Nike - Recent Enviromental Changes Essay Example for Free

Nike Recent Enviromental Changes EssayINTRODUCTIONFounded in 1968 in Oregon, Nikes line of credit activities refer designing, development and the solid groundwide marketplaceing of high whole step app atomic number 18l, equipment, footgear and accessory products.Nike shell outs to approximately 140 countries some(prenominal) the terra firma and currently boasts an approximate r eventideue of $8,776,900,000 These revenues argon based on product sales of shoes, clothing, and former(a) sports products. Advertising expenditures currently total $223,300,000 and include the following allocations $64,975,000 for ne 2rk television, $31,447,000 for consumer magazines, $7,700,000 for spot television, $343,000 for overboldspapers, $134,000 for outdoor postings, and $36,000 for radio. (Reed Elsevier) Most footwear products atomic number 18 do outside of USA. However appargonl products are produced in the USA and abroad. (www.stat sight.ca)In this hold we will try to explor e the interaction amid the company Nike and its external business environs, as tumefy as the sexual strengths and weaknesses of the company. We will attempt to disc everyplace some of the signifi fundamentt changes and events in the external environment that render occurred in the last 5 days and put one across directly oppositioned Nike. We will set forth how the company adapted and resolveed to these changes and what the effects of these events were. Also we will identify and describe some of Nikes internal strengths and weaknesses.CHANGES AND EVENTS IN THE EXTERNAL ENVIRONMENT INTERNATIONAL CRISESOne of the lots or less(prenominal) new-fangled worldwide environmental changes are the events of kinfolk eleventh 2001, when airplanes crashed into each of the World Trade Center towers in wise York, the Pentagon near capital letter, D.C., and near Pittsburgh, P.A. (www.geocities.com/capital of Greece/Acropolis/5232/) U.S. regime officials reported that the crashes wer e a coordinated terrorist attack. Since this catastrophe was non expected, no wiz was ready to act to it. Cole Haan store (owned by Nike), located in the World Trade Center plaza has been solely demolished. However, all of approximately 250-260 Nike and Cole Haan employees based in New York are safe and accounted for. In addition, no Nike employees were on board any of the planes relate in the terrorist attacks in New York, Pennsylvania and at the Pentagon. (www.centrum.sk) afterward closing on Tuesday, September 11th, and Wednesday, September 12th, all new(prenominal)wise Nike and Cole Haan stores in New York and Washington D.C. are open. (www.nike.com) This disaster affected not that the American people scarcely also the world frugality and many areas of business, including Nike Inc. The value of American dollar dropped rapidly and is recovering very slowly. Nike has a full-size amount of their products in inventory, which they are un fitted to sell and are preparing to cut down the occupation.This would mean a significant downsizing in number of employees. (www.geocities.com/Athens/Acropolis/5232/) many another(prenominal) consumers have reduced their travel to veritable retail destinations in general consumers are purchasing few non-essential products. Nike expects lower sales and profits over the next several months as consumers closely monitor the U.S. attacks on Afghanistan. (www.nike.com) When a military campaign, like the one in Afghanistan, brings new developments or intensifies, U.S. consumers buy less, prompting retailers to be set about more cautious with their product orders. These events caused a 12 pct decline in dowrys since September 11th of Nike Inc., the patiences leader. (www.nike.com) The company said the September 11th attacks on the United States have disrupted some of its long-range strategy plans. Analysts have predicted a base decrease in quarterly earnings estimates for Nike. They also said they expect intravenous feedingth-quarter 2001 sales to be faded by the slowdown in consumer spending.(www.msn.com) Decline and slow recovery of Nikes stock since Sept. 11th 2001 (www.moneycentral.msn.co.uk)The company expects to get over back advertisement and production next year. (www.nike.com) Nike, as a global company, is straightway foc use its apparent movements on assisting in the relief efforts and in heeding President Bushs directive to regain business as quickly as possible. (www.sme.sk) Both local and national scarlet hybrid agencies have identified immediate financial reserve as their most critical need. For that reason, the Nike Foundation has been collecting contributions from individual Nike employees and factor outy partners across the country and end-to-end the world. Through matching funds, Nike is making a $1 million contribution to the American Red sweep up and a variety of other local relief organizations through matching funds of employees and factory partners. In addit ion, Nike partner factories in Asia, Feng Tay and Pou Chen, have donated $100,000 each to the American Red Cross. (www.nike.com) Nike also is working with relief agencies in New York, Washington D.C. and Pennsylvaniato provide donations of Nike products for victims who are affected by these tragic circumstances, as proper as for those involved in the rescue and recovery efforts.These donations include more than 14,000 t-shirts, 11,400 pairs of socks, 1,200 pairs of Nike ACG work boots, 1,000 towels, plus hundreds of pairs of shoes, warm-ups, jackets, sudation shirts and gym bags for rescue workers to store their personal belongings. (www.sme.sk) (www.nike.com) Nike and Niketown New York will proceed to coordinate with relief and government agencies and provide as many requested products as possible for fire and rescue personnel. Already, more than $300,000 Nike products have been delivered or are on their focal point to New York relief agencies. (www.nike.com) Nike US employees participated in a Red Cross blood drive on Sept. 24-25 at its Beaverton-based world headquarters and Oct. 1st and Oct. 5th in its Memphis distribution center location. Nike also has donated money to pat for airtime for two 30-second advertisements to the Red Cross during the Oct. 7 dispel of the World Cup qualifying match between Team USA and Jamaica on ABC, as come up as purchasing space the West 4th wall in Manhattan for advertisements. (www.nike.com) The previous numbers signalize Nikes response to this huge global change from complaisant as well as from the business take down of view.Nikes donations as a response to the events of Sept. 11th 2001 Organization Amount Designation American Red Cross $250,000 ($106,000 from Nike employees globally) Relief efforts in NY, Washington, DC, and Pennsylvania PBA Widows and Childrens Police Relief Fund c/o Police liberality Association $175,000 Assistance to NY families for interment lives and family option expenses UFA Widows Ch ildrens Fund c/o Uniformed awaken Fighters Assn $175,000 Assistance to NY families for burial speak tos and family survival expenses Federal Employee Education Assistance Fund $100,000 Assistance to families for burial costs and family survival expenses International Association of Fire Fighters $50,000 Assistance to NY families for burial costs and family survival expenses New York State Fraternal Order of Police WTC Fund $50,000 Assistance to NY families for burial costs and family survival expenses Catholic Charities USA $50,000 Immediate counseling and family services for those impacted by NY disasters United Methodist commissioning on Relief $50,000 Immediate counseling and family services forthose impacted by NY disasters Mercy Corps facilitate for Kids Project $25,000 Helping children and families in NY and Washington DC Misc. adventure fund $75,000 Programs and organizations promoting racial and religious ameliorate and community building efforts Total Reported Cas h Donations $1 million (www.nike.com)E-BUSINESSAs the modern world changes through advances in technology, the global market economy also changes, affecting global businesses such as Nike Inc. Technological changes in the form of machines and mechanical inventions affected the economy during the industrial revolution, but today the advances are more in computer technology. The first computer was produced in the US approximately 50 years ago and was the size of a bountiful room needing its own electric power plant and cost a million dollars to build. This gigantic computer could only do simple calculations. Computers have since decreased swellly in size and cost and increased in productivity and capabilities. In the 1980s thither were unsound improvements in microprocessors, which allowed for the huge technological advances of the 90s. Computers are now part of many households and almost every family in the developed world has a computer. The top personal computer now costs between $2500 and $3500 compared to the bigger models earlier in the past century. The earnings has also been expanding globally and has changed our world into and global village.The first recitation of the net was developed in 1969, during the Cold War by the US department of defense as a communication in case of nuclear attack. The net became available in the 1980s for electronic mail and Internet chats, but improvements in HTML in the 1990s sparked the birth of a new way of communication and business (www.freespace.virgin.net/g.hirst/). A recent survey calculated 120 million users of the net ecumenic and numbers are still growing at an enormous rate. The development quick loading and the immediate moving Internet attracted people to do more things on the Internet. One of the new advances of the Internet is an E-business. Many people are now ordering goods and services over the Internet. One other use of Internet is also advertisement. Recently, Nike has been trying to find new mark ets and consumers. One huge innovation to get closer to the client is through the Internet. The Internet extend tos information available to people all around the world.Nikes web page is intentional to entertain the visitor through innovative, colourful graphics to inform the potential customer of Nikes activities and promoteand sell their products through the E-shop. The Nike accommodates to the world row of Internet and shopping over the Internet. They made their own web-shop where visiting customers can easily find the product, which they are looking for. This is a great way to improve future business of the company as Internet business is improving so quickly. It is also important to put a lot of effort and quality into the services offering through the Internet to make a good reputation about the services and name of the company. (www.niketown.com) GOVERNMENT REGULATIONS, LAWS AND TRADE BARRIERS In 1994, the EU commission obligate quotas on certain types of footwear manufac tured in China. Special Technology Athletic Footwear, footwear designed for use in sporting activities, met certain technical criteria and footwear having a CIF (cost, insurance and freight) price to a higher place 9 EUROs was excluded from these quotas.All other footwear produced by Nike falls under the quotas. However Nike feels that the quotas have not material effect on their business. (www.nike.com) In 1995 the EU commission initiated two anti-dumping legislations covering footwear trade from China, Indonesia and Thailand. In 1997 and 1998, the commission imposed definite anti-dumping duties on certain synthetic, textile and leather upper footwear originating from China Indonesia and Thailand. These anti-dumping duties have exclusions for STAF footwear, sports footwear and footwear with the CIF above 5,6 EUROs. (www.nike.com) This means the anti-dumping duties apply only to low cost footwear, which means that Nike can distribute most products except children shoes and low cos t sandals. However Nike shifted the production of these types of footwear to other countries and therefore the anti-dumping duties have not had a material affect on their business. (www.centrum.sk)If the EU measures become more restrictive Nike recommends that the European subsidiaries consider shifting the production of footwear to other countries in order to maintain competitive pricing. Nike continues to closely monitor global restrictions and maintain a multi-country sourcing strategy and contingency plans. Nike believes that their major competitors are in the similar position. (www.pravda.sk) NEW MARKETS AND CONSUMER TRENDS Revenue for the past three years of Nikes international (non-US) and US market (www.nikebiz.com) everywhere the past 4-5 years many new markets have opened for Nike, not only from the geographical point of view and expansions outside the US but also from the customer bring and trends perspective.(www.centrum.sk) As the concept of the global village is bec oming reality, more unexploded markets are opening up. Nike divides its global business into four regions the United States, Europe, Asia Pacific, and the Americas. (www.nike.com) While each region increased revenue in the financial year 2001, most of its growth came from the new unexplored markets outside.In the last seven years, Nike has built many international branch offices and subsidiaries as a response to the changing market. These are located in Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Croatia, Czechoslovakian Republic, Denmark, Finland, France, Germany, Hong Kong, Hungary, Indonesia, India, Ireland, Italy, Japan, Korea, Malaysia, Mexico, New Zealand, The Netherlands, Norway, Peoples Republic of China, The Philippines, Poland, Portugal, Singapore, Slovenia, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, the United Kingdom and Vietnam. (www.nike.com) Percentage of footwear production in proper(postnominal) countries The European m arket for athletic footwear and apparel continues to flourish. Every day, new shops open with a fealty to presentation and service that NIKE emphasizes. Nike feels the emotional connection growing in Europe is similar to the one NIKE created in the U.S. 20 years ago. (www.nike.com) Nikes Asian market is very profitable but also very demanding one. This market depends on authentic sports positioning and the ability to deliver technology-based performance products. Nikes attempt to fulfill these criteria has so distant been very successful.Nike is especially enthusiastic about the World Cup coming to Japan and Korea in 2002. They accept this will provide them with a great opportunity to influence their soccer success in Asia. (www.nike.com) The most competitive and developed market in the world for Nike is the USA. Revenues in this market grow at two percent per year. Although Nike has been struggling in some areas of this market, it continues to lead the athletic footwear market i n address and product innovation. Apparel in the U.S. is slowly making its way back to the market after duplicate of tough quarters in the past 2 years. U.S. Apparel is currently up 9% in revenue for the year and is starting to stabilize in the second half of fiscal 2001. (www.nike.com) Changes that have occurred in customer demand are directly proportional to the present trends of people. correspond to recent researches, American kids have only 25 percent of theirdaily life considered as free time, compared to about 40 percent in 1981. (www.nike.com) For a sports company this means less demand for leisure time clothes, footwear and equipment. According to statistics, athletic footwear sales have shown a decrease in the third quarter. This fact represents back-to-school sales, indicating less interest by the crucial teenage market as it moves toward different looks in the footwear area. This may be explained by an overall shift of interest and fashion in this market from sports t oward entertainment, music, and celebrities.A recent trend in the athletic footwear business shows that several of the large corporations are losing market share due to the declining sales in traditional markets. As aerobics, fitness and cross training markets decline there is a shift to non-traditional sports. By 1998, the publicity for a market in brown shoes had passed. brown shoes never impacted the athletic footwear market as predicted. Instead, hiking, off-trail and fashion footwear continue to show strong growth, with many athletic footwear companies expanding into those areas. (www.nike.com) It is predicted that the market for athletic footwear has peaked and is now declining and leveling off at a production level of about 300 million pairs. appearance driven spikes often occur, such as in 1995 where a production level of 345 million pairs was reached.This is viewed as a bonus for the industry. (www.nike.com) Retailers will thrive at the 300 million pair a year production l evel by working with retailers to consolidate store locations, manage inventories and maximize sell-through. The continued trend over the last five years is the consumers willingness to feed, on average, higher prices for athletic footwear. (www.proquest.com)IMPORTANT FINANCIAL EVENTSThe financial interactions between countries and governments affect the profits of the large corporations such as Nike and the retail values of their products. In trade union America legal proceeding are often measured in US dollars. This mutual currency makes transactions easier between countries. In the European Union, 15 different countries must convert their different currencies when doing business with other countries. This often accounts for increased retail prices in international goods and services.On January 1st 1999, 11 of the 15 members countries of the European Unionestablished permanent renewal rates between their existing currencies and the new EURO, the new common currency of the Eur opean union. Until the end of the transition period, public and private parties may pay for goods and services using the countries received currency or the EURO. Starting January 2002, the EURO will be the official currency of the EU and the original currencies will be completely withdrawn from circulation by June 30th 2002. (www.nike.com) Since January 1998 Nike has been researching the complications and affects of the transitions to the EURO. Nikes devoted project team has made modifications to inform technology systems supporting the market, management, invoicing, pay roles and cash management functions in order to make their conversion smooth.Nike believes that the introduction of the EURO will eliminate inequalities in exchange rates between countries although differences in cost between countries and different tax rates will still affect price differences at the retail level. Over the past three years Nike has been actively working to asses and coiffe a practices in pricing to extend effectively under this new currency. (www.nike.com) The cost of adapting Nikes systems and practices to the use of the EURO total approximately 8 millions US dollars and was generally related to the modification of their existing systems. Nike also believes that the change of currency will not have an impact on the financial conditions of results of operation. (www.nikebiz.com)INTERNAL STRENGTHS AND WEAKNESSES STRENGTHSDecision Making Nikes strongest weapon is decision-making. Their managerial team has been able to make decisions specific to their needs and although not all the time, most of the time they were right. They combined rationality, intuition and experience to come up with the best decisions ever made in this market. To prove the above, we can just look at some of their well-known choices made in the past. Nike managers decided to rely on globalization and externalization of risk of infection through wholly or partly-owned subsidiaries. (www.nike.com) The fac t that they have subsidiaries all over the world helps them to become more flexible and partially getting rid of potential risk. Their flexibility is proved by the diversity of sports areas they are involved in, which has also turned out to be a great decision since Nike is dominating most of these markets. (www.nike.com) This company is able to manufacture products for a dozen of different sports and still keep the top quality in all of them. From thestart, the managers of Nike decided to count on customer satisfaction and total quality of their products, realizing the social expectations that lied upon their shoulders.They have believed that quality outweighs the extra amount of money spent on manufacturing of the best products on the market. One of the most important decisions of Nikes management was advertising. They spent large amounts of money on commercials, which have in the long term paid back in multiples. They have used famous athletes to promote their brand, which is con sidered a great strategic plan. Also they decided to involve in various social activities. Their extraordinary advertising has helped them to develop the well-known image they have. (www.msn.com) The owners of the company visualized, gave the company a form, set their goals and then they tried to chance upon them.They leased the right personnel and they motivated them by generally higher wages than their competitors were offering. They also involved their employees in initiating and implementing change. According to these employees, Nike allowed them to gain self confidence, express their creativity, and involve in making decisions that need not only the expertise of a manager but also an experience of a worker. (www.nike.com) Looking at the present results of Nikes decisions, this kind of empowerment has shown to be a great choice.Research and Development Efforts Nike believes that the key factor of its success originates from their research and development efforts. (www.nike.com ) They emphasize the technical innovation in the design of their products to achieve their manufacturing goals, which are to create products capable of reducing injury, increasing athletes performance and maximizing comfort. Of course, Nike pays a lot of attention to their products design respectively to the present trends. (www.sgma.com) Since these criteria require a specific expertise, recruitment is one of the most important managerial issues of Nike. Looking at their past, we have to admit that they have succeeded in this with excellence. Nike has own staff of specialists in the areas of biomechanics, commit physiology, engineering, industrial design and others. They also have committees specialized on research and advisory.These committees are made of top-level athletes, coaches, trainers, equipment managers, orthopedics, podiatrists and other experts. (www.nike.com) These people use their expertise and experience tohelp Nike on its way to improvement. They help them to devel op new better products and improve upon present products. They also consult the company about designs, materials, and concept for product improvement. Athletes engage or sponsored by Nike test-prove the companys products during the development process. These facts are strongly held within the company and Nike is proud to include them in their reports (www.nikebiz.com).WEAKNESSESAbility To Respond And Adapt To Changes Since Nike is a consumer products company, the demand for their products highly depends on popularity of different sports and activities and the changing trends. thence they should be able to respond to these changes in costumer preferences and quickly adapt to them. This company must adjust their existing products, develop new ones, and create styles that are specific to the trends. (www.sgma.com) They also have to make an effort to influence sports and fitness preferences through aggressive marketing. This kind of environment is very unstable and puts one against ma ny different sources of risk. If you fail to react quickly to such changes it will show up on your sales and profits reports. Since Nike has been occupying the top of the sports equipment manufacturers chart for a long time they are getting used to their strategies, which are now becoming habits. (www.nike.com) This may be very useful in some cases but concord to analysts, over time, organizations develop and lock into ways of doing business, in spite of changing conditions.Nikes strategy has been to dominate only the markets that are relatively safe and tend to be very profitable since it has become the worlds leader in this market. (www.nike.com) Despite their great decision making abilities this has turned out to be a very unretentive choice. For example, Nike did not respond to the growing market of aerobics and fitness training because it seemed too small to be worth that much attention. (www.sgma.com) However, Reebok developed a line of aerobics and fitness equipment which h as met a lot of popularity among the customers. Since then, Reebok has been preeminent this market, which is currently the area of their main interest. (www.sgma.com) This was an example of a slow response to environmental changes. However, there are areas where Nike responded quickly and still was not quite successful. For example, soccer is currently the number 1 sport in the world and is currently dominated by the brand Adidas.(www.fisonline.com)Even though Nike soccer equipment qualitatively meets the Adidas products, Nike has not been able to take over this market. So what was wrong with their reaction? To dominate such a large market you have to be more aggressive and be able to gain customers attention. (www.sgma.com) Nikes failure in the soccer market is generally seen as the lack of interest, aggressivity and creativity in this area of business. (www.referaty.sk) Growth caller-out That Has Not Grown Fiscal year 2001 was an above average year for Nike. However, it was not great even though they finished hard in the fourth quarter. This year was fairly similar to the last four years. During that time Nike has been a growth company that has not grown. Until the end of the fiscal year 1997 everything was going great for Nike. From 1994 to 1997 this company went from being a strong company with growing market share and $3 one thousand thousand in revenues to one with dominant market share and revenues over $9 billion. (www.nike.com) Everything seemed to be going amend for Nike, they were successful in everything they touched and they were growing rapidly. At the end of the fiscal year 1997 they found themselves in a position where employees were euphoric, but overworked since there was not enough of them.To keep this enthusiasm going they hired more people and continued on their path to becoming a truly global company. (www.sgma.com) Since they effected that this couldnt be accomplished over few years they were trying to be the best at everything they were doing as well as building a strong team for the future. (www.nike.com) This was exactly the point where their growth has frozen and never started again. They penetrated new markets successfully, but were not able to keep up the standards they had set before. They focused on new areas of business so much that they forgot to do the old simple things right. (www.sgma.com) Despite all these efforts the industry was stand still. There were different reasons for this such as the U.S. market hitting the quoin point, Nike launching a massive 3-year supply train overhaul and the tough period in the Asian economy. (www.nike.com) The U.S. market recession point was well expected since this market had grown so fast. Nike launching the massive 3-year supply chain overhaul, which was well in advance of the competition, was not a productive strategy in short-term but its benefits are supposed to show up in the fiscal year 2002. (www.nike.com) Lastly the downside of the Asian economy was also predictable since this isa market with big turnovers and risks. However, it was not expected to influence Nike as much as it did.Great companies are able to deal with such events and keep on growing. Nike managers did not pay enough attention to these facts and that was the main reason of their growth halt. (www.sgma.com) Even though Nike is currently growing in some areas of market, such as Europe, Asia, Latin America and the soccer and golf markets, overall they are standing still. (www.nike.com) Year 2001 is the proof of the above. In this year Nike forgot to compete mid- and low-priced footwear in the U.S. and they were not able to match their orders and production well, in which they were very successful in the past. Now, Nike has to face a big decision. They can accept the problems they have and let their business go slowly down, or keep excelling in some things, be average in others and stay at the point where they are now.However, the best choice for Nike would be to fi nd the solutions to their problems and start growing again. (www.msn.com) (www.sgma.com)CONCLUSIONNikes environment is very unstable and exposures companies to unexpected risks. Generally, Nike has been able to respond to these changes (except few exceptions) by their creativity and flexibility. This company tries to prevent a direct impact of these changes on them by externalizing risk. Despite these facts, Nikes expansion is not as significant as it is expected to be. This is caused by some of their internal weakness and external changes. However, they still remain number 1 in the world footwear market. ( association Profiles For Students)BIBLIOGRAPHY1. Company Profiles For Students vol.2 m-z 1999 1st ed. P. 944-949 2. www.proquest.com 3. www.geocities.com/Athens/Acropolis/5232/ 4. www.sgma.com 5. www.centrum.sk 6. www.zoznam.sk 7. www.freespace.virgin.net/g.hirst 8. www.fisonline.com 9. www.statcan.ca 10. www.moneycentral.msn.co.uk 11. www.msn.com 12. www.nike.com 13. www.niketow n.com 14. www.nikebiz.com 15. www.sme.sk 16. www.pravda.sk 17. www.referat.sk 18. Reed Elsevier, 2000