Nike Success Story: Ruling The Sneaker Industry

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Sports is indeed a global medium of communication.  It penetrates through cultures, nations, and divisions. It's a long-standing consumer desire as well as a stimulus of human aspirations and development.

Individual effort, collaboration, respect, how to win, how to lose, and how to compete strongly and fairly are all valuable lessons learned via sports. In both good and terrible times, sports inspire, fascinate, and reward us. Sports is a fantastic industry to work in, and an even better one to run.

Nike has risen from a quiet small town, in Oregon to become the world's leading sports footwear and clothing corporation. It all began with a shoe and a t-shirt. It is now a diverse and sophisticated multinational corporation. Nike is well recognised for its footwear, clothes, and accessories. It offers products under the Nike and Jordan brands, and also via its Jordan Brand and Converse divisions.

Nike - Company Highlights

  • Startup Name-Nike
  • Formerly Called-Blue Ribbon Sports, Inc.(1964–1971)
  • Industry-Apparel, Accessories, Sports equipment
  • Headquarter-Beaverton, Oregon, U.S.
  • Founders-Bill Bowerman and Phil Knight
  • Founded-January 25, 1964
  • Key People-Phil Knight (Chairman Emeritus), Mark Parker (Executive Chairman), and John Donahoe (President and CEO)
  • Areas Served-Worldwide

About Nike, and How it Works?

Nike is an American multinational athletic brand that designs, manufactures, promotes, and distributes footwear, clothing, training accessories, and service. Many of its merchandise are used for leisure or casual activities while being built for sports purposes.

The bulk of Nike's products are made by independent contractors and sold directly to customers through Nike retail shops and online mediums, as well as through independent retailers, franchisees, and sales agents.

The company's global headquarters are in the Portland metropolitan region, in Beaverton, Oregon, the United States. It employs about 44,000 people globally, and the company's brand was valued at $19 billion in 2014, making it the leading name in the sporting world.

Nike sells its products under Nike Pro, Nike Golf, Nike+, Air Jordan, Nike Blazers, Air Max, and other brands, as well as subsidiaries including Hurley, Jordan, and Converse. Nike supports many popular professional athletes and sports clubs and teams throughout the globe, and its trademarks "Just Do It" and the Swoosh emblem is very well known.

Nike - Industry

The sports sector is becoming the world's largest as more individuals participate in sports and leisure activities to improve and balance their stress, health and work regulation. It has become popular as an active and passive piece of recreation.

Customers are actively investing more in sportswear, with sportswear and accessories accounting for a substantial portion of the cost. Sport in the twenty-first century is an industry characterised by extremism. Market research is currently at the forefront of marketing sports products and accessories, as marketplaces throughout the world become highly competitive.

The worldwide sports equipment and accessories industry is booming, with the rapid acceptance of innovative technology and a willingness to adapt to demographic shifts. The sector is booming because of e-commerce, which is a prominent retail medium these days that allows users to experience all of the available sports equipment manufacturers. It is a one-stop store for all athletics equipment and products, increasing the marketability of worldwide athletic apparel.

Numerous established market participants in retail, e-commerce, sports shops, and wholesale, as well as many new startups, make the sports equipment and accessories industry extremely competitive. Growing consumer health consciousness is predicted to propel the growth of sports equipment throughout the forthcoming years. In addition, the emerging trend of following famous athletes will fuel the accessories industry.

The market for sports equipment and apparel was estimated to be $480 billion in 2021, with a CAGR of 7.2 per cent expected to reach $817 billion by 2026.

Nike - Name, Logo, and Tagline

The word "Nike" was extracted from Greek mythology where Nike is the Winged Goddess of Victory. The 'swoosh' logo is derived from the goddess's wing, and it represents the sound of movement, speed, drive and, strength.

Nike's very popular slogan says, "Just Do It."

Nike - Founders

Bill Bowerman and Phil Knight founded Nike on January 25, 1964, which was then named "Blue Ribbon Sports", and then it became "Nike", Inc. on May 30, 1971.

Phil Knight

Philip Hampson Knight is a multimillionaire American entrepreneur. He, along with being the co-founder, is the former chairman and Chief executive officer of Nike.  Forbes ranked Knight as the world's 24th richest person on July 23, 2020, with his net worth being $54.5 billion.

In addition, he is the co-founder and CEO of Laika, a time-lapse film production company. Knight completed his education at the Stanford Graduate School of Business and the University of Oregon. He competed in track at the University of Oregon under Bill Bowerman, his coach and with him, he eventually co-founded Nike.

Bill Bowerman

William Jay Bowerman was a field and track coach in the United States and a co-founder of Nike, Inc. He coached 51 All-Americans, 31 Olympic competitors, 12 American record-holders, 22 NCAA winners, and 16 sub-4 minute milers in his time.  

He despised the title of coach, yet during his 24 years at the University of Oregon, the Duck's track and field team won every season except one, won four NCAA championships, and placed in the top ten in the country 16 times.

He helped Nike transition from being a supplier of other shoe brands to designing their shoes as a co-founder. He designed several of the company's popular products, including the Cortez and Waffle Racer.

Nike - Startup Story

Nike's roots may be traced all the way back to the year 1964 when Blue Ribbon Sports (Nike's former name) was created. Phil Knight had recently finished his bachelor's education at the University of Oregon, followed by a Master's degree at Stanford University, giving him two life-changing encounters.

He ran for the University of Oregon track team, where he met Bill Bowerman, his team's coach. Aside from his extreme rivalry, Bowerman was preoccupied with upgrading his running shoes and exploring various models on a constant schedule after learning from a local shoemaker.

Knight became the first runner to put Bowerman's footwear to the check. Bowerman offered to bring one of his shoes and customise it with his own design, perceiving Phil as a comfortable and modest runner with someone to explore.

Knight accepted the invitation, and the shoes reputedly functioned so well that his colleague Davis grabbed them and won gold in the 400-meters track race in the year 1960 Olympics. According to him, Bowerman made the shoes for Otis Davis. Knight attended Stanford's MBA school after graduating from the University of Oregon, where he wrote a thesis recommending that the manufacturing of running shoes be shifted from Germany to Japan, where labour costs were lower.

Knight put this theory to the test when he went on a trip to Japan shortly after graduation in 1962. He agreed to market the country's famous Tiger shoes in the United States with a group of Japanese entrepreneurs.

Coach Bowerman endorsed Knight's initiative, agreeing to an equal partnership with him for the ownership of their new firm, Blue Ribbon Sports, which was formed on January 25, 1964, in Eugene, Oregon.

After starting Blue Ribbon Sports, Knight evaluated the market for his foreign shoes by distributing them out of his car when he returned to America. Early on, it was clear that there was a demand for these less priced but still high-quality alternatives to Adidas and Puma, the industry's heavyweights.

Nike - Vision, and Mission

Nike's vision statement says, “To bring inspiration and innovation to every athlete in the world.”

Nike's mission statement says, "Our mission is what drives us to do everything possible to expand human potential. We do that by creating groundbreaking sports innovations, by making our products more sustainably, by building a creative and diverse global team and by making a positive impact in communities where we live and work."

Nike - Business Model, and Revenue Model

Nike's business model revolves around creating and distributing athletic and sporting goods, such as footwear, apparel, and equipment – as well as certain services. Everything is under one of the world's most well-known brands.

Customer Segment

Nike sells sports or athletic wear, footwear, and types of equipment. Nike's market is divided into four primary sections, also in order of revenue, geographically:

  • China
  • North America
  • the Asia Pacific and Latin America
  • Europe, Middle East, and Africa

Customer-Seller Relationship of Nike

Customers' interactions are almost entirely limited to self-service. The consumer will examine the brand or product online or offline at the store, purchase it, and put it to use. When necessary, there will be some engagement with a salesman. A FAQs section is also available on the official website, as well as customer service through phone, email, or live chat. Nike also offers Nike ID, a customisation service that tailors Nike items to the preferences of clients.

Value Proposition

Nike makes merchandise that encourages people to participate in sports. Their goods are significantly reliant on the brand's quality, inventiveness, and prominence. This is the brand's core, and it's exactly what buyers want when they buy a pair of Nikes.

Nike has a wide range of products for several sports and hobbies. What counts to the audience, though, is getting a product that has been thoroughly researched and developed using the greatest raw materials and technology available. They also want to maintain the brand's excellent reputation, which includes superstars like Michael Jordan, Tiger Woods, and Cristiano Ronaldo.

Cost Structure

Sales costs (mainly inventories and warehouses) account for more than $21 billion in annual expenditures for Nike. A further $3 billion is allocated to marketing, which includes spending for promotion and marketing, sponsor, marketing, brand events, and brand personality display. Over $500 million is spent each year on other general and administrative expenditures.

Nike is the world's largest footwear and clothing retailer, with these sales accounting for the majority of their income. Although its sports footwear is developed with a large investment in technology and high products, the majority of its products are utilized regularly for recreation purposes.

Nike also provides balls, sunglasses, backpacks, gloves, digital gadgets, and other sports equipment and accessories, as well as recreational items for a variety of physical and outdoor activities.

In order of sales, the corporation targets women, men, young athletes, and children. Nike's goods are divided into six groups: running, basketball, Jordan Brand, soccer, training, and sportswear (lifestyle products). Running, Jordan Brand and Sportswear are Nike's most profitable segments.

Nike - Controversies

Child Labour Allegations - Nike was chastised in the 1990s for using child labour in factories it hired to make footballs in Pakistan and Cambodia. Despite taking steps to stop or at least limit the practice, Nike continues to outsource production to firms that operate in locations where child labour is difficult to avoid due to a lack of regulation and oversight. An investigation from 2001 revealed instances of child labour and bad working conditions in a Nike facility in Cambodia. The documentary followed six young women who worked 7 days a week, frequently for 16 hours.

Paradise Papers - Nike was one of the firms that utilised offshore entities to evade taxes, according to the Paradise Papers, a series of private electronic papers linked to offshore investment, released on November 5, 2017.

Strikes in China Factory - One of the largest strikes in mainland China occurred in April 2014 at the Yue Yuen Industrial Holdings Dongguan shoe factory, which produces shoes for Nike and other brands. Yue Yuen underpaid a monthly employee by 250 yuan. Yue Yuen's average monthly wage is 3000 yuan. 70,000 people work at the plant. This practice had been in place for almost two decades.

Nike - Future Plans

Nike has not been spared from the covid outbreak. Revenue decreased by 1% in 2020 after falling by 38% the previous quarter. The company's ability to enhance profit and generate substantial growth in its digital platform, however, has delighted the market.

Nike's success has persuaded investors that the company is gaining market share throughout the pandemic and would come back stronger than its rivals. Those aspects, particularly the company's digital capabilities, reflect well for the firm's competition in the next 5 years.

Nike originally set a goal of $50 billion in annual revenue by the year 2020 in 2015. Due to previous setbacks when it lost momentum to Adidas, it was obligated to postpone that until 2022, but despite the pandemic's setbacks, the business is on the path to meeting that goal. To do so, it would have to increase sales at a compound annual rate of approximately 9% from $39.1 billion in fiscal 2019.

When the pandemic was already over, the company, like the rest of the apparel industry, seemed to be well-positioned to capitalise on demand. Stores were reopened, and there was undoubtedly a surge in spending on streetwear such as Nike's classic sneakers. Nike could be able to reach more than $60 billion in revenue by 2025, three years after surpassing its $50 billion objectives in 2022, thanks to its digital momentum and recovery from the pandemic.

However, the firm's profit ought to increase as more of its sales shift to online and direct, where it has complete leverage over the selling process and isn't required to share income with its partner companies. Nike's Consumer Direct Offense has helped the company gain ground on competitors like Under Armour and Adidas, and this growth is projected to continue in the future years.

Nike seems to have a bright future ahead of them. The stock should continue to be a winner over the next five years, with profit margins improving, a headwind from the end of the covid-19 virus outbreak, and a strong leader in its sector.

Nike - FAQs

What does Nike do?

Nike is an American multinational athletic brand that designs, manufactures, promotes, and distributes footwear, clothing, training accessories, and service.

Who founded Nike?

Bill Bowerman and Phil Knight founded Nike in the year 1964.

What was the former name of Nike?

The company was founded with the name, "Blue Ribbon Sports".

How does Nike make money?

Nike's business model is totally based on manufacturing and selling athletic and sporting goods, such as footwear, apparel, and equipment – as well as certain services.

Which companies do Nike compete with?

Adidas, Skechers USA, New Balance, Steve Madden, and ASICS America are among Nike's competitors.