INTERNATIONAL BUSINESS PLAN AND EXPANSION STRATEGIES OF FOREIGN COMPANY IN INDIA-NIKE

Submitted By VAIBHAV 11llb064

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INTRODUCTION OF NIKE
Nike is a major publicly traded sportswear, footwear and equipment supplier based in the US which was founded in 1962 originally know as Blue Ribbon Sports. Nike is the world leader in the manufacturing of sportswear and gear with more than 47 market shares across the global Nike produces a wide range of sports equipments such as running shoes, sportswear, football, basketball, tennis, golf, etc. Now Nike follows the global fashion trends and is well known and popular in the youth culture and hip hop culture to supply some fashion products. Nike recently teams up with Apple Company to produce the Nike+ products which can monitor a runner's performance through a radio in the shoe that can link to the iPods. Besides that, Nike also becomes the top of three companies which are climate-friendly companies which build better image to customers. Nike's excellence marketing strategies are their energy to achieve their market goals. Nike believes the "pyramid influence" that the preferences of a small percentage of top athletes influence the product and brand choice. So Nike contracted with many athletes' spokesperson, professional teams and college athletic teams to advertise and promote their products to customers. Nike seriously pay attention on the technology producing, design and selling such as e-commerce, high-tech running shoes, Nike+ with Apple, etc. Nike outsourcing their products most of the factories are located in Asia such as China, Indonesia and India.

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History of the company

Bill Bowerman and Phil Knight founded Nike Inc. as Blue Ribbon Sports in 1962. The partners began their relationship at the University of Oregon where Bowerman was Knights track and field coach. While attending Stanford University, Knight wrote a paper about breaking the German dominance of the U.S. athletic shoe industry with low-priced Japanese shoes. In an attempt to realize his theory, Knight visited Japan and engineered an agreement with the Onitsuka Tiger Company, a manufacturer of quality athletic shoes, to be their sole distributor in the United States. In 1962, Knight received the first shipment of 200 pairs of Tiger shoes to his parents garage in Oregon. The shoes were bought by Blue Ribbon Sports (BRS), the name of the partnership between Knight and Bowerman that they formed with only $1,000 in capital. Knight peddled Tigers shoes at local track meets grossing $8,000 of sales in their first year. In 1966, Bowerman, who had previously designed shoes for his university athletes, worked with Tiger to design the Cortez running shoe. The shoe was a worldwide success for the Onitsuka Tiger Company and was sold at the first BRS store. In 1971, BRS, with creditor support, started manufacturing their own line of shoes. Later that year, the first BRS shoe was introduced. The shoe was a soccer shoe that bore the Nike brand name, referring to the Greek Goddess of Victory, and the Swoosh trademark. A student designed the Swoosh trademark for a paltry fee of $35. The Swoosh was meant to symbolize a wing of the Greek Goddess. 1972 marked the breakup of the BRS/Tiger relationship. BRS soon changed its name to Nike, Inc. and debuted itself at the 1972 Olympic trials. In 1973, Steve Prefontaine was the first prominent track star to wear Nike shoes. The late 70s and early 80s also saw John McEnroe, Carl Lewis, and Joan Benoit sporting Nike shoes. Nike popularity grew so much that in 1979 they claimed 50% of the U.S. running market. A year later with 2,700 employees, Nike went public selling 2 million shares on the New York Stock Exchange. The 1980s were marked by the signing of Michael Jordan as a product spokesperson, revenues in excess of $1 billion, the formation of Nike International Ltd., and the "Just Do It" campaign. Nike also expanded its product line to include specialty apparel for a variety of sports. In 1990, Nike surpassed the $2 billion mark in consolidated revenue with 5,300 employees worldwide. In addition, we opened the Nike World Campus in Beaverton, Oregon. In 1991, Nike pushed revenues to $3 billion, up from $2 billion the prior year. This mark would continue to grow throughout the 90s, with revenues in 1999 reaching $8.8 billion. These revenues grew based on improvements in shoe
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technology and successful marketing campaigns. International revenues fueled a great portion of this growth with an 80% increase in 1991 from the prior year. In 1992 international revenues topped $1 billion for the first time and accounted for over one-third of our total revenues. Such growth continued throughout the 1990's as we continued to focus our marketing efforts on major sporting events like the World Cup, and the next generation of celebrity endorsers, such as Tiger Woods, Lance Armstrong, and the players of women's professional basketball (WNBA). At the end of the 90s, Nikes goal, as stated in our company web site, is to become a truly global brand. MAJOR MILESTONES 1970- The Swoosh first appears on a football/soccer cleat called the Nike. 1978- Tennis "bad boy" John McEnroe is signed by Nike to an endorsement contract. 1989- Nike enters the European football market 1994 +2003- Nike wins Advertiser of the Year at the Cannes Advertising Festival. 1996- Nike signs Tiger Woods 1999- Bill Bowerman, co-founder of Nike, dies on Dec. 24 at age 88. 2002- Nike purchases Hurley International 2003- Nike acquires once-bankrupt rival Converse for $305 million 2004- Phil Knight steps down as CEO and President of Nike, but continues as chairman 2005- Nike Signs Tennis Pro Rafael Nadal. 2006- Nike and Apple release the Nike+iPod sports kit 2008- Nike sells its Nike Bauer hockey equipment division & purchases Umbro.

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Nikes business plan

Mission Statement Our mission at Nike is to be a company that surpasses all others in the athletic industry. We will maintain our position by providing quality footwear, apparel and equipment to institutions and individual consumers of all ages and lifestyles. We pledge to make our products easy available worldwide through the use of retail outlets, mail order and our company web site. Nikes management believes that our success lies in the hands of our teammates, customers, shareholders and the communities in which we operate. We vow to keep this in mind with the execution of every decision within our company. Vision Statement At Nike, our vision is to remain the leader in our industry. We will continue to produce the quality products that we have provided in the past. Most importantly, we will continue to meet the ever-changing needs of our customers, through product innovation.

Nikes Global Business Strategy

When first founded in1 9 6 2 under the name of Blue Ribbon Sports, the strategy was to distribute low-cost, high-quality Japanese athletic shoes to American consumers in an attempt to break Germanys domination of the domestic industry. Today Nike offers athletic shoes at every marketable price point to a global market. Nike sustains its leading position through emphasizing quality products, constant innovation, and aggressive marketing. Nike sells its products in more than 180 countries under not only its namesake brand but brands such as Cole Haan, Converse, Hurley International, and Umbro. It uses distribution channels such as company-owned stores and websites or sports retailers, such as Foot Locker. As mentioned earlier, Nike is a truly global company, which means that its success story is transferrable over borders. It divides its sales into four main regions- the US, Europe, Middle East and Africa (EMEA), Asia Pacific, and Central and South America. For 2009 each of these regions accounted respectively for 34.1%, 28.7%, 17.3%, and 6.7% of total revenue.
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Segmentation Strategy:
Nike realizes that in order to be number one they need to offer a wide range of products to be able to develop a culture and fulfill their loyal customers needs. Nikes strategy in terms of segmentation is excellent. Their core product is footwear but they also manufacture apparel and equipment and thus, they spread their influence in other sport-related markets. Nike also has several sub-brands to grasp different consumer groups. Nikes main source of revenue is athletic footwear, which is also its core competency. It accounts for 54% of total revenues. It is designated for running, cross-training competency. It accounts for 54% of total revenues. It is designated for running, cross-training, basketball, soccer and it includes even a casual footwear line. Sales in this segment increased by 14% in 2009 from which a big portion was a result of the increase in sales in the Asia Pacific region. The second most profitable segment for Nike is a p p a r e l, such as t-shirts, shorts, sweatpants, and licensed apparel made specifically for universities with their own logos. With an increase of only 0.2%, apparel sales accounted for 27% of the companys revenue in 2009. However, sales in this segment grew by 14% in the previous period, between 2007 and 2008, due to the growth of 25% of revenues in emerging markets, such as Russia, and other EMEA countries but also a substantial revenue growth of 50% in China. Unlike footwear, which main market is the US, the majority of apparel sales come from the EMEA region accounting for 38% of total apparel revenue Equipment, such as balls, golf clubs etc. accounts for 6% of total revenues in 2009 and 13% come from other brands under Nike, such as Cole Haan, Converse, Umbro etc. these different sub-brands supplement Nike product lines. For instance, Umbro specializes in selling soccer apparel and footwear. Nike Golf targets golf players and offers specialized golf equipment, apparel and footwear. Cole Haan on the other hand offers premium dress and casual footwear. Hurley International offers products suitable for snowboarding, skating, and surfing.

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Market Segments: The market segments that Nike can mainly differentiate are high, medium and low end customers with varying income levels. Thus, Nike needs to segment on various fronts such as economic, demographic, geographical differentiations. Economic segmentation: High, medium and low income levels that can be clubbed with here lifestyles of high, medium and low end customers. Demographic segmentation: The company can segment the market into age, gender and class segments. Geographical segmentation: The company can segment the market into segments of north, west, east and south. Target Market: The company needs to target the market as per the brand image and equity in different markets. Thus, the company has targeted the market of high-end, high income level between the age of 16-55. Thus the market segment it is targeting is quite essential to differentiate itself from its competitors i.e. Reebok, Puma, Fila and local brands like Bata

Marketing Strategy:
Significant role for the competition of market share in the footwear industry plays marketing in order to strengthen the brand image, develop product identity and expand customer loyalty. Competition between players is n o n - p r I c e but rather based on differentiation in brand image and product innovations. Therefore, substantial investments in marketing campaigns are required. Nike invests annually between 11% and 13% of revenue in marketing. Nike focuses all of their attention on the Athlete, but delivers much more than shoes; they deliver all the surrounding products that the Athlete needs for experience. It is part and parcel of what makes Nike such a great consumer-focused brand.
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Marketing mix
1. Product: Nike offers a wide range of shoe, apparel and equipment products, all of which are currently its top-selling product categories. Nike started selling sports apparel, athletic bags and accessory items in 1979. Their brand Cole Haan carries a line of dress and casual footwear and accessories for men, women and children. They also market head gear under the brand name Sports Specialties, through Nike Team manufactures and distributes ice skates, skate blades, in-roller skates, protective gear, hockey sticks and hockey jerseys and accessories. 2. Price: Nikes pricing is designed to be competitive to the other fashion Shoe retailer. The pricing is based on the basis of premium segment as target customers. Nike as a brand commands high premiums. Nikes pricing strategy makes use of vertical integration in pricing wherein they own participants at differing channel levels or take part in more than one channel level operations. This can control costs and influence product pricing.
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3. Place: Nike shoes are carried by multi-brand stores and the exclusive Nike stores across the globe. Nike sells its product to about 20,000 retail accounts in the U.S. and in almost 200 countries around the world. In the international markets, Nike sells its products through independent distributors, licensees and subsidiaries. The company has production facilities in Asia and customer service and other operational units worldwide 4. Promotion: Promotion is largely dependent on finding accessible store locations. It also avails of targeted advertising in the newspaper and creating strategic alliances. Nike has a number of famous athletes that serve as brand ambassadors such as the Brazilian Soccer Team (especially Ronaldo, Renaldo, and Roberto Carlos), Lebron James and Jermane ONeal for basketball, Lance Armstrong for cycling, and Tiger Woods for Golf. Nike also sponsors events such as Hoop It Up and The Golden West Invitational. Nikes brand images, the Nike name and the trademark swoosh; make it one of the most recognizable brands in the world. Nikes brand power is one reason for its high revenues. Nikes quality products, loyal customer base and its great marketing techniques all contribute to make the shoe empire a huge success.

Advertising strategy:
Nikes strategy was to create dominant presence in media. Nike created media presence in several trend setting United States cities. TV ads linking Nike to a city were used, but real drivers were huge oversized billboards and murals on buildings that blanketed cities with messages featuring key Nike-sponsored athletes, not products. The company focuses its marketing on celebrity endorsement, i.e. athletes in basketball, golf, soccer, and tennis. Lately, Nike has also began to sponsor big sporting events so as to create huge awareness and brand following. In 2008, Nike spent significant amount on advertising in the Beijing 2008 Olympics and the Football Championship. After the recent Tiger Woods scandal Nike plans on revisiting it celebrity endorsement strategy. It can be noted that the swoosh logo is one of the most famous in the world due to these huge advertising efforts.

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Branding Strategy:
Nikes strategy in this front is to develop a premium brand associated with high quality product that satisfies customer needs. Nikes brand is associated with an aggressive attitude portrayed by, you dont win silver, you lose gold,12 which clearly suggests that winning is vital. The Nike customer associated the Nike brand with being the American way: Being individual and aggressive like Michael Jordan and John McEnroe. Nike built its brand around sports, attitude and lifestyle. Nike backed this strategy with marketing campaigns like Just do it and with the companies front athletes like Michael Jordan and Tiger Woods.

Selling Strategy:
Nikes strategy in early 2000s was to develop, flag ship stores, Nike Town shops in bigger cities, first national, and then abroad. Nike was the first company to establish flagship stores and it turned out to be a sensation. There are independent small retail stores that sell Nike products all around the world as well. Also, on seeing the potential of the low price market, Nike took efforts in 2005 to tap in to the low price segment by striking a deal with big
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retail discount stores like Walmart and rolled out starter shoes at a cheaper price, competing with private label brands. However, to avoid brand dilution, Nike did not use the swoosh logo in these shoes. Currently, Nike has a high quality website and uses it as an online selling channel. N i k e I d14, a part of the website allows a customer to customize his own shoes and buy it. The website is available in 14 languages and is different according to the country requirements.

Manufacturing Strategy:
Nike manufactures all of its footwear from outside United States. Nike has contract suppliers in China, Vietnam, Indonesia and Thailand15. These countries accounted for 36%, 36%, 22% and 6% of total NIKE brand footwear respectively. Nike also has manufacturing agreements with independent factories in Argentina, Brazil, India, and Mexico to manufacture footwear for sale primarily within these countries. Primary reason for this is that it is cheaper to manufacture in South East Asia and transport it to USA and Europe, regardless of the transportation and tariff costs involved. Organizational Strategy: With over 21,000 employees worldwide, the company was organized into departments by both geographic divisions and product categories, which created overlapping management responsibilities and a fluid leadership structure. For example, a footwear manager in Europe answered to both the Vice President of Footwear and the Vice President of Europe. However, there was no formal communication link between the regional vice presidents (those in the United States, Europe, Asia-Pacific, and Latin America) and the product vice presidents (footwear, apparel, equipment).16

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NIKES EXPANSION STRATEGY IN INDIA

While the number one mass sportswear brand Reebok is stuck in a court battle, worlds top sportswear player Nike is planning to replace it by expanding aggressively with a focus on mass segment. Apart from creating a fresh product line for young and up-coming sports enthusiasts, the company would also increase its core connect to athletes. The American sports-goods maker, the largest in the world, with revenues of nearly $21 billion (Rs 11,659 crores) in 2011, stands at the third position in India, after Adidas and Reebok. According to experts Reeboks market share in India is at about 50 per cent, Adidass 20 per cent and Nikes 15 per cent. Now, with Adidas planning to reduce the number of Reebok stores by a third in India, Nike is looking at retail properties to expand its presence. The company which operates out of Bangalore in India would focus a multi-channel distribution strategy and consumer-centric products. Currently, Nike has some 300-400 exclusive stores, according to industry sources, in comparison to Adidas over 650 and Reeboks nearly 900 stores. All Nike stores in India are franchisee outlets. As a part of its retail strategy, Nike is also looking at increasing its presence through MBOs. In the last few years, Nike has taken its total retail presence, that is, exclusive plus multi-brand outlets to 3,000 from 2,000. The market for sports goods in India is pegged at Rs 3,500 crores growing at a rate of about 1820 per cent. In the last few years, Nike has also worked towards building its brand by using a combination of star endorsements, grass roots-level activities and events besides high-profile advertising. Nike has moved its Indian headquarters - including its marketing office, apparel export base and product design centre - from Delhi to Bangalore. Satyen Patel, general manager, Nike Southeast Asia told The Times of India that the decision to shift its corporate base to Bangalore was made in order to leverage the strengths of the city. "Karnataka contributes 70 per cent of the company's apparel exports from India. Nike had its export and product design offices in Bangalore for the past two years. A lot of the software development work for Nike's global operations is also done here. And now company is in the process of giving a fresh thrust to our India business, members felt it would be good to
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consolidate all niksoffices in one place," he said. Patel admitted that India had been a market hitherto not sufficiently addressed by Nike and this new thrust was to establish its commitment to the country, which is one of the three key focus areas for Nike along with China and Brazil. "These three markets are the ones we absolutely need to grow to remain a powerhouse globally. In India, we will be introducing many more products and a better retailing format," he said. The $11bn giant is also open to the idea of eventually setting up a full-fledged subsidiary in India. It currently operates through a licensee, Sierra Industrial Enterprises Pvt Ltd, with Nike managing the brand and Sierra handling distribution. Chief Operating Officer Nike India Hemchandra Javeri said the company, which opened its largest Indian showroom in Bangalore on Tuesday, plans to increase the number of exclusive retail outlets in India from 60 at present to 120 in two years. "We plan to upgrade the existing stores to the level of the Bangalore one, which not only is a very large store, but also has touch screen kiosks and our complete range of apparel and footwear," Javeri said. New cricket products will be designed in Bangalore, and the company hopes to take these to other cricket-playing countries such as South Africa, New Zealand, and Australia. "We plan to make India a centre of design excellence for cricket-related items," Patel said. Patel added that Nike had done $40m worth of apparel exports from India last year and expects to do $75m this year, mainly to Europe, the US and Asia-Pacific. On women's footwear and apparel, Javeri said it's a market the company will focus on since it has been growing rapidly in India. The range includes workout gear and clothes for yoga and tennis. In shoes too, the company plans to introduce more products for women.

NIKE, Inc. Long-term Financial Objectives

Chief Financial Officer Don Blair gave an overview of the Companys performance against its long-term financial model, highlighting delivery of strong performance through good and bad market environments. Our long -term financial model helps us stay focused on driving sustainable, profitable growth,
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powerful cash generation, and preserving a very strong balance sheet, all of which gives us tremendous flexibility to invest in our business and generate extraordinary shareholder value. Primary financial objectives through 2015 included the following:

High single-digit revenue growth (average annual rate) Mid-teens Earnings Per Share growth (average annual rate) Return on Invested Capital of 25% Increasing dividends within a target calendar year payout range of 2535% of trailing four quarter earnings per share

Recommendations

Improve its marketing plan including advertising. SIMPLFY ITS WEB SITE Focus on setting up a reliable Information system Nike should focus more on its labour working conditions and wages Increase its market share in the middle-east. Increase its acquisition due to increasing the threat from Adidas and rebook merger.

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REFERENCES http://www.wikinvest.com/stock/Nike_(NKE) http://www.suite101.com/content/marketing-audit-of-nikes-strategies-a94402 http://hubpages.com/hub/Nike-Global-Business-and-Challenges http://www.scribd.com/doc/38643840/Nike-Strategy-Analysis-Final-Jun-2010 www.nikebiz.com www.Wikipedia.com

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