SPORTS FOOTWEAR AND APPAREL

INDUSTRY ANALYSIS

Nike Corporation
DEFINING THE INDUSTRY
 INDUSTRY DEFINED

 20,000 retail accounts throughout the U. S. using independent

distributors and also has contracts with 110 other countries
 Also has agreements with Internet companies and subsidiaries
 Operates within the sports footwear and apparel market.
 Originally designing and producing running shoes, their
portfolio has broadened to include a wide range of sports and
leisure wear. This is all endorsed by top sporting personalities
 NAICS CODES
 North American Industry Classification System
 The standard used by Federal statistical agencies in classifying
business establishments for the purpose of collecting, analyzing,
and publishing statistical data related to the U.S. business economy
 The first two digits of code designate the sector, the third
designates the subsector, the fourth digit designates the industry
group, the fifth digit designates the NAICS industry, and sixth digit
designates the U.S. detail industry
NAICS CODESName
NAICS Codes EXAMPLE
Classification Level

31-33 Manufacturing Sector

Leather and Allied

316 Subsector
Product Manufacturing
3162 Footwear Manufacturing Industry Group
31621 Footwear Manufacturing Industry

Rubber and Plastics

316211 U.S. Detail Industry
Footwear

Manufacturing 
NIKE PRODUCTS
 They design, develop, and market high
quality active sports apparel, equipment,
and accessory products
 Nike distributes one new shoe style every
single day
 Nike’s critical factors for success are
maintaining current standards, closer
working relationships, and retaining
customer loyalty by guaranteed standard
of product
 NIKE PRODUCTS
 Their products are made for men,
women, and children of all ages.
 The company presently sells roughly
300 models of athletic shoes in 900
styles for 25 different sports.
 Nike's target market for their shoes is
males and females between 18 and
35 years old.
 NIKE PRODUCTS

hey not only see competition from Adidas and Reebok, but also
with Old Navy and Abercrombie and Fitch

ontinuous marketing research is the key in assessing the market

 NIKE EXPANSION

 Nike has success as a result of collaborating with other

companies within the sports and fitness industry
 But at other times, Nike expanded into markets for which it is
not strategically suited
 Nike has realized to initiate more aggressive programs to
review product partnerships that are outside of its core basis of
products
 NIKE’S BIGGEST
COMPETITOR

onsist of 3 companies:
• Adidas
• Reebok
• TaylorMade
 Adidas Purpose:
◦ The production and distribution of apparel, footwear and equipment for sports and leisure as well as of products of adjoining
fields, furthermore the commercialization of the registered trademark Adidas.

 Adidas Mission:
◦ To be the leading sports brand in the world.

 The Adidas brand attitude “Impossible is nothing” drives all of their brand communication initiatives and it helps them
strengthen the Adidas brand’s bond with the consumer.
 Reebok’s Mission:
◦ Always challenge and lead through creativity.
 At the core of the Reebok brand is the affirmation of the uniqueness of all people.
 Reebok Strategic Focus:
◦ to become a consumer-driven brand that reflects the emphasis on individuality.

 Athletes Endorsed by Reebok:

◦ Sidney Crosby
◦ Alexander Ovechkin
◦ Allen Iverson
◦ Yao Ming
◦ Thierry Henry

 Reebok Partnerships:
◦ NFL
◦ NHL
◦ MLB
 TaylorMade’s Mission:
◦ To have the leading performance golf brands in the world.

 TaylorMade changed the game of golf by bringing the metalwood to the public 27 years ago, and today
is the market leader in the metalwood category.

 Strive to continually extend their brands’ positions as leaders in the development and implementation
of advanced performance technologies in all of their products including clubs, balls, footwear and
apparel.

 Just to give you an idea of how well TaylorMade is doing, they currently endorse 55 professional
golfers, one of which is Sergio Garcia, and as of February 17, 2009 he is ranked number two in world.
ADIDAS GROUP FINANCIALS
Net Sales Nine Months Nine Months
Change
in millions 2008 2007

Adidas 6,004 5,465 9.9%

Reebok 1,587 1,765 (10.1)%

TaylorMade 614 609 0.8%

INDUSTRY STRUCTURE
 GROWTH IN RECENT
DECADES

ike and Reebok set the standard

ike gained popularity

urking competitors
• Adidas Group
• Under Armour
 INDUSTRY WEAKENING

nternet skyrocketed sales in late 90’s

pcoming companies took advantage of new technologies

ales have slumped tremendously in past year

ike making 4% cut

nder Armour stated that analyst’s estimates are far below earlier predictions
THREAT OF NEW ENTRANTS

ighly saturated and challenging industry

epend in large part on first mover advantage and scale economies

reas to focus: Technologies, pricing, and costs of production

 INNOVATOR

ports Apparel and Footwear industry relies mainly on innovations and creativity

nnovative Ideas=Key success factor

ompany could have an advantage

ithout proper funding and resources a firm could be at a severe disadvantage

hreat of new entrants based on first-mover advantage is minimal

 ECONOMIES OF SCALE

ifficult to compete with large economies of scale

ard to handle all levels, more experienced firms are able to disperse

ew entrants suffer a severe cost disadvantage

ignificant amount of assets needed

 BARGAINING POWER OF
BUYERS AND SUPPLIERS

 Power of buyers can be determined by supply vs. demand and

number of buyers
 Price sensitivity effects demand
 Customers more affected by price
 Suppliers are more powerful when the ratio to buyers is more
 The vast range of products in the Athletic Apparel industry leads
to a dissimilar amount of bargaining power for the supplier
 SUBSTITUTE PRODUCTS AND
SERVICES

he threat of substitute products

The existence of close substitute products increases the propensity
of customers to switch to alternatives in response to price increases
 SUBSTITUTE PRODUCTS AND
SERVICES

ubstitutes are a threat because:

1) They are an attractive alternative product or service, which customers can easily shift to
if there are low switching costs.

2) The availability of substitutes invites customers to make price, quality and performance
comparisons

3) Competitively priced substitutes impose a maximum value on prices relevant industry

can charge for its products or services
SUBSTITUTE PRODUCTS AND
SERVICES

1) They are an attractive alternative

product or service, which customers can
easily shift to if there are low switching
costs

OR
SUBSTITUTE PRODUCTS AND
SERVICES
2) The availability of substitutes invites
customers to make price, quality and
performance comparisons

CAN I JUMP
HIGHER? CAN I RUN
FASTER?
IS IT
CHEAPER?
 SUBSTITUTE PRODUCTS AND
SERVICES

) Competitively priced substitutes impose a maximum value on

prices relevant industry can charge for its products or services

What is
worth ?
RIVALRY AMONG PARTICIPANTS

ompetitive rivalry

his is the major determinant of the competitiveness of the

industry. Sometimes rivals compete aggressively and
sometimes rivals compete in non-price dimensions such as
innovation, marketing, etc.
RIVALRY AMONG PARTICIPANTS

enerally competitive rivalry will be high if:

here is little differentiation between the products sold between customers.

ompetitors are approximately the same size of each other

f the competitors all have similar strategies.

t is costly to leave the industry hence they fight to just stay in

igh fixed or storage costs, which encourages fast turnover of inventory.

RIVALRY AMONG PARTICIPANTS

arket of Competitive Rivalry

INDUSTRY ENVIRONMENT
 NIKE VS. THE ECONOMY

  As the economy slows, consumer purchases are down. The biggest
threat for Nike would be economic recession.
 Asian economic crisis also affects Nike since its goods are
manufactured in Asia.
◦ The labor costs and material prices are going up. Nike's growth is not
just affected by the local economy but also in the international economy.
◦ A weak Euro and an Asian recession could mean weak sales for Nike.
 NIKE VS. ETHICS

n 1996, the ethical issue of child labor came to the surface

regarding the hiring of young employees by Nike’s Asian and Latin
subcontractors whose ages ranged from very young to teenagers.
The teen workers would have not been so controversial; however,
there were no regulations or work permits issued.
 NIKE VS. ETHICS

ithout proper management leading and planning in the Nike

Corporation, the company would have suffered from the child labor
issue.

ike has made a true bounce-back from the negative media attention, and
continues to be successful due to their strong business ethic philosophy.
 NIKE VS. SOCIETY

eople are more health conscious nowadays. Consequently, more

and more people are joining fitness clubs. There is an
accompanying growth for demands of fitness products particularly
exercise apparels, shoes and equipment. Nike naturally is at the
forefront of this surge in demand as people are looking for sports
shoes, apparels and equipment.
 NIKE VS. SOCIETY

he largest among Nike’s objectives, the women’s athletic market

will be a top priority in the next ten years. The number of women
collegiate athletes have increased from a few thousand in the
1960’s to almost one million today.
 TECHNOLOGY

roduct technology must evolve as fitness evolves, in order to give competitors an

advantage

ike introduced Nike Shox, which revolutionized the cushioning foam used in shoes

ike also collaborated with Apple and is launching new apparel and footwear that will
easily carry the consumer’s iPod
 TECHNOLOGY

roduct innovation is an ongoing process and is vital to stay ahead of competition

ompanies in this industry invest money in R&D to keep up with the new
demands of today’s athletes

ike employs many specialists including engineers, athletes, biomechanics, and

industrial designers to work together in the design process
 COMPETITION
 The top 3 firms in this industry are Nike, Adidas, and Puma
 The industry is relatively old, so firms must fight for market share rather than
relying on market growth
 AREAS FIRMS COMPETE ON

roduct offerings

echnologies

arketing Expenditures (endorsements and advertising)

ricing

osts of Production

ustomer Service
 COMPETITION

 Firms in athletic footwear and apparel also compete with firms

that provide other substitutes (such as leisure and casual wear)
 Skechers, K Swiss, New Balance, and Aasics
 Nike has created their own lines of casual shoes to compete in
these markets as well
◦ Example: Converse
 COMPETITION
 During hard economic times, people consume less retail goods
such as clothes and footwear
 Bureau of the Census estimates that retail and food service sales
for January 2009 are 9.7% below a year ago
 Consequently, the industry has turned to emerging markets to
continue sales growth
◦ China
◦ Russia
◦ Latin America
 GEOGRAPHY

 Production is outsourced to plants in Asia, Latin America, and

Africa
◦ This reduces costs because labor is cheaper
◦ Puts sources of production closer to where they will be sold
 Firms who outsource lose the ability to closely monitor product
quality and working conditions
 Although some people find this unethical, firms cannot afford to
keep production close to home and still compete on profit margins
 GEOGRAPHY

 Plants are also located in many different countries, rather than

being concentrated in one area
 Diversification of production plants reduces the risk that a firm will
greatly be affected by a problem in any particular country
◦ Example: Nike’s largest footwear factory accounts for only 6% of the
total footwear production
◦ Nike claims it can recover from any loss in production within one year’s
time
CONCLUSION
 OVERVIEW OF THE
INDUSTRY

• In this industry there is intense competition, fashion trends, and

price conscious consumers that have slowed growth in this
industry.

• This creates difficult situations for companies to produce a

brand image that appeals to consumers that want to shop for
cheaper apparel, but also apparel that has quality.
 WHERE THE INDUSTRY IS
NOW

inancially, the company must be aware that economies are not up to

par and that costs must be kept low to bring in the revenue.

ith the internet being a huge entry to Nike’s products, the company
must find a way to keep their consumers to see them as being more
user friendly as compared to their competitors.
 CONT.

ays for Nike to do this is to keep the site simple, fresh, and easy to
use.

y using new designs and better deals for orders made online for the
customers, it has the potential to bring in more revenue, as well as
improve the relationship between the company and its clients.
 INDUSTRY FORECAST

echnology is always changing, and if Nike can create apparel and athletic
equipment that the competitors cannot match, then Nike will grow even higher
than its rivals.

Technology can be based around anything from softer and more durable
running shoes, to a baseball bat with a new metal to make the ball go further.