Executive Summary
Introduction
Out of dissatisfaction with the available shoes and the desire to make better shoes, Nike was founded.1 Nike, which was formed as Blue Ribbon Sports in 1964, is known for its global retail presence and focuses on designing, developing, marketing, and selling sports products such as footwear, apparel, and sports equipment through its website and retail stores.2 By considering everyone who has a body, as an athlete, Nike’s mission is to ensure the expansion of human potential to every athlete in the world through inspiration and innovation.3
With its approach to building more equal, inclusive, and active communities, Nike gets the advantage of our shared love of sport by engaging its employees (73,300 employees)4 in their communities to build the next generation – kids.5 To better understand all aspects of Clothing and Apparel Manufacturing, it is essential to go through and analyze one of the largest and most influential companies in the industry, Nike. Therefore, this report focuses on giving a comprehensive view of Nike by presenting and analyzing the following aspects:
• The history of Nike
• A detailed timeline
• An analysis of Nike financial statements
• A SWOT Analysis
History
Before Nike was “Nike”, it was known as Blue Ribbon Sports. Blue Ribbon Sports was founded back in 1964 by co-founders Phil Knight and Bill Bowerman. Nike is known around the world for its high-profile endorsements, sleek designs, and PR campaigns. Understanding the history of Nike begins with the background of how the company became one.
Knight attended the University of Oregon where he ran for the track and field team. This put him into contact with the institution’s track coach, Bill Bowerman. Bowerman had an interest in optimizing his runners’ shoes using skills he learned from a local cobber to test different models. According to Nike, Knight was the first student to test one of Bowerman’s shoes. Bowerman saw Knight as a safely-unimportant runner to test his shoes, this Bowerman offered to fix up a pair of his shoes with his custom design. After Knight accepted the offer, apparently, the shoes worked so well that a teammate Otis Davis wore them to win a gold medal in the 400-meter dash in the 1960 Olympics.
Knight graduated from the University of Oregon in 1962, he then went forward to Stanford’s MBA program where he wrote a paper theorizing that the production of running shoes should move from Germany to Japan because labor was cheaper. Knight then finalized a deal with a group of Japanese businessmen to export the country’s popular Tiger shoes into the U.S.
Bowerman believed that German shoes didn’t have any special qualities to them, supporting Knight’s theory. This began their 50-50 business deal for ownership of Blue Ribbon Sports.
After founding Blue Ribbon Sports, Knight started selling the imported shoes out of his car when returning to the States. In 1965, Bowerman created a new design and pitched it to the Tiger shoe company. This design provided the support that runners have been seeking out when performing. The design consisted of a cushioned inner sole, soft sponge rubber in the forefoot and the tip of the heel, hard sponge rubber in the middle of the heel, and a firm rubber outsole. In 1967 the shoe was officially released and became a global hit. Although this design was a major success, it created conflict between Blue Ribbon Sports and their Japanese supplier. Tiger claimed that Blue Ribbon Sports were selling their version of the Tiger Cortez under a new line of shoes they called “Nike.”
In 1971 Tiger filed a lawsuit to formally split the two companies. It was settled that both companies would be allowed to sell their versions of the model. Following the split with Tiger, Blue Ribbon rebranded itself as Nike. Knight and Bowerman needed a logo for their newly branded company, therefore they reached out to Carolyn Davidson, a current design student at Portland State University. Davidson came up with a swoosh design and was compensated $35 ($2/hour). Later in 1983, Knight held a party for Davidson and awarded her 500 shares of stock.
Bowerman’s next hit design was created one morning while having breakfast, he wanted to create a running shoe with more traction; looking down at the waffle on his plate he imagined what it would look like inverted. To execute his idea, he poured melted urethane into his waffle iron designed the iconic “Waffle Trainer” shoe design. This shoe design ended up being one of the first of many major successes for Nike.
Nike held its most famous ad campaign in 1988 “Just Do It”, inspired by the last words of American murder Gary Gilmore.
Another one of Nike’s greatest assets are all of their celebrity endorsements and collaborations. In the early stages of Tiger Woods, Kobe Bryant, and Lebron James careers, Nike signed them. This gave Nike the advantage of having some of America’s star athletes representing their brand. One of their most lucrative endorsements took place in 1984 when Nike signed Michael Jordan. This deal created continuous success for Nike with Jordan quickly rising from his athletic performance and his shoe line, Air Jordans. By the end of 1985, Air Jordans made over $100 million in revenue.
All in all, a small company that started off as Blue Ribbon sports grew into one of the most renowned apparel companies in the world. Nike has become one of the largest companies in the world by signing professional athletes from every sports league.
Timeline
1964 – Phil Knight and Bill Bowerman founded Blue Ribbon Sports.
1971 – Officially becomes Nike Inc. by cutting ties with Onitsuka Tiger, bought swoosh logo created by Portland State University student Carolyn Davidson for $35.
1971 – Bowerman sparked an idea by placing rubber into a waffle iron creating the iconic sole pattern for Waffle Trainers.
1972 – Ilie Nastase, a Romanian tennis player, becomes the first athlete to sign an endorsement with Nike.
1979 – Nike introduces patented “Air” technology with Tailwind shoe.
1980 – Nike completes IPO with a price of 18 cents a share.
1984 – Nike signs Michael Jordan and launches the Air Jordan series.
1987 – Nike drops an ad for new Air Max shoes set to The Beatles’ “Revolution,” making it the first to use the band’s music.
1988 – The first-ever “Just Do It” campaign launches with an ad featuring 80-year-old running icon Walter Stack running across the Golden State Bridge.
1989 – “Bo Knows” ad campaign drops featuring football and baseball star Bo Jackson.
1990 – First Niketown store opens in Portland, Oregon.
1991 – Activist Jeff Ballinger publishes a report exposing low wages and poor working conditions among Indonesian Nike factories. Nike responds by initiating its first factory codes of conduct.
1996 – Nike signs with Tiger Woods.
1998 – During a worldwide protest, Nike raises the minimum age of its workers, increases monitoring, and adopts U.S. OSHA clean-air standards in overseas factories.
1999 – Nike co-founder Bill Bowerman dies at 88 years old.
2002 – Nike acquires surf-apparel company Hurley.
2003 – Nike signs Lebron James and Kobe Bryant.
2004 – Nike acquires Converse for $309 million.
2008 – Nike signs Derek Jeter.
2012 – Nike becomes the official supplier for NFL apparel.
2015 – Nike becomes the official supplier for NBA apparel.
2018 – Nike unveils ad campaign featuring athlete and political activist Colin Kaepernick, garnering a mix of public approval and backlash.
Financials
Income Statement
Nike has been experiencing overall growth since 2018, there has been a drop in revenue and net income in 2020. Apart from the setback in 2020, most likely caused by the COVID-19 pandemic. Nike has had growing performance in revenue, expense, and net income categories. Nike’s biggest competitor is argued to be Adidas. Compared to Nike, Adidas is performing at lower numbers and at a lower rate. This may be due to Nike having a larger footprint and popularity in the shoe market. Nike’s net income and revenue also seems to be stronger as Nike is outperforming adidas in terms of higher revenue and net income.
Figure 1: Income Statement
Source: NASDAQ
Financial Ratio
The liquidity ratios of Nike are not similar to Adidas’s ratios. With Nike’s 2021 ratios being: current 2.71, quick 1.9, cash, and 1.39, and Adidas being: current 1.54, quick 1.10, cash N/A. This is a comparison that shows that the ratios differ significantly, with Nike having higher current, quick, and cash ratios. For the liquidity ratios over the past 4 years, the trend shows that Nike’s ratios are going up apart from a setback in 2019. In the Profitable ratios the overall trend is also increasing apart from a setback in 2020.
Figure 2: Financial ratios
Source: NASDAQ
Statement of Cash Flows
Nike has a Net Income of $5,727,000,000 in 2021. Since 2018 the Net income has grown apart from a setback in 2020. Nike has a net cash flow of $1,541,000,000, which is lower than the net cash flow for the year of 2020. The net borrowing has also experienced a decrease, dropping by $6,325,000,000.
Figure 3: Statement of Cash Flows
Source: NASDAQ
Balance Sheet
Nike’s total current assets are $26,291,000,000. This has been increasing since 2018. The majority of the current assets come from its cash and cash equivalents which is 9,889,000,000. Nike has a total of $37,740,000,000 total assets, the majority of the total assets come from its fixed assets which is $8,017,000,000.
Nike’s total current liabilities is $9,674,000,000. Most of that comes from accounts payable at $9,205,000,000. The total liabilities are $24,973,000,000. With a majority of this coming from long-term debt at $9,413,000,000.
Figure 4: Balance Sheet
Source: NASDAQ
SWOT Analysis
Strengths
Nike is a well-known company to everyone around the world. 31% of global athletic footwear is Nike.
Nike sells shoes, clothes for all four seasons, and it has something for everyone. For their worldwide revenue, they made $30.6 billion.
They have many endorsements from celebrities from Michael Jordan to Lebron James. In 2020, the company made $3.6 billion in revenue from just selling products from their Jordan footwear line.
Nike has a strong customer base. In February of 2021, their market cap (stock) grew to $224 billion.
The manufacturing costs are low. In 2020, their gross profit was $16.2 billion. 50% of products came from Vietnam, 22% came from China, and 24% came from Indonesia.
Weaknesses
Nike has been known to have poor work conditions in their factories overseas. Treatment of employees is unfair, and the company relies on cheap labor costs.
Nike tends to deal with many lawsuits.
Nike depends on the US market for their sales and their revenue. In 2020, 41% of their revenue came from the US while the other 59% came from the rest of the world.
Many women have come forward and reported sexual harassment in the workplace. The New York Times have interviewed 50 female employees, former and present, about the company’s workplace.
Their core customers are retailers. 65% of Nike’s products are sold to retailers.
Opportunities
Nike has the technology that they can use to innovate their products.
They can make more of an effort to sell their products to consumers rather than to retailers.
They can work on making the working conditions better for their employees.
Nike can take the advantage and join other markets from around the world to help with their sales and revenue.
Threats
People counterfeit their products and make them cheaper for consumers as well as making them think that they are buying the real thing.
Nike has strong competitors.
Nike can face problems economically. In 2020, they saw a 38% decline in sales because of the pandemic.
Marketing and advertising prices are increasing. In the US, Nike has spent $1.47 billion on marketing.
Conclusion
In 1964, Phil Knight and Bill Bowerman started their own company called Blue Ribbon Sports. Later, Blue Ribbon Sports was renamed to the company everyone knows today as Nike. Nike is known for mainly their athletic footwear. They have many celebrity endorsements from Lebron James to their most popular collaboration with Michael Jordan. Looking at the financial side of Nike, they have seen growth in all categories since 2018, though they did see some decrease of revenue and net income in 2020. Nike is a well-known company around the world, and they have a good customer base. Though they are very popular to consumers and retailers, Nike also has some aspects that they need to work on as well, such as fixing their work conditions for employees. Nike is a large company and there are many ways that they can continue to build and grow that company as the years go on.
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