Intoduction

Nike’s foundation was on 1964 as managed Phil Knight and Bill Bowermann who are both the former track coach in the University of Oregon. The business is focus of the decrease of the transport cost because they believe that it can also gain higher margins with low labor cost. The company made it on top and recorded to have the best performance for the past 30 years due to the image of the organization’s holy superiority. Nevertheless, in 1997, declination of the company’s fortune had declined which performed a drop down of 40% to 47% in the same year and the profit also fell for 69% in the end year. Stable into negative is the result of the Standard and poor which shows that the plan had not worked. The primary reason of the declination of the company is the fact it is doing many limited editions and special runs so that they can maintain its image to be. These only show that they have brilliant marketing brand but their strategy remain to be unproven. There are also allegations on the foreign factories of the company for having the poor air quality. It has also been added on implementing child labor with minimum pay wage and lack of compensation and sick pay. In 1998, Knight came out to clean up the image of the company and says that they had walk on the fine line. This can start to improve the 350,000 workers’ conditions in the entire Asia. The plan is to restrict on working conditions which are not acceptable. Part of the plan also is the 40% wage increase and improves the quality of the air while increasing the minimum age of 18 years old.

Porter’s 5 forces

This model is used to identify the sources of competition, and how to gain advantage over them.

Potential Entrants

Other sportswear manufacturers expanding their portfolio

Cheap copies from the Far East

:: Buyers

The buyers of sports footwear have changed in the past decade. There has been and increase in women purchasing the shoes, Generation Y has a different tastes and purchasing methods.

:: Substitutes

When required for professional use there is no substitute goods, but as a fashion item there are many other goods that could be purchased.

:: Suppliers

Using production facilities in the Far East has give Nike economies of scale. Although there are now problems arising from these factories, they are switching to making there own goods, labour and political unrest causes delays in manufacturing and shipping of the goods,

:: Competitive Rivalry

Reebok, offering more choice of shoe, introducing endorsement by sports personalities, sponsoring sporting leagues

Adidas have recovered from the problems that plagued them, and have a good product mix, covering a wide range of sports.

Distribution and Retailers

Nike has a strong network of retailers in 200 coutries world wide through distributors, licensees and sudsiduaries. Within the USA there are 18000 stores that retail nike products. These are well established channels.

Nike made itself heavily dependant on one retailer Footlocker, representing 10% of their revenue. When Footlocker reduced their purchasing form Nike, it created a reduction in turnover in the short term. Organisations that are over dependant on one retailer are open to cash flow problems, if the retailer switches suppliers, reduces purchasing or ceases trading (Johnson, G & Scholes J 2004).

Past options: Although they have numerous retailers, they were heavily dependant on one out let chain

Rationale: To sell top of the range products

Future Options: To negotiate partnerships deals that allow for the choice of product for the retailer

Rationale: To prevent sudden withdrawal of products

Critical Success Factor: Customer being able to rely on source of product. If withdrawn they may find an alternative product

Change of Focus: Closer working partnerships

Theorist: Organisations that are over dependant on one retailer are open to cash flow problems, if the retailer switches suppliers, reduces purchasing or ceases trading. Johnson, G & Scholes J 2004

Nike has a “futures”, but can also ship overnight when needed. Although the “futures” method is currently working for Nike,

Past options: Futures ordering system

Rationale: A 6 month lead time for product orders, always knowing what is needed in production

Future Options:

Rationale:

Critical Success Factor: This is responsive to the market trends, but can also help retailers plan stock.

Change of Focus:

Theorist: Any change or threats within the markets could leave them overstocked (Groucutt, J. et al 2004)

Sales

In addition, consumer sales outside of the United States exceeded sales in the United States in 2003 with only 43% of the company's sales coming from the US In Europe there are difficulties in entering the market, the single currency and the trade rules make entry difficult for large organisations.

Past options: Target the US

Rationale: Growing market, but is now reaching saturation

Future Options: Target new markets, including e-commerce

Rationale: To avoid a reduction in sales

Critical Success Factor: Entry to the markets, by advertising and targeting the audience. Ensuring accurate and quick picking of the customers order

Change of Focus: Shift to global marketing, selling world wide from the web targeting Generation Y.

Theorist: By tailoring marketing to the customer needs Nike has been successful in the past and continues to be today (Johnson, G & Scholes J 2004)

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