Nike's Strategic and Financial Position Analysis Capstone Project

Nike's Strategic And Financial Position Analysis

Nike is a globally recognized multinational corporation founded by the Stanford Graduate School of Business graduate, Phil Knight, and Bill Bowerman who was the track and field coach at the University of Oregon. The two appear to be a natural fit as each hailed from a background that would appreciate the underlying design that goes into creating a quality running shoe.

Nike's global operations in aggregate employ a number greater than 30,000 employees throughout a range of services and job functions. A fraction of that aggregate is employed at the company headquarters in Beaverton, Oregon. According to www.nikebiz.com, "Nike employes more than 36,000 people globally. Our Nike World Headquarters located in Beaverton, Oregon is home to more than 7,000 employees. For the fiscal year ending May 31, 2010, we reported revenues of $19.0 billion." (www.nikebiz.com/company_overview/facts.html)

The Nike Mission Statement

"To bring inspiration and innovation to ever athlete in the world. If you have a body, you are an athlete." -- Bill Bowerman

According to www.nikebiz.com, "Bill Bowerman was a nationally respected track and field coach at the University of Oregon, who was constantly seeking ways to give his athletes a competitive advantage. He experimented with different track surfaces, re-hydration drinks and most importantly -- innovations in running shoes. But the established footwear manufacturers of the 1950s ignored the ideas he tried to offer them, so Bowerman began cobbling shoes for his runners." (www.nikebiz.com/company_overview/history/1950s.html)

The mission statement is clearly reflective of Bowerman's past as a track & field coach. This innate ability to see the athlete in all humans is what came naturally to Bowerman. To see an ability where others would consider no ability exists, or perhaps not as much as what Bowerman sees. Tiger Woods is an example of the talent Bowerman saw in an unproven individual prior to Tiger's opportunity to 'wow' the world in his first Masters Tournament.

Additionally, according to www.nikebiz.com, "Phil Knight was a talented middle-distance runner from Portland, who enrolled at Oregon in the fall of 1955 and competed for Bowerman's track program. Upon graduating from Oregon, Knight earned his MBA in finance from Stanford University, where he wrote a paper that proposed quality running shoes could be manufactured in Japan that would compete with more established German brands." (www.nikebiz.com/company_overview/history/1950s.html)

In accordance to the mission statement, the background of Knight and Bowerman would be critical to the emergence and subsequent dominance of the Nike brand in the running shoe industry. The sneaker design set Nike apart early on to the point where a brilliant marketing scheme would catapult the brand beyond the popular Converse and Puma brands.

The strategy of Nike ostensibly may be summed up on one word, innovation. Nike's inherent success is attributable to its ability to innovate at every corner to create a strategic advantage between its operations and that of the competition. Although some of its innovative ideas and advertising promotions did not work to the successes of previous ideas, the Nike strategy remained geared toward innovation.

According to www.nikebiz.com, "Innovation is at the heart of NIKE, Inc.'s business growth strategy. Our relentless focus to be better helps us create the world's most innovative products for consumers across the globe. This same philosophy and determination is driving change in how we approach corporate responsibility in today's marketplace. Years ago, when we started working to improve the labor, environmental and social impacts of our business model, we were largely driven by a need to manage risk. Today, our corporate responsibility approach has evolved from focusing on risk management, philanthropy and compliance to one that utilizes our natural focus on innovation to transition NIKE, Inc. into a business that is more sustainable, by which we mean that it brings people, planet and profits into balance for lasting success." (www.nikebiz.com/crreport/content/strategy/2-1-1-corporate-responsibility-strategy-overview.php?cat=cr-strategy)

Additionally, according to www.nikebiz.com, "To fulfill these demands, we must succeed in a world where natural and human resources are constrained. In the future, issues ranging from peaking oil prices, climate change mitigation and population growth to the decreasing availability of natural resources could impact our consumers and our business. As the world moves to a low-carbon economy, we see potential impact to labor forces, working conditions, communities, development, youth, sport, supply chains, products and more." (www.nikebiz.com/crreport/content/strategy/2-1-1corporate-responsibility-strategy-overview.php?cat=cr-strategy)

Nike has "defined three core strategic questions." (www.nikebiz.com/crreport/content/strategy/2-1-2-changing-world-urgent-challenges.php?cat=cr-strategy These three questions are provided below.

1.) What new business concepts could enable NIKE, Inc. To thrive in a sustainable economy?

2.) How do we create a road map for evolving to a future state and solve the challenges preventing us from getting there?

3.) How do we continue to evolve and improve our current model during the transition?

Ideas such as clean running and efficiently operating factories that harness renewable energy resources to generate power not only for their facility, but for the surrounding community perhaps provides the most 'bang for the buck' in terms of investment and the creation of Goodwill.According to Sroufe, Liebowitz & Sivasubramaniam (2010), "One of the biggest blunders in leading change toward sustainability is the failure to institutionalize sustainability within the firm (Doppelt, 2003). If the internal policies and practices are inconsistent with the needed sustainability culture, "the risks are high that old thinking and behavioral patterns will eventually rise up and overwhelm efforts to adopt more environmentally and socially responsible paths" (Doppelt, 2003, p. 36). We recommend an active and early role for HR to help create the systems and processes (for example, selection, training and reward systems) to reinforce the wide range off sustainability initiatives and institutionalize the change." (Sroufe, Liebowitz, Sivasurbamaniam, 2010)

A road map for the organization to facilitate a future state for the organization is inherently challenged by its access to resources and to human capital that can propel the organization forward to achieve its goals. Nike seeks to establish a rather ubiquitous goal of inspiring and innovation to every 'athlete' around the world. Therefore, the idea is that every human on the planet must have a pair of Nikes.

During the transition to this future state of enabling the future athlete by providing free or low cost sneakers to populations that would normally not be able to afford a pair of the relatively expensive sneaker, Nike is likely to increase R&D expenditure relative to the new markets to which further sustainability and market engagement is occurring. The evolution and improvement of the current business model is a function of the inputs received from the external environment to the organization.

Nike's strategy and impact in future affairs is an indirect function of the company history as written by Knight and Bowerman. Nike was originally and officially named Blue Ribbon Sports as this was the company that originally sold the first orders of the brand of Knight and Bowerman. According to www.nikebiz.com, "They shook hands to form Blue Ribbon Sports, pledged $500 each and placed their first order of 300 pairs of shoes in January 1964. Knight sol the shoes out of the trunk of his green Plymouth Valiant, while Bowerman began ripping apart Tiger shoes to see how he could make them lighter and better, and enlisted his University of Oregon runners to wear-test his creations. In essence, the foundation for what would become Nike had been established." (www.nikebiz.com/company_overview/history/1960s.html)

The beginnings of the company essentially led to what later became known as Nike. The pair of Knight and Bowerman wanted to move beyond distributorship to create their own brand. According to www.nikebiz.com, "They selected a brand mark today known internationally as the "Swoosh," which was created by a graphic design student at Portland State University named Carolyn Davidson. The new Nike line of footwear debuted in 1972, in time for the U.S. Track & Field Trials, which were held in Eugene, Ore." (www.nikebiz.com/company_overview/history/1970s.html)

Indeed, the famed 'Swoosh' was not an original idea of the founders. This is important as many businesses whose founders profited from the venture had a direct idea with regard to a logo or a methodology of performing an operation that led to the highly profitable business model. The focus on the performance of the athletic shoe was an important innovation to the founding group that is a function of understanding the needs of various types of athletes and the type of athletic footwear the athlete do require.

By the 1980s, the company had espoused itself as a formidable presence in the athletic shoe market. According to www.nikebiz.com, "Nike entered the 1980s on a roll, thanks to the successful launch of Nike Air technology in the Tailwind running shoe in 1979. By the end of 1980, Nike completed its IPO and became a publicly traded company. This began a period of transition, where several of Nike's early pioneers decided to move on to other pursuits. Even Phil Knight stepped down as president for more than a year in 1983-1984, although the remained the chairman of the board and CEO." (www.nikebiz.com/company_overview/history/1980s.html)

The obvious success of the Nike brand was still in a nascent phase of its eventual peak….....