In addition to these accomplishments, the company also branched into over a dozen businesses and has successfully created one of the most successful supply chains globally today (Barrett, 2003). Along the way to these stellar accomplishments however Nike has been accused of going too easy on suppliers who violate child labor laws and having questionable ethics (Doorey, 2011). It has also been experiencing high legal costs due to the various approaches the company takes to protecting its brand (Nike Investor Relations, 2012). As the company pursues high growth opportunities in women's apparel including shoes, one of the fastest growing markets it competes in, it is challenged with relatively moderate growth in sales, relatively flat gross contribution margins at 10% and a Return on Assets (ROA) of 14% with little growth over the period of analysis shown in the Appendix. On top of all these factors, the competitive climate of the industry has never been more intense and focused on taking share from the global market leader, who is Nike in many of the most attractive and fastest growing markets (Nike Investor Relations, 2012).
B. Competitive Analysis
The competitive intensity of the global shoe industry combined with the speed and cost savings of contract manufacturing have completely re-ordered the structure of this industry. The greatest potential threat that Nike faces today is the limited control they have over contract manufacturer's supply chain quality levels, ethical compliance to global standards of employment, and pricing thresholds for products (Nike Investor Relations, 2012). These weaknesses will be discussed in greater detail in the weaknesses section of this analysis. Nike dominates the women's shoe marketplace however, with well over 45% share...
alone (Nike Investor Relations, 2012). As the women's fitness segment is one of the fastest growing in the company, it is also attracting the majority of competitors as well. Dominant competitors include Adidas in Europe, with a commanding market share in core men's market segments of over 30% and a highly integrated supply chain with Asian production centers (Nike Investor Relations, 2012). Additional competitors include Crocs, K-Swiss, Rocky Brand, Reebok, and Timberland. For a financial comparison of these competitors relative to Nike please see the last table in the Appendix. Nike has been able to dominate these competitors by having the best overall financial performance including an industry-leading 77 days to sell inventory, as noted in the last table of the Appendix. Nike also has the highest working capital per share at 15.681, leading all competitors on this measure of financial efficiency. The most critical success factor behind Nike dominating many of its competitors globally is the continued focus on creating a competitive advantage in its supply chain operations and use of advanced analytics and enterprise software that can be used for delivering business intelligence (BI) reports and insights (Doorey, 2011). Nike has been able to also create a competitive advantage by using these analytics to predict and get in control of potentially difficult and costly ethical lapses by contract manufacturers, which is exactly what happened in China during a major production run of ladies shoes (Kanter, 2008). In 2011, 97% of all Nike products were manufactured off-shore, through contract manufacturers (Nike Investor Relations, 2012). Vietnamese-based manufacturers are the majority of the producers of Nike products (37%) followed by China at 34%, Indonesia at 23%
