MGTA05 – Fall 2018
Writing Assignment #1
Name: Soni, Yasvi Subject Business: Nike
Student Number: 1005245012 My E-mail: [email protected]
Nike is an American sportswear company with its headquarters located in Beaverton, Oregon. Nike is a part of the Footwear and Accessories industry. Its main rivals are Adidas, Reebok and Puma. Compared to its competitors, Nike has a much greater worldwide revenue and brand valuation of $33 billion and $27 billion, respectively (Bhasin H, 2018). Even though Nike’s competitors sell similar products, Nike is more successful because of the quality of its products, celebrity endorsements and strategies. Some of Nike’s well-known shareholders are Philip Knight, Travis A. Knight, and Mark Parker. Philip Knight had found Nike along with his former track coach. As of now, he is the second-largest shareholder of Nike. Travis A. Knight is the son of Philip Knight and currently the president and chief executive officer of the animation studio. He is also the largest shareholder of Nike. Lastly, Mark Parker is Nike’s chairman, president, chief executive officer and the third-largest individual shareholder of Nike stock (Rego M, 2018). Nike conducts its business in the Central and Eastern Europe, Greater China, Japan, North America, and the Western Europe (Nike Inc Sales, n.d.). Nike is expanding on its new Consumer Direct Offense which aspires to provide athletes with service faster and on a more personal level.
Nike’s main products consist of athletic footwear and apparel. Their athletic footwear allows athletes to run and play sports comfortably and better by having good grips. Nike’s footwear offers features that are different from other brand shoes, such as flexibility, provides great support, lightweight and durable. Benefits of Nike shoes are that they help restrain from getting foot injuries, and having lightweight shoes makes it easier for certain sports. Additionally, Nike makes different shoes suitable for each sport because there are different requirements for different sports. Nike’s athletic apparel provides great comfort and flexibility for consumers, which allows them to enjoy the fit and complete their tasks. Nike has been coming up with exciting and innovative products like Nike’s 4% system, which has tools that features ultra-lightweight and soft Nike ZoomX foam competent of supplying up to 85% energy return. To deliver sensation propulsion, these Nike shoes are also implanted with curved carbon fiber plate, that intensify stiffness. Another innovative product Nike offers, is the Nike FastFit. The Nike FastFit is a hand-operated system that immediately secures the entire foot. This product has immense benefits, it removes the continuous adjustments and readjustments of laces, by a simple pull; The shoe stays secure to the players foot throughout their movements (Nike News, n.d.). Nike differentiates itself from other brands by dividing its store into sections by sports. As a result, customers are surrounded by Nike’s vision of sports and influenced to buy the different products. Nike’s strategy of having different sections for each sport is efficient.
Revenue and Profit
For the fiscal year June-May of 2014, Nike’s revenue/net sales were $27.8 billion, gross profit was $12.45 billion and net income was $2.69 billion. In 2015, they had a revenue of $30.6 billion, gross profit of $14.07 billion and a net income of $3.27 billion. During the year 2016, Nike had a revenue of $32.38 billion, gross profit of $14.97 and net income of $3.76 billion. Throughout 2017, they had a revenue of $34.35 billion, gross profit of $15.31 billion, and net income of $4.24 billion. Lastly, in 2018, Nike has a revenue of $36.4 billion, gross profit of $15.96 billion and a net income of $1.93 billion (Nike Income Statement, 2018). Nike’s revenue is increasing throughout the years due to its pricing power, manufacturing efficiencies, growing direct-to-consumer sales, and lower taxes. Nike tries to sell its premium products for less or puts sales on its higher priced products to make it suitable for the consumers. This results in a quick increase in sales revenue. Nike reduces manufacturing costs through technology and infrastructure advancements; This boosts efficiency and reduces costs. Furthermore, they provide a service called NikeID which allows for consumers to customize their shoes, thus, attracting more customers to Nike. Finally, Nike receives greater sales from overseas countries that have lower taxes. Therefore, even though the dollar affects Nike, its overseas expansion helps sending more sales to its bottom line. In the past, Nike had been using sweatshops and child labour, which had an impact on its consumers decisions of buying their products. Although, they publicly pledged to change the company’s practices, and they have been doing that. Some of the worst products that Nike has ever produced are the Nike Airmax Model, Nike Air Force 1 CMFT Low, and the Lebron 12. The Nike Airmax Model did not succeed as Nike had envisioned due to its poor design causing discomfort. The Nike Air Force 1 CMFT Low is considered one of Nike’s worst products because of its heavy weight. Nike’s Lebron 12 was also a fail because of its Hyperposite wings design, which was initially there to provide additional support, but caused immense uneasiness (Taylor M, 2016).
Nike In the Real World
Recently, Nike created a new ad starring Colin Kaepernick. Nike’s shares fell after the announcement of the ad, but they are on the rise again, with online shares rising 31%. They are saying that the ad is paying off and inspiring people around the world (Garcia T, 2018). Previously, Nike had an incident with using sweatshops and child labour. Although they did improve after that incident, it seems as if the problem may be a menacing recovery.
Bhasin, H., BhasinI, H., A., O, M., Linton, F., Garcia, M., . . . Facebook. (2018, June 14). Top 10 Nike competitors – Competitor analysis of Nike. Retrieved from https://www.marketing91.com/top-10-nike-competitors/
Garcia, T. (2018, September 27). Nike says the Colin Kaepernick ‘Just Do It’ campaign is driving traffic and engagement. Retrieved from https://www.marketwatch.com/story/nike-says-the-colin-kaepernick-just-do-it-campaign-is-driving-traffic-and-engagement-2018-09-26?mod=MW_story_hoverstory
Nike Inc Sales by Country. (n.d.). Retrieved from https://csimarket.com/stocks/segments_geo.php?code=NKE
Nike income-statement 2018. (n.d.). Retrieved from https://amigobulls.com/stocks/NKE/income-statement/annual
Nike News. (n.d.). Retrieved from https://news.nike.com/news/
Rego, M. (2018, September 25). The Top Nike Shareholders (NKE). Retrieved from https://www.investopedia.com/articles/insights/052516/top-4-nike-shareholders-nke.asp
Taylor M. (2016). Retrieved from http://www.nike4s.com/nikes-worst-products/