Nike – Globalizing the Sportswear Industry
1 ) Evaluate Nike's business approach. Does Nike have a sustainable competitive advantage?
In line with the text, you will find four cornerstones in Nike's strategy: 1) Deepening it is relationship with customers. There are some obvious ways of having a " deep relationship” with clients such as taking into account results of numerous enquiries or following current trends like many companies perform. Nike truly does that, too. But as well it really features tight relationships with its customers. For example , Nike was major companies that introduced the chance to customize its products according to each client's specific tastes and preferences, named " NIKEiD”. Nike has the largest of all the three companies (adidas-Saloman and Reebok) range of products. It gives sportswear to get football, soccer, tennis, basketball players, skateboarders, snowboarders and the like. and allows people to select what is necessary for each of them. As a result of all the abovementioned the company offers millions of devoted customers worldwide, for whom Nike has become a part of a lifestyle. 2) Providing superior, progressive products to the marketplace. A good example of how Nike does that is certainly one of the most impressive products in the market, if not really the most a single, is Air max pas cher. Sports shoes with large air cushioning unit at the back heel, which is obvious from the area of the midsole, were one of the Nike's top selling units. 3) Making you�re able to send supply chain a competitive advantage, through operational self-discipline and quality. This is probably the response to the problem whether or not Nike has a environmentally friendly competitive benefit. The " futures” placing your order program, which is the distinguishing feature of Nike (adidas-Saloman and Reebok don't have an analog), permits retailers to order products in advance in a established period with a fixed cost, so the outlets will never be short on Nike's products. The goods themselves are produced in factories located in the third-world countries, with supervisors who also control the quality of the goods. 4) Accelerating development through centered execution.
installment payments on your Evaluate Nike's financial performance through May 31, 2004. How does Nike compare to Reebok and adidas-Saloman.
Nike continues to be performing very well from 99 to 2005. Its net sales have increased simply by 40% seeing that 1999, and net income doubling during the 6-year period (from 451 it happened in 1999, to 945 in 2005 making the growth rate 109%). What is also very important the operating cash flow percentage has become increasing which means the company continues to be operating more efficiently, optimizing it is costs.
Whenever we compare Nike to adidas-Saloman and Reebok, we can see that overall it has been outperforming both equally companies during the whole period. It has been much more stable with regards to sales growth, not to mention that in 2004 Nike's net revenue (12, 253) where twice the sales of adidas-Salomon (6, 478) and 4x the revenue of Reebok (3, 785). This makes up about Nike expanding more regularly and sequentially. Nike is more efficient that is eager by bigger operating cash flow percentage through 6 years. When it comes to ROS, ROA and ROE coefficient adidas-Salomon is pretty close to Nike, during a lot of years actually outperforming the American big. Reebok, however, has been lagging behind, which is clearly shown in the ROS, ROA and ROE pourcentage figures during 1999 and 2000 (0. 4%, 0. 7%, 2 . 1% in 1999 vs . adidas-Salomon's 4. 3%, 6. 6&, 33. five per cent and Nike's 5. 1%, 8. 6%, 13. 5%)
3. Utilizing a free cash-flow approach, what is the assessment of Nike's inventory value? Is definitely Nike well worth $88 per share or more?
First of all we have to calculate Nike's WACC.
|Risk Free Charge |4, five per cent
|Beta levered |0, 90
|Equity Risk Premium |5, 0%
|Cost of Equity...