Intro to Business Nike Project PDF

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Introduction to Business Group Project Part I: The Nike Metcon 3X is a built tough training shoe that provides support and comfort for all of your training wants and needs. The build includes Flywire and mesh material to keep the shoe lightweight yet durable. The sticky rubber sole provides traction at the forefoot of the shoe which adds traction. The shoe, made by Nike, is imported and is a part of a line of products. The Nike “Metcon 3” series was released in January of 2017. The line of shoes are specialized for training and are made mostly for going to the gym, but can be worn for everyday use. In shoe comes in many different colors schemes, but the most popular is a black based shoe with a gum colored undersole. Nike Incorporation is an American multinational corporation that develops, manufactures and sells footwear, apparel, equipment, accessories and services at the worldwide level. Nike, formally known as Blue Ribbon Sports, is based in Beaverton, Oregon and was originally founded in 1964. The company was founded by Bill Bowerman and Phil Knight and officially became Nike in the year of 1971. Nike’s two most recognizable features are the “swoosh” logo and their slogan of “Just Do It.” These two features have been dominating the sports apparel game for over 20 years now, edging out both Adidas and Under Armour for the top spot. According to Nasdaq.com, Nike earned $15,312 of gross profit in the year 2016. Social-Cultural Environment

Nike’s mission is to, “Bring inspiration and innovation to every athlete in the world —If you have a body, you are an athlete” (Nike). That being said, it’s fair to compare the company’s social-cultural trends, in part, with the current trends in health, exercise and overall fitness. The “Nike Metcon 3” is a weightlifting shoe and while it falls under the broader category of working out, it can be limited to those who consider themselves weightlifters. According to IBISWORLD, current health marketing campaigns against obesity, and an overall focus on improving health, in the united states and around the world, have made individuals more health conscious. Currently the health industry (gyms, fitness clubs) have a revenue of 31 billion dollars with an annual increase of 2.1%. This trend is expected to continue over the next 5 years. Being the world’s largest seller of footwear, athletic apparel and equipment, Nike’s market share , within the context of footwear, improved in quarter 2 2017 to 51.88%.(CSIMarket). In other words, it is dominating the cultural trends in health and exercising. In terms of weightlifters, a survey conducted by ACM’s health and fitness journal revealed that strength training has lost some popularity. Conversely it, continues to dominate as the fourth biggest focus of training. Historically speaking, strength training has continued to be a strong competitor among the 19 other categories including high interval training, yoga and weightless to name a few. An upward trend in health and exercise is likely to have the greatest impact on the Nike “Metcon 3”. Political and Legal environment

Looking at the statistics of the markets that Nike produces footwear to worldwide, the main region that buys most of the footwear is North America, who as of 2017, consumed 9.7 billion dollars of Nike shoes (Statista, 2017). The second closest region was Western Europe who consumed under half of the North American region, at about 4.1 billion dollars of revenue (Statista, 2017). One of the main focuses of the Political and Legal environment would be to the main consumers, and the other focus would be in the main producing regions and countries. The main legal concerns Nike has when looking at the consuming market would be making sure that the shoes do not contain any toxic materials, possibly different types of rubber and plastic that would harm the user of the shoe. They also would have to look at the importing aspects, whether or not the country that is producing the goods has a strict trade regulation or high tariffs with the country that is consuming. As for the country that is producing the products, which Nike has a lot, they would have to make sure that they abide labor laws. Nike has known to use sweatshops in the past, and made an effort to stop. As long as they do not disobey laws where sweatshops are illegal, Nike should be okay on the legal aspect of that, but possibly not the ethical. They also have to make sure that the producers are not exceeding the pollution rate that the country has set. They also have to make sure that the manufacturers are properly disposing of the waste that is produced, not illegally dumping trash in spots other than landfills, or not properly getting rid of toxic waste. Competition The main competitors for Nike are Reebok, Adidas, and Puma. Although these other companies do not have as much revenue or net worth that Nike has, they are 3

well-known companies. Adidas is an official soccer ball sponsor for FIFA, making them very well known in soccer playing countries, helping give a larger name for them. The main product that the produce is footwear, making them a large competition with unique designs and competitive prices. They also market to the middle upper class, like Nike does, and most of their shoes are considered to be high end. The second company to watch out for is Reebok. Reebok is a subsidiary of Adidas, making them having less competition against Adidas, and implementing some of the same marketing strategies Adidas has. Reebok also mainly focuses their attention to the running market with their shoes, making them a likely adversary for the shoe that Nike is attempting. The third and final competitor is Puma. Puma is not as big of a competitor, compared to Adidas and Nike’s sales worldwide in 2016, they had 3.63 Billion, where Adidas had !9.2 Billion, and Nike had 29.2(Statista, 2017). This means that they have less marketing and capital that is able to be bought. Technological Environment Advances in technology can influence how a business conducts sales, manufactures products communicates with customers or if it decides to outsource much of its products overseas. As an illustration, consider online shoe sales. Per IBISWORLD, men’s athletic shoes account for 20.8% of online shoe sales. In addition, Nike’s Facebook page has 28 million followers. In comparison to reebok, who has 8 million followers, this is an indication of how well Nike is doing. The overall technological environment of Nike is truly amazing when you really see what they achieve. The online display of the show is quite eye appealing and gives

the customer the option of choosing which color scheme he or she would like to purchase. However, going more in depth with Nike inside the factories. Becoming more eco-friendly is a common theme in the business world of today. Nike has done this with materials, “Pursuing greener chemistries with materials suppliers and contracted factories through an agreement with bluesign to open up its chemical formulation database, enabling access to 30,000 environmentally-better materials”. Moving into greener territories allows for an advancement in the way Nike does business. In a video from 2015 Nike plans to make their energy uses 100 percent reusable energy. This is an astonishing goal as it will allow for more advancements and in today's world everyone loves a product that helps the environment, so in a way it helps market the product as well. Overall Nike has a main goal for their technological advancements in the coming years and that is to be green and eco friendly. Economic Environment Currently, revenues for Nike went up 8% while their gross margin declined to 44.1%. This means that while their overall net income rose their expenses also rose in comparison. In other words, they have less assets to pay off their liabilities in relation to last year. Economic factors that will affect Nike include demand for shoes, market size and taxes. For example Nike's effective tax rate declined from 21.2 percent to 13.7 percent mainly due to operations outside of the United States. One trend to watch out for is the current administration's legislation to reduce taxes into a three tier system with the highest at 35 percent (Nike Fiscal Report). Summary

With Nike Incorporation being the leader in their industry, they are bound to have many threats to both their company and products. As far as Nike as a company goes, their competition is mainly other companies that compete with them. As of current trends, Nike’s main competitor is Adidas. Not only is Adidas the main sponsor of FIFA but they just striked a deal with the NHL to sponsor their hockey jerseys. Adidas being a major sponsor with FIFA is more important than the NHL because FIFA spans across many countries. With that being said, Nike is still the global leader in their respective industry.

Strengths

Weaknesses

Opportunities

Threats

Brand Image

Labor Controversies

Limit Labor Controversies

Competition

Innovation

Imitation Limited Presence in Increase Market Techniques by Developing Markets Presence in Developing Markets competitors

Global Market Share

Technological innovations

Benjamin Oquendo Ryan Penkala Skylar O’reilly Robert Abbott Dillon Murphy ADMN 400 R32

Part II:

1. Nike’s mission statement reads, “To bring inspiration and innovation to every athlete in the world”(Nike). This statement exemplifies the fact that with the assistance of Nike and it’s products, anybody can be an athlete. To be an athlete in Nike’s beliefs, you have to obtain the correct mindset. Bill Bowerman, a coach at The University of Oregon’s track team, once said, “If you have a body, you are an athlete” (Bowerman). This legendary quote is also used to complete their mission statement. Nevertheless, Nike’s strategic goals from the very beginning have been to transform the clothing and merchandising industry. It has partnered with the U.K and many other European countries to globalize and therefore support their goals of enhancing sustainability, customer awareness and environmental labeling. Not only do they lead the industry and empower athletes but they do so in a socially responsible way (Nike 10k, 2017). 2. According to the Wall street Journal, there are multiple institutions that all together hold about 80 percent of the company's shares. The top five on this list include The Vanguard Group, inc at 7.51 percent, SSga Funds Management, inc at 4.48 percent, BlackRock Fund Advisors with 4.28 percent, Wellington Management Co. LLP with 3.63 percent and Fidelity Management and Research Co. Among individuals, Philip H knight holds about 1.8 percent and the second highest is Mark G. Parker with 1.5 million shares. In short, most of the company's shares are distributed among many institutions. Aside from the company’s founder, Philip Knight, most of Nike's executives hold a small amount of the shares. 3. Nike has 12 members that compose its board of directors. At the head of the board is Mark G. Parker. Behind Parker is Philip Knight who has been a director since 1968 and is the co-founder of Nike. He has also served as the company’s president

from 1968 to 1990. Under Knight is Elizabeth J. Comstock. She is the individual who runs the executive committee and the finance committee. Parker who is in charge of the executive committee has also been vice president of Nike for a short period of time. Members under these three include John G. Connors (Adult Committee), Timothy D. Cook (Nominating and Corporate Governance Committee), John J. Donahoe II (Adult and Finance Committee), Alan B. Graf, JR (Adult and Nominating Committees), Travis A. Knight (Executive and Corporate Responsibility and Sustainability Committees), John C. Lechleiter (Compensation, Finance and Nominating Committees), Michelle A. Peluso (Adult and Corporate Responsibilities Committees), Johnathan A. Rodgers (Compensation and Corporate Responsibilities Committees) and finally John R. Thompson (Corporate Responsibilities Committee). The purpose of the executive committee is to support the operation of the board of directors by taking action when the directors deem fit. The executive committee also distributes Nike stock, fills vacancies in the board of directors and adopts and amends Nike’s bylaws. The executive committee is the most important group on Nike’s board of directors due to the fact that they fill the vacancies. Without adding new members to the board, the board of directors would be no more, giving the corporation less of a direction. 4. Nike’s environment is structured in a matrix organization which depicts a hierarchy depending on global function, geography and brand. Following Nike’s Chairman Emeritus, Phil Knight, is the CEO and CFO. It is important to note that immediately after the CEO the “President” and “CEO” at Converse is shown to demonstrate one of Nike's many subsidiaries. The organizational chart of human

resources is also broken down, starting at a global level. As shown, there is a vice president of human resources for North america, which is followed by multiple other directors. Moreover, Nike also has a Vice president which oversees footwear design, innovation and training. Nike employs 74,000 people worldwide with 26,000 being in the United States alone (Nike 10-K). Demographics within the U.S., include 48 percent White, 21 percent Black, 18 percent Latino, 7 percent Asian, 5% unknown and less than one percent Hawaiian, Indian or Alaskan Native each. The median age of employees is 33 years old and about 75 percent of employees report a high job satisfaction. The median salary and tenure at Nike is $64,600 and 3.2 respectively (Full List). According to Nike’s annual report, Nike contends, “Management considers its relationship with employees to be excellent” (Nike 10-K). They go on to explain that there are no worker unions within its workforce, unless required by law such as in foreign countries. This culture is evident, given nike’s recent news reports and ranking. Per GlassDoor, Nike has had over 3,000 reviews for an overall rating of 3.9 out of 5 stars, and 83 percent recommend it to a friend. Nike has been rated as having one of the best CEO’s for the past three years running (GlassDoor). Corporate Culture creates an environment that invites innovation and a workforce of motivated employees. In a video titled “Nike Talent Presents”, employees embrace a positive tone towards work/life balance and talk about some of the unique benefits offered by nike such as their daycare centers. During the video one employee says, “You are surrounded by passionate and talented individuals”. This quote says a lot about the approach these employees have which can be directly correlated to the style

of management that the company as a whole embraces. Nike has been ranked among the “Best places to work” for the past five years (Nike Talent Presents). 5. Nike has a standard interview process that mirrors practices across the industry.Conversely, one significant difference is that the superiors are known as “coaches” not managers. Despite its standard hiring process, there are variations depending on location. For example, this statement came from an individual, interviewing in Portland Oregon, “I proceeded to do a phone screen with the hiring manager a week later and it was also quite friendly and engaging” (Nike Interview). Showing that there could be multiple levels of their interview. Similarly, these three questions were asked to a sales associate from Commerce California, “Why Nike? What are you passionate about? A time where you got in a conversation with a random stranger?”(Nike Interview). The question that stood out among all the interviews was, “why Nike?”. Which is standard but according to the interviews given and shown by glass door, it seems like they focused on behavior and reactions to certain situations. Nike wants employees that go outside the box and become more innovative and collaborative in the process. 6. Nike is a solid paying company for people in higher management positions. The CEO Mark Parker will make 13.9 million in 2017 which is a 71 percent pay cut from his 47.6 million in 2016(salary.com). The tops the nation's average salary for CEOs at $163,231according to payscale. Trevor Edwards the president of Nike makes 4.9 million a year(salary.com). Eric D Sprunk the COF makes 4.4 million a year and the CFO Andrew Campion makes 3.9 million a year(salary.com).

7. Like many organizations, Nike offers incentive plans to the corporate officers of the company. They allow cash compensation based on a percentage of an employee's base salary, if they reach the Target Plan that the board of committees have put in place (U.S. Securities and Exchange Commission). This Target Plan can vary depending on what the Board of compensation committee decides is best for the goals of the company during the given year. The compensation has a maximum amount of $5 million dollars, giving employees a good reason to strive for excellence, in the interest of themselves and the company (U.S. Securities and Exchange Commission). 8. The company utilizes motivational programs in order to help them grow by sending managers through training programs that teach them how to extract employee's talents and skills to increase productivity at work and have a more creative and efficient work environment (Nike.Com). Their goals are to motivate employees in a much more comfortable environment rather than a strict and demanding one. According to Nike’s website, they “Motivate employees by making them feel as if their work has more in common with Mother Teresa rather than Henry Ford”. This allows the workers to feel less pressure, and produce higher quality products. They also use incentive programs and benefits as other means to motivate their employees (Nike.com). 9. For many companies today, sustainability and Global warming have impacted the way they do business-the same goes for Nike. The company has unveiled at least two products with a focus on sustainability and lower emissions by lack of waste. The “FLYKNIT” is a type of athletic footwear that uses different sewing patterns (less materials) without compromising the integrity of the shoe. Nike claims this shoe prevents millions of pounds of waste from ever reaching the landfill (Nike). In addition,

nike has created “Nike Grind”. This project aims at reusing materials or other products to create new products. In effect its recycling old inventory. Not only are these unique strategies that exemplify the company's share of social responsibility but as an industry leader, they also set an example. 10. Nike seems to be a well structured company that has enjoyed a lot of success. One of the management characteristics that stand out is the company's core management values: ● Lead ● Coach ● Manage ● Inspire As simple as the their values seem, they also show where the the company’s attention is focused-and that is in management. Common sense seems to dictate, and studies have shown many times over that a culturally diverse work environment that flows both ways leads to better leaders, inspires worker motivation and ultimately leads to increased productivity. Many economist believe that an entity, after a certain point, begin to see their average cost grow because management implements large scale assumptions across the whole organization. One suggestion for nike is that they continue to evaluate the differences in both regional and international borders going forward and that they embed group incentives versus individual incentives among their employees.

Part III:

1.

The demographic segmentation of Nike shoes is sorted out by factors such as

age, gender, occupation and generation. In Nike’s vision, each generation has different wants and needs over style and comfort. These factors can be considered psychographic segmentations because Nike targets individuals that have different lifestyles and personalities. As far as the Nike Metcon 3X shoe, Nike primarily targets young men. The product is a...