NIKE CORPORATION Introduction NIKE, world’s major public trader of athletic footwear and apparel, currently enjoys a 42% market share of the domestic footwear industry, with sales of $3.77 billion is dominating the US athletic shoe market. It designs and sells wide range of footwear and uniforms for variety of sports. The company has more than 700 retail stores worldwide and about 23000 retail accounts in US. Most of the manufacturing units are located in Asia, including Indonesia, China, Taiwan, India, Thailand, Vietnam, Pakistan, Philippines, and Malaysia. Major Competitor Adidas AG is the major competitor of Nike Inc. Adidas, is not completely different from Nike in terms of products they offers. Adidas is into the manufacturing and marketing of athletic as well as non-athletic footwear and apparel. Nike has a notable advantage when it comes to economies of scale. Adidas Group is second only to this company in terms of sales and market share. It enjoys 22% of the worldwide athletic footwear and apparel market. Source: Daily Finance Nike earned slightly less revenue of 19014M in the year 2010 as compared to 19176M in year 2009. It has 42% rises in its total net income in the year 2010 from 1486.7 to 1907.7M respectively (Nike income statement, 2010). On the other hand, Adidas Group had total sales of $15,889.1M in 2010 (Adidas income statement, 2010) which was remarkably low as compared to the sales of Nike Corporation. Core Competency The top notch athletic footwear companies compete with one another in terms of advertising; focusing on creating the brand image and the products they are trying to market (Drbul et al. 2006). Endorsing products with Celebrity marketing campaigns is the key component in which athletic shoe makers tries to differentiate their brands and associate their shoes with professional athletes and other celebrities to leverage brand image. The most remarkable of these relationships is between Nike and Michael Jordan. Despite Jordan’s retirement several years ago, the Air Jordan line is the huge source of profit and brand support for Nike (Kang 2006). The success of the Jordan and other celebrity endorsements has helped Nike to differentiate its products from its competitors especially Adidas whose brand image has so far failed to break the typical technical image. (Karnitschnig & Kang 2005). Nike employed unique distribution tactic in 2005 allowing its customers to design their own shoes. This personalization allows customers to choose colors, materials etc of their own choice to the shoes (Holmes 2006). Operations Strategy Nike is actively engaged in the outsourcing of its products to the Asian markets for over two and half decades. Their majority of output is produced by their factories in China, Indonesia and Vietnam. These production units are 100% owned by subcontractors, with the majority of their output consisting solely of Nike products. Nike has completely outsourced all of its operations but has kept only two main operations to in-house production- product designing and brand management. Inventory Management Nike’s inventory turnover ratio is 4.4 (Nike Inc,NYSE:NKE) which exceeds the industry average of 4.34 (Weygandt, 1996). A slight Reduction in the inventory level is required. Inventory turnover management will benefit Nike greater cash flows, reduced storage costs and less product spoilage. It can also reduce Nike’s inventory of out-of- fashion shoes and clothing. Nike employed MRP software helps the store managers to keep the track of the materials to be purchased through an online exchange result in signiﬁcant cost and time saving to the company (Shah, 2009). References Adidas: Income statement (2010). Retrieved on May 20, 2011 from http://www.hoovers.com/company/adidas_AG/stjyti-1-1njea5.html Dogiamis, G. & Vijayashanker, N. (2009) Adidas: Sprinting Ahead of Nike, Retrieved on May 20, 2011 from http://www.mcafee.cc/Classes/BEM106/Papers/2009/Adidas.pdf Drbul, Robert, et al. (2006, January). Textiles, Apparel & Footwear: Outlook for 2006. Lehman Brothers Dunsen V. S. (1998). The Manufacturing Practices of the Footwear Industry: Nike vs. the Competition, UNC - Chapel Hill, INTS 092 Dw Staff, (2006).EU Approves Adidas-Reebok Merger Retried on May 20, 2011 from http://www.dw-world.de/dw/article/0,,1870303,00.html Holmes, S. & Bernstein, A. The new Nike. (2004, September). Bloomberg Business Week, Washington. Retrieved on May 20, 2011 from http://www.businessweek.com/magazine/content/04_38/b3900001_mz001.htm Holmes, S. (2006). Adidas’ World Cup Shutout: U.S. Fans of Soccer’s Big Event Will See Only Adidas Ads on Television. Nike’s Response: A MySpace-style Site for Soccer Nuts. Business Week, pp. 106-107 Karnitschnig, Matthew & Kang. (2005, August). Leap Forward: For Adidas, Reebok Deal Capps Push to Broaden Urban Appeal; Known for Its Engineering, German Company takes on Nike in Lifestyle Market; Teaming Up with Missy Elliot. Wall Street Journal, p. A1 Kang, Stephanie. (2006, January). Sports Shoe Rivals Step Up. The Wall Street Journal. Nike (NKE) stock quote, Retrieved on May 20, 2011 from http://www.wikinvest.com/wiki/Nike_%28NKE%29 Nike Stock Performance, Daily Finance Retrieved on May 20, 2011 from http://www.dailyfinance.com/company/nike-inc/nke/nys/top-competitors Nike: Income statement (2010). Retrieved on May 20, 2011 from http://www.hoovers.com/company/NIKE_Inc/rcthci-1-1njea5.html Nike Inc,NYSE:NKE| ratios and returns, www.Forbes.com. Retrieved on May 20, 2011 from http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=NKE Shah, J. (2009, May). Supply Chain Management: Text and Cases, Prentice Hall Weygandt, J. J., Kieso, D. E., & Kell, W. G. (1996). Accounting Principles (4th ed.). New York, Chichester, Brisbane, Toronto, Singapore: John Wiley & Sons, Inc.
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