of digital products.
Relations with Customers and Marketing Solutions
The participation of Nike and Nike+ platform in the development of technologies for runners and athletes provides the company great popularity among consumers who regularly send new proposals for improving or supplementing already existing devices. It is likely that some of these suggestions are entirely based and have reasonable arguments. For example, according to Baloian, Burstein, Ogata, Santoro, and Zurita (2014), Nike+ is one of the successful examples of how a virtual training and guidance system works for amateurs and professional athletes. If the corporation continues to improve this platform and listen to the opinion of consumers, it will be able to achieve an even higher level of popularity and sales.
The promotion of the program through advertising will improve work in three areas. Firstly, the demand for goods and materials will get higher. Secondly, an increasing number of network users will be able to learn about Nike+ service and pay attention to this system. And thirdly, the popularity of the platform will allow the company to reach a new level and, possibly, become a partner of other large organizations that specialize in sales of other equally popular products. As Elowsson and Johansson (2013) note, the brand value allows any company to develop business ideas and improve market positions. It is possible to increase the effectiveness of online marketing if Nike becomes a participant in a new large-scale project in cooperation with another no less great corporation. In case the partnership is mutually beneficial, potential buyers will often hear the brand name and pay attention not only to joint products but also to new goods manufactured by Nike.
Thus, a successful implementation of all the initiatives and advertising courses in Nike+ system is entirely justified, and the products made by this company always find their application in the market. A qualitative marketing policy along with new ideas will allow to increase Nikes positions and not only to bring profit to its owners but also to please consumers with the quality of the goods.
References
Baloian, N., Burstein, F., Ogata, H., Santoro, F., & Zurita, G. (Eds.). (2014). Collaboration and technology: 20th international conference, CRIWG. Santiago, Chile: Springer.
Buhr, S. (2016). Apple and Nike teamed up to make a Nike+ special edition Watch Series 2 [Blog post]. Web.
Elowsson, E., & Johansson, J. (2013). Keep on running: Progressing customer experience through digital platforms: A case study of Nike+. Web.
The Nike Company was incorporated in 1967 to run its operations; to design, develop, and market its products of athletic footwear, equipment, and services. Nike has then developed to be among the worlds best brands. The company markets its products through its retail shops all over the world and uses digital platforms. It has almost all of its footwear is produced outside the United States, and the equipment products are produced in the United States and abroad. The Nike brands are categorized into, running, football, training, sportswear, and the Jordan brand. It has its products for different age groups, including children. Footwear is generally designed for athletics, but also there is a widened category for leisure too.
The Ratios According to the 10-k from 2018
Current ratio=current assets /current liabilities 2018
Current assets=cash, short-term investment, Inventories
C.A=.22536-7131=15405
C.L=22536-9812=12724
Ratio=15405/12724=1.2
Inventory turnover =Net sales/inventory
Net sales=36397
Inventory =5261
Turnover=36397/5261=6.91
7 Times
Debt to equity ratio=Total liabilities divided by total equity
Total liabilities =22536-9812=12724
Debt to Equity =12724/9812=1.3
Net profit Margin
Net income =1933
Net sales=36397
Net profit margin =1933/36397×100=5.31%
Return on Equity
Profit after tax divided by equity
Income tax 2392
G.P=15956
PAT=15956-2392=13564
Equity=9812
ROE=13564/9812=1.4
Price earnings ratio=MPS/EPS
Basic Eps =1.19
Common outstanding shares=1623.8
MPs=42.9million /1623.8=0.0264
EPS=1.19
P/E RATIO=0.0264/1.19=0.02218
Diluted shares outstanding=35.3
MPS=42.9/35.3=1.2
EPS=1.17
P/E RATIO=1.2/1.17=0.0957
Ratios Analysis
Current Ratio
The companys liquidity is favorable as it has high liquid investments inclusive of short-term investments. The working capital ratio is used to analyze the effectiveness of the current assets to be able to generate enough amount to pay the short-term obligations or the liabilities in a business operation (Reid & Myddelton, 2020). The ratio of Nike industries is1.2, thus its a desirable ratio in a business as it shows the flexibility of the firm to pay down its liabilities in the operations. This is an effective ratio for the company as it is able to meet the requirements. Nikes current assets efficiency to cater to its liabilities is favorable and more than its market competitors in the industry.
Inventory Turnover
Inventory turnover means the number of times the stock was sold to achieve net sales. A higher turnover indicates that there were higher sales in the period. From our 2018 data, the company has a turnover of 6.91 times, which is equivalent to 7 times. This means it sold its inventory seven times in that period to attain net sales. The industry is a high-moving one as the inventory was sold many times. The trend of the turnover was favorable as it has increased with a positive deviation of 0.2 turnovers from the previous year. The turnover of Nike is higher compared to its competitors in the market.
Debt to Equity Ratio
The ratio measures the degree to which a company is financing its operations through debt and equity. The Nike debt to equity ratio is 1.3; this is a medium debt-equity ratio as the company can manage. It indicates that for every $1.3 of debt, it will be equal to 1 equity from the previous year; the ratio has reduced, thus showing the firms reduction in using debts to finance its operations in the business. Most industries in the market use debt to finance their operations, and from this information in Nikes annual report, the company is doing great by not using debts to run its operations. Thus, Nike Company has the advantage to be ahead of its competitors in the market.
Net Profit Margin
The profit margin indicates the amount of income to be collected from net sales at the end of the Accounting period. Nike has a 5%net profit from the 2018 financial year. After it has incurred its expense and costs from the business operations at the end of the financial period, it gets a5% profit from its business activities. The net sales for this year increased from last years sales. From the report, its evident that there was an increase in the profit margin when compared with last years report. The company is doing quite well and has a higher profit margin than other industries in the market.
Return on Equity
Return on equity is the measure of profit or efficiency attributed to the equity invested. Nikes return on equity is at 1.4; this shows the efficiency of the firm increasing profit generation without much capital needed. The management has appropriately deployed the shareholders capital. This years returns have increased from last years returns. The company is generating enough returns as it is required from its equity investments. The companys investments generate a lot of profits than its competitors, this is a favorable return for the company.
Price Earnings Ratio
P/E ratio is used in valuing a company that measures its current price share to its per-share earnings. Investors use it to determine the relative value of a companys share in the market. Nike has a PE ratio of common shares at 0.02218; this is a low value for the company as it is below. For the diluted shares, it is at 0.957and the value of the shares is low. The market competitors have a high value of shares than Nike. This is unfavorable to Nike as it will attract few investors in financing them. According to Nikes annual report published at the end of its financial year in May 2018, the company has a low value of its shares on the market (Investor.nike, 2018).
Figure 1. Earnings per share graph
Note. Investors.nike. (2018). Reports fiscal 2018 fourth quarter and full year results.
As shown in Figure 1, the earnings per share have reduced from 2017 as 2018 recorded the lowest earnings per share compared to previous years.
Liquidity and Debt Assessment
The companys liquidity is high as it has a favorable working capital of 1.2. The companys investments are easily convertible to cash if the liquidity ratio is high (Lee, 2020). The company has a debt-to-equity ratio of 1.4 it should maintain a low ratio to have a good credit score. The debt of the company should be reduced as it is at 1.4 of equity. The firm should avoid using debts in financing its operation.
Profitability
The companys profits are increasing each year, and its net profit margin shows that it was increasing with a 5% increment each year. A companys profitability is essential as it gives the company a better potential for performance (Coulon, 2020). The company is more profitable by 5% of the sales made each year. Nikes industry gross profit margin increased in 2018. The net income from the shareholders dividends also has increased leading to higher profitability of the company. The total assets of the company also give a high income hence high profitability.
Cash Flow Opinion
The company can maintain a positive cash flow when it increases its cash reserves as it has a high liquidity ratio. By reinvesting, settling future debts, and paying out money to the shareholder, the firm will be able to generate a positive cash flow from its activities. The management should also understand the companys cash flow and maintain the money in all departments in the firm.
References
Coulon, Y. (2020). Profitability and performance ratios. Rational investing with ratios (pp. 85104). Springer International Publishing.
Timms abbreviation VISPAC is a guide to exceeding customer expectations, and it contains six categories: value, information, speed, personality, add-ons, and convenience. The personality component in question is essential in achieving customer satisfaction. In this case, an important role is played by individuality. It can be manifested in the appearance of the staff, as well as in the individual approach to each client. If the company is making an effort to achieve success in at least one of these categories, the customers loyalty will increase, and they will prefer this company to all the others.
Nike is one of the leading companies that create sports clothing, shoes, and sports equipment ( Nike, 2021). The business processes of this company are aimed at long-term cooperation with customers and not just at making a profit. The company established a new division, the primary purpose of which was to develop technologies that will allow users to track their activity using devices, and the company could get information on consumer data. This system was created so that the company could know about the preferences and habits of each client individually and, thus, communicate more effectively with them about their needs.
From Nike, I purchased their well-known product called the Nike FuelBand. I received information about this device from the companys manager via an online chat. The manager responded in a short time and gave complete information about the advantages and disadvantages of different models of the bracelet. In accordance with my needs, the manager selected the most suitable model for me, which corresponds to the category of personality, and as a supplement after the purchase, I was given a discount on the purchase of the following Nike products, which, in turn, matches the add-ons, according to VISPAC.
In conclusion, Nike actively interacts with the client and tries to meet their needs as much as possible. Furthermore, this company uses information, personality, and add-ons, which correspond to the three categories of the VISPAC model. Nikes products are already used by many people, and by developing new products, the production of which is designed for each customer taking into account their needs, expands the circle of fans of this brand.
Changing Decision Making and Introduction of New Products at Nike
Nikes downfall started when the managers developed the feeling that their decisions were final and correct with regards to the operations of the company. However, deteriorations in market performance forced the management to acknowledge the need to change how decisions were made and the type of products offered in the market ( Nike- A Case Study par. 3). Following increased competition and changes in the sports shoe market, the company contracted external managers to influence and guide the formulation of policies. The company was advised to take over small and specialized companies to widen its product line. However, the management rejected the idea. However, after increased underperformance, the company had no option but to introduce changes. Reforms were executed through the introduction of new designs of shoes targeted at niche markets ( Nike- A Case Study par. 5). For instance, the designers came up with new products meant for the soccer and golf markets. Change in decision making was affected by separating specialized teams from the general production group. The new teams focused on the production of items for the specialized markets.
How Nike can Use Change Techniques to Improve Effectiveness and Competitive Advantage
According to Gareth, there are two main types of changes in an organization (281). They include evolutionary and revolutionary reforms. The focus of the former cluster is narrow, regulated, and incremental. The latter entails drastic and wide-sweeping changes (Gareth 285). Nike should adopt an evolutionary change to keep up with the fluctuations in the market. By doing this, the company will be able to develop products that can meet immediate and anticipated customer needs. Also, the evolutionary change will enable the company to improve its competitive advantage. Ultimately, Nikes change goals will be attained.
Works Cited
Gareth, Jones. Organizational Theory, Design, and Change. 7th ed. 2012. Upper Saddle River, New Jersey: Prentice Hall. Print.
This paper is a critical analysis of Nike, an American based fashion and apparel company. Key sections of this document provide an evaluation of the companys external environment, its market share, internal operational dynamics and critical factors that influence its performance. The last section of the report outlines key recommendations the companys managers should adopt to remain relevant in its key market segments. However, before delving into these details, it is important to first review Nikes share perfromance. Figure 1 below shows that the company has had a positive share performance in 2018.
According to figure 1 above, Nikes share price steadily increased throughout 2018. The highest price reported within the year was $85.55, while the lowest was $62.49. In addition, throughout the year, the firms stock outperformed other companies within the same category, such as Amazon and Netflix (Google Markets 2019). Experts have characterised Nikes shares as a growth stock, because in 2018, investors received a 20% return on their money (Google Markets 2019).
The firms impressive stock performance could be attributed to its ability to insulate its bottom-line performance from competitive pressures. At the, same time, Nikes share variances should be contextualised within the larger context of its overall stock performance in the past two decades because, in 17 years, it has registered a high dividend payout ratio compared to its competitors (Google Markets 2019).
For example, the positive performance in 2018 aligns with the $0.02 per share increase in its quarterly dividend payment. The trend dates back to 2014 (Google Markets 2019). Therefore, the positive stock performance of 2018 is part of a continuous growth trend, which started 17 years ago. Indeed, figure 2 below shows that the 2018 share performance was part of a larger growth trend that started in 2014.
Nike has a significant market share in the global apparel industry. Figure 3 below shows that North America is the companys main market. Europe, Middle East, and Africa are the second largest markets, while China and the Asia Pacific regions provide the least revenue for the company.
Although figure 3 above shows the importance of the North American market to Nikes success, other key market segments have the potential to increase its revenues. For example, figure 4 below shows that Japan is the leading growth market for the fashion brand because it accounts for up to 25% of Nikes annual growth (Statista 2019). China is also another emerging market because it accounts for about 14% of its revenue (Statista 2019). Western Europe, Central Europe, Eastern Europe, North America and other countries are also important to the companys growth strategy because they account for 7%, 6%, 5% and 3% of the firms revenue for growth markets.
Variations in inflation rates have influenced customers purchasing power in the apparel industry. This index has a significant impact on sales because high rates mean that fewer customers buy fashion products, while low inflation rates mean that more customers buy new goods. There has been a general rise in interest rates in most global markets. For example, in figure 5 below, Giles (2018) from the Financial Times reports that the inflation rate in the UK has steadily increased between October 2015 and April 2018.
Figure 5: UK Inflation rates (Giles 2018, para. 1).
The increase in inflation rates means low liquidity within the market, as more people will be hesitant to spend money. This development could affect the bottom-line performance of fashion companies because their products have elastic demand. Overall, the increase in interest rates means that there could be an increase in the consumer price index, which could negatively affect profitability (Camarda 2018).
Unemployment
There has been a decrease in unemployment rates across major global economies (Camarda 2018). For example, since the 2007/2008 global financial crisis, the unemployment rate in the US has significantly declined from 10% in 2009 to 4% in 2019 (Camarda 2018). There has been a similar reduction in the UK unemployment rate because, in 2011, this figure was 8.3% and in 2018, it was 3.9% (Camarda 2018). Figure 6 below shows the general decline in unemployment rate within the UK from 2014 to 2018.
Figure 6: Unemployment rate in the UK (Trading Economics 2019, para. 1).
The low unemployment rate has a significant bearing on the cost of production in the apparel industry because it could increase overheads, as there will be fewer people willing to work for lower wages.
Currency
Currency fluctuation has a significant impact on the fashion and apparel industry because of its global nature. This macroeconomic force could influence the industrys performance by increasing the cost of production. For example, Camarda (2018) says that recent plummeting exchange rates in Switzerland have affected the cost of raw materials. These exchange rates have a significant impact on the fashion and apparel industry because companies often earn revenue and incur operational costs in varied currencies. The impact of such fluctuations is prevalent in the apparel industry because of its global nature.
Evidence of the impact of currency fluctuations on the fashion and apparel industry was seen in 2015 when Switzerland delinked its Swiss Franc from the European Union and local apparel companies immediately incurred a 15% rise in operating costs (Camarda 2018).
Brexit
The uncertainty regarding the exit of the UK from the European Union has had an impact on the fashion and apparel industry by making it difficult to plan in an uncertain economic environment. The uncertainty has a significant impact on labour relations, tax computations and even profit repatriation. The negative effect of Brexit on the fashion industry can be observed through the unwillingness of fashion designers to vote for the exit of Britain from the European Union (Cook 2017). For example, a recent report pointed out that Brexit would limit access to top-tier talent for British fashion designers (Cook 2017).
Nike Essay: Internal Analysis
Nike Company Analysis: Change of Leadership
Nike has recently reported changes in its leadership structure. These variations are set to improve the companys competitive position and brand image because they will promote inclusivity, respect and empowerment of employees (Nike Inc. 2018). Changes in leadership have also promoted diversity and inclusion in the organisation (Nike Inc. 2018). Overall, these developments create an environment where employees feel appreciated in promoting the companys success.
Nike Company Analysis: New Products
Nikes product strategy is consistent with the goal of athlete advancement. For example, the companys products have demonstrated innovation in cushioning platforms (Nike Inc. 2018). Nike React is one new product that is borne from its innovative strategy. Nike Air is another product that demonstrates the companys capability to develop functional and popular product designs. Generally, the companys product strategy is predicated on progress and athlete advancement (Nike Inc. 2018).
Nike Essay: Change in Structure of the Business
Nike is considering making changes to its business structure by integrating its brick-and-mortar business with digital platforms (Nike Inc. 2018). This strategic shift in its operational plan is aimed at improving sales because the firm has realised that the traditional model of retail did not accommodate dialogue. The business change is largely highlighted in the corporations new business product House of Innovation (Nike Inc. 2018).
Nike Essay: Objectives, Mission, and Vision
Vision Statement: To remain the most authentic, connected and distinctive brand (Smithson 2018, p. 2).
Mission Statement: To bring inspiration and innovation to every athlete in the world (Smithson 2018, p. 2).
Objectives
To protect and improve the companys position as the top brand in athletics
To grow the fitness market by establishing a strong momentum
To direct and manage Nikes global business in emerging markets
To support increased margins through the proper execution of business strategies
Nike Company Analysis: Business Legal Structure
Nike is a publicly listed company. This means that the companys ownership structure is modelled within a shareholding framework. Within this setup, the corporations shares are freely traded in the stock exchange market. As a publicly traded company, Nike has limited liability. In other words, the company can sue or be sued in the same manner as an individual does.
Nike Company Analysis: Organizational Structure
Nikes organisational structure reflects differences in regional markets. Therefore, it is designed to address variations in regional market performance. According to the geographic distribution of the companys structure, this framework has three key divisions, which include global corporate leadership, semi-autonomous geographic divisions, global segments for contrast and brand licensing (Thompson 2018). Under the global corporate leadership department, which is based in Oregon, USA, the company operates 12 key subsidiaries, which include Office of the President, Nike Brand, finance, global human resource management, merchandising department, the legal department, global sports marketing and operations (Thompson 2018).
In the semi-autonomous geographic division, the company operates six key entities, which include North America, Western Europe, Central/Eastern Europe, China, Japan and emerging markets. Lastly, the global division for merchandising has converse and brand licensing departments (Thompson 2018). Nikes robust organisational structure has supported the companys success and strengthened its organisational performance. Therefore, it is one of the companys key strengths.
Nike Company Analysis: Financial Performance
Nikes profitability has increased in the past five years from a low of $9 billion in 2011 to a high of $15 billion in 2017 (Pratap 2018). This profitability index is commensurate with a similar pattern in the companys revenues. Indeed, within the past five years, the companys revenues have increased from $20 billion in 2011 to $34 billion in 2017 (Pratap 2018). In 2016, the firm owned $2 billion to its creditors (Downie 2016).
This debt was distributed across different financial instruments because $7 million was short-term and $66 million was long-term (Downie 2016). Most of the debt ($1.99 billion) was in form of bonds (Downie 2016). The $2 billion debt mentioned above represents an increase in the companys liabilities because, in 2015, this figure was only $1.3 billion and in 2014, it was $1.4 billion (Downie 2016). Nonetheless, Nikes profitability and revenue show that the company is in good financial health. Its income, cash flow and profitability statements, which appear in appendices 1, 2 and 3 represent a broader understanding of the companys financial performance.
Nike Company Analysis: Conclusion and Recommendations
Conclusion
Critical issues that could affect Nikes performance include technology and increased competition. Technology is a critical success factor because it is changing how Nike conducts its business. The companys ability to succeed in the digital marketplace will determine how well it will remain relevant in todays fast-paced world. Competitive rivalry is also another key success factor that will shape the companys performance.
Although this force has traditionally affected the firms profitability, it remains one of its key threats. Particularly, the competition Nike will experience from some of its traditional rivals, such as Adidas and Puma, will shape the companys success. In addition, the firm should be cognizant of the fact that it is the leading footwear company in the world and consequently needs to improve its marketing strategy to remain at the top.
Recommendations
As highlighted above, two critical issues that could affect Nikes business operations are technology and business rivalry. The process of overcoming technological challenges depends on the companys ability to embrace digital marketing strategies. Nike has shown promise of adopting a digital business strategy because it has integrated its brick-and-mortar business with its digital marketing strategy to create a hybrid business plan that would channel the companys future sales (Nike Inc. 2018).
Lastly, to overcome competition, Nike needs to consistently innovate and revamp its marketing strategy to remain relevant and communicate to its customers about new products. This strategy has yielded significant levels of success, as seen through the launch of Nike Air and some of its traditional brands, such as Nike Jordan. By investing more resources in its research and development plan, the company should come up with more interesting and innovative products to maintain its market dominance.
Nike may be the Greek goddess of victory, but to most people nowadays it is the most recognizable activewear brand in America, and one of the biggest apparel brands in the world. Since I was a kid I’ve seen my favorite athletes, Lebron James, Michael Jordan, Tiger Woods, wearing Nike shoes and other apparel. I knew the company was cool, and I knew it was stylish, but until I did more research I had no idea just how iconic Nike and its “swoosh” are. But what made the company so great? The company was a catalyst in the fitness revolution that changed athletics from just activities that symbolized the upper social classes to something that was both fun and cool for the general public. But what inspired its founders to break the boundaries that the rest of the apparel community were comfortable remaining within? What I hope to accomplish with this paper is to both further my own understanding of one of the company’s that has been most influential on my life, and to convey to all those who read this paper my awe for this company, its founders, and pass some of my own enthusiasm on to them.
Blue Ribbon Sports was founded in 1962 by Phil Knight, Stanford Business School student and former University of Portland undergraduate athlete, to sell Japanese athletic shoes made by Onitsuka, an athletic-wear manufacturer, based on his gut feeling that the shoes would be major competitors to the German shoes that then dominated the American market. At the end of 1963, Knight’s vision came to fruition as he sold 200 pairs of “Tiger” athletic shoes, which he peddled at track and field events in the Portland area. The following year Knight was joined in business by his former coach Bill Bowerman who chipped in $36,500 to equal Knight’s investment. BRS had over $20,000 in sales in 1965 and it was forced to bring on another full time employee. In 1966 BRS opened its first retail outlet in Santa Monica, and thanks to its first store’s success it was able to open a second location in Massachusetts in 1967. Throughout these years Bowerman was influential in the design of Blue Ribbon’s innovative running shoes. His first design that became a big hit was the “Cortez” in 1968, and he quickly followed that by incorporating nylon into the upper part of the shoes, and by adding the first cushioned midsole throughout an athletic shoe.
The 70’s were a decade of big expansion, as the company started its own line of shoes for the first time. At this time the company began using swoosh logo and introduced its new name, “Nike,” after the Greek goddess of victory. A year later Nike broke with its original Japanese supplier and began promoting the 1972 Olympics, the first of its endorsement deals attempting to attach its name to the careers of the world’s biggest athletes.
In their first year of distribution, Nike’s shoes grossed almost two million dollars, and the company’s staff swelled to 45, while the company also expanded its operations to Canada and Australia. Bowerman’s next innovation was his moon shoe which he created using a waffle iron. The design helped increased the shoe’s traction without adding to its weight. Nike’s brand name continued to grow throughout the 70’s as more and more athletes began adopting its products. By the end of the decade, the company had expanded distributions into Asia, and Europe, and its shoes were so popular that Nike sold almost half the running shoes in the entire United States.
By the 1980’s Nike had grown to surpass Adidas, formerly the largest shoe company, in U.S. sales. In December 1980, Nike went public with an offering of two million shares of its stock. The 80’s also marked Nike’s shift to overseas manufacturing instead of producing its shoes in the U.S. As the jogging craze in the U.S. began to wane, Nike expanded its international operations with more intense marketing strategies to break into the European soccer shoe market which was dominated by Adidas and Puma. Another bi-product of the waning jogging craze was Nike’s expansion into industries besides running apparel, like women’s casual clothing, as well as gear and apparel for other sports. Nike branched out from athletics with its purchase of Cole Haan, a maker of casual and dress shoes, in 1987. In 1988 Nike launched its first “Just Do It,” campaign featuring athletes Michael Jordan, Bo Jackson, and director Spike Lee and a year late it launched its ‘Air Jordan’ brand.
Nike was the dominant force in athletic footwear in the early to mid-1990s. The company held about 30 percent of the U.S. market by 1995, far outdistancing the 20 percent of its nearest rival, Reebok. Overseas revenues continued their steady rise, reaching nearly $2 billion by 1995, about 40 percent of the overall total. Nike also acquired a hockey equipment company in 1994, making it the leading maker of hockey equipment in the world, and the company became part of Nike’s growing equipment division. Nike’s superstar of the 90’s was golf phenom Tiger Woods, who it signed to a 20 year $40 million endorsement contract which he payed off by winning more than 18 majors, breaking the all time record. The late 1990s were difficult times for Nike as it became the subject of scrutiny for its treatment of overseas workers, and the general backlash against multinational companies, and its struggles continued until it was finally able to turn the corner in 2002. Nike’s turnaround was thanks in large part to its acquisitions of diverse apparel brands like extreme sports brand Hurley, the stalwart brand Converse, and Starter which brought with it several of its portfolio companies and athletes it had been endorsing, most notably Shaquille O’Neal. Nike’s biggest endorsement contract of the 2000s was its signing of high school star Lebron James to a $90 million contract. Nike’s biggest challenge of the 20th century was by far Adidas’s purchase of Reebok, combining Nike’s two biggest competitors and giving them 30% of the worldwide athletic shoe market compared to Nike’s 37%. However, Nike has shown its ability to overcome obstacles before and there is no doubt it will continue to dominate the market and overcome this new challenge as well.
Nike has been the subject of a few controversies, with the criticisms focusing on the production of its apparel and shoes. Nike has been criticized for its use of “sweatshops” in China, Vietnam, Indonesia, and Mexico. Human rights groups have documented that Nike’s factories have violated minimum wage and overtime laws dating back more than 30 years, though Nike claims that these practices have been stopped. However, as of 2011 Nike has stated that most of its factories in China still do not meet its standards for worker treatment. There have reports from multiple sources that consistently state that Nike has failed to improve its working conditions for factory employees in many countries besides China.
Nike also faced criticism for its employment of child laborers in Cambodia and Pakistan. Despite its acknowledgement of this practice, Nike has also failed to curb the practice as it continues to provide contracts to companies in countries that are known to not regulate child labor forces. In 2001, a BBC documentary delved deeper into this issue and discovered child labor and poor working conditions in a sweatshop in Cambodia. It chronicled the lives of six girls who worked seven days a week for 16 hours a day in the factory.
In addition to the poor working conditions, Nike also faced a boycott in 2014 from workers in a factory that produced its shoes. The workers claimed that the factory was severely underpaying them and it was discovered that the practice had been going on for over 20 years before it was uncovered.
Nike’s main competitors are Adidas, Puma, and New Balance. Though Nike has dominated the athleticwear game since the 80’s, one thing that Adidas has recently beaten Nike at is their venture into the world of high fashion. Adidas has succeeded in partnering with famous designers to create apparel that is both sporty and fashionable, but Nike is fast on its heels. Nike recently unveiled a collaboration with Olivier Rousteing, a designer for the luxury brand Balmain, in an attempt to combat Adidas’s dominance in this business.
Mark G. Parker has been Chief Executive Officer and President of Nike since January 2006. He has worked at Nike since 1979 when he joined the company in the research, design and development department, and since then has been employed in various leadership positions throughout the company. In 2001 Parker was promoted to President of the Nike Brand, a post which he served at until 2006 when he became CEO. In addition to serving on Nike’s board, he also serves on the Disney’s Board of Directors. Mr. Parker graduated from Penn State in 1979 with a degree in Political Science. In 2015 Mr. Parker was paid $16.8 million and he has a net worth of $250 million. As CEO Mr. Parker is responsible for growing Nike’s global brands and businesses including Converse, Cole Haan and the Nike brand.
The company’s Board of Directors is comprised of 13 members. Three of the 13 directors are women, and three of the directors are minorities. Some of the more notable directors include Phil Knight, Nike’s founder, Travis Knight, his son, Mark Parker, the current CEO of Nike, and Timothy Cook, CEO of Apple. Other directors include the Chairman of PayPal, the former head coach of Georgetown University’s men’s basketball team, and the Vice Chairman of General Electric.
Nike focuses its business in four segments: footwear, apparel, equipment and global brands. The footwear division handles the production and design of all of Nike and Nike subsidiary shoe brands which manufacture sneakers and cleats for all sports as well as leisure shoes. The apparel segment handles all of Nike’s clothing production for all sports and is casual brands as well. Nike’s equipment division makes just about every piece of equipment imaginable and necessary for every sport as well as manufacturing cases for digital devices. The global brands segments is responsible for overseeing the development of all of Nike’s subsidiary brands including Jordan, Hurley and Converse. Much of Nike’s business success has come from its ability to attract top talent to endorse its apparel and sneakers. Some of its most famous athletes include Michael Jordan, Kobe Bryant and Lebron James. Recently, Nike signed Lebron James to a lifetime endorsement deal valued at over $1 billion dollars which is just a sign of how profitable Lebron is for the company.
Nike’s CFO and Executive Vice President is Andy Campion, a veteran of the company since joining in 2007 as Vice President of Global Planning and Development. He was made CFO of the Nike brand in 2010, responsible for leading long-range financial and strategic planning, and from that position he rose to become Senior VP of Strategy, Finance, and Investor Relations for Nike in 2014, before ascending to his current position in late 2015. Prior to working at Nike Campion held leadership positions in the finance department of the Walt Disney Company. His current responsibilities include leading all aspects of financial management for the global powerhouse. Though he hasn’t been CFO for a full year yet, and as such no records for his compensation have been made public, his predecessor was paid $2.5 million in 2015 which serves as a pretty strong indicator of what his pay will be like in 2016. Nike’s stock price as of its last close is $56.19. Nike’s net income for fiscal year 2015 was $3.27 billion, and it paid a tax of $4.21 billion on its gross profit of over $14 billion.
So much of Nike’s success has hinged on its brand image and the responsibility for crafting that image falls on one man: John Slusher. Slusher serves as Nike’s Executive Vice President of Global Sports Marketing, a position he has held since November 2007. Slusher has been responsible for managing all dealings with U.S. pro leagues and has led negotiation teams for many of Nike’s sports marketing agreements, including those for Jordan Brand and Converse. He led development and implementation of sports marketing strategies in both the Asia Pacific and Americas regions, including relationships with U.S. professional sports leagues in the regions and endorsement, sponsorship and licensing. One of Slusher’s greatest accomplishments has been ousting Adidas as the manufacturer of the jerseys worn by the players in both the NFL and the NBA. Slusher is arguably the most important executive at Nike because of the influence he has on developing the company’s image worldwide. Slusher joined Nike in 1998 and served in a variety of roles in the global sports marketing group, including Manager of Business Affairs and Associate Director, before becoming Vice President of Global Sports Marketing. Prior to joining Nike Slusher worked as an attorney at the law firm O’Melveny & Myers. He attended Dartmouth College before earning his law degree from the University of Southern California.
Nike’s COO is Eric Sprunk, a company man since 1993 when he joined Nike from the accounting firm PriceWaterhouse Coopers where he managed the Nike account. Sprunk previously served as Executive Vice President of Product & Merchandising where he was responsible for all Nike Brand product across the company’s footwear, equipment and apparel engines. Sprunk led product creation from innovation to design to sourcing to manufacturing to merchandising, giving him the insight needed to serve as the company’s COO, because nobody had better knowledge of the entire production process than him. As COO, Sprunk is responsible for maintaining Nike’s entire supply chain which spans manufacturing, sourcing, IT, demand, supply planning and procurement. Sprunk focuses Nike’s internal operations, making sure that its infrastructure is strong enough to maintain the continued growth necessary to support its global brand. Sprunk’s compensation for 2015 was almost $5 million, which was comprised of equity, cash bonus, and other forms of compensation. As COO, Sprunk is responsible for overseeing Nike’s 62,600 employees worldwide.
To me, Nike’s success is beyond doubt. No other company is as universally adopted in day to day life. Everywhere I go I see Nike shoes, shirts, shorts, gear, or even if it’s not Nike it’s one of its subsidiary brands that people are wearing. Becoming the official gear supplier of the NFL and NBA will be Nike’s most successful endorsement deal, and it has barely reaped the rewards of that sponsorship yet. And as new countries grow and become economically viable, Nike will expand there and find new markets in which to sell all of its products. While retailers have been struggling recently, names like Nike will never go away. The company’s ability to adapt to trends of the day and rise above its competitors in anything that it attempts has set it above its competitors like Adidas. Its global reach and appeal will only continue to expand, and the company will continue to dominate worldwide.
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