Industry Analysis: Nike, Inc.

Industry Analysis: Nike, Inc. By Team 1 Alex Jouganatos, Shawnee Moreland, Matthew Pastrano, Mami Yamamoto

Company Overview • Leader in design, development, marketing, and distribution. • They cover athletic clothing, footwear, equipment, accessories, and services worldwide.

Founded in 1964 in Oregon by Phil Knight and Bill Bowerman. • Products include running, NIKE, basketball, the Jordan brand, football, men’s training, women’s training, action sports, sportswear, and golf.

Major strength is partnership and licensing deals with many collegiate and professional athletic programs. • 1 billion dollar deal to serve as the official apparel provider of the NBA, WNBA, and NBA development league for the next 8 years.

wholly owned subsidiaries such as Converse Inc., which designs and distributes casual footwear, apparel, and accessories. • Converse sales was accounted for 5.94% of overall company earnings.

Competitive Advantages • Industry top competitors: Adidas and Under Armour • Adidas’ reign on soccer and the world cup: Adidas’ stock skyrockets about 7 percent every year around the world cup • Nike has been heavily investing in the world cup since 1994 but is still a step behind Adidas • Under Armour focuses more on usefulness over branding, which in itself is a brand • Under Armour took on Nike’s “Just Do It” mantra • Nike is the most successful company out of the three

Situation Analysis • Inventory T.O shows how quickly Nike turns its inventory within the year, Nike’s ratio represents that they have enough supplies to meet the demand, while not keeping obsolete inventory • Nike has increased their company size each year and the receivables ratios has increased each year, which is a good indicator that the sales and collections are moving proportionally • Payables T.O represents how quickly Nike is paying its obligations to suppliers and manufacturers, a higher ratio indicates that Nike is paying off its Accounts Payable very quickly given the size of the company

Revenue & Gross Income Comparison past 5 yrs • Nike is first in Sales Revenue and GI, Adidas second and Under Armour last • Nike has greater depreciation expense than Adidas and Under Armour which indicates that the NI for the company will be lower and not accurately represent how much farther ahead Nike is of its competition

Business and Economic Characteristics • 60% of sales are international. • China is a huge market place for Nike. • “During times of economic challenge, consumers will go to brands that they trust and can connect with. We have not seen the economy have a dramatic impact on the sales of our products, not just in the high end, but also in the mid-priced range” • Nike is one of the leading players in athletic footwear, apparel and sports equipment.

Driving Changes • Nike uses technology as something to impact change. • Online website • Sole of the shoe • Self lacing sneaker

Future Predictions Expansion in Asia? • Nike has focused recently on expansion in China and other emerging markets. • 12% revenue in China • Grew at a rate of 11.94% from 2016 to 2017. • The company is trying to make up for less impressive growth in North America which is 3.06% • Nike will likely to keep their focus on these geographic area to expand their business and popularity.

Stop making equipment? • Equipment has the smallest contribution to their overall revenue which is 4%. • Equipment business is focused in North America, and it has negative sales growth. • Nike stopped making golf clubs recently, because the company was having hard time competing with golf specialized companies. • It is important to focus on what the company is good at, and it has negative sales growth. The company will likely to stop making equipment in the future.

Focus on Nike owned retail store and online web page? • The significant change in distribution channels and in customer preferences. • Brings unique opportunities and risks to the industry. This change is encouraged by the increasing convenience of online shopping. • Major athletic footwear and apparel wholesaler Sports Authority declared bankruptcy in 2016, and also Foot Locker and Finish Line have been struggling in their business. This will decrease Nike’s distribution options. • Nike will likely to shift their focus on their Nike owned retail store or their online web page in the future.

Invention of new products? • Nike’s new competitors. Some of the brands who are less associated with the athletic footwear and clothing segment has started to take some market share. • Aasic recently announced that they will become a health and wellness brand addition to their shoe segment. • LuluLemon has captures a significant market share of women’s athletic apparel. • Nike and its main competitors will likely be forced to choose which areas to compete on. • The market is becoming red, and Nike will be forced to invent new products to create blue ocean. • Sell their products at a premium instead of discounted price, it will have positive impact on their margins.

Renting out their apparel products? • Potential long term trend in apparel is that renting vs owning. • Owning apparel is still the popular way, but renting apparel is becoming more popular recently. • Rent the Runway was a 125% increase in business over last year, and have added many brands into their collection. • Nike might start renting out their clothing in the future.

Industry Attractiveness • Nike is a global brand with instant name recognition • One of the most universally identifiable logos • Nike had a modest start up being founded with only $1200 in the Bank Account of Phil Knight and is now a 3.75-billion-dollar market cap company • Under Armour had a humble founding as well being started by a former college football player making shirts in his Grandmother’s Basement • This Industry Attracts people that see a need for product of a concept that has not been done before and the chance to spark innovation • An opportunity to make a product that is new and innovative is what makes this industry so attractive

Industry Analysis: Nike, Inc.