3 Industry Defined20,000 retail accounts throughout the U. S. using independent distributors and also has contracts with 110 other countriesAlso has agreements with Internet companies and subsidiariesOperates within the sports footwear and apparel market.Originally designing and producing running shoes, their portfolio has broadened to include a wide range of sports and leisure wear. This is all endorsed by top sporting personalities
4 NAICS Codes North American Industry Classification System The standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economyThe first two digits of code designate the sector, the third designates the subsector, the fourth digit designates the industry group, the fifth digit designates the NAICS industry, and sixth digit designates the U.S. detail industry
5 NAICS Codes Example NAICS Codes Name Classification Level 31-33 ManufacturingSector316Leather and Allied Product ManufacturingSubsector3162Footwear ManufacturingIndustry Group31621Industry316211Rubber and Plastics Footwear Manufacturing U.S. Detail Industry
6 Nike ProductsThey design, develop, and market high quality active sports apparel, equipment, and accessory productsNike distributes one new shoe style every single dayNike’s critical factors for success are maintaining current standards, closer working relationships, and retaining customer loyalty by guaranteed standard of product
7 Nike ProductsTheir products are made for men, women, and children of all ages.The company presently sells roughly 300 models of athletic shoes in 900 styles for 25 different sports.Nike's target market for their shoes is males and females between 18 and 35 years old.
8 Nike ProductsThey not only see competition from Adidas and Reebok, but also with Old Navy and Abercrombie and FitchContinuous marketing research is the key in assessing the market
9 Nike ExpansionNike has success as a result of collaborating with other companies within the sports and fitness industryBut at other times, Nike expanded into markets for which it is not strategically suitedNike has realized to initiate more aggressive programs to review product partnerships that are outside of its core basis of products
10 Nike’s Biggest Competitor Consist of 3 companies:AdidasReebokTaylorMade
11 Adidas Purpose: Adidas Mission: The production and distribution of apparel, footwear and equipment for sports and leisure as well as of products of adjoining fields, furthermore the commercialization of the registered trademark Adidas.Adidas Mission:To be the leading sports brand in the world.The Adidas brand attitude “Impossible is nothing” drives all of their brand communication initiatives and it helps them strengthen the Adidas brand’s bond with the consumer.
12 Reebok Strategic Focus: Reebok’s Mission:Always challenge and lead through creativity.At the core of the Reebok brand is the affirmation of the uniqueness of all people.Reebok Strategic Focus:to become a consumer-driven brand that reflects the emphasis on individuality.Athletes Endorsed by Reebok:Sidney CrosbyAlexander OvechkinAllen IversonYao MingThierry HenryReebok Partnerships:NFLNHLMLB
13 TaylorMade’s Mission: To have the leading performance golf brands in the world.TaylorMade changed the game of golf by bringing the metalwood to the public 27 years ago, and today is the market leader in the metalwood category.Strive to continually extend their brands’ positions as leaders in the development and implementation of advanced performance technologies in all of their products including clubs, balls, footwear and apparel.Just to give you an idea of how well TaylorMade is doing, they currently endorse 55 professional golfers, one of which is Sergio Garcia, and as of February 17, 2009 he is ranked number two in world.
14 Adidas Group Financials Net Sales in millionsNine Months 2008Nine Months 2007ChangeAdidas6,0045,4659.9%Reebok1,5871,765(10.1)%TaylorMade6146090.8%
16 Growth in Recent Decades Nike and Reebok set the standardNike gained popularityLurking competitorsAdidas GroupUnder Armour
17 Industry Weakening Internet skyrocketed sales in late 90’s Upcoming companies took advantage of new technologiesSales have slumped tremendously in past yearNike making 4% cutUnder Armour stated that analyst’s estimates are far below earlier predictions
18 Threat of New Entrants Highly saturated and challenging industry Depend in large part on first mover advantage and scale economiesAreas to focus: Technologies, pricing, and costs of production
19 InnovatorSports Apparel and Footwear industry relies mainly on innovations and creativityInnovative Ideas=Key success factorCompany could have an advantageWithout proper funding and resources a firm could be at a severe disadvantageThreat of new entrants based on first- mover advantage is minimal
20 Economies of Scale Difficult to compete with large economies of scale Hard to handle all levels, more experienced firms are able to disperseNew entrants suffer a severe cost disadvantageSignificant amount of assets needed
21 Bargaining Power of Buyers and Suppliers Power of buyers can be determined by supply vs. demand and number of buyersPrice sensitivity effects demandCustomers more affected by priceSuppliers are more powerful when the ratio to buyers is moreThe vast range of products in the Athletic Apparel industry leads to a dissimilar amount of bargaining power for the supplier
22 Substitute products and services The threat of substitute products The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases
23 Substitute products and services Substitutes are a threat because: 1) They are an attractive alternative product or service, which customers can easily shift to if there are low switching costs. 2) The availability of substitutes invites customers to make price, quality and performance comparisons 3) Competitively priced substitutes impose a maximum value on prices relevant industry can charge for its products or services
24 Substitute products and services 1) They are an attractive alternative product or service, which customers can easily shift to if there are low switching costsOR
25 Substitute products and services 2) The availability of substitutes invites customers to make price, quality and performance comparisonsCAN I JUMP HIGHER?CAN I RUN FASTER?IS IT CHEAPER?
26 Substitute products and services 3) Competitively priced substitutes impose a maximum value on prices relevant industry can charge for its products or servicesWhat is worth ?
27 Rivalry Among Participants Competitive rivalryThis is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc.
28 Rivalry Among Participants Generally competitive rivalry will be high if:There is little differentiation between the products sold between customers.Competitors are approximately the same size of each otherIf the competitors all have similar strategies.It is costly to leave the industry hence they fight to just stay inHigh fixed or storage costs, which encourages fast turnover of inventory.
29 Rivalry Among Participants Market of Competitive Rivalry
31 Nike vs. The Economy As the economy slows, consumer purchases are down. The biggest threat for Nike would be economic recession.Asian economic crisis also affects Nike since its goods are manufactured in Asia.The labor costs and material prices are going up. Nike's growth is not just affected by the local economy but also in the international economy.A weak Euro and an Asian recession could mean weak sales for Nike.
32 Nike vs. EthicsIn 1996, the ethical issue of child labor came to the surface regarding the hiring of young employees by Nike’s Asian and Latin subcontractors whose ages ranged from very young to teenagers. The teen workers would have not been so controversial; however, there were no regulations or work permits issued.
33 Nike vs. EthicsWithout proper management leading and planning in the Nike Corporation, the company would have suffered from the child labor issue.Nike has made a true bounce-back from the negative media attention, and continues to be successful due to their strong business ethic philosophy.
34 Nike vs. SocietyPeople are more health conscious nowadays. Consequently, more and more people are joining fitness clubs. There is an accompanying growth for demands of fitness products particularly exercise apparels, shoes and equipment. Nike naturally is at the forefront of this surge in demand as people are looking for sports shoes, apparels and equipment.
35 Nike vs. SocietyThe largest among Nike’s objectives, the women’s athletic market will be a top priority in the next ten years. The number of women collegiate athletes have increased from a few thousand in the 1960’s to almost one million today.
36 TechnologyProduct technology must evolve as fitness evolves, in order to give competitors an advantageNike introduced Nike Shox, which revolutionized the cushioning foam used in shoesNike also collaborated with Apple and is launching new apparel and footwear that will easily carry the consumer’s iPod
37 TechnologyProduct innovation is an ongoing process and is vital to stay ahead of competitionCompanies in this industry invest money in R&D to keep up with the new demands of today’s athletesNike employs many specialists including engineers, athletes, biomechanics, and industrial designers to work together in the design process
38 CompetitionThe top 3 firms in this industry are Nike, Adidas, and PumaThe industry is relatively old, so firms must fight for market share rather than relying on market growth
39 Areas Firms Compete On Product offerings Technologies Marketing Expenditures (endorsements and advertising)PricingCosts of ProductionCustomer Service
40 CompetitionFirms in athletic footwear and apparel also compete with firms that provide other substitutes (such as leisure and casual wear)Skechers, K Swiss, New Balance, and AasicsNike has created their own lines of casual shoes to compete in these markets as wellExample: Converse
41 CompetitionDuring hard economic times, people consume less retail goods such as clothes and footwearBureau of the Census estimates that retail and food service sales for January 2009 are 9.7% below a year agoConsequently, the industry has turned to emerging markets to continue sales growthChinaRussiaLatin America
42 GeographyProduction is outsourced to plants in Asia, Latin America, and AfricaThis reduces costs because labor is cheaperPuts sources of production closer to where they will be soldFirms who outsource lose the ability to closely monitor product quality and working conditionsAlthough some people find this unethical, firms cannot afford to keep production close to home and still compete on profit margins
43 GeographyPlants are also located in many different countries, rather than being concentrated in one areaDiversification of production plants reduces the risk that a firm will greatly be affected by a problem in any particular countryExample: Nike’s largest footwear factory accounts for only 6% of the total footwear productionNike claims it can recover from any loss in production within one year’s time
45 Overview of the Industry In this industry there is intense competition, fashion trends, and price conscious consumers that have slowed growth in this industry.This creates difficult situations for companies to produce a brand image that appeals to consumers that want to shop for cheaper apparel, but also apparel that has quality.
46 Where the Industry is Now Financially, the company must be aware that economies are not up to par and that costs must be kept low to bring in the revenue.With the internet being a huge entry to Nike’s products, the company must find a way to keep their consumers to see them as being more user friendly as compared to their competitors.
47 Cont.Ways for Nike to do this is to keep the site simple, fresh, and easy to use.By using new designs and better deals for orders made online for the customers, it has the potential to bring in more revenue, as well as improve the relationship between the company and its clients.
48 Industry ForecastTechnology is always changing, and if Nike can create apparel and athletic equipment that the competitors cannot match, then Nike will grow even higher than its rivals.Technology can be based around anything from softer and more durable running shoes, to a baseball bat with a new metal to make the ball go further.