Case Study on Nike, Inc

Case Study on Nike, Inc.

Case Study on Nike, Inc.

By:Paresh SidhdhapuraDigesh ShahChandrajit KhaniyaKartik PatelTejas SachalaJignesh Gamit

Facts of Nike• Nike, Inc. is a major publicly traded sportswear and

equipment supplier based in the United States.

• It is the world's leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment with revenue in excess of $18.6 billion USD in its fiscal year 2008 (ending May 31, 2008).

• The company was founded on January 25, 1964 as Blue Ribbon Sports by Bill Bowerman and Philip Knight, and officially became Nike, Inc. in 1978.

Cont…d• Nike markets its products under its own brand as well as

Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Skateboarding and subsidiaries including Cole Haan, Hurley International, Umbro and Converse.

• In addition to manufacturing sportswear and equipment, the company operates retail stores under the Niketown name.

• Nike sponsors many high profile athletes and sports teams around the world, with the highly recognized trademarks of "Just do it" and the Swoosh logo.

The Tumultuous years• In 1983,Inventory of 22 million

pairs of unsold shoes.• In 1984, Earnings dropped by 29

percent.• Falling shoe orders by 30 percent.• High Competition from Reebok.

Reasons for Tumult:• Reebok International Limited, a

subsidiary of German sportswear giant Adidas, is a producer of athletic footwear, apparel, and accessories.

• Reebok’s focus on Aerobic Shoes, which took the sales from $1.5million to over $600 million.

• Reebok’s USP was to make their appearance as fashion accessories.

Cont……………• U.S. sales jumped upward by 450% between

1983 and 1985, Nike didn’t enter the market till 1985.

• Nike’s problem was that the company had never outgrown its athletic youth or learned to keep its winning streak in perspective.

• Hired managers who had more experience on running tracks rather than sitting behind the desk.

Cont………• Failure to recognize aerobics

boom. Women -A major customer.• Ignorance of market trends.• Not satisfying customer needs.• Endorsement contracts effective. • Limited resources and unlimited

confidence.• Persuasion of top athletes.

Running to keep up• In 1985, reducing the inventories by significantly

discounting.• Lay off about 400 employees which is one-tenth

of his work force.• Knight’s more emphasis on performance rather

than styling.• Nike now also focus on a person who uses it for

his day-to-day activity and is more invoked to carry on exercise viz. walking, jogging, cycling etc.

Cont………..• In 1985, Nike unveiled its own version of the aerobics

shoes, a $40 leather shoe designed to be used also for bicycling.

• Nike sponsored Michael Jordan, the NBA star and promoted Air Jordan Basketball shoe, for which Nike paid a sum of $ 2.5 million for 5 years.

• In 1984, Nike’s basketball line showed a 49% increase in sales.

• Accounting for 39% of all Nike’s 1985, domestic footwear sales.

• In 1984, Reebok fell far behind Nike, with domestic sales of less than $300 million.

Cont…………..• In a US athletic shoe market now

totally nearly $2.73 billion, Nike’s sales figure of $620 millions was far behind Reebok’s astounding $850 million.

Positioning strategies :• Nike is positioned as a premium-brand, selling

well-designed and expensive products.

• Nike lures customers with a marketing strategy centering around a brand image which is attained by distinctive logo and the advertising slogan: "Just do it".

• Nike promotes its products by sponsorship agreements with celebrity athletes, professional teams and college athletic teams.

Cont…………….• Nike tried to make walkers more aware of the EXW

by sponsoring a series of walking races in California.• The EXW was expected to earn Nike big profits over

the long haul, but initial sales were nothing to get excited about.

• The company now attempted to lure new customers by focusing its design efforts to appeal to increasingly narrow, but varied, market segments viz. “Wimbledon” tennis shoe, “Classic” Golf shoe, etc.

Cont……………• Lesson learned: We have to

become more of a marketing company & we have to be there when the trends start.

StrengthsSponsoring of sports athletes and gain of valuable coverage.Development of high quality products at reasonable price.Re-location of products.Brand LoyaltyHigh prestige i.e. Famous

WeaknessPressured to charge low prices.Due to diversified products, values fall as market shares fall.

Strengths and Weakness

Opportunities Has established global brand recognition due to sporting events.Treated as a fashion brand by youths and thus stays in demand.Due to high quality products, it brings in more profit.

ThreatsFake products.New brands of the same quality with lower price margin leaving a competitive advantage.

Opportunities and Threats

Revolution• Reebok’s acquisition of Avira, buy

out of Rockport• Access to Avira technology & own

proven flair for fashion.• In 1987 Nike unveiled new two

new line of shoes, The cross training & Air lines, that can be used for all activities.

• The Air line – fifty models, price $45 to $110

Air• With Air, Nike sought to overcome

a variety of obstacles. It hoped that the cushion system could attract many people fearful about the effects of strenuous exercise on their joints.

• Its ads appeared in women’s magazines, sports magazine, TV ads,

• Styling, Hightech, attention to color combination & ornamentation.

The cross training line• The cross training line, which also

featured the air cushioning system.

• Appeal to people who were concerned about fitness but weren’t too involved in any one sports.

Results• During 1988 Nike began to gain rapidly

on Reebok. Nike bought the Cole Haan shoe company, which made casual & dress shoes.

• Nike launched a new $20 million campaign starring the highly visible young baseball & football player BO Jackson & the tag line “Just Do It”

• Company’s market share increase.• Analyst s predicted that Nike would finish

the year with higher sales than Reebok.

JUST

ITDO

• Questions?

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