Eugene McCarthy has been working for Nike since 1993. Having proven himself to be a good worker McCarthy was offered a position of an eastern regional footwear sales manager. He began to perform his duties during March 1997, but the contract was signed on the 1st of April 1997 as well as the “attached covenant not to compete and nondisclosure agreement as a condition of acceptance of the offer”, see Nike, Inc. v. Eugene McCarthy 379 F.3d 576 (2004).
Moreover, this document contained a phrase that “[s]ubsequent bona fide advancement of the employee with the employer” (see Inc. v. Eugene McCarthy 379 F.3d 576 (2004)) is necessary in case if the company wants the attached covenant to come into effect. Two years later McCarthy was offered a new position as the director of sales in the Brand Jordan division where he stayed until the day he resigned from the company. This has happened in June 2003. McCarthy was offered a position in Reebok in July 2003. This became the reason for the company Nike to appeal to the court. The parties agree that the document is enforceable, but there is a quarrel when the document came into effect.
Issue
Did the actions provided by McCarthy violate the attached covenant or the document fails to come into effect as being signed later there was no bona fide advancement.
Holding
The United States Court of Appeals, Ninth Circuit affirmed the decision of the district court that Eugene McCarthy violated the agreement, provided potential harm to the company, and had to leave the position offered by Reebok. Moreover, Reebok promised to hold the position for McCarthy while Nike had to pay him a salary for the restriction period according to the attached covenant.
Rationale
On the one hand, McCarthy was promoted to the new position in Nike Company before the agreement was signed. This means that there was no actual promotion under the contract that made the employee get to know specific and secret information. On the other hand, the employee began to perform his obligations one month earlier the contract was signed. Moreover, being aware of the secret information, McCarthy had to wait one restriction year before “be employed by, consult for, or be connected in any manner with, any business engaged anywhere in the world in the athletic footwear, athletic apparel or sports equipment and accessories business, or any other business which directly competes with NIKE or any of its subsidiaries or affiliated corporations” (see Inc. v. Eugene McCarthy 379 F.3d 576 (2004)) under the nondisclosure agreement McCarthy had to sign.
To be enforceable, the contract has to satisfy these three requirements, (1) it has to be time or place restricted, (2) it is to be reasonable (see Eldridge v. Johnston, 195 Or. 379, 245 P.2d 239, 250 (1952)), and (3) it has to be on good consideration. All these conditions were followed in the additional covenant and nondisclosure agreement that were the conditions for signing a contract devoted to employee promotion.
The information McCarthy represented to Reebok made harm to Nike’s sales that are the main problem that caused the court appeals. Thus, it is crucial to sign the contract before an employee is provided with the secret information and the statements in the contract should not be equivocal.
Nike Inc encounters challenges from a myriad of natural and physical environmental factors, which affect its performance. They include climate change, pollution, and floods among others. According to Esteve-Turrillas and De la Guardia (2017), climate change impacts different facets of Nike’s operating model, including production and supply chain. This company relies on cotton for the manufacture of its apparels.
Therefore, shortage of these raw materials might have devastating impacts on the company. Drought in nations that grow cotton results in the prices of this essential commodity going up, thereby affecting textile companies’ profitability. Variations in weather changes have led to Nike looking for alternative ways of manufacturing its products. This company is now turning to using synthetic materials because they are not affected by climate change (Ali Mahdi, Abass, Mazar, & Shaju, 2015). Nike Inc is also renowned for sourcing organic cotton, which is grown via environmentally friendly methods.
Apart from climate change, floods contribute to Nike’s production levels dwindling. For instance, in 2013, the company was forced to momentarily close its Thailand plants due to floods (Esteve-Turrillas & De la Guardia, 2017). Today, the call for environmental conservation has resulted in Nike changing its operations. This company is investing in environmentally friendly sources of energy as a measure to curb greenhouse gas emission.
Moreover, it appreciates the significance of water conservation and is looking for ways to recycle wastewater. Nike has partnered with DyeCoo, a Dutch firm, to establish inventive production procedures that will minimize energy use (Hemphill & White, 2016). Additionally, this partnership will assist Nike to prepare its fabric (dyeing) without using water. The move will see the company save a lot of water since presently it needs between 100 and 150 liters per a kilogram of fabric (Jegatheesan et al., 2016). The company has initiated programs that advocate recycling of used shoes to reduce pollution.
PEST Analysis
Political, economic, social, and technological changes have significant impacts on the apparel industry. The political factors include terrorism and geopolitical stability, which cause ambiguity in the international economy. The present political changes in the United States and the United Kingdom have contributed to poor performance in the textile sector (Ali Mahdi et al., 2015). Moreover, environmental laws and the call for reduction of global warming have led to the apparel industry investing in green sources of energy. Economic volatility has a toll order on the apparel segment (Ali Mahdi et al., 2015).
For instance, slow growth in the Chinese economy has led to a decline in demand for textile products. As the number of globally employed people continues to rise, there are expectations that the demand for apparel will increase, facilitating growth of this industry.
Noteworthy social transformations have happened in the last decade, and have impacted the sales of merchandise. The number of employed millennials has increased tremendously, resulting in the apparel industry considering this generation as its main target. Hall, Towers, and Shaw (2017) allege that millennials are not only sensitive to the prices of merchandise but also quality. Therefore, apparel companies like Nike have embarked on manufacturing quality and inexpensive products.
Technology is a critical factor that has revolutionized the apparel industry. Information technology (IT), globalization, Internet, and increased use of smartphones have changed the way people do their shopping. In return, textile firms have been forced to invest in technology to enable them reach many clients. According to Hall et al. (2017), most millennials prefer online shopping and value tailor-made services. Consequently, apparel companies like Nike have online stores that enable them to target this clientele.
References
Ali Mahdi, H. A., Abass, M., Mazar, T. I., & Shaju, G. A. (2015). A comparative analysis of strategies and business models of Mike Inc. and Adidas Group with special reference to competitive advantage in the context of a dynamic and competitive environment. International Journal of Business Management and Economic Research, 6(3), 167-177.
Esteve-Turrillas, F. A., & De la Guardia, M. (2017). Environmental impact of recover cotton in textile industry. Resources, Conservation and Recycling, 116(1), 107-115.
Hall, A., Towers, N., & Shaw, D. R. (2017). Understanding how millennial shoppers decide what to buy: Digitally connected unseen journeys. International Journal of Retail & Distribution Management, 45(5), 498-517.
Hemphill, T. A., & White, G. O. (2016). The world economic forum and Nike: Emerging ‘shared responsibility’ and institutional control models for achieving socially responsible global supply chain? Business and Human Rights Journal, 1(2), 307-313.
Jegatheesan, V., Pramanik, B. K., Chen, J., Navaratna, D., Chang, C., & Shu, L. (2016). Treatment of textile wastewater with membrane bioreactor: A critical review. Bioresource Technology, 204(1), 202-212.
This memorandum aims to justify the efficacy of Nike’s advertisement strategy by analyzing some of its unique features. “Just Do It” is Nike Company’s trademark which has served as a campaign attracting significant brand awareness. The slogan focuses on emotional branding, which is developing a relationship with the consumer by provoking their emotions. This branding archetype encompasses the attributes of heroism to tell a story of success from humble beginnings (Erjansola et al., 2021). Therefore, features of Nike’s logo, such as allusive design, color choice and emotional branding, make it effective, efficient, and understandable to the consumer, meaning it should be maintained as the preferred advertisement strategy.
Nike’s brand logo is part of its corporate visual identity since it metaphorically represents the company’s objectives. The target audience for Nike products is sports enthusiasts with a diverse tastes in sports shoes, wearable devices, and apparel. Therefore, the design of the logo is created to motivate consumers to up their game in physical activities by just doing it (Nagori, 2022). The design encompasses a Swoosh that looks like a fluid checkmark convincing the consumer to get started which is an effective emotional branding technique (Nagori, 2022). The Swoosh signifies something correct, ethical, or morally acceptable. This emblem alone can attract a potential client to the brand, reinforcing its validity for effectively drawing in consumers to the product. This convincing power indicates that the advertisement is viable and should be maintained.
The colors used in the logo help to enhance the understanding of this company’s mission and vision, which is an integral concept in the theory of emotional branding. For instance, the psychology of color indicates that different hues are linked to emotions in the human psyche (Lundin, 2018). Black shows sophistication, seriousness and quality, while white represents purity. People attracted to quality and purity are likely to believe a brand is defined by black-and-white colors (Lundin, 2018). The representation of these colors also provides an accurate and understandable description of the brand, promoting consumer loyalty. This factor indicates that Nike’s logo is an efficient and effective marketing strategy due to its distinct convincing approach.
The logo’s non-descriptive design provides insights into the company’s values and personality without instantly revealing the brand’s niche. This identity issue may seem like a setback, but it distinguishes the brand from others (Erjansola et al., 2021). The reason is that the logo is allusive, meaning it does not resemble any other corporate logos, enhancing its marketing strengths and effectiveness in promoting brand awareness (Erjansola et al., 2021). For example, it is unlikely that consumers will get confused when choosing a brand, considering that it is unique. This factor indicates that Nike’s logo efficiently enhances brand awareness, serving its core purpose, which validates its existence.
Nike’s logo is efficient, effective and understandable to the consumer and should not be eliminated. However, some improvements can enhance the current sign to be more pronounced, attractive and memorable (Lundin, 2018). One strategy is enlarging the Swoosh icon, considering that this evokes the idea of speed or movement. This design will make the logo highly visual, symbolizing speed and the right choice, which will significantly benefit the brand. Creative topography, such as handwritten fonts on the “Just do it” phrase, could also help create an authentic feel to ensure delight to loyal and potential clients (Lundin, 2018). If these improvements are implemented, the logo will be more attractive and memorable and highlight the company’s strengths.
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In the world of advertisements, the use of rhetorical devices can be described as an effective and significant way to engage the audience. Companies and brands today rely on rhetorical devices not only to engage with the audience but also to persuade them about a product or brand. One of the companies that have successfully employed the use of rhetoric devices in its adverts is Nike. Over the years, the company has been able to grow its customer base significantly by creating adverts that persuade and communicate well by relying on rhetoric devices. A good example of this can be seen in their advert dubbed “Never Settle, Never Done”. The advert mainly engages these devices to portray sport in a new dimension. The advert, through these devices, mainly brings women to the limelight in sports by creating confidence that they have the technical ability and speed for the game.
Discussion
In the advert, Nike effectively used a multitude of rhetorical appeals to ethos. Ethos entails how trustworthy and credible a source can be used. Nike being among the leading multinational corporations in clothing, footwear, and sports equipment, endorses numerous athletes and celebrities to wear their apparel. In the advert, for instance, famous faces from an all-star team at Wieden+Kennedy London are featured (Nike 00:10- 00:20). This is an appeal to ethos and a fundamental aspect of the advertisement. Besides, in this commercial, the company uses ethos by highlighting the different paths taken by female athletes to become great players. The advert uses ethos by showing famous faces to showcase the campaign. Among these faces include Alexia Puttellas and Leah Williamson.
The advert also uses the appeal by showcasing local community football clubs like Barcelona. This mainly helps exceptionally to connect to the young buyers and audience. The use of ethos and pathos in this advert mainly brings a new scope to the game and creates a new dimension for women. The faces featured in the commercial come from different backgrounds which further appeals to and connects the influence over the target audience for being female, people of color, and from unfortunate backgrounds (Nike 00:10- 00:40). Incorporating different athletes shows that Nike recognizes and supports people from different backgrounds and presents an opportunity for all to be successful by branching out their networks. Through ethos, the commercial demonstrates the significant and positive work that Nike has done to support female athletes and champion gender equality.
Pathos is yet another rhetorical appeal used throughout the advertisement in an attempt to give the commercial a personal connection. Pathos in the ad is used to give the ethos appeal more emotional sway and body. Another aspect of the advert is the emotional persuasion that is seen in both ethos and pathos. The brand mainly creates a heartfelt message that is both personable and sincere. This helps them reach a wider range of consumers because people can connect directly to the brand in terms of emotional connection rather than sales. In its entirety, the persuasion from its confident ethos sells emotion. The encouragement of women athletes and footballers in this advert captures many people’s emotions as well as the opinions of society. From the pathos perspective, the advertisement generally addresses the critical and sensitive issue of gender-based stereotypes of women in football. Touching on issues of gender inequality brings out an emotional journey whereby women are portrayed as equals to their male counterparts.
Conclusion
In conclusion, it is evident that the uses of pathos and ethos in the advert are all made successful by the strategies used to present them in the advert. These are strongly emotional and authoritative appeals that are effectively used in the commercial to champion gender equality and encourage women to be confident and daring in a field dominated by men. However, the commercial fails to incorporate statistical facts hence creating a logical fallacy which is a pitfall. It is therefore important for the company to incorporate evidence in its appeals. Altogether, the purpose of the commercial of drawing attention to the brand was accomplished by effectively setting up a positive rhetorical situation.
Work Cited
“Never Settle, Never Done.” YouTube, uploaded by Nike, Web.
The idea that “in the global commodity chain approach, that manufacturing represents a rather ‘lower order’ or ‘dead end’ factor in competitiveness for the supplier, which remains subordinated to agents that control ‘higher-order’ factors like proprietary technology, product differentiation, brand reputation…” (Merk 84) may be interpreted in a variety of ways. The examples of such companies like Nike and Yue Yuen help to realize that the process of introducing commodities to consumers is complex indeed, and it is wrong to identify some steps as more important. It may happen that even such a serious aspect like manufacturing can be of minor importance in comparison to other stages of the same stage.
The decision to use such combination of words is based on the nature of Nike and Yue Yuen’s work and the results they achieved. They are unexpected, unusual, and global. This is why the chosen phrase is a proof that the success of transnational corporations such as Nike or Yue Yuen depends on how a number of factors like differentiation, reputation, or upgrading are elaborated by the agents on a global level and turn out to be influential for the individuals, who are going to use a particular production.
The sentence under consideration may be explained as a possibility of the companies to demonstrate their profits by means of a control of various consumer markets including technological processes, branding ideas, or marketing details. Different experts introduce their own understanding of the Nike’s success: offshore outsourcing is defined as one of the ideas used by the company “where labor-intensive production and assembly processes actually produce the final Nike product” (Cyper & Dietz 456), and export garment assembly is used as the industry “in which developing countries can offer comparative advantage in manufacturing, particularly through labor costs” (Hurley and Miller 17).
The opinions of these authors help to realize that the level of work influence not only the quality of the production but also the order of its manufacturing. The experts have to identify ‘low order’ and ‘high order’ factors and imply them accordingly.
The global commodity chain approach focuses on the evaluation of the relations that take place between production of a good and its trade and the identification of the activities that have to be performed by a number of actors. This is why the role of managers or other representatives of the companies remains to be crucial regardless the current technological progress and the possibilities to replace people by technologies.
In general, the chosen extract may be used not only as a description of Nike or Yue Yuen’s achievements. It is a good example of how huge companies may and have to be developed following unusual ideas that cannot be theoretically supported. The readings by Cypher, Dietz, Hurley, and Miller help to comprehend the meanings of each word and compare them to the examples offered. It is not dangerous but rewarding to depart from the usual conditions of production, use an integrated package of services for people from different parts of the world, save costs for a further development, become able to introduce high-quality products and compete with the companies that have a world brand. This approach was chosen by Yue Yuen and improved by the individual abilities of the companies’ employees in respect to the success demonstrated earlier by the representatives of Nike.
Works Cited
Cypher, James, M. and Dietz, James, L. The Process of Economic Development, New York, NY: Routledge, 2008. Print.
Hurley, Jennifer and Miller, Doug. “Changing Face of the Global Garment Industry.” Threads of Labor: Garment Industry Supply Chains from the Workers’ Perspective. Eds. Angela Hale and Jane Wills. Hoboken, NJ: John Wiley & Sons, 2011. 16-39. Print.
Merk, Jeroen. “Restructuring and conflict in the global athletic footwear industry: Nike, Yue Yuen and labor codes of conduct.” Global Economy Contested: Power and Conflict Across the International Division of Labor. Ed. Marcus Taylor. New York: Routledge, 2008. 79-97. Print.
Nike is one of the largest footwear and sportswear suppliers in the USA. The organization operates in approximately 160 countries, and its workforce is composed of more than 44000 people. Nike’s total revenue was $20.862 billion in 2011 with total equity of $9.843 billion. Nowadays, the company is considered to be the leading sportswear and footwear in the world.
Phil Knight and Bill Bowerman founded Nike in 1964. It was initially Onitsuka Tiger’s distributor but in 1972 the company created its own brand. The offered production was in high demand with runners and athletes due to the fact that Nike’s footwear was very light and comfortable. In 1982, the company began its cooperation with an effective advertising agency that still help them work out a product promotion campaign. One of the most successful products of this collaboration is the famous Nike’s motto “Just Do It.”
The principal focus of Nike’s strategy is innovations’ implementation, sustainable development, and timely integration into the globalization processes. Nike’s target clients are young and middle-aged men and women who want to combine active lifestyle and comfort.
Among the main company’s competitors, one might point out Reebok and Adidas. In the meantime, Nike currently manages to hold its leading position with the help of its cost-effective management, and powerful promotion campaigns.
The company’s organizational structure can be referred to as the divisional type. Meanwhile, Nike also has functional departments. For example, there are such brands as Converse and Jordan that were created in relation to particular products while the functional department is still Nike. The decision-making is carried out by Nike’s CEO and the directors’ board. The company also has an operations department aimed at assuring consistent interconnection between the divisions.
The company’s departments are relatively free to perform decision-making; therefore, it might be assumed that the company pursues a laissez-faire leadership policy, at least on the top level.
Reebok
Reebok is one of the leaders among the world suppliers of sports and casual footwear, as well as fitness equipment.
The company was founded in 1979 by Paul B. Fireman. In 1982, they introduced special footwear for aerobic exercise. Due to the high-quality material and attractive design, the product became popular with athletes. Moreover, it was the first sports footwear designed specifically for females; thus, it managed to create a new market sector.
The main targeted customers are young and middle-aged women that lead an active lifestyle and care about their bodies. The company has a powerful advertising campaign, promoting its products through all the possible mass media sources. They engage such celebrities as Eva Mendes to advertise their specialties.
Reebok’s leadership style can be defined as delegating. In other words, the company has a relatively flattened hierarchy and delegates a large scope of responsibilities to the separate departments.
Profitability Ratios
One the basis of the companies’ income statements, three profitability ratios were worked out in order to provide detailed insights on their profitability from the investment standpoint.
Gross Profit Margin
Both companies show almost equal indexes relating to the gross profit margin. Thus, Reebok’s gross profit margin is 44%, while Nike has a 46% variable. It means that both companies manage to carry out a sustainable control of the cost of their inventories and the manufacturing of their products as well as to pass on the costs to the clients.
In the meantime, it might be recommended that Reebok performs a series of measures in order to raise its gross profit margin. There are two alternative solutions to complete this aim. First of all, Reebok can raise the cost of its products. In order to avoid undesirable consequences, the management should analyze the economic environment, the competitors’ activity, and the client base before implementing this measure. Secondly, the company might decrease the cost of the manufacturing process. Reebok might try to find a more beneficial supplier for materials or arrange favorable discounts with the already existing supplier.
Operating Profit Margin
The operating profit margin ratio differs quite significantly in the two companies. Thus, Reebok’s operating profit margin is 6%, whereas Nike’s variables are 7.8%. These variables provide valuable insights on the scope of the thrown off cash after the companies meet all the expenses. It might be, consequently, concluded that Nike has productive cost control and, it can be assumed that its sales are increasing faster than costs. It also means that that the company has worked out a low-cost operating strategy.
It is also critical to note that Reebok’s operating profit margin can improve in case its sales revenue grows excessively. Otherwise, the company can reduce its fixed costs so that they comprise a smaller percentage of total costs – the operating profit margin will essentially increase.
Net Profit Margin
The variables for the net profit margin in Nike and Reebok differ slightly with Nike showing a 5% net profit margin, and Reebok – 4%. It means that both companies convert approximately 4-5% of their sales into profits as long as all the expenses are met. Meanwhile, both companies can increase their variables by either reducing expenses or increasing the sales’ revenue.
News Events
Latest news on Nike’s performance have positive connotations and give grounds to presume that the company is profitable from the investment standpoint. According to authoritative sources, Nike shows sustainable profit growth. Thus, Reuters reports that the launch of the new products, for basketball players, runners, and other sportsmen, has assisted Nike to draw the customers’ attention to the higher-priced products, whereas the athletic sector shows consistent, effective performance in the relevant sector. It is likewise, reported that the company’s revenue from the home market gained 9.4% at the end of 2015. As a consequence, Reuters’ analysts assess Nine’s earnings to be of about 86% share and the revenue – $7.81 billion (Iyer, 2015). Another positive news concerning Nike refers to the company’s performance in the East market. Thus, Reuters reports that the scope of orders in the fast-growing market of China increased by 34%, that is the largest increase within the past two years. According to the analysts’ estimations, general sales in China region rose up by 24% (Swamynathan, 2015).
In the meantime, the latest data reported on Reebok’s performance does not provide much assurance for beneficial investment. Hence, the company, which showed sustainably high sales, being one of the most popular US sports footwear distributors in the 1980s, began to show a steady decline after being bought by Adidas. According to experts’ assessments, Reebok’s sales have reduced by more than a third since 2005. Despite the fact, that the CEO denies the company’s plans to sell Reebok because of its worsened performance, investors might still have reasonable questions concerning Reebok’s profitability (Mahlich, 2015).
Moreover, potential investors might, likewise, come across some concerning news that jeopardizes the company’s image. According to Reuters, a popular sports footwear maker, Skechers Inc, reported on filling a lawsuit against the company, accusing the latter of infringing of patents that belong to Skechers’ Go Walk shoes. The company stated that they sought compensation and a punitive damage as well as injunctive relief. Their suit was carried out in the U. District Court in California. Skechers also emphasized the fact that they would essentially take similar measures towards any retailer that distributed Reebok’s Walk Ahead shoes (Chakrabarty, 2014).
Income Statement Analysis
Nike
Nike’s income statement for the past two years has positive connotations for potential investors. Thus, the company’s revenues rose from 2013 to 2014 and continued growing from 2014 to 2015. On the whole, the company raised its revenues by 4,000,000 dollars. Their net results for the period from 2013 to 2014 and from 2014 to 2015 are, likewise, positive. Nike’s operating income also increased by 1,000,000 dollars. The company’s income before income taxes also rose. Within the past two years, it increased from 3,272,000 dollars to 4,205,000 dollars.
The company’s gross profit increased from 11,034,000 to 14,067,000 within the past two years (Nike Inc. Income Statement, 2015).
Reebok
The data from the Reebok’s income statement for the past two years provides favorable implications for potential investors, although its performance is less effective than Nike’s. Thus, from 2013 to 2015, the company’s revenues rose by 2,000$. Their net results for the relevant period did not show significant growth. Thus, the company’s net sales increased by only 500,000 dollars. The highest variables might be observed in the footwear segment – the company managed to increase its sales in the relevant segment by 2,000,000 dollars. A positive tendency can, likewise, be viewed in the apparel sector – its sales grew by 1,000,000 dollars in the past two years. In the meantime, the hardware product line shows a decline in its performance – the relevant sales decreased by 300,000 dollars. It is critical to note that despite the fact that Reebok shows consistent development and sales’ increase, its progress is relatively insignificant contrary to the associated company Adidas (Adidas. Five Year Statement, 2015).
Analysis
The examination of the companies’ income statements shows that Nike’s progress is more considerable than Reebok’s. Nike shows sustainable variables’ increase in all the segments, whereas Reebok’s success refers to particular aspects of its performance. It is, consequently, recommended that the company reconsiders its financial management in the hardware segment that has shown an insignificant decline in profit within the past two years.
Balance Sheet Analysis
Nike
Nike’s balance sheet data for the past two years has favorable implications for potential investors. Thus, the company’s total assets increased from 2013 to 2014 and continued increasing from 2014 to 2015. On the whole, the total assets have risen by 4,000,000 dollars. Their total liabilities results for the period from 2013 to 2014 and from 2014 to 2015 are, also, positive. Nike’s total liabilities have grown by 2,000,000 dollars. The company’s stockholder equity, likewise, increased. Within the past two years, it has grown from 11,081,000 dollars to 12,295,000 dollars (Nike Inc. Balance Sheet, 2015).
The vertical analysis of Nike’s balance sheet is represented in the table below (the dominator is the total assets variables).
$ Totals
Percent
Current Assets
15,976,000
74
Total Assets
21,600,000
100
Total Liabilities
8,893,000
41
Total Stockholder Equity
12,707,000
59
Reebok
Reebok’s balance sheet data for the past two years provides less favorable variables than Nike’s report. In the meantime, the company still shows sustainable progress despite the fact that its extent is not considerable. Within the period of the past two years, the company’s total assets increased by 1,700,000 dollars. Their total liabilities results for the period from are, likewise, relatively positive. Reebok’s total liabilities have grown by 500,000 dollars. The company’s stockholder equity did not show any significant rise. Thus, within the past two years, it has grown from 5,666,000 dollars to 5,489,000 dollars (Adidas. Five Year Statement, 2015).
The vertical analysis of Reebok’s balance sheet is represented in the table below (the dominator is the total assets variables).
$ Totals
Percent
Current Assets
3,113,000
23
Total Assets
13,343,000
100
Total Liabilities
3,003,000
22
Total Stockholder Equity
5,666,000
42
The examination of the companies’ balance sheets has shown that Reebok’s current assets make up the same percentage as the company’s total liabilities. Various the correlation between the relevant variables is more than significant in Nike company with 74% of current assets and only 41% of total liabilities, the relevant indexes for Reebok are almost equal (23% – current assets; 22% – total liabilities). It might be, consequently, suggested that the company tries to reduce the scope of its liabilities in order to improve the general financial health. This aim might be, likewise, achieved by enlarging the current assets of the company.
Reference List
Adidas. Five Year Statement. (2015). Web.
Chakrabarty, S. (2014). Skechers Sues Reebok for Patent Infringement. Reuters. Web.
Iyer, R. (2015). Nike Sales Rise 4.1 Percent as Demand Jumps in North America. Reuters. Web.
Mahlich, G. (2015). REFILE-Reebok Heads Back to the Gym with New German Marketing Blitz. Reuters. Web.
Financial management refers to the planning and management of finances of a business with the sole aim of achieving the set goals. It is geared towards maximizing profits and reducing losses. The main objectives include wealth creation and generation of a substantial return on investment (ROI) and cash based on risks taken and resources invested. Financial management involves acute planning, good control of finances, and appropriate decision-making (Megginson & Smart, 2009, p.24). Nike is a publicly-traded company that deals in sportswear and associated sports equipment. It is based in the United States and has its headquarters at Beaverton. In 2008, it had a workforce of 28,000 people and with its high financial turnover, good financial management was inevitable (Business Week, 2004).
Discussion
Before the entry of Don Blair in1999 as the Chief Financial Officer, Nike was undergoing a bad financial management crisis. This was a result of bad financial discipline, inappropriate supply-chain management, and bad operations. Blair helped in restoring its credibility in the financial markets by changing the business model they were using at the time. He introduced a new financial model that inculcated discipline, maintained steady growth, and attained an increase in profit levels (Business Week, 2004). Nike’s financial model ensures a good financial and operational relationship with its designers and numerous marketers. Their financial exploits are mainly pegged on the creativity and ability of their designers to produce quality designs that guarantee good performance in the market (Business Week, 2004).
The financial model that Nike adopted in the fall of the year 2000 was much different from the one they had before. The design they came up with centered on lower-octane revenue growth. Revenues shot up to 40% from 15% in earlier years with a small difference of 5% whenever they dipped. Nike has achieved substantial financial growth because it has excellent management of working capital and its culture of leveraging all of its assets (Business Week, 2004). This has maintained a steady cash flow and augmented the financial strength of their operations. Nike has also improved its operations in retail investments. They raised their dividends and spent $420 million in stock purchase last year. This has raised their cash flow by a great margin (Business Week, 2004).
Nike’s financial model is geared towards achieving a higher rate of growth, increasing volatility by a steady margin, and maintaining its investors’ confidence. They are achieving this through high financial investment in creativity and innovation. Nike understands that they ply a market that depends on the quality of the products supplied in the market. That is why they maintain a steady cash flow to be able to overcome the dynamics of the markets (Business Week, 2004). This is why they spend a lot of money in using professional athletes and college teams to endorse and market their products. They spend a large amount of their revenue on marketing and advertising their products.
Nike’s financial problem areas include their new model of demand and supply system. This has changed their product distribution management system and has resulted in shortages and excesses of products in the market and late deliveries. As a result, their profits have dipped and revenue growth has decreased. Another problem is competition from other companies. This has pushed Nike into spending more money on marketing and advertisements thus lowering their profits by a great margin (Business Week, 2004).
Conclusion
As one of the largest sportswear manufacturers and suppliers, Nike’s success has been leveraged by its financial management system. They invest mostly in innovation and creativity to maintain a competitive edge by producing high-quality products.
References
Business Week. (2004). The New Nike. Web.
Megginson, W.L,. & Smart. S. (2009). Introduction to Corporate Finance. South-West England: Cengage Learning.
Consumer responses towards the product are based on distinguish feature and reliability factor. There are several immunity may occur during the selection of Nike sports shoes due to the demographic characteristic of a consumer. Consumer behavior is rational in front of Nike product selection.
The basal concept leads towards the customer retention via offering the quality feature product, thus essential part for Nike is to influence the targeted customer. Consumer intention plays a vital role for better analyzing the whole scenario of purchasing Nike sports shoes. Most of the time consumer prefer branded products and pay less attention towards the price issue.
An observer can measure the responses of the customer and find the actual information in regard of selection preferences that are based on the brand attachment. Reputed organizations pay worthy attention towards studying their valued customer due to his/her response towards the product selection. Consumer behavior needs to be understood at deeper level by analyzing the need and wants at a place where product is displayed.
Consumer buying process is largely based on the valued information, which gathers from several sources. Analyzing the brand with its quality feature comes on the top priority of the customer. Attitude and behavioral changes of others directly effects the purchase decision at the end of consumer. Non-verbal reflection may alert the consumer to revise the decision for purchasing branded product.
Nike become a corporate brand from last few decades, and captures the market on the basis of sports goods manufacturer. Nike invests a huge amount in their research departments for statistical measurement of consumer behavior on the basis of their purchasing decision and how long it can generate the effective results.
More focused to recognize the need of existing and new customer comes on the top priority of the Nike products. Distinguish feature of Nike sports shoes may attract the customer and build an intention to attach with product for a longer period i.e. brand loyalty. Most preferable factors for the customer are the quality and design of the product which gives a unique look in his/her personality.
Brand recognition and quality in sports shoes divert the negative approach of customer into positive ones and create a link with loyal customers. Nike’s designer brings the innovative ideas and creativity in products after critical evaluation of the consumer demands. The main focus of Nike is to design the close loop sports shoe that is comfortable for the consumer and give edge in sports activities.
Nike’s strategies are based on the customer satisfaction and keep them motivated for purchasing the branded products. Nike management has also worked on the price issue which is not warmly welcomed by the new customers. Minimize the cost of sports shoes by recycling of defective items.
Management of Nike recognized that, consumer behavior is not constant all the time. The intention and preference factor create the difference in purchase decision by the customer. The habitual nature of the particular customer highly focused to divert into regular purchase of Nike sports shoes and timely encourage the customer to purchase the product and create a word of mouth for attracting new customer.
Based on financial reports from NIKE Inc., it is estimated that the company’s supply and demand have been growing. Various indicators of financial performance are shown to confirm the growth. The company’s products are considered to be inelastic due to the weak connection between changes in price and changes in demand. The recommendation suggested to ensure further development of NIKE Inc. is to primarily maintain its cult status and popularity, which are the reasons for its inelastic demand.
Nike Demand and Supply Conditions
The market demand for any given product or service of a company is a complex notion. It is not merely the number of products or services purchased over a certain period of time, but rather it is a combination of factors and results of commercial activities used to assess the company’s development and propose recommendations for future actions. One of the ways to evaluate market demand is to examine several key indicators from the company’s financial performance reports (Edler, Georghiou, Blind, & Uyarra, 2012). These indicators include the company’s income, the prices of relevant products and services, the current trends in customer taste and behavioral patterns, demographic information on the company’s target audiences and customers, and financial predictions (e.g., expected prices). These key indicators for NIKE Inc. (NIKE Inc., 2016; Annual Financials for NIKE Inc., 2016) are shown in Table 1.
Table 1. Key financial performance indicators for demand evaluation.
Indicator
Year
2016
2015
2014
2013
2012
Revenue (in millions USD)
32,376
30,601
27,799
25,313
23,331
Net income (in millions USD)
3,760
3,273
2,693
2,472
2,211
Price/Earning ratio
25.6
27.5
25.9
22.8
23.0
Demand creation expense (in millions USD)
3,278
3,213
3,031
—
—
Cost of goods sold (in millions USD)
17,990
16,750
15,340
14,410
13,620
Gross margin (in percent)
46.2
46.0
44.8
43.6
43.5
In 2016, NIKE Inc. once again confirmed itself to be the world’s largest sportswear manufacturer, and the company demonstrated better financial performance results than had been predicted. According to the company’s financial statements, the “orders scheduled for delivery” indicator, also referred to as the future orders indicator, grew by 11 percent (NIKE Inc., 2016). A 16-percent increase in profits is also explained by rising demand. The supply of the company is estimated to be sufficient for the existing level of demand.
NIKE Inc. has been consistent in its position that the company’s growth is due to its strong connection to consumers. Around 2010, the company’s supply and demand were challenging to analyze due to a difficult economic situation in which both indicators were finding a new normal. In 2012, the company’s revenues and inventory supply were both down. The company even reduced their supply, reflecting an actual or expected drop in demand. This supply reduction was almost 13 percent. However, as the economic situation improved, NIKE Inc. returned to upward trends in supply and demand, which shows that the temporary complications were largely due to market factors, not the company’s operations, strategy, or governance.
Nike Price Elasticity of Demand
Price elasticity of demand is an indicator measured by comparing changes in the demand for certain products or services (expressed in quantities purchased) with corresponding changes in the prices of those products and services. The indicator is calculated by dividing the percent change in demanded quantities by the percent change in price. Based on these calculations, demand is then deemed either elastic or inelastic. This measurement is necessary for management to make decisions concerning whether or not to raise the price of products or services that are in demand. Depending on the estimated elasticity, the increase in profit can be calculated. In cases of high elasticity, increasing the price of the product or service is risky because the business’s profit may decrease as a result (Edler et al., 2012). The reason is that high elasticity signifies that there are substitutes readily available for the product or service, which consumers will purchase instead of the company’s product or service in case the price is raised.
Due to the specific area of operation of NIKE Inc., which is the narrow sportswear market, the demand for the company’s product can be estimated as rather inelastic. As a result, NIKE Inc. is unlikely to gain many more customers by reducing its prices.
Among all of NIKE Inc.’s products, the ones that are estimated to be particularly highly inelastic are the company’s shoes. NIKE shoes have gained a cult following, which is why they are in strong and constant demand. An important indication of this inelasticity is the fact that the prices and profits of some of the shoe collections by NIKE Inc. have increased over the past two decades, while the costs of the company have stayed relatively the same. This is explained by the uniqueness of the products, their cult status, and the domination of particular goods, such as Air Jordan shoes, in the market. When the company’s original basketball footwear was presented to the market in 1985, its retail price was 65 USD, making them the most expensive basketball shoes available. As shown in the financial performance reports, the product’s popularity has constantly grown over the years (NIKE Inc., 2016). Based on the inelasticity of its products, the main recommendation that can be proposed to NIKE Inc. is to strengthen its popularity among target and non-target consumers for the purpose of maintaining the upward dynamics of its demand and supply.
Edler, J., Georghiou, L., Blind, K., & Uyarra, E. (2012). Evaluating the demand side: New challenges for evaluation. Research Evaluation, 21(1), 33-47.
Nike Company is considered as one of the classic world wide corporations established in America. Its fame is also associated to the superfluous profits that the company makes out of the large volumes of shoes that it produces. Nike Company has been able to propagate its revenues from the fact that its sells its products from more than 140 countries worldwide.
Despite of the company being able to generate profound profits out of the large volumes from the apparels and shoes, it is being characterized by some features that may in one way or another be perceived as unethical.
Some of the issues that the company ought to keenly observe comprise of the working condition of the employees. In essence the working condition may comprise of the remuneration to its respective employees and the conditions that the company dictates to its subcontractors (Hill, 2009).
Nike being termed as the best performing corporation on a global sense in terms of the apparels and shoes it is able to produce in an annual basis. This means that it is being able to control the market. In other words, the company has been able to set up and establish the conditions that ought to be followed by other marketers, live alone its subcontractors.
Considering the amount of remuneration that the company offers to its employees and the conditions that it has set up to even the foreign factories that it works with, it would be just if the company is held responsible for such conditions.
As long as the subcontractors make products for Nike Company, the foreign countries associated with the subcontractors in one way or another are being controlled by Nike Company. Therefore, the conditions that those foreign companies implemented are indirectly linked to Nike Company and thus, this justifies why Nike Company ought to be held responsible for any condition within the foreign company (Hill, 2009).
Though, Nike may be held responsible for the conditions subsisting in foreign countries, which might be regarded as being unethical, there are others that ought to be held both in the mother country and in the foreign countries. Some of the working conditions that should be upheld in the foreign countries are the issues concerning the overtime rates. In order to have a livable wage, there should be no limit for the overtime. In essence it should not be limited in any way (Bateman & Snell, 2009).
It would be justified to criticize Nike Company for the low wages it provides to the subcontractors residing in Indonesia. Considering the high standard of living – constituted to the amount of work done by the subcontractors – at least Nike Company should be advocating for the minimum age, but for an increment in total wages.
Also, considering the amount of profits the company generates, a little increase will be considerable. In view of the way Nike retaliated to the negativity publicity about the sweatshops by promising to improve the working conditions and also amending the labor rule and regulations, it was not a better way forward.
The negative publicity would still hold as long as those products would remain produced from the “sweatshops” Additionally, considering that the company is aimed at offering quality products to its clients, changing the brand name of the production site (sweatshop) would in one way initiate a positive insight in people’s mind.
A pay rise is another factor that would be considered as an improvement in the working conditions. Furthermore, cutting links with other factories that could follow up their rules could not help improve the working conditions. Instead amending the rules to strengthen the bond could be a way out in improving the conditions.
There is therefore a dire need for the company to improve the working conditions within its strategy. For instance, the company should consider a pay rise that should conform to the current living standard. Additionally, the company should not be dictatorial on the quantity of products that a single person ought to produce to be eligible for payment.
Overtime rates should be limited by any law, but instead, should be open as long as somebody is ready to work. Nike, being a global corporation, should work independently and not focus much on being profit oriented, but also consider the welfare of its employees (Mejia, Balkin, & Cardy, 2006).
In this regard, the reputation of a business is not built by the amount of profits that the business generates; neither by volume of production, but by how well the business treats its employees and the public at large. Nike Company should be guided by such motives and thus, there will be a right to argue that WRC has a right to argue that the FLA is a tool of industry.
If Nike does not make any adjustments to the working conditions, and assuming that all the challenges stems out from the “Sweatshop”, the issue may turn into a global problem and the global solution is closing down the company. Therefore, global managers should ensure that there is enough marketing research within their target markets before deciding on the products and services to offer.
References
Bateman, T.S & Snell, S.A. (2009). Management: Leading and Collaborating in the Competitive World (8th ed.). New York: The McGraw-Hill Companies.
Hill, C. W. (2009). International business. Competing in the Global Marketplace (7th ed). Boston, MA: McGraw-Hill.
Mejia, L. G., Balkin, D. B. & Cardy L. R. (2006). Management: People, Performance, Change. New York: McGraw-Hill.