Nike Business Model: Not a business but an inspiration
Born in a family of runners, Nike has always been a household name. I would spend a considerable amount of time trying new models and visiting the Nike Website for any possible discounts.
Quite recently, I finished Phil Knight’s Memoir- Shoe Dog. The story behind the brand speaks of resilience. Nike entered an already dominated market, faced supply-chain issues, financial problems, and lawsuits.
Each hurdle had the potential to put them out of business, but they fought against all odds and emerged to be the most dominant player in the sportswear market. Today, let us analyze the industry and the business model & strategies that made Nike a success story.
The Sportswear Industry
The sportswear industry in the world is dominated by Nike, Adidas, Asics, and UnderArmour. The global sportswear market size is projected to reach US$ 113190 million by 2026, from US$ 93160 million in 2020, at a CAGR of 3.3% during 2021-2026.
The sportswear industry saw a hit during the COVID 19 pandemic; however, it fared far better than the rest of the apparel industry. There was a shift in the sales pattern; people started to buy sportswear for indoor sports rather than outdoor sports.
The industry saw a change in their customer base- there was an increase in women buyers, and currently, more than 50% of buyers are women. Moreover, the pandemic shifted the public’s focus towards physical health and the importance of an active life, which boosted sales for the sportswear industry.
The industry is highly competitive as there is a shortage of raw materials and incredible demand. This problem causes an imbalance in the supply chain. New companies often do not have the funds to handle such an imbalance. Nike faced the same issue for a very long time and was floating due to supply-chain delays but eventually dealt with it after it introduced the idea of “futures” to its stockholders.
The problem was then resolved after the cash inflow when the company became public. However, even a small market share in this segment can yield good profits. Nike was not the first to enter this market, but with its innovative designs and marketing strategies, it managed to make its way to the top. Nike doesn’t sell shoes. It sells an idea with its marketing strategy!!
Nike’s Outsourcing Business Model
Nike has a mass-market business model which caters to sports enthusiasts. The product categories are broadly shoes, sports apparel, and accessories. Their first products were running shoes, given that Phil Knight was a runner himself.
Before they went public, they opened their Apparel line, which has been equally successful. They ventured out to Basketball sneakers and slowly created a demand for shoes as footwear used for daily use.
Nike Inc. (originally known as Blue Ribbon Sports) first started as a reseller for Onitsuka Tiger shoes from Japan. Post their fallout, they outsourced their manufacturing from 300 independent suppliers in 35 countries such as China, Vietnam, Thailand, etc. Today, there are 1096 Nike retail stores worldwide, apart from E-commerce and online platforms. They sell their products in 170 countries across the world. Nike currently has a brand value of 34.8Bn USD.
They have the highest market share in the shoes and sports apparel department. They were the first American shoe-selling company to open their warehouse and sell their products in the Chinese market. Countries such as India, Italy, Mexico, and Argentina have manufacturing units catering to local markets. This move significantly lowers the supply chain woes and makes Nike accessible all over the world.
Nike’s business model focuses on Innovation and Customization. Despite the sportswear being outsourced, Nike maintains strict quality checks. It spends a lot of resources and time for designing, research, and development.
Bill Bowerman (Nike’s early partner) would often use waffle irons to experiment with shoes! Their designs are admirable- anyone who has a pair of Nike’s Air Zooms can vouch for this. They introduced the world to Air-Cushioning technology in shoes.
There is a special team- Nike Explore Team Sport Research Lab, which is responsible for innovations. It employs researchers with doctorates in biomedical engineering, biomechanics, kinesiology, mechanical engineering, physics, physiology, and systems science. The company maintains advisory boards and research committees consisting of athletes, trainers, coaches, orthopedists, podiatrists, equipment managers, and experts who can guide the product design and development process.
Customization is another feature that Nike provides. NikeID is a service that allows buyers to customize their shoes. They can choose colors, sports style, and traction. One can visit Nike by You, Custom shoes and have a shoe tailored to their needs and likes.
Brand positioning and Advertising
When Knight first started Nike, he did not believe in the power of advertising. Funny how things change, Nike spent 3.59 billion U.S. dollars only on advertising and promotional events in 2020. Nike roughly spends 10% of its revenue on advertising. However, their marketing strategy often reminds me of a verse from the book and their spirit throughout the book.
I’d tell men and women in their mid-twenties not to settle for a job or a profession or even a career. Seek a calling. Even if you don’t know what that means, seek it. Phil Knight
The first employees of the firm were Shoe dogs. Bill Bowerman was Phil Knight’s track coach. Jeff Johnson and Phil Knight went for 13-mile runs when they met to discuss strategies. All of them loved running and shoes. Their love for running pushed them to sell shoes and build amazing designs for runners around the world.
They were passionate about the cause and reflected the same in their marketing strategies. More than advertising their shoes, they advertise running and sports. They are master storytellers; they create demand for themselves by inspiring people to take up sports.
Another amazing strategy that makes the brand alluring is that it is inclusive and takes a firm stand on social issues. Nike was one of the first brands to release Pro Hijab, a product for Muslim women in sports. They’ve encouraged women empowerment and involvement of women in sports- their social media channel NikeWomen inspires women to take up sport and a healthy lifestyle.
Nike’s worldwide fan following is certainly anchored to its essence of standing for social justice over and over again. The recent decision of Nike to split with soccer player Neymar based on an allegation raised by a female employee of sexual harassment by the soccer player affirms the brand’s willingness and effort to stick to social norms.
Check out this story on how Nikes stand for social justice has created a powerful node in its brand association .
The company supported and debuted an ad campaign centered on Colin Kaepernick. He was a former NFL player who refused to stand for the national anthem before his games in protest of racism and discrimination in America. The sport boycotted him due to political pressure, but Nike debuted an ad campaign supporting the cause right after the event.
When Nike first started, celebrity endorsements were considered one-way tickets to putting a brand’s shoes on the map. Nike has indeed continued to follow this particular strategy and has the world’s leading athletes to promote its products, including Tiger Woods, Michael Jordan, Cristiano Ronaldo, Rafael Nadal, and many more. In the 2016 Olympics, In the category of shoe brands- Nike had the highest number of players who won medals.
Shoes are one of the world’s oldest creations. One thing that can be observed is how Nike has always been a pioneer in innovating shoes and sports apparel. Nike has built a business model that observes trends and always stayed relevant to the market.
Entrepreneurs can surely take a leaf out of Nike’s books. Stay resilient, relevant, do not be intimidated by competition, and sell a vision rather than a product.
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Move to zero.
In the race against climate change we’re creating solutions that are better for all athletes* and the planet. We’ve set bold, science-based targets.
Scaling Ideas at NIKE is the Game-Changer
In the race against climate change we’re creating solutions that are better for all athletes* and the planet. We’re scaling sustainable innovations throughout our whole business to reduce NIKE's environmental impact. We’ve set bold, science-based targets. And we’re optimistic—our successes and failures over the past 30 years are inspiring the solutions and resolve to create a future in which we all and this beautiful blue ball thrive.
Putting Progress in Perspective
NIKE has the climate impact of a global city. That’s a significant role for a company to play and it motivates us to look at everything we do, because small adjustments lead to big changes. Most people understand NIKE is big. But we thought it would be worthwhile to give that idea more context. NIKE is about 75,400 employees; upwards of 1 million employees in our owned and supplier facilities; over 1,500 physical spaces; and we emitted 11,706,664 metric tons CO2e in FY20. If we were a city, we’d have roughly the population and carbon footprint of Amsterdam, Netherlands.
Materials & Design
Currently, 78% of all NIKE, Jordan, and Converse products contain some recycled material. We’re working to increase that number because adjusting materials, which are about 70% of our total carbon footprint, is one of our biggest opportunities to reduce our impact. Take recycled polyester. This now foundational fabric begins as recycled plastic bottles. They are cleaned, shredded into flakes, converted into pellets, and spun into new, high-quality yarn that delivers peak performance while reducing carbon emissions by up to 30% compared to virgin polyester. One of our most popular product lines, the Tempo Short, is made from at least 75% recycled polyester. Most options come in at 100%. To date, this single product is responsible for pulling 112 million plastic bottles out of landfills and waterways.
Sustainable materials matter that much more if our manufacturing is done responsibly. Our end-to-end approach looks at carbon, energy, waste, chemistry and water across the entire product lifecycle, ultimately making choices that improve conditions for teams and locations worldwide. Creating products takes energy. And today, that process also makes waste. But there is a growing truth of waste: trash is treasure. One of our greatest inventions is Nike Air. It’s also one of our most sustainable innovations. We’re able to reuse more than 90% of the waste from Air manufacturing, often turning it into new Air bags. This ensures all Nike Air soles are made with at least 50% recycled material. Small changes pave the way to achieve big aims. Since our last Impact Report, we’ve made single digit centimeter adjustments across product manufacturing meaning more than 3.5 million kg of waste was prevented. At scale, these adjustments and innovations are our path to achieving our aims of 100% of the waste from our extended supply chain diverted from landfills and at least 80% recycled back into NIKE products and other goods. We aren’t there yet, but just like our athletes constantly working to be better than they were before, progress is an every day goal.
Completing the Circle
The last phase of a product’s life—getting it to athletes* and, eventually, back from them—is the most challenging sustainability puzzle. Customized goods and next-day delivery are norms. What to do with a well-loved or defective product is blurry. And no one likes receiving a crunched package. So we’re re-thinking it all with ingenuity, science and grit. We’ve set a 2025 goal to donate, refurbish, or recycle 10X more used or defective product than we do today. To achieve this, we’re making it easier for people to return their used product back to us. Active in stores throughout the USA and Europe, we’re scaling Reuse-A-Shoe to stores in Greater China and re-energizing our operations. We’re hosting up-cycling workshops and providing relevant content like the Nike Circular Design Guide to consumers. Recently, we rolled out Nike Refurbished in select North America stores. We’re also hosting up-cycling workshops and providing relevant content like repair & care videos (that will go live this summer) to help extend the life of products. We’re just getting started with some of these services, but our aim is the same as with anything we do. To serve all the planet’s athletes with inspiration and innovation.
A Team Effort
When it comes to re-writing our planet’s future, our aim is to change industry standards along with our products and processes. Because we know that the faster we can collectively do more for the environment, the better it will be for generations to come. We’re also creating ways for each athlete* to take part. Look for the sunburst when shopping NIKE products. Tune in to Talking Trash for discussion and ideas from the NIKE community. Take note of brands’ accountability to larger sustainability agreements like G7 Fashion Pact, Transform to Net Zero and UNFCCC Fashion Industry Charter for Climate Action . Keep an eye out for Membership resources, like Repair & Care videos going live this summer and local store programming.
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Complete Business Model of Nike | IIDE
By Aditya Shastri
Nike’s journey from a Japanese shoe importer to building one of the largest and most iconic sportswear brands in the world today. The Journey has been so stimulating and phenomenal. Nike is the leading brand of athletics shoes, apparel, sports equipment, and sports-related services. It has a market share of $39.1 billion making it the largest sports brand in the world.
Nike, one of the most valued apparel brands, has always kept its customer on their toes with its captivating advertisements and athlete endorsements with the best-known sportspersons like Cristiano Ronaldo. Thus this makes us eager to know the business model of Nike.
In this Case Study, We will be discussing the business model of Nike and its marketing strategies.
But, before we go through its business model let us know about Nike as a company.
Founded in 1964 as Blue Ribbon Sports by the Coach and Student duo, Bill Bowerman and Phil Knight who are currently the co-founders of the company. It became Nike in 1971 which was named after the Greek goddess of victory.
The company’s world headquarters are situated near Beaverton, Oregon, (USA). It employs over 75,500 people around the globe. In 2020 the brand alone was valued at around $32 billion, making it the foremost valuable brand among sports businesses.
Nike is well known for its ‘Swoosh’ logo and its “Just Do It” slogan. Other than its own brand, Nike also markets its product offerings under the brand names Nike Pro, Nike+, Nike Golf, Nike Blazers, Air Jordan, Air Max, and others as subsidiaries including brands Jordan, Hurley Int. and Converse.
Now having known so much about the company, let’s understand how does this valuable brand make money by looking at its detailed business model.
Business Model of Nike
The business model is used to determine a company’s plan for generating revenue. It determines the products or services the business plans to sell, its identified target market, and any anticipated expenses.
Let’s take a look at all the elements of Nike’s Business model one by one.
Let us start with Nike’s product offerings.
1. Nike’s Product Offerings
Nike is predominantly into the business of selling footwear and sports apparel in the following product categories — Running, Nike Basketball, the Jordan Brand, Football (Soccer), Training, and Sportswear. The company owns the Converse brand as well.
Let us now see Nike’s customer segments.
2. Nike’s Customer Segments
Nike markets itself to anyone who wants to purchase athletic and sports apparel, footwear, and equipment. Geographically speaking, Nike’s customer market is split into 4 main divisions, in order of revenue the regions being- North America, EMEA (Europe, Middle East, and Africa), Greater China, and APLA (the Asia Pacific and Latin America).
Let us now see Nike’s value proposition.
3. Nike’s Value Proposition
Nike offers a diverse variety of products to inspire anyone to become an athlete. Their products heavily rely on the quality of their products, innovation (R&D), and status of the brand. This is the foundation of the Nike brand and it’s exactly what the customers seek when they buy a Nike product.
Let us now check the marketing channels of Nike.
4. Nike’s Marketing Channels
Nike uses many different channels for marketing. Its main marketing channel is its brick-and-mortar stores, especially the Nike-branded ones. The company has a scattered sales network, with 1,152 physical stores throughout the globe. Nike also has an e-commerce platform, which serves in over 45 countries.
Besides these channels, Nike also employs other channels, such as social media, digital, print, TV advertising, brand events, and heavy sponsorship of athletes and teams.
Now we shall see Nike’s customer relationship.
5. Nike’s Customer Relationships
The relationship with the purchasers is practically restricted to self-service. The customer can check the merchandise in the store (online or offline), buy and use it. Nike also assigns each of its customers a unique Nike ID which is a personalization service that brings Nike products closer to customer’s desires.
Let us now see Nike’s revenue stream.
6. Nike’s Revenue Streams
The revenue of the company is derived from the sales of its products: footwear, apparel, equipment, and accessories. In the past ten years, Nike has successfully managed to grow its revenue at a compounded annual rate of growth of 7.0% from US $19.0 billion in 2010 to US $37.4 billion in 2020.
Nike makes money by merchandising footwear via wholesale customers that distribute the Nike brands across the world.
Let us now see the key resources of Nike.
7. Nike’s Key Resources
It has five physical distribution centres all over the world. It also has a team sports research lab and it has the third-largest design patent portfolio within the United States.
Let us now see what are the key activities of Nike.
8. Nike’s Key Activities
The main key activity of the corporate is designing and developing the products. In order to achieve that, other activities are involved, such as negotiation with the suppliers, marketing, sales, and advertising are essential.
Let us now see the key partners of Nike.
9. Nike’s Market Share
Nike Waffle Shoes sold for $475,500, becoming the most expensive sneakers ever auctioned while Nike at present has 1,152 brand stores worldwide. Nike’s market share stood at around 27.4% during 2019, before its industry rivals Adidas and Reebok, making Nike the world’s largest company in the global footwear market.
Let us now see Nike’s competitor’s analysis.
10. Nike’s Competitors Analysis
Nike is amongst the largest and top three sports apparel companies i.e. Nike, Adidas, and Reebok and which makes the other two companies the top competitors of Nike Inc.
Adidas & Reebok
In 2005, Adidas acquired Reebok for $3.8 billion. After the businesses, Reebok and Adidas have acquired a robust position to compete with Nike. Adidas group consists of three subsidiaries i.e. Reebok, Runtastic, and TaylorMade.
Accordingly, Adidas and Reebok are the strongest competitors of Nike with Adidas being the second-largest shoemaker in the world. Adidas’s brand valuation is $14.3 billion and revenue amounted to 21.218 billion (Euro), whereas Reebok’s revenue amounted to 1.41 billion (Euro).
Let us see the cost structure of Nike.
11. Nike’s Cost Structure
The largest expense for Nike is the cost of goods sold (mostly inventory and warehousing), that account for over $21 billion per year. In addition, around $3 billion are spent on marketing, including advertising and promotion costs, sponsorship, media, brand events, and retail brand presentation. The rest of the general and administrative expenses account for over $500 million expense each year.
After having understood the business model of Nike, let’s dive into the digital marketing that contributed to the success of the company.
Secrets behind the Digital Marketing Strategies Adopted by Nike
Nike has successfully transformed the athletic industry with its technological innovations, but today many of us know the corporate by its flashy ads and sports celebrities.
Well most definitely Nike can be termed as a marketing-oriented company, and their product is their most vital marketing tool. In digital marketing, when the term monsters are used, it basically refers to those giant companies whose success is immense, and every action within their online strategy implies multimillion-dollar profits. Nike is one among the other representatives of this category and a king in Marketing.
Let’s look into the Secrets Behind Digital Marketing Strategies Used by Nike.
1. Focus should always be on Telling a story instead of the brand itself
Nike believes that Gone is the era in which the marketing strategies were linked to giving characteristics of the company’s products only, in today’s date brands have to sell a story to keep people hooked for a longer-term.
Nike implemented this by shifting its focus from object-based ads to create a story around inspiration. ‘Just Do It’, Nike’s well-known slogan that invites a lifestyle that revolves around overcoming difficulties and invites people to reach their own potentials.
Let us now see the platforms that Nike uses.
2. Using the Platforms that the Customer Use
Nike found out that its target audience preferred youtube as its customer channel rather than television.
Nike believed that a brand must not be the one that just waits for the customer to find them. Instead, it should be the ones who must do the work of reaching its target audience. As a result of this, Nike’s latest video ads have had more airtime on YouTube than on television.
3. Always Allow the Target Audience to create their own content
Nike believes that a brand must give its customers the opportunity to customize its products according to their needs and preferences. For this Nike gave the customers the option of customizing the design of sports shoes in accordance with their style. This strategy makes users feel like a valuable subject for the company.
4. Develop Viral Content that people will love to read and share
The history of Nike advertising has witnessed many ups and downs, but most of the time, the trend has been phenomenal. Nike has always believed that creating viral content is the key to grab your target market’s attention.
Implementing this they have always innovated and proposed new ways of distributing new ideas. And as a result, Nike’s advertising became popular all around the world which isn’t so easy to achieve for a sports shoe manufacturing company.
5. Always Be Aware of the Current Social Issues
It is very important for any brand to be aware of the current social issues surrounding the world. It should have few campaigns addressing them, for this Nike always tried to project a picture of authenticity and choose such protagonists for its advertisements characters that symbolized nascent social and cultural movements.
In the following years, Nike has developed its tactics by placing a greater emphasis on the spokesperson of its products and combining them into a successful strategy, by signing contracts with the most popular athletes. Which made it an “Athlete’s Brand”.
With this, our case study on Nike’s business model has come to an end. So let’s conclude this case study.
On the analysis of the business model of Nike, we can see that it has implemented its business model splendidly. Its product offerings, customer segmentation, value proposition, customer relationship, key activities, etc are on point.
The evolution of Nike’s advertising campaign proves that the digital marketing strategies were a hit. The success story of Nike is halfway based on constant innovation and timely investments, which have resulted in Nike making a profit of over millions of dollars each year.
The success of the business model of Nike relies on the sum of innovation and marketing. The company faces some serious competition in the market – such as Adidas or Reebok. Honing their digital marketing strategy, Nike is making master moves to ensure that they are at the forefront of digital marketing and giving customers what they want, easy and fast.
Wasn’t it interesting to know the business model of Nike? Learn how to grow your business using digital marketing, check out our website for more information .
You can also check out Free Digital Marketing Masterclass by IIDE to understand what digital marketing is all about.
If you are interested in digital marketing and wish to be in touch with our academic counsellors then connect with them at [email protected] for a free counselling session.
Hope you liked this case study and found it informative and insightful!
Lead Trainer & Head of Learning & Development at IIDE
Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs...... [Read full bio]
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Nike business model.
The Nike Business Model is based on producing and selling athletic and sports products, including footwear, clothing, equipment — and also some services. Everything is under one of the most famous brands in the world. Let’s take a closer look at how and why Nike company has become so relevant in the business world.
A brief history of Nike
Nike was first founded as “Blue Ribbon Sports” in January 1964 by Phil Knight, a student at the University of Oregon and track athlete, along with his coach Bill Bowerman. The company was officially rebranded as Nike in May 1971, which is the Goddess of Victory in Greek mythology.
Headquartered in Beaverton, Oregon, Nike is one of the most well-succeeded sports brands globally, manufacturing shoes and sportswear, but the story behind its foundation is that, before that, Adidas and Puma — both of them German brands — completely dominated the sneakers market, in every single sport.
So, Knight decided to introduce cheap, but high-quality running shoes, and he achieved it through a partnership with Onitsuka Tiger (now known as Asics), a Japanese running shoes company, as its U.S. distributor.
In the ’70s, the partnership between Blue Ribbon Sports and Onitsuka collapsed, so Knight decided it was time for its own line of footwear. The company was relabeled as Nike, and the worldwide-famous swoosh design was first used in 1971.
After that, Nike thoroughly conquered the sneakers market of sports footwear. Some of its main achievements include Michael Jordan’s signature footwear, the Air Jordan (1984), as well as renowned marketing campaign slogans, such as “There is no finish line” (1977) and “Just do it” (1988). Nowadays, it dominates the global sports market, with an impressive 38% of the market share.
Who Owns Nike
Nike is owned by one of its co-founders, Phil Knight, the Chairman Emeritus. The company also has Mark Parker as the Executive Chairman and John Donahoe as the President and CEO.
Nike’s Mission Statement
“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”.
How Nike makes money
Nike is the largest footwear and apparel seller in the world, and its revenue is generated mainly from these sales. Although its footwear items are designed especially for athletic purposes, with massive investment in innovation and high-quality products, most of them are usually worn on a daily basis, for leisure times.
Nike also sells sports equipment and accessories, such as balls, eyewear, bags, gloves, digital devices, and more, as well as recreational articles for many physical and outdoor activities. The company targets men, women, young athletes, and kids — in order of revenue. And Nike’s product subdivides into six categories: Running, Basketball, Jordan Brand, Soccer, Training, and Sportswear (lifestyle products), being Running, Jordan, and Sportswear are the strongest ones in revenue.
Nike doesn’t actually produce the items it sells. Its manufacturing is all outsourced, mostly outside the United States. They are more than 300 external independent suppliers, in over 35 countries, such as Vietnam, China, Indonesia, and Thailand.
Manufacturers in India, Argentina, Italy, Mexico, and Brazil are also contracted to produce for local markets. In spite of its large supply chain and manufacturing network, Nike still focuses on maintaining the quality and innovative character of its products, investing heavily in research and development.
Nike’s Business Model challenges
- Competition: Sports articles and apparel market is marked by massive competition, not only in the USA but all over the globe, both in marketing and supply chain — because the amount of suppliers for high-quality raw materials is limited. This competition leads to a great investment in research and development and in marketing and sales, in order to stand out;
- Trends: Nike’s success relies on anticipating customers’ demands. But these changing preferences are not always easy to predict. So, there is no certainty that every new product will gain the expected acceptance in the market. Therefore, it requires a great expenditure in adjusting the mix to keep profitable. Moreover, Nike relies on experts in several areas in order to produce innovative articles, such as engineers, physiologists, designers, biochemists, chemists, orthopedists, coaches, etc.;
- Global risks: Some global conditions and changes can have either positive or negative impacts on sales, such as economic crises or recessions (especially in emerging nations), environmental policies, trade regulations, data security and privacy, and more.
Nike’s Business Model Canvas
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Nike’s Customer Segments
Nike markets to anyone who wants to buy athletic and sports apparel, footwear, and equipment. Geographically speaking, Nike’s market is divided into four main divisions, also in order of revenue:
- North America
- EMEA (Europe, Middle East, and Africa)
- Greater China
- APLA (the Asia Pacific and Latin America)
Nike’s Value Propositions
Nike offers products to inspire anyone to become an athlete. Their products heavily rely on the quality, innovation, and status of the brand. This is the foundation of the brand, and it is exactly what the customers seek when they buy a Nike. The company offers a great variety of items, for many different sports and activities.
But, indeed, what matters for the audience is acquiring a product that has been heavily studied and developed from the best raw materials and technology available. Also, they want to carry the successful reputation the brand states, since athletes such as Michael Jordan, Tiger Woods, and Cristiano Ronaldo speak for the company.
Nike uses many different channels for marketing . Its main channel is the brick-and-mortar stores, especially the Nike-branded ones. The company has an extensive sales network, with 1,152 physical stores throughout the world (numbers of 2019). Nike also has an e-commerce platform, which serves more than 45 countries.
Besides that, Nike employs other channels, such as social media, digital, print, and TV advertising, brand events, and heavy sponsorship of athletes and teams. Therefore, its marketing expenses usually reach over $3.5 billion a year ($3,753 million in 2019).
Nike’s Customer Relationships
The relationship with the customers is practically restricted to self-service. The customer will check the product in a store (online or offline), and buy and use it. There will be some interaction with a salesperson when needed. Moreover, there is a FAQ session on the website and customer support via phone, e-mail, or live chat. Nike also has Nike ID, which is a personalization service that brings Nike products closer to customers’ desires.
Nike’s Revenue Streams
The revenue streams of the company are the sales of its products: footwear, apparel, equipment, and accessories. The total revenue reached $39,117 million, in 2019.
Nike’s Key Resources
Nike’s key resources consist of:
- Physical structures : Five distribution centers in Memphis and others in California;
- Human resources: Nike Explore Tea Sports Research Lab, with more than 40 researchers that work on innovations;
- Intellectual property : Third-largest design patent portfolio in the United States.
Nike’s Key Activities
The main key activity of the company is designing and developing the products. In order to achieve that, other activities are involved, such as research (about materials, technologies, and trends/behavior) and negotiation with the suppliers. Additionally, marketing, sales, and advertising are essential for this business model .
Nike’s Key Partners
As Nike relies on outsourced contractors to manufacture its articles, these manufacturers are surely its most important key partners . They are more than 145 footwear factories and over 400 apparel factories, mostly outside the United States. Besides that, other partners include some universities and institutions in North America, Europe, and Asia for sports and scientific research.
Nike’s Cost Structure
The largest expenses for Nike are the costs of sales (mostly inventory and warehousing), that account for more than $21 billion per year. Additionally, around $3 billion is for marketing, including advertising and promotion costs, sponsorship, media, brand events, and retail brand presentation. Other general and administrative expenses cost over $500 million a year.
Nike’s SWOT Analysis
Below, there is a detailed swot analysis of Nike:
- Production costs: Since Nike’s business model outsources almost all its production, the company has reduced its operational costs, significantly, and focused its efforts and capital on marketing and sales. However, that doesn’t mean Nike has lost control over production quality. It only relies on suppliers that can support the brand’s standards;
- Minor sales variations: The demand for Nike’s products doesn’t fluctuate a lot during the year. The sales of fashion products and apparel usually remain equivalent all throughout the months. Due to some major campaigns, the company sometimes experiences a sudden rise. But, in these cases, there have been many studies, and it is ready to meet the demand;
- Quality: As Nike produces higher quality products, compared to most of its competitors, the company is also able to raise prices. This works out precisely because the quality has made the brand achieve a strong and reliable reputation, resulting in market-leading;
- Speed: For sales to succeed, the companies must transform ideas into products on the shelves as fast as possible. Nike, through its processes, has accomplished this efficiency, keeping its audience engaged and avoiding losses.
Nike’s business model success rests on the sum of innovation and marketing. The company faces some strong players in the market — such as Adidas or Under Armour. That’s why the brand maintains its focus on research and development. Its future plans, for instance, are to increase the use of sustainable material, a strategy to grow popularity and engage the audience.
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Investor News Details
Nike, inc. reports fiscal 2022 fourth quarter and full year results.
BEAVERTON, Ore.--(BUSINESS WIRE)-- NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2022 fourth quarter and full year ended May 31, 2022.
- Fourth quarter reported revenues were $12.2 billion, down 1 percent compared to prior year and up 3 percent on a currency-neutral basis*
- NIKE Direct reported revenues for the fourth quarter were $4.8 billion, up 7 percent compared to prior year and up 11 percent on a currency-neutral basis
- Wholesale reported revenues for the fourth quarter were $6.8 billion, down 7 percent compared to prior year and down 3 percent on a currency-neutral basis
- Gross margin for the fourth quarter decreased 80 basis points to 45 percent.
- Diluted earnings per share was $0.90 for the fourth quarter
- The Company announced its Board of Directors has authorized a new four-year, $18 billion program to repurchase shares of NIKE's Class B Common Stock
“NIKE’s results this fiscal year are a testament to the unmatched strength of our brands and our deep connection with consumers," said John Donahoe, President and CEO, NIKE, Inc. “Our competitive advantages, including our pipeline of innovative product and expanding digital leadership, prove that our strategy is working as we create value through our relentless drive to serve the future of sport."**
Fourth quarter NIKE Direct revenues grew 7 percent on a reported basis and 11 percent on a currency-neutral basis, led by 25 percent growth in EMEA, 43 percent growth in APLA and 5 percent growth in North America, partially offset by a decline in Greater China. NIKE Brand Digital grew 15 percent on a reported basis and 18 percent on a currency-neutral basis, driven by double digit growth in APLA, North America and EMEA. NIKE-owned stores declined 2 percent on a reported basis and increased 1 percent on a currency-neutral basis.
“In this dynamic environment, NIKE's unrivaled strengths continue to fuel our momentum,” said Matt Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc. "Two years into executing our Consumer Direct Acceleration, we are better positioned than ever to drive long-term growth while serving consumers directly at scale."**
Non-recurring Items Impacting Comparability in the Fourth Quarter
Fourth quarter results contain several non-comparable items, including non-recurring charges recorded in Other (income) expense, net, totaling approximately $150 million, associated with the deconsolidation of our Russian operations , and the transition of our businesses in Argentina, Chile and Uruguay to strategic distributor models.
Fourth Quarter Income Statement Review
- Revenues for the NIKE Brand were $11.7 billion, down 1 percent on a reported basis and up 3 percent on a currency-neutral basis, led by 20 percent growth in EMEA.
- Revenues for Converse were $593 million, down 1 percent on a reported basis and up 3 percent on a currency-neutral basis, due to wholesale revenue declines offset by growth in our direct to consumer business.
- Gross margin decreased 80 basis points to 45.0 percent, primarily due to higher inventory obsolescence reserves in Greater China and elevated freight and logistics costs, partially offset by strategic pricing actions, favorable changes in net foreign currency exchange rates, including hedges, and margin expansion in our NIKE Direct business.
- Demand creation expense was $1.1 billion, up 6 percent, primarily due to increased sports marketing expenses and continued investments in digital marketing to support heightened digital demand.
- Operating overhead expense increased 8 percent to $3.0 billion, due to higher strategic technology investments, and an increase in NIKE Direct variable costs and wage-related expenses.
- The effective tax rate was (4.7) percent compared to 18.6 percent for the same period last year, due to a shift in our earnings mix and a non-cash, one-time benefit related to the onshoring of our non-U.S. intangible property.
- Net income was $1.4 billion, down 5 percent, and Diluted earnings per share was $0.90, down 3 percent compared to prior year.
Fiscal 2022 Income Statement Review
- Revenues for the NIKE Brand were $44.4 billion, up 5 percent on a reported basis and 6 percent on a currency-neutral basis, driven by double-digit growth in NIKE Direct, partially offset by slight declines in wholesale revenues.
- NIKE Direct revenues were $18.7 billion, up 14 percent on a reported basis and up 15 percent on a currency-neutral basis, led by NIKE Brand digital growth of 18 percent and NIKE-owned stores were up 10 percent.
- Revenues for Converse were $2.3 billion, up 6 percent on a reported basis and up 7 percent on a currency-neutral basis, led by double-digit growth in our direct to consumer business, partially offset by lower wholesale revenues.
- Gross margin increased 120 basis points to 46.0 percent, primarily due to margin expansion in our NIKE Direct business, a higher mix of full-price sales and favorable changes in net foreign currency exchange rates, including hedges, partially offset by elevated freight and logistics costs and higher inventory obsolescence reserves in Greater China in the fourth quarter.
- Demand creation expense was $3.9 billion, up 24 percent compared to prior year, primarily due to normalization of spend against brand campaigns and continued investments in digital marketing to support heightened digital demand.
- Operating overhead expense increased 11 percent to $11.0 billion due to higher strategic technology investments, and an increase in wage-related expenses and NIKE Direct variable costs.
- The effective tax rate was 9.1 percent, compared to 14.0 percent for the same period last year, due to a shift in our earnings mix and a non-cash, one-time benefit related to the onshoring of our non-U.S. intangible property.
- Net income was $6.0 billion, up 6 percent, and Diluted earnings per share was $3.75, up 5 percent compared to prior year.
May 31, 2022 Balance Sheet Review
- Inventories for NIKE, Inc. were $8.4 billion, up 23 percent compared to the prior year period, driven by elevated in-transit inventories due to extended lead times from ongoing supply chain disruptions, partially offset by strong consumer demand.
- Cash and equivalents and short-term investments were $13.0 billion, $479 million lower than prior year, as free cash flow was offset by share repurchases and dividends.
NIKE continues to have a strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 20 consecutive years of increasing dividend payouts.
In the fourth quarter, the Company returned approximately $1.5 billion to shareholders, including:
- Dividends of $481 million, up 11 percent from prior year.
- Share repurchases of $1.1 billion, reflecting 8.5 million shares retired as part of the four-year, $15 billion program approved by the Board of Directors in June 2018.
In fiscal 2022, the Company returned approximately $5.8 billion to shareholders, including:
- Dividends of $1.8 billion, up 12 percent from prior year.
- Share repurchases of $4.0 billion, reflecting 27.3 million shares retired. As of May 31, 2022, a total of 77.4 million shares for $8.7 billion had been repurchased under the current program.
In June 2022, the Board of Directors authorized a new four-year, $18 billion program to repurchase shares of NIKE's Class B common stock. The Company's new program will replace the current $15 billion share repurchase program, which will be terminated in fiscal year 2023. Repurchases under the Company's new program will be made in open market or privately negotiated transactions in compliance with the Securities and Exchange Commission Rule 10b-18, subject to market conditions, applicable legal requirements and other relevant factors. The new share repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be suspended at any time at the Company's discretion.
NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on June 27, 2022, to review fiscal fourth quarter and full year results. The conference call will be broadcast live via the Internet and can be accessed at http://investors.nike.com . For those unable to listen to the live broadcast, an archived version will be available at the same location through 9:00 p.m. PT, July 15, 2022.
About NIKE, Inc.
NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Converse, a wholly-owned NIKE, Inc. subsidiary brand, designs, markets and distributes athletic lifestyle footwear, apparel and accessories. For more information, NIKE, Inc.’s earnings releases and other financial information are available on the Internet at http://investors.nike.com . Individuals can also visit http://news.nike.com and follow @NIKE.
View source version on businesswire.com : https://www.businesswire.com/news/home/20220627005703/en/
Investor Contact: Paul Trussell [email protected]
Media Contact: KeJuan Wilkins [email protected]
Source: NIKE, Inc.
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BEAVERTON, Ore.-- (BUSINESS WIRE)-- NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2022 fourth quarter and full year ended May 31, 2022. Fourth quarter reported revenues were $12.2 billion, down 1 percent compared to prior year and up 3 percent on a currency-neutral basis*
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