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B O A M E N T, C O L I N B E S T, B R E N D A N
C O U G H L I N , D A R R I E N H O R N , C H A S E F R E R K I N G ,
D A N I E L J O N E S , D Y L A N M O R G R E T, A A R O N
P L AT T S
NIKE INC.
CHECKPOINT 2: STRATEGY FORMULATION,
IMPLEMENTATION, FIT & PERFORMANCE
STRATEGY FORMULATION & IMPLEMENTATION: 7S FRAMEWORK
SOGs,
SGs, VMPGs,
Strategy
(as Plan)
Strategy
(as Position)
Structure
(OS)
Style
(OC)
Systems
(VCA)
Skills
(VRIO/CC)
Staff
(OL, VCA)
Strategy
Formulation
Strategy
Implementation
• Main Idea:
Greater fit amongst
subsystems leads to greater
organizational effectiveness
CHECKPOINT 2: PRESENTATION OUTLINE
STATEGY FORMULATION
SOG’S: Vision, Mission, Purpose, Goals, and “Mantra”
STRATEGY: Business-Level Strategic Positioning
STRATEGY IMPLEMENTATION
SKILLS: VRIO Framework/Core Competencies
STYLE: Organizational Culture Analysis
STRUCTURE: Organizational Structure Analysis
STRATEGY FIT AND PERFORMANCE
FIT: Modified 5S Analysis
PERFORMANCE: Financial Analysis
 APPENDIX AND REFERENCES AT END
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY FORMULATION: SUPERORDINATE GOALS
SOGs,
SGs, VMPGs,
Strategy
(as Plan)
Strategy
(as Position)
Structure
(OS)
Style
(OC)
Systems
(VCA)
Skills
(VRIO/CC)
Staff
(OL, VCA)
Strategy
Formulation
Strategy
Implementation
• Main Idea:
Greater fit amongst
subsystems leads to greater
organizational effectiveness
STRATEGY FORMULATION: SUPERORDINATE GOALS
Mission Vision
Purpos
e
Goals Mantra
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY FORMULATION: SUPERORDINATE GOALS
Mission: “To bring inspiration and innovation to every athlete in the
world.”
Mission Vision Purpose Goals Mantra
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY FORMULATION: SUPERORDINATE GOALS
Vision: “If you have a body, you are an athlete.”
Design a shoe for everyone
 Using high quality materials
 Made ethically (wages and work conditions)
 Safe for the Planet
Purpose: “Nike is dedicated to serving athletes
and helping them reach their full potential”
‘Continually innovate to remain sustainable’
Create value for shareholders
Mission Vision Purpose Goals Mantra
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY FORMULATION: SUPERORDINATE GOALS
Goals: We Strive for Innovation that:
 Serves the athlete
 Grows the company
 Delivers inspiration
 Minimize Waste (Recycling ‘Reuse a Shoe’
program
 Promote Social Responsibility
 Focus on innovation, collaboration,
transparency and advocacy
Mission Vision
Purpos
e
Goals Mantra
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY FORMULATION: SUPERORDINATE GOALS
• Tagline: “Just Do It!”
• Mantra: “Authentic, athletic performance”
Mission Vision
Purpos
e
Goals Mantra
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY FORMULATION: SUPERORDINATE GOALS
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
S T R E N G T H S
 Great customer loyalty
 Sponsorship Pride
W E A K N E S S E S
 Too geared towards the
athlete and less towards
their average consumer.
STRATEGY FORMULATION: SUPERORDINATE GOALS
CHECKPOINT 2: PRESENTATION OUTLINE
STATEGY FORMULATION
SOG’S: Vision, Mission, Purpose, Goals, and “Mantra”
STRATEGY: Business-Level Strategic Positioning
STRATEGY IMPLEMENTATION
SKILLS: VRIO Framework/Core Competencies
STYLE: Organizational Culture Analysis
STRUCTURE: Organizational Structure Analysis
STRATEGY FIT AND PERFORMANCE
FIT: Modified 5S Analysis
PERFORMANCE: Financial Analysis
 APPENDIX AND REFERENCES AT END
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY FORMULATION: STRATEGY AS POSITION
SOGs,
SGs, VMPGs,
Strategy
(as Plan)
Strategy
(as Position)
Structure
(OS)
Style
(OC)
Systems
(VCA)
Skills
(VRIO/CC)
Staff
(OL, VCA)
Strategy
Formulation
Strategy
Implementation
• Main Idea:
Greater fit amongst
subsystems leads to greater
organizational effectiveness
Broad
Differentiation
Broad Low Cost
Focused
Differentiation
Focused Low
Cost
BroadNarrow
Differentiation Low Cost
Scopeofadvantage
Type of Advantage
Strategy: Porter’s Strategy Typology
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY FORMULATION: STRATEGY AS POSITION
Type of Advantage: Differentiation
•Willingness to pay a premium price:
•On average Nike’s customers pay over twice the world average
price for a running shoe
•Over 50% of the shoe sales greater than 85% are Jordan’s
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY FORMULATION: STRATEGY AS POSITION
Strategy Formulation:
Business Level Strategic
Positioning
Scope of Advantage: Broad
• Diverse Demographic:
•People of all ages, race and sex wear Nike shoes and apparel for
a wide variety of uses.
• Wide Geographic:
•Nike has a presence on every continent and provides its products
to every country in the world, touching a wide base of different
cultures.
• Variety of Usage:
•Nike makes all sorts of shoes that serve a variety of purposes
such as shoes for: Runners, Soccer, Skateboarding, Leisure,
Formal, etc. There is a shoe for everybody.
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY FORMULATION: STRATEGY AS POSITION
Strengths & Weaknesses: Business Level
Strategy
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY FORMULATION: STRATEGY AS POSITION
S T R E N G T H S
• Globally positioning
themselves all over the
World makes it fast and
easy to produce and deliver
products.
W E A K N E S S E S
High prices make switching
costs lower for some
consumers; potentially
switch to lower cost
rivals.
CHECKPOINT 2: PRESENTATION OUTLINE
STATEGY FORMULATION
SOG’S: Vision, Mission, Purpose, Goals, and “Mantra”
STRATEGY: Business-Level Strategic Positioning
STRATEGY IMPLEMENTATION
SKILLS: VRIO Framework/Core Competencies
STYLE: Organizational Culture Analysis
STRUCTURE: Organizational Structure Analysis
STRATEGY FIT AND PERFORMANCE
FIT: Modified 5S Analysis
PERFORMANCE: Financial Analysis
 APPENDIX AND REFERENCES AT END
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY IMPLEMENTATION: SKILLS
SOGs,
SGs, VMPGs,
Strategy
(as Plan)
Strategy
(as Position)
Structure
(OS)
Style
(OC)
Systems
(VCA)
Skills
(VRIO/CC)
Staff
(OL, VCA)
Strategy
Formulation
Strategy
Implementation
• Main Idea:
Greater fit amongst
subsystems leads to greater
organizational effectiveness
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY IMPLEMENTATION: SKILLS
Resources Valuable Rare Inimitability Organization
Leadership X
Diversity X
Accessibility X
Product Differentiation X
Customer Service X
Supply Chain X X
Culture X X
Endorsements X X
Corporate Social Responsibility X X
Marketing/Advertising X X X
Research & Development X X X
Brand Awareness X X X X
Innovation X X X X
Efficiency X X X X
Consumer Loyalty X X X X
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
VRIO ANALYSIS
CORE COMPETENCIES METAPHOR
The
Approach:
Core
Competenci
es
• Brand Awareness
• Innovation
• Efficiency
• Consumer Loyalty
The Dunk:
End
Products
• High quality
Footwear/Apparel
• Advanced
technological
products
• Equipment
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY IMPLEMENTATION: SKILLS
The Grip:
Core
Products
• Soles
• Fabrics
VRIO AND CORE COMPETENCIES
S T R E N G T H S
 Nike’s combination of financial
resources, global supply chain, and
decades of established vendor
relationships makes the firm incredibly
efficient.
 Few companies are as globally
recognized as Nike. This is in part due to
their extensive marketing campaigns.
 Nike has an extensive R&D program.
This allows them to stay at the forefront
of their industry, as they consistently
release innovative and technologically
advanced products.
W E A K N E S S E S
 Although Nike has strived to
better their image of CSR, there
are still allegations of abuse and
mistreatment of employees in
some factories
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY IMPLEMENTATION: SKILLS
CHECKPOINT 2: PRESENTATION OUTLINE
STATEGY FORMULATION
SOG’S: Vision, Mission, Purpose, Goals, and “Mantra”
STRATEGY: Business-Level Strategic Positioning
STRATEGY IMPLEMENTATION
SKILLS: VRIO Framework/Core Competencies
STYLE: Organizational Culture Analysis
STRUCTURE: Organizational Structure Analysis
STRATEGY FIT AND PERFORMANCE
FIT: Modified 5S Analysis
PERFORMANCE: Financial Analysis
 APPENDIX AND REFERENCES AT END
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY IMPLEMENTATION: STYLE
SOGs,
SGs, VMPGs,
Strategy
(as Plan)
Strategy
(as Position)
Structure
(OS)
Style
(OC)
Systems
(VCA)
Skills
(VRIO/CC)
Staff
(OL, VCA)
Strategy
Formulation
Strategy
Implementation
• Main Idea:
Greater fit amongst
subsystems leads to greater
organizational effectiveness
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL
CULTURE
ANALYSIS
Cohesive
Strong
Non-cohesive
Weak
Focus on “Production”
Impersonal
Focus on “People”
Humanistic
Bureaucratic
Stability
Adaptive
Change
Risk-averse
Security
Focus on “Effort” (or not)
Enjoy the Process
Support Orientation
Change Orientation
Strength Orientation
5
4
5
4
5
4
5
4
5
4
1
2
1
1
2
1
1
2
2
3
1
3
3
3
3 2
STRATEGY IMPLEMENTATION: STYLE
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL CULTURE:
STRENGTH ORIENTATION: 4
• Cult-like culture
• Nike’s tribal identity: “We have the best-kept secrets”
• Employees are said to quote the 11 Maxims of Nike
– Similar to the Ten Commandments
• Nike’s story and history is embedded into employees
• Quote from one of Nike’s GMs:
– “It’s about making sure that every person in the system adopts a different
world view, sense of purpose and approach to their job.”
1 2 3 4 5
Non-Cohesive
Weak
Cohesive
Strong
STRATEGY IMPLEMENTATION: STYLE
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL CULTURE:
CHANGE ORIENTATION: 3.5
1 542 3
Bureaucratic
Stability
Adaptive
Change
•“To fulfill our potential we know we need to operate in completely new ways, making
sustainability integral to our innovation and performance.” (Mark Parker, Nike President &
CEO)
•After trouble regarding illegal manufacturing practices, Nike became the 1st company in the
industry to voluntarily disclose names of all contract factories producing Nike products.
•Nike launched Making, which is an app that helps designers and product creators make
informed decisions about the environmental impacts of materials they choose.
•33,000 employees worldwide, yet only 14 (board of directors) make the important decisions
regarding the company.
•Every year Nike requires all employees to read and verify they read the code of ethics, “Inside
the Lines”
STRATEGY IMPLEMENTATION: STYLE
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL CULTURE:
SUPPORT ORIENTATION: 2.5
1 2 3 4 5
Focus on
“People”
Humanistic
Focus on
“Production”
Impersonal
•During the 1990s and early 2000s, people accused Nike of sweatshop labor: This proved to be an impersonal process stated
by then Nike director, Todd McKean, “Hey, we don't own the factories. We don't control what goes on there.
•
•Four core principles for Nike management team:
- Lead - Coach - Drive - Insprire
•"Figure out where you want your career to go, and when you see something that would help you get there, ask us for it.” (Nelson Farris,
Nike’s head of corporate education)
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY IMPLEMENTATION: STYLE
ORGANIZATIONAL CULTURE ANALYSIS
S T R E N G T H S
 Strong cult-like culture
 Focus on helping
employees grow
 Industry leading results
W E A K N E S S E S
 Bureaucratic decision-
making
 High R&D costs from risk
seeking
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY IMPLEMENTATION: SKILLS
CHECKPOINT 2: PRESENTATION OUTLINE
STATEGY FORMULATION
SOG’S: Vision, Mission, Purpose, Goals, and “Mantra”
STRATEGY: Business-Level Strategic Positioning
STRATEGY IMPLEMENTATION
SKILLS: VRIO Framework/Core Competencies
STYLE: Organizational Culture Analysis
STRUCTURE: Organizational Structure Analysis
STRATEGY FIT AND PERFORMANCE
FIT: Modified 5S Analysis
PERFORMANCE: Financial Analysis
 APPENDIX AND REFERENCES AT END
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY IMPLEMENTATION: STRUCTURE
SOGs,
SGs, VMPGs,
Strategy
(as Plan)
Strategy
(as Position)
Structure
(OS)
Style
(OC)
Systems
(VCA)
Skills
(VRIO/CC)
Staff
(OL, VCA)
Strategy
Formulation
Strategy
Implementation
• Main Idea:
Greater fit amongst
subsystems leads to greater
organizational effectiveness
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL STRUCTURE ANALYSIS
HIERARCHY OF AUTHORITY DIMENSION
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIC
STRUCTURE
Flat, horizontal
hierarchy.
HIERARCHY OF
AUTHORITY
The extent to which there
are many (or few) levels
in the organization’s
hierarchy.
1 2 3 4 5 6 7 8 9 10
MECHANISTIC
STRUCTURE
Tall, vertical
hierarchy.
• PHILLIP H. KNIGHT (CHAIRMAN OF THE BOARD OF DIRECTORS)
• MARK PARKER (PRESIDENT AND CEO, NIKE, INC.)
• TREVOR EDWARDS (PRESIDENT, NIKE BRAND)
• DAVID AYRE (EVP, GLOBAL HUMAN RESOURCES)
• DON BLAIR (EVP AND CFO)
• JEANNE P. JACKSON (PRESIDENT, PRODUCT & MERCHANDISING)
• HILARY KRANE (EVP, CHIEF ADMINISTRATIVE OFFICER)
• JOHN SLUSHER (EVP, GLOBAL SPORTS MARKETING)
• ERIC SPRUNK (CHIEF OPERATING OFFICER)
• CORPORATE GOVERNANCE
• BOARD OF DIRECTORS
STRATEGY IMPLEMENTATION: STRUCTURE
ORGANIZATIONAL STRUCTURE ANALYSIS
FORMALIZATION DIMENSION
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIC
STRUCTURE
Few (formal) written
rules and
regulations; more
informal approach.
FORMALIZATION
The extent to which
rules exist in written
form and cover a wide
range of
contingencies.
1 2 3 4 5 6 7 8 9 10
MECHANISTIC
STRUCTURE
Lots of (formal)
written rules and
regulations; “by the
book” approach.
• Nike’s subsidiaries reap minor independence within definitively set
boundaries.
• Projects that exceed limits placed by regional headquarters or global
headquarters do need approval of the region
• Nike’s contracted manufactures are required to comply with their “code of
conduct”
• Environmental and sustainability requirements – suppliers
• The 11 Nike Maxims that all employees follow
STRATEGY IMPLEMENTATION: STRUCTURE
ORGANIZATIONAL STRUCTURE ANALYSIS
SPECIALIZATION DIMENSION
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIC
STRUCTURE
Employees perform a
wide range of tasks in
their job; fluid roles;
overlapping tasks.
SPECIALIZATION
The extent to which
tasks are subdivided
into separate jobs.
1 2 3 4 5 6 7 8 9 10
MECHANISTIC
STRUCTURE
Each employee
performs only a narrow
range of tasks; rigid
roles; task are
separated with little/no
overlap.
• Nike uses a functional structure to divide up activities and decentralizes
control within the design process to individual teams
• Nike’s specialization within the company has lead to departmentalization
(footwear, apparel, equipment, marketing/sales)
• Nike has succeeded by remaining flexible in a volatile market by using
subcontracting relationships overseas in low labor-cost countries
STRATEGY IMPLEMENTATION: STRUCTURE
ORGANIZATIONAL STRUCTURE ANALYSIS
OVERALL STRUCTURE ANALYSIS
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
FORMALIZATION
8
CENTRALIZATION
5
STANDARDIZATION
5
SPECIALIZATION
8
HIERARCHY OF AUTHORITY
3
OVERALL STRUCTURAL ANALYSIS
5.8
STRATEGY IMPLEMENTATION: STRUCTURE
ORGANIZATIONAL STRUCTURE ANALYSIS
STRENGTHS AND WEAKNESSES
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRENGTHS
• Standardization: Nike gives its employees flexibility (with specific
guidelines) to continuously innovate
WEAKNESSES
• Specialization: Most of the income comes from footwear segment – may
need to emphasize moreszk on other segments
STRATEGY IMPLEMENTATION: STRUCTURE
CHECKPOINT 2: PRESENTATION OUTLINE
STATEGY FORMULATION
SOG’S: Vision, Mission, Purpose, Goals, and “Mantra”
STRATEGY: Business-Level Strategic Positioning
STRATEGY IMPLEMENTATION
SKILLS: VRIO Framework/Core Competencies
STYLE: Organizational Culture Analysis
STRUCTURE: Organizational Structure Analysis
STRATEGY FIT AND PERFORMANCE
FIT: Modified 5S Analysis
PERFORMANCE: Financial Analysis
 APPENDIX AND REFERENCES AT END
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL FIT & PERFORMANCE
SOGs,
SGs, VMPGs,
Strategy
(as Plan)
Strategy
(as Position)
Structure
(OS)
Style
(OC)
Systems
(VCA)
Skills
(VRIO/CC)
Staff
(OL, VCA)
Strategy
Formulation
Strategy
Implementation
• Main Idea:
Greater fit amongst
subsystems leads to greater
organizational effectiveness
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL FIT & PERFORMANCE
MODIFIED 5S ANALYSIS
Superordinat
e Goals
Position Structure Style Skills
Superordinate
Goals
Position
Structure
Style
Skills
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL FIT & PERFORMANCE
MODIFIED 5S ANALYSIS
Best Fits
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
SOG’s & Position
Skills & Position
 Both “best fits” relate to Nike’s extremely
strong positioning
 Reaching every athlete everywhere
made possible through broad
differentiation
 “PUPPY” achieved through effectively
communicated SOGs, top-down
 Excellent core and end products
teamed with top-notch distribution &
manufacturing system = SOGs
satisfied
ORGANIZATIONAL FIT & PERFORMANCE
MODIFIED 5S ANALYSIS
Worst Fits
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
Structure & SOGs
Style & SOGs
 Both weaknesses point to issues with
compatibility of the flat, mechanized,
sometimes-bureaucratic organization
with the goals of CSR, inspiration, and
advocacy
ORGANIZATIONAL FIT & PERFORMANCE
MODIFIED 5S ANALYSIS
Overall Subsystem Fit Very
Good
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
If 7S Thesis holds, then financial performance should be “very good” as well
CHECKPOINT 2: PRESENTATION OUTLINE
STATEGY FORMULATION
SOG’S: Vision, Mission, Purpose, Goals, and “Mantra”
STRATEGY: Business-Level Strategic Positioning
STRATEGY IMPLEMENTATION
SKILLS: VRIO Framework/Core Competencies
STYLE: Organizational Culture Analysis
STRUCTURE: Organizational Structure Analysis
STRATEGY FIT AND PERFORMANCE
FIT: Modified 5S Analysis
PERFORMANCE: Financial Analysis
 APPENDIX AND REFERENCES AT END
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL FIT & PERFORMANCE
FINANCIAL ANALYSIS
Key takeaway: Nike is turning over inventory at a rate at least 30% greater than key
industry competitors, implying strong sales and effective inventory management
practices.
0
1
2
3
4
5
6
2010 2011 2012 2013 2014
COGS/AverageInventory
Activity: Inventory Turnover
Nike Under Armour Puma Adidas/Reebok
Activity - Inventory Turnover
2010 2011 2012 2013 2014
Nike 4.64 4.77 4.5 4.21 4.16
Under
Armour
2.93 2.82 2.97 3.03 3.13
Puma 3.45 3.1 3.11 2.98 2.9
Adidas/
Reebok
3.49 3.04 3.13 2.87 2.95
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL FIT & PERFORMANCE
FINANCIAL ANALYSIS
0
5
10
15
20
25
30
2010 2011 2012 2013 2014
NIasa%ofEquity
Profitability: Return on Equity (ROE)
Nike Under Armour Puma Adidas/Reebok
Key takeaway: Nike has set the bar for the Textile and Apparel industry, achieving ROE
greater than 20% every year with consistent and stable growth. Nike’s ROE indicates it
is effectively using shareholder funds to generate profits.
Profitability - ROE (%)
2010 2011 2012 2013 2014
Nike 20.67 21.77 21.92 23.08 24.5
Under
Armour
15.27 17.1 17.67 17.36 17.31
Puma 15.4 15.38 4.38 0.34 4.11
Adidas/
Reebok
13.52 13.5 9.87 14.58 8.82
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL FIT & PERFORMANCE
FINANCIAL ANALYSIS – SUMMARY
Overall Financial Performance =
Excellent
At or near industry leader in almost all
financial ratio analyses
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL FIT & PERFORMANCE
S T R E N G T H S
SOG & Position fit
Skills & Position fit
ROE
Inventory Turnover
W E A K N E S S E S
Skills & Style
Structure & SOG
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIZATIONAL FIT & PERFORMANCE
MODIFIED 5S & FINANCIAL ANALYSIS SUMMARY
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
Modified 5S Analysis:
Over fit = Very Good
Financial Analysis:
Financial Performance
= Excellent
7S Framework holds
CHECKPOINT 2: PRESENTATION OUTLINE
STATEGY FORMULATION
SOG’S: Vision, Mission, Purpose, Goals, and “Mantra”
STRATEGY: Business-Level Strategic Positioning
STRATEGY IMPLEMENTATION
SKILLS: VRIO Framework/Core Competencies
STYLE: Organizational Culture Analysis
STRUCTURE: Organizational Structure Analysis
STRATEGY FIT AND PERFORMANCE
FIT: Modified 5S Analysis
PERFORMANCE: Financial Analysis
 APPENDIX AND REFERENCES AT END
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
APPENDIX
Complete Organizational Culture Analysis
Complete Organizational Structure Analysis
Complete Financial Analysis
References
ORGANIZATIONAL CULTURE:
OUTCOME ORIENTATION: 5
• “Because we are Nike, we have a very powerful and very high profile brand.
Along with those come extremely high expectations, as well as very high
demand with a very low timeframe” (Shawn Browning, Nike Facility Manager).
• Quote from Professional Retailstore Maintenance Association
– “Working with Nike, Inc.’s Facilities maintenance department to changing a tire on a car going 65
miles per hour down the road” (Former Supplier of Nike).
• Accelerated innovation to maintain sustainability
1 2 3 4 5
Focus on “Performance”
Pressurized/Get Results
Focus on “Effort” (or
not) Enjoy the
Process
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY IMPLEMENTATION: SKILLS
ORGANIZATIONAL CULTURE:
RISK ORIENTATION: 5
1 52 3 4
Nike’s culture stresses risk, and more importantly, innovation. Using a highly
differentiated mindset, Nike aims to be the first company to expand its products
and is unafraid of risks.
Risk-seeking
Innovative
Risk-averse
Security
•Expanded to Canada in 1972 (Giving Nike their global recognition), now located in +24
countries
•According to Fast Company, leading business media brand, Nike was the #1 most innovative
company of 2013
• “My fear is being this big, slow, constipated, bureaucratic company that’s happy with its
success.” (Mark Parker, Nike President & CEO)
•Example of innovation: Flyknit Racers, which are lightest running shoe at 5.6 ounces
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
STRATEGY IMPLEMENTATION: SKILLS
ORGANIZATIONAL STRUCTURE ANALYSIS
STANDARDIZATION DIMENSION
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIC
STRUCTURE
People are free to create
and introduce new ideas
which means their
organizations are less
likely to routinely do
things the same way after
time.
STANDARDIZATION
The extent to which
things are done the
same way, time after
time.
1 2 3 4 5 6 7 8 9 10
MECHANISTIC
STRUCTURE
Organization
consistently and
routinely does things
the same way, time
after time.
• “Nike can respond to changes in sports shoe fashion very quickly. Using its
global computer system, it can, literally overnight, change the instructions it
gives to each of its suppliers so that, within a few weeks, its foreign
manufacturers are producing new kinds of shoes.” – Hill, Jones
• The Nike Swoosh is used as a pattern standardization tool among all levels
of promotional/advertising functions
• Nike divides product lines into specific customer categories – specific,
individual customer groups
STRATEGY IMPLEMENTATION: STRUCTURE
ORGANIZATIONAL STRUCTURE ANALYSIS
CENTRALIZATION DIMENSION
STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
ORGANIC
STRUCTURE
Decision making is
delegated to
empowered individuals
at lower levels in the
organization.
CENTRALIZATION
The extent to which
decisions are made at
or near the top of the
organization’s
hierarchy.
1 2 3 4 5 6 7 8 9 10
MECHANISTIC
STRUCTURE
Decisions are made
at or near the top of
the organization.
• Global headquarters is at the top of the hierarchical decision-making matrix
and also manages Nike’s regional operations/all major markets
• Regional headquarters adds an additional layer to make the structure more
effective/efficient by reducing complexity
• Regional headquarters allows for leverage in financial/management
operations and also enhances supply chain management
STRATEGY IMPLEMENTATION: STRUCTURE
ORGANIZATIONAL FIT & PERFORMANCE
FINANCIAL ANALYSIS
SG&A expenses cover everything from direct selling expenditures to salaries of non-sales personnel, rent, etc.
When normalized against revenue and compared to other industry firms, SG&A expenses can give insight into
whether management is spending efficiently or wasting valuable cash flows.
Key takeaway: Over the past five years, Nike has consistently spent a lower percentage of its revenues on
SG&A expenses, suggesting efficient sales and effective monetary controls in comparison to industry firms.
0
5
10
15
20
25
30
35
40
45
50
2010 2011 2012 2013 2014
%ofRevenue
Selling, General, & Administrative Expenses (% of
Revenue)
Nike Under Armour Puma Adidas/Reebok
Selling, General, & Administrative Expenses (% of
Revenue)
2010 2011 2012 2013 2014
Nike 34.45 33.14 30.34 30.80 31.53
Under
Armour
39.30 37.45 36.55 37.27 37.55
Puma 38.02 37.65 42.70 42.97 40.82
Adidas/
Reebok
41.23 40.54 42.36 41.87 42.57
ORGANIZATIONAL FIT & PERFORMANCE
FINANCIAL ANALYSIS
Liquidity ratios, such as the Quick and Current ratio, provide a look into a firm’s ability to pay off its short-term debt obligations.
The higher the liquidity ratio, the larger the margin of safety from insolvency.
Key takeaway: Quick Ratio (QR) was used to eliminate significant inventory differences, as Nike carries noticeably less of its
current assets in inventory (25-28%) than other key industry competitors (34-41%). Nike has remained at or near the top of its
industry in terms of QR, suggesting strong management of short-term assets and sufficient protection against bankruptcy in the
short term.
0.00
0.50
1.00
1.50
2.00
2.50
2010 2011 2012 2013 2014
QuickAssets/CurrentLiabilities
Liquidity: Quick Ratio
Nike Under Armour Puma Adidas/Reebok
Liquidity Ratio - Quick Ratio
2010 2011 2012 2013 2014
Nike 2.32 1.94 1.82 2.31 1.71
Under
Armour
2.00 1.64 2.02 1.29 2.05
Puma 1.19 1.22 1.18 1.23 1.15
Adidas/
Reebok
0.83 0.79 0.87 0.77 0.92
ORGANIZATIONAL FIT & PERFORMANCE
FINANCIAL ANALYSIS
Leverage ratios provide a measure of how indebted the firm is. The Debt/Equity (D/E) ratio in particular depicts how
aggressive firm’s are with financing its activities with debt, versus equity. Aggressive debt financing can amplify
shareholder returns, but can also contribute to volatile earnings.
Key takeaway: Nike’s D/E ratio is similar to other key industry competitors, and indicates Nike is no more/less
aggressive with debt financing than most industry competitors (exception: Adidas). The graph does depict Nike, and the
industry, becoming more aggressive with debt financing over time.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2010 2011 2012 2013 2014
TotalDebt/TotalEquity
Leverage: Debt/Equity Ratio
Nike Under Armour Puma Adidas/Reebok
Leverage - Debt-to-Equity Ratio (total debt/total equity as
a %)
2010 2011 2012 2013 2014
Nike 47.84% 52.37% 48.97% 57.62% 71.78%
Under
Armour
35.81% 44.50% 41.62% 49.76% 55.19%
Puma 70.71% 60.87% 58.99% 55.24% 59.02%
Adidas
/Reebo
k
129.83% 113.54% 119.96% 111.48% 120.91%
ORGANIZATIONAL FIT & PERFORMANCE
FINANCIAL ANALYSIS
Profitability ratios such as ROE and ROA provide a metric to analyze a firm’s ability to generate earnings relative
to various balance sheet accounts. ROA gives an idea of how efficient management is at using assets to
generate income, with a higher ROA implying more effective use of assets.
Key takeaway: While Under Armour is setting the industry standard, Nike is right behind, exhibiting strong and
consistent returns on assets compared to industry firms.
0
2
4
6
8
10
12
14
16
18
20
2010 2011 2012 2013 2014
NIasa%ofAssets
Profitability: Return on Assets (ROA)
Nike Under Armour Puma Adidas/Reebok
Profitability - ROA (%)
2010 2011 2012 2013 2014
Nike 13.78 14.5 14.55 15.04 14.89
Under
Armour
15.27 17.1 17.67 17.36 17.31
Puma 9.23 9.3 2.75 0.22 2.64
Adidas
/Reebo
k
5.82 6.1 4.56 6.77 4.08
REFERENCES
"1.3 About Nike Inc - NIKE, Inc." 1.3 About Nike Inc - NIKE, Inc. N.p., n.d. Web. 4 Apr. 2015.
Barbara, Brenner. Inside the NIKE Matrix * (n.d.): n. pag. Jörn Ambos and Bodo B. Schlegelmilch, The New Role of Regional Management , 2010, Hampshire: Palgrave Macmillan,
2010. Web. 2015.
Brown, Melanie. "“It’s Not About the Shoes”: How Nike’s Advertising Crosses Borders and Transcends Nationality." Melanie Brown, 19 June 2011. Web. 14 Apr. 2015.
Chiles, Todd. "Management 4970 - Strategic Management." Columbia, January 2015. 11. 05 April 2015.
Farfan, Barbara. "Company Mission Statements." About Money. N.p., n.d. Web. 3 Apr. 2015.
Hill, Charles, and Gareth Jones. Strategic Management: An Integrated Approach. N.p.: Cengage Learning, n.d. Cengage Learning, 27 Oct. 2007. Web. 14 Apr. 2015.
Jackson, Lisa. "How Nike Drives Innovation & Change." Corporate Culture Pros. N.p., 03 June 2013. Web. 15 Apr. 2015.
Jay, Mary Lou. "Nike, Inc.: High Profile Brand, High Expectations." January 2015. ServiceChannel. 14 April 2015. <http://corp.servicechannel.com/wp-
content/uploads/2014/07/PRSM-JanFeb2015-Nike-High-Profile-Brand-High-Expectations-1.pdf>.
Kollegian, Les. Nike's 11 Maxims. 22 June 2010. 14 April 2015. <http://www.jacobtyler.com/nikes-11-maxims/>.
Loth, RIchard. Profitability Indicator Ratios. n.d. 12 April 2015. <http://www.investopedia.com/university/ratios/profitability-indicator/>.
Mergent Online. n.d. 9 April 2015. <http://www.mergentonline.com/login.php>.
“Nike. Corporate Social Responsibility.” Workers and Factories. Overview - NIKE, Inc. N.p., n.d. Web. 10 Apr. 2015. http://www.nikebiz.com/crreport/content/workers-and-
factories/3-1-0-overview.php?cat=overview
Nike Inc FInancial Statements. n.d. 09 April 2015. <http://financials.morningstar.com/balance-sheet/bs.html?t=NKE>
"Nike Makers." Nike Makers. N.p., n.d. Web. 15 Apr. 2015.
Nisen, Max. "At Nike, Workers Quote The Company's Maxims Like The Ten Commandments." Business Insider (2013).
"Nike Sustainability Timeline." Nike Sustainability Timeline. N.p., n.d. Web. 15 Apr. 2015.
Pradhan, Phoebe. "Nike Strives to Overcome Sweatshop Abuse - The Borgen Project." The Borgen Project. N.p., 15 Feb. 2014. Web. 10 Apr. 2015. http://borgenproject.org/nike-
strives-to-overcome-sweatshop-abuse/
Riper, Tom V. "Nike Risks Millions Going All In With McIlroy." Forbes. Forbes Magazine, 15 Jan. 2013. Web. 7 Apr. 2015.
http://www.forbes.com/sites/tomvanriper/2013/01/15/nike-risks-millions-going-all-in-with-mcilroy/
"The Secret To Brand Loyalty We Can All Learn From Nike." Social Media Agency Social Control. N.p., 07 Jan. 2015. Web. 6 Apr. 2015. http://socialcontrol.com/the-secret-to-brand-
loyalty-we-can-all-learn-from-nike/
Vogel, Lorrie. "Nike's Gameplan for Growth that's Good for All." 11 May 2012. Management Innovation eXchange. 14 April 2015.
<http://www.managementexchange.com/story/nike%E2%80%99s-gameplan-growth-that%E2%80%99s-good-all>.
Wharton Research Data Services. n.d. Wharton University of Pennsylvania. online database. 8 April 2015. <https://wrds-web.wharton.upenn.edu/wrds/ds/finstate/indexqtr.cfm>.
"Working at NIKE." Glassdoor. N.p., n.d. Web. 7 Apr. 2015. http://www.glassdoor.com/Overview/Working-at-NIKE-EI_IE1699.11,15.htm

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Nike Checkpoint 2

  • 1. B O A M E N T, C O L I N B E S T, B R E N D A N C O U G H L I N , D A R R I E N H O R N , C H A S E F R E R K I N G , D A N I E L J O N E S , D Y L A N M O R G R E T, A A R O N P L AT T S NIKE INC. CHECKPOINT 2: STRATEGY FORMULATION, IMPLEMENTATION, FIT & PERFORMANCE
  • 2. STRATEGY FORMULATION & IMPLEMENTATION: 7S FRAMEWORK SOGs, SGs, VMPGs, Strategy (as Plan) Strategy (as Position) Structure (OS) Style (OC) Systems (VCA) Skills (VRIO/CC) Staff (OL, VCA) Strategy Formulation Strategy Implementation • Main Idea: Greater fit amongst subsystems leads to greater organizational effectiveness
  • 3. CHECKPOINT 2: PRESENTATION OUTLINE STATEGY FORMULATION SOG’S: Vision, Mission, Purpose, Goals, and “Mantra” STRATEGY: Business-Level Strategic Positioning STRATEGY IMPLEMENTATION SKILLS: VRIO Framework/Core Competencies STYLE: Organizational Culture Analysis STRUCTURE: Organizational Structure Analysis STRATEGY FIT AND PERFORMANCE FIT: Modified 5S Analysis PERFORMANCE: Financial Analysis  APPENDIX AND REFERENCES AT END STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 4. STRATEGY FORMULATION: SUPERORDINATE GOALS SOGs, SGs, VMPGs, Strategy (as Plan) Strategy (as Position) Structure (OS) Style (OC) Systems (VCA) Skills (VRIO/CC) Staff (OL, VCA) Strategy Formulation Strategy Implementation • Main Idea: Greater fit amongst subsystems leads to greater organizational effectiveness
  • 5. STRATEGY FORMULATION: SUPERORDINATE GOALS Mission Vision Purpos e Goals Mantra STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY FORMULATION: SUPERORDINATE GOALS
  • 6. Mission: “To bring inspiration and innovation to every athlete in the world.” Mission Vision Purpose Goals Mantra STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY FORMULATION: SUPERORDINATE GOALS
  • 7. Vision: “If you have a body, you are an athlete.” Design a shoe for everyone  Using high quality materials  Made ethically (wages and work conditions)  Safe for the Planet Purpose: “Nike is dedicated to serving athletes and helping them reach their full potential” ‘Continually innovate to remain sustainable’ Create value for shareholders Mission Vision Purpose Goals Mantra STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY FORMULATION: SUPERORDINATE GOALS
  • 8. Goals: We Strive for Innovation that:  Serves the athlete  Grows the company  Delivers inspiration  Minimize Waste (Recycling ‘Reuse a Shoe’ program  Promote Social Responsibility  Focus on innovation, collaboration, transparency and advocacy Mission Vision Purpos e Goals Mantra STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY FORMULATION: SUPERORDINATE GOALS
  • 9. • Tagline: “Just Do It!” • Mantra: “Authentic, athletic performance” Mission Vision Purpos e Goals Mantra STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY FORMULATION: SUPERORDINATE GOALS
  • 10. STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE S T R E N G T H S  Great customer loyalty  Sponsorship Pride W E A K N E S S E S  Too geared towards the athlete and less towards their average consumer. STRATEGY FORMULATION: SUPERORDINATE GOALS
  • 11. CHECKPOINT 2: PRESENTATION OUTLINE STATEGY FORMULATION SOG’S: Vision, Mission, Purpose, Goals, and “Mantra” STRATEGY: Business-Level Strategic Positioning STRATEGY IMPLEMENTATION SKILLS: VRIO Framework/Core Competencies STYLE: Organizational Culture Analysis STRUCTURE: Organizational Structure Analysis STRATEGY FIT AND PERFORMANCE FIT: Modified 5S Analysis PERFORMANCE: Financial Analysis  APPENDIX AND REFERENCES AT END STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 12. STRATEGY FORMULATION: STRATEGY AS POSITION SOGs, SGs, VMPGs, Strategy (as Plan) Strategy (as Position) Structure (OS) Style (OC) Systems (VCA) Skills (VRIO/CC) Staff (OL, VCA) Strategy Formulation Strategy Implementation • Main Idea: Greater fit amongst subsystems leads to greater organizational effectiveness
  • 13. Broad Differentiation Broad Low Cost Focused Differentiation Focused Low Cost BroadNarrow Differentiation Low Cost Scopeofadvantage Type of Advantage Strategy: Porter’s Strategy Typology STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY FORMULATION: STRATEGY AS POSITION
  • 14. Type of Advantage: Differentiation •Willingness to pay a premium price: •On average Nike’s customers pay over twice the world average price for a running shoe •Over 50% of the shoe sales greater than 85% are Jordan’s STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY FORMULATION: STRATEGY AS POSITION
  • 15. Strategy Formulation: Business Level Strategic Positioning Scope of Advantage: Broad • Diverse Demographic: •People of all ages, race and sex wear Nike shoes and apparel for a wide variety of uses. • Wide Geographic: •Nike has a presence on every continent and provides its products to every country in the world, touching a wide base of different cultures. • Variety of Usage: •Nike makes all sorts of shoes that serve a variety of purposes such as shoes for: Runners, Soccer, Skateboarding, Leisure, Formal, etc. There is a shoe for everybody. STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY FORMULATION: STRATEGY AS POSITION
  • 16. Strengths & Weaknesses: Business Level Strategy STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY FORMULATION: STRATEGY AS POSITION S T R E N G T H S • Globally positioning themselves all over the World makes it fast and easy to produce and deliver products. W E A K N E S S E S High prices make switching costs lower for some consumers; potentially switch to lower cost rivals.
  • 17. CHECKPOINT 2: PRESENTATION OUTLINE STATEGY FORMULATION SOG’S: Vision, Mission, Purpose, Goals, and “Mantra” STRATEGY: Business-Level Strategic Positioning STRATEGY IMPLEMENTATION SKILLS: VRIO Framework/Core Competencies STYLE: Organizational Culture Analysis STRUCTURE: Organizational Structure Analysis STRATEGY FIT AND PERFORMANCE FIT: Modified 5S Analysis PERFORMANCE: Financial Analysis  APPENDIX AND REFERENCES AT END STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 18. STRATEGY IMPLEMENTATION: SKILLS SOGs, SGs, VMPGs, Strategy (as Plan) Strategy (as Position) Structure (OS) Style (OC) Systems (VCA) Skills (VRIO/CC) Staff (OL, VCA) Strategy Formulation Strategy Implementation • Main Idea: Greater fit amongst subsystems leads to greater organizational effectiveness STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 19. STRATEGY IMPLEMENTATION: SKILLS Resources Valuable Rare Inimitability Organization Leadership X Diversity X Accessibility X Product Differentiation X Customer Service X Supply Chain X X Culture X X Endorsements X X Corporate Social Responsibility X X Marketing/Advertising X X X Research & Development X X X Brand Awareness X X X X Innovation X X X X Efficiency X X X X Consumer Loyalty X X X X STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE VRIO ANALYSIS
  • 20. CORE COMPETENCIES METAPHOR The Approach: Core Competenci es • Brand Awareness • Innovation • Efficiency • Consumer Loyalty The Dunk: End Products • High quality Footwear/Apparel • Advanced technological products • Equipment STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY IMPLEMENTATION: SKILLS The Grip: Core Products • Soles • Fabrics
  • 21. VRIO AND CORE COMPETENCIES S T R E N G T H S  Nike’s combination of financial resources, global supply chain, and decades of established vendor relationships makes the firm incredibly efficient.  Few companies are as globally recognized as Nike. This is in part due to their extensive marketing campaigns.  Nike has an extensive R&D program. This allows them to stay at the forefront of their industry, as they consistently release innovative and technologically advanced products. W E A K N E S S E S  Although Nike has strived to better their image of CSR, there are still allegations of abuse and mistreatment of employees in some factories STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY IMPLEMENTATION: SKILLS
  • 22. CHECKPOINT 2: PRESENTATION OUTLINE STATEGY FORMULATION SOG’S: Vision, Mission, Purpose, Goals, and “Mantra” STRATEGY: Business-Level Strategic Positioning STRATEGY IMPLEMENTATION SKILLS: VRIO Framework/Core Competencies STYLE: Organizational Culture Analysis STRUCTURE: Organizational Structure Analysis STRATEGY FIT AND PERFORMANCE FIT: Modified 5S Analysis PERFORMANCE: Financial Analysis  APPENDIX AND REFERENCES AT END STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 23. STRATEGY IMPLEMENTATION: STYLE SOGs, SGs, VMPGs, Strategy (as Plan) Strategy (as Position) Structure (OS) Style (OC) Systems (VCA) Skills (VRIO/CC) Staff (OL, VCA) Strategy Formulation Strategy Implementation • Main Idea: Greater fit amongst subsystems leads to greater organizational effectiveness STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 24. ORGANIZATIONAL CULTURE ANALYSIS Cohesive Strong Non-cohesive Weak Focus on “Production” Impersonal Focus on “People” Humanistic Bureaucratic Stability Adaptive Change Risk-averse Security Focus on “Effort” (or not) Enjoy the Process Support Orientation Change Orientation Strength Orientation 5 4 5 4 5 4 5 4 5 4 1 2 1 1 2 1 1 2 2 3 1 3 3 3 3 2 STRATEGY IMPLEMENTATION: STYLE STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 25. ORGANIZATIONAL CULTURE: STRENGTH ORIENTATION: 4 • Cult-like culture • Nike’s tribal identity: “We have the best-kept secrets” • Employees are said to quote the 11 Maxims of Nike – Similar to the Ten Commandments • Nike’s story and history is embedded into employees • Quote from one of Nike’s GMs: – “It’s about making sure that every person in the system adopts a different world view, sense of purpose and approach to their job.” 1 2 3 4 5 Non-Cohesive Weak Cohesive Strong STRATEGY IMPLEMENTATION: STYLE STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 26. ORGANIZATIONAL CULTURE: CHANGE ORIENTATION: 3.5 1 542 3 Bureaucratic Stability Adaptive Change •“To fulfill our potential we know we need to operate in completely new ways, making sustainability integral to our innovation and performance.” (Mark Parker, Nike President & CEO) •After trouble regarding illegal manufacturing practices, Nike became the 1st company in the industry to voluntarily disclose names of all contract factories producing Nike products. •Nike launched Making, which is an app that helps designers and product creators make informed decisions about the environmental impacts of materials they choose. •33,000 employees worldwide, yet only 14 (board of directors) make the important decisions regarding the company. •Every year Nike requires all employees to read and verify they read the code of ethics, “Inside the Lines” STRATEGY IMPLEMENTATION: STYLE STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 27. ORGANIZATIONAL CULTURE: SUPPORT ORIENTATION: 2.5 1 2 3 4 5 Focus on “People” Humanistic Focus on “Production” Impersonal •During the 1990s and early 2000s, people accused Nike of sweatshop labor: This proved to be an impersonal process stated by then Nike director, Todd McKean, “Hey, we don't own the factories. We don't control what goes on there. • •Four core principles for Nike management team: - Lead - Coach - Drive - Insprire •"Figure out where you want your career to go, and when you see something that would help you get there, ask us for it.” (Nelson Farris, Nike’s head of corporate education) STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY IMPLEMENTATION: STYLE
  • 28. ORGANIZATIONAL CULTURE ANALYSIS S T R E N G T H S  Strong cult-like culture  Focus on helping employees grow  Industry leading results W E A K N E S S E S  Bureaucratic decision- making  High R&D costs from risk seeking STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY IMPLEMENTATION: SKILLS
  • 29. CHECKPOINT 2: PRESENTATION OUTLINE STATEGY FORMULATION SOG’S: Vision, Mission, Purpose, Goals, and “Mantra” STRATEGY: Business-Level Strategic Positioning STRATEGY IMPLEMENTATION SKILLS: VRIO Framework/Core Competencies STYLE: Organizational Culture Analysis STRUCTURE: Organizational Structure Analysis STRATEGY FIT AND PERFORMANCE FIT: Modified 5S Analysis PERFORMANCE: Financial Analysis  APPENDIX AND REFERENCES AT END STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 30. STRATEGY IMPLEMENTATION: STRUCTURE SOGs, SGs, VMPGs, Strategy (as Plan) Strategy (as Position) Structure (OS) Style (OC) Systems (VCA) Skills (VRIO/CC) Staff (OL, VCA) Strategy Formulation Strategy Implementation • Main Idea: Greater fit amongst subsystems leads to greater organizational effectiveness STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 31. ORGANIZATIONAL STRUCTURE ANALYSIS HIERARCHY OF AUTHORITY DIMENSION STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE ORGANIC STRUCTURE Flat, horizontal hierarchy. HIERARCHY OF AUTHORITY The extent to which there are many (or few) levels in the organization’s hierarchy. 1 2 3 4 5 6 7 8 9 10 MECHANISTIC STRUCTURE Tall, vertical hierarchy. • PHILLIP H. KNIGHT (CHAIRMAN OF THE BOARD OF DIRECTORS) • MARK PARKER (PRESIDENT AND CEO, NIKE, INC.) • TREVOR EDWARDS (PRESIDENT, NIKE BRAND) • DAVID AYRE (EVP, GLOBAL HUMAN RESOURCES) • DON BLAIR (EVP AND CFO) • JEANNE P. JACKSON (PRESIDENT, PRODUCT & MERCHANDISING) • HILARY KRANE (EVP, CHIEF ADMINISTRATIVE OFFICER) • JOHN SLUSHER (EVP, GLOBAL SPORTS MARKETING) • ERIC SPRUNK (CHIEF OPERATING OFFICER) • CORPORATE GOVERNANCE • BOARD OF DIRECTORS STRATEGY IMPLEMENTATION: STRUCTURE
  • 32. ORGANIZATIONAL STRUCTURE ANALYSIS FORMALIZATION DIMENSION STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE ORGANIC STRUCTURE Few (formal) written rules and regulations; more informal approach. FORMALIZATION The extent to which rules exist in written form and cover a wide range of contingencies. 1 2 3 4 5 6 7 8 9 10 MECHANISTIC STRUCTURE Lots of (formal) written rules and regulations; “by the book” approach. • Nike’s subsidiaries reap minor independence within definitively set boundaries. • Projects that exceed limits placed by regional headquarters or global headquarters do need approval of the region • Nike’s contracted manufactures are required to comply with their “code of conduct” • Environmental and sustainability requirements – suppliers • The 11 Nike Maxims that all employees follow STRATEGY IMPLEMENTATION: STRUCTURE
  • 33. ORGANIZATIONAL STRUCTURE ANALYSIS SPECIALIZATION DIMENSION STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE ORGANIC STRUCTURE Employees perform a wide range of tasks in their job; fluid roles; overlapping tasks. SPECIALIZATION The extent to which tasks are subdivided into separate jobs. 1 2 3 4 5 6 7 8 9 10 MECHANISTIC STRUCTURE Each employee performs only a narrow range of tasks; rigid roles; task are separated with little/no overlap. • Nike uses a functional structure to divide up activities and decentralizes control within the design process to individual teams • Nike’s specialization within the company has lead to departmentalization (footwear, apparel, equipment, marketing/sales) • Nike has succeeded by remaining flexible in a volatile market by using subcontracting relationships overseas in low labor-cost countries STRATEGY IMPLEMENTATION: STRUCTURE
  • 34. ORGANIZATIONAL STRUCTURE ANALYSIS OVERALL STRUCTURE ANALYSIS STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE FORMALIZATION 8 CENTRALIZATION 5 STANDARDIZATION 5 SPECIALIZATION 8 HIERARCHY OF AUTHORITY 3 OVERALL STRUCTURAL ANALYSIS 5.8 STRATEGY IMPLEMENTATION: STRUCTURE
  • 35. ORGANIZATIONAL STRUCTURE ANALYSIS STRENGTHS AND WEAKNESSES STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRENGTHS • Standardization: Nike gives its employees flexibility (with specific guidelines) to continuously innovate WEAKNESSES • Specialization: Most of the income comes from footwear segment – may need to emphasize moreszk on other segments STRATEGY IMPLEMENTATION: STRUCTURE
  • 36. CHECKPOINT 2: PRESENTATION OUTLINE STATEGY FORMULATION SOG’S: Vision, Mission, Purpose, Goals, and “Mantra” STRATEGY: Business-Level Strategic Positioning STRATEGY IMPLEMENTATION SKILLS: VRIO Framework/Core Competencies STYLE: Organizational Culture Analysis STRUCTURE: Organizational Structure Analysis STRATEGY FIT AND PERFORMANCE FIT: Modified 5S Analysis PERFORMANCE: Financial Analysis  APPENDIX AND REFERENCES AT END STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 37. ORGANIZATIONAL FIT & PERFORMANCE SOGs, SGs, VMPGs, Strategy (as Plan) Strategy (as Position) Structure (OS) Style (OC) Systems (VCA) Skills (VRIO/CC) Staff (OL, VCA) Strategy Formulation Strategy Implementation • Main Idea: Greater fit amongst subsystems leads to greater organizational effectiveness STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 38. ORGANIZATIONAL FIT & PERFORMANCE MODIFIED 5S ANALYSIS Superordinat e Goals Position Structure Style Skills Superordinate Goals Position Structure Style Skills STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 39. ORGANIZATIONAL FIT & PERFORMANCE MODIFIED 5S ANALYSIS Best Fits STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE SOG’s & Position Skills & Position  Both “best fits” relate to Nike’s extremely strong positioning  Reaching every athlete everywhere made possible through broad differentiation  “PUPPY” achieved through effectively communicated SOGs, top-down  Excellent core and end products teamed with top-notch distribution & manufacturing system = SOGs satisfied
  • 40. ORGANIZATIONAL FIT & PERFORMANCE MODIFIED 5S ANALYSIS Worst Fits STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE Structure & SOGs Style & SOGs  Both weaknesses point to issues with compatibility of the flat, mechanized, sometimes-bureaucratic organization with the goals of CSR, inspiration, and advocacy
  • 41. ORGANIZATIONAL FIT & PERFORMANCE MODIFIED 5S ANALYSIS Overall Subsystem Fit Very Good STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE If 7S Thesis holds, then financial performance should be “very good” as well
  • 42. CHECKPOINT 2: PRESENTATION OUTLINE STATEGY FORMULATION SOG’S: Vision, Mission, Purpose, Goals, and “Mantra” STRATEGY: Business-Level Strategic Positioning STRATEGY IMPLEMENTATION SKILLS: VRIO Framework/Core Competencies STYLE: Organizational Culture Analysis STRUCTURE: Organizational Structure Analysis STRATEGY FIT AND PERFORMANCE FIT: Modified 5S Analysis PERFORMANCE: Financial Analysis  APPENDIX AND REFERENCES AT END STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 43. ORGANIZATIONAL FIT & PERFORMANCE FINANCIAL ANALYSIS Key takeaway: Nike is turning over inventory at a rate at least 30% greater than key industry competitors, implying strong sales and effective inventory management practices. 0 1 2 3 4 5 6 2010 2011 2012 2013 2014 COGS/AverageInventory Activity: Inventory Turnover Nike Under Armour Puma Adidas/Reebok Activity - Inventory Turnover 2010 2011 2012 2013 2014 Nike 4.64 4.77 4.5 4.21 4.16 Under Armour 2.93 2.82 2.97 3.03 3.13 Puma 3.45 3.1 3.11 2.98 2.9 Adidas/ Reebok 3.49 3.04 3.13 2.87 2.95 STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 44. ORGANIZATIONAL FIT & PERFORMANCE FINANCIAL ANALYSIS 0 5 10 15 20 25 30 2010 2011 2012 2013 2014 NIasa%ofEquity Profitability: Return on Equity (ROE) Nike Under Armour Puma Adidas/Reebok Key takeaway: Nike has set the bar for the Textile and Apparel industry, achieving ROE greater than 20% every year with consistent and stable growth. Nike’s ROE indicates it is effectively using shareholder funds to generate profits. Profitability - ROE (%) 2010 2011 2012 2013 2014 Nike 20.67 21.77 21.92 23.08 24.5 Under Armour 15.27 17.1 17.67 17.36 17.31 Puma 15.4 15.38 4.38 0.34 4.11 Adidas/ Reebok 13.52 13.5 9.87 14.58 8.82 STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 45. ORGANIZATIONAL FIT & PERFORMANCE FINANCIAL ANALYSIS – SUMMARY Overall Financial Performance = Excellent At or near industry leader in almost all financial ratio analyses STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 46. ORGANIZATIONAL FIT & PERFORMANCE S T R E N G T H S SOG & Position fit Skills & Position fit ROE Inventory Turnover W E A K N E S S E S Skills & Style Structure & SOG STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 47. ORGANIZATIONAL FIT & PERFORMANCE MODIFIED 5S & FINANCIAL ANALYSIS SUMMARY STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE Modified 5S Analysis: Over fit = Very Good Financial Analysis: Financial Performance = Excellent 7S Framework holds
  • 48. CHECKPOINT 2: PRESENTATION OUTLINE STATEGY FORMULATION SOG’S: Vision, Mission, Purpose, Goals, and “Mantra” STRATEGY: Business-Level Strategic Positioning STRATEGY IMPLEMENTATION SKILLS: VRIO Framework/Core Competencies STYLE: Organizational Culture Analysis STRUCTURE: Organizational Structure Analysis STRATEGY FIT AND PERFORMANCE FIT: Modified 5S Analysis PERFORMANCE: Financial Analysis  APPENDIX AND REFERENCES AT END STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE
  • 49. APPENDIX Complete Organizational Culture Analysis Complete Organizational Structure Analysis Complete Financial Analysis References
  • 50. ORGANIZATIONAL CULTURE: OUTCOME ORIENTATION: 5 • “Because we are Nike, we have a very powerful and very high profile brand. Along with those come extremely high expectations, as well as very high demand with a very low timeframe” (Shawn Browning, Nike Facility Manager). • Quote from Professional Retailstore Maintenance Association – “Working with Nike, Inc.’s Facilities maintenance department to changing a tire on a car going 65 miles per hour down the road” (Former Supplier of Nike). • Accelerated innovation to maintain sustainability 1 2 3 4 5 Focus on “Performance” Pressurized/Get Results Focus on “Effort” (or not) Enjoy the Process STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY IMPLEMENTATION: SKILLS
  • 51. ORGANIZATIONAL CULTURE: RISK ORIENTATION: 5 1 52 3 4 Nike’s culture stresses risk, and more importantly, innovation. Using a highly differentiated mindset, Nike aims to be the first company to expand its products and is unafraid of risks. Risk-seeking Innovative Risk-averse Security •Expanded to Canada in 1972 (Giving Nike their global recognition), now located in +24 countries •According to Fast Company, leading business media brand, Nike was the #1 most innovative company of 2013 • “My fear is being this big, slow, constipated, bureaucratic company that’s happy with its success.” (Mark Parker, Nike President & CEO) •Example of innovation: Flyknit Racers, which are lightest running shoe at 5.6 ounces STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE STRATEGY IMPLEMENTATION: SKILLS
  • 52. ORGANIZATIONAL STRUCTURE ANALYSIS STANDARDIZATION DIMENSION STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE ORGANIC STRUCTURE People are free to create and introduce new ideas which means their organizations are less likely to routinely do things the same way after time. STANDARDIZATION The extent to which things are done the same way, time after time. 1 2 3 4 5 6 7 8 9 10 MECHANISTIC STRUCTURE Organization consistently and routinely does things the same way, time after time. • “Nike can respond to changes in sports shoe fashion very quickly. Using its global computer system, it can, literally overnight, change the instructions it gives to each of its suppliers so that, within a few weeks, its foreign manufacturers are producing new kinds of shoes.” – Hill, Jones • The Nike Swoosh is used as a pattern standardization tool among all levels of promotional/advertising functions • Nike divides product lines into specific customer categories – specific, individual customer groups STRATEGY IMPLEMENTATION: STRUCTURE
  • 53. ORGANIZATIONAL STRUCTURE ANALYSIS CENTRALIZATION DIMENSION STRATEGY FORMULATION STRATEGY IMPLEMENTATION FIT AND PERFORMANCE ORGANIC STRUCTURE Decision making is delegated to empowered individuals at lower levels in the organization. CENTRALIZATION The extent to which decisions are made at or near the top of the organization’s hierarchy. 1 2 3 4 5 6 7 8 9 10 MECHANISTIC STRUCTURE Decisions are made at or near the top of the organization. • Global headquarters is at the top of the hierarchical decision-making matrix and also manages Nike’s regional operations/all major markets • Regional headquarters adds an additional layer to make the structure more effective/efficient by reducing complexity • Regional headquarters allows for leverage in financial/management operations and also enhances supply chain management STRATEGY IMPLEMENTATION: STRUCTURE
  • 54. ORGANIZATIONAL FIT & PERFORMANCE FINANCIAL ANALYSIS SG&A expenses cover everything from direct selling expenditures to salaries of non-sales personnel, rent, etc. When normalized against revenue and compared to other industry firms, SG&A expenses can give insight into whether management is spending efficiently or wasting valuable cash flows. Key takeaway: Over the past five years, Nike has consistently spent a lower percentage of its revenues on SG&A expenses, suggesting efficient sales and effective monetary controls in comparison to industry firms. 0 5 10 15 20 25 30 35 40 45 50 2010 2011 2012 2013 2014 %ofRevenue Selling, General, & Administrative Expenses (% of Revenue) Nike Under Armour Puma Adidas/Reebok Selling, General, & Administrative Expenses (% of Revenue) 2010 2011 2012 2013 2014 Nike 34.45 33.14 30.34 30.80 31.53 Under Armour 39.30 37.45 36.55 37.27 37.55 Puma 38.02 37.65 42.70 42.97 40.82 Adidas/ Reebok 41.23 40.54 42.36 41.87 42.57
  • 55. ORGANIZATIONAL FIT & PERFORMANCE FINANCIAL ANALYSIS Liquidity ratios, such as the Quick and Current ratio, provide a look into a firm’s ability to pay off its short-term debt obligations. The higher the liquidity ratio, the larger the margin of safety from insolvency. Key takeaway: Quick Ratio (QR) was used to eliminate significant inventory differences, as Nike carries noticeably less of its current assets in inventory (25-28%) than other key industry competitors (34-41%). Nike has remained at or near the top of its industry in terms of QR, suggesting strong management of short-term assets and sufficient protection against bankruptcy in the short term. 0.00 0.50 1.00 1.50 2.00 2.50 2010 2011 2012 2013 2014 QuickAssets/CurrentLiabilities Liquidity: Quick Ratio Nike Under Armour Puma Adidas/Reebok Liquidity Ratio - Quick Ratio 2010 2011 2012 2013 2014 Nike 2.32 1.94 1.82 2.31 1.71 Under Armour 2.00 1.64 2.02 1.29 2.05 Puma 1.19 1.22 1.18 1.23 1.15 Adidas/ Reebok 0.83 0.79 0.87 0.77 0.92
  • 56. ORGANIZATIONAL FIT & PERFORMANCE FINANCIAL ANALYSIS Leverage ratios provide a measure of how indebted the firm is. The Debt/Equity (D/E) ratio in particular depicts how aggressive firm’s are with financing its activities with debt, versus equity. Aggressive debt financing can amplify shareholder returns, but can also contribute to volatile earnings. Key takeaway: Nike’s D/E ratio is similar to other key industry competitors, and indicates Nike is no more/less aggressive with debt financing than most industry competitors (exception: Adidas). The graph does depict Nike, and the industry, becoming more aggressive with debt financing over time. 0 0.2 0.4 0.6 0.8 1 1.2 1.4 2010 2011 2012 2013 2014 TotalDebt/TotalEquity Leverage: Debt/Equity Ratio Nike Under Armour Puma Adidas/Reebok Leverage - Debt-to-Equity Ratio (total debt/total equity as a %) 2010 2011 2012 2013 2014 Nike 47.84% 52.37% 48.97% 57.62% 71.78% Under Armour 35.81% 44.50% 41.62% 49.76% 55.19% Puma 70.71% 60.87% 58.99% 55.24% 59.02% Adidas /Reebo k 129.83% 113.54% 119.96% 111.48% 120.91%
  • 57. ORGANIZATIONAL FIT & PERFORMANCE FINANCIAL ANALYSIS Profitability ratios such as ROE and ROA provide a metric to analyze a firm’s ability to generate earnings relative to various balance sheet accounts. ROA gives an idea of how efficient management is at using assets to generate income, with a higher ROA implying more effective use of assets. Key takeaway: While Under Armour is setting the industry standard, Nike is right behind, exhibiting strong and consistent returns on assets compared to industry firms. 0 2 4 6 8 10 12 14 16 18 20 2010 2011 2012 2013 2014 NIasa%ofAssets Profitability: Return on Assets (ROA) Nike Under Armour Puma Adidas/Reebok Profitability - ROA (%) 2010 2011 2012 2013 2014 Nike 13.78 14.5 14.55 15.04 14.89 Under Armour 15.27 17.1 17.67 17.36 17.31 Puma 9.23 9.3 2.75 0.22 2.64 Adidas /Reebo k 5.82 6.1 4.56 6.77 4.08
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Notas del editor

  1. It is our nature to innovate. Nike is a company. Nike is a brand. Simplify and go. The consumer decides. Be a sponge. Evolve immediately. Do the right thing. Master the fundamentals. We are on the offense – always. Remember the man. (The late Bill Bowerman, Nike co-founder)"