4 MAJOR MILESTONES1970- The Swoosh first appears on a football/soccer cleat called the Nike.1978- Tennis "bad boy" John McEnroe is signed by Nike to an endorsement contract.1989- Nike enters the European football marketNike wins Advertiser of the Year at the Cannes Advertising Festival.1996- Nike signs Tiger Woods1999- Bill Bowerman, co-founder of Nike, dies on Dec. 24 at age 88.2002- Nike purchases Hurley International2003- Nike acquires once-bankrupt rival Converse for $305 million2004- Phil Knight steps down as CEO and President of Nike, but continues as chairman2005- Nike Signs Tennis Pro Rafael Nadal.2006- Nike and Apple release the Nike+iPod sports kit2008- Nike sells its Nike Bauer hockey equipment division & purchases Umbro.
5 CURRENT VISION STATEMENT "To bring inspiration and innovation to every athlete in the world"If you have a body, you are an athlete.Nike co-founder Bill Bowerman
6 CURRENT MISSION STATEMENT To lead in corporate citizenship through proactive programs that reflect caring for the world family of Nike, our teammates, our consumers, and those who provide services to Nike.
7 PROPOSED VISION STATEMENT To equip every athlete with products that combine performance, quality, and fashion.
8 PROPOSED MISSION STATEMENT At Nike, we desire to deliver superior products to customers and athletes that are both safe and dependable (1, 2 and 6). Our well trained employees and experienced executives will ensure a competitive advantage for our markets, growth for the company, and profits for our shareholders (5). Our commitment to social responsibility and the communities in which we operate will ensure business relationships and alliances for the future and a perception of concern with our stakeholders (6, 8). We will continue to utilize innovation and technology to provide our employees with the best possible work environment while adapting to the many changes in the global market (3, 4, 7, and 9).1. Customers2. Products or services3. Markets4. Technology.5. Concern for survival, growth, and profitability6. Philosophy7. Self-concept8. Concern for public image9. Concern for employees
12 OPPORTUNITIESCreating sportswear that would incorporate recycled materials from their own production lines and other places.Promotion as a fashionable wear, not just sportswear.Growing segment of the female athletes.International expansion into emerging markets – e.g.. IndiaAdditional marketing of existing products to appeal to new demographic groups.Develop new alliances with companies that are respected regarding social responsibility.Brand reorganization by market regions
13 THREATS High competitive industry Failure to respond to market trends in timely manner could greatly affect financial position.Production of counterfeit goods, and generic products.Negative public perception created by environmental, child labor, contracted manufacturing issues, and sponsored athletes.International currency changes could decrease profits.Federal Trade regulations in dealing with foreign manufactures.
14 EFE MATRIX External Opportunities 1. Creating sportswear that would incorporate recycled materials from their own production lines and other places.0.0530.152. Promotion as a fashionable wear, not just sportswear.0.0620.123. Growing segment of the female athletes.0.080.244. International expansion into emerging markets – e.g. India40.485. Additional marketing of existing products to appeal to new demographic groups.0.070.146. Develop new alliances with companies that are respected regarding social responsibility.17. Brand reorganization by market regionsExternal Threats1. High competitive industry0.562. Failure to respond to market trends in timely manner could greatly affect financial position.0.090.363. Production of counterfeit goods, and generic products.4. Negative public perception created by environmental, child labor, contracted manufacturing issues, and sponsored athletes.0.275. International currency changes could decrease profits.6. Federal Trade regulations in dealing with foreign manufactures.Totals1.003.03
16 Eric D. Sprunk Vice President Global Footwear ORGANIZATIONAL CHARTPhilip H. KnightChairman ofthe BoardCEO and PresidentMark G. ParkerGary M. DestefanoPresident of GlobalOperationsitleHans van AlebeekVice President,Global operations &TechnologyDonald W. BlairVice President andCFODavid J. AyreVice PresidentGlobal HumanResourscesRonald D. McCrayChief AdministrativeofficerBernard F. PliskaCorporate ControllerTrevor Edwards VicePresident GlobalBrand & CategoryManagementPresident Nike BrandCharles D. DensonPresident AffiliatesLewis L. Bird IIIJohn SlusherGlobalSports MarketingEric D. Sprunk Vice President Global Footwear
17 (In millions, except per share data) 2009 INCOME STATEMENTYear Ended May 31(In millions, except per share data)200920082007Revenues$ 19,176.10$ 18,627.0$ 16,325.9Cost of sales$ 10,571.70$ 10,239.6$ ,165.4Gross margin$ 8,604.40$ ,387.4$ ,160.5Selling and administrative expense$ 6,149.60$ ,953.7$ ,028.7Restructuring charges (Note 16)$$Goodwill impairment (Note 4)$Intangible and other asset impairment (Note 4)$Interest income, net (Notes 1, 7 and 8)$ (9.50)$ (77.1)$ (67.2)Other (income) expense, net (Notes 17 and 18)$ (88.50)$$ (0.9)Income before income taxes$ 1,956.50$ ,502.9$ ,199.9Income taxes (Note 9)$$$Net income$ 1,486.70$ ,883.4$ ,491.5Basic earnings per common share (Note 12)$$$Diluted earnings per common share (Note 12)$$$Dividends declared per common share$$$
18 LIABILITIES AND SHAREHOLDERS’ EQUITY 2009 BALANCE SHEETMay 31,20092008(In millions)ASSETSCurrent assets:Cash and equivalents$ 2,291.10$ 2,133.90Short-term investments$ 1,164.00$Accounts receivable, net (Note 1)$ 2,883.90$ 2,795.30Inventories (Notes 1 and 2)$ 2,357.00$ 2,438.40Deferred income taxes (Note 9)$$Prepaid expenses and other current assets$$Total current assets$ 9,734.00$ 8,839.30Property, plant and equipment, net (Note 3)$ 1,957.70$ 1,891.10Identifiable intangible assets, net (Note 4)$$Goodwill (Note 4)$$Deferred income taxes and other assets (Notes 9 and 18)$$Total assets$ 13,249.60$ 12,442.70LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:Current portion of long-term debt (Note 8)$$Notes payable (Note 7)$$Accounts payable (Note 7)$ 1,031.90$ 1,287.60Accrued liabilities (Notes 5 and 18)$ 1,783.90$ 1,761.90Income taxes payable (Note 9)$$Total current liabilities$ 3,277.00$ 3,321.50Long-term debt (Note 8)$$Deferred income taxes and other liabilities (Note 9)$$Commitments and contingencies (Notes 15 and 18)$Redeemable Preferred Stock (Note 10)$Shareholders’ equity:Common stock at stated value (Note 11):Class A convertible — 95.3 and 96.8 shares outstanding$Class B— and shares outstanding$Capital in excess of stated value$ 2,871.40$ 2,497.80Accumulated other comprehensive income (Note 14)$$Retained earnings$ 5,451.40$ 5,073.30Total shareholders’ equity8693.17825.3Total liabilities and shareholders’ equity
19 2009 FINANCIAL RATIOS Liquidity Ratios Current 2.97 Quick 2.25 Leverage RatiosDebt to total assets0.06Debt to equity0.09Long-term debt to equity0.05Times-interest-earned ratio61.06Activity RatiosFixed Assets Turnover9.8Total Assets Turnover1.45Inventory Turnover8.14Profitability RatiosGross profit margin 0.45Operating profit margin0.13Net profit margin0.08Return on assets0.11Return on equity0.17Price-earnings ratio18.83EPS3.03Growth Ratios3 YearsSales Growth%Net Income Growth%Earnings per share Growth%Dividends per share Growth%
20 FINANCIAL TRENDS Date Sales EBIT DEPRECIATION TOTAL NET INCOME LONG TERM DEBTMay-0919.18 Bill1.96 BillMill1.49 BillMillMay-0818.63 Bill2.50 BillMill1.88 BillMillMay-0716.33 Bill2.20 BillMillMillMay-0614.95 Bill2.14 BillMill1.39 BillMillMay-0513.74 Bill1.86 BillMill1.21 BillMill
21 STRENGTHS Recognized brand name – ‘Swoosh’ is ubiquitous Strong in research and development – innovative product developmentStrong marketing campaign - sponsors top athletes. Marketing practices enables them to expand the athletic market.Diverse portfolioSuccessful advertising campaigns.Customer loyaltyStrong financial positionStrong international presence
22 WEAKNESSES Products are highly priced Revenues are still mostly dependent upon footwear salesHistory for violations of minimum wages, child labor and over times in its manufacturing countries.Little control over quality of products from 3rd party contractorsAnti-globalization groupsPrice sensitivity of products
23 IFE MATRIX Internal Strengths Recognized brand name – Swoosh is ubiquitous0.1040.40Strong in research and development – innovative product development0.0730.21Strong marketing campaign - sponsors top athletes. Marketing practices enables them to expand the athletic market0.090.36A very professionally competitive company0.080.24Diverse portfolioSuccessful advertising campaignsCustomer loyalty0.060.18Strong financial positionStrong international presence0.4Internal WeaknessesProducts are highly priced20.12Revenues are still mostly dependent upon footwear sales0.05History for violations of minimum wages, child labor and over times in its manufacturing countries.Little control over quality of products from 3rd party contractors1Anti-globalization groups0.04Price sensitivity of productsTotals1.003.10
25 SWOT MATRIX WT Strategy SO Strategy- S1, O2, O3: The swoosh is so well known that recycled materials and fashionable lines of clothing would definitely create a whole new dimension for Nike.- S3, O3, O4: With some of the most recognizable and followed athletes globally, expanding into places like India and forming alliances with different kinds of sports leagues will be a viable strategy to expand.- S5, O6, O7: Use the company`s successful competitiveness and alliances to reorganizing the brand name and appeal to new/ different demographic groups.WT Strategy- W3, W5, T4, T5: Due to Nike`s history of low labor wages to the thousands of factory workers, a recession may spell the end of many jobs and the production of many more important products. Improving the working conditions and pay of its factory workers is an ideal strategy to prevent such circumstances.- S6, S7, T3: The quality of material throughout Nike`s diversified portfolio, may be able to help combat counterfeit goods and generic products. Especially now that many consumers associate cost with quality.- S3, S9, T1, T2: Nike is well known for some of the athletes that it endorses, as well as its international presence, which will help maintain and attract customers even if there are high prices and challenging economic times, as long as it remains at the forefront of market trends.ST StrategyWO Strategy- W1, W2, O1, O2:Creating sportswear and even fashionable wear from recycled materials, would be an opportunity to sell products at a lower cost.- W4, O4: Use 3rd party contractors to manufacture cheap/ lower cost products in order to appeal to the group of consumers who end up buying generic products, because official merchandise is too expensive.
26 SPACE MATRIX ES average -1.29 CA average -1.43 IS average 5.29 Financial Strengthrating is 1 (worst) to 6 (best)Ratings1Liquidity6.02Leverage3Working capital4Return on assets4.05Return on equity6Price per earnings7Earnings per share5.0Industry StrengthFS Total37.0Profit potentialExtent LeveragedEconomies of scaleGrowth potentialFinancial stabilityResource utilizationDiverse PortfolioEnvironmental Stabilityrating is -1 (best) to -6 (worst)IS TotalPrice range of competing products-2.0Competitive pressureEase of exit from market-1.0Successful and recognized advertisingEndorsement agreementsPrice elasticity of demandRisk involved in businessCompetitive advantageES Total-9.0Market shareGlobal presenceStrong investor reputationTechnological innovationProduct life cycleCustomer loyaltyControl over suppliers and distributors-3.0CS total-10.0ES average-1.29CA average-1.43IS average5.29FS averageX Coordinate3.86Y Coordinate4.00Strategy ->>>>Aggressive
28 BCG MATRIX II I III IV Stars Question Marks Dogs Cash Cow HighLow+25+20III+15StarsQuestion Marks+5(4) 11%(3) 17%(1) 35%IGR(2) 37%-5Cash CowDogs-15IIIIV-20-25LowDivisionsRevenue% RevenueProfits% ProfitsRMSPIG Rate%(1) U.S.6,542.939%837.235%11.20%(2) AMEA5,512.233%877.137%-2.20%(3) Asia Pacific3,322.020%394.617%2.70%(4) Americas1,284.78%263.611%Total16,661.8100%2,372.5
29 IE MATRIX EFE I F E High 3-4 Medium 2-2.99 Low 1-1.99 Strong 3-4 AverageWeakI F E
30 MATRIX ANALYSIS Alternative Strategies IE SPACE GRAND BCG Count Forward Integrationx4Backward IntegrationHorizontal IntegrationMarket PenetrationMarket DevelopmentProduct DevelopmentRelated Diversification2Unrelated Diversification1Horizontal DiversificationJoint VentureRetrenchmentDivestitureLiquidation
31 Prod/Recycle/Materials Add. Sports Accessories QSPMMarket ExpansionProd/Recycle/MaterialsAdd. Sports AccessoriesKey factorsWeightASTASExternal1 to 4Create products from recycled materials0.130.320.240.4Promotion as a fashionable wear, not just sportswear.0.070.2110.14Growing segment of the female athletes0.08-International expansion into emerging markets - India0.120.480.24Add. marketing of existing prod - appeal to new groupsNew alliances with co. respected for social responsibility0.060.18Brand reorganization by market regionsHigh competitive industry0.320.16Failure to respond to market trends in timely mannerNegative public perceptionFederal Trade regulations with foreign manufacturesInternational currency changes could decrease profitsProduction of counterfeit goods, and generic productstotal should be 1.0InternalRecognized brand name – Swoosh is ubiquitousStrong in research and development/innovation0.090.360.27Strong marketing campaign/sponsors top athletesDiverse portfolioSuccessful advertising campaignsCustomer loyaltyStrong financial positionStrong international presenceProducts are highly pricedRevenues still mostly dependent upon footwear sales0.050.15Violations for wages and child labor in manuf. countriesLittle control over quality of prod. from 3rd party contract.Anti-globalization groupsPrice sensitivity of products4.953.75
32 RECOMMENDATIONSInvest $500 million in India that will increase revenue by 4.5% through product development, market development, and market penetration in the next 3 years.Open a new Nike Super store in each of India’s largest cities: Mumbai, Delhi, and Bangalore at $5 million per store.Invest $235 million in R&D and manufacturing contracts over the next 3 years.Invest $220 million on marketing and advertisement over the next 3 years.Sign an endorsement bat sponsorship deal with Sachin Tendulkar, India’s biggest cricket star to a multi-year contract. The terms include apparel, footwear, and his own name brand. The deal is worth $30 million over 3 years.
33 OBJECTIVESTo continue being the world leader in sports equipment and apparel.To complete brand reorganization within market regions that will lower cost of sales.To create sportswear that would incorporate recycled material.To develop new alliances with companies who are well respected regarding social responsibility.To invest in additional marketing of existing products that will appeal to new demographic groups.To promote products as fashion wear, not just sportswear.
35 PROJECTED INCOME Year Ended May 31 Projected 2009 2010 (In millions, except per share data)Revenues$ 19,176.10$ 19,463.74Forecasted 1.5% revenue increase.Cost of sales$ 10,571.70$ 10,730.281.5% increase.Gross margin$ 8,604.40$ 8,733.47Selling and administrative expense$ 6,149.60$ 6,351.953.3% increase from previous year.Restructuring charges (Note 16)$$Goodwill impairment (Note 4)$$Intangible and other asset impairment (Note 4)$Interest income, net (Notes 1, 7 and 8)$ (9.50)$ (9.50)Other (income) expense, net (Notes 17 and 18)$ (88.50)Income before income taxes$ 1,956.50$ 2,429.52Income taxes (Note 9)$$Based on 24% from 2009Net income$ 1,486.70$ 1,846.43Basic earnings per common share (Note 12)$$Diluted earnings per common share (Note 12)$$Dividends declared per common share$$
36 PROJECTED BALANCE SHEET Year Ended May 31,Projected20092010ASSETSCurrent assets:Cash and equivalents$ 2,291.10$ 2,163.80Minus $ in investment.Short-term investments$ 1,164.00Accounts receivable, net (Note 1)$ 2,883.90$ 2,976.183.2% previousInventories (Notes 1 and 2)$ 2,357.00$ 2,628.00Influenced by the cricket lineDeferred income taxes (Note 9)$Prepaid expenses and other current assets$$Total current assets$ 9,734.00$ 10,104.38Property, plant and equipment, net (Note 3)$ 1,957.70$ 1,972.70Plus $15 million for three new stores.Identifiable intangible assets, net (Note 4)$Goodwill (Note 4)$$Deferred income taxes and other assets (Notes 9 and 18)$$Total assets$ 13,249.60$ 13,617.04LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:Current portion of long-term debt (Note 8)$$Notes payable (Note 7)$$Accounts payable (Note 7)$ 1,031.90$ 1,051.50Accrued liabilities (Notes 5 and 18)$ 1,783.90Income taxes payable (Note 9)$$Total current liabilities$ 3,277.00$ 3,307.30Long-term debt (Note 8)$$Less portion of $32.0Deferred income taxes and other liabilities (Note 9)$$Commitments and contingencies (Notes 15 and 18)$Redeemable Preferred Stock (Note 10)$Shareholders’ equity:Common stock at stated value (Note 11):Class A convertible — 95.3 and 96.8 shares outstanding$Class B— and shares outstanding$Capital in excess of stated value$ 2,871.40$ 2,995.40Accumulated other comprehensive income (Note 14)$Retained earnings$ 5,451.40$ 5,665.83Total shareholders’ equity$ 8,693.10$ 9,031.53Total liabilities and shareholders’ equity
37 PROJECTED FINANCIAL RATIOS 2009Projected 2010Liquidity RatiosCurrent 2.973.06Quick2.252.26Leverage RatiosDebt to total assets0.06Debt to equity0.09Long-term debt to equity0.050.04Times-interest-earned ratio48.5565.66Activity RatiosFixed Assets Turnover9.89.87Total Assets Turnover1.451.43Inventory Turnover8.147.41Profitability RatiosGross profit margin 0.45Operating profit margin0.10.12Net profit margin0.08Return on assets0.110.14Return on equity0.170.20Price-earnings ratio18.8317.83EPS3.033.20Growth Ratios3 Years1 YearSales Growth%1.50Net Income Growth%24.20Earnings per share Growth%4.23Dividends per share Growth%2.04
39 Primary Responsibility BALANCED SCORECARDArea of ObjectivesMeasureTime ExpectationPrimary ResponsibilityCustomers1. Customer satisfactionCustomer and online surveysQuarterlyManagers/ Marketing2. Customer LoyaltyProduct and purchasing reviews. Memberships and number of returning and new customers.Marketing3. AccessibilityOpen more stores in various countries.Biannually- AnnuallyManagers/Employees1. Improve working conditionsIncrease in productivity, employee surveys.CEO2. Improve employee trainingIncrease in productivity and overall operating efficiencyHuman ResourcesCommunity/Social Responsibility1. Business EthicsEndorse positive role model athlete`s. Increase promotion of sports and wellness.Annually2. Environmentally FriendlyRecycle materials, improve reputation and customer perspective.Biannually3. Community involvementRun local sports camps, community/ city events- increase customer awareness.Regional ManagersOperations/ Processes1. Improve Brand ImageIncrease in sales and customer recommendations.2. Product InnovationNumber of new stores, products and marketingCEO/ Marketing3. Market PenetrationNumber of stores and sales in new/ other countriesFinancial1. Reduce Cost of productionDecrease in production expenses.CFO2. Increase RevenueIncrease in annual sales