Strategic Plan:

Incorporation Report
Company Overview
Nike, Inc. is a multinational corporation that was established in 1964.
Phil Knight and Bill Bowerman founded the firm that was initially known
as Blue Ribbon Sports. However, it changed its name to Nike
Incorporation in 1971. Its head office is located at Beaverton, Oregon.
Since its inception, Nike, Inc. has successfully penetrated the apparel
and accessories industry.

The firm specializes in designing, developing, and manufacturing

apparel, footwear, and accessory products. Independent contractors,
most of whom are located outside the US, produce its products. Nike
primarily designs it products for athletic purposes. However, a
significant proportion of its products are worn for leisure and casual
reasons (Nike Incorporation, 2013).

Currently, Nike, Inc. is renowned as the largest manufacturer and

supplier of athletic shoes and sports equipment in the world. The firm
distributes its products through independent distributors, retail
accounts, and company-owned retail stores. The firm has also adopted
the concept of online marketing.

Nike’s success over the past decades has arisen from new product
development and commitment towards marketing. Between 1990 and
1999, Nike extended its market reach by venturing into the sports
industry. The firm started designing customized sports apparel for
specific teams such as the Brazilian National Team and the United
States men and female national soccer teams.

Moreover, the firm adopted the concept of product endorsement by

contracting sports celebrities. In 1995, Nike contracted Eldrick ‘Tiger’
Woods to be its marketing ambassador (Nike Incorporation, 2013).

By the end of 2013, Nike had a human resource base of over 48,000
employees in all its stores that are located in different parts of the
world. The firm considers human capital one of the most valuable
aspects in achieving operational efficiency. Subsequently, the firm has
nurtured an effective employee relationship.

Mission
Nike, Inc. intends to provide athletes around the world with innovative
and inspiring products.

Corporate Values

Nike’s operations are based on a number of principles, which are

commonly referred to as the 11 maxims as illustrated below.

Competitiveness

The firm ensures that all its operations are focused on sustaining its
competitiveness in a market that is characterized by a high rate of
change. It urges its employees to act like leaders while executing their
responsibilities.
Innovation

The firm perceives innovation as the core component in achieving

organizational competency.

Profit maximization

Nike, Inc. is a business. Subsequently, its operations are profit

oriented.

Nike is a brand

The firm is committed towards ensuring that its products achieve

global market recognition. To achieve this goal, the firm is focusing on
fostering brand recognition through effective brand management
practices such as developing brand identity.

Its ‘swoosh’ logo, which indicates speed, has gained remarkable

market recognition around the world. The firm perceives its logo
(‘swoosh’ symbol) as a mark of global leadership. Therefore, Nike
only penetrates markets that it believes it can attain market leadership
(Nike Incorporation, 2013).

GET CUSTOM ESSAY

Simplify and go

Nike specializes in designing and producing products that have short

life cycles with regard to fashion and technology. Consequently, the
firm appreciates the importance of effective decision making to attain
market success.

Customer focus
Nike appreciates the complexity that is associated with meeting
customers’ needs. Subsequently, the firm ensures that its products are
aligned with such needs, tastes, and preferences. The firm considers
customers one of its stakeholders.

‘Be a sponge’

The firm encourages its employees to be flexible in terms of executing

their duties. Its commitment towards flexibility arises from recognition
of the importance of listening to new ideas in its new and continuous
product development processes.

Evolve immediately

Nike Incorporation focuses on positioning itself as the market leader in

the sports apparel, footwear, and accessories market. Thus, the firm
perceives change as a fundamental source of innovation. The firm’s
broad product portfolio evidences its commitment towards innovation.

Corporate responsibility

Nike considers itself a global citizen. Thus, it adheres to social

responsible business operations. Moreover, Nike, Inc. encourages other
stakeholders to observe the element of diversity, sustainability,
transparency, and honesty in their operations.

Mastering the fundamentals

Nike views its ability to refine its current organizational performance as

key component in its future success. Thus, the firm undertakes
constant evaluation of its performance to identify the fundamental
elements.

Organizational culture
Nike understands the significance of fostering a strong organizational
culture to achieve long-term success. For example, the firm continues
to uphold late Bill Bowerman’s values of innovation, understanding,
and respecting customers’ needs.

Products
Nike focuses on producing seven main categories of the Brand Jordan
and Nike Brand products. These categories include:

I. Basketball
II. Football
III. Men’s Training
IV. Women’s Training
V. Running
VI. Action Sports
VII. Nike Sportswear

In addition to the above product categories, Nike designs different

recreational and kids’ products. In an effort to develop a rich product
portfolio, Nike, Inc. has diversified its product offering by designing
goods for various sports such as lacrosse, wrestling, walking, tennis,
outdoor activities, football, golf, baseball, and cricket (Nike
Incorporation, 2013).

In an effort to gain substantial market share, Nike, Inc. has appreciated

the emergence of a trend whereby consumers are increasingly
appreciating sports apparel and footwear as part of their casual and
leisurewear. Currently, the firm’s running, basketball, Nike sportswear,
soccer, and children’s products are the top-selling products. Nike
projects this trend to be sustained in the future.
SWOT Analysis
Advantages

Market recognition

The firm has gained significant market recognition because of its

effective brand management practices. For example, the adoption of
the ‘swoosh’ as the firm’s trademark has made Nike one of the widely
recognized companies in the world.

Cost management

Nike’s production processes are undertaken by independent factories,

which are selected from the global market. The firm mainly outsources
its production activities to low-cost companies that are mainly located
in the emerging Asian economies such as China, Thailand, Taiwan,
Malaysia, Sri Lanka, Vietnam, and Indonesia. Because of outsourcing,
Nike has succeeded in minimizing the cost of operation (Nike
Incorporation, 2013).

Competitiveness

Nike has succeeded in fostering competitiveness in the global market.

One of the sources of its competitiveness includes effective marketing.
The firm has adopted effective marketing strategies, which have
enhanced the rate of product penetration in the global market. For
example, it has adopted product endorsement by superstar athletes as
one of its marketing strategies. Consequently, Nike has been able to
enter diverse markets.

Product research and development

The firm considers research and development a fundamental element

of achieving market success. Thus, the firm invests a substantial
amount of resources in its market research processes. This plan has
played a remarkable role in identifying the prevailing market trends.
Additionally, investment in research and development enables Nike to
align its products with the prevailing market needs.

The firm’s research and development activities are undertaken by a

qualified research and development team, which comprises experts in
different areas such as chemistry, industrial design, exercise
physiology, biomechanics, and engineers amongst other experts. The
firm’s research and development activities are also undertaken in
collaboration with experienced advisory boards and research
committees.

The committees comprise podiatrists, coaches, trainers, equipment

managers, and orthopedists. The collaboration between experts
enables the firm to successfully identify areas of improvement.
Therefore, the firm’s commitment towards research and development
has significantly minimized injury amongst athletes whilst improving
their performance.

Corporate social responsibility

A survey conducted to assess adherence to social responsible business

practices in 2010 ranks Nike, Inc. 3rd amongst the most responsible
firms in the world. The firm’s success in CSR is evidenced by its
adoption of concepts of reducing, recycling, and re-using its products.
Subsequently, the firm has been able to minimize environmental
pollution.

Weaknesses

Labor practices

Nike has extensively been criticized for its unlawful and unfair labor
practices. First, the firm is criticized for contracting companies from
Mexico, China, Indonesia, and Vietnam to undertake its production
processes. The criticism arises from the contracted companies’
violation of the best labor practices such as adherence to minimum
wage and paying employees’ overtime.

For example, in 2011, the firm was accused of abusing its employees
and paying them unfair wages in Indonesia (Taibi, 2013). In addition to
the above issues, Nike is also criticized for its failure to curb child
labor. Some of the countries in which Nike is accused of exploiting
child labor in its production processes include Bangladesh and
Pakistan.

Working environment

The firm has also been criticized for subjecting employees to unhealthy
working environment. In 2001, the British Broadcasting Corporation
released a documentary showing poor working conditions in a
Cambodian factory that had been outsourced by Nike, Inc. The
documentary showed that most of the employees worked for over 16
hours per day for seven days. Such practices adversely affected the
firm’s image and sales.

Opportunities
The ability of an organization to attain competitive advantage is
influenced by the extent to which it exploits opportunities that are
available in the business environment. Consequently, it is essential for
organizations to undertake broad market research to identify viable
business opportunities.

Pearce and Robinson (2014) assert that market research enables an

organization to identify new ideas and market gaps that it can exploit.
Nike faces numerous opportunities that it can exploit in order to
improve its competitiveness. Some of the opportunities are illustrated
below.

Product development

Nike can achieve long-term success by investing in new and

continuous product development. Despite the fact that Nike specializes
in designing sports footwear and apparel, most of its customers do not
participate in sports. Therefore, the firm can invest in new product
development to satisfy the market demands.

Nike has established adequate capacity in developing new products

because of its well-experienced research and development team. Nike
should also consider diversifying its product portfolio by venturing into
new market segments. One of the categories that the firm should
consider includes the high-value products such as jewelries and
sunglasses. High-value products enable organizations to maximize
their profitability.

Internationalization

Most economies around the world have experienced significant

economic growth, despite the recent global financial crisis. The
economic growth has emanated from implementation of effective
economic stimulus packages. Consequently, most households have
experienced an increment in their purchasing power. Nike should
consider exploiting the emerging market opportunities.

However, it should undertake a comprehensive market research to

identify the most viable market to enter. Some of the markets that the
firm should consider include the emerging economies such as
countries in the Gulf Region. By venturing into new markets, there is a
high probability of Nike increasing its sales revenue and hence its
profitability.

Marketing

The sports apparel, footwear, and accessories market is experiencing

significant transformation, which is evidenced by increment in the
intensity of competition. Some of the firm’s core competitors include
Adidas-Reebok, Under Armor, New Balance Athletic, Fila, and Puma.
These firms have successfully penetrated the global sportswear
market. However, Nike continues to be the market leader.

To sustain its market, Nike should invest in aggressive marketing to

nurture adequate brand recognition, especially in its new markets. One
of the aspects that the firm should consider includes sports
sponsorship and product endorsement.

The firm should consider adopting the concept of product sponsorship

and endorsement. Nike should identify different sports celebrities,
prominent personalities, and sports team that it can include in its
sponsorship and product endorsement processes. This plan will enable
the firm to create sufficient awareness amongst diverse customer
groups.

Technology
Nike should consider enhancing its competitiveness by investing in the
emerging technologies in its production process. Leveraging on
technology will enhance the firm’s ability to develop high quality and
safe products. Consequently, the firm will be able to appeal a large
number of potential customers.

Threats

Firms face different issues that might threaten their long-term

competitiveness and survival. Thus, it is imperative for business
leaders to be cognizant of the possible threats in their operations.
Some of the core threats to Nike’s operations are evaluated below.

Competition

The firm’s competitiveness may be affected by increment in the

intensity of competition within the athletic, equipment, and footwear
industry. Some of the old industry players such as Addidas-Reebok, Li
Ning, V.F Corp, and Puma have sustained their competitiveness.
Moreover, newer companies such as Under Armor have gained
significant market share, which was previously controlled by Nike.

The firm is also competing with different vertical retailers, for example
Uniqlo and Lululmon. Currently, firms in the apparel industry are
increasingly diversifying their product portfolio through product line
extension. Additionally, the industry is experiencing an increment in
the number of new entrants in an effort to exploit the available market
opportunities.

Change in consumer tastes

Satisfying consumers’ demand is a complex undertaking that

organizations encounter in their pursuit of competitiveness. The
complexity arises from the fact that consumer tastes and preferences
are subject to change. Therefore, rapid change in consumer tastes and
preference is one of the major risks that the firm faces in its operation.

Economic changes

Occurrence of economic changes such as the recent global financial

crisis and the sovereign debt crisis in the Euro Zone may pose a threat
to the firm’s ability to maximize its profitability. Melicher and Norton
(2013) assert that such economic changes adversely affect consumers’
purchasing power because of economic uncertainty.

Additionally, during such economic periods, consumers reduce their

consumption expenditure. Subsequently, the firm may experience a
reduction in its market share.

Business objectives
Nike, Inc. focuses on maximizing its shareholders’ wealth.

To achieve this goal, Nike intends to achieve a substantial rate of

market growth. In 2014, Nike announced its intention to increase its
sales revenue to over US$36 billion by 2017.

This goal represents a 42% increment in its sales revenue from US$
25.31 billion fiscal revenue in 2013. Nike’s management team projects
its sales to reach $30 billion during its 2015 fiscal year (Lulu, 2013).

Nike also intends to continue developing unique and high quality

sports apparel, footwear, and equipment to sustain its market
dominance. According to the firm, achieving market dominance will
enable it attain an optimal market position. In addition to the above
objectives, Nike intends to sustain its annual capital expenditure within
a range of 3%-4% of its total annual revenues (Saintvilus, 2014).
Nike has managed to sustain its financial performance over the past
years. For example, the firm’s net income between 2011 and 2013
increased from $ 2,172 million to $ 2,464 million. The chart below
illustrates the trend in the firm’s financial performance.

Amount in million $

2013 2012 2011

Sales revenues 25,313 23,331 20,117

Cost of sales 14,279 13,183 10915

Gross profit 11,034 10,148 9,202

Demand creation expense 2,745 2,607 2,344

Operating overheads 5,035 4,458 4,017

Selling and administration expense 7,780 7,065 6,361

Earnings before tax 3,272 3,025 2,862

Tax expense 808 756 690

Effective tax rate 24.70% 25% 24.10%

Net income 2,464 2,269 2,172

Source: (Nike Incorporation, 2013)

Key strategies
To achieve the above business objectives, it is critical for the firm to
formulate effective strategies. Some of the strategies that the firm’s
management team should take into account are illustrated herein.
Geographical market expansion

The firm should consider expanding into the international market to

maximize its sales revenue.

Leveraging on emerging technologies

Nike, Inc. should consider exploiting the marketing capabilities that are
presented by the emerging web-based technologies. This move will
enhance the firm’s ability to increase its customer base.

Product quality

Consumers are increasingly demanding quality and unique products in

their consumption process. According to Yee and Sidek (2008), clients
are progressively basing their brand loyalty decisions on product
quality. This trend has arisen from the intensity of competition within
the sportswear industry, which has significantly increased consumers’
choice whilst reducing the cost of switching to competing products.

Strategy implementation
Market expansion

Nike intends to increase its sales revenue to US$36 billion. However,

this goal can only be achieved if the firm increases its customer base.
Subsequently, it is vital for the firm to invest in an aggressive
internationalization strategy. The firm should consider entering the
emerging markets in China and other countries in Eastern and Central
Europe. Moreover, Nike should consider expanding into North America
and Japan.
Currently, these markets are experiencing a high rate of economic
growth, which has arisen from their commitment towards economic
transformation. Venturing into these markets will increase Nike’s
likelihood of maximizing its sales revenue because of their high
population growth rate (Leonard, 2014).

Previously, Nike experienced challenges in its quest to market its

products in the Chinese market because of the strong currency
headwinds and/or the existence of inventory build-up. However, the
firm is committed towards succeeding in the Chinese market by
developing products that are aligned with the customer tastes and
preferences.

Apart from venturing into new markets, Nike should consider

increasing its market reach by opening new stores in its existing
markets. This strategy will improve product accessibility and hence the
firm’s ability to increase its customer base (Pearce & Robinson, 2014).

In its market expansion efforts, the firm should consider contracting

renowned sports athletes to endorse its products. Effective product
endorsement will aid in establishing product authenticity, hence
developing a high level of customer loyalty (Lussier & Kimball, 2009).

Product differentiation

In its quest to succeed in the international market, Nike should

consider investing in continuous and new product development to
enhance the level of its product differentiation. However, the firm’s
success in differentiating its products will depend on how well it
understands market dynamics. Therefore, the firm will be required to
undertake extensive competitor and consumer market research.
In its competitor market research, Nike should focus on understanding
its core competitors’ products in order to identify the prevailing gaps
with regard to product quality. Yee and Sidek (2008) define product
quality as product features and characteristics that lead to satisfaction
of the consumers’ implied or stated needs.

Consumers may switch to competition products if they perceive that

they are not achieving the desired level of utility by consuming a
particular brand.

The consumer market research will enable the firm to understand

consumer tastes and preferences towards sports apparel, equipment,
and footwear. In the course of its operation, Nike recognizes that its
success may be affected by the changing consumer tastes, which
cannot be forecasted with a 100% degree of certainty (Nike
Incorporation, 2013).

One of the issues that the firm should take into account in its product
development includes enhancing its products’ functional attributes. For
example, the firm should ensure that its products are odor-resistant,
durable, waterproof, lightweight, breathable, and anti-microbial. These
aspects will enhance the functionality of its sportswear products.
Subsequently, the firm will be able to undertake effective product
design.

In order to succeed in developing new products, Nike should consider

expanding its brand by establishing new product categories. Some of
the products that the firm should consider include jewelries. Venturing
into new market segments will boost the firm’s sales revenues.

E-commerce
Consumers are increasingly using various web-based technologies in
their purchasing process. This trend has emanated from the high rate
of technological developments such as internet penetration. Morrison
(2006) asserts, “the rapid adoption of digital technologies and evolving
shopping behaviors are transforming e-commerce into an essential
marketing element” (p.65).

Therefore, Nike must consider investing in e-commerce to attract the

emerging digital consumers. Currently, the firm has implemented the
‘Direct-to-Consumer’ strategy in an effort to reach a large number of
consumers.

Nike should consider improving its e-commerce capability by investing

in effective online technologies. One of the issues that the firm should
consider entails designing an online platform or applications that will
enable it interact with its customers.

Therefore, the firm will be able to gain adequate market intelligence,

which can be utilized in building the brand. Egol, Rajagopalan, and
Sayer (2012) confirm, “online direct-to-consumer sites are valuable
tools for building stronger, more loyal consumer relationships, creating
category growth, and when retailer consolidation is a concern,
sustaining sales in the face of declining reach” (p.14).

Additionally, the platform should provide customers with an

opportunity to purchase goods online. Investing in e-commerce
technologies will enhance the firm’s ability to customize its operations,
hence developing a strong brand loyalty.

Measurement and control

Nike should formulate a comprehensive measurement and control

plan. The measurement and control plan should take into account a
number of issues. First, the firm should continuously evaluate its
annual sales revenue to identify the trend.

The analysis of the sales revenue should be undertaken geographically

to determine the contribution of each geographic market that the firm
has ventured into in relation to its overall sales revenue.

Conducting geographical assessment will provide the firm with

sufficient insight on whether it is adequately exploiting the market
potential. Subsequently, the firm will be able to identify the prevailing
market gaps and make the necessary adjustments in its marketing
processes.

In addition to the above aspects, Nike should evaluate the size of its
customer base and market share to determine the likelihood of
achieving the set objectives. By increasing its customer base, the firm
will be able to maximize its sales revenue. Gaining additional market
share will enhance its level of market dominance.

Conclusion
Nike has managed to achieve an optimal market position in the global
sports apparel and footwear industry. Its success has arisen from its
adoption of effective strategic management practices, which are aimed
at maximizing the shareholders’ wealth and fostering a high level of
customer satisfaction. One of the strategic management practices that
the firm has considered in its operation entails effective brand
management.

The firm is committed towards positioning itself as one of the widely

recognized brands in the sports apparel, footwear, and equipment
market in order to maximize the shareholders’ wealth.
However, the likelihood of achieving this goal will depend on the firm’s
commitment in implementing effective strategic management
practices. Some of the strategies that it should consider include
investing in market expansion, product differentiation, and e-
commerce.

In its market expansion process, Nike should exploit opportunities that

are available in the emerging economies in Europe and Asia. Examples
of such economies include India and China. The firm should ensure that
its products are optimally positioned in the global market through
effective product differentiation.

One of the ways through which the firm can achieve this goal is by
investing in effective product research and design. Additionally, it
should invest in the emerging web-based technologies such as e-
commerce to exploit the emerging consumer trends. By leveraging on
technology, Nike will be able to enhance its competitive advantage by
developing a strong relationship with its customers.

Any organization that wishes to remain on top of competition should

devise strategies that will drive it towards realizing this objective. One
of the strategies is coming up with a team of experts whose role is to
steer the organization’s marketing plan. As such, Nike should set aside
a management team to carry out this task. Nike’s selected team
should continuously evaluate its performance in the local and
international market.

Evaluation of international market performance should be undertaken

geographically to determine its regional performance. Moreover,
geographical evaluation will enable it formulate strategies that are
specific to the respective markets, hence improving their effectiveness.
Based on the expositions made in the paper, it is clear that Nike has
made significant strides since its inception. However, based on the
evident competition from the emerging companies in addition to the
changing customer demands and preferences, the firm has to
formulate techniques that will sustain its performance in the market.