In 1964, Phil Knight and Bill Bowerman initially founded Nike Inc. as Blue Ribbon Sport. Over the years, Nike has developed into the world’s leading producer and supplier of athletic shoes and apparel (Nike Inc., 2010). The headquarters are based Beaverton, Oregon, and as of May 2011, the corporation operated in 46 countries across the globe. The growth can be evidenced in Nike’s collection of subsidiaries that comprises 156 businesses and brands such as Converse, Cole Haan, Umbro, NikeGolf and Hurley. The company has 254 shops in the US and more than 700 across the world (Nike Inc., 2010). Currently, Nike is trading for $82.04 on the New York Stock Exchange. In the last fiscal year, the company posted revenue of US$25.3 billion (Nike Inc., 2014).
The corporation focuses on three main strategic business units (SBU): apparel, equipment, and footwear. The latter category is the strongest of the three SBUs, and the company holds the largest share of the footwear market (35%), leading by 11% (Nike Inc., 2014). The apparel category is struggling amid fierce competition from other companies such as Puma and Adidas. It holds only 7% of the market (Nike Inc., 2014). The equipment category holds the least percentage considering the high competition in the market and recent venture into the market compared to the other categories that have been established for several years.
According to the current fiscal year’s quarter results, the company’s revenues have increased by18percentage while earnings per shares and inventories grew by 19% and 41%, respectively (Nike Inc., 2010). The tremendous growth is a result of increased demand for the Nike brand in today’s global market; therefore, its operations are influenced by various global factors that determine it strategic plans. In efforts to curb the competition from Puma and Adidas, Nike has focused on growing it apparel market. Considering that the competitors hold large shares of the market, Nike is embracing new technology in producing higher quality products, as well as developing a stronger sense of social and environmental responsibility.
The corporation’s competitive edge is in its ability to produce quality products at affordable prices. Nike has created a strong brand. The principle behind its foundation was making shoes for everybody, not only athletes. Its “swoosh” logo coupled with the slogan “Just Do It” makes Nike emerge as a “Can Do” company. It is a globally recognized brand that consumers, especially, the youth find easy to recall. More so, the Nike brand matches its high quality, resilience, durability, as well as fitness, thus making it the brand of choice for most consumers. In addition, Nike has outsourced its production to overseas facilities thereby cutting the cost of production and focusing on activities that add more value to the production, for instance, design, research as well as product development (Nike Inc., 2014).
Considering Nike’s business cycle, it is in the maturity stage. Therefore, it is focusing on long-term goals such as increasing stock value and maintaining its market share rather than short-term goals such as development of infrastructure and brand establishment. In the last 50years, it has set standards for the sporting industry, and the strategic goals aim at further dominance of the industry and diversifying the subsidiaries portfolio. These activities also aim at preventing competitors from getting Nikes market share. The company’s maturity in the industry has allowed product diversification as in the case of Cole Haan that introduced Nike into the luxury footwear market (Nike Inc., 2014). It is vital for Nike to embrace strategies that can facilitate it to adapt to the fast changing trends; otherwise, the company may risk falling into the decline phase of the business cycle.
According to the Chief Financial Officer, Don Blair, the company’s long-term strategy is designed to ensure strong delivery through bad and good market environments (Nike Inc., 2010). As a result, Nike can focus on achieving sustainable, powerful cash generation, profitable growth, as well as maintaining strong balance sheets. These factors create tremendous flexibility for Nike to invest in the industry and increase shareholder value. In addition, the company has adapted the environmental, social and financial requirements for adjusting to a sustainable economy that significantly determines how business models will evolve in the next decade (Nike Inc., 2010).
Although competition and other challenges make it hard to adapt to a sustainable economy, its importance is underlined by the looming post-globalization era, which will be characterized by overwhelming economic pressure resulting from consumer behavior, regulations, scarcity, and innovation (Morden, 2007). The future will require closed-loop business models working towards achieving zero waste through recycling or composting all materials. Nike has taken the initiative to realize a closed-loop business model through designing products that can be manufactured using materials recovered throughout the manufacturing process and at the end of a product’s life. Certainly, fully achieving this vision requires the company to seek new answers to production challenges by inventing novel ways to reuse as well as recycle waste material into new quality products (Morden, 2007). Designers must find new viable raw materials and leaders must evaluate the impact on supply chains as well as labor forces.
Morden, T. (2007). Principles of strategic management (1st ed.). Aldershot, England: Ashgate.
Nike Inc.,. (2010). NIKE, Inc. Introduces 2015 Global Growth Strategy. NIKE, Inc.. Retrieved 5 September 2014, from http://nikeinc.com/news/nike-inc-introduces-2015-global-growth-strategy
Nike Inc.,. (2014). 3.1.4 Our Strategy: Evolving Approach – NIKE, Inc.. Nikebiz.com. Retrieved 5 September 2014, from http://www.nikebiz.com/crreport/content/workers-and-factories/3-1-4-our-strategy-evolving-approach.php?cat=overview