Nike financial analysis
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CONTENTES
•Introduction
•Nike History Timeline
•Financial analysis
•Industry Analysis
•Corporate structure
•Company analysis
•Current and future success
•Implementation plan and strategies
•Recommendations
INTRODUCTION Type: Public (NYSE: NKE) in NASDAQ market Founded : January 25, 1962 as Blue Ribbon
Sports 1978 as Nike, Inc. Founders :WilliamJ. "Bill" Bowerman Philip H.
Knight NIKE Headquarters: Washington County,
Oregon, United States (Near Beaver ton, Oregon)
Area served: Global Key people :Philip H. Knight (Chairman) Mark
Parker (CEO &President)
INTRODUCTION
Employees: 32800 (2009), 35000(2010) ,
Subsidiaries: Cole Haan,Hurley International, Converse Inc. and Umbro.
Industry :Sportswear, Sports Equipment, Athletic shoes ,Apparel ,Sports equipment Accessories
Website: www.nike.com
Nike History Timeline 1962: Phillip Knight, Stanford University, Blue
Ribbon Sports 1964: William Bowerman becomes a partner by
matching Knight's investment of $500. 1965: Hires a full time employee, and annual sales
reach $2,000. 1966: Blue Ribbon Sports, also known as BRS, rents
its first retail space; employees can now stop selling shoes from their cars.
1969: It now has several stores and 20 employees; sales are close to $300,000.
Nike History Timeline 1971: Nike, capitalizing on the Greek goddess
of victory. The first Nike product sold with the new symbol is a soccer shoe.
1970 ± 1975: Steve Prefontaine was turned to the University of Oregon by Bill Bowerman and wore Nike products
1976: The popularity of jogging increases revenue to $14 million.
1978: The company changes its name to Nike. 1980: Nike goes public, offering 2 million shares
of stock.
Nike History Timeline 1990: Nike files suit against competitors for
copying the patented designs of its shoes, and also engaged in a dispute with the U.S. Customs Service over import duties on its Air Jordan basketball shoes.
1997: Feb., Stocks reaches a high of $76 per share.
1998: Sept., Stocks tumbles to $31 per share 2000: The National Football League declines to
renew its exclusive apparel licensing arrangement with Nike.
Nike History Timeline
2001: Nike opens its first Nike Goddess store, a unit targeting women, in Newport Beach, CA.
2003: Nike purchases Converse Inc. for $ 305 million.
2008 :Nike acquired sports appar el supplier Umbro,
2009: Air Jordan Shoe 2010: Nike Future Sole Design
Competition
Evolution of the Logo
FINANCIAL ANALYSIS
ACCOUNTING POLICIES Management Estimates
The preparation of financial statements in conformity with generally accepted accounting principles Recognition of Revenues
Wholesale revenues are recognized when title passes and the risks and rewards of ownership have passed to the customer, based on the terms of sale.
Shipping and Handling Costs
Shipping and handling costs are expensed as incurred and included in cost of sales.
Advertising and Promotion
Advertising production costs are expensed the first time the advertisement is run. Media (TV and print) placement costs are expensed in the month the advertising appears.
FINANCIAL ANALYSIS Cash and Equivalents
Cash and equivalents represent cash and short−term, highly liquid investments with maturities of three months or less at date of purchase.
Inventory Valuation
Inventories are stated at lower of cost or market and valued on a first−in, first−out (“FIFO”) or moving average cost basis.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are recorded at cost. Depreciation for financial reporting purposes is determined on a straight−line basis .
FINANCIAL STATEMENTS
.
NET INCO
ME
TOTAL
ASSETS
TOTAL
LIABIL
ITIE
S
TOTAL
EQUIT
Y
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
16,000.00
200820092010
FINANCIAL STATEMENTS
cash from operating cash from investing cash from financing
2008 1936.3 -489.8 -1226.1
2009 1736.1 -798.1 -733.9
2010 3164.2 -1267.5 -1061.2
-1,250.00
-750.00
-250.00
250.00
750.00
1,250.00
1,750.00
2,250.00
2,750.00
3,250.00
STATEMENT OF CASH FLOW
Axis Title
FINANCIAL ANALYSIS
FINANCIAL ANALYSIS
FINANCIAL ANALYSIS
FINANCIAL ANALYSIS
FINANCIAL ANALYSIS
STOCK HISTORY
RATIO ANALYSIS
INDUSTRY ANALYSIS
Sportswear, and sports accessories & footwear industries
Since the 2003 athletic footwear industry has begun to enter the high-cost, high-growth "double high" development mode.
In 2010, the United States athletic apparel market become the world’s largest Sportswear market.
Competition ADIDAS AG: 2009 revenues - $13.8
billion. It competes in the overall
sporting goods market.
PUMA: 2009 revenue - $3.3 billion.
Puma AG is a Germany-based
competitor in the sells sports footwear, apparel, accessories, and equipment.
UNDER ARMOUR: 2009 revenue - $856.4 million. Its products, which are designed with microfibers intended to wick away perspiration, extend across the sporting goods, outdoor, and active lifestyle markets.
In addition to Nike's footwear competitors, the company also competes with other makers of outdoor apparel, such as V.F. Corporation, Columbia Sportswear and Quicksilver
Competition
PESTEL ANALYSIS
POLITICAL
Political unrest in the production countries
Terrorism in the home country
ECONOMIC
Barriers of entry to the
EU
economic recession
The labor costs and
material prices are going up
Social
Increase in the female share of the market
demand for fitness
products Social
responsibility toward its
labor
PESTEL ANALYSIS
Technological
Design Ability
Speed of change of product
Specialist employees
Environmental
Re use a shoe
Climate impact
Sustainability philosophy
Legal
child labor issue
Unsafe working
conditionsLaws
protecting copying products
PESTEL ANALYSIS
Geography
Production in Asia, Latin America and
Africa
Assets located in many different countries
Monitor product quality
International
More demand on products
Support athletic women
Bigger share of the market globally
Porter’s 5 forces Potential Entrants (LOW)
Barriers to entry in the athletic footwear industry are high due to several factors: It is as very capital intensive industry Economies of scale The industry itself is in a consolidation phase and only the big
ones will survive.
Buyers (Very High) Customers more affected by price There has been and increase in women purchasing the
shoes The buyers for this industry are retailers and end users.
Porter’s 5 forces Substitutes (HIGH)
They are an attractive alternative product or service, which customers can easily shift to if there are low switching costs
The availability of substitutes invites customers to make price, quality and performance comparisons
Suppliers (LOW) The suppliers do not have the power to bargain the
price of their product, since there are numerous suppliers.
Using production facilities in the Far East has give Nike economies of scale.
Porter’s 5 forces
Competitive Rivalry(HIGH)Reebok, offering more choice of shoeAcquisition between Adidas and Rebook
COMPANY STRUCTURE• Philip H. Knight
• (Chairman of the Board of Directors(
• Mark G. Parker• (President and Chief Executive Officer(
• Charles D. Denson• (President of the NIKE Brand (
• Jeanne P. Jackson• (President, Direct to Consumer (
• David J. Ayre• (Vice President, Global Human (
COMPANY STRUCTURE
Nike’s mission statement is: Nike aims to lead in corporate citizenship through
proactive programs that reflect caring for the world family of Nike, our teammates, our consumers, and those who provide services to Nike
Its vision statement is:“To bring inspiration and innovation to every
athlete in the world”(If you have a body, you are an athlete)
PRODUCTSBaseball equipments Running shoe
AIR MAX T-shirts ,hoodies
PRODUCTS
Outfits Golf equipments
Tennis shoes and balls Footballs
COMPANY ANALYSIS (SWOT)
Strengths
• Nike is strong at research and development
• Offers their products worldwide• Nike is a globally recognized
• Nike has no factories• It has a strong sense of marketing
strategy• Strong financial position
Weaknesses
• reported to have applied child labor in Pakistan
• Accusations of poor conditions in the work place.
• History of violations of over time laws
• Searching for cheap labor• income of the business is still
heavily dependent upon its share of the footwear
COMPANY ANALYSIS (SWOT)
Opportunities
• Product development that changes as the trends change.
• Diversification in products range• Expansion in the global markets
• Make efforts to reduce the pollution generated from the Nike manufacturing
factors.• Reduce prices in Asian and third world
countries • Expansion into sport sunglasses and
jewelry lines.
Threats
• currency value fluctuations that can lead to losses
• Competition is strong among athletic footwear
• Managing the financial conditions in the economy
• Maintaining the reputation of being eco-friendly.
Value chain analysis
COMPETITIVE ADVANTAGE
Technology in Products
Nike technology allows
consumers to connect their iPod
devices to sensors inside the
shoes to record time, distance,
pace, and calories burned. Manufacturing Skills
Due to cheap labor in foreign countries, Nike outsources virtually all production to other areas of the world.
COMPETITIVE ADVANTAGE
Strength of Patents
One of Nike’s most revolutionary technologies comes through its footwear cushioning. Competitors have tried to match rival Nike’s cushioning systems, but none have matched their success
Economies of Scale
Nike is the single largest producer of athletic footwear and apparel, allowing them large cost advantages over competition.
Current and future success
Nike challenges Tightening competition – growth of Adidas, New
Balance, Marketing expenditures are growing steadily. Losing market share in China Nike’s premium and high quality brand image
doesn’t sync with the expectations of the customer
Nike is heavily dependent on information technology systems across its supply chain
Current and future success
Nike success Nike shoes and other accessories have also become
the favorite fashion products for teenagers. Nike is known around the world for being one of the
iconic brands The Nike Air Max 2010 has been a great success for
Nike The Global 100 Most Sustainable Corporations in the
World one of the World’s Most Ethical Companies In 2009 NIKE, Inc. scored the highest in nonprofit
organization Climate Counts’ annual rankings.
Current and future success
Future Success Nike future performance is subject to the inherent
uncertainty presented by volatile macroeconomic conditions that may have an impact on Nike operations around the world.
The company will continue to implement its corporate projects and programmes to suit the demand and social needs of its worldwide customers.
will become more socially responsible in the eyes of average consumers, and so the availability of its brand products will further increase.
R&D
Nike has an underground research lab full of geniuses toiling to create the newest and most advanced designs and technology in the sneaker business
Research is primarily divided into three parts:
Biomechanics
How the body moves.
Physiology
How the body works, especially under stress.
Sensory/Perception
The evaluation of how a product works, feels, and wears; how a person feels when wearing the shoes.
R&D
The research and development (R&D) centre's role is to identify the
physiological needs of athletes
Nike spends a lot out of its revenue into R & D of new products and designs to
constantly stay ahead of the competition.
NIKE STRATEGIES
Segmentation Strategy:High, medium and low income levels that can
be clubbed with here lifestyles of high, medium and low end customers.
Target Market:The company has targeted the market of high-
end, high income level between the age of 16-55
NIKE STRATEGIES Marketing Strategy:
Nike focuses all of their attention on the Athlete, but delivers much more than shoes; they deliver all the surrounding products that the Athlete needs for experience. It is part and parcel of what makes Nike such a great consumer-focused brand.
Organizational Strategy:With over 35,000 employees worldwide, the company
was organized into departments by both geographic divisions and product categories, which created overlapping management responsibilities and a fluid leadership structure
NIKE STRATEGIES
Advertising strategy:
The company focuses its marketing on celebrity endorsement, i.e. athletes in basketball, golf, soccer, and tennis. Lately, Nike has also began to sponsor big sporting events so as to create huge awareness and brand following
FUTURE PLAN
Nike expects to Increase its future orders for delivery. Nike will continue to focus their resources on those
investments that drive sustainable and profitable growth. The Company announced plans to grow the NIKE Brand in
all six of its geographies the Company outlined plans to open approximately 250-
300 new NIKE-branded stores worldwide over the next five years
Increasing dividends within a target calendar year payout range of 25-35% of trailing four quarter earnings per share
Nike expected to have Return on Invested Capital of 25%
Our Recommendation
Improve its marketing plan including advertising. SIMPLFY ITS WEB SITE Focus on setting up a reliable Information
system Nike should focus more on its labor working
conditions and wages Increase its market share in the middle-east. Increase its acquisition due to increasing the
threat from adidas and rebook merger.
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