Nike's Market Share example essay topic

Profile of the Footwear Industry a. Industry Size and Growth The history of footwear goes back may thousands of years. It grew out of necessity to provide protection. Initially, footwear was made of plaited grass or ra wide held to food with thongs. Soon the rich and influential began distinguishing themselves by the craftsmanship aand decoration, which characterized their shoes. Today the footwear industry manufactures a wide range of footwear ranging from leather, rubber and other synthetic materials, and styles ranging from casual, formal, work, and athletic shoes.

On average, every man, every woman, and child in the United States purchases more than four pairs of shoes each year, a level of consumption that establishes the U.S. as the world's largest importer of footwear. The U.S. accounts for about 40 percent of footwear imports. In 2002, Americans spent approximately $38 billion to purchase more than 1.1 billion pairs of shoes. In these four styles of footwear, athletic shoes make up about 35 percent of the U.S. footwear market. The exercise boom sent athletic shoemakers Nike (#1), Reebok, and adidas-Salomon to the front of the pack. Athletic footwear includes aerobic dance, baseball / softball, basketball, cross training, hiking, running, sport sandals, tennis, walking, "ath leisure" (athletically styled ca sula shoes, canvas, suede and alternative sports) and "other", such as golf, football, and volleyball.

From the 1980's through most of the 1990's, athletic footwear saw rapid growth. However, in 1998, sales suffered their first annual decline in five years. The market for athletic footwear remained difficult in the first half of 2000. Consumers spent $6.514 billion for athletic shoes in the first six months, versus $6.503 billion during the same period in 1999, according to research conducted by SGM A. Consumers purchased 180 million pair of shoes, up 2% from 177 million pair in the same period a year earlier. The second half of athletic shoe sales, a trend that remains under way. Athletic footwear sales rose 4.4% in 2000 to $14.3 billion. b.

Industry Profitability The athletic footwear industry is a challenging and saturated market. Intense competition, fashion tends, and price conscious consumers have slowed groth in this industry. Manufacturers are combating sluggish sales with radical new styles, along with offering more sales at lower price points. Companies are looking for new ways to boost sales by capitalizing in direct internet sales to consumers. Many companies are also increasing profitability by transferring production to cheaper offshore facilities. This segment has reached a point of maturity in the domestic market and can look forward to only modest sales growth for long term.

However, sales are improving slightly, especially in the areas of running shoes, cross trainers and basketball shoes. Therefore, companies with strong brands will increasingly turn to international markets for growth. c. Industry Entry and Exit Barriers Entry Barriers The athletic footwear industry is a very competitive and mature market. The leaders of this industry are very well established.

Leaders like Nike, Reebok have made the industry what it is today. Consequently, long -time competitors like Saucony and K-Swiss have been struggling for years just to keep their brands alive. This cutthroat environment has hindered the entry of new competitors. Economies of scale also contribute the lack of newcomers into this market. In order to have an edge over the leaders, companies must be able to compete at all levels such as reasonable pricing, efficient production, and high product quality. These things are difficult to achieve without the resources of an established manufacturer.

Another key barrier to entry is the access of traditional distribution channels. When combining the shelves at stores like Sports Authority and Footlocker, it is evident that leaders dominate the shelves. Lesser known brands are viewed by retailers as being too risky to replace an established brand like Nike or Reebok on the shelf. These walls seems to be breaking down with the help of internet. The costs of overhead that come along with traditional brick and mortar retail distributors are being significantly diminished. New entrants are now able to slide into markets without these high startup costs, making it more profitable to begin production.

Exit Barriers When a company decides to exit form this industry it must be aware of things such as indebtedness and its ability to meet those obligations. A company must also be cognizant of lawsuits filled by its stakeholders and claims made on any residual assets. History of Nike The Nike Corporation began as nothing more than a friendship between college track coach and a student athlete. Bill Bowerman was the University of Oregon's tack coach in 1957 when he and runner Phil Knight met for the first time. Knight, an MBA student, was working on thesis speculating on ways to penetrate the German donimated U.S. athletic shoe market. At the same time, Boweman tinker d with various athletic shoe design for which he used his wife's waffle iron to develop Nike's famous tread.

In 1964 Bowerman and Knight partnered and formed Blue Ribbon Shoes, a company with one employees that specialized in designing shoes for track and field athlete. During their first year, Boweman and Knight slow 1,300 pairs of shoes and generated revenues of $8000. Over the next few years, Bowerman and Knight invested their money into Blue Ribbon Shoes and by 1969, the company had grown to include 20 empployess and produced annual revenues of over $300,000. Blue Ribbon Shoes' big break came in 1972 when it introduced the Nike brand at the summer Olypmic games Steve Prefontaine, a world -class track star was signed to endorse the Nike brand, and eventually, Blue Ribbon Shoes became officially known as the Nike Corporation.

Nike suffered a blow in 1975 when Prefontaine was killed in an automobile accident at the age of 24. Despite losing its key endorser, Nike continued to exceed everyones's expectations in growth and revenues. Over the next decade, Nike's revenue grew into millions as new products and product lines were introduced alongside celebrity athlete endorsers like John McEnroe and Micheal Jordan. In 1986 Nike reached the billion-dollar mark revenues and contunied to grow in leaps and bounds.

Although in an economic downturn, the company's 1990 revenues reached nearly $9 billion, ans Nike continues to sign big name endorsers like golf phenomenon Tiger Woods. On christmas Eve, 1999, Bill Bowerman passed away. Although no longer an active member of Nike's board of directors, Bowerman's ideas and philosophies continued to have an impact on Phil Knight and the company as a whole. As the one remaining co-founder of Nike, Knight recently instituted a restricting of upper and executive - level management. Knight recruited executives from some of the top Fortune 500 companies including Microsoft, General Motors, and Disney. In addition, Knight shifted many of the existing managers into different positions and divisions throughout the company.

By doing so, Knight hopes to keep the ideas fresh and the energy level high amon the managers. Mission Statement of Nike "To be the world's leading sports and fitness company" Mission at Nike is to be a company that surpasses all other's in athletic industry. They maintain their position by providing quality footwear, apparel, and equipment to institutions and individual consumers of all ages and lifestyles. They pledge to make their products easy available worldwide through the use of retail outlets, mail order and company's web site. Nike's management be lives that their success lies in the hands of its teammates, customers, shareholders and the communities in which they operate. They won to keep this in mind with the execution of every decision within the company.

Profile of the CEO Philip H. Knight, chairman and Chief Executive Officer, is the co-founder of Nike, Inc. He has been the driving force behind Nike company's success since its inception in 1964 under the name of Blue Ribbon sports. Knight is 65 years old and holds an undergraduate degree from the University of Oregon and MBA from Stanford University. Knight practiced as a CPA and thought at Portland State University prior to founding the company known today as Nike. He has been an innovative visionary in the industry of athletic footwear and apparel.

His efforts have helped to established Nike as an Industry leader in both national and international markets. Knight's managerial mode is one that characterized by strategic planning. This mode is representative of an open-minded CEO, one willing to take calculated risks and make conservative decisions based on careful analysis of external and internal environments. Knight's decision-making style favors th participative approach.

He is not hesitant to make unilateral decisions, but prefers to look to his trusted management them for their insight and ideas before choosing a course of action. Recent Challenges Recently Nike has received negative publicity from the media regarding sweatshop-type factories in foreign nations, predominantly Asian countries. Because a large amount of Nike's products are made in overseas factories, allegations of child endangerment, low wages, and overall poor working conditions surfaced against Nike. Knight and Nike quickly responded by instituting minimum age requirements in all factories, as well as wage increases and regular inspections. Although these improvements help to quash some of the negative publicity, many workers' rights groups still argue that Nike is not doing enough to remedy these conditions. Nike has also been affected by the recent retire of basketball superstar Micheal Jordan.

It is estimated that since his drafting into the NBA in 1984, Jordan's impact on the U.S. economy has been over $10 billion, of which, $2, 6 billion can be traced back to Jordan related products sold by Nike. Jordan retierment prompted Nike to seek out another celebrity athlete endorse to help fill the void. As a result, golf progidy Tiger woods was signed to endorse Nike's line of golf shoes, apparel, and equipment. Last year Nike's golf division revenues were in the $200 million dollar range and expectations are high for the future.

Organizational Culture at Nike Nike has created a corporate culture rich with employee loyalty and team spirit. Red "Swoshshes" float across everything form screen savers to coffee cups at the ompany's headquarters in B everton, Oregon. The company chooses to call its headquarters a " campus" instead of an office. Employees are called "players", supervisors are "coaches" and meetings are "huddles". These terms go a long way to make the daily work experience less than dull for the lucky employees in Beaverton. In 1985, thirteen years after the company founded, Nike was blindsided when Reebok developed its multicolored aerobic shoes.

It was then that Nike decided to reinvent the busine and culture, becoming highly motivated about selling sports and "Nike way-of life" With this decision the company also restructured its marketing campaign, focusing more on an image rather than just product advertising, a strategy which led to the "Just Do It" mantra. Since then, Nike has been striving to words an inner culture that reflects mantra. Employees are given an hour and half for lunch to play sports or simply workout. The new Nike is not just about shoes and slam-dunks, but about promoting life styles. All new employees view a video of sports highlights accompanied by a soundtrack that discusses the soul of athlete and competitive spirit. In addition mangement sends weekly emails to update employees on the recent success of Nike-sponsored athletes, and often hosts spokespeople to motivate and thank its staff for contributions to the sport world.

It is not suprising that athletic background helps a prospective employee. In keeping with its sports approach Nike asks its players to work by two principals above all others. "Honesty first, and competition second. Compete with yourself not your colleagues". SWOT ANALYSIS OF NIKE Strenghts: Nike's strenghts comprise their brand recognition, innovation, revenue, and size.

One of its key competencies is the capability to extend its brand name coverage to a broad range of products. Nike has been at the leading edge of innovation and continues to illustrate that with the introduction of the Nike Shox Shoe. The shock absorbing system in the shoe has never seen in a shoe before. The reputation of the shoe demonstrates that Nike not only has what it takes to invent cutting edge products, but also shows that they can create products that consumers will purchase. However, much of Nike's strenght is drawn from a considerable change in the lifestyle behaviour of its major consumers: the young adults. Weaknesses: Nike's weaknesses consists of shrinking market share, poor brand image, falling out of touch with what consumers want, and being slow to respond to changing consumers preferences.

While Nike's market share is more than twice the close competition, Nike's shrinking market share has become a weakness for them. In recent years, Nike has not been successful with manufacturing shoes that are worn for fashion versus function. The young adult consumer is for the most part concerned with the look and style of the shoe as opposed to its usage. This generation also seeks and thrives on being original and having their own unique style. Young adults outlook on fashion is a downfall for Nike, because they connect Nike with their older siblings and parents thus creating a brand image tat some of them would prefer not to wear. Within the past year Nike has recognized this shift toward fashion with all of their consumers.

One direct answer over the past year was Nike's introduction of its Air Presto athletic shoe, which is made of "stretch mesh" to a chive sizing more similar socks and will be available in 17 colors. The launch campaign for the Air Presto and will features south Park and Po ekman animation characters with names based on the color of the shoes. These efforts symbolize Nike's commitment too a changing market, but whether Nike has addressed this shift in fashion too late is unknown. Any return to a more formal dress code than that now found in the young adult population could threaten Nike's position in the marketplace.

Nike's failure to foresee problems in relation to labor and factory conditions at production locations has resulted in bad publicity and declining sales as society and consumers call for more "socially responsible" companies. The average of Nike's board director is 62, the youngest member being 49 and oldest being 79. This constitutes a possible weakness in that there is a lack of younger members of the board who could serve to bring a new perspective to the company And assist in achieving Nike's goals. Opportunities: Nike's opportunities are cutting edge technology and forecasted great expectations for the coming years in the industry. Nike has always been one of the first organizations to announce technological breakthroughs in the shoe industry, as proven by the waffle design, Air Jordan, and now Nike Shox. After a downturn in the footwear industry, the athletic shoe busine is expected to grow in the coming years, which will be beneficial to all of the busine in the athletic footwear industry.

Threats: The key threat for Nike is market saturation. The problem is that the athletic shoe market is already full of different brands and companies, Now there is very little room for new companies. There is also very little room for new product innovation and growth of market share for companies like Nike. Since Nike is currently holding the lead in the market as far as market share, there is little room for them to expand.

Nike is now competing with other athletic companies as well as companies that just sell clothing or other types of shoes. If all of these other companies merely gain a small percentage of the market, Nike will be one of the main companies to start losing market share. In response to this threat, Nike should focus its efforts on a broader market in order to keep its market share and make sure that competitiors like Old Navy do not steal away its market share. Nike's threats are include the increase of competition, the down year the industry occurrence in 2000 and 2001, products like cell phones taking the place of shoes as a social status indicator, and the overall slowing economy. Competitiors like New Balance who gained 5% out of 10% of the footwear market share, have a done tremendous job with meeting customer style and comfort preferences. Nike understands that they must be more successful with replying to changing consumer taste if they hope to regain past year market share loss and preserve their current market share.

Another major threat to Nike is the weakening of Nike's high social status connection. Ten years ago owning a pair of Nike infleunced how cool you were. Today being cool is established by society as owning several possessions like pagers and cll phones. This overall shift in what society deems as important and fashionable requires constant versatility and adaptability on business part. STRENGTHS WEAKNESSES OPPORTUNITIES Brand RecognitionInnovationRevenueSize Shrinking market shareS low to respond to changing environment Not responding to customer needs THREATS Cutting Edge TechnologyEconmy on the Rise Increasing Competition Substitution for Social status Indicator.