Nike Inc.Footwear and Apparel Industry
Bo Ament, Colin Best, Brendan Coughlin, Darrien Horn, Chase Frerking, Daniel Jones, Dylan
Morgret, Aaron Platts
STRATEGIC CONTEXTWhy is it important?▪Understand the setting and constraints over time
▪Shaping force of current strategizing
Historical Context
• Strategic History
External Context
• Strategic Group Analysis• Five Forces Analysis• Macroenviromental Analysis
Blue Ribbon Era
Nike Era, The Swoosh
Shoe Revolution/E
xpansionJust Do It Era Reestablishi
ng Nike
STRATEGIC HISTORY: BLUE RIBBON ERA
STRATEGIC HISTORY: NIKE ERA, THE SWOOSH
Blue Ribbon Era
Nike Era, The Swoosh
Shoe Revolution/E
xpansionJust Do It Era Reestablishi
ng Nike
Blue Ribbon Era
Nike Era, The Swoosh
Shoe Revolution/E
xpansionJust Do It Era Reestablishi
ng Nike
STRATEGIC HISTORY: SHOE REVOLUTION/EXPANSION
STRATEGIC HISTORY: JUST DO IT ERA
Blue Ribbon Era
Nike Era, The Swoosh
Shoe Revolution/E
xpansionJust Do It Era Reestablishi
ng Nike
Blue Ribbon Era
Nike Era, The Swoosh
Shoe Revolution/E
xpansionJust Do It Era Reestablishi
ng Nike
STRATEGIC HISTORY: REESTABLISHING NIKE
EXTERNAL CONTEXTStrategic Group AnalysisFive Forces AnalysisMacroenviromental Analysis
STRATEGIC GROUP ANALYSIS
FIVE FORCES ANALYSIS OF THE FOCAL STRATEGIC GROUP IN THE FOOTWEAR
INDUSTRY
FIVE FORCES ANALYSIS
Rivalry Among Existing FirmsRivalry (Moderate) Strategic Group Profitability (Moderate)
Determinates
Sub-Determinates
Strength of Sub-
DeterminatesStrength of
DeterminatesStrength of
Force (Rivalry)
Explanation
Number of Firms - - High Four firms in strategic group; oligopoly; price
war Concentratio
n - - High Low CR4 = 98%
“Price War” - - Low Low
- Industry rivalry focused on marketing and contracting top athletes; premium products
- 50% of shoe sales greater than $85 are Nike
Industry Growth - - High Low
- Footwear industry up 25.94% from YAGO- Athletic footwear grown average of 8.6%
last 3 years- Note: UA growing faster thanks to
marketing budget
Product Differentiatio
n
Functional Differences Low
Moderate Moderate
- Little functional differences among SG - Loyal customers willing to pay premium
prices - Young market = dominance of premium
shoe marketBrand/
Psychological Differences
High
Switching Costs - - High High
- High switching costs due to high psychological/brand differentiation
- Online dist. has greatly lowered switching costs
Exit Barriers
Low salvage value Low
Moderate Moderate
- Nike contracts all manufacturing; low P&E commitment
- Nike committed to carry on Bowermann’s legacy
- Older execs, most with company since 1970s
Escalation of commitment/em
otional attachment
High
Threat of New EntrantsThreat of New Entrants (Moderately Low) (Moderately High)
DeterminatesSub-
Determinates
Strength of Sub-Determinates
Strength of Determinates
Strength of Force Explanation
Economies of scale - - High Low
Capital requirements - - High Low
Product differentiatio
n among existing firms
Functional Differences Low
Moderate ModerateBrand/
Psychological Differences
High
Switching costs - - High Low
Access to critical
resources
Access to distribution channels for
new entrants
Moderate
Moderately High
Moderately HighAccess to
necessary inputs for
new entrants
High
Threat of New EntrantsThreat of New Entrants (Moderately Low) (Moderately High)
Determinates
Sub-Determinates
Strength of Sub-
Determinates
Strength of Determinat
eStrength of
Force Explanation
Retaliation
History of existing firms lashing out
High
High LowResources by
existing firms to fight back
High
Existing firms likelihood to lower prices
Moderately High
Government Policy
Government regulation of
entry Low
Moderate ModerateGovernment regulation of
focal strategic group
Low
Patent production for existing firms
High
Threat of Substitute Products
Threat of Substitute Products ( ) Industry Profitability ( )
Determinates Sub-Determinates
Strength of Sub-Determinates
Strength of Determinate
Strength of Force Explanation
Substitute products easily
available
Substitute Product #1
Substitute Product #2
Bargaining Power of SuppliersBargaining Power of Suppliers (Low) Strategic Focal Group Profit
(High)Determinates Sub-
DeterminatesStrength of
Sub-Determinates
Strength of Determinate
Strength of Force Explanation
Concentration in Supplying
Industry relative to
Concentration in focal industry
Moderately Low Low
Supplier sells unique
product that is a small
percentage of its sales
Importance to buyer Low
Low LowFocal firms to choose from Low
Switching costs for buyers Low
Threat of forward
integration by supplier (C^3)
Cash: Supplier has cash
reserves to forward
integrate
Moderately Low
Low LowCare: Supplier is
motivated to forward
integrateLow
Competencies: Supplier has the competencies
to forward integrate
Moderately Low
Bargaining Power of BuyersBargaining Power of Buyers (Moderately High) Industry Profitability (Moderately
Low)
Determinates
Sub-Determinat
es
Strength of Sub-
Determinates
Strength of
Determinate
Strength of Force Explanation
Concentration in
buying industry
relative to concentration in focal
industry
Moderately Low
Moderately Low
Bargaining Power of BuyersBargaining Power of Buyers (Moderately High) Industry Profitability (Moderately
Low)
Determinates
Sub-Determinat
es
Strength of Sub-
Determinates
Strength of
Determinate
Strength of Force Explanation
Concentration in
buying industry
relative to concentration in focal
industry
Moderately Low
Moderately Low
Volume Purchase of Buyers
Five Forces Analysis
Focal Strategic Group vs Industry ROA
Five Forces Analysis – Threats and Opportunities
• Threats • Opportunities
Sources
• http://www.bidnessetc.com/20791-athletics-footwear-industry-hurdles-sight/
• http://markets.on.nytimes.com/research/markets/usmarkets/industry.asp?industry=53223
• http://www.businessinsider.com/nike-outbids-under-armour-for-kevin-durant-2014-9
• http://blogs.marketwatch.com/behindthestorefront/2014/04/17/nike-was-awarded-540-patents-in-2013-heres-what-that-means-for-investors/