Nike And The Athletic Shoe Industry example essay topic

SHORT CASE SUMMARY Nike, Inc. (503-671-6453, web) is the worlds #1 athletic shoe and apparel seller. Nike currently employs 20,700 employees, with total sales of $8.78 billion. Nike and the athletic shoe industry have evolved into one of the most competitive market in recent years.

But, analysts believe that athletic shoe sales will slow down over the next few years. The slowdown will come with the change in consumer trends. For instance, the younger market is beginning to buy more casual shoes and work boots. Another reason for the slowdown is that people are buying more medium priced athletic shoes and not going for the high price brand name shoes. As a result, this is bringing Nike a lot more competition to surpass. In order for Nike to remain on top of the athletic shoe industry they must establish an exceptional global strategy.

If Nike penetrates the global market successfully than this will give the company an overall competitive advantage. Nike doesn't only sell athletic shoes, but a wide variety of sporting goods and clothing. They also design, develop, and market high quality active sports apparel, equipment, and accessory products. Their huge lines of products are designed for just about every sport in existence. Their products are made for men, women, and children of all ages. Nike has 20,000 retail accounts throughout the U.S. using independent distributors and also has contracts with 110 other countries.

The company also has agreements with Internet companies and subsidiaries. Nike, Inc. has many retail outlets around the world, including their famous outlet "NIKETOWN" located in major cities. "NIKETOWN" gives customers the experience to become more educated on the company's goals and objectives for their products. The store educates its customer while at same time entertaining them too. This store gives customers a chance to become more brand loyal to Nike, Inc.

Over the years Nike has gained an enormous amount of consumer awareness that they have eliminated the company name from all other products. The "swoosh" logo is automatically associated with the company name by just about anyone in the world. The meaning for Nike has lived up to the company's expectations. Nike means "the goddess of victory", which is exactly what the company has had since its creation. HISTORY A competitive runner, Phil Knight, incorporated Blue Ribbon Sports in Oregon in 1968. Blue Ribbon Sports was the first to receive the "swoosh" logo, but changed its name to Nike in 1978.

Nike's research and development department used technological expertise to produce several different athletic shoes, which changed the whole outlook on the industry. After being in business for five years Nike, Inc. had a 44% annual growth. Shortly after Nike didn't pay attention to the sale of aerobic shoes, which hurt them slightly. International operations were the main focus for Nike, Inc. in the early 1980's. An excess of inventory in 1985 caused Nike to reduce prices and lose manufacturing contract in the Far East. This pushed Nike from the top spot in the market.

As a result, Nike had to lay off 350 employees in 1986. Nike began their climb back in 1988 with the introduction new advertising strategies and the development of the new footwear. The main focus was on the customer's wants and needs their purchase of Nike's athletic shoes. In 1988, Nike bought a subsidiary called Cole Haan based in New Hampshire. The company Cole Haan cost Nike $64 million, but was worth every cent. The Cole Haan subsidiary manufactures casual footwear, something Nike was lacking for years.

This purchase helped Nike's casual footwear operations grow 16% within the year. In 1990, Nike, Inc. purchased Cole Haan Company Accessories, which distributes top quality braces, belts, and small leather goods. As Nike grew in 1990 they opened their first retail store "NIKETOWN". In 1991, the company purchased Tetra Plastics, which was used for the development of the air sole shoes.

In 1993, they then bought a cap-making company named Sports Specialties. Then in 1994, Nike introduced a new line of air sandals called "Air Mada". Nike acquired Can star Sports, Inc. the world largest hockey equipment manufacture in 1995. Throughout Nike's history their international sales have lagged due to strong overseas competition.

COMPETITION Nike's major competitor is Reebok, which also designs and develops athletic shoes and apparel. These two companies compete in the U.S. and internationally. Each company uses their own type of advertising strategy to reach their target customers. Many of the advertisements feature athletic stars and commercials that relate to the customers. Nike and Reebok are major competitors, but also have to worry other national and international competitors. Nike's other competitors are Callaway Golf, Converse, Deckers Outdoor, FUBU, Fila, Fortune Brands, Fruit of the Loom, Hi-Tec Sports, Levi Strauss, Nautica, New Balance, Polo, Puma, Rawlings, Rollerblade, Russell Corp., Sara Lee, Skechers, Spalding, Stride Rite, Timberland, Tommy Hilfiger, Wolverine, and Adidas.

In Europe the competition is growing and is a major area for Nike to strike. Nike is second in sales in Europe, just behind Adidas. International sales for Nike have been increasing but are losing other opportunities by competitors signing large contracts with sports figures and teams. These contracts are giving competitors an edge nationally and internationally. In 1998, 1,200 jobs were cut due to falling sales and the reduction of costs in Asia. CHANGES IN THE ATHLETIC SHOE INDUSTRY The growth of athletic shoe and apparel industry is the direct result from consumer changes for the better.

The baby boomer generation is becoming more health conscious and living much more active lifestyles. Along with Generation X's interest in living a healthy life. Also, there is more women playing sports than ever, which means more shoes to buy. The more sports these kids and young adults play throughout their life the more accessories and equipment they will need to compete. Nike gives their customers the feeling of self-confidence and the advantage over their competition.

The only problem Nike has is the aging adults who do not participate in any sports or fitness programs. Adults aged 25-55 only one in five exercise up to two times a week. Also, the growing obesity problem that is affecting Americans more and more each year. Nike has established many contracts with international countries for manufacturing their products. Even with changing exchange rates and tariffs Nike feels its still cost effective to manufacture their shoes internationally.

Another reason for these contracts is the labor costs and benefits, which makes it cheaper to manufacture the products. There are some problems with the idea of these types of contracts. For example, some countries are becoming less interested in manufacturing shoes and starting to produce their own electronics. There may also be problems with labor situations, shipping and unreliable quota systems. Nike must also consider the many legal restrictions that the global market may pose. INTERNAL FACTORS Nike's research and development expenses for 1999 were $97.50 million, which only represented 1.1% of sales.

R & D in the athletic industry are based on innovation and does not cost a company a lot of money on equipment. Nike continues to depend on developments to modify its products from competitors. The company presently sells roughly 300 models of athletic shoes in 900 styles for 25 different sports. Nike's target market for their shoes are males and females between 18 and 35 years old. The product are altered and improved frequently. Nike distributes one new shoe style every single day.

Nike advertises its products in a variance of ways and targets its ads to particular groups or types of people. The company continues to disburse advertising cash on TV ads during professional and college sports events, prime-time programs, and late-night TV programs. Many or most of their ads feature professional sports figures that are role models for Nike customers. Advertising cost Nike $978.2 million in 1997. Along with endorsement fees of $100 million for those sports stars everyone loves. Nike has been criticized for its social responsibility throughout its lustrous history.

Nike was known to have 6,700 Indonesian employees from Asia working 100-degree factories. These factories were poorly vented and the workers were forced to inhale toxic fumes while working. There was also evidence of abuse by Nike a factory manager on Vietnamese production workers. Nike has developed many programs to show their improving social responsibility issues. For example, Nike and the Boys and Girls Clubs of America began a program called Kids Movement. This program teaches young people about fitness awareness.

Nike, Inc. also provides funds for the Children's Television Workshop for literacy TV programs. The company firmly incorporated the N.E.A.T. (Nike Environmental Action Team) in 1993. This program was implemented to maintain environmental initiatives by recycling old shoes and utilizing them to make new shoes. Nike, Inc. happens to employ mostly health-conscious corporate employees. About 40% of Nike's employees are under the age of 30.

The corporate campus helps apply this type of culture with the benefits it offers their employees. For instance, the company has wooded areas, running trails and fitness centers for their active employees. This is a major part of Nike's corporate culture, which then trickles down to Nike's management styles. Nike lets manager's keep lines of communication open and lets them determine their own decision making.

The company also offers their employees something called Life Trek. This is a benefit and compensation program that gives their employees a sense caring and trust. THE FUTURE With the increase in competition and limit of growth the U.S. athletic shoe industry, Nike is still slated to be a major leader in the market. The advertising and innovative marketing in the industry should still leave it extremely competitive. The only problem that Nike worries about are customers becoming less brand-loyal and buying cheaper athletic shoe brands. Nike is trying to make the point that it is worth spending more money on better quality made shoe, than buying a cheap shoe that will only last a little while.

One major area that brings unlimited opportunities to Nike is the international market. In the United Sates, there are 4 people for every pair of Nike, France has 11, Japan has 50, and China has 11,821. These figures show that the greatest growth for Nike is overseas.