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I. General Description

       Michael Jordan, Tiger Woods, Mia Hamm. Many of today’s sports icons are associated

with arguably the greatest footwear and apparel company of all time. Nike has become one of the

most recognizable companies in the entire world in a period of only 25 years. With a logo that

rivals McDonald’s Golden Arches, endorsements from the likes of Michael Johnson, and a

leader that created a Fortune 500 company from a waffle iron, Nike not only dominates their

industry, but also has become a major trendsetter in American popular culture. However,

criticism has accompanied this success. From questions about its labor practices in Southeast

Asia to defending itself against charges of corporate invasion of college campuses, Nike has

shown it is not immune to the challenges faced by many global corporations.

Principle Products and Services

       From the time University of Oregon Coach Bill Bowerman designed the first modern

long distance running shoe to today when Nike’s products include everything from sunglasses to

softball bats, Nike has continually been a revolutionizing force in the industry. Founders Phillip

Knight and Bill Bowerman began with 200 shoes in 1963. By 1979, only one year after Nike,

Inc. began, it was the number one running shoe with nearly 50 percent of the U.S. market

revenues (Appendix A). For over 17 years, one of Nike’s principle products has been the Air

Jordan basketball shoe. In 2002, Nike offers a variety of products including shoes, apparel, and

equipment, has 15 Nike towns, and provides the apparel for many college teams (Appendix B).

Primary Competitors

       “Nike’s share of the worldwide athletic footwear market grew 54% from 22.5% in 1991

to 34.6% in 2000, or more than double its nearest rival” (Appendix C-2). For many years Nike

was the main player in the shoe industry; however, with the rise of demand for shoes in the low
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to middle price range, the company has faced increased competition from companies such as

Reebok, Adidas, New Balance, and others. Reebok challenged Nike in professional licensing by

signing an apparel deal in August 2001 with all NBA, WNBA and NBDL teams. Aside from

other athletic shoe companies, Nike also faces competition from companies that manufacture

boot style shoes such as Doc Martin (Appendix C).

Financial Indicators

       From following Nike’s stock price the past three months, we noticed that while the stock

price did not grow exponentially, it also did not drop below our purchase price (Graph A). Nike

as a company has faced this situation over the past four years. Total revenues reached 9.187

billion in 1997; however, in 2001 revenues had only increased to 9.489 billion (Appendix D-11).

In a letter to shareholders, CEO Phil Knight said, “During that time we have been a growth

company that has not grown” (Appendix D-Chairman's Letter). Despite this lack of growth, the

release of Air Jordan XVII Experience in January helped stock prices rise immediately

(Appendix E-1). Shares rose $1.90 in February when Nike purchased a teenage lifestyle brand

Hurley International, in an attempt to penetrate a teenage market it had been struggling in

(Appendix E-2).

Corporate Identity Systems

       Nike easily has one of the most recognizable logos in all of America. The “Swoosh,”

designed by a graphic design student, only cost Knight $35. Ironically, Knight told the graphic

designer “I don’t love it, but it will grow on me” (Appendix F). The design is memorable, simple

in form, workable in all sizes, and invokes strong signal value. The slogan “Just Do It” is as

universal as Nike’s logo. Nike describes the slogan as “a call to action, a refusal to hear excuses,

and a license to be eccentric, courageous, and exceptional” (www.nikebiz.com).
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II. Reputation

Strengths

Strong and Meaningful Reaction to Labor Criticism:

       One of the largest issues at Nike is the global concern over its labor practices. In

response to these concerns, Nike has taken widespread action to improve working conditions,

wages, and workers’ education. Nike sets its wages overseas relative to the minimum wage of

the country where the factory is located. In most cases, entry-level contract workers make at least

25 percent more than is required by their local government. According to Nike, these wages

usually enable its workers to meet basic needs and assist in supporting family members to some

extent as well (Appendix G-1). Nike has also disclosed the names, addresses, and contact

information for factories where its collegiate apparel is made to help dispel public scrutiny about

its labor practices. Additionally, Nike is involved with federal organizations that mandate fair

labor practices such as Apparel Industry Partnership, Global Alliance, and Fair Labor

Association. Nike monitors its factories around the world under the auspices of the FLA

(Appendix G-5).

High Quality Products and Good Overall Reputation:

       A survey of 95 UNC students found that 70 percent consider the quality of Nike products

to be above average while only 5 percent describe the quality as below average (Graph B). Only

11 percent felt that Nike’s overall reputation is below average. 37 percent felt its reputation is

average, while 48 percent fell Nike’s reputation is above average (Graph C). We hypothesize that

these findings are indicative of the general attitude towards Nike products.
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Management and Leadership of Phil Knight:

       To guide the company past a threatening sales slide in 2001 CEO Phil Knight recruited

and trained a management team that was great in numbers, skill level, and experience. Since

promising increased sales over a year ago, Knight’s vision for the management team has been to

revitalize the company’s “core revenue category,” which will spurn growth especially in the US

footwear market (Appendix D-Chairman's Letter). In an act of kindness, Knight donated $23.3

million in stock last March to an undisclosed recipient. Knight is regarded as a generous

benefactor, giving to a wide variety of causes and charities (Appendix E-3).

Name Recognition and Effective Marketing:

       Nike considers its corporate identity systems to be one of its most valuable assets, and the

trademarks are registered in over 100 countries (Appendix D-7). Furthermore, Nike’s ads are

some of the most memorable. Television ads featuring Spike Lee, Bo Didley, Michael Jordan,

and even Bugs Bunny are remembered clearly decades later. Nike recently took a leap of faith

when it ran a non-stop one-minute commercial during the Winter Olympics in Salt Lake City

(www.nikebiz.com). The risk paid off, and the ad has been publicly regarded as a success. By

combining creative, memorable ads and a logo that is instantly recognized around the world,

Nike has gained the spotlight in front of a global audience.

Weaknesses

Poor Communication of Labor Practices:

       The aforementioned survey found that people generally feel that Nike’s labor practices

are unfair. 50.5 percent described the fairness of Nike’s labor practices as below average, and 21

percent described it as average. Only 10 percent said it was above average (Graph D). Nike’s

labor practices have also been criticized in public protests around the country and in letters to the
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editors of major newspapers. However, research shows that Nike has taken significant action to

ensure a good, fair work environment. This data suggests that Nike has not done a good job

informing the public of the positive actions it has already taken concerning labor. Nike’s image

was also harmed by allegedly giving factories advance warning of monitor visits. In

communicating to the public, Nike has done a poor job of expressing a genuine concern for the

well being of its factory workers. Critics say that Nike has foolishly handled accusations of

unfair labor practices as a public relations matter instead of a humanitarian one (Appendix H).

Lack of Affordable Shoe Lines:

       CEO Phil Knight has acknowledged that one of Nike’s pitfalls is its neglect of mid-price

range shoes (Appendix D-Chairman's Letter). With its popular Air Jordan shoe priced at $200

and a myriad of other designs priced well over $100, Nike has failed in its appeal to a large

segment of potential buyers who want to buy shoes in the $60 to $85 range. Promotion and

development of shoes costing less than $90 will prove crucial to the growth of Nike’s shoe sales,

especially in the United States (Appendix C).

Uninformed Factory Workers:

       Although Nike factories are held responsible for informing workers about the code of

conduct and their rights as workers, independent research shows that a great majority of Nike’s

approximated 500,000 factory workers do not understand their rights. Furthermore, workers do

not believe that factory owners are trustworthy enough to solve any complaints that they have

(Appendix H). Educating workers about their rights under Nike’s code of conduct is essential to

the well being of its factory workers.

Opportunities

Increased Sales due to the Strengthening Economy:
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       The stock market experienced a serious decline after the September 11 terrorist attacks.

However, the economy has been improving and the stock market has almost returned to its pre-

September 11 average. Analysts are forecasting profits to rise 16.5 percent for the year

(Appendix E-4). Nike has an opportunity to increase its sales and profits because of the

improving economy.

More Positive Public Perception of how Nike is Socially Responsible:

       Nike representatives are very aware of their ability to give back to the communities

where its factories and offices are located. Through its community donations program, Nike

“donates excess inventory, sample products, and used office equipment – including computers –

to non-profit or charitable organizations” (Appendix I). Nike also supplies shoes, apparel, and

money to disaster relief funds. For example, Nike donated $410,000 for the Taiwan Earthquake

Relief effort in 1999. Nike also provides college scholarships for underprivileged youth and

gives money to other organizations through the Nike Foundation (Appendix I). Even though

Nike lists most of these charitable actions on their website, it has not publicized these donations

as much as other companies. The public’s perception of Nike could be greatly improved if more

people were aware its charitable acts.

Growth Through Increased Presence in the Mid-to Low-Priced Shoe Market:

       In the 2001 annual report, Phil Knight discussed the company's stagnant growth, and

attributed it in part to the fact that "we forgot to be competitive in mid- to low- priced shoes in

the US" (Appendix D-Chairman's Letter). Many of Nike's new lines of shoes are so expensive

that they exclude many potential customers. The Nike Shox Griffey sells for $120, while the Air

Jordan XVII costs customers $200. Many of Nike's competitors’ new shoe lines range from $60
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to $85. By becoming competitive in this price range, Nike can lure away some of its competitors'

customers and jumpstart growth by increasing sales.

Threats

Increased Awareness of Human Rights and Worker Fairness Deficiencies:

       There have been an increasing number of organizations who work to ensure human rights

for all people and to promote fair labor practices over the past ten years. Due to this increased

awareness, many companies have been accused of having sweatshops and other questionable

labor practices in the poorer nations where they manufacture their products. Although Nike pays

above the minimum wage of every country where it has factories, it has been accused of not

paying its workers enough. These accusations, and the resulting negative public perception of

Nike's labor practices, have and could continue to blemish the company’s reputation.

Growing Competition:

       Even though Nike reported annual sales of over $9 billion in 2001, they still face

increased competition from other major shoe and athletic equipment companies. Nike does not

dominate shoe sales like it did five years ago. Other companies such as Reebok, Adidas, and

New Balance have attracted some of Nike's past customers and look to continue their upward

sales trends (Graph E).

Competitors Are Attracting Many of the Female Shoe Buyers:

       A Morgan Stanley report recommended that Nike “make its merchandise appeal to

women since many (women) favor its rivals’ products” in order to increase sales (Appendix C).

Nike’s competitors have been actively attempting to attract female customers, while Nike has not

focused as much on this segment of the population. In its ad campaign “It’s A Woman’s World,”

Reebok focuses all of its attention on women. Many of Nike’s advertisements center on
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expensive men’s shoes and neglect to advertise female shoes. Women, therefore, are turning to

other shoe companies for their athletic shoe needs.

Mounting Disapproval of the Alleged "Corporatization" of College Athletics:

       Over the past few years there has been increased concern over the "corporatization" of

college athletics. Many students, faculty, and alumni of universities are questioning the benefits

and consequences of contract deals between large corporations and athletic programs (Appendix

E-5). Although these contracts pay for uniforms, shoes, and some of the coaches' salaries, people

fear that universities will begin to lose the importance of higher education by signing deals with

large corporations that use athletes as running advertisements in exchange for a large fee. Nike

could see a decline in the number of universities that will agree to these multi-million dollar

contracts if this disapproval continues to increase.

III. Recommendations

       Nike has numerous strong traits, but there are areas that have potential for improvement.

Nike has faced criticism about its overseas labor practices, and although they have developed

programs to fight these labor criticisms, Nike should follow its own advice and “just do it.” In

other words, Nike needs to implement the labor programs they have already devised. Beyond

the labor issue, Nike has neglected two important publics: women and shoe buyers seeking a

mid-priced shoe. In order to realize their potential sales, they must actively pursue these two

publics. The following objectives aim to improve both labor concerns and domestic shoes sales.

Objective I

To increase positive public perception of Nike’s labor practices by 20% by April 16, 2003.

Strategy 1: Increase communication of positive steps Nike is taking with its labor practices.

Target publics: 1) Media
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                2) Consumers who are aware of the labor issues such as university students and

                activist organizations

Tactics

         Create fact sheet addressing minimum wage discrepancies from country to country, and

          distribute this information to news sources.

         Circulate “Letters to the Editor” from Nike’s Director of Communications explaining

          and highlighting positive aspects of Nike’s labor practices.

         Bring in a visible Nike representative to visit college campuses and effectively address

          labor issues among students.

         Create focus groups to discuss the issue on campuses nation wide to more thoroughly

          address their concerns.

         Distribute a video news release promoting Nike’s efforts in the global community,

          including how the company ensures safe and fair working conditions and how it gives

          back to the surrounding communities.

Strategy 2: Make changes to improve Nike’s current labor conditions.

Target Publics: 1) Government agencies and immediate supervisors of Nike’s

                    foreign laborers

                 2) Nike employees



                3) Organizations (like Students for Economic Justice and the Global Exchange)

                    that are outspoken against Nike’s labor practices
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Tactics

         Ensure that factories do not receive prior notification of upcoming visits to monitor labor

          practices.

         Provide employees with time and money to enroll in the educational courses Nike offers.

         Create an anonymous notification system that would protect workers that blow the

          whistle on inadequate working conditions.

         Immediate supervisors must specify and inform employees of Nike’s code of conduct

          and their labor rights immediately upon hiring said employees.

Objective II

To increase American shoes sales by $100 million by April 16, 2003.

Strategy 1: Establish better presence in the affordable shoe market.

Target publics: 1) Media

                 2) Customers looking to spend less than $85 on shoes

Tactics

         Develop television and print advertisements that promote Nike’s Presto Line of shoes,

          which are priced at $60 to $85.

         Aggressively target budget consumers by offering sales promotions and discounts on

          lower-priced Nike shoes.

         Build a stronger relationship with moderately priced retailers by sending sales

          representatives to stores.

         Increase number of Nike factory outlet stores that sell discontinued or blemished

          products.

Strategy 2: Establish a competitive presence among female buyers.
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Target publics: 1) Media

                 2) Female consumers, both potential and real

Tactics

         Create advertisements that showcase Nike’s female shoes by using professional athletes

          and non-celebrity females who use Nike products.

         Develop a shoe named after a female celebrity, such as Mia Hamm, that would be

          comparable to Air Jordan’s.

         Actively pursue more female athletes for endorsements and advertisements by extending

          competitive contract offers.

				
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