The Nike Files

Like other apparel companies, Nike participates in non-equity alliances with  many professional athletic associations.  These alliances come in the form of licensing agreements that allow Nike to design, produce and sell merchandise using the logos of the teams that are a part of that association.  In addition to the team and association logos, Nike also sells replica jerseys of the most popular players in those associations.  Definitely a smart way to boost revenues. Nike has taken these relationships a step further with the NFL and the NBA.  They have reached partnership agreements with each of these leagues to be the official apparel provider.  This means that Nike has the responsibility of providing each of the teams with game day uniforms for the players, and apparel for coaches, players and staff. As far as the NBA goes, Nike's move to be the "exclusive on-court apparel provider" has come with some changes that we've not seen in the NBA to date. ...

I'm sure Phil Knight had no idea that Nike would become the dominant force in the athletic industry that it is today.  He was probably confident that Nike would be a competitive athletic shoe company, based on early successes.  Nike's willingness to expand its offerings through the years has been a major contributor to its success. Today, Nike offers a full line of shoes and apparel for pretty much any sport that you can think of.  But  not all of the products are geared toward athletes. They have accepted the fact that most of the shoes that they sell are worn for fashion purposes.  This has led them to create special edition/limited release products designed by urban designers – allowing them to offer products to a segment of the population that may not have purchased Nike products before. Nike also made the move several years ago to offer a wide variety of sporting goods.  They offered equipment for baseball, football, hockey, and golf among many oth...

In the world of athletic shoes and apparel, we can typically see a trend in pricing.  There have historically been prices that customers have become familiar with for certain types of shoes.  This can be attributed to tacit collusion. Nike commands the market in athletic shoes, yet its prices are not outrageous compared to its competition.  Why is this?  A simple answer is that the incentive of Nike's competitors to "cheat" in the short-term is not greater than the long-term benefits of cooperation.  Meaning that competitors know that if they undercut Nike on comparable products they will experience short-term financial gains, but that Nike and other competitors can lower future pricing in order to squeeze out the non-cooperative firm. Nike also understands that it must keep its pricing competitive in order to maintain its market share in the industry.  Any increase in price that consumers perceive as unjustified will create a decrease in market share f...

Nike does not have the overhead that comes with owning ad operating its own manufacturing facilities.  Instead, Nike chooses to contract its manufacturing out to specialists, saving enormous amounts of money.  The decision to do so is both financial and strategic. Financially, Nike is not responsible for the day-to-day operations of the plant.  They don't directly pay the employees.  Nor do they pay for the purchase and maintenance of the equipment involved in the manufacturing process.  This frees up money for the most important of Nike sustaining its competitive advantage - innovation. By employing the option to contract, Nike does not have to physically mass produce the products and can spend more time developing new or improved technologies and products.  They are also not tied to a plant if there is an advance in manufacturing technology that would allow them to produce their products more efficiently, or even push the envelope of what can be done....

Over the years, Nike has established an enormous loyal customer base.  No matter what sport they play, athletes have gravitated toward Nike.  Nike has been achieved the reputation of being a quality manufacturer and provider of athletic shoes, apparel and equipment that continue to give athletes the edge that they need when game time arrives.  The willingness of Nike to listen to the consumer about what they want and need also has a lot to do with this loyalty. Nike understands that its reputation is on the line whenever an athlete laces up for competition and is wearing that swoosh.  That is why Nike continues to push the envelope when designing its products.  Nike doesn't just want to produce the best products, they want to produce the best products that people want to wear.  After all, this is what earned Nike the reputation of being the best. One of the ways that Nike gives customers what they want is through the NikeID program.  This program i...

Nike has positioned itself as a leader in athletic footwear, apparel and equipment.  In doing so, Nike has continued to grow its product line and the technologies used in these products.  Because of the large volume of units that Nike produces each year, it has been able to successfully reduce production costs and sustain healthy profit margins. Because Nike produces so many units each year, it is effectively able to reduce the threat of suppliers.  Meaning that the suppliers of raw materials used in the production of Nike's goods are not likely to increase prices for its products because Nike can likely acquire the same goods elsewhere at a competitive price.  Suppliers that sell a large volume to a particular firm value that relationship and will typically try to accommodate that firm, knowing that losing that business could be detrimental. A relationship between a successful firm and its supplier(s) can be viewed as symbiotic.  If Nike continues to grow t...