Nike Competitive Advantage

* 1. MGMT65000 Strategic Management spring 2011 Test 1 By Divya Mishra School of Management Purdue University Calumet Submitted to Dr. Arifin Angriawan1Page * 2. Company profile & backgroundNIKE, Inc. is diligent in the design, development and worldwide marketing of footwear,apparel, equipment and accessory ingatherings. . It sells its products to around 18,000 retail accountsin the unite States and through a mix of independent distributors, licensees and subsidiaries innearly 200 countries. NIKE is the largest seller of athletic footwear and athletic apparel in the world. The Company creates designs for men, women and children.The top selling product categoryincludes running, basketball, childrens, cross-training and womens shoes. It also designs shoesfor outdoor activities like tennis, golf, soccer, baseball, football, bicycling, volleyball, wrestling,cheerleading, aquatic activities, hiking and other athletic and amateur mappings. Index membership Sector Industry EmployeesS &P 500 Consumer Cyclical Footwear 23,300ProductsNIKE sells sports attire and accessories relevant to each sport mentioned above as intumesce as othersports-inspired lifestyle apparel, like bags, socks, sport balls, eyewear, protective equipment,basic sport equipment, etc.In addition to NIKEs footwear, apparel, and accessories businesses, the Company sells productsunder other brand names in particular markets. NIKE wholly-owns quintet footwear and apparelcompanies that specialize in different sports Cole Haan, Converse Inc. , Hurley InternationalLLC, Umbro Ltd. , and NIKE Golf. These subsidiaries combined together account for 13% oftotal revenue enhancements, $2. 5 billion, in fiscal 2009. Manufacturing Footwear & ApparelAll of NIKEs footwear is manufactured outside the United States in the factories of China,Vietnam, Indonesia, and Thailand and account for 98 percent of total NIKE brand footwear in2009.The main(prenominal) raw materials used in NIKE footwear are rubber, plastic compounds, and foamcushioning materials, nylon, leather, canvas, and polyurethane films used for cushioningcomponents. NIKE brand apparel is also manufactured almost entirely outside of the United States, in 34different countries. The main materials used in NIKE apparel are natural and synthetic fabricsand threads, plastic and metal hardware, and water and heat resistant fabrics. Marketing and AdvertisingNIKE places a significant cant on marketing the company and its products.NIKE aggressivelybonds the contracts with highly successful and influential athletes, coaches, teams, and leagueslike Michael Jordan, Serena Williams, and Tiger Woods to popularize its footwear, apparel andsports accessories. In order to sustain its dominance in the industry and stay competitive stay, NIKE activelyresponds to trends and changes in consumer preferences by adjusting the mix of existing productofferings, developing new products, styles and categories, and influencing sports and fitnesspreferences through aggressive marketing.Its primary areas of marketing remain network TV andmagazines. 2Page * 3. CompetitorsThe rivalry in the sports wear industry is very high. NIKE competes with numerous athletic andleisure shoe companies worldwide. It faces fierce disputation in product offerings, technologies,marketing expenditures, pricing, costs of production, and customer services. The maincompetitors are Adidas, Reebok, Timberland, Woodland, and Puma.SWOT Analysis for NIKE Strengths Weaknesses Brand recognition Overseas manufacturing High product quality dependency Effective marketing Decreasing United States strategy market share Capacity of innovation High product price Strong distribution chain compared to Adidas Strong R&D coin exposure Strong customer Medium retail presence relationship/satisfaction SWOT Analysis Opportunities Threats Expansion into emerging Fierce industry competition markets Revenue relies on Increased demand in product consumers discretionary innovation in come Growing segment of women Economic rescission athletes Fluctuation in the notes Increase in the number of sports events like Olympic, FIFA3Page * 4.NIKE Innovations NIKE with Apple The NIKE+ package consists of a pair of specially designed NIKE+ running shoes, an iPod nano, and a NIKE + iPod sport fit. The kit consists of a sensor that fits into a built-in pocket beneath the insole of the left shoe and a receiver that fits into the iPod nano dock connector. As a person runs, iPod tells the distance, pace, and calories burned via voice feedback that adjusts music volume as it plays. (Google image) institution your own shoes NIKE allows customers to design their own shoes from a catalogue of predefined designs. Customers can claim their own colors and mascots to create shoes which define their personality.It provides Touch screen technology in store allowing customers to design shoes of choice. (Google image) Nike self lacing semiautomatic shoes NIKE is also coming up with t he new automatic self lacing sneakers. The automatic lacing system provides a set of straps that can be automatically opened and closed to switch between a loosened and tightened position. 4Page * 5. Critical data of Nike Annual Report$ Millions 2010Net Income 1,906. 7Current Liability 3,364. 2Total Assets 14419. 3Tax valuate 24. 2%Interest Rate 6. 35%Long-Term Debt 445. 8Return on Equity 19. 54%Total Equity 9753. 7Weighted Average Cost of working capital 8. 9%Capital Employed 11055. 1Interest Expense 6. EBIT 2516. 9NOPAT 1907. 81Return On Capital Employed 20. 7%Economic Value Added 1267. 25Cash Flow From Operations* 3164. 2Capital expenditure* 335. 1Free Cash Flow 2045. 31Five year Nike note performance vs. S&P500* (Fiscal year 2006-2010) 2% Nike S&P500 90%5Page * 6. 2010Nike revenue growth 2006-2010 Nike Revenue 25000 20000 Revenue 15000 10000 5000 0 2006 2007 2008 2009 2010 YearNike revenue generation by product 2010 Revenue Generation by Product 6% 34% Footwear 60% Apparel Equ ipment6Page * 7. 1. Please use Figure 2. 3 page 53 (Grants textbook, 7th edition) as your overall guide to draw a balanced scorecard for the firm.Please draw a balanced scorecard for the firm that you choose. Identify all four perspectives, each perspectives objectives and their relationships. See example in the appendix. Feel free to turn it. On the other pages please elaborate on the four perspectives and their elements. For the financial performance perspective, at least you need to discuss ROCE, EVA, and FCF. Conclude what the numbers remember to you as a manager (e. g. Good, bad, or neutral and why). Why do firms need to prepare a balanced scorecard? (20 points) Balance Scorecard for NIKE 2010FINANCIAL trustyNEUTRAL ROCE 17. 8% Neutral EVA 1267. 25 millions Good FCF 2045. 1 millions Good ROE 19. 54% Good Profit Margin 10. 03% Good NIKE growth 7% vs. industry growth Good 4. 5% Bad High advertising cost Good Better COGS% than competitorsCUSTOMER GOOD-NEUTRAL Custom er Satisfaction Good Customer obedience Good Customer retention ratio Good Market Share Good Competitive Price Bad Number of Customers Good Good Design own shoes optionINTERNAL GOOD Marketing Innovative Products Good Celebrity endorsement Good Diversity of online product Good R&D interconnected researches Good Product technology Good High quality product design Good Good supplier relation Good IT for inventory bind Good7Page