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International Business: Nike Corporation
The purpose of this work is to research Nike Corporation in relation to international business through the conduction of a SWOT analysis of the company, as well as analyzing the industry. Further this paper will examine the top competitors of Nike Corporation as well as the international factors and elements which affect the corporation either positively or negatively.
Nike Corporation states on the Nike.com website that the Nike Foundation is "a reflection of the Nike Culture." The stated mission of the Nike Corporation is reflected in their statement of commitment to "assisting youth to achieve both their personal goals as well as to contribute to the overall betterment of society." The Nike Corporation's stated goals are to:
Assist young people in understanding their power of ignition of positive change and then to provide the youth with tools needed in this action.
Engaging youth in the debate and decisions that impact upon their lives.
Identification of models to convene youth in exploratory settings enabling articulation of concerns, design of solutions and creation of actions.
In the area of sports to create and sustain opportunities for youth to enjoy the positive benefits of individual as well as group sports. Sargent et al. (2005)
Nike owned subsidiaries are Converse, Inc. A designer, marketer and distributor of footwear, apparel, equipment as well as accessories for an array of fitness and sports activities. Bauer NIKE Hockey Inc. is a leader in the design and distribution of hockey equipment; Cole Haan is a leading designer as well as marketer of designer luxury shoes, purses, accessories as well as coats; Hurley International LLC is a designer, marketer and distributors of athletic footwear as well as designing and marketing apparel for the value chain retail.
I. In the Beginning - Nike Corporation:
Nike began in 1960 when Bill Bowerman was in the process of handcrafting track shoes for his team at the University of Oregon and in 1962 a business plan was developed by Phil Knight at Stanford University business school. By 1967 Bowerman had created the first track shoe composed of lightweight and durable nylon which he called Marathon and the same year a student, Carolyn Davidson designed the Nike "swoosh" and charged a fee in the amount of $35.00. In the year of 1974 track star Steven Prefontaine was the first to wear Nike sneakers. By 1976 Nike participated in its Olympic debut and when 1979 rolled in Nike was the number one selling shoe of its type as a new record was set by Joan Benoit, age 21 at the Boston Marathon. By 1998 Nike Corporation made its product available to the open market. Nikes website states that: "Speed comes in many forms: Quickness, agility, precision, instinct. Few sports can't benefit from speed of thought. Few sports reward pure speed at the expense of tactical insight." Further stated is that "Speed. It's a measure of physical and mental capacity, a measure of controlled force, a measure of instinctive genius. A measure of the time it takes to do something well. It's a measure of success. Be first to the finish line, whether the race takes seconds or years, and you've won."
" Simple as that." (Nike Corporation Website)
By 1989 Nike Corporation began export of its product. Stated is that:
"Along the way we grew in form; single product - single market, multiple product - multiple markets, multiple brands - multiple markets."
II. Growth and Expansion
Nike is developing as a golf equipment company. During Tiger's toughest year golf sales broke records. The shoe called "Air Zoom Total 90" became the biggest seller of soccer boots in the largest five European countries in the 4th quarter of 2004. Nike's subsidiary brands of Cole Haan Bauer Nike Hockey, Converse and Hurley are stated to be "now up and over a billion dollars in revenue."
Nikes Revenue Performance for BY 2000-2004
Nike Revenue Distribution for FY 2000 versus 2004:
Nike EPS Performance FY 2000-2004
ROI: Return on Invested Capital FY 2000-2004
Nike Stock Performance vs. S& P. 500
S& P -14%
IV. Nike Corporation Strategy:
According to Nike Corporation President Charlie Denson: "We had to reenergize the corporate culture of competitiveness and focus. We had to clarify our growth agenda." Stated by Mark Parker was the fact that: "Organizational strength and common goals" are the fundamentals in focus). In the Nike Corporation Annual Report the CEO Denson stated further that:
"Business in China could be overwhelming we are starting to work on a different model by doing more local sourcing that we'll test in Brazil, it will mitigate some of the geopolitical and financial risks of doing business in an emerging country, which we may be able to use in India or Russia in the future." In the Denson further pointed out the fact that the "women's business is much more varied region to region than the men's business" and that the women consumers are different from region to region such as the differences expressed between those of women consumers in Europe or Asia. Highlighting the past year is Nike's "new line of soccer products such as the Air Zoon Total 90 III Shoe."
Other shoes, the Shox and the Nike Sphere are fast selling products. The Nike Free is a technological imitation of the feeling of being barefoot. Offered are customizable products. Denson states that:
'We need to focus on knowing who our consumer is, who we are competing against and who we are. When we know those answers, we think we can win."
V. Community Service
The NikeGo is an initiative that turns recycled shoes into sports surfaces such as tracks.
Nike Corporations earning for the first quarter per diluted share showed a 23% increase to $1.21 versus $0.98 per share diluted one year ago. Increases in revenue in the first quarter were 18% to $3.6 billion. Nike Corporation's records gross margin was reported at 44.5% which is a 1.5 increase over last year. Worldwide future orders showed a 9.9% increase.
The Nike Corporation purchased shares totaling 2,142,600 for the amount of $155.2 million. The Board of Directors approved a $1.5 billion share repurchase program.
VI. Complications in Production:
Nike contracts for its products manufacture in countries with low labor costs. Bulk of Nike products are manufactured either in China, Thailand and Indonesia with some parts coming from South Korea and Taiwan. Reportedly the company has: "sought to foster the appearance and reality of good working conditions in the Asian factories producing its products. All contractors are required to sign a Memorandum of Understanding that, in general commits them to comply with local laws regarding minimum wage, overtime, child labor, holidays and vacations, insurance benefits, working conditions and other similar matters and to maintain records documenting their compliance." A 1996 audit found a Vietnamese factory in violation of regulations relating to atmospheric pollution which caused 77% of the workers to experience respiratory problems. Three Chinese factories were found to be in violation of minimum wage laws, exposure to dangerous levels of dust and toxic fumes and employment by individuals under the age
VII. SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats):
Nearly thirty years in business
New product line rapidly selling
Aligned with "winners"
Technologically superior products
Number One shoemaker controlling 20% of market
Weakness in the world economy
Expansion possibilities in China, India, Russia
The women's consumer market (as stated by Denson)
Labor suits and complaints
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