Nike Strategy and Business Model Analysis

NIKE, INC. Case

Kyle Thibodeau

Strategy and Business Model Analysis

NIKE, Inc, is a multi-national company that creates athletic inspired apparel, footwear, and accessories. NIKE, Inc.’s mission is to bring inspiration and innovation to every athlete in the world.  They have a very unique business strategy, which is focused on sustainability and maximizing efficiency, while producing high quality athletic gear. Their current strategy is feasible based on the continuing, broad-thinking, innovation that the company prides itself on. NIKE, Inc. is currently creating revolutionary products that effectively utilize scarce materials. NIKE, Inc.’s focus on sustainability has not only effected the environment, but also their product costs. Because they are using fewer materials, creating less waste, and changing the manufacturing process their costs have significantly dropped, which has increased their profit margins. Currently, their competitive advantage is a combination of their quality, revolutionary products, and their reduced costs. In the future, when more materials are becoming scarce, NIKE, Inc. will continue to flourish because of their lean manufacturing and innovation, causing them to sustain their competitive advantage.

Financial Analysis        

NIKE, Inc.’s financial performance has been improving over the years from increased revenues and decreased cost of goods sold. From 2013 to 2014, NIKE Inc. has been able to grow revenues from $25.3B to $27.8B. Additionally, the company has been able to reduce the percentage of sales devoted to cost of goods sold from 56.41% to 55.23%. This has allowed NIKE, Inc. to have a higher gross margin for each of their products due to their innovative design, process and materials. In 2014 alone, NIKE Inc. has a 20.8% market share in athletic footwear and is predicted to increase further. Traditionally NIKE Inc.’s business model is to supply athletic apparel and footwear to athletes. However, one of their newer products, the FuelBand, is an example of how their innovations created revenue. The FuelBand is a tech band that keeps track of athlete’s performance information. It is estimated that the FuelBand had added over $30M to their revenues. In 2013 NIKE, Inc. created a water free dying facility that would reduce water consumption per shirt by 30 liters and create a more consistent coloring. This energy efficient, eco-friendly way of dying is one example of how NIKE, Inc.’s innovation not only creates superior products but also eliminates costs.

Stakeholder Analysis I

• Customers: The customers of NIKE, Inc. are interested in purchasing innovative, quality active wear that will enhance their performance. Increasingly consumers are interested in “green” products that are environmentally friendly.
• Upper Management: NIKE, Inc.’s upper management is focused on sustainability and following out their innovation and sustainability vision. However, their main priority is to increase the financial position of NIKE, Inc.
• Creditors: The creditors are focused on NIKE, Inc.’s financial performance over anything because they want to be compensated for their loans/investments.
• Suppliers: NIKE Inc.’s suppliers are interested in making money by selling materials and goods to NIKE Inc. They also want to maintain a good relationship with NIKE, Inc. to ensure future sales.

Stakeholder Analysis II

There is a divide in what the stakeholders in NIKE, Inc. are looking to receive from them. Creditors and Suppliers are not concerned with NIKE, Inc.’s sustainability plan, but are more concerned with their financial performance. They both are looking for compensation for their goods and services. The upper management and the customers are both interested in sustainable business and their quality product. However, upper management is looking to make as much profit as possible, where the consumer is looking to purchase the best quality shoe at the lowest possible price. If NIKE, Inc. was to shift their focus even more to sustainability and less to financial performance they could potentially upset creditors, suppliers, and upper management. If NIKE, Inc.’s financial performance were to decrease they may not be able to pay for supplies, loans, or even salaries. Currently, NIKE, Inc. is successfully balancing their sustainability goal with their financial performance goals.