Nike is among the brands that can be called world recognized. Not many companies can be proud of such an accomplishment. Adidas, Sony, Mercedes Benz, BMW, and some others can be set in one line with Nike in terms of brand awareness. Considering the status of the company, the world’s recognized leader on the targeted market, the paper aims to analyze the article “Nike, Inc. – 2010” by Randy Harris, exploring the company’s history and background, product-market characteristics, the industry structure, the competitive environment, the company’s performance, the management/organizational structure, current problems and difficulties as well as ethics/leadership inside Nike.
History and Background
Nike’s history starts in 1964 as the small venture of two men from Beaverton, Oregon. Back then, it was known as Blue Ribbon Sports and was founded by Bill Bowerman and Phil Knight, a track and field trainer and a talented runner for middle distances respectively. The Nike brand was introduced in 1972. The company owners decided to take the name of the Greek goddess of victory. The world-recognized ‘swoosh’ logo was developed by Carolyn Davidson, a student mastering design at Portland State University. The company obtained the Nike name officially in 1978. Nike gained a 50% market share, and in the same year, the company went IPO. In 1985, the company introduced Air Jordan shoes, the basketball shoes under the name of the best NBA player Michael Jordan. The history of company acquisitions is as follows: Bauer was acquired in 1995, Hurley in 2002, Converse in 2003, Starter in 2004, and then divested in 2007, and finally Umbro Ltd. became the member of Nike brands’ family in 2008.
Nike is the largest company in the world that designs, markets, and distributes the athletic footwear as well as athletic apparel. There is a wide variety of accessories, sports-oriented apparel, and equipment designed, marketed, and distributed by the company. Today, Nike owns such brands as Nike and Nike Golf as well as several subsidiary companies such as Umbro Ltd., Converse, Cole Haan, and Hurley International.
The company operates on the market of the following categories of products: equipment, footwear, and apparel. Most footwear products of Nike are designed for the usage for athletic purposes, but many customers (preferring Nike brand) wear footwear for leisure or some accessory of fashion style. The company pays great attention to the issue of quality of their footwear production as well as design, so it has the major part of the market share gained by Nike, constituting about 70% of total sales in the USA. Apparel and sports equipment gains are less impressive, and they constitute about 25% of total sales in the U.S. market share each.
Applying Porter’s Five Forces model of competition, the structure of the industry can be described as follows. Threats of new entrants are not determining for Nike’s position on the market because Nike is the leading company on it, and new entrants would not be able to compete significantly. Threats of substitutes cannot influence the position of the company on the market as well because the company develops in the rapid style, following the needs of the customers and providing the demanded products on time. The bargaining power of buyers has influence from minor to minimal since customers’ loyalty is at the high level, and the Nike brand is widely recognized for its high quality, diverse price, and flexible approach to upcoming trends. The bargaining power of suppliers cannot influence Nike significantly, as the company has a rather diversified pool of suppliers and outsourced subcontractors, producing Nike’s goods. Finally, the most determining force is rivalry among the existing competitors because the competition is rather high on this market.
Nike has rather strong competitors on the market such as Adidas and Puma. It should be noted that Puma is a rather distant competitor with ambitious plans, considering the market share it has on the U.S. market but this company is capable of providing quality and innovative products, so its role of the competitor is justified. The major competitor is Adidas, the German-originated worldwide designer, marketer, and distributor of products, very similar to those that Nike has in its portfolio. Adidas and its subsidiary company, Reebok, as well as TaylorMade Golf, have about 8 billion Euros in net sales worldwide, so the company can be called the direct and very serious competitor to Nike.
The company’s performance in 2009 resulted in about 19 billion U.S. dollars. In the United States, Nike sells products to over than 25,000 retail stores. There are 338 retailers in the USA selling for Nike, including 140 stores, belonging to Nike factories. The U.S. sales of Nike constituted 43% of company’s total revenues in 2008. Nike sells to almost 27,000 accounts of retail sales abroad along with 336 outlets of retail sale abroad. The company generated 66% of its revenues in 2008 outside the USA. Five subsidiaries of Nike generated about $2.4 billion in total as of 2008.
The management structure of the company is called by Nike as “a collaborative matrix organization” (Harris 17). Nike has its founder, Phillip H. Knight on the position of Chairman of the Board still as well as the group of experienced top managers, such as Mark G. Parker, Charles D. Denson, and Donald W. Blair. The company has five subsidiaries operating under their own brands.
Current Problems and Difficulties
The demand for Nike products slows down on the core market, (the USA, Western Europe), making the company aggressively enter the markets of Brazil, India, Eastern Europe, and China. The competition is much stronger on these markets as Adidas has rather strong positions there. Nike faces certain challenges in increasing its presence online the sales via this most perspective channels are not too high yet.
Nike has all production capacity outsourced, diversifying it extensively. The company’s products are manufactured in the developing countries and, in some cases, certain ethically controversial issues have been raised such as the exploitation of children labor and unfair treatment to the employees ay such factories. However, it should be said that Nike as the responsible company and the leader on the market has made everything possible to clarify all issues of such kind to eliminate the basis for further allegations. The company is an effective and goal-oriented company with the great focus on healthy competition, allowing it to develop and grow further.
Summing up, the paper analyzed the article “Nike, Inc. – 2010” by Randy Harris, explored its history and background, product-market characteristics, the industry structure, the competitive environment, the company’s performance, the management/organizational structure, the current problems and difficulties as well as ethics/leadership inside the company. Nike has a rich history, very promising perspectives of the development, and a smart approach to production in terms of diversification of its production outsourcing assets.
Harris, Randy. Nike, Inc. – 2010. Case Study. Print.