Report Nike
Report Nike
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The story of Nike begins with the story of Blue Ribbon Sports back in 1964.
Around that time, Phil Knight - founder of Nike, had just gone through
University of Oregon followed by a stint at Stanford for his MBA, leaving
him with two crucial experiences that set the trajectory of his future. At
University of Oregon, he ran for the school's track and field team, putting
him into contact with their coach, Bill Bowerman - co-founder of Nike.
Aside from an intensely competitive ethos, Bowerman displayed a
fascination with optimizing his runners' shoes, constantly tinkering with
different models after learning from a local cobbler.
According to Nike, Knight was the first student to try one of Bowerman's
shoes. Seeing him as a safely-unimportant runner to test his shoes on,
Bowerman offered to take one of his shoes and fix them up with his custom
design. Knight accepted the offer, and, supposedly, the shoes worked so well
that his teammate Otis Davis took them and ended up using them to win
gold in the 400-meter dash in the 1960 Olympics. Otis Davis insists to this
day that Bowerman made the shoes for him.
Coach Bowerman, who long believed that German shoes, though the best on
the market, weren't anything too special to be replicated or even improved
on, supported Knight's venture, entering into a 50-50 business deal for
ownership of their new company, Blue Ribbon Sports, established in
Eugene, Oregon, on Jan. 25, 1964.
2. History of Nike
After founding Blue Ribbon Sports, Knight tested the waters for his
imported shoes, initially selling them out of his car when he came back to
the States.
This design would turn out to be both a major success and source of conflict
between Blue Ribbon and its Japanese supplier. Dubbed the Tiger Cortez,
the shoe dropped in 1967 and became an instant hit for its comfortable,
sturdy, and stylish design. Around the time of its success, though, relations
soured between Blue Ribbon and Tiger. Knight claims that the Japanese
company was seeking a way out of its exclusivity deal with Blue Ribbon
and sought to sink the company. Tiger claims to have discovered Blue
Ribbon Sports selling their own version of the Tiger Cortez under a new line
of shoes they called "Nike."
The new brand needed its own logo. They reached out to a design student at
the nearby Portland State University, Carolyn Davis, to provide sketches.
Phil Knight reluctantly settled on a swoosh design, reportedly saying, "Well,
I don't love it, but maybe it will grow on me." Davis charged $2/hour and
received a total of $35 for the logo. In 1983 Phil Knight, apparently having
come around to the logo, held a party for Davidson and awarded her 500
shares of stock, speculated to be worth roughly $1 million today.
● Logo’s history
● Nike’s timeline
– 1964 : Nike was established on 25th January 1964 , called “Blue Ribbon
Sports”
– 1966 : BRS opens its first retail store at 3107 Pico Avenue in Santa
Monica .
– 1971 : Has been renamed Nike and will carry the new Swoosh logo
designed by Carolyn Davidson
– 1977 : Nike has its first advertising brand, which is “No finish line”
– 1980 : Nike captured 50% of the US athletic shoe market, and the
company went public in December of that year
– 1990 : Nike moved to its eight-building World Headquarters campus in
Beaverton, Oregon. Nike's first retail store, named Niketown, opened in
downtown Portland in November of that year
– 2013 : Nike became a member of the Dow Jones Industrial Average
– 2019 : The company has stopped selling directly through Amazon,
focusing more on direct customer relationship
NIKE, Inc. designs, develops, markets and sells high quality footwear,
apparel, and equipment, accessories and services. Its athletic footwear
products are designed primarily for specific athletic use, although a large
percentage of the products are worn for casual or leisure purposes. It focuses
on NIKE Brand and Brand Jordan product offerings in seven key categories:
running, basketball, football, men’s training, women’s training, NIKE
sportswear, and action sports. It also markets products designed for kids, as
well as for other athletic and recreational uses such as baseball, cricket, golf,
lacrosse, outdoor activities, football, tennis, volleyball, walking, and
wrestling.
The company sells a line of performance equipment under the NIKE Brand
name, including bags, socks, sport balls, eyewear, timepieces, digital
devices, bats, gloves, protective equipment, golf clubs, and other equipment
designed for sports activities. It also sells small amounts of various plastic
products to other manufacturers through its wholly-owned subsidiary, NIKE
IHM, Inc. Its reportable operating segments for the NIKE Brand are: North
America, Western Europe, Central & Eastern Europe, Greater China, Japan,
and Emerging Markets. The company wholly-owned subsidiaries include
Converse Inc., which designs, markets and distributes casual footwear,
apparel and accessories and Hurley International LLC, which designs,
markets and distributes action sports and youth lifestyle footwear, apparel
and accessories.
● Organizational chart
● Finance
On December 19, 2013, Nike's quarterly profit rose due to a 13 percent
increase in global orders for merchandise since April of that year. Future
orders of shoes or clothes for delivery between December and April, rose to
$10.4 billion. Nike shares (NKE) rose 0.6 percent to $78.75 in extended
trading.
In November 2015, Nike announced it would initiate a $12 billion share
buyback, as well as a two-for-one stock split, with shares to begin trading at
the decreased price on December 24. The split will be the seventh in
company history.
In June 2018, Nike announced it would initiate a $15 billion share buyback
over four years, to begin in 2019 upon completion of the previous buyback
program.
For the fiscal year 2018, Nike reported earnings of US$1.933 billion, with
annual revenue of US$36.397 billion, an increase of 6.0% over the previous
fiscal cycle. Nike's shares traded at over $72 per share, and its market
capitalization was valued at over US$114.5 billion in October 2018.
In March 2020, Nike reported a 5% drop in Chinese sales associated with
stores' closure due to the COVID-19 outbreak. It was the first decrease in six
years. At the same time, the company's online sales grew by 36% during Q1
of 2020. Also, the sales of personal training apps grew by 80% in China.
● Vision/Mission/Objectives
● Products
Nike makes all kinds of products including gym shoes, clothing and apparel,
equipment and accessories. “In 2004, Nike products were manufactured by
more than 800 suppliers, employing over 600,000 workers in 51 countries”
(Locke, Kochan, Romis & Qin, 2007, p. 6)
● 4Ps Strategy
1. Price :
– Definition : In a value-based pricing strategy, Nike considers consumers'
perceptions of a product's value, and this value is used to determine the
maximum price a consumer is willing to pay for that product. Nike's 4P
marketing strategy is successfully used against pricing strategy to maximize
profit and emphasize high value in promoting and presenting products.
– Evidence :
● In Vietnam, a pair of genuine Nike shoes will cost from 1.5 to 2 million
VND. The product lines with low prices are usually walking shoes, gym
shoes, in the higher segment there are football and tennis shoes.
● And the basketball shoe product line always has a high price because it is
not only what makes Nike's brand but the materials, technology, and design
are all completed to the highest level.
2. Place
– Definition : The third P is the Place . This is a method to help the brand
distribute to retail agents nationwide through main systems and different
distribution channels .
– Apply : Previously, Nike also distribute its products through retail
partner . However , Nike is gradually eliminating those partners to focus on
selling at its website and genuine stores. The most notable incident is that
Nike has terminated its sales contract on Amazon since 2019.
3. Products
– Definition : The first P in the 4Ps Marketing Strategy is Product . Products
are the first foundation in the marketing strategy of all business activities,
the core point in meeting the needs and desires of consumers.If the product
is not good, all efforts of the business will fail.Products in Marketing are
tangible objects (such as machinery and equipment manufacturing) or
intangible services (such as hotels, tourism, telecommunications services).
– Apply : For Nike, this is considered a sportswear company that always
strives to innovate and improve technology to create, find new materials and
designs to "please" consumers.Nike's main products are divided into 3
categories:
● Shoes
● Fashion (including apparel, jewelry and accessories)
● Sports Equipment and Supplies
4. Promotion :
– Definition : And of course, the last P is what shoppers love the most -
Promotion , the publicization of a product, organization, or venture so as to
increase sales or public awareness .
– Apply :
+ Nike implements promotional tactics to communicate to the target
audience about the product, and then convince customers to buy.
+ Nike stands out with promotional communication strategies such as
emotional marketing strategy, using celebrity images, promoting diversity
on social networks, and inspirational ads.
+ Advertising is always the part that Nike invests the most. The company
sponsors many top athletes, clubs and high school, university and local clubs
to create a wide coverage.
+ NIKE's TVCs all touch on the emotions of customers, with words of
encouragement for everyone to move forward and not try, overcome
adversity to reach success.
– Evidence :
+ With the use of celebrities, Nike always works with the best athletes in
the sport they represent, for example: Cristiano Ronaldo (soccer), LeBron
James (basketball), Rafael Nadal (pants) racket) or famous football clubs
such as Barcelona (Spain), Chelsea (England), Paris Saint-Germain
(France).
+ Nike tested it successfully and now the business has become one of the
largest social networking businesses in the world, surpassing Google,
Instagram or Pinterest. Nike has 35 million Facebook likes, 8.9 million
Twitter followers, and over 191 million Instagram followers
● Advertising
In 1982, Nike aired its first three national television ads, created by newly
formed ad agency Wieden+Kennedy (W+K), during the broadcast of the
New York Marathon. The Cannes Advertising Festival has named Nike its
Advertiser of the Year in 1994 and 2003, making it the first company to
receive that honor twice.
Nike also has earned the Emmy Award for best commercial in 2000 and
2002. The first was for "The Morning After," a satirical look at what a
runner might face on the morning of January 1, 2000, if every dire
prediction about the Y2K problem came to fruition. The second was for a
2002 spot called "Move," which featured a series of famous and everyday
athletes in a variety of athletic pursuits.
1. Human rights
Although earning $800 million annually and lavishing millions on
star athletes to endorse their products, many unsafe conditions were
found at one of the shoes manufacturer’s plants in Vietnam. In 1997,
Ernst & Young attacked Nike over low pay, long hours and damaging
air quality in factories. The Ernst & Young report painted a dismal
picture of thousands of young women, most under age 25, laboring 10
1/2 hours a day, six days a week, in excessive heat and noise and in
foul air, for slightly more than $10 a week. Therefore, Nike had to
take numerous steps to improve working conditions. After 10 months,
it was reported to be ''clean, organized, adequately ventilated and well
lit''.
On the other hand, as one of the world’s largest athletic brands, Nike
faces great criticism in regards to their use of labor sweatshops in Asia.
It was found that up to 50% of the factories limited their employees’
bathroom and water usage. Employees were forced to work over sixty
hours each week and were punished if they refused to work overtime. In
these sweatshops, women are much underpaid, hardly enough to cover
their basic living. Workers have claimed to be both verbally and
physically abused by their employers. Being such a popular and well
known brand, Nike has an image to uphold. Though Nike claims to put
effort into resolving these issues of abuse among their factories, some
are skeptical as to how dedicated Nike really is to put an end to the
horrendous working conditions of their Asian factories.
3. Environment
Nike received Ethical Consumer’s worst rating for its cotton sourcing
policy, because it lacks a clear approach to use of pesticides and
herbicides. Cotton accounts for 12.34% of all insecticide sales and
3.94% of herbicide sales, even though cotton covers only 2.78% of
global arable land. Nike used some organic cotton and Better Cotton
Initiative (BCI) certified cotton, but this wasn’t 100%. Companies
that have the environment in mind should have a clear statement
committing to the use of 100% sustainable cotton.
Nike also uses leather as a substantial part of its business. The leather
industry uses a cocktail of harmful chemicals to preserve leather.
Tannery effluent also contains large amounts of other pollutants
which can pollute the land, air and water supply, making it a highly
polluting industry. Nike made reference to using Leather Working
Group (LWG) certified leather in its Impact Report 2019, but no clear
information was provided about what percentage was certified 100%
LWG gold standard. LWG Gold is the only standard Ethical
Consumer considers positive.
4. Animal rights
Nike claims that the new material has the potential to revolutionize
the industry as its Nike Flyknit did when it was launched in 2012, as it
sees Nike using discarded leather scraps from the floor of tanneries
and using them together with synthetic fiber to create a new material.
Up to 30 percent of a cow’s hide is discarded during a typical leather
manufacturing process according to Nike, but its new innovative
material takes waste scraps to create something new.
The sportswear giant argues that Flyleather uses 90 percent less water
and has a 80 percent lower carbon footprint than traditional leather
manufacturing, which has the second-highest environmental impact
on Nike’s carbon emissions and water usage. One pair of Nike
Flyleather shoes is said to have half the carbon footprint as a pair of
shoes made from traditional leather and as the material is produced on
a roll it creates less waste than traditional leather.
However because the new material also consists of a blend of natural
and synthetic fibers, it makes it more difficult to recycle the fibers
used to make Flyleather once more, raising questions concerning the
sustainable nature of the material.
5. Sweatshops
6. Social Controversy
IV. Evaluation
It is observed that Nike Inc. is one of the world’s leading sports goods
brands that operate in different parts of the world. For this reason, it is quite
important from the perspective of Nike Inc. to assess and select a market
where they can easily run their business operations and compete with their
competitors viably (Malhotra, et al2009). Furthermore, the selection of the
market is very important to the success of any organization. That is why the
top officials of Nike Inc. are quite keen to consider all possible factors
through which they can get maximum benefit. The research carried out by
administering questionnaires to Nike stakeholders revealed one thing,
“Importance of positive publicity.” Putting itself in a unique position to
capitalize on opportunities has been crucial to Nike, Inc. Extensive
advertising, improved brand recognition, a broader range of products, and a
dogged determination to better compete with rivals have all contributed to
this result. Nike employs various business strategies, including strategic
management models, product differentiation, and well-established
distribution channels. The Swoosh logo and the slogan “Just Do it” have
become synonymous with the high quality of Nike’s products in the minds
of many. Ingenious advertising and top-notch goods are what keep
customers coming back for more. Everything that Nike does is meant to
protect its reputation in the industry. Many secrets and red flags hidden by
the company are meant to keep its clean image before the public and its
customers.
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