business plan nike pdf

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.

Value Proposition

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.

Wrapping up

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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Nike: An Innovation Journey

• First Online: 29 November 2017

Cite this chapter

• Michelle Childs 5 &
• Byoungho Jin 6  

Part of the book series: Palgrave Studies in Practice: Global Fashion Brand Management ((PSP:GFBM))

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Nike is an American multinational company that has evolved to become a global leader in athletic wear with annual sales exceeding $21 billion in 2016, more than half of which is attributed to international markets. Since its inception in 1964, Nike has been an innovation leader in product development, marketing and consumer experience. Due to a dedication to continuous innovation, Nike has been able to sustain a competitive advantage within the athletic apparel and footwear marketplace. This case highlights key points in Nike’s journey of innovation and examines how Nike has successfully emerged as a global champion within the athletic wear industry. Based on these analyzed strategies, this case provides implications that are relevant for practitioners and academics.

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Childs, M., Jin, B. (2018). Nike: An Innovation Journey. In: Jin, B., Cedrola, E. (eds) Product Innovation in the Global Fashion Industry. Palgrave Studies in Practice: Global Fashion Brand Management . Palgrave Pivot, New York. https://doi.org/10.1057/978-1-137-52349-5_4

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Nike Marketing Strategy: A Company to Imitate

Patrick Flynn , University at Albany, State University of New York

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This paper takes an in depth look at how Nike became the largest company in its industry and how other companies across various industries have tried to model Nike’s plan for success. At the heart of Nike’s business plan are the company’s unique marketing strategy and culture that significantly helps foster innovation and creativity. First I will go into a brief history of the company and its most popular brand. Then an in-depth analysis will be provided of these two important pillars of success. The next part of the paper will focus on how other companies in the same industry and different industries have used similar strategies to try and improve their own profits and products.

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Flynn, Patrick, "Nike Marketing Strategy: A Company to Imitate" (2015). Accounting . 14. https://scholarsarchive.library.albany.edu/honorscollege_accounting/14

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MARKETING STRATEGY OF NIKE

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Converse Cuts Jobs as Part of Parent Nike’s Cost-Savings Plan

Converse is cutting some jobs as parent company Nike Inc. trims its staff across divisions in search of cost savings.

Nike is undergoing a $2 billion cost-cutting plan that includes slashing 2 percent of its workforce. Layoffs have hit its Oregon headquarters across two rounds, with the process expected to conclude by the end of its fiscal year, according to an internal memo reviewed by Bloomberg News.

Converse, based in Boston, operates its own product-development, supply-chain and marketing functions specific to its business. The brand does use technology from Nike in its products.

Converse “is realigning some of our teams to better support future growth,” a spokesperson for the unit said in a statement Tuesday. “We can confirm that the total changes to Converse’s workforce were included in Nike’s overall 2 percent reduction plan, however, we were operating on a discrete timeline.”

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Nike had nearly 84,000 employees worldwide as of last May. Converse, known for its Chuck Taylor and One Star sneakers, represents about 5 percent of Nike’s total sales.

By Kim Bhasin

Learn more:

Nike to Axe Hundreds of Jobs in Bid to Save $2 Billion Amid Sales Slump

The announcement comes after the sportswear giant said sales only rose 1 percent in the three months to Nov. 30.

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Converse Reveals Job Cuts as Nike Inc. Layoffs Continue

Converse is cutting roles as part of a general Nike Inc. business restructuring plan, the company confirmed to FN.

In a statement, Converse said it "is realigning some of our teams and optimizing the way we work in support of our biggest growth opportunities." The company also said that it "is continually taking steps to support our future growth."

The job cuts are part of Nike's previously announced layoffs amid a general plan to "streamline" the organization and save up to $2 billion in costs over the next three years, the company said in  December . At the time, Nike alluded to layoffs and said it could soon face employee severance costs as it rolled out the strategic plan.

In February, Nike  confirmed  that it was laying off 2 percent of its workforce and in April, disclosed via a filing with the state of Oregon that 740 employees will have been let go at the global headquarters as part of two rounds of layoffs by June. As early as  November , several Nike employees had taken to LinkedIn to share they were laid off from the company amid a broader C-suite shakeup across design and marketing.

Nike did not confirm how many roles were impacted at Converse, which it acquired for $305 million in 2003 . Bloomberg News first reported on the cuts.

Nike has recently faced  criticism  for what experts and analysts see as a lack in innovation in its product pipeline. In December, Nike touted a new plan to build a "multiyear cycle of innovation" to win over consumers, which in part included streamlining the distribution of some of its key franchises to drive more brand heat. Since then, Nike has  touted  new products like the  Air Max DN , the  Pegasus Premium  and the  Pegasus 41 .

In explaining the Swoosh's innovation lag, Nike chief executive officer John Donahoe recently ignited backlash when he said  remote work  was to blame. According to analysts, Nike's innovation issues stem from relying too heavily on best-sellers instead of creating new franchises, as well as a broad loss of talent at the top and prioritizing financial goals over brand equity.

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Biden hikes tariffs on Chinese EVs, solar cells, steel, aluminum — and snipes at Trump

President Joe Biden slapped major new tariffs on Chinese electric vehicles, advanced batteries, steel, aluminum and other goods Tuesday as he embraced a strategy that’s increasing friction between the world’s two largest economies.

President Joe Biden sits down to sign a document in the Rose Garden of the White House in Washington, Tuesday, May 14, 2024, imposing major new tariffs on electric vehicles, semiconductors, solar equipment and medical supplies imported from China. (AP Photo/Susan Walsh)

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President Joe Biden speaks in the Rose Garden of the White House in Washington, Tuesday, May 14, 2024, announcing plans to impose major new tariffs on electric vehicles, semiconductors, solar equipment and medical supplies imported from China. (AP Photo/Susan Walsh)

FILE - A worker assembles an SUV at a car plant of Li Auto, a major Chinese EV maker, in Changzhou in eastern China’s Jiangsu province on March 27, 2024. The Biden administration is announcing plans to slap new tariffs on Chinese electric vehicles, advanced batteries, solar cells, steel, aluminum and medical equipment. (Chinatopix Via AP, File)

WASHINGTON (AP) — President Joe Biden slapped major new tariffs on Chinese electric vehicles, advanced batteries, solar cells, steel, aluminum and medical equipment on Tuesday, taking potshots at Donald Trump along the way as he embraced a strategy that’s increasing friction between the world’s two largest economies.

The Democratic president said that Chinese government subsidies ensure the nation’s companies don’t have to turn a profit, giving them an unfair advantage in global trade.

“American workers can outwork and outcompete anyone as long as the competition is fair,” Biden said in the White House Rose Garden. “But for too long, it hasn’t been fair. For years, the Chinese government has poured state money into Chinese companies ... it’s not competition, it’s cheating.”

The tariffs come in the middle of a heated campaign between Biden and Trump, his Republican predecessor, to show who’s tougher on China. In a nod to the presidential campaign, Biden recognized lawmakers from Michigan in his remarks and spoke about workers in Pennsylvania and Wisconsin, all battleground states in November’s election.

Asked to respond to Trump’s comments that China was eating America’s lunch, Biden said of his rival, “He’s been feeding them a long time.” The Democrat said Trump had failed to crack down on Chinese trade abuses as he had pledged he would do during his presidency.

Karoline Leavitt, the Trump campaign’s press secretary, called the new tariffs a “weak and futile attempt” to distract from Biden’s own support for EVs in the United States, which Trump says will lead to layoffs at auto factories.

The Chinese government was quick to push back against the tariffs, saying they “will seriously affect the atmosphere of bilateral cooperation.” The foreign ministry used the word “bullying.”

The tariffs are unlikely to have a broad inflationary impact in the short term because of how they’re structured, some not to take effect until 2026, but there could be price increases in the meantime for EV batteries, solar and some other specific items.

Biden administration officials said they think the tariffs won’t escalate tensions with China, yet they expect China will explore ways to respond to the new taxes on its products. It’s uncertain what the long-term impact on prices could be if the tariffs contribute to a wider trade dispute.

The tariffs are to be phased in over the next three years, with those that take effect in 2024 covering EVs, solar cells, syringes, needles, steel and aluminum and more. There are currently very few EVs from China in the U.S., but officials worry low-priced models made possible by Chinese government subsidies could soon start flooding the U.S. market.

Chinese firms can sell EVs for as little as $12,000 . China’s solar cell plants and steel and aluminum mills have enough capacity to meet much of the world’s demand, with Chinese officials arguing their production keeps prices low and would aid a transition to the green economy.

China’s commerce ministry said in a statement that the tariffs were “typical political manipulation” as it expressed its “strong dissatisfaction” and pledged to “take resolute measures to defend its rights and interests.”

Under the findings of a four-year review on trade with China, the tax rate on imported Chinese EVs will rise to 102.5% this year, up from total levels of 27.5%. The review was undertaken under Section 301 of the Trade Act of 1974, which allows the government to retaliate against trade practices deemed unfair or in violation of global standards.

Under the 301 guidelines, the tariff rate is to double to 50% on solar cell imports this year. Tariffs on certain Chinese steel and aluminum products will climb to 25% this year. Computer chip tariffs will double to 50% by 2025.

For lithium-ion EV batteries, tariffs will rise from 7.5% to 25% this year. But for non-EV batteries of the same type, the tariff increase will be implemented in 2026. There are also higher tariffs on ship-to-shore cranes, critical minerals and medical products.

The new tariffs, at least initially, are largely symbolic since they will apply to only about $18 billion in imports. A new analysis by Oxford Economics estimates the tariffs will have a barely noticeable impact on inflation by pushing up inflation by just 0.01%.

The Chinese EV maker BYD has explored the possibility of opening factories in Mexico for the Mexican market, possibly creating a way to ship goods into the United States. U.S. Trade Representative Katherine Tai said she was talking with industry and workers about the possibility and to “stay tuned.”

The auto industry is still trying to assess the impact of the tariffs. But at present, it appears they could be assessed on only two Chinese-made vehicles, the Polestar 2 luxury EV and potentially Volvo’s S90 luxury gas-electric hybrid midsize sedan.

“We’re still reviewing the tariffs to understand exactly what’s affected and how,” said Russell Datz, spokesman for Volvo, a Swedish brand now under China’s Geely group. A message was left seeking comment from Polestar, which also falls under Geely.

The Chinese foreign ministry spokesperson, Wang Wenbin, said the U.S. is trampling on the principles of a market economy and international economic and trade rules.

“It’s a naked act of bullying,” Wang said.

The Chinese economy has been slowed by the collapse of the country’s real estate market and past coronavirus pandemic lockdowns, prompting Chinese President Xi Jinping to try to jumpstart growth by ramping up production of EVs and other products, making more than the Chinese market can absorb.

This strategy further exacerbates tensions with a U.S. government that claims it’s determined to strengthen its own manufacturing to compete with China, yet avoid a larger conflict.

“China’s factory-led recovery and weak consumption growth, which are translating into excess capacity and an aggressive search for foreign markets, in tandem with the looming U.S. election season add up to a perfect recipe for escalating U.S. trade fractions with China,’’ said Eswar Prasad, professor of trade policy at Cornell University.

The Europeans are worried, too. The EU launched an investigation last fall into Chinese subsidies and could impose an import tax on Chinese EVs.

After Xi’s visit to France last week, European Commission President Ursula von der Leyen warned that government-subsidized Chinese EVs and steel “are flooding the European market” and said, “The world cannot absorb China’s surplus production.’’

Biden’s administration views China, with its subsidies of manufacturing, as trying to globally control the EV and clean-energy sectors, whereas the administration says its own industrial support is geared toward ensuring domestic supplies to help meet U.S. demand.

“We do not seek to have global domination of manufacturing in these sectors, but we believe because these are strategic industries and for the sake of resilience of our supply chains, that we want to make sure that we have healthy and active firms,” Treasury Secretary Janet Yellen said.

The tensions go far beyond a trade dispute to deeper questions about who leads the world economy as a seemingly indispensable nation. China’s policies could make the world more dependent on its factories, possibly giving it greater leverage in geopolitics. At the same time, the United States says it’s seeking for countries to operate by the same standards so competition can be fair.

China maintains the tariffs are in violation of the global trade rules the United States originally helped establish through the World Trade Organization. It accuses the U.S. of continuing to politicize trade issues and on Friday said the new tariffs compound the problems caused by tariffs the Trump administration previously put on Chinese goods, which Biden has kept.

Those issues are at the heart of November’s presidential election, with a bitterly divided electorate seemingly united by the idea of getting tough with China. Biden and Trump have overlapping but different strategies.

Biden sees targeted tariffs as needed to defend key industries and workers, while Trump has threatened broad 10% tariffs against all imports from rivals and allies alike.

Biden has staked his presidential legacy on the U.S. pulling ahead of China with its own government investments in factories to make EVs, computer chips and other advanced technologies.

Trump tells his supporters America is falling further behind China by not betting on oil to keep powering the economy, despite its climate change risks. The ex-president may believe tariffs can change Chinese behavior, but he believes the U.S. will be reliant on China for EV components and solar cells.

“Joe Biden’s economic plan is to make China rich and America poor,” he said at a rally this month in Wisconsin.

AP autos writer Tom Krisher contributed to this report from Detroit.