Nike, origially known as Blue Ribbon Sports, was founded by University of Oregon track athlete Philip Knight and his coach Bill Bowerman in January 1964. The company initially operatedas a distributor for Japanese shoe maker Onitsuka Tiger, making most sales at track meets out of Knight's automobile.The company's profits grew quickly, and in 1966, BRS opened its first retail store, located onPico Boulevard in Santa Monica, California. By 1971, the relationship between BRS and OnitsukaTiger was nearing an end. BRS prepared to launch its own line of footwear, which would bear thenewly designed Swoosh by Carolyn Davidson. The Swoosh was first used by Nike in June 1971, andwas registered with the U.S. Patent and Trademark Office on January 22, 1974.Today the OnitsukaTiger brand is owned by one of Nike's competitors, ASICS.The first shoe to carry this design that was sold to the public was a soccer shoe named"Nike,” which was released in the summer of 1971. In February 1972, BRS introduced its first line of Nike shoes, with the name Nike derived from the Greek goddess of victory. In 1978, BRS, Inc.officially renamed itself to Nike, Inc. Beginning with Ilie Nastase; the first professional athlete tosign with BRS/Nike, the sponsorship of athletes became a key marketing tool for the rapidly growingcompany.The company's first self-designed product was based on Bowerman's "waffle" design. After the University of Oregon resurfaced the track at Hayward Field, Bowerman began experimentingwith different potential outsoles that would grip the new urethane track more effectively. His effortswere rewarded one Sunday morning when he poured liquid urethane into his wife's waffle iron.Bowerman developed and refined the so-called 'waffle' sole which would evolve into the now-iconicWaffle Trainer in 1974.
By 1980, Nike had reached a 50% market share in the United States athletic shoe market, andthe company went public in December of that year. Its growth was due largely to 'word-of-foot'advertising (to quote a Nike print ad from the late 1970s), rather than television ads. Nike's firstnational television commercials ran in October 1982 during the broadcast of the New York Marathon. The ads were created by Portland-based advertising agency Wieden+Kennedy, which hadformed several months earlier in April 1982.Together, Nike and Wieden+Kennedy have created many indelible print and television adsand the agency continues to be Nike's primary today. It was agency co-founder Dan Wieden whocoined the now-famous slogan "Just Do It" for a 1988 Nike ad campaign, which was chosen by
as one of the top five ad slogans of the 20th century, and the campaign has beenenshrined in the Smithsonian Institution San Franciscan Walt Stack was featured in Nike's first "JustDo It" advertisement that debuted on July 1, 1988.The "Just Do It" trademark was filed by Nike, Inc.on October 3, 1989 with the description attributed to sports clothing, on which the mark was to beaffixed.Throughout the 1980s, Nike expanded its product line to include many other sports andregions throughout the world. Nike is a global sports shoe giant company. It is the largest seller of athletic footwear in theworld, holding the lion share of 33% of the global market. The company has production facilities inAsia, sales facilities in almost 200 countries, and customer service and other operational unitsworldwide
Challenges & Solutions
Challenges and Fixes
Nike has faced a number of challeges in its efforts to integrate sustainability within product design and innovate a redefined future but it has led to us iterating, innovating and finding new ways to operate more efficiently, effectively and creatively:
Uneven adoption of the Index and new vision.
Even though corporate leadership held all categories accountable for achieving Considered targets, there was considerable variation in how quickly different groups have integrated the Considered Index and how well they operationalized the tool. Some businesses have faced greater challenges. Some businesses had a more entrenched resistance. Since then, Nike has integrated sustainability principles into its innovation processes, governance and portfolios to generate innovation that delivers products and services that combine performance, innovation and sustainability. Additionally, Nike has set a vision for what changes are needed in innovation, with its people and culture and in the way it works in two areas– in product and in manufacturing – that build on past achievements and on processes established to drive change.
Perfromance risks in the adoption of new materials.
There were a number of performance and aesthetic risks that Nike footwear faced in using EPMs such as synthetic leather. There was a potential performance risk, for example, that using recycled content could degrade physical properties like material durability, threatening Nike’s strict quality standards. One of the product creation directors in footwear described that with some EPM synthetic leather alternatives, the options weren’t very attractive: “Leathers look boardy and dry, and the textiles aren’t very interesting.” Today, rising input costs mean the need for innovation and technology has never been greater. Through innovative design, science, technology and process changes, our long term vision is to progressively design out waste, eliminate hazardous chemicals and non-renewable energy consumption. Innovation also allows us to design in new materials and new approaches to products.
This vision has been built on years of assessing trends and materiality for Nike and the changes that are impacting our business, our value chain, our consumers and the world. In 2007, we undertook an assessment with SustainAbility some meta trends that have only become more relevant as we’ve shaped and defined our strategy. These meta trends highlight the areas of our value chain and our business that have the most potential for innovation. We use these filters in our work, our assessment of opportunity and the way we approach reporting.
In most cases, Considered made the design process more complex. While designers liked to iteratively find the right design, Considered required thinking about pattern efficiency much earlier in the process. It required more planning, often took longer, and it was often harder to find designs that both looked “cool” and were efficient. “On most product decisions, it’s not lower in cost, better in performance, and more sustainable,” explained one category product director. “If it was that easy, that’d be great! So usually on every component of a shoe, there are tough decisions to be made.” A designer within the Cleated category noted, “We try to make designs look cool first, then run it by other filters like cost and Considered. We design in response to a lot of constraints, like price and performance requirements, and goals like cool looks and feel. More constraints makes the process harder and, maybe, slower.” Different from then, sustainable innovation is now increasingly at the core of the business. To hedge against the complexity, we needed to focus on identifying disruptive solutions in order to manage environmental impact and business risk. So, what does this mean in terms of the sustainability of our products? The truth is, it’s a challenge to figure out how to measure that. Rather than working toward a certain percentage of, say, recycled content in a finished product, we have worked to improve our base materials, and we are now creating systems that allow us to better assess the impacts of the resulting products. That said, we do already have some ways to measure our success. For example, over the past five years we have achieved a 19 percent reduction in waste related to the production of footwear uppers. Considered Design contributed to that gain, along with manufacturing process optimization and other best practices. That’s the same as not producing 15 million pairs of shoe uppers over that time period. Our use of Environmentally Preferred Materials (EPMs) – ones that have lower environmental impacts throughout their lifecycles in terms of chemistry, water, energy use and waste – provides another strong indicator of our progress. We also learned that addressing symptoms doesn’t embed change so it focuses in on the earliest stages of the product life cycle.
Given the extremely fast pace of product development in response to consumer trends and ongoing organizational change efforts, product creation employees didn’t have a lot of time for implementing Considered. We now recognize that integration is an imperative to address process changes so we redefined reporting structures, design and sourcing processes and created materials to help us better achieve superior products with lower environmental impact.
The potential additional costs for developing greener Time
better achieve superior products with lower environmental impact.
Higher Costs footwear was another challenge facing Considered. Alongside the increasing cost of petroleum, adding EPMs made Considered design potentially even more expensive. Large product category teams had some success negotiating price reductions based on volume, but smaller categories struggled to overcome margin pressures. Because Nike is a growth copany, sustainability, today, becomes increasingly important to our growth strategy. As we have learned over the years, sustainability is not just a strategy for growth, but a competitive advantage.
Supply Chain Partners
Some contract manufacturers have been highly responsive to category requests for help implementing Considered, but others, either because of their size, prior capital investments in less-efficient machinery, management focus, or lack of technical capacity, were not able to nimbly and successfully execute the Considered design requirements.
Because we now know that early intervention is key, educating factories on why a stable, competitive, well compensated workforce makes good business sense. Nike focuses on training, incentivizing and holding contract manufacturers accountable to its Nike standards and continues to raise the bar with each iteration of the Indexes. Nike’s new rating system, the Manufacturing Index, looks comprehensively at a contract manufacturer’s total performance and includes a deeper look at how a factory approaches sustainability. This Index elevates labor and environmental performance alongside traditional supply chain measures of quality, cost and on-time delivery.
Considered faced several challenges with consumers. For one, many consumers were skeptical that a running shoe made from EPMs would in fact perform as well as a shoe that was not. For example, one focus group initially was very receptive to a Considered running shoe, but after being told it was unusually “green” started viewing it as a lower performance product. Today, Nike is meeting consumer demands through performance, innovation and sustainability which drive superior product. The Flyknit technology is a good example of where performance meets sustainability. Nike Flyknit, which uses precisely engineered yarn and fabric variations to create a featherweight, formfitting and virtually seamless upper. It’s a new way to knit the multiple pieces of a shoe upper out of what is essentially a single thread. It’s great for the athlete because it is lighter and offers a more custom fit. It’s good for the planet because it drastically reduces waste from the upper production process. And shareholders stand to benefit from the reduced cost of production and potential for increased margins over time as the the innovation grows to full scale. It’s a nascent technology that holds tremendous opportunity.
PESTLE Analysis of Nike
The focus should be on the macro environmental factors of Nike, as it is an international organization, so consists of political, economics, society, and technology.
It is the responsibility of government to create such economic policies, which will have a great effect on the growth of business. In this context, Nike, has been aided greatly by the US policies, hence providing them with the opportunity to modernize their products (Cooter, et. al., 1988). And this support by the US government and also low interest rates, the international competitiveness of the tax system and stable currency conditions, help a lot in the formation of the foundation, which might have been sensitive to the growth of the Nike.
Like for many other organizations as well companies, the biggest threat economically would be the economic recession. The recession always have adverse effects on the growth and advancement of Nike. As it is known that the US economy is facing a huge downturn, so in this context the purchase by the consumers are also decreasing down (Keller, 2002). Besides US, Asia’s economies downfall too has its effects on the Nike, as many of its products are being manufactures in the Asia as well. And consequently the voices of labor work and martial’s are also increasing rapidly.
Since people are getting health conscious day by day, so I order to remain fit, many of them join the fitness clubs. And joining fitness clubs mean more demand of the Nike products like shoes, etc. Nike has always been the first choice of people when it comes to buy something sport/fitness related. On the other hand Nike has failed to address the problems like that of the condition of labor and factory at different locations of the production in Asia (Clancy, et. al., 2000). This has its negative effects on the Nike ad its sale.
Nike very efficiently applies all the marketing and technology tactics. It, mainly applies, marketing information systems to the economics of innovation, differentiation, segmentation etc.
So, in short with all these, Nike has been able to maintain its name in the market and it’s positing as well and works effectively on its production and marketing to boost up its sale.
Being a multinational, Nike has always maintained the business ethics. It has always paid all due importance to remaining environment friendly. Legal issues have been handled by Nike as per the surrounding they have been operating in. Whenever any company enters a new country, it has to worry about the existing laws and practices. Same is true for Nike. Whenever Nike has entered a new region or country, the local trade and other laws have marked an impact over the way things are done at Nike. Nike however has always believed in staying away from problems. Every time they have entered a new country, they have done so after checking the local laws in detail. If in case the regional laws are totally against what Nike can offer, they have opted to stay out of trouble. For example, the government policies with regard to foreign investment and franchise business are different in the developed world and the under developed world. Nike has always paid attention to this issue. In case the government is too friendly or too strict with them, they have preferred to take one step at a time.
The study of environment not only includes our overall environment of the earth but also the micro and macro environment surrounding a business. Nike has proved itself responsible in all three cases. As far as the global environment is concerned, Nike is ISO certified from global environment, pollution and carbon foot prints tracing point of view. Nike is a strong believer of green environment and as per requirement they have brought changes in the way things work and the processes to ensure that environmental factor has been taken care of. The objectives behind them are fulfilling customer’s expectations, contributing in creating an environmental friendly atmosphere, motivational boost in employees and being on top of legislation. A positive attitude has been indicated in a study towards social and environmental responsibility on part of companies around the world. Nike has proved it time and again that it is a responsible organization.
Porter’s Five Forces of Competition Framework
According to Grant (2005), there are many features of an industry in which a company competes that determines the level of competition it will face and the profits it will get. The most famous classification was done by Michael Porter, known as Porters Five Forces framework which can help a company determine its potential profits by looking at five sources of competitive pressure. The five sources of competition are 1) competition from entrants 2) competition from substitutes 3) competition from established rivals 4) bargaining power of suppliers and 5) bargaining power of buyers.
Threat of entry/Barriers to entry
The threat of entry is highest in the apparel market due to the relatively lower costs of manufacturing apparel compared to the footwear market where the biggest threat posed is basically from current rivals already established in the market e.g Adidas and Puma, who although behind in market share, are currently implementing strategies that are helping them close the gap on Nike. Adidas has especially been gaining ground on Nike boosted by its strong presence in sponsoring the European soccer tournament where it sponsored eventual winners Spain (Torry 2012).
According to Marketing Weekly News (2012), Adidas is also planning on moving into the more fashion-aligned market of teenagers which could see it improve global market share. NEO, a fast fashion adidas sub-brand aimed at teenagers is Adidas’ attempts to enter new apparel segments that will even pit it against the likes of H&M and Zara in an effort to gain market share and squeeze more profits out of mature industries.
Another threat of entry is posed by Under Armour Inc. an established company in the athletic sportswear in the USA which in 2009 decided to enter the U.S athletic footwear market creating competition in a market which had been dominated by a few players like Nike and Adidas. Recently the US sports brand has started entering markets which have been traditionally fought over by Nike and Adidas. For example, Under Armour is using its sponsorship of Tottenham Hotspur in an "aggressive" digital marketing drive which it views as part of a wider strategy to steal market share from Nike and Adidas in the apparel category in Europe. This is the firms first foray into professional football, which have been areas where Nike and Adidas traditionally dominated and performed well in but are now having to brace for new competition from Under Armour (Sebastian 2012).
Threat of substitutes
Substitutes in the footwear category can include any other types of shoes that consumers can choose to serve similar purposes. Substitutes here therefore include the likes of sandals, which can act as substitutes, even though they may not fulfill exact same purpose. It is difficult to think of other substitutes that can fulfill the same purpose as athletic shoes from the footwear industry since this an industry that has something very specific to offer to a targeted market. This means that it is not meant to appeal to the general population and everybody. Thus consumers who are looking for shoes to run in will not look for boots as substitutes simply because boots are cheaper substitutes. This is due to the specialization of running shoes that makes substitutes hard to come by.
But while athletic footwear has little substitutes, sportswear apparel can have substitutes that include normal everyday clothing which can be used for athletic purposes if necessary. For example, some consumers may choose to wear tight fitting t shirts to exercise in instead of using Nikes sportswear, making normal clothing from high street brands substitutes.
Rivalry between firms (Industry structure)
Adidas: Although Adidas is currently not able to outcompete Nike in terms of sales and market share, it has been outperforming Nike and gaining market share since 2006 while Nike has been losing market share since 1998 when it still had more than 47 percent of the market, which has been cut back to 32 percent (MSN money 2011). Adidas is also still the second biggest competitor to Nike competing for market share and has plans in the pipeline that it is trying to implement in order to grow. One of them is heavy sponsorship of football tournaments all over the globe since football has the highest fan support with more than 2billion people who follow it, with Basketball behind it with 1.2 billion followers. One such plan has been paying off when Spain, the team it sponsored at the 2012 Euro championships, won the tournament in style (Torry 2012).
Puma: Puma is another rival to Nike that has been having a bad time with financial figures not going according to expectation. Although the firm has been sponsoring some very famous names (it sponsored the Italian football team who reached the final of Euro 2012), while Usain Bolt wore the firm’s kit when he competed in the 100m at the London 2012 Olympic Games, Puma has served up a profit warning. It said that net earnings for the first quarter of 2012 were expected to be 13 percent below the 115m Euros reported during the same period last year. Puma is also expect to take a EURO 100m restructuring charge showing that the firm is doing not as well as expected so Nike has little worry from this rival. According to the Financial Times (2012), the main problem with Puma does not lie on the sporting field but in the stands. Puma's recovery over the past decade was driven mainly by its popularity with fashion-conscious youngsters. So it is not helping Puma that many youth are unemployed in the Eurozone. Puma generates more than 45 per cent of sales from Europe, the Middle East and Africa, so the fall in spending power has been hurting it badly, as does rising competition in the sports lifestyle market. The company is also hurt by its dependence on shoes, which account for about half of sales.
Under Armour: As stated previously, Under Armour has been the one company that has gained the most from any slip ups from both Nike, Adidas and Puma as it has been going strong for the last few years.
The footwear market is one of those industry categories where the demand is always there. Retailers have to buy whatever the big brands like Nike make whether they like it or not therefore this also means that suppliers like Nike and Adidas have a lot of power compared to other industries. One of the biggest factors that contribute to this is the fact shoes such as Nikes are made very cheaply but sold at very expensive prices making them very desirable for retailers, which gives suppliers like Nike power. It is one of reasons why Nike has always been famous for sweatshop prices (Forbes 2012)
Power of Buyers
Highly Competitive market due to market saturation and slowdown in the sales industry worldwide, buyers more intellectual, have specific wants and needs and know where to get discounts and deals. As seen with the problems in the Eurozone experiencing high rates of unemployment as seen with the problems with Puma, many consumers have more discretion to choose what to buy and what not to buy as the world economies suffer.
Now that we have looked at Nike and the competitive pressures it faces in the industry as it tries to make profits and stay competitive, it is upto the company to find ways around some of these pressures, fully analysing what is driving the industry in general. Michael Porter did offer some suggestions to companies trying to sustain a competitive advantage with three strategies which were focus, cost leadership or differentiation (Grant 2005). So depending on which strategy Nike chooses, it could choose to innovate better shoes by investing in R&D, focus on marketing or simply reduce prices to become the lost cost leader in its industry like Walmart.
Nike Value Chain
Companies often use the term “value chain” to refer to the actors and stages needed to bring their product or service to market and ultimately to its end of life. At Nike we use this term too, though we also find the “chain” metaphor a bit linear and limiting for something that is actually interconnected in multiple ways, like an ecosystem or a web.
The connections in this chain drive our decision making. For example, the quality of our planning shapes the choices we make for manufacturing. Efficient manufacturers create little to no scrap and turn what remains back into material inputs for new products. Nearly 85 percent of our footwear manufacturing waste is now diverted from landfill or incineration through recycling and other efforts. Also, insights we gain in the use phase impact how we design our products. Our design decisions, in turn, determine whether a product can be recycled at the end of its life. Design choices can also eliminate the need for toxics in the manufacturing process, and our ability to get toxics out of products determines whether materials can be recycled in a closed loop. Working with the right manufacturers means better insight and control of quality and in performance for the environment and their workers. Choosing the right partners for moving our products around improves our ability to gather and track data on transportation emissions and to get products where they need to be at the right time. Each choice has financial, environmental and social impacts that are intertwined and mutually dependent.
These are just a few examples of the interconnections. We invite you to explore Nike’s value chain through the graphic below and online where you will find additional detail about impacts and relevant stories. This value chain outlines each phase, where the greatest impacts occur, and some of the key tools we are using to increase efficiencies, reduce impacts and improve working conditions throughout the system.
The marketing mix or the 4 Ps of Marketing are Product, Price, Place (distribution), andPromotion. Nike's 4Ps are the following:
Nike produces a wide range of sports equipment. Their first products were track runningshoes. They currently also make shoes, jerseys, shorts, baselayers etc. for a wide range of sportsincluding track & field, baseball, ice hockey, tennis, Association football, lacrosse, basketballand cricket. Nike Air Max is a line of shoes first released by Nike, Inc. in 1987. The most recentadditions to their line are the Nike 6.0, Nike NYX, and Nike SB shoes, designed for
skateboarding. Nike has recently introduced cricket shoes, called Air Zoom Yorker, designed to be 30% lighter than their competitors. In 2008, Nike introduced the Air Jordan XX3, a high performance basketball shoe designed with the environment in mind. Nike sells an assortment of products, including shoes and apparel for sports activities likeassociation football, basketball, running, combat sports, tennis, American football, athletics, golf and cross training for men, women, and children. Nike also sells shoes for outdoor activities suchas tennis, golf,skateboarding,association football, baseball, American football, cycling,volleyball, wrestling, cheerleading, aquatic activities, auto racing, and other athletic andrecreational uses. Nike is well known and popular in youth culture,chavculture and hip hopculture as they supply urban fashion clothing. Nike recently teamed up withApple Inc.to produce the Nike+ product which monitors a runner's performancevia a radio device in the shoewhich links to the iPod nano. While the product generates useful statistics, it has been criticized by researchers who were able to identify users' RFID devices from 60 feet (18 m) away usingsmall, concealable intelligence motes in a wireless sensor network.In 2004, they launched the SPARQ Training Program/Division.Some of Nike's newest shoes containFlywireand Lunarlite Foam. These are materialsused to reduce the weight of many types of shoes. They also sell small amounts of plastic products to other manufacturers through Nike IHM Inc.
Bauer Nike Hockey Inc. manufacturesand distribute ice skates, skate blades, in-roller skates, protective gear, hockey sticks and hockey jerseys and accessories.
The type of good that will be marketed is going to affect the price of a product.
Nike usesvertical integration in pricing wherein they own participants at differing channel levels or engage in more than one channel level operations. This is also an attempt to control costs andinfluence pricing practices.
Nike’s pricing is designed to be competitive to the other fashionshoe retailers. The pricing is based on the basis of premium segment as target customers. Nike as a brand commands high premiums. Nike’s pricing strategy makes use of vertical
integration in pricing wherein they own participants at differing channel levels or take part inmore than one channel level operations. This can control costs and influence product pricing.
Nike shoes are carried by multi-brand stores and the exclusive Nike stores across the globe. Nike sells its product to about 20,000 retail accounts in the U.S. and in almost 200 countriesaround the world. In the international markets, Nike sells its products through independentdistributors, licensees, and subsidiaries. Independent distributors need not adapt to local pressures because the 4Ps of marketing are managed by distributors.
Nike has contracted withmore than 700 shops around the world and has offices located in 45 countries outside the UnitedStates. Most of the factories are located in Asia, including Indonesia, China, Taiwan, India, Thailand,Vietnam, Pakistan, Philippines, and Malaysia. Nike is hesitant to disclose information about thecontract companies it works with. However, due to harsh criticism from some organizations likeCorpWatch, Nike has disclosed information about its contract factories in its Corporate GovernanceReport.
Promotion is largely dependent on finding accessible store locations. It also avails of targeted advertising in the newspaper and creating strategic alliances. Nike has been one of thetop retail industries for quite a long time. This is because they sell quality products, customer loyalty, but most of all, its great marketing techniques. Nike has a number of famous athletes tocreate a great deal of attention to their products. Nike has signed the top athletes in manydifferent sports such as the Brazilian Soccer Team (especially Ronaldino, Renaldo, and RobertoCarlos), Lebron James, and Jermane O'Neal for basketball, Lance Armstrong for cycling, andTiger Woods for Golf. Sponsoring of events is another great promotional technique for Nike. It brings attention Nike's products. Web sites are a great promotional tool as they cover theseevents. Such events include Hoop it up and The Golden West Invitational. Nike also personalizeswebsites. They make the websites exclusively for a sport such as nikebasketball.com,nikefootball.com, and nikegolf.com. Nike is positioned as a premium-brand, selling well-designed and expensive products. Nike lures customers with a marketing strategy centering on a brand image which is attained bydistinctive logo and the advertising slogan: "Just do it.”
CORE AND FOCUS STRATEGY
Nike has “done it” again and again. Its marketing strategy has catapulted the company to its lofty perch atop the sports gear, apparel and footwear marketplace. In fact, according to D&B site Hoovers, Nike is the world’s #1 shoe and apparel company.
What is the basis of Nike’s winning strategy?
The three biggest weapons Nike uses in its marketing arsenal are the…
Nike Swoosh logo, which appears on the uniforms and athletic gear of athletes. This logo is strategically placed so that it visually prominent as athletes perform and as their performances are carried on TV broadcasts, instant replays, videos, magazines and newspapers
Focus on hero athletes, such as basketball legend Michael Jordan.
Creation of ads that become news stories so that the news media ends up promoting the ad messages for free and creating large viral pyramids that leverage the Nike brand and message content.
This basic strategy has paid off for Nike. It has brought it great riches and market leadership.
All is not rosy in Nikeland
In the past few years, however, the “hero athlete” component has come under fire as a result of the bad behavior of some of its “heroes” most notably Michael Vick, Tiger Woods, Kobe Bryant, Marion Jones, Alex Rodriquez, and most recently, Lance Armstrong, and Oscar Pistorius. In an effort to contain the damage, Nike has distanced itself from Lance Armstrong, and just suspended its contract with Pistorius pending further investigation of the murder charges against him. Since Tiger and Kobe never cheated in their sports or killed anyone, Nike has stood by them with little negative repercussions for the Company. Time and good performance has also helped to dampen the negative feelings toward Kobe and Tiger with a large assist from Nike’s advertising. Right after the Tiger Woods scandal broke, Nike created a famous commercial that featured his father talking to him from the grave. Nike also stood by Marion Jones and Alex Rodriquez after deciding that their offenses do not rise to the same level as Armstrong and Pistorius. Nike initially dropped Michael Vick after the dogfighting scandal, but it has teamed up with Vick again since his rehabilitation and return to football and his winning ways.
Nike's Firm Performance and Competitive Advantage
On Dec. 20, 2011, Nike released their financial results for the second fiscal quarter of 2012 and let's just say that their performance continues to "Just Do It". Reported highlights from their second quarter financials are that revenues are up 18 percent to $5.7 billion (up 16 percent if you exclude their currency changes), diluted earnings per share are up 6 percent to $1.00, worldwide futures orders are up 13 percent, and inventories are up 35 percent. Obviously the rising inventory levels are a slight cause for concern, but besides that Nike continues to set the bar in the sports apparel industry. “Our strong second quarter results demonstrate that the NIKE, Inc. portfolio is a powerful engine for growth,” said Mark Parker, President and CEO, NIKE, Inc. “We’re able to accomplish this by staying focused on what we do best – deliver innovative products and experiences that serve athletes, inspire consumers and reward our shareholders. Going forward we’ll continue to use the unique power of our portfolio to drive growth, manage risk and connect with consumers.”
Nike is accomplishing this growth due to both their temporary competitive advantages, such as their current distribution channels and satisfaction level with consumers, but in most part its due to their sustained competitive advantages. Nike's brand is one of the most recognized around the globe (BuisnessWeek named it the 31st ranked brand in the world), it's research and development department continues to innovate (most recently continuing to expand on their Apple platformedNike+ line of athletic electronics by introducing the physical activity-monitoring wristband, the Nike+ FuelBand), and their incredibly effective marketing (the "Just Do It" campaign to their sponsorships with some of the top athletes in the world: Tiger Woods, LeBron James, Lance Armstrong, and Cristiano Ronaldo to name a few). The gap between Nike's $2.23 billion in net income and their closest, publicly traded competitor Adidas's $854.56 million is so staggering that it's hard to imagine Nike being unseated by anyone in the near future.
Our stakeholders help us to prioritize key issues and develop our corporate responsibility policies. We engage with stakeholders because we learned early on in our corporate responsibility journey the importance of engaging and listening. We see engagement with multiple stakeholders as a key enabler of both risk mitigation and innovation.
Nike engages with a broad range of stakeholders on an ongoing basis, including individuals in civil society organizations, industry and government, as well as consumers and shareholders. We do this informally, through participation and/or membership in networks and organizations and as a structured part of our outreach strategies on issues and challenges. We also do this through formal partnership work covered by area throughout this report.
We believe that developing and refining the skill of listening is critical to a company’s success. This has been true for Nike’s history of listening to and innovating for athletes to deliver performance products, and it is how we approach our corporate responsibility efforts.
Plan for Growth
Nike is a growth company. But we want to deliver growth in the right way. We seek growth that is:
Like many other businesses, Nike faced some significant headwinds in FY10 and FY11. Around the world, unemployment was high, especially among youth; and governments wrestled with high debt levels. Rising costs for energy and labor sparked inflationary pressures. In turn, higher costs for materials, labor and freight were evident in our margins.
While the headwinds we faced were shared across our industry, the competitive advantages we have are unique to the Nike portfolio. In spite of ongoing macroeconomic challenges, we are well positioned to leverage our strengths – including scale, operational capabilities and pricing power – to help mitigate the risks beyond our control and capitalize on opportunities to grow the company.
Integrating Sustainability Into Our Game Plan
At Nike, one way we seek to deliver shareholder value is through sustainable growth. To us, sustainable growth means our long-term vision to deliver profitable growth decoupled from constrained natural resources, even as we work to deliver value to our shareholders in the near term. Meeting these two objectives requires a careful balance – one our stakeholders expect of us – and it remains our commitment. We attempt to strike this balance by leveraging our significant competitive advantages, including our authentic, emotional connections with consumers; innovative product and retail experiences that lead the industry; and a strong NIKE, Inc. portfolio that gives us tremendous opportunities for growth and profitability.
As we set aggressive goals in all areas of our business – financial, social and environmental – we are committed to sharing these goals and to reporting on our performance to consumers, the investment community and others interested in our commitments and progress, including the wider sports and apparel industry, community groups and academia. Over the past 15 years, we have moved from approaching sustainability as a risk management issue to viewing it as an innovation opportunity and a competitive advantage to be integrated into every aspect of our business.
A more holistic sustainability strategy that is fully integrated into the business enables Nike to create value, not just through risk mitigation, but also through top-line growth, cost avoidance and better access to capital. As an example, our next portfolio of sustainability targets is designed to improve Nike’s environmental and social impacts for us and across our value chain, while also avoiding costs across the value chain by reducing waste, energy and water expenditures.
In FY10, to help us further accomplish this transition, we launched a new business unit called Sustainable Business & Innovation, as well as a new business sub-unit called Sustainable Manufacturing & Sourcing. And in FY11, we launched Nike Better World, an online platform to engage consumers in our sustainability vision and our efforts to balance people, profit and planet.