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UMK - Nike Case Study - Group #1

Karam J.J

Karam JJ

on 6 December 2014

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Transcript of UMK - Nike Case Study - Group #1

Strategic Management
(GST 5103) 

Prepared for:
Prof. Dr. Sazali Abdul Wahab
Nike’s Global Women’s Fitness Business
Executive Summary
Structure of company
Product orientation

Disintegrated nature
Primary Business Unit
Geographic Regions
Sports Categories
Sports Categories
Footwear (66%)
Apparel (28%)
Geographic Regions
Primary Business Unit
US (44%)

Europe, middle East and Africa (33%)

Asia-Pacific (16%)

Americas (7%)



Organization structure of Nike: Complex Matrix
Research and Development
Management Style / Culture
Social Responsibility
Finance / Accounting
While importing/exporting, foreign production, and political dustups over working conditions in developing countries are factors that effect this industry.
Threaten action by underage workforce
Poor employment record
Corporate social responsibility
Contract manufacturing and copying of product (intellectual property)
Trade agreement
Sports and athletics are traditionally male-dominated. Nike, though strongly positioned with men, looks to new segments, like women’s fitness, to accelerate their growth and strengthen their position as the brand of choice for athletes of all types/ages/vendors
Based on extensive research, Nike discovered that women don’t do fitness. Instead, they run, they walk, they exercise on cardio machines, they take dance classes and they do yoga. Nike must position their brand accordingly for their women’s fitness line(s). it.
The target consumer for the women’s fitness segment is the “Sweat Beauty”. She is 22 years old, confident, and slightly irreverent. She’s a woman who wants to workout hard and look good while she’s doing it.
General External Environment
Demographic / Global (Geographic Regions)
Both production and demand of Athletic/performance apparel and footwear are seasonally driven. Leading up to and during each sport’s respective seasons, demand peaks, then drops off when the season ends.
The majority of consumer demand is coming from three markets: the U.S., the big five in Europe, and two Asia countries.
US (44%)
Europe, middle East and Africa (33%)
Asia Pacific (16%)
Souht Americas (7%)
Nike wanted
and reorganize the company’s focus from a
product orientation
to a
Darcy Winslow
will use her leadership skills to transition her responsibilities to shape a new organization to support the defined business strategy, stimulate cross-business collaboration, and sustain innovation
women’s fitness to a
major focus
for the famously testosterone –driven company
Major Problems
Creating a Women’s Fitness Business
Lack of cross business
integration Internal & external
i.e footwear, apparel, equipment, & market
Designing the Organization
Coordinating to work together on the same timeline/ calendar
Transitioning/developing into new leadership role
Causes of the Problems
Nike‘s business is organized around a
product orientation approach
, with three primary business units focused on footwear, apparel, & equipment
Each product market was working on
separate calendars/timelines
Global programs and regional teams
always share the
same priorities
Lack of
Nike believed that adding women’s sports and fitness into a male-dominated culture would only
cause complexity
to already complicated organization structure
Finding the
right people
to fit the
right positions
within the core team
Goals to be Accomplished
To move from a product-based organization to a
consumer-based organization
Making the Women’s Fitness Business
footwear, apparel, & equipment into one category
business schedules
Making up the Global Women’s Fitness
core team
the company’s
culture, perceptions, and commitment,
rather than just changing the product
Potential Solutions
Changing the Game Strategy
Product oriented approach
Create a new company
The She-conomy
NIKE in 2003
of women say advertisers
don't understand
of consumer purchases come from women (FastCompany).
Women spend
$7 Trillion
annually, over half of the United States GDP
Yet NIKE does not have an effective marketing strategy for women.
Male Dominated Culture
Product Oriented
- Next in 1997 the footwear business dedicated three resources to bringing a women’s prospective to its running category as more and more women becoming active in that sports.

- After a few other experiments within the company including strides made in the apparel business, Nike created its global women’s footwear division in 2001.

- In the mid 2002 Nike started goddess store beyond the southern California and started a goddess collection together with a small team.
- In March 2004, Nike designated a cross functional task force for each of the five areas and gave them the mandate to validate the opportunities and present a case for how to enter this business.

- The women’s task force was made up of core teams of five or six men and women from different parts of the business who worked on the project as second job.

- From a competitive perspective Nike faced off against a handful of traditional but well respected brands in women’s footwear with Nike maintaining a leading position in some categories but not others.
- The challenges of coordinating across this calendar and different direction of the matrix were compounded by facts that Nike developed products for four seasons a year which mean that each business was managing multiple seasons at any given time.

- In the early to the mid 1990s when the company created a women team within its product marketing group and signed endorsement contacts with female athletes such as Sheryl Swoops, Lisa Lslie, Grabrielle Leece and Mia Hamm. They organized as women team.
- Since Nike is a multinational Industry they can easily access to the mass number of their targeted customer throughout the world. Besides, Nike gets the completive advantage of their brand products.

- Women usually tend to purchase the brand products. On the other hand Nike plans their products according to their customer’s choice. Nike has only competitor in the market named Adidas. Since Nike is a very old sportswear industry with unique design products for their customers they can easily perceive the customers need with the research work they usually conduct from time to time.
In short, innovation is driving fitness products to improve performance, with greater specialization for specific segments.
Nike has integrated technology system to develop their product.
Nike always adopted latest technology for their product and match with their vision
Prepared by Group #1:
Karam J. Jawamir
(P13D207P – alhadithie@gmail.com)
Dato Nabil
(P13D093F – de-nabil@yahoo.com)
Saynul Islam
(P13D092P – sainul_2000@yahoo.com)
Mohammed Ghazali
(P14D374P – ghazali@mtib.gov.my)
Cost/Benefit Analysis of Potential Solutions
Changing the Game Strategy is the best solution because

It reorganizes Nike businesses around footwear, apparel, and equipment as one whole category
Creates cross business integration which forces these business to work together
Move from more masculine towards female & Generation Y.
Helps to expand the Nike Global Market and gives the female consumer everything they want and need
Maintenance of the relationship between brand images; quality and price have to be consistent.
Integrated Calendar Alignment
Creates Micromanagement which allows for development of high level positions and outlines the responsibilities of each role
People & strategy map
Builds a core team
Recommendations and Rationale
The appropriateness of the new strategy for the women's fitness proposed by the Changing the Game team
Nike - Case Profile
• Started in
by Bill Bowerman and Phil Knight
• Main focus was shoes –
design, produce and sell

, Nike was well known in both
domestic and international markets
• Nike has approximately
employees worldwide and operations in
• In 2006, sales had reached
$15 billion
• In 2006,
of the business was footwear,
was apparel and
was equipment
• During
, Nike looked closer at creating a
women’s division
and even signed endorsements with some famous female athletes
, Nike created the
global women’s division
•Nike opened
Nike Goddess
stores that were geared towards the women’s product line
next move
took them the next level for their women’s division
Product Range
Capacity for innovation
Distribution expertise
Single Brand
Stars endorsement
Contract manufacturing
Large portfolio of products

New Markets
E commerce
Research and development
Increase product line
Product diversification
Change target market
New manufacturing countries
Fashion Trends
Contract manufacturing and copying of product (intellectual property)
Consumer lifestyle changes
Bad press associated with Nike
Outlets canceling orders
Single Brand
Too many stars endorsement
Contract manufacturing
Spread portfolio of products
Reliant on retailers
Reduction of target market

The question to analyze is
“What will it take to make the category-driven approach successful?”
Slow down in the economy
Reduction in consumer confidence
Barriers of entry to the EU
Contract manufacturing
NIKE has estimated that the market for the women’s fitness segment is approximately $13B. The women ‘s fitness segment is broken down as follows : 25% Footwear, 70% Apparel and 5% equipment
Threat of New Entrants/Barriers to Entry
Power of Suppliers
Own produce
Nike contracted with approximately 600 factories in 46 county to manufacture Nike products around the world
Industry Analysis
Product Substitutes
There are dozens of brands that produce products for every sport/fitness activity imaginable.
Consumers are overwhelmed with choices. With little protection over their innovations, brands such as Nike and Adidas/Reebok are constantly fighting off substitutes to their products.
Intensity of Rivalry Among Competitors
Power of Buyers
Competitive products all compete on differentiation.
Low switching cost
Women began to demand shoes with style, fashion, comfort and should be for women
Running replaced by aerobics and fitness
Basket ball shoes demanded performance unlike casual shoes
Each sport shoe separately defined as category, addressing the needs of the customers in each sport.
High competitors in an Oligopoly (other leading firms Adidas, Reebok, Puma)
Strong brand identity and product differentiation
Intensity of Rivalry is moderate
Exp. Competitors dynamic
Olympic Games, World Cup, Asia Games, Commonwealth Games, Tennis, ext.
More of an emphasis on non-price competition.
Firms instead try to increase their range of products to capture more of the market
Brand image and customer loyalty is huge in this industry, which leads to the brands competing in advertising
“To Bring Inspiration And Innovation To Every Athlete In The World"
Situational Analysis
Nike research facilities had evolved to the present 13,000 square feet building designated to the constant improvements of technologies, where research is divided into three parts:

: how the body moves
: how the body works specially under stress.
: the evaluation of how a product works, feels and wears.

Nike products undergo a rigorous testing process that covers a wide variety of testing surfaces (regular basketball hardwood, soccer turf, running tracks and endless outdoor testing on various terrains), and four important factors are taking into account, geography, gender, age and skill level.All of this combined with the results of about a dozen other tests are used to develop new, user-friendly products.

Current Competitors

- Namely Lulu Lemon, Under Armour and Danskin – are identified in the case as examples of the relative easy new competitors have in entering with focus on a niche segment within the broader market.

- The global nature of athletics and the regional popularity of specific sports keeps the doors wide open for new foreign competition.

Market Penetration / acceptant

Once they’ve established themselves and built a successful brand in that segment, competitors look to grow into new segments, encroaching on established brands like Nike and Adidas/Reebok
Creating a Women’s Fitness Business

- Lack of cross business
- integration Internal & external
- i.e footwear, apparel, equipment, & market

Designing the Organization
- Coordinating to work together on the same timeline/ calendar
At the end of FY09, Nike contracted with approximately 600 factories in 46 countries to manufacture Nike products.

Our contracted manufacturing base is changing. Nike is executing a long-term sourcing consolidation strategy and streamlining its supply chain operations, which has, thus far, resulted in a 10-percent decrease in suppliers from FY06 to FY09. In 2007 we began assessing the contract manufacturing base and undertaking a multi-year strategy to:

1. Streamline our supply chain to do business with a focused number of contract manufacturing groups
2. Build a strong and sustainable sourcing base for greater operational efficiencies and future growth
3. Align with contract manufacturing groups best positioned to deliver performance product and innovation that Nike consumers have come to expect
4. Continue to partner with contract manufacturers committed to Nike's corporate responsibility principles
Nike Brand Factories by Region and Product (at FY close, May 31 each year)
Nike contracted with 618 factories to manufacture product in FY09, down from previous years and reflective of our consolidation strategy that focuses on contract manufacturing group optimization to build a long-term sustainable sourcing base capable of delivering product, innovation and reinforcing relationships with factories committed to our corporate responsibility principles.
How Nike reach buyers…..
Outlet Nike
Consignments Sport Outlet
On-line Shopping
Summary : Industry Analysis
Porter’s Five Forces Model
Target Market – Male and Female (18 – 34 years old)
Positioning – High performance shoes designed with hi-tech features
Have many brands and products model for each type of consumers.
Have high allocation of advertising budget for endorser contract, TVC, print ads, and sponsorship activities
Have top endorsers that are the champion in their sports areas
Nike has worldwide distribution line.
Nike has good distribution line to retailer.
Nike has new ordering system, named Futures Ordering Program
Knight as CEO Nike, is an former athlete of long distance run.
Nike working culture is established as camaraderie and cooperative culture.
Factory design in Oregon is especially designed to create natural circumstances and equipped with complete sport facilities.
Nike has Nike Sport Research Laboratory (NSRL) and Advanced Product Engineering (APE) which cooperated in developing and executing idea.
Nike has direct research to the athlete by accompanying their daily activities to find the best suitable product.
Nike always developing superior technology to complete with others
Nike placed VP for social responsibility in 1998
Nike joined Fair Labour Association (FLA) and Global Alliance for Workforce and Communities (GAWC)
Nike funded many NGO such as WWF, etc.
Nike do public relation activities to keep the company’s image.
Nike has healthy financial situation

But, Profit margin is lower than Gross Profit margin.
EU is charging into one currency
USA economic growth is in slow growth because of WTC
Contract manufacturing is chosen by many athletic shoes company.
Since 70’s, customer is more brand-minded
Sport Consumer preferences is charging into more fashion-oriented
Young consumer is believed much in advertising promotion and use internet as the primary sources of information.
Buying motives of young consumer is dominated for leisure activity.
Since 90-s, woman’s consumer dominated the athletic shoe market because of the changing lifestyle.

World is entering global trade climate with NAFTA and GATT
There is anti-dumping regulation existed in EU

Nike has integrated technology system to develop their product
Nike always adopted latest technology for their product and matched with their vision.
Competition is more tight with the coming of Reebok and Adidas
Competition is happened around the world, globally, not locally
Athletic shoe trend is going to be fashion-oriented
- They have a very structural work force who always deals with the women psychology towards the fitness of the sportswear. Externally Nike is very strong to take decision one step ahead against their competitor.

- They have plenty of product lines according to the varieties of sports that usually women take place. Nike usually launches their products regarding the geographical consideration with appropriate pricing.

- Sometimes Nike come up with different concepts like goddess of Venice to attract the women more to meet their core needs. Thus the policies taken by Nike towards their business growth and profitability are very attractive.

Nike is very efficient in taking decisions regarding competition and innovation in the market. They explored the market and conduct different researches in to establish new market for the women fitness wear. There are many success factors for Nike. These are :
Creating specialized divisions for women’s fitness wear.
Creating more branches throughout the world.
Seasonal kickoff and creative direction.
Design Review.
Prototype Review
Go-to-Market Strategy
Pre lining
- Brand Execution post review.

- Creating task force as team together with male and female hired from different sectors of business.

- Restructuring and redesigning the organ gram and designated them to the specified development of the women fitness wear.

- Immediately reacting against the competitor’s steps in the market. Suppose how adidas is designing and preparing plans for the sportswear. Nike then come up with some cost benefits schemes for the fitness wears for the women.

- Each year Nike is facing and generating more than their targeted profit.

- So financially the company is very sound and can reinvest their profit to some new innovations to grab an attention in the market.

- I case of Physical, Human and organizational aspect, Nike hires the best work force from different parts of business around the world.

- Their human resources are very efficient in dealing with the customer and always try to ensure hundred percent satisfactions with their services to the customers for fitness wears.
- To distinguish its brand and increase customer loyalty,

- Nike uses differentiation business level strategy.

- It offers high quality goods and acceptable price.

- Nike is perceived as something “fancy”, in terms of sport goods manufacturer.
- As a marketing strategy at Nike, consumers make the decisions.

- At Nike, their job is to know what motivates and inspires them.

- As a member of the brand marketing team, they help communicate the Nike brand.

- They drive our mission of connecting with consumers through a variety of channels by working with digital marketing, sports marketing, event marketing, regional marketing and the field representatives.

- As a member of the sports marketing team you work in service of the premier athletes around the world to collect insights on authentic innovations, build inspirational stories and steward long-term brand relationships. 

- This team develops and executes sports marketing strategies worldwide. The general focus of every employee on the staff is to make the best product possible.
In the past, Nike has utilized product differentiation as their competitive strategy.

As Nike reputation dictates, they continue to place our emphasis in global.

Nike has built its business on providing products that rise above all others; it has made them success that Nike are today.

Nike is known for its technologically advanced products.

Nike are the leaders in this area, which allows our products to stand out from the rest. Nike focus also allows us to maintain a somewhat narrow niche that enables us to effectively capture the needs and wants of our consumers.
- Nike will also focus on making a strong effort in price leadership.

- Nike products in the past have been concentrated in the higher end of the pricing category.

- Nike entering into lower price categories with our quality products.

- To bring inspiration and innovation to every athlete in the world.

- Nikes long-term financial goal/model is to motivate the company.

- They are always concerned about the sustainable, profitable growth and strong cash flow, and they both performed well on the balance sheet.

- Nike is worth emphasizing that growing partnerships with retailers to create more customer experience of different groups to promote the idea category in major markets.

- Nike's wholesale business model has also been sustained as a major driver of long-term growth, despite the 2015 Nike retailers will continue to contribute to the total business of more than 80%.
Research & Development – Nike R & D lab evaluated as “far & away the best” in the industry. Large number of patents testimony to its commitment to R & D.

Extensive SCM capabilities – has attained competency in leveraging low cost countries like China & Vietnam as its manufacturing hub. Sources its products from 900 factories spread across 50 countries
- Nike’s “jocks” culture shows a strong homogeneity through a common passion for sports and the betterment of athletes.

- Nike, Inc. has created employee networks to help facilitate relationships and awareness regarding internal diversity. The Diversity & Inclusion team creates inclusive environments by sharing the fundamentals of diversity, uses diversity and inclusion to inspire new ideas, and encourages connections between unlikely players.

- Nike, Inc. has never had interruptions in operations due to employee disagreements.

- The strategic implications of the successful human resources allow Nike, Inc. to have strong employee loyalty, which, in turn can create a decrease in costs of employee turnover.
- Department by both geographic divisions and product categories

- Create overlapping management responsibilities and a fluid leadership structure
Nike, Inc. initiated the formation of Business for Innovation Climate and Energy
Policy (BICEP) and SB&I “Lab” for sustainable innovation through external partnerships in 2009 thus creating an atmosphere and presence of being truly innovative.

Nike, Inc. was created on a foundation of innovation starting with the waffle iron inspired sole. This allowed traction with less material, resulting in a lighter weight shoe.

Nike Sports Research Lab (NSRL), designed to encompass the innovative ideas from athletes, designers, engineers and scientists, this team was created to develop solutions based on biomechanics, physiology, perception and athletic performance.
Strategic implications of successful innovation for Nike, Inc. will create resiliency when  problems occur. The creation of innovative solutions can further strengthen internal teams and in turn, have developed as a core competency.
- Globally recognized brand worth $16+ billion.

- Brand Names-Nike Golf, Hurley International LLC, Converse, Inc., Jordan Brand. Nike, Inc. tagline, “Just Do It” and their mission, “To bring inspiration and innovation to every athlete” and describing an athlete as “If you have a body you are an athlete” are all the foundations of developing their reputation and brand.
 A strong reputation further encourages and supports Nike, Inc.’s strategy of global exposure. Reputation of a brand and a company creates customer loyalty and customer lifetime value.
Goal to spread understanding of

21st century, successfully

corporate responsibility
into the heart of the
Greater level of
is required.
endorsements, and
quality products
enhance the
to the
customer’s demands
Most important is
total sales.
In respect to sustainability Nike is ensuring new
for the gross portion of the
Nike is
very fast
and the
is flying high.
Sustainable Competitive Advantage
Study Case – Nike’s Global Women’s Fitness Business : Driving Strategic Integration
The Management Strategic Concept and Cases Book
Nike Report - http://www.nikebiz.com/crreport/content
Hummels,H and Timmer, D.(2004) Investors in Need of Social, Ethical, and Environmental Information Journal of Business Ethics Jun 2004Vol.52, Iss. 1
Kaler, J. (2003) Differentiating Stakeholder Theories
Journal of Business Ethics Aug 2003.Vol.46
Rowley, T (1998) A normative justification for stakeholder theory Business and Society. Mar 1998
Welch, J.(1997) Business ethics in theory and practice: Diagnostic notes.
A prescription for value Journal of Business Ethics, Feb 1997.Vol.16,

Along the way, Nike acquired some great companies that extend their reach within and beyond sports:
Cole Haan,

sells dress and casual footwear and accessories
for men and women

Nike Bauer Hockey
manufactures and distributes hockey ice skates, apparel and equipment, as well as equipment for in-line skating, and street and roller hockey.

Hurley International,

designs and distributes a line of action sports apparel for surfing, skateboarding and snowboarding, and youth lifestyle apparel and footwear.

designs and distributes athletic and casual footwear, apparel and accessories.
Business is a



After Math and NIKE Today
Nike’s Revolutionary Support Sports Bra, The Considered 2K5 shoe and Nike+ Air Zoom Moiré, were recognized by I.D. magazine in its Best of Consumer Product Category.
#55 on Business Week’s Top 100 Places to Launch A Career list
Recognized in 2006, 2007 as well as 2008 on Fortune magazine’s 100 Best Companies To Work For list because of Nike’s employee benefits Aftermath and Nike Today
Acquired the sports apparel supplier Umbro
Ranked as being the Most Admired Company in America in the Apparel industry
Runner-up to Apple in Innovation
Topped the industry in long-term investment, financial soundness and social responsibility
Two popular products: Nike Air Hyperdunk and Nike Zoom Kobe IV
Released the Nike+ Sports Band in stores
Earned silver in the CLIO Awards for Nike+.
First on the Dutch Top 100 Best Brand Awareness list
Second in the European Football Sponsor Brands Top 20
Ranked number 1 for the ‚green score‛ and number 2 for the ‚reputation score‛ based on Newsweek’s Green Rankings
Named as one of the World’s Most Ethical Companies by the Ethisphere Institute
Ended being the official kit sponsor for the Indian cricket team (2006-2010)
Nike Pro Combat jersey collection was worn by teams from many Universities

Nike stated that 2/3 of its factories in Indonesia producing Converse products did not meet the company’s standards for the treatment of their workers
Named one of the best American companies for gay, lesbian, bisexual, and transgender workers
Ranked tenth on the Corporate Responsibility Magazine’s 100 Best Corporate Citizens List
Announced its intention of selling Cole Haan and Umbro
Earned the number 1 spot in the Climate Counts performance rankings in the Apparel/Accessories sector
Cleverly leveraged their recognizable logo and received brand identification at the 2012 Olympic Games
CEO Mark Parker announced the removal of Joe Paterno’s name from the child development center
Joined the (RED) campaign to prevent the transmission of the HIV virus from mother to child
Officially became the sponsor of the NFL
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