Research paper

 

Nike: The Most Powerful Shoe Company

Elizabeth Curtis

March 14, 2009

BIS 101 W (7 pm)

Central Michigan University

“The most powerful force in sports in not a football or baseball team.

It is a shoe company”

-Donald Katz

Just Do it

 

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Executive Summary

Nike has grown to be the world’s largest marketer of athletic footwear and

apparel. It has accumulated billon of dollars ever since it started business in 1964. It was

originally named Blue Ribbon Sports. The popular shoe company started in the trunk of

Phil Knight’s car and quickly became known for its “swoosh” logo. Nike is also well

known for its slogan “just do it”. The name ‘Nike’ was named after the winged Greek

goddess of victory. Nike also markets products under Nike Golf, Nike Pro, Air Jordan,

and Nike Skateboarding. Hurley and Converse are two of Nike’s subsidiaries and they

design, market, and distribute athletic footwear too. The company sells products

internationally and sponsors many professional athletes. Nike is heavily advertised and

one of the best brand names known in the world. Nike shoes are not just the latest fashion

trend; they are also light and comfortable to wear. When you buy Nike products you are

guaranteed to get great value for your money and of course satisfaction (Greenburg,

1994).

Nike has many products to offer for various sports. They started only making

running shoes and now progressed to making clothing and sporting equipment. Their

sporting equipment is made for sports such as track and field, baseball, hockey, tennis,

football, golf, lacrosse, basketball, cricket, and soccer. Nike does not just manufacture

sports apparel and running shoes. The company also operates many retail stores and

outlet stores. Nike shoes are sold for $40-200 a pair at many stores across the United

States. Pricing depends on the style and the popularity of the shoe. Nike’s headquarters is

 

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located on 74 acres in the heart of Oregon. There are 16 beautiful buildings paying tribute

to some of the most talented athletes ever to live (Katz, 1994).

Nike provides more than just sporting equipment and shoes. They provide great

jobs and benefits for people all over the world. To became a Nike team member you do

not have to be an athlete. You simply have to think like an athlete and put forth effort to

better the company. Nike provides great retirement plans, free gym memberships,

medical insurance, and many other benefits. They offer many job positions and ways you

can participate in the sports industry (Geisel, 1994).

All companies are facing tough times during the economic crisis. Nike’s sales

have been declining 10% because citizens cannot afford brand name merchandise. Nike

plans to still provide quality products to the world. You can always count on the most

powerful shoe company in the world.

 

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History

Nike, Inc was a company that was not created overnight; it took determination

and risk to create a new running shoe. A passionate athlete named Philip Knight founded

Nike in 1964. It was originally named Blue Ribbon Sports and changed to Nike in 1978.

Bill Bowerman was Philip’s track coach and inspired him to invent a lighter, more

durable running shoe. He had an extraordinary track career at the University of Oregon

and attended the Stanford Business School in 1962. At business school, he had to

complete a semester-long project. The project consisted of devising a small business and

creating a marketing plan. Knight decided to fulfill his coaches’ dream and he created a

higher quality running shoe. His business professor found his project to be different but

nothing special (Greenburg, 1994).

In 1963, Philip Knight made a business trip to Japan. He presented himself to the

president of Tiger Shoes as an American athletic equipment distributor. Philip wanted to

sell Tiger shoes in the United States. He was not an athletic equipment distributor but lied

to the president of Tiger Shoes. Philip Knight received exactly what he wanted and

started to sell running shoes under the name of Blue Ribbon Sports (Katz, 1994).

Philip Knight sold $8,000 worth of Tiger Shoes and placed an order for more in

1964. He spent long hours selling shoes from the back of his car at sporting events. After

becoming unsatisfied with selling shoes, Philip decided to start making his own shoes. At

the time, he was an accounting teacher at Portland State University and asked a student to

design a logo for a new shoe company. In 1971, Caroline Davidson created the Swoosh

logo. It represented the wing of the Greek Goddess, Nike. The Greek Goddess

 

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symbolized victory. Philip handed her $35.00 for the new Nike logo and was very

pleased (Greenberg, 2009).

Philip quickly found he could not run a company alone; therefore, he asked his

former Oregon track coach for help. Bowerman and Knight decided to hire a full-time

salesman for more help. Jeff Johnson was hired and played an important role in selling

shoes. Jeff created the products first brochures, print ads, marketing materials, and shot

the first photograph for the company’s catalogues (Katz, 1994). Knight and Bowerman

considered Nike successful when they received $1 million in sales in 1971. Philip knew

he had to stay ahead of competitors and wanted his brand to stand out, so he decided to

add traction to the bottom of the shoes. Bowerman drew the new shoe from his wife’s

waffle iron. The shoe had an outsole that had waffle-type nubs for traction but were

lighter than traditional training shoes (Greenberg, 2009).

Nike shoes became the most unique shoe in the 1970s. In 1979, the first line of

clothing was launched and the Nike Air shoe-cushioning device debuted. Soon after in

1981, Nike products started to be sold internationally. Nike started to really become

popular when they started to sponsor the best athletes in the world. In 1988, Nike signed

basketball superstar Michael Jordan. According to Katz (1994), “not everyone can be a

Nike Guy. For Example: Michael Jordan refusing to wear Reebok at the 1992 Olympics”.

In the early 90s, revenue reached $3 billion allowing Nike to crush its competitors.

Another star athlete also signed a 20-year contract. Tiger Woods agreed to sign a $40

million endorsement in 1995. In 2000, the Nike Shox’s were invented. They provided a

new footwear cushioning system and this started a new trend across the world. Today,

 

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Nike is constantly thinking of new ideas to improve their shoes and sports equipment

(Katz, 1994).

Products and Services Offered

Nike lives by the important saying, “If you have a body you, you are an athlete.”

They develop products that help athletes of every level of ability reach their potential.

They provide three main product engines that include footwear, apparel, and equipment.

Nike started only making running shoes but over the years they have continued to come

up with new products. Now jerseys, shorts, watches, pants, and baselayers are made for a

variety of sports. They make products for track and field, baseball, hockey, tennis,

football, golf, lacrosse, basketball, cricket, and soccer. They do not just produce sporting

apparel and equipment. Nike also produces urban style clothing because of their

association with the hip-hop culture. They have even created skateboarding shoes called

the Nike SB. Other products include the Air Zoom Yorker; a newly designed cricket shoe

that is 30% lighter than other competitors. Most of Nike's newest shoes contain flywire

and lunarlite foam. These are materials used to reduce the weight of many types of shoes.

Recently, they have teamed up with Apple Inc and produced the Nike+. The Nike+

uniquely monitors a runner’s performance and links it to an iPod Nano. Nike products are

made for men, women, and children of all ages (Hollister, 2008).

Nike distributes all of their products across the globe. The Nike headquarters is

located near Beaverton, Oregon and is called the Nike World Campus. It consists of 16

buildings and each building pays tribute to some of the most legendary athletes in the

world. Mia Hamm, Michael Jordan, Lance Armstrong, Jerry Rice, and John McEnroe are

 

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some of the athletes that have been honored. Nike also provides Nike Stores, NikeFactory

Stores, and NikeWomen stores. Nike has 20,000 retail accounts throughout the U.S. and

contracts with 110 other countries. To produce these products there are 700 contract

factories in 52 countries. There are close to 800,000 workers involved in making Nike’s

popular sporting products.

Organizational Culture and Working Environment

Nike does more than just provide outfits for the world’s best athletes. They are a

place to explore potential, eliminate boundaries, and the chance to follow your career

dreams. Nike employers look for people who can grow, think, dream and create. The

Nike staff thrives in a culture that embraces diversity and rewards imagination. They

always seek achievers, leaders and visionaries. Every employee brings inspiration and

innovation to the sporting business. Nike has been named Fortune Magazine’s 100 Best

Companies To Work For. They are the world’s largest sports and Fitness Company that

works with communities and cultures around the world. To become part of the Nike staff

you do not need to be an athlete, you simply need to think like one (Hollister, 2009).

Diversity is considered to be an important part of the sport company’s business.

All of Nike differences allow the brand to be creative and to reach people globally.

Diversity helps a Nike employer recruit the most creative minds. The more the staff

works together, the more Nike can offer consumers. Nike believes in equality and

fairness in the workplace by recruiting from employment sources. Some of these

organizations include the European PWN (Professional Women’s Network), the National

 

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Black MBA Association Career Fair, Portland Latino Career Fair, the Diversity, Inc./NY

Times Career Fair, and the National Society of Hispanic MBAs (Geisel, 1994).

Nike provides wonderful employee benefit packages. Medical insurance and

disability plans are all above the 80th percentile of competitor companies. Nike time-off

plans are ranked #1 when compared to competitor companies. They have kept their

discounted stock purchase plan with a full 15 percent discount and look-back period. The

benefit program also provides workers with the chance to stay fit by providing free gym

memberships. Every region provides variable medical coverage, a performance sharing

plan, fitness center memberships, time off, retirement, and more (Geisel, 1994)

Nike also provides a number of other employee benefits for US employees

including direct deposit of paycheck, scholarships for children of employees, and tuition

assistance. They will match not only your contributions to the nonprofit organizations of

your choice, but will also contribute $10 for every hour of volunteer work you offer.

There is a casual dress code at Nike stores worldwide. You can show up to work in jeans

and sneakers. As an employee you get up to 50 percent off all Nike footwear, apparel,

and equipment, plus discounts for family members (Geisel, 1994).

Nike offers a great retirement plan but retirement plans vary by geographic

region. Nike's Board of Directors determines the contribution amount based on annual

financial performance every year. It is fully funded and invested by Nike. Employees are

eligible after completing 1,000 or more hours of service during one fiscal year of

employment. Nike's fiscal year is from June 1 to May 31 (Geisel, 1994).

Nike has so many stores across the globe and this provides many different job

 

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positions. Jobs include administrative support, brand and consumer marketing, human

resources, manufacturing and engineering, design, logistics, sales, and finance. There are

many important job positions waiting to be filled by people that are determined to

represent Nike to the best of their ability (Geisel, 1994).

Anticipated Future & Financial Outlook

Nike is the world’s largest sportswear company but could see some trouble in the

future. They have recorded a drop in sales for the third quarter and things could get

tougher as orders for apparel and shoes is declining by 10%. Nike sells its products ahead

of time and this gives insight on the health of the sports equipment and the footwear

market (Casey, 2009).

Future orders for Nike products are scheduled to be delivered in the spring and

early summer. Nike’s future order is $6.5 billion and this is down from $7.2 billion in an

earlier quarter. Their revenue declined 2.3% to $4.44 billion at the end of the February

28th quarter. The U.S makes up one third of Nike’s sales and sales increased from 3% to

$1.6 billion. The sports company had a drop in sales because of sales declining in other

countries. Europe, the Middle East and Africa all had sale decreases of 14% to $1.2

billion. Nike’s subsidiaries did not have a sales decrease. Brands such as Converse and

Hurley increased 1% to $587.4 million. Competitors do not consider Nike’s sales loss to

be bad for the company. Other sports companies have lost a huge amount of money

during the economic crisis. Nike has a history of increasing revenue; therefore, when

sales started to decline Nike employees were scared (Casey, 2009).

Nike agreed to obtain Umbro in 2007 for $580 billion. Umbro is a British based

 

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soccer brand. Nike took a $240.7 million goodwill charge and this led to a 4.7% decline

in their net income and they reported 50 cents per share. Nike posted a net income of

$463.8 million and 92 cents per share in the same time period. Nike has had some

positive occurrences during these tough economic times. They are currently stealing

market share from other competitors. Nike’s share of the sports market rose three

percentage points to 48% of shoes being sold. Adidas lost a percentage point and this

caused them to fall in the market by 5%. Puma and Reebok lost shares at the same time

Nike did (Casey, 2009).

Summary of Findings

Nike has always been a huge part of my life. I grew up playing sports; therefore, I

have bought numerous Nike products. My soccer cleats, t-shirts, shorts, and pants all

contained the “swoosh.” Today, I cannot even count how many pairs of Nike tennis shoes

that lay at the bottom of my closet. I became a fan of Nike when they started sponsoring

Mia Hamm. I was a young soccer player that admired her, so of course I admired her

clothing too. Wearing Nike tennis shoes and apparel made me feel special, and I felt like

a professional athlete.

I never thought about working at Nike; however, after completing the research

project I am very interested. During my junior year, I plan to apply for their marketing

internship. Having an athletic background and studying marketing prepares me for a

position at Nike. Being a marketing executive for a 500k company that would allow me

to be creative and involved with sports would be amazing. I strongly believe Nike

produces quality products and would recommend anyone to buy their products or even

 

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work for them. They provide great benefits and treat their employees with respect. Health

and fitness has always been important to me, so I found it very surprising that Nike

provides free gym memberships. I also believe that Nike does not have worry about their

sales during this economic crisis. They have so many great employees and products to

offer. All Nike needs to do is stay ahead of their competition by coming up with new

product ideas. People around the world are familiar with the Nike logo; therefore, they

will not forget about the company.

Gaining more knowledge on a valuable 500k company will be very beneficial.

Learning about Nike was both interesting and fun. I will be able to present this project to

employers at job and internship interviews. I think employers will be blown away by the

effort and time I put into this project. It could also give me a better chance of receiving

the Nike internship. This project has started me on the right path towards a business

career.

 

 

Bibliography

1. Beckland, L. (1991). Swoosh. San Diego: Harcourt Brace Jovanovich.

2. Casey, N. (2009, March 19). Corporate News: Nike Signals Tougher

Outlook. Wall Street Journal (Eastern Edition), p. B.4. Retrieved March

17, 2009, from ABI/INFORM Global database.

3. Geisel, J. (1994, November). With wit and flair, Nike Inc. just does it. Business

Insurance, 28(45), 27. Retrieved March 24, 2009, from ABI/INFORM

Global database.

4. Greenberg, K. (1994). Bill Bowerman& Phil Knight: Building the Nike Empire.

Woodbridge: Blackbirch Press.

5. Hollister, G. (2008). Out of Nowhere. Indianapolis: Meyer & Meyer Sport.

6. Katz, D. (1994). Just Do It. New York: Random House.