TABLE OF CONTENTS
1. Company history..............................................................2
2. General environment.......................................................3
3. Task environment.............................................................7
4. References.....................................................................11
1. COMPANY HISTORY
When Nike co-founder Bill Bowerman made this observation many
years ago, he was defining how he viewed the endless possibilities for
human potential in sports. He set the tone and direction for a young
company created in 1972, called Nike, and today those same words
inspire a new generation of Nike employees.
Nike Inc. was founded in 1962 by Bill Bowerman and Phil Knight as a
partnership under the name, Blue Ribbon Sports. Our modest goal then
was to distribute low-cost, high-quality Japanese athletic shoes to
American consumers in an attempt to break Germany's domination of
the domestic industry. Today in 2000, Nike Inc. not only manufactures
and distributes athletic shoes at every marketable price point to a
global market, but over 40% of our sales come from athletic apparel,
sports equipment, and subsidiary ventures.
Nike maintains traditional and non-traditional distribution channels
in more than 100 countries targeting its primary market regions:
United States, Europe, Asia Pacific, and the Americas (not including the
United States). Nike utilizes over 20,000 retailers, Nike factory stores,
Nike stores, Nike Towns, Cole Haan stores, and internet-based Web
sites to sell our sports and leisure products. We dominate sales in the
athletic footwear industry with a 33% global market share. Nike Inc.
has been able to attain this premier position through "quality
production, innovative products, and aggressive marketing."
Our goal is to carry on his legacy of innovative thinking, whether to
develop products that help athletes of every level of ability reach their
potential, or to create business opportunities that set Nike apart from
the competition and provide value for our shareholders.
That includes more than 35,000 Nike employees across six
continents, each of whom make their own contribution to fulfill our
2
mission statement: to bring inspiration and innovation to every athlete
in the world.
Products
Our primary product focus is athletic footwear designed for
specific-sport and/or leisure use. We also sell athletic apparel carrying
the same trademarks and brand names as many of our footwear lines.
Among our newer product offerings, we sell a line of performance
equipment under the Nike brand name that includes sport balls,
timepieces, eyewear, skates, bats, and other equipment designed for
sports activities. In addition, we utilize the following wholly-owned
subsidiaries to sell additional sports-related merchandise and raw
materials: Cole Haan Holdings Inc., Nike Team Sports, Inc., Nike IHM,
Inc., and Bauer Nike Hockey Inc. Our most popular product categories
include the following: Running; Basketball; Cross-Training; Outdoor
Activities; Tennis; Golf; Soccer; Baseball; Football; Bicycling; Volleyball;
Wrestling; Cheerleading; Aquatic Activities; Auto Racing; Other athletic
and recreational uses.
Customers
Nike prefers areas of high population and density where it can
meet the different tastes of people living there. Nike targets both
genders; males and females. Different sizes and designs of the
products allow Nike to reach customers from the age of eight to the
age of 55. The majority of Nikes market consists of sportsmen and
sport teams. However, Nike also targets well educated individuals who
appreciate the difference offered by Nike. Casual clothes are very
successful as well and enjoy high sale from different kinds of
customers.
3
Competitors
There are many competitors for Nike that specialize in the
sportswear industry like Adidas, Puma, Diadora, Umbro, and Reebok.
Nike must gain strategic advantage by positioning their offerings
against those of the competitors.
2. GENERAL ENVIRONMENT
Political
The main countries that Nike trades in are America (where Nike
originated) and the United Kingdom and other European countries such
as France and Germany.
In these main countries that Nike sell products in there is stable
political environments where there is a democracy meaning that the
governments in this countries have been elected by the general public
in that particular country. The majority of these countries home and
export markets have been boosted with the inclusion of the euro
meaning that it is easier to trade between countries. This is an
advantage to Nike, as they do not need to be influenced by exchange
rates when exporting goods from one country to the other.
Nike has to be aware of pressure groups trying to get bans on
methods that Nike uses. This could be things such as trying to stop
Nike from being able to set up factories in undeveloped countries and
also using certain leathers coming from animals to make football
boots.
4
Nike needs to be aware of any help they could get off the
governments such as getting subsidies for setting up Nike factories in
areas of high unemployment like Nissan setting up a major factory in
Sunderland. This could be a big help to Nike as it would mean getting
planning permission for a factory and it would also mean they can
import more goods into this particular countries markets.
Economical
Nike experienced slow down in the economy, Egypt, like many other
countries of the world, is facing right now an economic depression as a
natural consequence of the worlds economic crisis.
In our target Market the athletes, A and B+ social classes for Nike
products, the purchasing power is almost the same as before. We are
more likely to have other people buying our products instead of our
competitors more than those who will stop buying them for lack of
money, and suffer from reduction in consumer confidence
Social
Nike are a multinational company so these affects the decisions that
they make when designing a new product or making a new advertising
campaign.
A big decision for Nike to consider is how to make the products
available to the customer. To do this Nike must research the buying
habits of a customer. This can mean how much and how often they buy
a product and therefore would it be easier for customers to have their
goods delivered for convenience.
Nike have to assess the way in goods are purchased. They will have
to look at the increase of Internet shopping and mail order compared to
5
buying products from a shop and then make the decision to invest
more in these types of shopping.
Another factor Nike need to consider is the lifestyle of the customer
and must answer questions such as the time that people have got to
go shopping and whether they work unsocial hours meaning that
internet shopping may be more affective to larger amounts of people.
Nike have to take into accounts religious and political features of the
countries they are trading in such as restrictions on advertising such as
advertising unhealthy products to children or religious restrictions to
advertising such as bearing large amounts of skin in advertisements.
Nike could also look at religious beliefs and may be able to make
products around these religious beliefs. They may also need to know
that certain religions and social groups may be against wearing a
particular type of material such as fur.
Nike has to consider how many people live in these areas. For
example you should not make to many products for the market they
are trading in because the supply will go up and the demand will go
down meaning that Nike have to reduce the price to sell the product.
When a new product is being made Nike have to evaluate the
climates and terrain they are selling in for example they will not be
able to sell a product designed to keep the body cool in an area that is
freezing cold such as Scandinavian countries.
Technological
Nike use Technology in a number of different of areas within the
business.
6
The first area they use technology for is making the products and
they have to be aware of any new advances in machinery that would
make it quicker, easier and cheaper to make the products.
Nike is always trying to make new products with new and unique
designed to do a specific job, such as keeping the body cool. When
these products are created these ideas will be patented and this will
give Nike an advantage over the competition.
Another big area for Nike is the Internet this is for internet sales
which is a big area for Nike to tap into. Nike will realise that if they can
get into this market they will make a huge profit.
Nike also has to use technology to make their advertisements. Nike
will always want to use more technology in their advertisements along
with their stars as they can get a lot more sales from a good
advertising campaign such as the recent Freestyle campaign.
Environmental
Nike have to consider a number of factors to do with the
environment when making their products these factors are as follows.
Raw Materials
Nike have to consider whether the raw materials. That they use to
make their products are going to run out. The Raw materials that nike
use are animal skins for leather. Fortunately for Nike these materials
will not run out animals can keep on re producing.
Nike need to consider whether they could use synthetic materials
instead of skins so that they stop killing animals and reduce the cost of
obtaining these materials.
7
The trends will be changing for the type of materials used for the
products and Nike need to consider how to obtain these materials
while causing as little damage to the environment as possible.
Nike needs to understand that pressure groups will not like them
harming the environment and that if Nike do not conduct good public
relations with these groups and do harm the environment then Nikes
goods could be boycotted which will mean losses of profit for Nike.
Legal
For all companies legal issues are of key importance to the company
as these laws can determine how an organisation conducts its
business. It is essential that a business complies with these rules or
else they will have to pay a high price or even fold. The Egyptian
government encourages investment like franchising and Foreign Direct
Investment that will help Nike, when they think of opening a factory at
Egypt.
8
3. TASK ENVIRONMENT
The task environment is the environment that most organizations
like to focus on. The task environment is very helpful to the
organization because it helps them to specifically identify
environmental factors that are important in the companys success.
This environment is made up of five parts.
The first part is the competitors. Competitors compete mostly
for customers dollars for example Nike, Adidas and Puma all compete
for customers that are looking for athletic shoes, soccer cleats etc.
Moreover, Nike faces tough competition with Reebok and Adidas with
the former focusing on quality and not quantity and strategizing for
increased international sales. Possibility of new entrants, nonetheless,
is not significantly high and established companies could easily
venture into an athletic footwear line. These companies, however,
might be trendy but must be guarded with the demands of the athlete.
Nike is an organization that had long-term contracts with professional
and collegiate athletes then running expensive television and
magazine advertisements. Aside from contracting agreement with
individual teams, Nike settles agreements with the entire sports league
which enables the company to enter and market itself in
The second part is customers. Organizations have individual
customers as well as wholesalers, retailers, and schools that are also
customers to companies. For Globalization, as such, not only requires
Nike to globalize its communication technology but also contributes to
ever-fiercing competition thus the continued product innovations
(Frenkel, 2001). Stonehouse et al (2004) notes that continuous product
development is considered necessary because Knight believes that
there is a seven-year brand cycle within the athletic footwear industry.
Nike combated the perils of globalization through embracing a
9
continuous business model without sacrificing the core design of its
products. Pal (2008, p. 265) describes Nikes business model that
transformed into a network-centric organization using information
technology to better equip coordination among its more than 800
partners in over 52 countries.
The third part are suppliers, the ones who provide resources to
other organizations. Nikes suppliers were obligated to comply with the
basic labor, environmental and health and safety standards.
Nikes suppliers were required to observe, sign and post within their
factories this Code of Conduct. Nike conducted trainings with suppliers
and assembled a team of 90 compliance staff based in 21 countries to
monitor suppliers and about 1,000 production managers were working
with suppliers (Locke, Kochan, Romis and Qin, 2007). Nikes
restructuring in global supply chain led to significant improvements in
working conditions.
Nikes supply chain management focused on its process innovation
to do their products different from other shoe producers, continuous
improvement by maintaining its relationship with its suppliers to be
able to do its production process better, and execution discipline by
doing things right, adhering to the corporate and governmental laws
and policies.
Nikes relationship with its suppliers made it possible for them to
have quality product with low costs due to reduced administrative and
payroll costs. The flow of their products reduced time in initial design,
production and distribution from sending new designs to suppliers who
produces the shoe parts, to forwarding the shoe parts from suppliers to
companies assembly and finally in shipping the finished products for
worldwide distribution. Nikes diversity of 860 suppliers allowed them
flexibility, faster service in cases of emergencies and quality
10
assurance. Nikes technologies in transferring of data, orders,
communication through internet and databases allowed them to
perform and meet the needs of its customers in a timely manner and
have a good inventory and monitoring control.
The fourth part is strategic partners. This means that two
companies work together in order to help each other. Nike, as a
network organization, had dispersed members that is linked using
advanced technology. Nike believed that through modules or networks
a strong mechanism of horizontal linkage greater cross-functional
coordination could be achieved. This could be true considering that
other organizational structure could not provide Nike the flexibility.
Vertical structures could show only the functionality of Nikes networks
hence only formal relationships while horizontal structures would not
be advisable since few rules are permitted. This would be impossible
for Nike where functions are geographically-dispersed. Though both
can tap efficiency and learning, Nike had its own idea of improving the
flow of information from Oregon to other units globally.
Jones and George (2003, p. 232) assert that the network structure
provides Nike two important advantages: quick responding to changes
in sports shoe fashion and low cost. Nike makes use of a global IT
system that can literally change the instruction it gives each of the
suppliers in real time. As such, within a matter of short period its
foreign manufacturers are producing new kinds of shoes. Nikes cost
are also low because of Southeast Asian labor are a fraction of that of
its US counterparts. With Nikes ability to outsource and use foreign
manufacturers keep the headquarters' structure flat and flexible. This
relatively inexpensive functional structure to organize its activities
enabled Nike to obtain talent and resources worldwide.
11
Although the virtual structure provides high flexibility for Nike to be
responsive to market trends and changes, Nike is hindered by the loss
of hands-on control of several functions and employees. Considerably a
hollow organization, Nike has a weakened organizational culture and
employee loyalty. Inherent risks are also evident including relationship
management and contract partner failure and/or business exit. True
enough, Nike is faced with minimal tasks environment but with
international environment that is otherwise conflict-laden and
competition-pressured. While in the internal environment Nike is
considered as a technological innovator, technological capabilities also
make a standout within the athletic shoes industry
Public is increasingly becoming aware of new technological
improvements in footwear as well hence increasing stability, support,
comfort and performance are at the core of Nikes research and design.
Taken from the modernism theory of organizations, Nike adapts to
rapidly changing environment through the use of technology. Likewise,
Nike also capitalizes on healthier lifestyles of the people although the
industry in general is in its mature stage of the industry life cycle.
Further, major threats for Nike are government regulation especially
those that attacks the corporate social responsibilities (CSR) and
ethicality of Nike, and also economic downturns and changes in shoe
fashion. All these makes high end shoes like Nike an unaffordable
luxury good.
The fifth part is employees; This was mirrored in Nikes Code of
Conduct, setting standards for partnerships by seeking contractors who
are committed to best practices and continuous improvement in areas
of employing management practices that respects the rights of all
employees, minimizing impact on the environment, providing a safe
and healthy workplace, promoting the health and well-being of all
employees. Core standards hence are forced labor, child labor,
12
compensation, benefits, hours of work/overtime, environment, health
and safety and documentation and inspection (Hartman, Arnold and
Wokutch, pp. 145-146).
A centerpiece of our work in the past few years is our HRM program,
which combines multi-stakeholder workshops, training for factory
managers and the surveying of workers. We have found that factory
managers aiming for full and consistent compliance with labor
requirements sometimes lack the systems and skills to achieve it. By
building the capabilities of contract factory management, we strive to
create a sustainable framework for improving working conditions
overall. In addition, the training supports the transition to lean
manufacturing powered by a skilled, empowered workforce.
4. REFERENCES
1. Nike, Inc. 10-K, 2009.
2. Wikiinvest.com, Nike, Inc.
3. Athletic Footwear; Industry Analysis, Tufts University, Economics of
Management and Strategy, May, 2006.
13
4. History of Nike, Sneakerhead.com
5. Nike Official Website www.nike.com
6. Expanding the Playing Field: Nikes World Shoe Project Case, The
William
Davidson Institute, January 2002.
7. www.nike.com.eg
14
