Nike's current international strategy

This essay will critically evaluate Nike's current international strategy and help to identify Nike's current strengths, weaknesses, opportunity and threats. This essay will also consider the political, legal and cultural issues which Nike can face while implementing any strategies in international markets. This strategy will also consider the threats of entering into a new market and supply of sufficient funds and labour in terms of applying the strategy. Taking any strategy into consideration will also involve an impact analysis and risk, therefore, any potential consequences and levels of risk involved and how to overcome those risks will be covered in the next section. Finally, the essay will analyse the competition in the selected market, strategy adapted by the competitors and how Nike uses its brand power strategies to anticipate such threats.

Nike is the world market leader in athletic shoes and apparel. According to Mintel, 20%of the U.S. athletic market is controlled by Nike and Nike operates in more than 200 countries. Europe, Asia, North and Latin America are the main markets in which Nike sells its products, which makes it a truly global organisation. The main products of Nike include footwear, sports equipment, men and women clothing and accessories. Nike is established in 1972 by former university of Oregon star Phil Knight which is now one of the richest people in America. Instead of manufacturing, Nike designs and markets its products, while contracting for their manufacture from 600 factories scattered all around the globe, that employ around 650,000 people. (L. Hill, 2009)

Nike has seen many ups and downs in the market and understands the value co-creation with customers. Nike has customers around the globe and it remains informed and connected with its customers which gives Nike a new source of value. Nike understands the use of involving customers into the business and therefore offers internet sites where customers can share their interactions and experiences, can give their suggestions. Nike can build trust and relationships with Nike community, can learn directly from customers and provide customers what they want which enhances the brand.

Let us consider the overall financial performance of Nike across the globe. For the year ended 30/11/2008, revenues rose 11% to $10.02B. Net income rose 4% to $1234.8B (www.nikebiz.com). These financial figures are reflection of great success of Nike in global market as these are taken after assuming the price rise in U.S. and all the changes in the currency exchange rates have taken into consideration. As, it is clear from the figures provided, the revenues have increased tremendously in the year 2008, implies a higher sale of footwear in all the international markets which is obviously a good point to note, because in the period of recession where all the economies are going down, an increase of 11% cannot be neglected. Improved hedge rates year after year leads to higher gross margin which are reflected in the net income which has increased by 4%. (www.forbes.com)

Table 1: Financial data

Sales

Profits

Market Value

Employees

Assets

$ 13.2 Billion

$ 1.1 Billion

$23 Billion

250000

$8.6 Billion

Table 1 above gives the insights of financial structure of Nike plc, as it is clear from the figures in table 1 that Nike is strong in financial terms due to which it can increase its business globally. Company has enough capital to implement any international market strategy for example advertising in international markets, providing better services to customers, invest in the new planning etc.

Table 2 below indicates that the company is moderately efficient in doing the business. The current ratio of -3 implies that company has sufficient liquid capital to enforce new marketing strategies and extending its business. Invest in promotional activities will also be a good idea. A gearing ratio of barely 2% suggests that company has spare debt capacity which is another benefit because Nike can apply for a loan if it will be in need, however the current condition of the company is adequately equipped in financial and capital viewpoint. Net profit margin of 8.1% suggests that Nike is competent in converting sales to profit margin.

Table 2: Ratios

Net Profit Margin

P/E

ROA

ROE

Current Ratio

Div/Yield

Earning/Share

($)

Gearing

8.1%

18.1

14.3

23.2

-3

1.3

4.4

0.2

Growth rate of Nike is indicated in the table 3 below which shows constant steady sales over the past years. A growth rate of 15% in one year and 7% over the last 5 years suggests that Nike is a big player in the market and is constantly playing at the same position. Its sales are increasing day by day due to the market strategy it applies, and the popularity it gained by sponsoring celebrity such as Michael Jordan and Tiger Woods. “Just Do It” the marketing phrase of Nike is buzz in the town and its ‘swoosh' logo gives it that different identity.

Table 3: Growth Rates

1 Year

5 Years

Dividend %

37%

9.03%

Revenue %

15%

7%

Earning per share %

26.8%

17.5%

For all of the successes Nike has gained, it has repeatedly accused due to lots of issues for more than a decade.

References:

www.nikebiz.com accessed on 30/01/2010

www.globalexchange.org accessed on 30/01/2010

Charles W.L. Hill (2009) “International Business Competing in the Global Marketplace” 7th Edition, pp. 154-157

“Co-creating value through customers' experiences: the Nike case” available at http://www.emeraldinsight.com/Insight/viewContentItem.do?contentType=Article&contentId=1742554 accessed on 01/02/2010

www.forbes.com accessed on 2/2/2010

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