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Evolution vs Creationalism
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Niles Eldredge believes in evolution, which states that all science is theory; he also believes that creationism should not be taught in a classroom environment. Many creationists disagree; over this heated debate that has been going on since the idea of evolution. “Although technological advances since 15 have been prodigious, and although science news magazines are springing up like toadstools, the American public appears to be badly informed about the real nature of science as it ever was” (p. 516). I agree with Niles Eldredge that evolution should be taught in the school system over creationism. “Much of the success of recent creationists efforts lies in a prior failure to educate our children about science � how it is done, by whom, and how its results are to be interpreted” (517).
Eldredge states that evolution is only a theory. “To the charge the ‘evolution is only a theory’, we say ‘all science is theory’. Theories are ideas or complex sets of ideas, which explain some aspect of the natural world” (p. 51). Eldredge shows the reader that, “All biologists, including biochemists, molecular geneticists, physiologists, behaviorists, and anatomists, see a pattern of similarity interlocking the spectrum of millions of species, from bacteria to timber wolves”(51). He continues to inform us that, “All forms of life have the nuclei acid RNA. One major branch of life, the vertebrates, all share backbones. All mammals have three inner ear bones, hair, and mammary glands” (51). It seems that evolution comes with some scientific proof, even though; it is still only a theory. Evolution is a process of change in a certain direction, a historical development of a biological group, and it is a theory that the various types of animals and plants have their origin in other pre-existing types, and that the distinguishable differences are due to modification in successive generations.
“Creationists, of course, have an alternative explanation for this order permeating life’s diversity. It is simply the way the supernatural creator chose to pattern life” (51). They continue to say “...evolution is only a theory. Scientists cannot agree on all details either of the exact course of evolutionary, history, of how evolution actually takes place’” (518). They continue on to say “Creationists then declare that many scientists have grave doubts that evolution actually [has] occurred … They argue that since evolution is only a theory, why not, in the spirit of fair play, give equal time to equally plausible explanation of the origin of the cosmos, of life on earth, and of mankind” (518). Creationists believe that God created everything, I feel that more people would believe their theory if they had physical evidence to prove their theory. “No form of creationism even remotely qualifies for inclusion in a science curriculum” (50). Some schools are letting teachers adopt the “equal time”. “Increasingly, teachers are left to their own discretion, and whether out of personal conviction, a desire to be ‘fair’, or fear of parental reprisal, they are teaching creationism along with evolution in their biology classes. It is simply the path of least resistance” (50). I feel that this theory; if taught at all in public schools should be taught to students in high school or older, so they can make their own opinion about which theory they believe and which one they do not believe.
“Biologists of all disciplines agree to a remarkable degree on the outlines of this theory, the so�called ‘modern synthesis’. In a nutshell, this was a vindication of Darwin’s original position that evolution is predominantly an affair of gradual progressive change. As environmental conditions changed, natural selection favored those variants best suited to new conditions. Thus evolutionary change is fundamentally adaptive” (51-). I feel that creationism should not be taught within the public school system. Evolution in the other hand; while not a finally theory, has more credibility then creationism and should be taught in the public school system. Creationism should be continued to be taught at Sunday schools, and in private schools, where religion is accepted by the attendee’s choice. “If the public were more aware that scientist are expected to disagree, that what a scientist writes today is not the last word, but a progress report on some very intensive thinking and investigation, creationists would be far less successful in injecting an authoritarian system of belief into curricula supposedly devoted to free, open rational inquiry into the nature of natural things” (p. 5).
Please note that this sample paper on Evolution vs Creationalism is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on Evolution vs Creationalism, we are here to assist you. Your cheap custom college paper on Evolution vs Creationalism will be written from scratch, so you do not have to worry about its originality.
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Niles Eldredge believes in evolution, which states that all science is theory; he also believes that creationism should not be taught in a classroom environment. Many creationists disagree; over this heated debate that has been going on since the idea of evolution. “Although technological advances since 15 have been prodigious, and although science news magazines are springing up like toadstools, the American public appears to be badly informed about the real nature of science as it ever was” (p. 516). I agree with Niles Eldredge that evolution should be taught in the school system over creationism. “Much of the success of recent creationists efforts lies in a prior failure to educate our children about science � how it is done, by whom, and how its results are to be interpreted” (517).
Eldredge states that evolution is only a theory. “To the charge the ‘evolution is only a theory’, we say ‘all science is theory’. Theories are ideas or complex sets of ideas, which explain some aspect of the natural world” (p. 51). Eldredge shows the reader that, “All biologists, including biochemists, molecular geneticists, physiologists, behaviorists, and anatomists, see a pattern of similarity interlocking the spectrum of millions of species, from bacteria to timber wolves”(51). He continues to inform us that, “All forms of life have the nuclei acid RNA. One major branch of life, the vertebrates, all share backbones. All mammals have three inner ear bones, hair, and mammary glands” (51). It seems that evolution comes with some scientific proof, even though; it is still only a theory. Evolution is a process of change in a certain direction, a historical development of a biological group, and it is a theory that the various types of animals and plants have their origin in other pre-existing types, and that the distinguishable differences are due to modification in successive generations.
“Creationists, of course, have an alternative explanation for this order permeating life’s diversity. It is simply the way the supernatural creator chose to pattern life” (51). They continue to say “...evolution is only a theory. Scientists cannot agree on all details either of the exact course of evolutionary, history, of how evolution actually takes place’” (518). They continue on to say “Creationists then declare that many scientists have grave doubts that evolution actually [has] occurred … They argue that since evolution is only a theory, why not, in the spirit of fair play, give equal time to equally plausible explanation of the origin of the cosmos, of life on earth, and of mankind” (518). Creationists believe that God created everything, I feel that more people would believe their theory if they had physical evidence to prove their theory. “No form of creationism even remotely qualifies for inclusion in a science curriculum” (50). Some schools are letting teachers adopt the “equal time”. “Increasingly, teachers are left to their own discretion, and whether out of personal conviction, a desire to be ‘fair’, or fear of parental reprisal, they are teaching creationism along with evolution in their biology classes. It is simply the path of least resistance” (50). I feel that this theory; if taught at all in public schools should be taught to students in high school or older, so they can make their own opinion about which theory they believe and which one they do not believe.
“Biologists of all disciplines agree to a remarkable degree on the outlines of this theory, the so�called ‘modern synthesis’. In a nutshell, this was a vindication of Darwin’s original position that evolution is predominantly an affair of gradual progressive change. As environmental conditions changed, natural selection favored those variants best suited to new conditions. Thus evolutionary change is fundamentally adaptive” (51-). I feel that creationism should not be taught within the public school system. Evolution in the other hand; while not a finally theory, has more credibility then creationism and should be taught in the public school system. Creationism should be continued to be taught at Sunday schools, and in private schools, where religion is accepted by the attendee’s choice. “If the public were more aware that scientist are expected to disagree, that what a scientist writes today is not the last word, but a progress report on some very intensive thinking and investigation, creationists would be far less successful in injecting an authoritarian system of belief into curricula supposedly devoted to free, open rational inquiry into the nature of natural things” (p. 5).
Please note that this sample paper on Evolution vs Creationalism is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on Evolution vs Creationalism, we are here to assist you. Your cheap custom college paper on Evolution vs Creationalism will be written from scratch, so you do not have to worry about its originality.
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Consent to medical procedures and best interests of the child in Australia.(This essay won a University Prize)
If you order your custom term paper from our custom writing service you will receive a perfectly written assignment on Consent to medical procedures and best interests of the child in Australia.(This essay won a University Prize). What we need from you is to provide us with your detailed paper instructions for our experienced writers to follow all of your specific writing requirements. Specify your order details, state the exact number of pages required and our custom writing professionals will deliver the best quality Consent to medical procedures and best interests of the child in Australia.(This essay won a University Prize) paper right on time.
“In the overwhelming majority of cases, the best judges of a child’s welfare are his or her parents.” Lord Fraser, Gillick v West Norfolk and Wisbech Area Health Authority [186] AC 11
This statement by Lord Fraser has been incorporated into Australian law since Marion’s case was decided in 1 and rest on the presumption that parents will always act in the child’s ‘best interests’ when making decisions for the child. However, is this the case in all situations? In critical matters, are parents granted the right to make decisions for their children? What are a child’s ‘best interests’? What degree of autonomy do children have in the context of health care choices? What considerations are deemed to be relevant in a contest between the parties? This discussion paper explores these issues as well as examining what is likely to happen if a dispute comes before the Family Court under the current law in South Australia.
Who is a child?
The stipulation of what age separates childhood from adult hood is purely arbitrary. In both domestic and international law , children are those persons who have not yet achieved the age of 18 years. The Family Law Act 175 declares that a child is a person under the age of 18 years. All other persons are deemed to be adults.
In South Australia, in the medico-legal context, a person of 16 years of age may exercise the ‘adult’ right of granting their consent to medical treatment by virtue of s 6 of the Consent to Treatment and Palliative Care Act 15.
Why are parents responsible for children’s welfare?
Children live under the aegis of their adult guardians who derive their parental powers to make decisions on behalf of the child from both the common law and legislation. The explanation for the old common law powers of parental control is the oft-quoted statement by Blackstone that “…the power of parents is derived from their duty…”. However, any absolute right of control or right arising from a duty has been rejected as part of the Australian common law. Instead, the contemporary view is that the “… common law gives this power to parents simply because it perceives them to be the most appropriate repository of such a power.”
Parental responsibility is defined in s 61B of the Family Law Act 175 as meaning all the duties, powers, responsibilities and authority which, by law, parents have in relation to their children. This definition does not explain what these duties, et cetera are; therefore, it must be presumed that the reference is to common law and legislative rights and responsibilities.
Why do courts have a responsibility for children’s welfare?
Courts are charged with responsibility for children under the doctrine of parens patriae, literally “parent of the nation”. The role of the courts is to act as an objective parent. The objective test is set in the context of the ordinary mother and father [more passengers bound for Clapham!] and applied subjectively to the particular child. Indeed, the Family Court has greater powers than parents do in deciding matters relating to a child’s best interests with respect to a child of a marriage. It can also override any decision by the State courts vis à vis the welfare of a child who is not a ward of the state.
What are the ‘best interests’ of the child and how are they defined?
Although much talked about, a child’s ‘best interests’ are in reality an abstract concept. They are not defined in any statute or case law, yet they are the presumptive standard used by parents and judicial officers when making decisions regarding children. The Family Law Act 175 states that a child’s best interests are paramount when making decisions with respect to the child’s ‘care, welfare and development’. The Family Court’s powers over parents in this area will be discussed later.
The sanctity of life is a presumption that appears throughout judgements concerning children particularly when parents have decided to withhold their consent for medical treatment in circumstances that might lead to the death of the child. Another presumption is framed in the context of what quality of life outcomes are associated with a particular medical treatment and whether it would have a detrimental effect on the child’s development into adulthood.
In deciding what constitutes best interests however, it seems that the emotional trauma associated with some procedures is not taken into account. Treatments that produce emotional trauma will be justified because the trauma will be outweighed by the anticipated benefits of the procedure. In fact, the predicted physical outcome of a particular course of treatment seems to be the main determinant factor in judicial decisions. This leads us to another apparent presumption made by the courts; that is, the supremacy of medical opinion over all other considerations.
The rule of law v the rule of medicine.
Medical opinion has a considerable impact on the courts determination of what constitutes acting in the child’s best interests. Without exception this will be the most decisive factor where the sanctity of life is in issue, even in cases where a ‘Gillick competent’ child has unequivocally refused consent to the procedure . In every reported case the medical profession was granted consent by the court to proceed with treatment they deemed most appropriate, despite the refusal by the child and, in some instances, contrary to the wishes of the parents. The courts have even acquiesced to medical opinion in cases where the religious or cultural wishes of the child or the parents have been contrary to medical opinion. In the case of Re Hofbauer the New York Court of Appeal allowed parents to adopt an ‘alternative’ form of treatment for their child.
Although it is thought unlikely that such a course would be taken by English or Australian courts, it would appear that they have ceded significant discretionary powers to the medical profession in a manner that is inconsistent with the Australian common law principle developed in Rogers v Whitaker . The recourse by the court to the Bolam principle, of allowing medical opinion to be the paramount consideration, is inconsistent with the High Court decision, which reposes all discretionary power in the court. In turn, his rise in the status of medical opinions to the level of matters of judicial notice overwhelms the role of the parent. The advisory role of the medical profession should not be allowed to become one of absolute authority.
Do children in South Australia attain medico-legal adult rights at 16 years?
As noted above, persons in South Australia who have attained the age of 16 years are granted the power to consent to medical treatment by virtue of s 6 of the Consent to Medical Treatment and Palliative Care Act 15. However, this grant does not create an unfettered right to make decisions with respect to all medical treatment. Although children may be able to consent to medical procedures, they do not apparently possess the corollary right of refusal.
Furthermore, the Family Court could hold the right granted to the child under the State Act as invalid. In a contested situation where the child was maintaining this right to consent to medical treatment the Family Court could overrule the child’s ability, and indeed the parents ability, to exercise any power of consent because of its supreme jurisdiction over matters concerning the welfare of children in Australia. This is a point to which I shall return.
When can children have the unequivocal right to consent or refuse?
Quite obviously, in the case of infants and ‘young’ children, it is neither logical nor practicable to allow them to make decisions on a matter that may have profound and irreversible ramifications on their future. However, there could come a time, before attaining majority, when a person is capable of not only consenting to medical treatment but also refusing to be subjected to it. Currently this is does not seem to be the case in England or in Australia.
“Every human being of adult years and of sound mind has the right to determine what shall be done to [their] own body…” even if death is the consequence of that decision. The underlying principle, the ‘presumptive standard’, is that all adults are presumed to be competent to make decisions of that magnitude. However, children are presumed to be incompetent unless they can demonstrate that they have achieved “… a sufficient understanding and intelligence to enable [them] to understand fully what is proposed.”. This level of understanding, known as ‘Gillick competence’, must be demonstrated to the satisfaction of the court, and has become known as the ‘evidential standard’ of competence as opposed to the presumptive standard outlined above.
Clearly the evidential standard is harder to achieve than the presumptive standard. The presumptive standard always exists until rebutted, usually by expert opinion evidence. The evidential standard however must be proven to exist to the degree required by civil law; that is, on the balance of probabilities. One of the problems that has been encountered by children with respect to establishing this standard has been that if their preference does not accord with the prevailing medical opinion, then their decision will be seen as irrational and therefore falling short of the evidential standard.
Therefore, the unequivocal autonomous right of a child to determine appropriate medical treatment can only be achieved by compliance with the prevailing medical and legal opinions. Compliance is inconsistent with the notion of autonomy.
Autonomy for children
Autonomy is recognised as a ‘general moral notion’ that empowers individuals to make their own decisions based on “… their own values and beliefs without the interference of another individuals values.”. It has been suggested that it is in the best interests of both the individual and society that autonomous decisions be respected, provided that significant harm to others does not result from that course of action.
The preamble to the Convention on the Rights of the Child, ratified by Australia in 11, recognises that children have a right of autonomy that develops in accordance with their capacity. Article 1 of the Convention states that “State parties shall assure to the child who is capable of forming his or her own views the right to express those views freely in all matters affecting the child, the views of the child being given due weight in accordance with the age and maturity of the child.” This article also implicitly confers on the child the right to be heard in judicial proceedings. However, in matters before the Family Court, where most decisions affecting a child’s welfare with respect to medico-legal issues will be made, children are represented by court appointed ‘separate representatives’
The findings of the Australian Law Reform Commission were that in most cases the representatives “… discount, editorialise or reject …” the child’s expressed wishes and “… argue the case in accordance with [the separate representatives] own views of the child’s best interests.” This practice, in the case of a ‘Gillick competent’ child, does not accord with either the notion of autonomy or the obligation that Australia has by virtue of its ratification of the treaty emanating from the Convention. Moreover, the actions of the separate representatives could be the subject of a challenge under the external affairs powers of the Constitution.
The ratification of a treaty does not introduce its terms into the law of Australia. However, it may have an impact on the interpretation of legislation and the development of the common law. Furthermore, in the case of Teoh v Minister for Immigration and Ethnic Affairs it was held by the Full Bench of the Federal Court that an obligation under a treaty would be a relevant consideration for a public officer who is entrusted with a discretion, or it may form the foundation for a legitimate expectation that the officer will exercise a discretion in a particular way.
It is arguable that the separate representative, as an appointed officer of the court, is a public officer within the meaning of Teoh’s case and therefore bound by that decision to conform with the provisions of Article 1 of the Convention, particularly if the separate representatives are employees of the Legal Services Commission.
In South Australia, can a 16 year old person exercise an unfettered right to consent to medical treatment?
Under South Australian legislation, a person of 16 years can give consent to medical treatment in the same way as an adult. However, this grant of right to the person is probably invalid under the provisions of s 10 of the Constitution because of an inconsistency with Part VII of the Family Law Act 175. A Commonwealth law may exclude the operation of a State law, or render the law inoperative, where there is an inconsistency between them.
An indirect inconsistency between State and Commonwealth law can arise in circumstances where it can be inferred that the intention of the Commonwealth law was to ‘cover the field’. There are three questions to consider when determining whether there is an indirect inconsistency between two laws. The questions to be answered are; what field or subject does the Commonwealth law seek to regulate; is the Commonwealth law intended to be the law; does the State law encroach upon that area of Commonwealth responsibility?
In the case of P v P a majority of the High Court held that PartVII of the Act was intended to confer on the Family Court, jurisdiction - unimpeded by State laws - to authorise the sterilisation of a child. It was determined that the jurisdiction of the Family Court was directly concerned with child welfare issues and therefore supported by s 51 (xxi) and s 51 (xxii) of the Constitution. Welfare rights were deemed to be an aspect of the jurisdiction of the Family Court, which could be frustrated if State laws were allowed to circumscribe the Courts’ powers in determining the circumstances in which a child could be subjected to medical treatment.
From the decision in P v P it is arguable that the High Court decided that the subject matter which Part VII of the Family Law 175 was intended to regulate ‘covers’ all welfare matters affecting children with respect to medical treatment. As any person who has not attained the age of 18 is a child under Family Law, this would also include children in South Australia who are purported to have been enfranchised with the right to consent to medical treatment.
Another way to determine whether the Commonwealth intended the Family Law Act 175 to be the law on this subject matter is to demonstrate that there is a manifest intention of exclusivity on the part of the Commonwealth. In O’Sullivan v Noarlunga Meat Ltd it was decided that if the Commonwealth legislation could be described as an “… extremely elaborate and detailed…” piece of legislation then this characteristic decisively demonstrated the intention on the part of the Commonwealth to ‘cover the field’. It could be contended that the extensive and elaborate details of Part VII of the Family Law Act 175 dealing with child welfare evinces an intention by the Commonwealth to exhaustively cover this field of subject matter.
An attempt by the State to make a law regulating some aspect of child welfare would be inconsistent with the Family Law Act 175 and would arguably render it invalid under the provisions of s 10 of the Constitution. Therefore, the grant of right under Section 6 of the Consent to Medical Treatment and Palliative Care Act 15 is probably invalid. It could also be invalid because it purports to create a legal right that the Commonwealth law effectively prohibits.
How true is the statement of Lord Fraser?
In the overwhelming majority of case where there is no matter in dispute, parents are probably deemed to be the best judges of a child’s welfare. However, in matters critical to the health of a child where the parents consider issues other than bald medical outcomes to be important, the opinion of the medical profession rather than the judgement of the parents will rule supreme in a manner that is arguably inconsistent with Australian law. Therefore parental autonomy is conditional to medical opinion.
In the area of autonomy children fare no better than their parents do. In South Australia, a person of 16 years or a ‘Gillick’ competent child can allegedly consent to medical treatment. However, any right to consent they may have is circumscribed by the provisions of Part VII of the Family Law Act and the fact that s 6 of the Consent to Medical Treatment and Palliative Care Act is probably invalid under s 10 of the Constitution.
Please note that this sample paper on Consent to medical procedures and best interests of the child in Australia.(This essay won a University Prize) is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on Consent to medical procedures and best interests of the child in Australia.(This essay won a University Prize), we are here to assist you. Your cheap custom college paper on Consent to medical procedures and best interests of the child in Australia.(This essay won a University Prize) will be written from scratch, so you do not have to worry about its originality.
Read more
Out staff of freelance writers includes over 120 experts proficient in Consent to medical procedures and best interests of the child in Australia.(This essay won a University Prize), therefore you can rest assured that your assignment will be handled by only top rated specialists. Order your Consent to medical procedures and best interests of the child in Australia.(This essay won a University Prize) paper at affordable prices with !
“In the overwhelming majority of cases, the best judges of a child’s welfare are his or her parents.” Lord Fraser, Gillick v West Norfolk and Wisbech Area Health Authority [186] AC 11
This statement by Lord Fraser has been incorporated into Australian law since Marion’s case was decided in 1 and rest on the presumption that parents will always act in the child’s ‘best interests’ when making decisions for the child. However, is this the case in all situations? In critical matters, are parents granted the right to make decisions for their children? What are a child’s ‘best interests’? What degree of autonomy do children have in the context of health care choices? What considerations are deemed to be relevant in a contest between the parties? This discussion paper explores these issues as well as examining what is likely to happen if a dispute comes before the Family Court under the current law in South Australia.
Who is a child?
The stipulation of what age separates childhood from adult hood is purely arbitrary. In both domestic and international law , children are those persons who have not yet achieved the age of 18 years. The Family Law Act 175 declares that a child is a person under the age of 18 years. All other persons are deemed to be adults.
In South Australia, in the medico-legal context, a person of 16 years of age may exercise the ‘adult’ right of granting their consent to medical treatment by virtue of s 6 of the Consent to Treatment and Palliative Care Act 15.
Why are parents responsible for children’s welfare?
Children live under the aegis of their adult guardians who derive their parental powers to make decisions on behalf of the child from both the common law and legislation. The explanation for the old common law powers of parental control is the oft-quoted statement by Blackstone that “…the power of parents is derived from their duty…”. However, any absolute right of control or right arising from a duty has been rejected as part of the Australian common law. Instead, the contemporary view is that the “… common law gives this power to parents simply because it perceives them to be the most appropriate repository of such a power.”
Parental responsibility is defined in s 61B of the Family Law Act 175 as meaning all the duties, powers, responsibilities and authority which, by law, parents have in relation to their children. This definition does not explain what these duties, et cetera are; therefore, it must be presumed that the reference is to common law and legislative rights and responsibilities.
Why do courts have a responsibility for children’s welfare?
Courts are charged with responsibility for children under the doctrine of parens patriae, literally “parent of the nation”. The role of the courts is to act as an objective parent. The objective test is set in the context of the ordinary mother and father [more passengers bound for Clapham!] and applied subjectively to the particular child. Indeed, the Family Court has greater powers than parents do in deciding matters relating to a child’s best interests with respect to a child of a marriage. It can also override any decision by the State courts vis à vis the welfare of a child who is not a ward of the state.
What are the ‘best interests’ of the child and how are they defined?
Although much talked about, a child’s ‘best interests’ are in reality an abstract concept. They are not defined in any statute or case law, yet they are the presumptive standard used by parents and judicial officers when making decisions regarding children. The Family Law Act 175 states that a child’s best interests are paramount when making decisions with respect to the child’s ‘care, welfare and development’. The Family Court’s powers over parents in this area will be discussed later.
The sanctity of life is a presumption that appears throughout judgements concerning children particularly when parents have decided to withhold their consent for medical treatment in circumstances that might lead to the death of the child. Another presumption is framed in the context of what quality of life outcomes are associated with a particular medical treatment and whether it would have a detrimental effect on the child’s development into adulthood.
In deciding what constitutes best interests however, it seems that the emotional trauma associated with some procedures is not taken into account. Treatments that produce emotional trauma will be justified because the trauma will be outweighed by the anticipated benefits of the procedure. In fact, the predicted physical outcome of a particular course of treatment seems to be the main determinant factor in judicial decisions. This leads us to another apparent presumption made by the courts; that is, the supremacy of medical opinion over all other considerations.
The rule of law v the rule of medicine.
Medical opinion has a considerable impact on the courts determination of what constitutes acting in the child’s best interests. Without exception this will be the most decisive factor where the sanctity of life is in issue, even in cases where a ‘Gillick competent’ child has unequivocally refused consent to the procedure . In every reported case the medical profession was granted consent by the court to proceed with treatment they deemed most appropriate, despite the refusal by the child and, in some instances, contrary to the wishes of the parents. The courts have even acquiesced to medical opinion in cases where the religious or cultural wishes of the child or the parents have been contrary to medical opinion. In the case of Re Hofbauer the New York Court of Appeal allowed parents to adopt an ‘alternative’ form of treatment for their child.
Although it is thought unlikely that such a course would be taken by English or Australian courts, it would appear that they have ceded significant discretionary powers to the medical profession in a manner that is inconsistent with the Australian common law principle developed in Rogers v Whitaker . The recourse by the court to the Bolam principle, of allowing medical opinion to be the paramount consideration, is inconsistent with the High Court decision, which reposes all discretionary power in the court. In turn, his rise in the status of medical opinions to the level of matters of judicial notice overwhelms the role of the parent. The advisory role of the medical profession should not be allowed to become one of absolute authority.
Do children in South Australia attain medico-legal adult rights at 16 years?
As noted above, persons in South Australia who have attained the age of 16 years are granted the power to consent to medical treatment by virtue of s 6 of the Consent to Medical Treatment and Palliative Care Act 15. However, this grant does not create an unfettered right to make decisions with respect to all medical treatment. Although children may be able to consent to medical procedures, they do not apparently possess the corollary right of refusal.
Furthermore, the Family Court could hold the right granted to the child under the State Act as invalid. In a contested situation where the child was maintaining this right to consent to medical treatment the Family Court could overrule the child’s ability, and indeed the parents ability, to exercise any power of consent because of its supreme jurisdiction over matters concerning the welfare of children in Australia. This is a point to which I shall return.
When can children have the unequivocal right to consent or refuse?
Quite obviously, in the case of infants and ‘young’ children, it is neither logical nor practicable to allow them to make decisions on a matter that may have profound and irreversible ramifications on their future. However, there could come a time, before attaining majority, when a person is capable of not only consenting to medical treatment but also refusing to be subjected to it. Currently this is does not seem to be the case in England or in Australia.
“Every human being of adult years and of sound mind has the right to determine what shall be done to [their] own body…” even if death is the consequence of that decision. The underlying principle, the ‘presumptive standard’, is that all adults are presumed to be competent to make decisions of that magnitude. However, children are presumed to be incompetent unless they can demonstrate that they have achieved “… a sufficient understanding and intelligence to enable [them] to understand fully what is proposed.”. This level of understanding, known as ‘Gillick competence’, must be demonstrated to the satisfaction of the court, and has become known as the ‘evidential standard’ of competence as opposed to the presumptive standard outlined above.
Clearly the evidential standard is harder to achieve than the presumptive standard. The presumptive standard always exists until rebutted, usually by expert opinion evidence. The evidential standard however must be proven to exist to the degree required by civil law; that is, on the balance of probabilities. One of the problems that has been encountered by children with respect to establishing this standard has been that if their preference does not accord with the prevailing medical opinion, then their decision will be seen as irrational and therefore falling short of the evidential standard.
Therefore, the unequivocal autonomous right of a child to determine appropriate medical treatment can only be achieved by compliance with the prevailing medical and legal opinions. Compliance is inconsistent with the notion of autonomy.
Autonomy for children
Autonomy is recognised as a ‘general moral notion’ that empowers individuals to make their own decisions based on “… their own values and beliefs without the interference of another individuals values.”. It has been suggested that it is in the best interests of both the individual and society that autonomous decisions be respected, provided that significant harm to others does not result from that course of action.
The preamble to the Convention on the Rights of the Child, ratified by Australia in 11, recognises that children have a right of autonomy that develops in accordance with their capacity. Article 1 of the Convention states that “State parties shall assure to the child who is capable of forming his or her own views the right to express those views freely in all matters affecting the child, the views of the child being given due weight in accordance with the age and maturity of the child.” This article also implicitly confers on the child the right to be heard in judicial proceedings. However, in matters before the Family Court, where most decisions affecting a child’s welfare with respect to medico-legal issues will be made, children are represented by court appointed ‘separate representatives’
The findings of the Australian Law Reform Commission were that in most cases the representatives “… discount, editorialise or reject …” the child’s expressed wishes and “… argue the case in accordance with [the separate representatives] own views of the child’s best interests.” This practice, in the case of a ‘Gillick competent’ child, does not accord with either the notion of autonomy or the obligation that Australia has by virtue of its ratification of the treaty emanating from the Convention. Moreover, the actions of the separate representatives could be the subject of a challenge under the external affairs powers of the Constitution.
The ratification of a treaty does not introduce its terms into the law of Australia. However, it may have an impact on the interpretation of legislation and the development of the common law. Furthermore, in the case of Teoh v Minister for Immigration and Ethnic Affairs it was held by the Full Bench of the Federal Court that an obligation under a treaty would be a relevant consideration for a public officer who is entrusted with a discretion, or it may form the foundation for a legitimate expectation that the officer will exercise a discretion in a particular way.
It is arguable that the separate representative, as an appointed officer of the court, is a public officer within the meaning of Teoh’s case and therefore bound by that decision to conform with the provisions of Article 1 of the Convention, particularly if the separate representatives are employees of the Legal Services Commission.
In South Australia, can a 16 year old person exercise an unfettered right to consent to medical treatment?
Under South Australian legislation, a person of 16 years can give consent to medical treatment in the same way as an adult. However, this grant of right to the person is probably invalid under the provisions of s 10 of the Constitution because of an inconsistency with Part VII of the Family Law Act 175. A Commonwealth law may exclude the operation of a State law, or render the law inoperative, where there is an inconsistency between them.
An indirect inconsistency between State and Commonwealth law can arise in circumstances where it can be inferred that the intention of the Commonwealth law was to ‘cover the field’. There are three questions to consider when determining whether there is an indirect inconsistency between two laws. The questions to be answered are; what field or subject does the Commonwealth law seek to regulate; is the Commonwealth law intended to be the law; does the State law encroach upon that area of Commonwealth responsibility?
In the case of P v P a majority of the High Court held that PartVII of the Act was intended to confer on the Family Court, jurisdiction - unimpeded by State laws - to authorise the sterilisation of a child. It was determined that the jurisdiction of the Family Court was directly concerned with child welfare issues and therefore supported by s 51 (xxi) and s 51 (xxii) of the Constitution. Welfare rights were deemed to be an aspect of the jurisdiction of the Family Court, which could be frustrated if State laws were allowed to circumscribe the Courts’ powers in determining the circumstances in which a child could be subjected to medical treatment.
From the decision in P v P it is arguable that the High Court decided that the subject matter which Part VII of the Family Law 175 was intended to regulate ‘covers’ all welfare matters affecting children with respect to medical treatment. As any person who has not attained the age of 18 is a child under Family Law, this would also include children in South Australia who are purported to have been enfranchised with the right to consent to medical treatment.
Another way to determine whether the Commonwealth intended the Family Law Act 175 to be the law on this subject matter is to demonstrate that there is a manifest intention of exclusivity on the part of the Commonwealth. In O’Sullivan v Noarlunga Meat Ltd it was decided that if the Commonwealth legislation could be described as an “… extremely elaborate and detailed…” piece of legislation then this characteristic decisively demonstrated the intention on the part of the Commonwealth to ‘cover the field’. It could be contended that the extensive and elaborate details of Part VII of the Family Law Act 175 dealing with child welfare evinces an intention by the Commonwealth to exhaustively cover this field of subject matter.
An attempt by the State to make a law regulating some aspect of child welfare would be inconsistent with the Family Law Act 175 and would arguably render it invalid under the provisions of s 10 of the Constitution. Therefore, the grant of right under Section 6 of the Consent to Medical Treatment and Palliative Care Act 15 is probably invalid. It could also be invalid because it purports to create a legal right that the Commonwealth law effectively prohibits.
How true is the statement of Lord Fraser?
In the overwhelming majority of case where there is no matter in dispute, parents are probably deemed to be the best judges of a child’s welfare. However, in matters critical to the health of a child where the parents consider issues other than bald medical outcomes to be important, the opinion of the medical profession rather than the judgement of the parents will rule supreme in a manner that is arguably inconsistent with Australian law. Therefore parental autonomy is conditional to medical opinion.
In the area of autonomy children fare no better than their parents do. In South Australia, a person of 16 years or a ‘Gillick’ competent child can allegedly consent to medical treatment. However, any right to consent they may have is circumscribed by the provisions of Part VII of the Family Law Act and the fact that s 6 of the Consent to Medical Treatment and Palliative Care Act is probably invalid under s 10 of the Constitution.
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Dwayne Niatum's She Keeps the Dance Turning Like the Earth
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Dwane Niatum’s “She Keeps The Dance Turning Like The Earth” is about a young man named Crow who faces his sister Claire’s suicide. Unable to work and his love ,Rachel, ready to leave him, he takes the necessary steps to get his life back together. Crow’s struggles to overcome his loss take him on an emotional journey that eventually leads to a remarkable transformation and the healing of his soul. Crow goes from an overwhelming sadness, to guilt and confusion, to an unemotional neglect of his life, and finally, to an exorcism and a return to creativity.
In the first part of the story Crow is feeling overwhelmed with sadness at the news of Claire’s suicide. As he speaks to Rachel on the telephone his mind is not there. “Slowly he becomes a mountain bird drifting beyond the Hoko River” (15). Crow’s mind is drifting away to another place and time. He is going to visit Claire’s grave and needs to be alone.
In the second part, a day or two later, Crow is struggling to deal with guilt and confusion. He sits by her grave and talks to Claire, trying to come to an understanding of what has happened. He asks her, “Will I ever know why you stopped in midair?”(16). He feels as if he is going “mad” because he needs to know “why” and she cannot answer him. His mind is in a state of confusion. They had been through so much together as children and “together they had outran the nightmare”(16). Crow feels a sense of guilt because she was too young and full of life to die and he should have been there for her no matter what.
In part three, nearly three months later, Crow begins to pay attention to the fact that he is losing track of time, neglecting his work and avoiding Rachel, who is trying everything she can to get him to snap out of it. She tells him, “Claire wouldn’t want you to fall apart, throw your life in the river”(1). He cannot stand hurting Rachel anymore, but is haunted by visions of Claire drowning. He feels his spirit is broken and that a demon is lurking inside him. Crow realizes that he must find a way to overcome his grief or he will lose everything, including Rachel. It is time for a transformation.
As he walks down by the river, Crow makes a final decision to end the suffering. He looks at his reflection and sees the past rising up out of the water as horrible masks, and he knows it is time to get rid of them all! “He owes it to Rachel, himself and maybe more importantly, to Claire’s spirit dancing somewhere out there over the water, still turning like the earth”(11). He feels the demons leaving him, like an exorcism, and “the flight of his soul on its’ long journey home”(11). He senses a form of healing taking place as he swims in the icy water and his creativity returning.
In part four, the conclusion, Crow returns home a new man, his emotional journey at its end and his transformation and healing complete. He is reminded of his grandfather and inspired to carve the animals of his people. He presents Rachel with the first of a series of sculptures, “Heron Growing Still With Water”(11). Crow is happy and wants to make Rachel happy also. There is hope for the future at last.
Works Cited
Niatum, Duane. Earth Power Coming “She Keeps the Dance Turning Like the
Earth.” Simon J. Ortiz. Tsaile, Arizona Navajo Community College Press,
18. 15-1
Please note that this sample paper on Dwayne Niatum's She Keeps the Dance Turning Like the Earth is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on Dwayne Niatum's She Keeps the Dance Turning Like the Earth, we are here to assist you. Your cheap custom college paper on Dwayne Niatum's She Keeps the Dance Turning Like the Earth will be written from scratch, so you do not have to worry about its originality.
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Dwane Niatum’s “She Keeps The Dance Turning Like The Earth” is about a young man named Crow who faces his sister Claire’s suicide. Unable to work and his love ,Rachel, ready to leave him, he takes the necessary steps to get his life back together. Crow’s struggles to overcome his loss take him on an emotional journey that eventually leads to a remarkable transformation and the healing of his soul. Crow goes from an overwhelming sadness, to guilt and confusion, to an unemotional neglect of his life, and finally, to an exorcism and a return to creativity.
In the first part of the story Crow is feeling overwhelmed with sadness at the news of Claire’s suicide. As he speaks to Rachel on the telephone his mind is not there. “Slowly he becomes a mountain bird drifting beyond the Hoko River” (15). Crow’s mind is drifting away to another place and time. He is going to visit Claire’s grave and needs to be alone.
In the second part, a day or two later, Crow is struggling to deal with guilt and confusion. He sits by her grave and talks to Claire, trying to come to an understanding of what has happened. He asks her, “Will I ever know why you stopped in midair?”(16). He feels as if he is going “mad” because he needs to know “why” and she cannot answer him. His mind is in a state of confusion. They had been through so much together as children and “together they had outran the nightmare”(16). Crow feels a sense of guilt because she was too young and full of life to die and he should have been there for her no matter what.
In part three, nearly three months later, Crow begins to pay attention to the fact that he is losing track of time, neglecting his work and avoiding Rachel, who is trying everything she can to get him to snap out of it. She tells him, “Claire wouldn’t want you to fall apart, throw your life in the river”(1). He cannot stand hurting Rachel anymore, but is haunted by visions of Claire drowning. He feels his spirit is broken and that a demon is lurking inside him. Crow realizes that he must find a way to overcome his grief or he will lose everything, including Rachel. It is time for a transformation.
As he walks down by the river, Crow makes a final decision to end the suffering. He looks at his reflection and sees the past rising up out of the water as horrible masks, and he knows it is time to get rid of them all! “He owes it to Rachel, himself and maybe more importantly, to Claire’s spirit dancing somewhere out there over the water, still turning like the earth”(11). He feels the demons leaving him, like an exorcism, and “the flight of his soul on its’ long journey home”(11). He senses a form of healing taking place as he swims in the icy water and his creativity returning.
In part four, the conclusion, Crow returns home a new man, his emotional journey at its end and his transformation and healing complete. He is reminded of his grandfather and inspired to carve the animals of his people. He presents Rachel with the first of a series of sculptures, “Heron Growing Still With Water”(11). Crow is happy and wants to make Rachel happy also. There is hope for the future at last.
Works Cited
Niatum, Duane. Earth Power Coming “She Keeps the Dance Turning Like the
Earth.” Simon J. Ortiz. Tsaile, Arizona Navajo Community College Press,
18. 15-1
Please note that this sample paper on Dwayne Niatum's She Keeps the Dance Turning Like the Earth is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on Dwayne Niatum's She Keeps the Dance Turning Like the Earth, we are here to assist you. Your cheap custom college paper on Dwayne Niatum's She Keeps the Dance Turning Like the Earth will be written from scratch, so you do not have to worry about its originality.
Order your authentic assignment from and you will be amazed at how easy it is to complete a quality custom paper within the shortest time possible!
monitary policy
If you order your custom term paper from our custom writing service you will receive a perfectly written assignment on monitary policy. What we need from you is to provide us with your detailed paper instructions for our experienced writers to follow all of your specific writing requirements. Specify your order details, state the exact number of pages required and our custom writing professionals will deliver the best quality monitary policy paper right on time.
We are currently in an economic state of transition. The United States has been suffering from an economic recession, and now we are showing some slow positive progress. The Federal Reserve has been utilizing monetary policy to help our economy stabilize and grow. The Federal Reserve has been focusing on inflation and expansion and have been taking measures to help ensure economic stability.
The economy has been rebounding quicker than most of the prognosticators had predicted. Real gross domestic product has increased at an annual rate of -1/4 percent in the second quarter of the year. Real gross domestic product has also flourished at a rate of more than seven percent in the third quarter. The labor market which has been weakening has been showing signs of stabilizing. Almost 00,000 new jobs were created over the July-to-October period. Although the economy seems to be improving additional improvement needs to be made before our countrys labor and capital resources can be fully utilized. Before the most recent employment report, many commentators had portrayed this period as a jobless recovery period. Industrial production has only risen by percent from its cyclical downturn as compared to a 6-1/ percent increase in 10-1 and nearly 0 percent increase on average after the other post-war recessions (Ferguson, 00).
The consumer price index has been affected by changes in food and energy prices. The core measure that has excluded these components has slowed down over the past year. The core CPI is only up 1-1/4 percent from its past level one year ago. The performance indicates that the U.S. economy has obtained effective price stability. The achievement has been obtained by many factors economic slack, quicker productivity growth, steady inflation expectations, and the general publics confidence that the Federal Reserve is dedicated to keeping inflation under control. Current research has revealed that as inflation has decreased over the past two decades the sensitivity of prices to the level of resource utilization has also decreased. Unlike in the past periods, the presence of rising inflation is much less likely to effect the economy as activity improves and the output margin declines. Currently inflation seems more likely to decrease than to increase. Under the current circumstances the central bank has the ability to observe events before it is forced to confront the need to return the position of policy to a neutral position (Ferguson, 00).
Considering the high degree of uncertainty of the economic outlook in the current geopolitical environment, the members of the FOMC firmly believe that the most possible outcome will be that the fundamentals should support a strengthening of economic growth. Business caution is expected to decline over the span of the year to clearly identifiable signs of improving sales. At the present time inventories are lean relative to sales and restocking is expected to provide additional momentum to production in the period ahead. The fast pace of expansion of productivity, the waning effects of previous declines in household wealth, and the highly accommodative position of monetary policy should also continue to increase activity. Even though state and local governments are faced with budgetary problems, their control is likely to counteract only a small part of the stimulus from the past and future fiscal policy actions at the federal level. The strengthening economies of our key trading partners along with the improving competitiveness of U.S. products should be able to generate demand for our exports. In total of all of these factors the federal government has predicted that the country will move to a faster pace of economic expansion while inflationary pressure is expected to remain well contained (Monetary Policy and the Economic Outlook, 00).
Federal Reserve policymakers believe that the most likely outcome for this year will be an increase in the pace of economic expansion. They plan on focusing on economic expansion and maintaining inflation rates. The forces affecting demand this year seem to be on balance contributing to a strengthening of the economic expansion. Currently monetary policy remains extremely accommodative. The federal fiscal policy is and will likely continue to remain stimulative. State and local government spending will most likely continue to be restrained by significant budget challenges. Activity overseas is also expected to improve this year even if it is at a slower pace than in the United States. The increase in growth along with the improving competitiveness of U.S. products should create an increased demand for our exports. Large gains in productivity even though they are unlikely to be as large as in 00 should be able to continue to promote both household and business spending (Monetary Policy and the Economic Outlook, 00).
The Federal Reserve policymakers think that consumer prices will increase less this year than they did during 00, particularly if energy prices help turn around last years sharp rise. Resource utilization should remain adequately relaxed to exert further downward pressure on underlying inflation. The central tendency of the FOMC members projections is for increases in the chain-type price index for personal consumption expenditures (Monetary Policy and the Economic Outlook, 00).
The macroeconomic policies seem to be set for an increase in the pace of economic growth and stable inflation. The growth should be adequate enough to make meaningful progress in reducing the slack in our nations labor and capital resources. The amount of underutilized resources is still large and it may take a significant amount of time to be worked off completely. In the past, our economy has experienced cyclical turns and surprising shocks, and it has proved to be very resilient. It seems that the focus is firmly on stable growth and inflation rates with the hope of utilizing our countries resources and maintaining economic stability.
Resources
Ferguson, Roger. (November 1, 00). Economic outlook. Retrieved November 0, 00, from http//www.federalreserve.gov/boarddocs/speeches/00/00111/default.htm
Monetary Policy and the Economic Outlook. (February 11, 00). Retrieved November 0, 00, from http//www.federalreserve.gov/boarddocs/speeches/00/00110/default.htm
Please note that this sample paper on monitary policy is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on monitary policy, we are here to assist you. Your cheap custom college paper on monitary policy will be written from scratch, so you do not have to worry about its originality.
Read more
Out staff of freelance writers includes over 120 experts proficient in monitary policy, therefore you can rest assured that your assignment will be handled by only top rated specialists. Order your monitary policy paper at affordable prices with !
We are currently in an economic state of transition. The United States has been suffering from an economic recession, and now we are showing some slow positive progress. The Federal Reserve has been utilizing monetary policy to help our economy stabilize and grow. The Federal Reserve has been focusing on inflation and expansion and have been taking measures to help ensure economic stability.
The economy has been rebounding quicker than most of the prognosticators had predicted. Real gross domestic product has increased at an annual rate of -1/4 percent in the second quarter of the year. Real gross domestic product has also flourished at a rate of more than seven percent in the third quarter. The labor market which has been weakening has been showing signs of stabilizing. Almost 00,000 new jobs were created over the July-to-October period. Although the economy seems to be improving additional improvement needs to be made before our countrys labor and capital resources can be fully utilized. Before the most recent employment report, many commentators had portrayed this period as a jobless recovery period. Industrial production has only risen by percent from its cyclical downturn as compared to a 6-1/ percent increase in 10-1 and nearly 0 percent increase on average after the other post-war recessions (Ferguson, 00).
The consumer price index has been affected by changes in food and energy prices. The core measure that has excluded these components has slowed down over the past year. The core CPI is only up 1-1/4 percent from its past level one year ago. The performance indicates that the U.S. economy has obtained effective price stability. The achievement has been obtained by many factors economic slack, quicker productivity growth, steady inflation expectations, and the general publics confidence that the Federal Reserve is dedicated to keeping inflation under control. Current research has revealed that as inflation has decreased over the past two decades the sensitivity of prices to the level of resource utilization has also decreased. Unlike in the past periods, the presence of rising inflation is much less likely to effect the economy as activity improves and the output margin declines. Currently inflation seems more likely to decrease than to increase. Under the current circumstances the central bank has the ability to observe events before it is forced to confront the need to return the position of policy to a neutral position (Ferguson, 00).
Considering the high degree of uncertainty of the economic outlook in the current geopolitical environment, the members of the FOMC firmly believe that the most possible outcome will be that the fundamentals should support a strengthening of economic growth. Business caution is expected to decline over the span of the year to clearly identifiable signs of improving sales. At the present time inventories are lean relative to sales and restocking is expected to provide additional momentum to production in the period ahead. The fast pace of expansion of productivity, the waning effects of previous declines in household wealth, and the highly accommodative position of monetary policy should also continue to increase activity. Even though state and local governments are faced with budgetary problems, their control is likely to counteract only a small part of the stimulus from the past and future fiscal policy actions at the federal level. The strengthening economies of our key trading partners along with the improving competitiveness of U.S. products should be able to generate demand for our exports. In total of all of these factors the federal government has predicted that the country will move to a faster pace of economic expansion while inflationary pressure is expected to remain well contained (Monetary Policy and the Economic Outlook, 00).
Federal Reserve policymakers believe that the most likely outcome for this year will be an increase in the pace of economic expansion. They plan on focusing on economic expansion and maintaining inflation rates. The forces affecting demand this year seem to be on balance contributing to a strengthening of the economic expansion. Currently monetary policy remains extremely accommodative. The federal fiscal policy is and will likely continue to remain stimulative. State and local government spending will most likely continue to be restrained by significant budget challenges. Activity overseas is also expected to improve this year even if it is at a slower pace than in the United States. The increase in growth along with the improving competitiveness of U.S. products should create an increased demand for our exports. Large gains in productivity even though they are unlikely to be as large as in 00 should be able to continue to promote both household and business spending (Monetary Policy and the Economic Outlook, 00).
The Federal Reserve policymakers think that consumer prices will increase less this year than they did during 00, particularly if energy prices help turn around last years sharp rise. Resource utilization should remain adequately relaxed to exert further downward pressure on underlying inflation. The central tendency of the FOMC members projections is for increases in the chain-type price index for personal consumption expenditures (Monetary Policy and the Economic Outlook, 00).
The macroeconomic policies seem to be set for an increase in the pace of economic growth and stable inflation. The growth should be adequate enough to make meaningful progress in reducing the slack in our nations labor and capital resources. The amount of underutilized resources is still large and it may take a significant amount of time to be worked off completely. In the past, our economy has experienced cyclical turns and surprising shocks, and it has proved to be very resilient. It seems that the focus is firmly on stable growth and inflation rates with the hope of utilizing our countries resources and maintaining economic stability.
Resources
Ferguson, Roger. (November 1, 00). Economic outlook. Retrieved November 0, 00, from http//www.federalreserve.gov/boarddocs/speeches/00/00111/default.htm
Monetary Policy and the Economic Outlook. (February 11, 00). Retrieved November 0, 00, from http//www.federalreserve.gov/boarddocs/speeches/00/00110/default.htm
Please note that this sample paper on monitary policy is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on monitary policy, we are here to assist you. Your cheap custom college paper on monitary policy will be written from scratch, so you do not have to worry about its originality.
Order your authentic assignment from and you will be amazed at how easy it is to complete a quality custom paper within the shortest time possible!
World is round !
If you order your custom term paper from our custom writing service you will receive a perfectly written assignment on World is round !. What we need from you is to provide us with your detailed paper instructions for our experienced writers to follow all of your specific writing requirements. Specify your order details, state the exact number of pages required and our custom writing professionals will deliver the best quality World is round ! paper right on time.
The world is round .. yet its oval .. indicating that things can be distinct from what they seem . Its dicy world with all sorts of confusions yet people manage their life here in this world somehow with aspirations and joys that they try to derive out of mundane things
This project presents “Operations of the Secondary market”. The Secondary market is a booming sector experiencing robust growth in India.
We have attempted to study this market in the project. Our group has sincerely tried to understand the functioning of the Secondary Market . After making a thorough study of the Operations of the main stock exchanges like NSE & BSE, we have analyzed various opportunities lying ahead & the various problems faced by them with suitable suggestions.
We want to thank our mentor Prof. Naveen Singh. for guiding us in the making of this project. We also thank N.L.Dalmia Institute OF Management Studies for their active co-operation. This project has been a great learning experience.
We express our sincere gratitude to all the related members of the Respected Stock Markets who have given motivation and provided us with all the valuable information which has resulted into the successful completion of the project work.
INTRODUCTION
Secondary Markets are the markets wherein already existing issues and debt instruments like debentures and G Secs and other corporate bonds are traded.
Secondary market is an essential part of the capital market. Any transaction, that occurs after the primary offering (like IPO), is known as a secondary transaction. Such transactions occur in the secondary markets.
Predominantly, secondary market dealings are that of equity of various companies which are listed across the several stock exchanges established throughout the country. This enables the shareholders to easily sell their holdings, thereby ensuring liquidity for them.
Early Days Of Stock Markets
The origin of stock markets in India goes back to the nineteenth century. The first stock exchange to be established in India was set up in the year 1875. The next was Ahmedabad Stock Exchange in 184 and Calcutta Stock Exchange in 108.
Calcutta and Bombay Stock Exchanges were the active centers of Trading in the 1th and the 0th centuries. Trading was concentrated in the bank stocks like Bank of Bengal, Chartered Mercantile Bank, Chartered Bank and Oriental Bank.
Currently there are stock exchanges in India. They were founded at different times, in different places, under different laws. However, all of them have now been recognized and regulated under a single law, namely the Securities Contracts (Regulation) Act,156. The stock exchanges are Self Regulatory Organizations (SROs) under the act. In addition to ordinary regulatory powers over the stock exchanges, the Central Government and/or SEBI can nominate upto three members to the board of each stock exchange. The Government and SEBI have the authority to make, approve and amend the bye-laws of stock exchanges. In return, the stock exchanges have been granted strong regulatory authority over its members i.e. the Stock Brokers.
Stock Exchanges are managed by a Governing Body which consists of a President, a Vice-President, an Executive Director, elected Directors, public representatives and nominees of the Government as discussed above. The governing body is responsible for the policy making and for ensuring the smooth functioning of the exchange.
In December 15, SEBI setup the Inter-Exchange Coordination Group, consisting of heads of all major stock exchanges and representations from regional stock exchanges to help improve the compliance process among the stock exchanges.
Please note that this sample paper on World is round ! is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on World is round !, we are here to assist you. Your cheap custom college paper on World is round ! will be written from scratch, so you do not have to worry about its originality.
Read more
Out staff of freelance writers includes over 120 experts proficient in World is round !, therefore you can rest assured that your assignment will be handled by only top rated specialists. Order your World is round ! paper at affordable prices !
The world is round .. yet its oval .. indicating that things can be distinct from what they seem . Its dicy world with all sorts of confusions yet people manage their life here in this world somehow with aspirations and joys that they try to derive out of mundane things
This project presents “Operations of the Secondary market”. The Secondary market is a booming sector experiencing robust growth in India.
We have attempted to study this market in the project. Our group has sincerely tried to understand the functioning of the Secondary Market . After making a thorough study of the Operations of the main stock exchanges like NSE & BSE, we have analyzed various opportunities lying ahead & the various problems faced by them with suitable suggestions.
We want to thank our mentor Prof. Naveen Singh. for guiding us in the making of this project. We also thank N.L.Dalmia Institute OF Management Studies for their active co-operation. This project has been a great learning experience.
We express our sincere gratitude to all the related members of the Respected Stock Markets who have given motivation and provided us with all the valuable information which has resulted into the successful completion of the project work.
INTRODUCTION
Secondary Markets are the markets wherein already existing issues and debt instruments like debentures and G Secs and other corporate bonds are traded.
Secondary market is an essential part of the capital market. Any transaction, that occurs after the primary offering (like IPO), is known as a secondary transaction. Such transactions occur in the secondary markets.
Predominantly, secondary market dealings are that of equity of various companies which are listed across the several stock exchanges established throughout the country. This enables the shareholders to easily sell their holdings, thereby ensuring liquidity for them.
Early Days Of Stock Markets
The origin of stock markets in India goes back to the nineteenth century. The first stock exchange to be established in India was set up in the year 1875. The next was Ahmedabad Stock Exchange in 184 and Calcutta Stock Exchange in 108.
Calcutta and Bombay Stock Exchanges were the active centers of Trading in the 1th and the 0th centuries. Trading was concentrated in the bank stocks like Bank of Bengal, Chartered Mercantile Bank, Chartered Bank and Oriental Bank.
Currently there are stock exchanges in India. They were founded at different times, in different places, under different laws. However, all of them have now been recognized and regulated under a single law, namely the Securities Contracts (Regulation) Act,156. The stock exchanges are Self Regulatory Organizations (SROs) under the act. In addition to ordinary regulatory powers over the stock exchanges, the Central Government and/or SEBI can nominate upto three members to the board of each stock exchange. The Government and SEBI have the authority to make, approve and amend the bye-laws of stock exchanges. In return, the stock exchanges have been granted strong regulatory authority over its members i.e. the Stock Brokers.
Stock Exchanges are managed by a Governing Body which consists of a President, a Vice-President, an Executive Director, elected Directors, public representatives and nominees of the Government as discussed above. The governing body is responsible for the policy making and for ensuring the smooth functioning of the exchange.
In December 15, SEBI setup the Inter-Exchange Coordination Group, consisting of heads of all major stock exchanges and representations from regional stock exchanges to help improve the compliance process among the stock exchanges.
Please note that this sample paper on World is round ! is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on World is round !, we are here to assist you. Your cheap custom college paper on World is round ! will be written from scratch, so you do not have to worry about its originality.
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acceptance in high school
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From the Salem witch trials to the civil rights movement, we as Americans have never been accepted the way we are. There will always be someone judging you, either its yourself or your arch enemy. We buy the clothes that are in style because we think it might make us look cool in the eyes of other and maybe it does but we still have to work to be accepted. Jocks, rockers and rappers all experience different high schools. What about that nerd that eats lunch all by himself in a corner because no one wants to socialize with them as it might harm their reputation? Rappers and rockers all hang out at different ends of the school while the straight and gay avoid each other at all costs. Why not accept each other for who we are? If this really was a society in which we could live as we wanted and not have to have the newest line of fashion or the like one type of music this place we call America would be very different. It is not impossible to achieve but it is inevitable. Maybe if we all would not care what the other boy or girl at school thought about your raggedy shirt, then would we get there.
The rest that I am writing here is just to be able to get acces to this website because I need 50 words and I only have 08 so I am just wasting time while I sit here and write a lot of nonsense. Thank you goodbye
Please note that this sample paper on acceptance in high school is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on acceptance in high school, we are here to assist you. Your cheap custom college paper on acceptance in high school will be written from scratch, so you do not have to worry about its originality.
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From the Salem witch trials to the civil rights movement, we as Americans have never been accepted the way we are. There will always be someone judging you, either its yourself or your arch enemy. We buy the clothes that are in style because we think it might make us look cool in the eyes of other and maybe it does but we still have to work to be accepted. Jocks, rockers and rappers all experience different high schools. What about that nerd that eats lunch all by himself in a corner because no one wants to socialize with them as it might harm their reputation? Rappers and rockers all hang out at different ends of the school while the straight and gay avoid each other at all costs. Why not accept each other for who we are? If this really was a society in which we could live as we wanted and not have to have the newest line of fashion or the like one type of music this place we call America would be very different. It is not impossible to achieve but it is inevitable. Maybe if we all would not care what the other boy or girl at school thought about your raggedy shirt, then would we get there.
The rest that I am writing here is just to be able to get acces to this website because I need 50 words and I only have 08 so I am just wasting time while I sit here and write a lot of nonsense. Thank you goodbye
Please note that this sample paper on acceptance in high school is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on acceptance in high school, we are here to assist you. Your cheap custom college paper on acceptance in high school will be written from scratch, so you do not have to worry about its originality.
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Citations
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Use APA format (See Hacker handbook or an online APA site for examples) and a signal phrase to introduce the expert(s) whose reader-centered guidelines you are promoting. Example Communication Consultants Arthur Bell and Dayle Smith (1) have developed proven communication approach to facilitate writing called . . ..(p.48). Refer to them subsequently by last names (Bell and Smith also recommend. . . . .).
1. Citations are necessary whenever you quote or summarize someones specific information or ideas within a report or paper. Even when you DO use outside sources, you will mostly summarize because quoting more than a sentence or two will bore readers and undermine your own authority as the report or paper author. Bring in the outside expert to clarify, reinforce, or justify your ideas because most people are resistant to change and confused by new approaches.
You can gain authority by introducing and quoting or summarizing the experts point at the beginning of your own point, putting the citation immediately at the end of the quoted sentence or at the end of a couple sentences of summary. Then you continue, using your own explanation, examples, and facts to promote the experts ideas within your organization or group. Try this approach with resistant readers who may question your authority and wisdom.
You can justify or clarify the points youre making by bringing in the experts to punctuate or clarify your ideas, summarizing data from the experts findings, the experts example, or the experts particularly provocative quote.
. How frequently should you list the parenthetical citations?
Citation frequency varies with the field. When youre summarizing in a humanities paper using MLA, you will cite page numbers more frequently than with APA, for example. See Hackers remark on the bottom of p. 1, for example.
With any documentation system or style, an immediate citation is necessary with any quote, even if your next sentence summarizes material from that same expert. You may introduce this continuing summary (Bell and Smith also report . . . .) or simply list the names in parenthesis at the end of their summarized ideas (Bell & Smith, 1, p.48). Leave out the parenthetical page number if youve summarized their ideas from widely scattered pages, but always include a signal phrase and page number for your initial citation. Communication consultants Arthur Bell and Dayle Smith (1) recommend blah, blah, blah (p.48).
Once youve cited an outside source, you can reference them again later Bell and Smith (1) have also mentioned. . . . , leaving out the page numbers this time unless you have quoted or included a highly specific paraphrase. Many writers leave out the date as well in subsequent APA references, which is fine for Report 1.
If you are taking examples from your Study Group, make them anonymous examples, briefly telling the writing situation, so your readers arent confused about what they represent. No citations are necessary.
Introducing YOUR OWN employees writing as a Report 1 example (If you are using an example from your own organization, please heed my warning NOT to mention names and to put the example in a positive context.) One of our own employees faced the challenge of answering an angry customer in this email message (You would quote your brief example here.) If youre including a reader-centered revision of that same example, again introduce it tactfully It would be easier to convince this customer by emphasizing the benefits (reorganizing the information, or whatever) Then follow with the revised example. NEVER criticize a current employee in public unless you want to be the most hated manager in the office and want your employees to feel paralyzed every time they write.
Please note that this sample paper on Citations is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on Citations, we are here to assist you. Your cheap custom college paper on Citations will be written from scratch, so you do not have to worry about its originality.
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Use APA format (See Hacker handbook or an online APA site for examples) and a signal phrase to introduce the expert(s) whose reader-centered guidelines you are promoting. Example Communication Consultants Arthur Bell and Dayle Smith (1) have developed proven communication approach to facilitate writing called . . ..(p.48). Refer to them subsequently by last names (Bell and Smith also recommend. . . . .).
1. Citations are necessary whenever you quote or summarize someones specific information or ideas within a report or paper. Even when you DO use outside sources, you will mostly summarize because quoting more than a sentence or two will bore readers and undermine your own authority as the report or paper author. Bring in the outside expert to clarify, reinforce, or justify your ideas because most people are resistant to change and confused by new approaches.
You can gain authority by introducing and quoting or summarizing the experts point at the beginning of your own point, putting the citation immediately at the end of the quoted sentence or at the end of a couple sentences of summary. Then you continue, using your own explanation, examples, and facts to promote the experts ideas within your organization or group. Try this approach with resistant readers who may question your authority and wisdom.
You can justify or clarify the points youre making by bringing in the experts to punctuate or clarify your ideas, summarizing data from the experts findings, the experts example, or the experts particularly provocative quote.
. How frequently should you list the parenthetical citations?
Citation frequency varies with the field. When youre summarizing in a humanities paper using MLA, you will cite page numbers more frequently than with APA, for example. See Hackers remark on the bottom of p. 1, for example.
With any documentation system or style, an immediate citation is necessary with any quote, even if your next sentence summarizes material from that same expert. You may introduce this continuing summary (Bell and Smith also report . . . .) or simply list the names in parenthesis at the end of their summarized ideas (Bell & Smith, 1, p.48). Leave out the parenthetical page number if youve summarized their ideas from widely scattered pages, but always include a signal phrase and page number for your initial citation. Communication consultants Arthur Bell and Dayle Smith (1) recommend blah, blah, blah (p.48).
Once youve cited an outside source, you can reference them again later Bell and Smith (1) have also mentioned. . . . , leaving out the page numbers this time unless you have quoted or included a highly specific paraphrase. Many writers leave out the date as well in subsequent APA references, which is fine for Report 1.
If you are taking examples from your Study Group, make them anonymous examples, briefly telling the writing situation, so your readers arent confused about what they represent. No citations are necessary.
Introducing YOUR OWN employees writing as a Report 1 example (If you are using an example from your own organization, please heed my warning NOT to mention names and to put the example in a positive context.) One of our own employees faced the challenge of answering an angry customer in this email message (You would quote your brief example here.) If youre including a reader-centered revision of that same example, again introduce it tactfully It would be easier to convince this customer by emphasizing the benefits (reorganizing the information, or whatever) Then follow with the revised example. NEVER criticize a current employee in public unless you want to be the most hated manager in the office and want your employees to feel paralyzed every time they write.
Please note that this sample paper on Citations is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on Citations, we are here to assist you. Your cheap custom college paper on Citations will be written from scratch, so you do not have to worry about its originality.
Order your authentic assignment and you will be amazed at how easy it is to complete a quality custom paper within the shortest time possible!
Ambition in Macbeth
If you order your custom term paper from our custom writing service you will receive a perfectly written assignment on Ambition in Macbeth. What we need from you is to provide us with your detailed paper instructions for our experienced writers to follow all of your specific writing requirements. Specify your order details, state the exact number of pages required and our custom writing professionals will deliver the best quality Ambition in Macbeth paper right on time.
Ambition is often the driving force in one’s life. It is supposed to be the motivating factor that drives one towards success. Society also deems ambition a necessary quality of their leader. It can be said that Macbeth exhibits this quality of ambition. He is the strong, valiant warrior who has won in battle and brought victory to Scotland. However, Macbeth’s quest to acquire more power-his ambition-ultimately leads to his tragic demise. How can one allow himself to be destroyed by such a thing? Before Duncan’s murder, Macbeth questions and second guesses his ambitious tendencies and actions. Despite his anxiety, he succumbs to these tendencies and finds himself in an increasingly precarious situation, with his back against the wall and growing ever closer to his almost inevitable end.
There is no doubt that Macbeth is a noble man. He risked everything he had to protect Scotland from Norway, and single-handedly took down the treacherous Thane of Cawdor
“Till that Bellona’s bridegroom, lapped in proof,
Confronted him with self-comparisons,
Point against point, rebellious arm ‘gainst arm,
Curbing his lavish spirit and, to conclude,
The victory fell on us.” (1..54-57)
Macbeth was seen as a brave and noble man by all of his peers, and even King Duncan himself. This is why Duncan proclaimed “What he hath lost, noble Macbeth hath won,” (1..67) referring to the fact that he named Macbeth to be Thane of Cawdor. One would think that after such accomplishment and high standing that Macbeth would be satisfied with his position. However, this is not the case.
It is obvious that Macbeth has ambition, as most people who are in power do. In fact, ambition is often a necessary quality of people in such high standing as Macbeth is. However, Macbeth’s ambition does not just drive him to do great things. It in fact controls him
“I have no spur to prick the sides of my intent, but only
Vaulting ambition, which o’erleaps itself
And falls on th’ other---” (1.7.5-8)
Macbeth clearly realizes that his ambition is too great. It is about to make him do something that he knows is wrong, and is against everything he has supposedly stood for, yet he also knows there is nothing he can do to stop it.
Macbeth second guesses his intent to murder Duncan before he commits the crime
“We will proceed no further in this business
He hath honored me of late, and I have bought
golden opinions from all sorts of people.” (1.7.1-)
He realizes that maybe he is just better off in the position he is in right now. Maybe he should wait and acquire his higher standing in a noble way. However, through the persuasion of Lady Macbeth, he commits the murder anyway.
After the murder, one can see a clear shift in Macbeth. It was as if his killing of one man opened the flood gates for a litany of other murders he felt he needed to commit. He orders the killing of Banquo and Fleance, both of whom were once dear to him. It is as if his ambition is blinding him of his wrong-doings. One can look at Macbeth’s actions after his murder of Duncan and see that he is clearly headed on a path towards disaster, derived from one source his ambition.
It is fair to say that Macbeth’s actions in the latter parts of the play stem from a sort of madness that has consumed him. It is a madness that has derived from guilt of killing Duncan, paranoia of getting caught, and, most shockingly, a need to protect what he has wrongfully acquired the throne. His actions are clearly driven by the fact that he wants to keep his place on the throne. Instead of being remorseful of his actions, he is much more worried that he himself will be murdered because of his dastardly deed. This is obviously not the thought process of a noble main, which clearly indicates that Macbeth has lost, to some extent, his sanity.
Through all these things, one can clearly see that Macbeth is headed on a path for disaster; a path started, and forcefully driven, by his ambition. His ambition drove him to kill Duncan so he could acquire the throne. His ambition then drove him to order the murders of Banquo and Fleance. Through that process alone, one could say that Macbeth’s ambition did lead to his downfall. However, even more disastrous than the external consequences of his ambition were his internal consequences. Macbeth’s ambition was constantly putting him in a struggle between right and wrong. Macbeth finally lost this battle, and succumbed to the evil side of his ambition. Being the successful, proud, and noble warrior that he was, maybe this loss of what was good inside of him was the root of Macbeth’s insanity. One will never know, but it can be said that Macbeth’s ambition, whether through his actions or through his own internal degradation, did ultimately lead to his demise.
Please note that this sample paper on Ambition in Macbeth is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on Ambition in Macbeth, we are here to assist you. Your cheap custom college paper on Ambition in Macbeth will be written from scratch, so you do not have to worry about its originality.
Read more
Out staff of freelance writers includes over 120 experts proficient in Ambition in Macbeth, therefore you can rest assured that your assignment will be handled by only top rated specialists. Order your Ambition in Macbeth paper at affordable prices !
Ambition is often the driving force in one’s life. It is supposed to be the motivating factor that drives one towards success. Society also deems ambition a necessary quality of their leader. It can be said that Macbeth exhibits this quality of ambition. He is the strong, valiant warrior who has won in battle and brought victory to Scotland. However, Macbeth’s quest to acquire more power-his ambition-ultimately leads to his tragic demise. How can one allow himself to be destroyed by such a thing? Before Duncan’s murder, Macbeth questions and second guesses his ambitious tendencies and actions. Despite his anxiety, he succumbs to these tendencies and finds himself in an increasingly precarious situation, with his back against the wall and growing ever closer to his almost inevitable end.
There is no doubt that Macbeth is a noble man. He risked everything he had to protect Scotland from Norway, and single-handedly took down the treacherous Thane of Cawdor
“Till that Bellona’s bridegroom, lapped in proof,
Confronted him with self-comparisons,
Point against point, rebellious arm ‘gainst arm,
Curbing his lavish spirit and, to conclude,
The victory fell on us.” (1..54-57)
Macbeth was seen as a brave and noble man by all of his peers, and even King Duncan himself. This is why Duncan proclaimed “What he hath lost, noble Macbeth hath won,” (1..67) referring to the fact that he named Macbeth to be Thane of Cawdor. One would think that after such accomplishment and high standing that Macbeth would be satisfied with his position. However, this is not the case.
It is obvious that Macbeth has ambition, as most people who are in power do. In fact, ambition is often a necessary quality of people in such high standing as Macbeth is. However, Macbeth’s ambition does not just drive him to do great things. It in fact controls him
“I have no spur to prick the sides of my intent, but only
Vaulting ambition, which o’erleaps itself
And falls on th’ other---” (1.7.5-8)
Macbeth clearly realizes that his ambition is too great. It is about to make him do something that he knows is wrong, and is against everything he has supposedly stood for, yet he also knows there is nothing he can do to stop it.
Macbeth second guesses his intent to murder Duncan before he commits the crime
“We will proceed no further in this business
He hath honored me of late, and I have bought
golden opinions from all sorts of people.” (1.7.1-)
He realizes that maybe he is just better off in the position he is in right now. Maybe he should wait and acquire his higher standing in a noble way. However, through the persuasion of Lady Macbeth, he commits the murder anyway.
After the murder, one can see a clear shift in Macbeth. It was as if his killing of one man opened the flood gates for a litany of other murders he felt he needed to commit. He orders the killing of Banquo and Fleance, both of whom were once dear to him. It is as if his ambition is blinding him of his wrong-doings. One can look at Macbeth’s actions after his murder of Duncan and see that he is clearly headed on a path towards disaster, derived from one source his ambition.
It is fair to say that Macbeth’s actions in the latter parts of the play stem from a sort of madness that has consumed him. It is a madness that has derived from guilt of killing Duncan, paranoia of getting caught, and, most shockingly, a need to protect what he has wrongfully acquired the throne. His actions are clearly driven by the fact that he wants to keep his place on the throne. Instead of being remorseful of his actions, he is much more worried that he himself will be murdered because of his dastardly deed. This is obviously not the thought process of a noble main, which clearly indicates that Macbeth has lost, to some extent, his sanity.
Through all these things, one can clearly see that Macbeth is headed on a path for disaster; a path started, and forcefully driven, by his ambition. His ambition drove him to kill Duncan so he could acquire the throne. His ambition then drove him to order the murders of Banquo and Fleance. Through that process alone, one could say that Macbeth’s ambition did lead to his downfall. However, even more disastrous than the external consequences of his ambition were his internal consequences. Macbeth’s ambition was constantly putting him in a struggle between right and wrong. Macbeth finally lost this battle, and succumbed to the evil side of his ambition. Being the successful, proud, and noble warrior that he was, maybe this loss of what was good inside of him was the root of Macbeth’s insanity. One will never know, but it can be said that Macbeth’s ambition, whether through his actions or through his own internal degradation, did ultimately lead to his demise.
Please note that this sample paper on Ambition in Macbeth is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on Ambition in Macbeth, we are here to assist you. Your cheap custom college paper on Ambition in Macbeth will be written from scratch, so you do not have to worry about its originality.
Order your authentic assignment and you will be amazed at how easy it is to complete a quality custom paper within the shortest time possible!
Nike - Strategic Analysis
If you order your custom term paper from our custom writing service you will receive a perfectly written assignment on Nike - Strategic Analysis. What we need from you is to provide us with your detailed paper instructions for our experienced writers to follow all of your specific writing requirements. Specify your order details, state the exact number of pages required and our custom writing professionals will deliver the best quality Nike - Strategic Analysis paper right on time.
Nike
Remy Ajluni
Adam Brook
Anthony Colletti
Elizabeth Crompton
Conrad Pilewicz
Michael Ramos
Current nature and structure of the athletic footwear industry
The athletic footwear industry is a highly competitive environment where the top four manufacturers hold over 70% of the market share. The barriers to entry into the industry are comparatively low, as anyone with new creative design ideas can produce and market their product, but the success of smaller companies is oftentimes shaky. Brand loyalty, ample capital, and broad based sourcing create an environment where the bigger companies such as Nike and Reebok have little trouble maintaining market share. Nike enjoys the largest share, with 4.% of the nearly $8 billion market in the year 000. Reebok was second with 11.%, Adidas had 10.8%, and New Balance had .6% of the market. The remaining 5% must be divided among the numerous smaller companies fighting for a shot at survival.
One of the important characteristics of the footwear industry is the fact that the product is necessary to consumers, yet very much a discretionary purchase as well. The actual structure of athletic shoes does not change very much from season to season. The design and fashion aspects are what significantly differentiate one product from another. Due to these factors, athletic shoe purchases are largely dependant on economic conditions. When the economy is good and consumers are enjoying plenty of disposable income, they are more likely to make new purchases to update their shoe collections. When there is a shorter supply of income, consumers will put off purchases until they are absolutely necessary and the price of the shoes is low enough.
Currently, the athletic shoe industry is performing well. Overall footwear spending in the United States has decreased in recent years, but athletic shoe sales are increasing. In 001 $15.1 billion was spent on footwear while in 00 the industry experienced a 5% decrease to $40.56 billion. In the athletic sector, consumer sales have increased. The number of shoes sold in 00 was 7% higher than 001 sales, reaching 48.6 million pairs. Although sales are up, manufacturers are still looking for additional opportunities because the average price paid has decreased from $8.0 in 001 to $6.61 in 00 or a 4.% loss. These conditions of added sales but declining prices have led to fairly slow growth in the industry.
Because the US market has reached its maturity, manufacturers are looking at the opportunities in foreign markets as the next step for growth. The US population growth rate is extremely low, 1% per year, but the populations of developing countries are exploding. The abundance of opportunity in foreign markets has allowed the footwear industry to thrive when domestic growth is nearly non-existent.
Within the footwear industry, manufacturers typically produce their product and use their distribution channels to circulate the goods to retailers and, ultimately, consumers. Some companies such as Nike have opened a limited number of retail stores themselves to diversify sales channels and lower dependence on retailers. Retail stores by manufacturers allow them to more effectively maintain contact with the consumer and collect feedback, but are not currently a feasible route of distribution for the industry on a large scale. Manufacturer’s relationships with retailers are pivotal. The retailers have significant power over the manufacturers. By lowering the amount of inventory that they hold, retailers have shifted the inventory risk to manufacturers. Also, because they are the main routes of transmission, retailers have significant leverage over manufacturers on many aspects of the industry such as pricing, product labeling, or cooperative advertising where both share costs.
Key factors that influence success
Brand awareness is one of the biggest assets that an athletic shoe company can have. Consumers are constantly exposed to endless advertising and marketing campaigns for never-ending product lines. If a company is able to establish brand awareness, they will have a significant advantage in grabbing consumer’s attention and, therefore, market share. In today’s society where consumers have significantly less time to shop and compare, brand awareness is critical. If an established brand name effectively conveys the messages of quality and dependability, consumers will automatically go to that brand relying on the image that has been created when they don’t have time to shop around.
Manufacturing efficiency is something that companies are constantly striving for as well. Athletic shoe manufacturers must balance the costs of labor, raw materials, shipping, import tariffs, and technological advancements. In an effort to keeps costs down, the industry has been looking to overseas sourcing. Favorable legislation regarding foreign manufacturing has led to a huge increase in foreign sourcing. In order to diversify supply and production lines, manufacturers have spread out their operations over many areas to avoid over concentration in one region. With this strategy, if one country or region experiences problems that interrupt production, the affected company is not completely out of options and can still accomplish production.
Distribution channels dictate who a company’s customer will be and how they will get the product. The footwear companies must choose their channels carefully because they want to make the product available, yet remain true to their image and goals. Retailers account for the largest percentage of sales, so manufacturers must be especially careful with their relationships with them. If a disagreement arises between manufacturer and retailer, the manufacturer could face potentially extensive problems getting the product to market. A recent example of this occurred between Foot Locker and manufacturer Nike. In an attempt to carry more of the lower cost shoes that consumers are demanding, Foot Locker cut back on their high-end purchases from Nike significantly. Nike, in turn, had to look for other outlets for their signature lines.
The ability of companies in the industry to shorten their design, development, production, and distribution cycles is vital to success. In the past, retail stores could carry a product months in advance of a projected need, but now consumers want to buy closer to when they actually experience the need for the good. With the shortened cycles, manufacturers can place more of an emphasis on styling and keep up with the changes in fashion.
Technological advancement is becoming more and more of a player in the footwear industry. With computer-aided design (CAD), companies have been able to successfully shorten their design to distribution cycle to only a few months. Previously, the new product development phase oftentimes took years. Also, new technology has facilitated new quick-response programs that link retailers with manufacturers to allow the retailer to have the correct inventory when it is needed called EDI. Immediately after a sale is made, electronic point of sale scanners read the information related to the sale such as price, product, size, etc. and notify the manufacturer of the sale. With this, the manufacturer is able to accurately modify production to fit consumer demand. Also, retailers are not required to hold as much inventory with this system, which lowers costs for them and, ultimately, consumers.
Demand cycles
While footwear is definitely a necessity for the general population, most footwear purchases are discretionary. Shoe design does not significantly alter in fundamental structure from season to season, so any additional purchase by the consumer is probably for fashion or style reasons. Due to the largely subjective nature of athletic footwear purchasing, the success of the industry is dependant on the current economic cycle. When consumers are concerned about future economic conditions, they will put off their purchases until their confidence rebounds. As can be seen by the graph below, consumer confidence hit its peak around 000 and has been fluctuating ever since. After the events of September 11, 001 and then when consumers were concerned about impending war in Iraq, confidence drastically dropped, but was able to rebound somewhat. Industry sales in 000 were around $. billion, dipped to $8. billion in 001 largely due to the drop in consumer confidence after September 11, and began to recover in 00 to a little over $ billion.
In addition to the amount of confidence that consumers have for the future, the amount of disposable income available to them directly affects how much is spent on athletic footwear. When consumers experience a drop in disposable income, discretionary purchases such as footwear are put off. One general exception to this trend within the industry is due to the fact that teenagers account for a large portion of industry sales in the athletic footwear sector. Teenagers are responsible for % of all athletic shoe purchases and are typically not as concerned with the costs of goods as older consumers are. When adults are saving as much as they can, teens will still spend any disposable income that they have. Also, teens are more willing to pay for the higher priced shoes while adults are reluctant to buy the specialty goods.
U.S. Department of Commerce Bureau of Economic Analysis
Competitive forces affecting the industry
-Potential new entrants
The footwear industry includes moderate barriers to entry. Any person with a design that interests consumers can outsource their production to an independent manufacturer and can potentially enter the market. The capital and distribution channels that are required for success make it difficult for the smaller entrants to flourish though. The top manufacturers absolutely dominate the industry, with Nike holding over 40% alone.
-Bargaining power of Buyers
Buyers in the athletic footwear industry enjoy a great deal of power. Consumers have shown again and again that they will simply wait until prices reach a level they feel is reasonable before making a purchase. Nearly 40% of all shoe purchases are made through discount stores. Also, consumers are able to make informed decisions about a purchase through utilization of Internet websites. The bargaining power of retailers is also a problem for footwear manufacturers. In recent years, retailers have begun to hold fewer inventories, forcing manufacturers to pay for increased inventory levels on their end. Manufacturers must also make sure that retailers are selling the product in accordance with the desired image of the shoe. Nike has recently experienced a disagreement with their largest retailer Foot Locker due to pricing disagreements. As a result, Foot Locker significantly reduced its high end purchases from Nike and Nike decided to shift their high end product sales elsewhere.
-Bargaining power of Suppliers
The materials for footwear production are relatively easy to obtain. To keep costs low, manufacturers have begun widening their supply channels to ensure that they are not depending too much on one source. The recent SARS outbreak is one example why suppliers are diversified. Many manufacturers relied on China to supply low cost goods for manufacturing. When the outbreak made traveling to the area impossible, manufacturers had to find alternative ways to get supplies such as utilizing the Internet.
-Threat of substitute products
Athletic footwear manufacturers must constantly be aware of the threat of substitute products available to the consumer. The major manufacturers such as Nike, Adidas, and Reebok hold a majority of market share but are far from the only choices that consumers have. There are numerous other options for athletic shoe purchases. Although brand loyalty allows some measure of constancy for the manufacturers, if the design does not match the current trend, consumers will simply buy one of the many alternatives.
-Rivalry among competitors
Rivalry among competitors is high. Overall, the product that all manufacturers offer is basically the same. Differentiation of the product is vital for success. Consumers have many options to choose from and manufactures have to tailor their marketing strategies to catch part of the market. The advertising dollars that are spent in the hopes of differentiation are staggering… In 000, Nike spent over $10 million on advertising alone. In a recent deal with LeBron James, a basketball player, Nike beat out Reebok with a $0 million offer. In turn, Reebok took on year old Mark Walker as part of their “the future of basketball” advertising campaign. Finally, in another odd twist of the competition between the athletic shoe companies, Kobe Bryant broke an $8 million deal with Adidas and was going to sign with Nike. Although the relationship between Bryant and Nike disintegrated due to recent events, this just illustrates the lengths that competitors go to in order to outdo each other.
Industry Location on the Product Life Cycle
The athletic footwear industry is in the maturity stage of the PLC. The product itself has become very similar across the board because the wishes of the consumer have been well established. Since the market is fixed, additional profits come only by taking those profits directly from a competitor. The intense competition between competitors in the market is obvious, as that is the only way to succeed at this stage of the product life cycle.
00 sales � 001 sales = 08-804 = 1.5%
001 sales 804
Company location on the BCG
-Nike
Nike is positioned at the cow position on the BCG matrix.
PLC 8-488.8 = .04 or 4.%
488.8
target co sales = 8 = 1.56
Relative Market Share nearest competitor(adidas) 67.7
-Adidas
Adidas is located at the star position on the BCG matrix.
PLC = 67.7-578.87 = .176 or 17.6%
578.87
Adidas = 67.7 = .0
Market Share Reebok 17.87
-Reebok
Reebok is at the cash cow position on the BCG matrix.
PLC 17.87-.88 = .045 or 4.5%
.88
Reebok = 67.7 = .8
Market share Adidas 7718.66
Industry trends
Trend Implications for the industry Implications for target company Citations
Product line diversification. Manufacturers are producing a much wider variety of products for more segments of customers. Retail stores, wider customer base, more revenue Standard and Poor’s Industry Profile for Apparel & Footwear
Overseas production and sourcing Lower material and labor costs as well as a diversified network of production and supplies to ensure stability if one source is rendered unavailable or unusable. Lower production costs and less risk of losing revenue if one region experiences problems.
Foreign sales With the US market at maturity, companies are looking overseas to utilize the vast opportunity in foreign markets. Nike sales in the foreign sector are growing at a much faster rate than those in the US leading to higher profits.
Diversified distribution channels Products are readily available at multiple places, thereby reaching a broader customer base. May dilute the product’s image if put into channels that do correspond with the desired image.
Lower retail inventories Retailers are not carrying as much inventory, leaving that responsibility with the manufacturers. Nike must assume more inventory risk and carry the extra costs associated with inventory. The Wall Street Transcript Interview with John Shanley on athletic footwear companies, 1/7/0.
Response to negative public opinion of labor practices
“Rapid globalization and the unfettered quest for lowest-- cost production-coupled with the value clash between affluent countries and those in the very early stages of industrialization” has lured many companies to manufacture their products in under developed countries. Much protest has arisen concerning companies’ labor practices in these countries. Consumers are becoming more conscious of a company’s reputation and are making purchases based on their opinion of the company. “In fact, a recent MORI poll commissioned by the Co-operative Bank suggests that a third of consumers are `seriously concerned with ethical issues. Within the past year, over half of us have bought a product or recommended a company on the basis of its reputation.”
NIKE
Nike has been a target for protest since the early 10s. Many activists, students and unions have alleged that Nike’s labor practices are unfair and their treatment of workers is inhumane. When compared to Adidas and Reebok, Nike receives the majority of the attention from protestors and activists. After many years of such protest, Nike’s reputation eventually became tarnished and in 18 the company reported a 50% decline in profits from the previous year. On its website, Nike responds to the issues of its labor practices “Nike is committed to being a responsible corporate citizen. We work to improve the lives and working conditions of all workers. We dont own these factories, but we take pride in our relationships with them. Nikes relationship with its contract factories is guided by our Code of Conduct and the Code Leadership Standards, a set of labor, health and environmental standards.”4 In response to all the protest, Nike has been developing a formal factory monitoring program.
REEBOK
Reebok has lived in Nike’s shadow since 10, when the industry giant surpassed Reebok in sales. As a result, Reebok has not been under the extreme scrutiny that Nike has faced. There are those opposed to Reebok’s labor practices nonetheless. Doug Cahn, director of human rights programs for Reebok, says “Theres a correlation between factories producing good-quality products and those with good working conditions.5 Reebok seems to have taken the human rights issue to heart. To ensure that production standards were compliant with human rights, Reebok formed a task force to establish international standards concerning labor practices. The task force drew on information from outside the company to form standards, which made sure the standards developed were very effective. Internationally accepted standards were looked at along with standards set forth by the United Nations. Reebok sends auditors, often unannounced, to check factory conditions. The company also uses a type of double check ADIDAS
In 1, Robert Louis-Dreyfus was appointed chairman of Adidas. He brought with him radical change concerning the manufacture of Adidas products. Dreyfus decided that the company should focus more on marketing and branding and less on production, so he closed the majority of the plants in Western Europe and moved most of the production, 0%, to Asia, Southern Europe and Northern Africa. As a result of this shift, Adidas has been criticized for having poor working conditions in their factories. Criticism has put pressure on Adidas to monitor their factory working conditions more closely. Whereas Nike has its Code of Conduct, and Reebok has its Human Rights Production Standards, Adidas has no code of conduct concerning the treatment of workers in their factories. In January of 1, Adidas appointed David Husselbee as the new director of social and environmental affairs. Up until Husselbee was hired, Adidas concerned themselves with human rights issues on a makeshift basis. They
The program was designed to monitor working conditions and treatment of workers in Nike factories. Regular audits are carried out in each of its factories to make sure no children are employed. In addition, Nike has signed the United Nations’ Global Compact which is “an initiative launched…to encourage businesses to implement certain human rights, labor and environmental principles.” In 1, Nike put into action a Code of Conduct that deals exclusively with labor rights. The company also joined President Bill Clinton’s Fair Labor Campaign and created a labor practices department in 16. To improve the well being of workers, Nike employed micro-credit programs, adult education, and better factory monitoring. Nike also hired an audit firm to make sure contractors in Vietnam, China, South America, and Indonesia adhered to the labor standards that had been set. “Nike now claims it is a market leader not only in shoe design but also in labor standards.”
process to ensure proper working conditions, “third-party auditors are used in countries where the company does not believe it has personnel with the necessary expertise to judge working conditions.”5 Reebok has recently developed software with SAP, a logistics software supplier, that allows them to track human rights issues in developing and undeveloped countries. The software will allow Reebok to monitor workers’ wages and even the number of hours each employee works.6 A computerized tracking system such as this will enable Reebok to respond faster and more effectively to any human rights issues that might arise. In 17, the Department of Labor released its first “Trendsetters Report”, which is “ a list of retailers and manufacturers who have taken action to combat sweatshops and ensure that their shelves are stocked with only ‘No Sweat’ garments.”7 Reebok was among the companies that made the list. Companies mentioned on the list were found to have a strong commitment to would only worry about issues when the issues arose. After the company saw the amount of pressure that Nike was under to address labor issues, Adidas decided to put a human rights policy into action. Adidas, though, did not use the program to effect public relations, but rather used it as a defensive tool. ’We see our human rights policy as a natural part of being good corporate citizens,’ says one executive. ‘Emphasising it would only detract from our brand.’10 Most of the action the company takes about concerns that arise is interactive, meaning they wait until a problem is reported to solve it. “The group plans to take a more proactive role in the future.”10 This way the company could fix any problem before it really becomes a problem. Husselbee is currently working with activists and campaigners to come up with plans of action to “provide independent confirmation of progress (or lack of it).”10 By imploring this type of strategy, Adidas gains a lot of credibility when it comes to dealing with
The media is starting to see that Nike has made a solid effort to improve labor issues and that the changes they have made are having a positive effect. Numerous newspapers have reported that labor conditions have improved in Nike’s factories. As a result of the actions Nike has taken to deal with the voices of dissent, their sales figures have been steadily increasing since the slump in 18. Nike has made a sincere effort to improve working conditions for its employees in undeveloped countries, and this translates directly to increased sales figures.
labor laws. These companies comply with law enforcement when violations are found and also monitor work conditions strictly to ensure no human rights violations. Reebok’s company website shows a strong commitment to human rights as well. “We believe that we all have a responsibility to understand human rights, to expose injustice, and to support efforts that ensure dignity and rights for all human beings. The business practices we have developed and implemented around the world and our history, are a reflection of our commitment.” It appears that Reebok is more effective at dealing with any negative opinion that may arise from any of its labor practices. Even though most protest against Reebok is eclipsed by protest against Nike, Reebok effectively deals with issues that surface concerning labor and human rights. protest. Adidas is making strides to respond to concerns regarding their labor practices. But ultimately they need to develop a set of standards that all their factories must abide by. They should also develop a reliable system to monitor the conditions in their factories.
Advertising campaigns
Advertising is a huge part of the athletic shoe industry. Companies spend a large portion of their revenue on advertising. A lot of pressure is put on the companies to come up with new and successful advertising campaigns. If a campaign fails, the companies sales suffer as a result. NIKE
Nike has always been an industry leader when it comes to advertising. Their ad campaigns are known all over the world as being widely successful. Nike is truly a trendsetter when it comes to advertising, not just for shoes, but for the advertising industry as well. In June, Phil Knight, CEO and co-founder of Nike, will be named advertiser of the year for the second time (the first being in 14) at the Cannes International Advertising Festival. After gaining some steam and noting steady increases in sales, Nike started to establish itself in the industry. “Into this Eastern establishment came this weird new cultish… sensibility a definite west by northwest, New Age-y, maniacal, running/fitness/discipline subculture. The company was all about the clarity of matching technology to athletic performance-and, in the ads, showing the passion that resulted.”11 By going against the norms in advertising, Nike was able to distance itself from other shoe makers and thus establish strong customer core. There are many aspects of advertising that have REEBOK
Unlike Nike, Reebok has not really been known for their revolutionary advertising. During the early 0s, the battle for market share in the athletic footwear industry was a heated one, but after Nike took the lead, the market shares have remained fairly constant, with Nike far in the lead. Nike dominates big name athletes to endorse its products, so Reebok has decided to focus on non-athletes, namely hip-hop artists, to create their own signature collections. This strategy seems to be working for the company so far. Reebok has realized that if they were to succeed in the market, they had to focus on selling to the urban teenage male. Reebok launched its Rbk campaign, which moved away from the Reebok image and attempted to establish one that would get the attention of the urban teenage male. To go along with its new hip-hop urban image Reebok signed Allen Iverson to release his own shoe collection, which has become a top seller for the company. Reebok has also recently moved beyond athletes to sign rappers Jay-Z and 50 Cent in hopes to tap into their popularity. ADIDAS
Adidas uses strategies used by both Nike and Reebok to market their products. The company plans on raising their global media spending by up to 0%. Like Nike, Adidas signs athletic superstars to endorse their products. Recently they signed All-Star Tracy McGrady to a lifetime deal and also signed Tim Duncan of the San Antonio Spurs. Most of Adidas’ advertising is geared toward the European market since about 65% of their sales are made there. They recently signed soccer sensation David Beckham to an endorsement contract to boost sales in England and across Europe.16 Beyond using big stars to endorse their products, Adidas has rode the retro wave to bring back its trademark logo, the Trefoil. Retro styling is making a big impact on the footwear industry. Consumers associate the Trefoil with retro styling, and because of its recent resurgence, the logo is becoming more popular. Adidas has shifted a bit from performance and is now focusing on retro style. 17 As long as Adidas realizes the retro fad is most likely a fleeting one, they should
brought Nike success. Its use of famous celebrity athletes in advertising their products is unrivaled by any other company. Through clever ad campaigns, Nike was able to “humanize athletes.”11 Nike placed famous athletes that seemed almost “untouchable” in often humorous situations. Many of the athletes would mock and poke fun at themselves, making them seem more human and less untouchable. Ads with Bo Jackson, Michael Jordan, and Charles Barkley are just a few that demonstrated this concept and were exceptionally successful at doing so. Company advertising in the shoe industry changes with different social and economic trends. Nike, on the other hand, often creates their own trends with their advertisements. The current throw back jersey craze sprouted from Nike’s basketball ads set in Rucker Park, in Harlem, that recreated pick-up games played there in 175. Nike’s use of technology in advertising is among the best in the world. The advertisements are The strategy seems to be working well for Reebok. Jay-Z’s Reebok line has become the fastest selling product ever for the company. Critics of this strategy say that Reebok is running a risk associating themselves with the unpredictable rap industry. The popularity of the stars they sign on may wane within the near future, but that’s a risk they’re willing to take.1 On October 7, 00, Reebok made a big move concerning their marketing and advertising by hiring Sonny Voccaro, former marketing guru for Nike. Voccaro is responsible for signing big names like Michael Jordan, Kobe Bryant, and Tracy McGrady to endorsement deals. Voccaro is a big addition to the Reebok staff and will most likely do great things for their advertisement campaigns. Reebok is currently launching a $50 million global campaign that focuses on its vector logo. Through the campaign “Reebok is hoping to create an iconic connection to its brand mark.”15 Reebok is hoping to make the vector seen as a symbol not have any problems with sales. If too much focus is taken away from the performance aspect of their products and put instead on retro styling, Adidas could lose a lot of customers due to inadequate athletic products. The company should ride the retro wave for a while but realize that the performance qualities of their products is a permanent consumer draw.
“so well-executed that the editing is about twice as good as it has to be.”11 Use of the best technology enables Nike to create ads that truly grab a consumers attention, which could make them think about buying Nike the next time they go shopping for a pair of shoes. Nike’s new “Speed” campaign puts the focus on individual athletes and their stories. The spots focus on runners and the determination they exhibit. 1 Nike’s current strategy still focuses on signing big name athletes to sell their products. This strategy appears to be extremely successful for Nike, as they are currently have the top market share in the industry. Compared to Reebok and Adidas, Nike has a definite advantage when it comes to contracts with big name athletes. Michael Jordan, Derrick Jeter, Warren Sapp, and now Lebron James, who currently signed a $0 contract with Nike, are just a few of the big names Nike has contracts with. of authenticity and performance. Reebok wants to do for the vector what Nike did for the Swoosh. Reebok hopes that their $450 million contract with the NFL and NBA to be their official apparel suppliers will put the vector out there for everyone to see. The company feels that if everyone sees the vector connected all over the NFL and NBA, they will associate it with a quality product.15 Reebok’s strategy of moving toward more of a hip-hop and urban feel seems to be working for them so far, but as the popularity of the people they have signed diminishes, which it most likely will if the hip hop industry stays true to current trends, then they will have spent millions of dollars on successfully short lived campaigns. Nike has the right idea signing athletes; although there will be a few busts, for the most part the stars remain popular. As for promoting the vector, Reebok is moving in the right direction. If they can manage to get consumers to associate their logo with quality and performance, they will ultimately sell more products.
Factory Distribution
Distribution is simply the way in which a company gets its product to the consumer. Successful companies have found an optimum way to distribute their products. NIKE
Nike has developed superior control of its distribution channels. “Nikes distribution is as about as tight as you can make a consumer goods-oriented business.”1 The company has developed a Futures program to remove a good portion of inventory risk associated with distribution. A retailer puts in a non-cancelable order months ahead of scheduled delivery. This system helps Nike predict the demand for a product and also assures the buyer will have an adequate supply. Almost 0% of US footwear is ordered under the Futures program. Nike improves distribution efficiency and output by improving its distribution facilities, most notably their recent improvements to their Memphis distribution center. State of the art conveyors and sorters were installed to achieve a higher throughput. “This is now the kind of system befitting an industry leader.”0 The measures taken toward improvement have more than doubled the amount of product that is distributed from the facility. Order accuracy has risen to .8% as a result of the new system. ADIDAS
In 16 Adidas had quite a scare concerning the distribution of its merchandise. The problem occurred with the company’s automated distribution system and almost brought distribution to a stand still. Adidas has since entered into a long term agreement with Caliber Logistics to distribute footwear in the United States. Adidas Canada has made many improvements in distribution. In 17 they made a transition from paper based distribution to a fully automated one. After the addition of Salomon and Taylor Made to the Adidas name, the company had to move two and a half times more inventory. The change to a fully automated distribution system made it easier for the company to handle the influx. Implementation of the fully automated system has cut distribution costs in half as well as made a significant improvement in order accuracy. Adidas has immensely improved its distribution since the mid 0’s. Now customers and retailers can get the product they want when they want it. A smoother operating distribution system will REEBOK
Reebok is taking big steps toward improving their distribution system. A state of the art distribution center has been set up in Massachusetts. The center is controlled by a new warehouse management system that allows for products to be distributed more effectively. This new system has improved employee productivity and kept the inventory accuracy rate high. Reebok realizes that to stay competitive in the industry, their distribution system needs to be nearly flawless. Any problems with distribution could have a negative effect on overall sales.
The system put in at the Memphis plant is truly trendsetting. With that kind of attention to their distribution centers, Nike will minimize any problems that may arise from distribution. A continued effort by Nike to make advancements and improvements in their distribution will ultimately lead to improved financial figures. enable Adidas to keep up with Nike in terms of product availability.
Ability to Innovate
A company’s ability to innovate can distinguish it from other companies in the industry. An innovative company will set itself apart from its competitors by constantly coming up with new products and new ways of doing things. In an industry as fickle as footwear, being innovative is key to a company’s success. NIKE
Nike has been a leader in innovation in the footwear industry. The creative directors have developed the Design Ethos, which sets parameters for Nike’s approach to design throughout the entire company. There are four design functions at Nike footwear, equipment, apparel and identity. Each group contains individual groups, such as men’s basketball, and each of these has its own design team. “Over the years Nike has learned from hard experience that what the athlete likes and what the consumer likes are often not the same thing.”4 Many of Nike’s designs are created for the consumer, not just for professional athletes. That doesn’t mean that the product is inferior in any way in terms of performance, it just means that Nike factors in the wants of normal consumers into their designs. “Our designs are required to perform for elite athletes as well as for everyday athletes,’”4 says one executive. Nike has a big research and development department available REEBOK
for the designers to use in developing new products. Nike set up the Advanced Innovation Team to continually and totally innovate for the company. The team has the responsibility “to enforce the idea that design is not just about simple evolution. The focus for AIT was real innovation -- solving a problem in a brand new way.”4 For the team, innovating starts even before a design is made for a new product. They must look at other factors, such as how different textiles perform, to set the groundwork for an innovative design. John Hoke, Nike global director for footwear says, “From my perspective the true beating heart of Nike is innovation, therefore insight is the fuel for our imagination and creativity. It is the genesis point of all our ideas at Nike.”4 Nike’s approach to innovation puts it well ahead of the pack in terms of both sales and product innovation/development. The company’s commitment to innovation will ensure it future success.
Main Customer Groups
While looking at the different trends and styles of present day athletic footwear, we can further our research within the product and look at the different customer groups that our three companies focus their attention towards. We are primarily looking at the three different companies and the rules of style that may apply to a specific customer group for this product. In some cases, the customer group that they are focusing on may greatly impact the demand for the product because of different influences whether it is there income level, influence of childhood, or even there changing preference of a specific product.
Footwear is classified within many different categories, which makes the research of specific athletic footwear more difficult. For example, we are focusing on the companies of Nike, Adidas, and Reebok, and all of these companies make numerous styles of shoe lines. They range from golf cleats to soccer cleats to cross-country shoes. So when trying to determine the main customer groups, each line of shoes is basically broken down within the group that the specific product is directed towards. So when looking at the different types of customer groups within the athletic footwear industry, some of the key customer demographic trend are broken up into different generations of tastes in style.
The industry of footwear can be broken up into three main customer groups, which are the Baby Boomers, Generation X, and Generation Y. These customer groups do not have much in common except for their love of shoes and the different tastes in the new fashion trends of footwear. These three generations are broken down as follows Baby Boomers are from ages 5-5, Generation Y are consumers from 4-1, and Generation X is consumers from -. As we develop ideas about the main customer groups within the footwear industry we can conclude that the Baby Boomers account for 1% of the population, which is equal to about 81 million consumers. Generation Y is the second largest group that accounts for 8% of the population which represents about 75 million consumers. The smallest customer group is Generation X, they comprise about 17% of the population, which equals about 46 million consumers.1 Collected information from many consumer surveys rates Nike high among the consumers of Generation Y and X. Nike has become more appealing among younger consumers and has shifted away from the Generation of the Baby Boomers.
Nike and many other large shoe industry retailers are shifting there marketing direction from the Baby Boomers to the younger consumers of Generation X and Generation Y. There are many reasons to why the industry is trying to change their target market to younger viewers. As people become older many of there attitudes, priorities, and time obligations have decreased their ambition for shopping. Now that many of the Baby Boomers are within there forties and fifties, many of there priorities have shifted towards the future, in a sense that they need to save for retirement, different tuition payments for there children, and also different healthcare necessities that are important to them and there family. Lets say a consumer from the Baby Boomers generation was going to purchase some shoes, they are more likely to have a longer life span with those shoes then someone who is within there teenage years. Younger consumers put more wear and tear on their shoes than someone who is about 40 or 50. Many companies within the footwear industry know that the spending power of the Baby Boomers has not come to a halt. In Fact, there is still a very prosperous market out there, but the key is finding it. One way that the industry is trying to increase the spending among the Baby Boomers generation is by offering clothing lines in a more conservative style and also in a wide variety of sizes.
As mentioned before, the more present day trends of the footwear companies are geared on marketing to Generation Y. Many companies within the industry have come to the conclusion that by establishing trends among Generation Y, there becomes a greater vision and influence in future product design. By the influences of Generation Y, its impact does not only affect that specific consumer group, but filters to other Generations like X and also the younger brothers and sisters of Generation Y. It has always been said throughout the industry that teenagers show a great amount of brand loyalty to there apparel manufacturers. That is why many manufacturers try to establish a marketing ploy that influences children who want to dress like their older siblings or elders. So if they get them while they are young, they are more likely going to see profits from the children within the future.
Generation Y
Ages 4-1 Generation X
Ages - Baby Boomers
Ages 5-5
Growth Rate
(10-000) 80,61,468-
71,87,755=
8,7,71/
71,87,755=
.114 ,81,74-
4,175,=
-,84,08/
4,175,=
-.07607 8,86,47-
6,801,8=
0,04,40/
6,801,8=
.1885
Size of the group relative to the total population and is that changing 75 million consumers representing 8% of the population. The group of Generation Y has been increasing at a rate of 11% 46 million consumers representing 17% of the population. The group of Generation X has been decreasing at a rate of 7% 81 million consumers representing 1% of the population. The Baby Boomers have been increasing at a rate of %
Income Levels4
(000-001) Median Income
Male
000 $,546
001 $,01
Female
000 $7,60
001 $7,467 Median Income
Male
000 $0,54
001 $0,510
Female
000 $1,04
001 $1,47 Median Income
Male
000 $78,61
001 $7,444
Female
000 $45,80
001 $46,606
Unemployment Rate Changes5
Generation Y in the year 00, there were ,61,000 people unemployed.
In 001, the unemployment rate average for 16 & over was 4.7%. In 00 the unemployment rate average was 5.78
Generation X in the year 00, there were ,0,000 people unemployed.
In Summary of the unemployment rate of 001was 4.7 percent and in 00 the average unemployment rate was 5.78 The unemployment rate for this generation was 4.1 percent in the first quarter, up from .4 percent three years earlier. The overall jump in that period 4.0 percent to 5.8 percent.
Psychographic 1 Generation Y grew up with strong fashion statements by the media. This can attribute to the fact that this consumer group sows more brand loyalty. Generation X consumers are the type of shoppers that bounce from different high-end stores to the mass marketing stores. Baby Boomers have reached a point in their life in which their priorities have shifted. They are concentrating more on tuition payments, mortgage, and other relative expenses. Modern Trends and styles do not affect this type of consumer group as much.
Psychographic Many of the consumers within Generation Y have developed a mind set of “Spend, Spend, Spend”, which in all paints a picture for many retailers in the future. Generation X is said to fit the description of being very conscious of their style. They are trying to present a look that is impressive to other peers, which makes them feel like dressing up for many occasions. Retailers are trying to get these consumers back into spending more on the modern styles and trends. By doing this, retailers are trying to shift these styles to more of a conservative look. By producing a more conservative look, it will captivate more of the characteristics found within the consumer look.
Factors Occurring in the Environment External to the Industry
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies are withdrawing from Indonesia and Korea due to stronger labor unions, as well as the fact that labor is much cheaper in China than it is in the two aforementioned countries. In Tangerang, Indonesia, for example, the minimum wage rose from 40,000 rupiah/month up to 58,000. (1)() In 16 Indonesia was the hotbed for shoe production in Asia. Now, due to its reputation for “lawlessness and chaos” as well as expensive labor, Nike and Reebok have shut down factories in Korea and Indonesia and relocated to places such as China. Other companies such as Puma won’t even start up business here. These moves will surely raise more issues with those concerned about the treatment of smaller countries by large American corporations. This is the opposite effect of sweatshop issues, because it is eliminating many of them, but consequently is crushing a huge part of Indonesia’s economy. Korean companies are finding ways to counter this exodus and keep the industry alive. (1) Nike has been forced to relocate, moving out of Indonesia, which was once the primary place for their shoe production. Indonesia was once the site of 8% of Nike’s shoe production, which then dropped to 0% in 00, and possibly down to 6% with the closing of its Dosen plant. This will look bad for Nike as people will believe they are being careless about the treatment of its workers by leaving thousands jobless. (1) (1)
Dhume, Sadanand. “Just Quit It.” Far Eastern Economic Review, September 1, 00.
()
Min, Kim Jung. “A New Spring In Its Step.” Far Eastern Economic Review, February 1, 00.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
SARS, a deadly fast-spreading strain of pneumonia, has disrupted the travel to and from Asia, as it is at its most prominent in China, Hong Kong and Taiwan. This in turn has made it more difficult for the shoe industry to coordinate production and control quality. (4) If SARS turns into an even more major epidemic than it already is, it will play a huge role on the way business is done with Asia. Considering the fact that shoe inspections will increase once shipped, the outcome of SARS will “add friction to the cost of doing business in Asia.” This in turn will show up in the price of the product. (5) Nike realized a lot from the SARS outbreak. The impact of SARS had huge impacts for Nike, as it lost employees in Asia, encountered difficulty in coordinating production, and also had to deal with West Coast port closures. As Ray Knight states SARS gave “global business a wake-up call as to just how quickly markets can be squelched by unexpected circumstances.” (6) (4)
Standard and Poors Current Environment http//www.netadvantage.standardandpoors.com/
(5)
Maiello, Michael. “Aftershock.” Forbes, vol. 171 no. . Apr. 8, 00. p. 44-46.
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Major shoe companies have faced heat in the form of boycotts and protests for the supposed running of “sweatshops” in smaller countries where labor is extremely cheap. Companies such as Nike have been said to rudely mistreat their employees and force them to work in terrible conditions. (7) For much of the industry, sweatshop scandals help them because most of the time they have to do with Nike. However, as Reebok pulls a large percentage of their production from Indonesia, many worry that the change in locations in the chase for lower wages will make abuse charges prevalent once again. (7) Nike has battled with accusations that it runs sweatshops for roughly 1 years now. Nike is currently in a U.S. Supreme Court battle in order to gain first amendment rights to defend itself. Nike is trying to earn the right to defend itself, after it had been sued for supposedly defending itself with lies. Any accusations questioning the responsibility of Nike as a corporate citizen is attention that they would like to avoid at all cost. (8) (7)
Ellis, Kristi. “Global Labor Pains Advocates Worry Abuse Will Rise as Factories Relocate.” FN, 58 (40), October 14, 00.
(8)
“Courtside with Nike.” http//arizonarepublic.com
May 6, 00.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The sluggish economy has forced major forces in the shoe industry to take major action, way more than in the past when the economy was a little more stable. Results of this include buyouts of smaller companies, as well as pushing sales in other countries that currently have stronger economies. () The athletic shoe industry is one of the most recognizable global markets. Reebok, Adidas and Nike are all recognizable no matter what country you’re in due to the endorsements of major American and International athletes. The direction that the sluggish economy has forced the industry to take will only make it that much more dominant once the American economy recovers. () Nike has been forced to place a little more emphasis on ventures other than that of marketing the new Jordans, for instance. In Ray Knight’s letter to the shareholders he discusses the fact that Nike placed major focus on product, advertising, and getting management caught up to sales. All of these were achieved and because of this Nike will be stronger once the economy begins to recover. The good news is, as Standard and Poor’s predicts, is that GDP increased .% in the second quarter and that it will pick up in the second half to achieve .5% for the year. (6)() ()
Standard and Poor’s Industry Profile. http//www.netadvantage.standardandpoors.com/
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The current industry sees the internet playing an increasingly important role in the sales, marketing, and global reach of major athletic shoe companies. (10)(11)(1) If one visits any of the big three company’s websites, it can link to 18 countries on Reebok’s site, on Adidas’ and 16 on Nike’s. The websites also give the opportunity for customers to contact the company as well as buy products from the website without having to go to the store looking for a particular product that might not be in stock. (10)(11)(1) Nike by far has the most extensive website of any of the three major brands. While Adidas and Reebok do have impressive sites, the Nike site is incredible in its extensiveness. Nike also offers a new product called the NikeId in which you can create your own shoe, custom made for the customer. The internet is an excellent tool for reaching customers and broadening the scope of the company. (1) (10)
www.adidas.com
(11)
www.reebok.com
(1)
www.nike.com
Factors Relating to Industry Actions
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The athletic shoe industry has begun to take notice of the need to give women attention in this market. Women need active footwear and apparel as much as men do, thus the advent of new stores and extended women’s product lines by many of the major shoe companies. (1) Various companies are opening stores strictly for women. These companies, such as Nike, Adidas, Puma, and Champion, are expanding their lines to incorporate enough products to open a store, or boutique within a larger store, that focuses strictly on women. Dick’s opened two women’s only stores in Buffalo and Albany under its brand name Ativa. In order to be successful, these women’s stores are believed to need a wide selection of merchandise and exceptional customer service. (1) Nike Goddess, a website that has been functioning since 10, has been opened as a store in a few locations and Nike plans to expand on this idea by opening more stores. These stores will either be separate stores, or boutiques within larger stores. Lady Foot Locker will incorporate Nike Goddess into its 600 stores, Nordstrom will incorporate it in its department store, and Macy’s will get a smaller version of the store this year. This is nothing but a good thing for Nike as it will only expand its market and try to double its sales to women by mid-decade. (14) (1)
Ryan, Thomas J. “Girl Talk.” Sporting Goods Business 6, no. 6 (Jun 00) p. 18.
(14)
Warner, Fara. “Nike’s women’s movement.” Fast Company no. 61(Aug. 00) p. 70-75.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies are searching overseas for big name athletes to endorse their products, and thus expand their market in order to drive sales. () The recent U.S. economic downturn has caused people within the United States to buy less of the really expensive athletic shoes such as the new $00 Jordans. For this reason, and the basic idea of just driving sales to a wider market, the major companies have worked on gaining endorsements from major international athletes. Reebok has recently won its first ever endorsement battle with Nike by winning away Yao Ming in a newly signed endorsement deal. This should give them a huge leg-up in the Chinese footwear market where Basketball is the second most popular sport in the country. (15) Nike has realized that by signing major athletes from sports around the world, they can increase sales and market themselves on a much larger scale. Nike has signed the likes of Ronaldo, the Brazilian soccer player, and sponsors such National soccer teams as Brazil, Korea, and Manchester United of the English Premiere League. Because of this, Nike has seen International sales exceed domestic sales for the first time as they reached 51%. (6) ()
Standard and Poor’s Industry Profile. http//www.netadvantage.standardandpoors.com/
(15)
Aoki, Naomi. “Reebok Signs Top Basketball Player Away from Nike.” Knight-Ridder Tribune Business News. October 4, 00.
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies have begun to restructure their relationships with major retailers, as well as form relationships with new companies. One reason for this being so is that certain shoe companies give the retailers an opportunity to increase their profit margins by selling their shoes. (16) Seeing that Nike in many cases creates the trends for this industry, it is easy to understand how their battle with Foot Locker has created an opportunity for companies such as Reebok and Adidas. After the dispute between Nike and Foot Locker, where Foot Locker cleared many Nikes off of their shelves, Reebok and Adidas benefited greatly due to the fact that it cleared $50 million worth of shelf space for companies such as themselves. (17) Many thought that Nike would suffer from the problems that them and Foot Locker had seeing that Nike would have to find a new home for $50 million in marquee product. However, Nike has aligned with mall-based retailers such as Footaction and The Finish Line, directly competing with Foot Locker and doing just fine. Nike also combined with The Finish Line for three TV co-op spots this year to push the two companies. (18) (16)
Carr, Bob. “Has Nike won its battle with Foot Locker?” Sporting Goods Business 6, no. 6 (Jun 00). p 10.
(17)
Ryan, Thomas. “Hot off the shelf.” Sporting Goods Business 5, no. 11 (Nov 00). p 0.
(18)
“Finish Line, Nike team again retailer’s inventory of Shox Status shoes shines in humorous spot.” http//rdsweb.rdsinc.com
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Due to the slowdown of the U.S. economy as of late, major footwear companies are seeking to buy smaller ones in order to bolster their own sales and eliminate potential competition. (1) Demand for shoes will probably remain constant even when a larger line buys out a small one. However, many companies that have the means to buy a smaller one are simply doing so to try and keep up with the larger behemoths. By doing so, companies grab market share and can use another products label to help their cause. (0) Nike has recently bought out classic shoemaker Converse, for $05 million, in order to gain additional market share as well as reaching the retro market of the shoe industry, which is becoming increasingly popular. They plan on running it as a separate entity and not change the traditional Converse shoes. This will certainly mean a big boost in sales for Nike. (1) (1)
Standard and Poor’s Industry Trends. http//www.netadvantage. standardandpoors.com
(0)
Ryan, Thomas. “Hungry for Profits.” Sporting Goods Business, 6 no. , Feb 00. p 4.
(1)
Schlosser, Julie. “Nike Goes Old School.” Fortune, 148 no. , August 11, 00. p 150.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Major shoe companies keep trying to come up with the newest and most interesting advertising/marketing campaigns in order to push their product to customers in a way that sets them apart from the rest. () One example of this trend is the way that Reebok has created another way of battling Nike for superstar athletes, that being to market shoe lines from non-athletes such as hip-hop artists Jay-Z and 50 cent. These artists will gain Reebok some “street” credibility as the create signature collections for Reebok extension Rbk. () Nike will most likely have to counter this move assuming that the direction Reebok is taking has huge success. Nike has always gained endorsements solely from athletes, but it may stand to learn something from Reebok if they find success. Nike may face some problems competing with Reebok seeing that Reebok now has Allen Iverson and Yao Ming as well. ()
Devaney, Polly. “Reebok shoots from the hip-hop in sneaker wars.” Marketing Week. July 1, 00. p1.
Summary of the State of the Company and of the Industry
Footwear Industry
The athletic footwear industry is a market where three top manufacturers dominate Nike, Adidas, and Reebok. The three companies alone together control nearly 70% total market share (Section I part 1). As large as the markets are, there are many new entrants that have made successful forays into the market as new entrants (Puma), however, the overall cost and feasibility are greatly debatable which makes the footwear industry a rather difficult market to enter. One important note about the Footwear industry that is worthy to mention is the underlying nature of footwear as a consumer product. Athletic footwear is much as necessity as it is a discretionary purchase (Section I part 1). This notion is where the industry has risen to levels that provide tremendous value for its consumers. It is no surprise, thus, that much of athletic footwear sales have primarily been attributed to branding and image. Such proves to be the driving factor that has ultimately sustained sales. The current state of the industry has been in its maturity phase for some time. Nike holds the lions share of the market and continues to dominate.
Company Strengths
There are various strengths that Nike is endowed with. Most notably, Nike is the largest manufacturer of athletic footwear and apparel in the world. In terms of footwear, Nike enjoyed control of nearly 4.% of the entire footwear market in 000 at nearly 8 billion dollars (Section I part 1). That is more than both its number two and number three competitors combined! This dominance has helped Nike to become the athletic colossus that it is today. Nikes branding also directly contributes to its advantage due to Nikes ability to not only market shoes, but allows the consumer to take on the vicarious roles of the numerous celebrity endorsers that promote Nike in the first place. Nike has virtually invented the notion of the celebrity endorsement with the likes of Pete Sampras and Andre Agassi in Tennis; Michael Jordan in Basketball; and the recent acquisition of teen basketball sensation Lebron James who signed with Nike for a reported $0 million (Section Part ). The ability to throw enormous amounts of money to these athletes has given Nike a comparative advantage over the number and . In addition, Nikes financial soundness has proven stable through economic cycles. Nike has enjoyed higher margins of sales compared with that of its immediate competition (Section Part 1) and although sales have slumped in the recent economic downturn, Nike appears on its way to regaining profitable levels.
Company Weaknesses
Though Nike enjoys the title of being the largest athletic footwear and apparel manufacturer in the world, it goes without saying that Nike has had its share of company weaknesses. An analysis of the house of quality reveals an opportunity that seems to consistently be overlooked by not just Nike, but from Adidas and Reebok as well. This stems from the inability (or lack of effort) to market to the large baby boomer segment (Section 4 Part 4, c). What would appear to be a market that looks for comfort, price and quality (Section 4 Part 4, c) seems to be a sorely underdeveloped niche that Nike (As well as others) could take advantage of. On other notable weakness is not as readily apparent but a major concern nonetheless. This weakness has to do with Nikes shear size. Being the biggest on the block is not without its trade offs. Nike has had to work hard for its place in the market but adjusting to global pressures, social pressures, and being stuck in branding an expensive shoe leads to limited options in dealing with an environment constantly influx (Section Part ). Nike has made slow adjustments to react to all of these issues on many fronts and Nike is definitely without its critics (Especially from human rights activists groups).
Company Opportunities
One major opportunity that Nike has homed in on regards the foray into the womens market. Nike has made a push to market to women with new product lines, distribution centers, and web stores (Nike Goddess) that are exclusively marketed to women (Section 5). Another way that Nike has been able to take advantage is underpinned with the recent acquisition of Converse (Section a). Such a move is telling of Nikes value of the recent trend for the demand for trendy retro products. The acquisition was intended to position Nike by leveraging the throwback lifestyle. With the current stable demand for such products, Nike is able to reap the benefits by acquiring a company whose entire legend is embodied with a solid retro history (Converse Chuck Taylor All Stars). Not deviating far from that emphasis on trends is the decision to reproduce older shoe models that were conceived of decades ago. The hip hop community has been a driving factor in sales with the surge in popularity of the Air Force One model shoe. In fact, the shoe has been resurrected in multi-platinum record sales from the song Air Force Ones by rap singer Nelly. Nike has thus had the fortunate situation to be in a position to cash in on such opportunities.
Company Threats
Nikes most immediate threats stem from environmental factors. The SARS epidemic in Asia has been a prime example of how Nikes company can be affected by conditions in far flung places like Asia. The implications of the epidemic were large in scale in that Nike has had to close ports on the West Coast and take other actions to deal with the virus (Section V). Another trend that has left a sour taste in the mouth of Nike involves the human rights pressures to improve working conditions and to directly deal with the sweatshops that Nike has been accused of (Section V). Such controversies have placed CEO Phil Knight in the role as global villain which can detract from Nikes impression on the public and overall performance. Increasing expenses of relocation, improving factory working conditions and dealing with negative publicity has led Nike to a take on a defensive position on an ongoing basis.
Balanced Scorecard
Financial Measures Process Measures
• Profit margin
• Cost of sales as a percentage of total sales
• Return on equity
• Market share
• Return on investment • Percentage of deliveries made within a specified number of working days from the date of order
• Average number of defects per shoe at final inspection
• Labor cost and usage per 1000 defect free units
• Percentage of shipments received on promised date but after the promised time
• Average time to adjust to change orders.
Organizational learning and Organization Development Measures Customer Satisfaction Measures
• Average delivery time to distribution centers
• Periodic employment performance reviews
• Quality circles utilized to rate internal team based performances
• Time spent dealing with bottlenecks within supply chain
• Ongoing inventory of distribution channels Segments are Generation Y
Generation X
Baby Boomers
• Average dollar amount spent on athletic footwear per year in each segment
• Average distance traveled to purchase Nike products
• The percentage of customers within each segment that value the quality of the product
• Average number of repeat customers that purchased Nike products.
• The percentage of customers who purchase Nike products based on image
Nike’s Current Strategies and Goals
Nike has in placed several strategies that encompass improving growth and profits in a variety of areas. The struggling economy has not changed Nike’s attitude towards growth. One strategy that Nike focuses on, in continuing to help the company grow is Person Marketing. Nike has been using the best athletes, and sports teams (or clubs) all over the world to help market their products. The regenerative nature of sports has allowed Nike to sign new upcoming stars like LeBron James, Carmelo Anthony, Lleyton Hewitt, Michael Vick and others. These are the athletes that will push Nike beyond their expectations and will set the standards for the next generation to exceed. Nike’s second greatest source of potential lies with the products the company is working on. Nike’s design team is constantly developing new concepts in speed and agility to give athletes the latest innovative equipment to improve performance. The third strategy that Nike uses, perhaps the most important, is advertising and marketing. These two components capture the essence of the product and the attention of consumers around the world.
These strategies support the financials especially profit margin and market share. Under consumer measures Nike’s strategies also support the percentage of customers who purchase Nike products based on image.
Nike
Remy Ajluni
Adam Brook
Anthony Colletti
Elizabeth Crompton
Conrad Pilewicz
Michael Ramos
Current nature and structure of the athletic footwear industry
The athletic footwear industry is a highly competitive environment where the top four manufacturers hold over 70% of the market share. The barriers to entry into the industry are comparatively low, as anyone with new creative design ideas can produce and market their product, but the success of smaller companies is oftentimes shaky. Brand loyalty, ample capital, and broad based sourcing create an environment where the bigger companies such as Nike and Reebok have little trouble maintaining market share. Nike enjoys the largest share, with 4.% of the nearly $8 billion market in the year 000. Reebok was second with 11.%, Adidas had 10.8%, and New Balance had .6% of the market. The remaining 5% must be divided among the numerous smaller companies fighting for a shot at survival.
One of the important characteristics of the footwear industry is the fact that the product is necessary to consumers, yet very much a discretionary purchase as well. The actual structure of athletic shoes does not change very much from season to season. The design and fashion aspects are what significantly differentiate one product from another. Due to these factors, athletic shoe purchases are largely dependant on economic conditions. When the economy is good and consumers are enjoying plenty of disposable income, they are more likely to make new purchases to update their shoe collections. When there is a shorter supply of income, consumers will put off purchases until they are absolutely necessary and the price of the shoes is low enough.
Currently, the athletic shoe industry is performing well. Overall footwear spending in the United States has decreased in recent years, but athletic shoe sales are increasing. In 001 $15.1 billion was spent on footwear while in 00 the industry experienced a 5% decrease to $40.56 billion. In the athletic sector, consumer sales have increased. The number of shoes sold in 00 was 7% higher than 001 sales, reaching 48.6 million pairs. Although sales are up, manufacturers are still looking for additional opportunities because the average price paid has decreased from $8.0 in 001 to $6.61 in 00 or a 4.% loss. These conditions of added sales but declining prices have led to fairly slow growth in the industry.
Because the US market has reached its maturity, manufacturers are looking at the opportunities in foreign markets as the next step for growth. The US population growth rate is extremely low, 1% per year, but the populations of developing countries are exploding. The abundance of opportunity in foreign markets has allowed the footwear industry to thrive when domestic growth is nearly non-existent.
Within the footwear industry, manufacturers typically produce their product and use their distribution channels to circulate the goods to retailers and, ultimately, consumers. Some companies such as Nike have opened a limited number of retail stores themselves to diversify sales channels and lower dependence on retailers. Retail stores by manufacturers allow them to more effectively maintain contact with the consumer and collect feedback, but are not currently a feasible route of distribution for the industry on a large scale. Manufacturer’s relationships with retailers are pivotal. The retailers have significant power over the manufacturers. By lowering the amount of inventory that they hold, retailers have shifted the inventory risk to manufacturers. Also, because they are the main routes of transmission, retailers have significant leverage over manufacturers on many aspects of the industry such as pricing, product labeling, or cooperative advertising where both share costs.
Key factors that influence success
Brand awareness is one of the biggest assets that an athletic shoe company can have. Consumers are constantly exposed to endless advertising and marketing campaigns for never-ending product lines. If a company is able to establish brand awareness, they will have a significant advantage in grabbing consumer’s attention and, therefore, market share. In today’s society where consumers have significantly less time to shop and compare, brand awareness is critical. If an established brand name effectively conveys the messages of quality and dependability, consumers will automatically go to that brand relying on the image that has been created when they don’t have time to shop around.
Manufacturing efficiency is something that companies are constantly striving for as well. Athletic shoe manufacturers must balance the costs of labor, raw materials, shipping, import tariffs, and technological advancements. In an effort to keeps costs down, the industry has been looking to overseas sourcing. Favorable legislation regarding foreign manufacturing has led to a huge increase in foreign sourcing. In order to diversify supply and production lines, manufacturers have spread out their operations over many areas to avoid over concentration in one region. With this strategy, if one country or region experiences problems that interrupt production, the affected company is not completely out of options and can still accomplish production.
Distribution channels dictate who a company’s customer will be and how they will get the product. The footwear companies must choose their channels carefully because they want to make the product available, yet remain true to their image and goals. Retailers account for the largest percentage of sales, so manufacturers must be especially careful with their relationships with them. If a disagreement arises between manufacturer and retailer, the manufacturer could face potentially extensive problems getting the product to market. A recent example of this occurred between Foot Locker and manufacturer Nike. In an attempt to carry more of the lower cost shoes that consumers are demanding, Foot Locker cut back on their high-end purchases from Nike significantly. Nike, in turn, had to look for other outlets for their signature lines.
The ability of companies in the industry to shorten their design, development, production, and distribution cycles is vital to success. In the past, retail stores could carry a product months in advance of a projected need, but now consumers want to buy closer to when they actually experience the need for the good. With the shortened cycles, manufacturers can place more of an emphasis on styling and keep up with the changes in fashion.
Technological advancement is becoming more and more of a player in the footwear industry. With computer-aided design (CAD), companies have been able to successfully shorten their design to distribution cycle to only a few months. Previously, the new product development phase oftentimes took years. Also, new technology has facilitated new quick-response programs that link retailers with manufacturers to allow the retailer to have the correct inventory when it is needed called EDI. Immediately after a sale is made, electronic point of sale scanners read the information related to the sale such as price, product, size, etc. and notify the manufacturer of the sale. With this, the manufacturer is able to accurately modify production to fit consumer demand. Also, retailers are not required to hold as much inventory with this system, which lowers costs for them and, ultimately, consumers.
Demand cycles
While footwear is definitely a necessity for the general population, most footwear purchases are discretionary. Shoe design does not significantly alter in fundamental structure from season to season, so any additional purchase by the consumer is probably for fashion or style reasons. Due to the largely subjective nature of athletic footwear purchasing, the success of the industry is dependant on the current economic cycle. When consumers are concerned about future economic conditions, they will put off their purchases until their confidence rebounds. As can be seen by the graph below, consumer confidence hit its peak around 000 and has been fluctuating ever since. After the events of September 11, 001 and then when consumers were concerned about impending war in Iraq, confidence drastically dropped, but was able to rebound somewhat. Industry sales in 000 were around $. billion, dipped to $8. billion in 001 largely due to the drop in consumer confidence after September 11, and began to recover in 00 to a little over $ billion.
In addition to the amount of confidence that consumers have for the future, the amount of disposable income available to them directly affects how much is spent on athletic footwear. When consumers experience a drop in disposable income, discretionary purchases such as footwear are put off. One general exception to this trend within the industry is due to the fact that teenagers account for a large portion of industry sales in the athletic footwear sector. Teenagers are responsible for % of all athletic shoe purchases and are typically not as concerned with the costs of goods as older consumers are. When adults are saving as much as they can, teens will still spend any disposable income that they have. Also, teens are more willing to pay for the higher priced shoes while adults are reluctant to buy the specialty goods.
U.S. Department of Commerce Bureau of Economic Analysis
Competitive forces affecting the industry
-Potential new entrants
The footwear industry includes moderate barriers to entry. Any person with a design that interests consumers can outsource their production to an independent manufacturer and can potentially enter the market. The capital and distribution channels that are required for success make it difficult for the smaller entrants to flourish though. The top manufacturers absolutely dominate the industry, with Nike holding over 40% alone.
-Bargaining power of Buyers
Buyers in the athletic footwear industry enjoy a great deal of power. Consumers have shown again and again that they will simply wait until prices reach a level they feel is reasonable before making a purchase. Nearly 40% of all shoe purchases are made through discount stores. Also, consumers are able to make informed decisions about a purchase through utilization of Internet websites. The bargaining power of retailers is also a problem for footwear manufacturers. In recent years, retailers have begun to hold fewer inventories, forcing manufacturers to pay for increased inventory levels on their end. Manufacturers must also make sure that retailers are selling the product in accordance with the desired image of the shoe. Nike has recently experienced a disagreement with their largest retailer Foot Locker due to pricing disagreements. As a result, Foot Locker significantly reduced its high end purchases from Nike and Nike decided to shift their high end product sales elsewhere.
-Bargaining power of Suppliers
The materials for footwear production are relatively easy to obtain. To keep costs low, manufacturers have begun widening their supply channels to ensure that they are not depending too much on one source. The recent SARS outbreak is one example why suppliers are diversified. Many manufacturers relied on China to supply low cost goods for manufacturing. When the outbreak made traveling to the area impossible, manufacturers had to find alternative ways to get supplies such as utilizing the Internet.
-Threat of substitute products
Athletic footwear manufacturers must constantly be aware of the threat of substitute products available to the consumer. The major manufacturers such as Nike, Adidas, and Reebok hold a majority of market share but are far from the only choices that consumers have. There are numerous other options for athletic shoe purchases. Although brand loyalty allows some measure of constancy for the manufacturers, if the design does not match the current trend, consumers will simply buy one of the many alternatives.
-Rivalry among competitors
Rivalry among competitors is high. Overall, the product that all manufacturers offer is basically the same. Differentiation of the product is vital for success. Consumers have many options to choose from and manufactures have to tailor their marketing strategies to catch part of the market. The advertising dollars that are spent in the hopes of differentiation are staggering… In 000, Nike spent over $10 million on advertising alone. In a recent deal with LeBron James, a basketball player, Nike beat out Reebok with a $0 million offer. In turn, Reebok took on year old Mark Walker as part of their “the future of basketball” advertising campaign. Finally, in another odd twist of the competition between the athletic shoe companies, Kobe Bryant broke an $8 million deal with Adidas and was going to sign with Nike. Although the relationship between Bryant and Nike disintegrated due to recent events, this just illustrates the lengths that competitors go to in order to outdo each other.
Industry Location on the Product Life Cycle
The athletic footwear industry is in the maturity stage of the PLC. The product itself has become very similar across the board because the wishes of the consumer have been well established. Since the market is fixed, additional profits come only by taking those profits directly from a competitor. The intense competition between competitors in the market is obvious, as that is the only way to succeed at this stage of the product life cycle.
00 sales � 001 sales = 08-804 = 1.5%
001 sales 804
Company location on the BCG
-Nike
Nike is positioned at the cow position on the BCG matrix.
PLC 8-488.8 = .04 or 4.%
488.8
target co sales = 8 = 1.56
Relative Market Share nearest competitor(adidas) 67.7
-Adidas
Adidas is located at the star position on the BCG matrix.
PLC = 67.7-578.87 = .176 or 17.6%
578.87
Adidas = 67.7 = .0
Market Share Reebok 17.87
-Reebok
Reebok is at the cash cow position on the BCG matrix.
PLC 17.87-.88 = .045 or 4.5%
.88
Reebok = 67.7 = .8
Market share Adidas 7718.66
Industry trends
Trend Implications for the industry Implications for target company Citations
Product line diversification. Manufacturers are producing a much wider variety of products for more segments of customers. Retail stores, wider customer base, more revenue Standard and Poor’s Industry Profile for Apparel & Footwear
Overseas production and sourcing Lower material and labor costs as well as a diversified network of production and supplies to ensure stability if one source is rendered unavailable or unusable. Lower production costs and less risk of losing revenue if one region experiences problems.
Foreign sales With the US market at maturity, companies are looking overseas to utilize the vast opportunity in foreign markets. Nike sales in the foreign sector are growing at a much faster rate than those in the US leading to higher profits.
Diversified distribution channels Products are readily available at multiple places, thereby reaching a broader customer base. May dilute the product’s image if put into channels that do correspond with the desired image.
Lower retail inventories Retailers are not carrying as much inventory, leaving that responsibility with the manufacturers. Nike must assume more inventory risk and carry the extra costs associated with inventory. The Wall Street Transcript Interview with John Shanley on athletic footwear companies, 1/7/0.
Response to negative public opinion of labor practices
“Rapid globalization and the unfettered quest for lowest-- cost production-coupled with the value clash between affluent countries and those in the very early stages of industrialization” has lured many companies to manufacture their products in under developed countries. Much protest has arisen concerning companies’ labor practices in these countries. Consumers are becoming more conscious of a company’s reputation and are making purchases based on their opinion of the company. “In fact, a recent MORI poll commissioned by the Co-operative Bank suggests that a third of consumers are `seriously concerned with ethical issues. Within the past year, over half of us have bought a product or recommended a company on the basis of its reputation.”
NIKE
Nike has been a target for protest since the early 10s. Many activists, students and unions have alleged that Nike’s labor practices are unfair and their treatment of workers is inhumane. When compared to Adidas and Reebok, Nike receives the majority of the attention from protestors and activists. After many years of such protest, Nike’s reputation eventually became tarnished and in 18 the company reported a 50% decline in profits from the previous year. On its website, Nike responds to the issues of its labor practices “Nike is committed to being a responsible corporate citizen. We work to improve the lives and working conditions of all workers. We dont own these factories, but we take pride in our relationships with them. Nikes relationship with its contract factories is guided by our Code of Conduct and the Code Leadership Standards, a set of labor, health and environmental standards.”4 In response to all the protest, Nike has been developing a formal factory monitoring program.
REEBOK
Reebok has lived in Nike’s shadow since 10, when the industry giant surpassed Reebok in sales. As a result, Reebok has not been under the extreme scrutiny that Nike has faced. There are those opposed to Reebok’s labor practices nonetheless. Doug Cahn, director of human rights programs for Reebok, says “Theres a correlation between factories producing good-quality products and those with good working conditions.5 Reebok seems to have taken the human rights issue to heart. To ensure that production standards were compliant with human rights, Reebok formed a task force to establish international standards concerning labor practices. The task force drew on information from outside the company to form standards, which made sure the standards developed were very effective. Internationally accepted standards were looked at along with standards set forth by the United Nations. Reebok sends auditors, often unannounced, to check factory conditions. The company also uses a type of double check ADIDAS
In 1, Robert Louis-Dreyfus was appointed chairman of Adidas. He brought with him radical change concerning the manufacture of Adidas products. Dreyfus decided that the company should focus more on marketing and branding and less on production, so he closed the majority of the plants in Western Europe and moved most of the production, 0%, to Asia, Southern Europe and Northern Africa. As a result of this shift, Adidas has been criticized for having poor working conditions in their factories. Criticism has put pressure on Adidas to monitor their factory working conditions more closely. Whereas Nike has its Code of Conduct, and Reebok has its Human Rights Production Standards, Adidas has no code of conduct concerning the treatment of workers in their factories. In January of 1, Adidas appointed David Husselbee as the new director of social and environmental affairs. Up until Husselbee was hired, Adidas concerned themselves with human rights issues on a makeshift basis. They
The program was designed to monitor working conditions and treatment of workers in Nike factories. Regular audits are carried out in each of its factories to make sure no children are employed. In addition, Nike has signed the United Nations’ Global Compact which is “an initiative launched…to encourage businesses to implement certain human rights, labor and environmental principles.” In 1, Nike put into action a Code of Conduct that deals exclusively with labor rights. The company also joined President Bill Clinton’s Fair Labor Campaign and created a labor practices department in 16. To improve the well being of workers, Nike employed micro-credit programs, adult education, and better factory monitoring. Nike also hired an audit firm to make sure contractors in Vietnam, China, South America, and Indonesia adhered to the labor standards that had been set. “Nike now claims it is a market leader not only in shoe design but also in labor standards.”
process to ensure proper working conditions, “third-party auditors are used in countries where the company does not believe it has personnel with the necessary expertise to judge working conditions.”5 Reebok has recently developed software with SAP, a logistics software supplier, that allows them to track human rights issues in developing and undeveloped countries. The software will allow Reebok to monitor workers’ wages and even the number of hours each employee works.6 A computerized tracking system such as this will enable Reebok to respond faster and more effectively to any human rights issues that might arise. In 17, the Department of Labor released its first “Trendsetters Report”, which is “ a list of retailers and manufacturers who have taken action to combat sweatshops and ensure that their shelves are stocked with only ‘No Sweat’ garments.”7 Reebok was among the companies that made the list. Companies mentioned on the list were found to have a strong commitment to would only worry about issues when the issues arose. After the company saw the amount of pressure that Nike was under to address labor issues, Adidas decided to put a human rights policy into action. Adidas, though, did not use the program to effect public relations, but rather used it as a defensive tool. ’We see our human rights policy as a natural part of being good corporate citizens,’ says one executive. ‘Emphasising it would only detract from our brand.’10 Most of the action the company takes about concerns that arise is interactive, meaning they wait until a problem is reported to solve it. “The group plans to take a more proactive role in the future.”10 This way the company could fix any problem before it really becomes a problem. Husselbee is currently working with activists and campaigners to come up with plans of action to “provide independent confirmation of progress (or lack of it).”10 By imploring this type of strategy, Adidas gains a lot of credibility when it comes to dealing with
The media is starting to see that Nike has made a solid effort to improve labor issues and that the changes they have made are having a positive effect. Numerous newspapers have reported that labor conditions have improved in Nike’s factories. As a result of the actions Nike has taken to deal with the voices of dissent, their sales figures have been steadily increasing since the slump in 18. Nike has made a sincere effort to improve working conditions for its employees in undeveloped countries, and this translates directly to increased sales figures.
labor laws. These companies comply with law enforcement when violations are found and also monitor work conditions strictly to ensure no human rights violations. Reebok’s company website shows a strong commitment to human rights as well. “We believe that we all have a responsibility to understand human rights, to expose injustice, and to support efforts that ensure dignity and rights for all human beings. The business practices we have developed and implemented around the world and our history, are a reflection of our commitment.” It appears that Reebok is more effective at dealing with any negative opinion that may arise from any of its labor practices. Even though most protest against Reebok is eclipsed by protest against Nike, Reebok effectively deals with issues that surface concerning labor and human rights. protest. Adidas is making strides to respond to concerns regarding their labor practices. But ultimately they need to develop a set of standards that all their factories must abide by. They should also develop a reliable system to monitor the conditions in their factories.
Advertising campaigns
Advertising is a huge part of the athletic shoe industry. Companies spend a large portion of their revenue on advertising. A lot of pressure is put on the companies to come up with new and successful advertising campaigns. If a campaign fails, the companies sales suffer as a result. NIKE
Nike has always been an industry leader when it comes to advertising. Their ad campaigns are known all over the world as being widely successful. Nike is truly a trendsetter when it comes to advertising, not just for shoes, but for the advertising industry as well. In June, Phil Knight, CEO and co-founder of Nike, will be named advertiser of the year for the second time (the first being in 14) at the Cannes International Advertising Festival. After gaining some steam and noting steady increases in sales, Nike started to establish itself in the industry. “Into this Eastern establishment came this weird new cultish… sensibility a definite west by northwest, New Age-y, maniacal, running/fitness/discipline subculture. The company was all about the clarity of matching technology to athletic performance-and, in the ads, showing the passion that resulted.”11 By going against the norms in advertising, Nike was able to distance itself from other shoe makers and thus establish strong customer core. There are many aspects of advertising that have REEBOK
Unlike Nike, Reebok has not really been known for their revolutionary advertising. During the early 0s, the battle for market share in the athletic footwear industry was a heated one, but after Nike took the lead, the market shares have remained fairly constant, with Nike far in the lead. Nike dominates big name athletes to endorse its products, so Reebok has decided to focus on non-athletes, namely hip-hop artists, to create their own signature collections. This strategy seems to be working for the company so far. Reebok has realized that if they were to succeed in the market, they had to focus on selling to the urban teenage male. Reebok launched its Rbk campaign, which moved away from the Reebok image and attempted to establish one that would get the attention of the urban teenage male. To go along with its new hip-hop urban image Reebok signed Allen Iverson to release his own shoe collection, which has become a top seller for the company. Reebok has also recently moved beyond athletes to sign rappers Jay-Z and 50 Cent in hopes to tap into their popularity. ADIDAS
Adidas uses strategies used by both Nike and Reebok to market their products. The company plans on raising their global media spending by up to 0%. Like Nike, Adidas signs athletic superstars to endorse their products. Recently they signed All-Star Tracy McGrady to a lifetime deal and also signed Tim Duncan of the San Antonio Spurs. Most of Adidas’ advertising is geared toward the European market since about 65% of their sales are made there. They recently signed soccer sensation David Beckham to an endorsement contract to boost sales in England and across Europe.16 Beyond using big stars to endorse their products, Adidas has rode the retro wave to bring back its trademark logo, the Trefoil. Retro styling is making a big impact on the footwear industry. Consumers associate the Trefoil with retro styling, and because of its recent resurgence, the logo is becoming more popular. Adidas has shifted a bit from performance and is now focusing on retro style. 17 As long as Adidas realizes the retro fad is most likely a fleeting one, they should
brought Nike success. Its use of famous celebrity athletes in advertising their products is unrivaled by any other company. Through clever ad campaigns, Nike was able to “humanize athletes.”11 Nike placed famous athletes that seemed almost “untouchable” in often humorous situations. Many of the athletes would mock and poke fun at themselves, making them seem more human and less untouchable. Ads with Bo Jackson, Michael Jordan, and Charles Barkley are just a few that demonstrated this concept and were exceptionally successful at doing so. Company advertising in the shoe industry changes with different social and economic trends. Nike, on the other hand, often creates their own trends with their advertisements. The current throw back jersey craze sprouted from Nike’s basketball ads set in Rucker Park, in Harlem, that recreated pick-up games played there in 175. Nike’s use of technology in advertising is among the best in the world. The advertisements are The strategy seems to be working well for Reebok. Jay-Z’s Reebok line has become the fastest selling product ever for the company. Critics of this strategy say that Reebok is running a risk associating themselves with the unpredictable rap industry. The popularity of the stars they sign on may wane within the near future, but that’s a risk they’re willing to take.1 On October 7, 00, Reebok made a big move concerning their marketing and advertising by hiring Sonny Voccaro, former marketing guru for Nike. Voccaro is responsible for signing big names like Michael Jordan, Kobe Bryant, and Tracy McGrady to endorsement deals. Voccaro is a big addition to the Reebok staff and will most likely do great things for their advertisement campaigns. Reebok is currently launching a $50 million global campaign that focuses on its vector logo. Through the campaign “Reebok is hoping to create an iconic connection to its brand mark.”15 Reebok is hoping to make the vector seen as a symbol not have any problems with sales. If too much focus is taken away from the performance aspect of their products and put instead on retro styling, Adidas could lose a lot of customers due to inadequate athletic products. The company should ride the retro wave for a while but realize that the performance qualities of their products is a permanent consumer draw.
“so well-executed that the editing is about twice as good as it has to be.”11 Use of the best technology enables Nike to create ads that truly grab a consumers attention, which could make them think about buying Nike the next time they go shopping for a pair of shoes. Nike’s new “Speed” campaign puts the focus on individual athletes and their stories. The spots focus on runners and the determination they exhibit. 1 Nike’s current strategy still focuses on signing big name athletes to sell their products. This strategy appears to be extremely successful for Nike, as they are currently have the top market share in the industry. Compared to Reebok and Adidas, Nike has a definite advantage when it comes to contracts with big name athletes. Michael Jordan, Derrick Jeter, Warren Sapp, and now Lebron James, who currently signed a $0 contract with Nike, are just a few of the big names Nike has contracts with. of authenticity and performance. Reebok wants to do for the vector what Nike did for the Swoosh. Reebok hopes that their $450 million contract with the NFL and NBA to be their official apparel suppliers will put the vector out there for everyone to see. The company feels that if everyone sees the vector connected all over the NFL and NBA, they will associate it with a quality product.15 Reebok’s strategy of moving toward more of a hip-hop and urban feel seems to be working for them so far, but as the popularity of the people they have signed diminishes, which it most likely will if the hip hop industry stays true to current trends, then they will have spent millions of dollars on successfully short lived campaigns. Nike has the right idea signing athletes; although there will be a few busts, for the most part the stars remain popular. As for promoting the vector, Reebok is moving in the right direction. If they can manage to get consumers to associate their logo with quality and performance, they will ultimately sell more products.
Factory Distribution
Distribution is simply the way in which a company gets its product to the consumer. Successful companies have found an optimum way to distribute their products. NIKE
Nike has developed superior control of its distribution channels. “Nikes distribution is as about as tight as you can make a consumer goods-oriented business.”1 The company has developed a Futures program to remove a good portion of inventory risk associated with distribution. A retailer puts in a non-cancelable order months ahead of scheduled delivery. This system helps Nike predict the demand for a product and also assures the buyer will have an adequate supply. Almost 0% of US footwear is ordered under the Futures program. Nike improves distribution efficiency and output by improving its distribution facilities, most notably their recent improvements to their Memphis distribution center. State of the art conveyors and sorters were installed to achieve a higher throughput. “This is now the kind of system befitting an industry leader.”0 The measures taken toward improvement have more than doubled the amount of product that is distributed from the facility. Order accuracy has risen to .8% as a result of the new system. ADIDAS
In 16 Adidas had quite a scare concerning the distribution of its merchandise. The problem occurred with the company’s automated distribution system and almost brought distribution to a stand still. Adidas has since entered into a long term agreement with Caliber Logistics to distribute footwear in the United States. Adidas Canada has made many improvements in distribution. In 17 they made a transition from paper based distribution to a fully automated one. After the addition of Salomon and Taylor Made to the Adidas name, the company had to move two and a half times more inventory. The change to a fully automated distribution system made it easier for the company to handle the influx. Implementation of the fully automated system has cut distribution costs in half as well as made a significant improvement in order accuracy. Adidas has immensely improved its distribution since the mid 0’s. Now customers and retailers can get the product they want when they want it. A smoother operating distribution system will REEBOK
Reebok is taking big steps toward improving their distribution system. A state of the art distribution center has been set up in Massachusetts. The center is controlled by a new warehouse management system that allows for products to be distributed more effectively. This new system has improved employee productivity and kept the inventory accuracy rate high. Reebok realizes that to stay competitive in the industry, their distribution system needs to be nearly flawless. Any problems with distribution could have a negative effect on overall sales.
The system put in at the Memphis plant is truly trendsetting. With that kind of attention to their distribution centers, Nike will minimize any problems that may arise from distribution. A continued effort by Nike to make advancements and improvements in their distribution will ultimately lead to improved financial figures. enable Adidas to keep up with Nike in terms of product availability.
Ability to Innovate
A company’s ability to innovate can distinguish it from other companies in the industry. An innovative company will set itself apart from its competitors by constantly coming up with new products and new ways of doing things. In an industry as fickle as footwear, being innovative is key to a company’s success. NIKE
Nike has been a leader in innovation in the footwear industry. The creative directors have developed the Design Ethos, which sets parameters for Nike’s approach to design throughout the entire company. There are four design functions at Nike footwear, equipment, apparel and identity. Each group contains individual groups, such as men’s basketball, and each of these has its own design team. “Over the years Nike has learned from hard experience that what the athlete likes and what the consumer likes are often not the same thing.”4 Many of Nike’s designs are created for the consumer, not just for professional athletes. That doesn’t mean that the product is inferior in any way in terms of performance, it just means that Nike factors in the wants of normal consumers into their designs. “Our designs are required to perform for elite athletes as well as for everyday athletes,’”4 says one executive. Nike has a big research and development department available REEBOK
for the designers to use in developing new products. Nike set up the Advanced Innovation Team to continually and totally innovate for the company. The team has the responsibility “to enforce the idea that design is not just about simple evolution. The focus for AIT was real innovation -- solving a problem in a brand new way.”4 For the team, innovating starts even before a design is made for a new product. They must look at other factors, such as how different textiles perform, to set the groundwork for an innovative design. John Hoke, Nike global director for footwear says, “From my perspective the true beating heart of Nike is innovation, therefore insight is the fuel for our imagination and creativity. It is the genesis point of all our ideas at Nike.”4 Nike’s approach to innovation puts it well ahead of the pack in terms of both sales and product innovation/development. The company’s commitment to innovation will ensure it future success.
Main Customer Groups
While looking at the different trends and styles of present day athletic footwear, we can further our research within the product and look at the different customer groups that our three companies focus their attention towards. We are primarily looking at the three different companies and the rules of style that may apply to a specific customer group for this product. In some cases, the customer group that they are focusing on may greatly impact the demand for the product because of different influences whether it is there income level, influence of childhood, or even there changing preference of a specific product.
Footwear is classified within many different categories, which makes the research of specific athletic footwear more difficult. For example, we are focusing on the companies of Nike, Adidas, and Reebok, and all of these companies make numerous styles of shoe lines. They range from golf cleats to soccer cleats to cross-country shoes. So when trying to determine the main customer groups, each line of shoes is basically broken down within the group that the specific product is directed towards. So when looking at the different types of customer groups within the athletic footwear industry, some of the key customer demographic trend are broken up into different generations of tastes in style.
The industry of footwear can be broken up into three main customer groups, which are the Baby Boomers, Generation X, and Generation Y. These customer groups do not have much in common except for their love of shoes and the different tastes in the new fashion trends of footwear. These three generations are broken down as follows Baby Boomers are from ages 5-5, Generation Y are consumers from 4-1, and Generation X is consumers from -. As we develop ideas about the main customer groups within the footwear industry we can conclude that the Baby Boomers account for 1% of the population, which is equal to about 81 million consumers. Generation Y is the second largest group that accounts for 8% of the population which represents about 75 million consumers. The smallest customer group is Generation X, they comprise about 17% of the population, which equals about 46 million consumers.1 Collected information from many consumer surveys rates Nike high among the consumers of Generation Y and X. Nike has become more appealing among younger consumers and has shifted away from the Generation of the Baby Boomers.
Nike and many other large shoe industry retailers are shifting there marketing direction from the Baby Boomers to the younger consumers of Generation X and Generation Y. There are many reasons to why the industry is trying to change their target market to younger viewers. As people become older many of there attitudes, priorities, and time obligations have decreased their ambition for shopping. Now that many of the Baby Boomers are within there forties and fifties, many of there priorities have shifted towards the future, in a sense that they need to save for retirement, different tuition payments for there children, and also different healthcare necessities that are important to them and there family. Lets say a consumer from the Baby Boomers generation was going to purchase some shoes, they are more likely to have a longer life span with those shoes then someone who is within there teenage years. Younger consumers put more wear and tear on their shoes than someone who is about 40 or 50. Many companies within the footwear industry know that the spending power of the Baby Boomers has not come to a halt. In Fact, there is still a very prosperous market out there, but the key is finding it. One way that the industry is trying to increase the spending among the Baby Boomers generation is by offering clothing lines in a more conservative style and also in a wide variety of sizes.
As mentioned before, the more present day trends of the footwear companies are geared on marketing to Generation Y. Many companies within the industry have come to the conclusion that by establishing trends among Generation Y, there becomes a greater vision and influence in future product design. By the influences of Generation Y, its impact does not only affect that specific consumer group, but filters to other Generations like X and also the younger brothers and sisters of Generation Y. It has always been said throughout the industry that teenagers show a great amount of brand loyalty to there apparel manufacturers. That is why many manufacturers try to establish a marketing ploy that influences children who want to dress like their older siblings or elders. So if they get them while they are young, they are more likely going to see profits from the children within the future.
Generation Y
Ages 4-1 Generation X
Ages - Baby Boomers
Ages 5-5
Growth Rate
(10-000) 80,61,468-
71,87,755=
8,7,71/
71,87,755=
.114 ,81,74-
4,175,=
-,84,08/
4,175,=
-.07607 8,86,47-
6,801,8=
0,04,40/
6,801,8=
.1885
Size of the group relative to the total population and is that changing 75 million consumers representing 8% of the population. The group of Generation Y has been increasing at a rate of 11% 46 million consumers representing 17% of the population. The group of Generation X has been decreasing at a rate of 7% 81 million consumers representing 1% of the population. The Baby Boomers have been increasing at a rate of %
Income Levels4
(000-001) Median Income
Male
000 $,546
001 $,01
Female
000 $7,60
001 $7,467 Median Income
Male
000 $0,54
001 $0,510
Female
000 $1,04
001 $1,47 Median Income
Male
000 $78,61
001 $7,444
Female
000 $45,80
001 $46,606
Unemployment Rate Changes5
Generation Y in the year 00, there were ,61,000 people unemployed.
In 001, the unemployment rate average for 16 & over was 4.7%. In 00 the unemployment rate average was 5.78
Generation X in the year 00, there were ,0,000 people unemployed.
In Summary of the unemployment rate of 001was 4.7 percent and in 00 the average unemployment rate was 5.78 The unemployment rate for this generation was 4.1 percent in the first quarter, up from .4 percent three years earlier. The overall jump in that period 4.0 percent to 5.8 percent.
Psychographic 1 Generation Y grew up with strong fashion statements by the media. This can attribute to the fact that this consumer group sows more brand loyalty. Generation X consumers are the type of shoppers that bounce from different high-end stores to the mass marketing stores. Baby Boomers have reached a point in their life in which their priorities have shifted. They are concentrating more on tuition payments, mortgage, and other relative expenses. Modern Trends and styles do not affect this type of consumer group as much.
Psychographic Many of the consumers within Generation Y have developed a mind set of “Spend, Spend, Spend”, which in all paints a picture for many retailers in the future. Generation X is said to fit the description of being very conscious of their style. They are trying to present a look that is impressive to other peers, which makes them feel like dressing up for many occasions. Retailers are trying to get these consumers back into spending more on the modern styles and trends. By doing this, retailers are trying to shift these styles to more of a conservative look. By producing a more conservative look, it will captivate more of the characteristics found within the consumer look.
Factors Occurring in the Environment External to the Industry
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies are withdrawing from Indonesia and Korea due to stronger labor unions, as well as the fact that labor is much cheaper in China than it is in the two aforementioned countries. In Tangerang, Indonesia, for example, the minimum wage rose from 40,000 rupiah/month up to 58,000. (1)() In 16 Indonesia was the hotbed for shoe production in Asia. Now, due to its reputation for “lawlessness and chaos” as well as expensive labor, Nike and Reebok have shut down factories in Korea and Indonesia and relocated to places such as China. Other companies such as Puma won’t even start up business here. These moves will surely raise more issues with those concerned about the treatment of smaller countries by large American corporations. This is the opposite effect of sweatshop issues, because it is eliminating many of them, but consequently is crushing a huge part of Indonesia’s economy. Korean companies are finding ways to counter this exodus and keep the industry alive. (1) Nike has been forced to relocate, moving out of Indonesia, which was once the primary place for their shoe production. Indonesia was once the site of 8% of Nike’s shoe production, which then dropped to 0% in 00, and possibly down to 6% with the closing of its Dosen plant. This will look bad for Nike as people will believe they are being careless about the treatment of its workers by leaving thousands jobless. (1) (1)
Dhume, Sadanand. “Just Quit It.” Far Eastern Economic Review, September 1, 00.
()
Min, Kim Jung. “A New Spring In Its Step.” Far Eastern Economic Review, February 1, 00.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
SARS, a deadly fast-spreading strain of pneumonia, has disrupted the travel to and from Asia, as it is at its most prominent in China, Hong Kong and Taiwan. This in turn has made it more difficult for the shoe industry to coordinate production and control quality. (4) If SARS turns into an even more major epidemic than it already is, it will play a huge role on the way business is done with Asia. Considering the fact that shoe inspections will increase once shipped, the outcome of SARS will “add friction to the cost of doing business in Asia.” This in turn will show up in the price of the product. (5) Nike realized a lot from the SARS outbreak. The impact of SARS had huge impacts for Nike, as it lost employees in Asia, encountered difficulty in coordinating production, and also had to deal with West Coast port closures. As Ray Knight states SARS gave “global business a wake-up call as to just how quickly markets can be squelched by unexpected circumstances.” (6) (4)
Standard and Poors Current Environment http//www.netadvantage.standardandpoors.com/
(5)
Maiello, Michael. “Aftershock.” Forbes, vol. 171 no. . Apr. 8, 00. p. 44-46.
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Major shoe companies have faced heat in the form of boycotts and protests for the supposed running of “sweatshops” in smaller countries where labor is extremely cheap. Companies such as Nike have been said to rudely mistreat their employees and force them to work in terrible conditions. (7) For much of the industry, sweatshop scandals help them because most of the time they have to do with Nike. However, as Reebok pulls a large percentage of their production from Indonesia, many worry that the change in locations in the chase for lower wages will make abuse charges prevalent once again. (7) Nike has battled with accusations that it runs sweatshops for roughly 1 years now. Nike is currently in a U.S. Supreme Court battle in order to gain first amendment rights to defend itself. Nike is trying to earn the right to defend itself, after it had been sued for supposedly defending itself with lies. Any accusations questioning the responsibility of Nike as a corporate citizen is attention that they would like to avoid at all cost. (8) (7)
Ellis, Kristi. “Global Labor Pains Advocates Worry Abuse Will Rise as Factories Relocate.” FN, 58 (40), October 14, 00.
(8)
“Courtside with Nike.” http//arizonarepublic.com
May 6, 00.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The sluggish economy has forced major forces in the shoe industry to take major action, way more than in the past when the economy was a little more stable. Results of this include buyouts of smaller companies, as well as pushing sales in other countries that currently have stronger economies. () The athletic shoe industry is one of the most recognizable global markets. Reebok, Adidas and Nike are all recognizable no matter what country you’re in due to the endorsements of major American and International athletes. The direction that the sluggish economy has forced the industry to take will only make it that much more dominant once the American economy recovers. () Nike has been forced to place a little more emphasis on ventures other than that of marketing the new Jordans, for instance. In Ray Knight’s letter to the shareholders he discusses the fact that Nike placed major focus on product, advertising, and getting management caught up to sales. All of these were achieved and because of this Nike will be stronger once the economy begins to recover. The good news is, as Standard and Poor’s predicts, is that GDP increased .% in the second quarter and that it will pick up in the second half to achieve .5% for the year. (6)() ()
Standard and Poor’s Industry Profile. http//www.netadvantage.standardandpoors.com/
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The current industry sees the internet playing an increasingly important role in the sales, marketing, and global reach of major athletic shoe companies. (10)(11)(1) If one visits any of the big three company’s websites, it can link to 18 countries on Reebok’s site, on Adidas’ and 16 on Nike’s. The websites also give the opportunity for customers to contact the company as well as buy products from the website without having to go to the store looking for a particular product that might not be in stock. (10)(11)(1) Nike by far has the most extensive website of any of the three major brands. While Adidas and Reebok do have impressive sites, the Nike site is incredible in its extensiveness. Nike also offers a new product called the NikeId in which you can create your own shoe, custom made for the customer. The internet is an excellent tool for reaching customers and broadening the scope of the company. (1) (10)
www.adidas.com
(11)
www.reebok.com
(1)
www.nike.com
Factors Relating to Industry Actions
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The athletic shoe industry has begun to take notice of the need to give women attention in this market. Women need active footwear and apparel as much as men do, thus the advent of new stores and extended women’s product lines by many of the major shoe companies. (1) Various companies are opening stores strictly for women. These companies, such as Nike, Adidas, Puma, and Champion, are expanding their lines to incorporate enough products to open a store, or boutique within a larger store, that focuses strictly on women. Dick’s opened two women’s only stores in Buffalo and Albany under its brand name Ativa. In order to be successful, these women’s stores are believed to need a wide selection of merchandise and exceptional customer service. (1) Nike Goddess, a website that has been functioning since 10, has been opened as a store in a few locations and Nike plans to expand on this idea by opening more stores. These stores will either be separate stores, or boutiques within larger stores. Lady Foot Locker will incorporate Nike Goddess into its 600 stores, Nordstrom will incorporate it in its department store, and Macy’s will get a smaller version of the store this year. This is nothing but a good thing for Nike as it will only expand its market and try to double its sales to women by mid-decade. (14) (1)
Ryan, Thomas J. “Girl Talk.” Sporting Goods Business 6, no. 6 (Jun 00) p. 18.
(14)
Warner, Fara. “Nike’s women’s movement.” Fast Company no. 61(Aug. 00) p. 70-75.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies are searching overseas for big name athletes to endorse their products, and thus expand their market in order to drive sales. () The recent U.S. economic downturn has caused people within the United States to buy less of the really expensive athletic shoes such as the new $00 Jordans. For this reason, and the basic idea of just driving sales to a wider market, the major companies have worked on gaining endorsements from major international athletes. Reebok has recently won its first ever endorsement battle with Nike by winning away Yao Ming in a newly signed endorsement deal. This should give them a huge leg-up in the Chinese footwear market where Basketball is the second most popular sport in the country. (15) Nike has realized that by signing major athletes from sports around the world, they can increase sales and market themselves on a much larger scale. Nike has signed the likes of Ronaldo, the Brazilian soccer player, and sponsors such National soccer teams as Brazil, Korea, and Manchester United of the English Premiere League. Because of this, Nike has seen International sales exceed domestic sales for the first time as they reached 51%. (6) ()
Standard and Poor’s Industry Profile. http//www.netadvantage.standardandpoors.com/
(15)
Aoki, Naomi. “Reebok Signs Top Basketball Player Away from Nike.” Knight-Ridder Tribune Business News. October 4, 00.
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies have begun to restructure their relationships with major retailers, as well as form relationships with new companies. One reason for this being so is that certain shoe companies give the retailers an opportunity to increase their profit margins by selling their shoes. (16) Seeing that Nike in many cases creates the trends for this industry, it is easy to understand how their battle with Foot Locker has created an opportunity for companies such as Reebok and Adidas. After the dispute between Nike and Foot Locker, where Foot Locker cleared many Nikes off of their shelves, Reebok and Adidas benefited greatly due to the fact that it cleared $50 million worth of shelf space for companies such as themselves. (17) Many thought that Nike would suffer from the problems that them and Foot Locker had seeing that Nike would have to find a new home for $50 million in marquee product. However, Nike has aligned with mall-based retailers such as Footaction and The Finish Line, directly competing with Foot Locker and doing just fine. Nike also combined with The Finish Line for three TV co-op spots this year to push the two companies. (18) (16)
Carr, Bob. “Has Nike won its battle with Foot Locker?” Sporting Goods Business 6, no. 6 (Jun 00). p 10.
(17)
Ryan, Thomas. “Hot off the shelf.” Sporting Goods Business 5, no. 11 (Nov 00). p 0.
(18)
“Finish Line, Nike team again retailer’s inventory of Shox Status shoes shines in humorous spot.” http//rdsweb.rdsinc.com
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Due to the slowdown of the U.S. economy as of late, major footwear companies are seeking to buy smaller ones in order to bolster their own sales and eliminate potential competition. (1) Demand for shoes will probably remain constant even when a larger line buys out a small one. However, many companies that have the means to buy a smaller one are simply doing so to try and keep up with the larger behemoths. By doing so, companies grab market share and can use another products label to help their cause. (0) Nike has recently bought out classic shoemaker Converse, for $05 million, in order to gain additional market share as well as reaching the retro market of the shoe industry, which is becoming increasingly popular. They plan on running it as a separate entity and not change the traditional Converse shoes. This will certainly mean a big boost in sales for Nike. (1) (1)
Standard and Poor’s Industry Trends. http//www.netadvantage. standardandpoors.com
(0)
Ryan, Thomas. “Hungry for Profits.” Sporting Goods Business, 6 no. , Feb 00. p 4.
(1)
Schlosser, Julie. “Nike Goes Old School.” Fortune, 148 no. , August 11, 00. p 150.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Major shoe companies keep trying to come up with the newest and most interesting advertising/marketing campaigns in order to push their product to customers in a way that sets them apart from the rest. () One example of this trend is the way that Reebok has created another way of battling Nike for superstar athletes, that being to market shoe lines from non-athletes such as hip-hop artists Jay-Z and 50 cent. These artists will gain Reebok some “street” credibility as the create signature collections for Reebok extension Rbk. () Nike will most likely have to counter this move assuming that the direction Reebok is taking has huge success. Nike has always gained endorsements solely from athletes, but it may stand to learn something from Reebok if they find success. Nike may face some problems competing with Reebok seeing that Reebok now has Allen Iverson and Yao Ming as well. ()
Devaney, Polly. “Reebok shoots from the hip-hop in sneaker wars.” Marketing Week. July 1, 00. p1.
Summary of the State of the Company and of the Industry
Footwear Industry
The athletic footwear industry is a market where three top manufacturers dominate Nike, Adidas, and Reebok. The three companies alone together control nearly 70% total market share (Section I part 1). As large as the markets are, there are many new entrants that have made successful forays into the market as new entrants (Puma), however, the overall cost and feasibility are greatly debatable which makes the footwear industry a rather difficult market to enter. One important note about the Footwear industry that is worthy to mention is the underlying nature of footwear as a consumer product. Athletic footwear is much as necessity as it is a discretionary purchase (Section I part 1). This notion is where the industry has risen to levels that provide tremendous value for its consumers. It is no surprise, thus, that much of athletic footwear sales have primarily been attributed to branding and image. Such proves to be the driving factor that has ultimately sustained sales. The current state of the industry has been in its maturity phase for some time. Nike holds the lions share of the market and continues to dominate.
Company Strengths
There are various strengths that Nike is endowed with. Most notably, Nike is the largest manufacturer of athletic footwear and apparel in the world. In terms of footwear, Nike enjoyed control of nearly 4.% of the entire footwear market in 000 at nearly 8 billion dollars (Section I part 1). That is more than both its number two and number three competitors combined! This dominance has helped Nike to become the athletic colossus that it is today. Nikes branding also directly contributes to its advantage due to Nikes ability to not only market shoes, but allows the consumer to take on the vicarious roles of the numerous celebrity endorsers that promote Nike in the first place. Nike has virtually invented the notion of the celebrity endorsement with the likes of Pete Sampras and Andre Agassi in Tennis; Michael Jordan in Basketball; and the recent acquisition of teen basketball sensation Lebron James who signed with Nike for a reported $0 million (Section Part ). The ability to throw enormous amounts of money to these athletes has given Nike a comparative advantage over the number and . In addition, Nikes financial soundness has proven stable through economic cycles. Nike has enjoyed higher margins of sales compared with that of its immediate competition (Section Part 1) and although sales have slumped in the recent economic downturn, Nike appears on its way to regaining profitable levels.
Company Weaknesses
Though Nike enjoys the title of being the largest athletic footwear and apparel manufacturer in the world, it goes without saying that Nike has had its share of company weaknesses. An analysis of the house of quality reveals an opportunity that seems to consistently be overlooked by not just Nike, but from Adidas and Reebok as well. This stems from the inability (or lack of effort) to market to the large baby boomer segment (Section 4 Part 4, c). What would appear to be a market that looks for comfort, price and quality (Section 4 Part 4, c) seems to be a sorely underdeveloped niche that Nike (As well as others) could take advantage of. On other notable weakness is not as readily apparent but a major concern nonetheless. This weakness has to do with Nikes shear size. Being the biggest on the block is not without its trade offs. Nike has had to work hard for its place in the market but adjusting to global pressures, social pressures, and being stuck in branding an expensive shoe leads to limited options in dealing with an environment constantly influx (Section Part ). Nike has made slow adjustments to react to all of these issues on many fronts and Nike is definitely without its critics (Especially from human rights activists groups).
Company Opportunities
One major opportunity that Nike has homed in on regards the foray into the womens market. Nike has made a push to market to women with new product lines, distribution centers, and web stores (Nike Goddess) that are exclusively marketed to women (Section 5). Another way that Nike has been able to take advantage is underpinned with the recent acquisition of Converse (Section a). Such a move is telling of Nikes value of the recent trend for the demand for trendy retro products. The acquisition was intended to position Nike by leveraging the throwback lifestyle. With the current stable demand for such products, Nike is able to reap the benefits by acquiring a company whose entire legend is embodied with a solid retro history (Converse Chuck Taylor All Stars). Not deviating far from that emphasis on trends is the decision to reproduce older shoe models that were conceived of decades ago. The hip hop community has been a driving factor in sales with the surge in popularity of the Air Force One model shoe. In fact, the shoe has been resurrected in multi-platinum record sales from the song Air Force Ones by rap singer Nelly. Nike has thus had the fortunate situation to be in a position to cash in on such opportunities.
Company Threats
Nikes most immediate threats stem from environmental factors. The SARS epidemic in Asia has been a prime example of how Nikes company can be affected by conditions in far flung places like Asia. The implications of the epidemic were large in scale in that Nike has had to close ports on the West Coast and take other actions to deal with the virus (Section V). Another trend that has left a sour taste in the mouth of Nike involves the human rights pressures to improve working conditions and to directly deal with the sweatshops that Nike has been accused of (Section V). Such controversies have placed CEO Phil Knight in the role as global villain which can detract from Nikes impression on the public and overall performance. Increasing expenses of relocation, improving factory working conditions and dealing with negative publicity has led Nike to a take on a defensive position on an ongoing basis.
Balanced Scorecard
Financial Measures Process Measures
• Profit margin
• Cost of sales as a percentage of total sales
• Return on equity
• Market share
• Return on investment • Percentage of deliveries made within a specified number of working days from the date of order
• Average number of defects per shoe at final inspection
• Labor cost and usage per 1000 defect free units
• Percentage of shipments received on promised date but after the promised time
• Average time to adjust to change orders.
Organizational learning and Organization Development Measures Customer Satisfaction Measures
• Average delivery time to distribution centers
• Periodic employment performance reviews
• Quality circles utilized to rate internal team based performances
• Time spent dealing with bottlenecks within supply chain
• Ongoing inventory of distribution channels Segments are Generation Y
Generation X
Baby Boomers
• Average dollar amount spent on athletic footwear per year in each segment
• Average distance traveled to purchase Nike products
• The percentage of customers within each segment that value the quality of the product
• Average number of repeat customers that purchased Nike products.
• The percentage of customers who purchase Nike products based on image
Nike’s Current Strategies and Goals
Nike has in placed several strategies that encompass improving growth and profits in a variety of areas. The struggling economy has not changed Nike’s attitude towards growth. One strategy that Nike focuses on, in continuing to help the company grow is Person Marketing. Nike has been using the best athletes, and sports teams (or clubs) all over the world to help market their products. The regenerative nature of sports has allowed Nike to sign new upcoming stars like LeBron James, Carmelo Anthony, Lleyton Hewitt, Michael Vick and others. These are the athletes that will push Nike beyond their expectations and will set the standards for the next generation to exceed. Nike’s second greatest source of potential lies with the products the company is working on. Nike’s design team is constantly developing new concepts in speed and agility to give athletes the latest innovative equipment to improve performance. The third strategy that Nike uses, perhaps the most important, is advertising and marketing. These two components capture the essence of the product and the attention of consumers around the world.
These strategies support the financials especially profit margin and market share. Under consumer measures Nike’s strategies also support the percentage of customers who purchase Nike products based on image.
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Nike
Remy Ajluni
Adam Brook
Anthony Colletti
Elizabeth Crompton
Conrad Pilewicz
Michael Ramos
Current nature and structure of the athletic footwear industry
The athletic footwear industry is a highly competitive environment where the top four manufacturers hold over 70% of the market share. The barriers to entry into the industry are comparatively low, as anyone with new creative design ideas can produce and market their product, but the success of smaller companies is oftentimes shaky. Brand loyalty, ample capital, and broad based sourcing create an environment where the bigger companies such as Nike and Reebok have little trouble maintaining market share. Nike enjoys the largest share, with 4.% of the nearly $8 billion market in the year 000. Reebok was second with 11.%, Adidas had 10.8%, and New Balance had .6% of the market. The remaining 5% must be divided among the numerous smaller companies fighting for a shot at survival.
One of the important characteristics of the footwear industry is the fact that the product is necessary to consumers, yet very much a discretionary purchase as well. The actual structure of athletic shoes does not change very much from season to season. The design and fashion aspects are what significantly differentiate one product from another. Due to these factors, athletic shoe purchases are largely dependant on economic conditions. When the economy is good and consumers are enjoying plenty of disposable income, they are more likely to make new purchases to update their shoe collections. When there is a shorter supply of income, consumers will put off purchases until they are absolutely necessary and the price of the shoes is low enough.
Currently, the athletic shoe industry is performing well. Overall footwear spending in the United States has decreased in recent years, but athletic shoe sales are increasing. In 001 $15.1 billion was spent on footwear while in 00 the industry experienced a 5% decrease to $40.56 billion. In the athletic sector, consumer sales have increased. The number of shoes sold in 00 was 7% higher than 001 sales, reaching 48.6 million pairs. Although sales are up, manufacturers are still looking for additional opportunities because the average price paid has decreased from $8.0 in 001 to $6.61 in 00 or a 4.% loss. These conditions of added sales but declining prices have led to fairly slow growth in the industry.
Because the US market has reached its maturity, manufacturers are looking at the opportunities in foreign markets as the next step for growth. The US population growth rate is extremely low, 1% per year, but the populations of developing countries are exploding. The abundance of opportunity in foreign markets has allowed the footwear industry to thrive when domestic growth is nearly non-existent.
Within the footwear industry, manufacturers typically produce their product and use their distribution channels to circulate the goods to retailers and, ultimately, consumers. Some companies such as Nike have opened a limited number of retail stores themselves to diversify sales channels and lower dependence on retailers. Retail stores by manufacturers allow them to more effectively maintain contact with the consumer and collect feedback, but are not currently a feasible route of distribution for the industry on a large scale. Manufacturer’s relationships with retailers are pivotal. The retailers have significant power over the manufacturers. By lowering the amount of inventory that they hold, retailers have shifted the inventory risk to manufacturers. Also, because they are the main routes of transmission, retailers have significant leverage over manufacturers on many aspects of the industry such as pricing, product labeling, or cooperative advertising where both share costs.
Key factors that influence success
Brand awareness is one of the biggest assets that an athletic shoe company can have. Consumers are constantly exposed to endless advertising and marketing campaigns for never-ending product lines. If a company is able to establish brand awareness, they will have a significant advantage in grabbing consumer’s attention and, therefore, market share. In today’s society where consumers have significantly less time to shop and compare, brand awareness is critical. If an established brand name effectively conveys the messages of quality and dependability, consumers will automatically go to that brand relying on the image that has been created when they don’t have time to shop around.
Manufacturing efficiency is something that companies are constantly striving for as well. Athletic shoe manufacturers must balance the costs of labor, raw materials, shipping, import tariffs, and technological advancements. In an effort to keeps costs down, the industry has been looking to overseas sourcing. Favorable legislation regarding foreign manufacturing has led to a huge increase in foreign sourcing. In order to diversify supply and production lines, manufacturers have spread out their operations over many areas to avoid over concentration in one region. With this strategy, if one country or region experiences problems that interrupt production, the affected company is not completely out of options and can still accomplish production.
Distribution channels dictate who a company’s customer will be and how they will get the product. The footwear companies must choose their channels carefully because they want to make the product available, yet remain true to their image and goals. Retailers account for the largest percentage of sales, so manufacturers must be especially careful with their relationships with them. If a disagreement arises between manufacturer and retailer, the manufacturer could face potentially extensive problems getting the product to market. A recent example of this occurred between Foot Locker and manufacturer Nike. In an attempt to carry more of the lower cost shoes that consumers are demanding, Foot Locker cut back on their high-end purchases from Nike significantly. Nike, in turn, had to look for other outlets for their signature lines.
The ability of companies in the industry to shorten their design, development, production, and distribution cycles is vital to success. In the past, retail stores could carry a product months in advance of a projected need, but now consumers want to buy closer to when they actually experience the need for the good. With the shortened cycles, manufacturers can place more of an emphasis on styling and keep up with the changes in fashion.
Technological advancement is becoming more and more of a player in the footwear industry. With computer-aided design (CAD), companies have been able to successfully shorten their design to distribution cycle to only a few months. Previously, the new product development phase oftentimes took years. Also, new technology has facilitated new quick-response programs that link retailers with manufacturers to allow the retailer to have the correct inventory when it is needed called EDI. Immediately after a sale is made, electronic point of sale scanners read the information related to the sale such as price, product, size, etc. and notify the manufacturer of the sale. With this, the manufacturer is able to accurately modify production to fit consumer demand. Also, retailers are not required to hold as much inventory with this system, which lowers costs for them and, ultimately, consumers.
Demand cycles
While footwear is definitely a necessity for the general population, most footwear purchases are discretionary. Shoe design does not significantly alter in fundamental structure from season to season, so any additional purchase by the consumer is probably for fashion or style reasons. Due to the largely subjective nature of athletic footwear purchasing, the success of the industry is dependant on the current economic cycle. When consumers are concerned about future economic conditions, they will put off their purchases until their confidence rebounds. As can be seen by the graph below, consumer confidence hit its peak around 000 and has been fluctuating ever since. After the events of September 11, 001 and then when consumers were concerned about impending war in Iraq, confidence drastically dropped, but was able to rebound somewhat. Industry sales in 000 were around $. billion, dipped to $8. billion in 001 largely due to the drop in consumer confidence after September 11, and began to recover in 00 to a little over $ billion.
In addition to the amount of confidence that consumers have for the future, the amount of disposable income available to them directly affects how much is spent on athletic footwear. When consumers experience a drop in disposable income, discretionary purchases such as footwear are put off. One general exception to this trend within the industry is due to the fact that teenagers account for a large portion of industry sales in the athletic footwear sector. Teenagers are responsible for % of all athletic shoe purchases and are typically not as concerned with the costs of goods as older consumers are. When adults are saving as much as they can, teens will still spend any disposable income that they have. Also, teens are more willing to pay for the higher priced shoes while adults are reluctant to buy the specialty goods.
U.S. Department of Commerce Bureau of Economic Analysis
Competitive forces affecting the industry
-Potential new entrants
The footwear industry includes moderate barriers to entry. Any person with a design that interests consumers can outsource their production to an independent manufacturer and can potentially enter the market. The capital and distribution channels that are required for success make it difficult for the smaller entrants to flourish though. The top manufacturers absolutely dominate the industry, with Nike holding over 40% alone.
-Bargaining power of Buyers
Buyers in the athletic footwear industry enjoy a great deal of power. Consumers have shown again and again that they will simply wait until prices reach a level they feel is reasonable before making a purchase. Nearly 40% of all shoe purchases are made through discount stores. Also, consumers are able to make informed decisions about a purchase through utilization of Internet websites. The bargaining power of retailers is also a problem for footwear manufacturers. In recent years, retailers have begun to hold fewer inventories, forcing manufacturers to pay for increased inventory levels on their end. Manufacturers must also make sure that retailers are selling the product in accordance with the desired image of the shoe. Nike has recently experienced a disagreement with their largest retailer Foot Locker due to pricing disagreements. As a result, Foot Locker significantly reduced its high end purchases from Nike and Nike decided to shift their high end product sales elsewhere.
-Bargaining power of Suppliers
The materials for footwear production are relatively easy to obtain. To keep costs low, manufacturers have begun widening their supply channels to ensure that they are not depending too much on one source. The recent SARS outbreak is one example why suppliers are diversified. Many manufacturers relied on China to supply low cost goods for manufacturing. When the outbreak made traveling to the area impossible, manufacturers had to find alternative ways to get supplies such as utilizing the Internet.
-Threat of substitute products
Athletic footwear manufacturers must constantly be aware of the threat of substitute products available to the consumer. The major manufacturers such as Nike, Adidas, and Reebok hold a majority of market share but are far from the only choices that consumers have. There are numerous other options for athletic shoe purchases. Although brand loyalty allows some measure of constancy for the manufacturers, if the design does not match the current trend, consumers will simply buy one of the many alternatives.
-Rivalry among competitors
Rivalry among competitors is high. Overall, the product that all manufacturers offer is basically the same. Differentiation of the product is vital for success. Consumers have many options to choose from and manufactures have to tailor their marketing strategies to catch part of the market. The advertising dollars that are spent in the hopes of differentiation are staggering… In 000, Nike spent over $10 million on advertising alone. In a recent deal with LeBron James, a basketball player, Nike beat out Reebok with a $0 million offer. In turn, Reebok took on year old Mark Walker as part of their “the future of basketball” advertising campaign. Finally, in another odd twist of the competition between the athletic shoe companies, Kobe Bryant broke an $8 million deal with Adidas and was going to sign with Nike. Although the relationship between Bryant and Nike disintegrated due to recent events, this just illustrates the lengths that competitors go to in order to outdo each other.
Industry Location on the Product Life Cycle
The athletic footwear industry is in the maturity stage of the PLC. The product itself has become very similar across the board because the wishes of the consumer have been well established. Since the market is fixed, additional profits come only by taking those profits directly from a competitor. The intense competition between competitors in the market is obvious, as that is the only way to succeed at this stage of the product life cycle.
00 sales � 001 sales = 08-804 = 1.5%
001 sales 804
Company location on the BCG
-Nike
Nike is positioned at the cow position on the BCG matrix.
PLC 8-488.8 = .04 or 4.%
488.8
target co sales = 8 = 1.56
Relative Market Share nearest competitor(adidas) 67.7
-Adidas
Adidas is located at the star position on the BCG matrix.
PLC = 67.7-578.87 = .176 or 17.6%
578.87
Adidas = 67.7 = .0
Market Share Reebok 17.87
-Reebok
Reebok is at the cash cow position on the BCG matrix.
PLC 17.87-.88 = .045 or 4.5%
.88
Reebok = 67.7 = .8
Market share Adidas 7718.66
Industry trends
Trend Implications for the industry Implications for target company Citations
Product line diversification. Manufacturers are producing a much wider variety of products for more segments of customers. Retail stores, wider customer base, more revenue Standard and Poor’s Industry Profile for Apparel & Footwear
Overseas production and sourcing Lower material and labor costs as well as a diversified network of production and supplies to ensure stability if one source is rendered unavailable or unusable. Lower production costs and less risk of losing revenue if one region experiences problems.
Foreign sales With the US market at maturity, companies are looking overseas to utilize the vast opportunity in foreign markets. Nike sales in the foreign sector are growing at a much faster rate than those in the US leading to higher profits.
Diversified distribution channels Products are readily available at multiple places, thereby reaching a broader customer base. May dilute the product’s image if put into channels that do correspond with the desired image.
Lower retail inventories Retailers are not carrying as much inventory, leaving that responsibility with the manufacturers. Nike must assume more inventory risk and carry the extra costs associated with inventory. The Wall Street Transcript Interview with John Shanley on athletic footwear companies, 1/7/0.
Response to negative public opinion of labor practices
“Rapid globalization and the unfettered quest for lowest-- cost production-coupled with the value clash between affluent countries and those in the very early stages of industrialization” has lured many companies to manufacture their products in under developed countries. Much protest has arisen concerning companies’ labor practices in these countries. Consumers are becoming more conscious of a company’s reputation and are making purchases based on their opinion of the company. “In fact, a recent MORI poll commissioned by the Co-operative Bank suggests that a third of consumers are `seriously concerned with ethical issues. Within the past year, over half of us have bought a product or recommended a company on the basis of its reputation.”
NIKE
Nike has been a target for protest since the early 10s. Many activists, students and unions have alleged that Nike’s labor practices are unfair and their treatment of workers is inhumane. When compared to Adidas and Reebok, Nike receives the majority of the attention from protestors and activists. After many years of such protest, Nike’s reputation eventually became tarnished and in 18 the company reported a 50% decline in profits from the previous year. On its website, Nike responds to the issues of its labor practices “Nike is committed to being a responsible corporate citizen. We work to improve the lives and working conditions of all workers. We dont own these factories, but we take pride in our relationships with them. Nikes relationship with its contract factories is guided by our Code of Conduct and the Code Leadership Standards, a set of labor, health and environmental standards.”4 In response to all the protest, Nike has been developing a formal factory monitoring program.
REEBOK
Reebok has lived in Nike’s shadow since 10, when the industry giant surpassed Reebok in sales. As a result, Reebok has not been under the extreme scrutiny that Nike has faced. There are those opposed to Reebok’s labor practices nonetheless. Doug Cahn, director of human rights programs for Reebok, says “Theres a correlation between factories producing good-quality products and those with good working conditions.5 Reebok seems to have taken the human rights issue to heart. To ensure that production standards were compliant with human rights, Reebok formed a task force to establish international standards concerning labor practices. The task force drew on information from outside the company to form standards, which made sure the standards developed were very effective. Internationally accepted standards were looked at along with standards set forth by the United Nations. Reebok sends auditors, often unannounced, to check factory conditions. The company also uses a type of double check ADIDAS
In 1, Robert Louis-Dreyfus was appointed chairman of Adidas. He brought with him radical change concerning the manufacture of Adidas products. Dreyfus decided that the company should focus more on marketing and branding and less on production, so he closed the majority of the plants in Western Europe and moved most of the production, 0%, to Asia, Southern Europe and Northern Africa. As a result of this shift, Adidas has been criticized for having poor working conditions in their factories. Criticism has put pressure on Adidas to monitor their factory working conditions more closely. Whereas Nike has its Code of Conduct, and Reebok has its Human Rights Production Standards, Adidas has no code of conduct concerning the treatment of workers in their factories. In January of 1, Adidas appointed David Husselbee as the new director of social and environmental affairs. Up until Husselbee was hired, Adidas concerned themselves with human rights issues on a makeshift basis. They
The program was designed to monitor working conditions and treatment of workers in Nike factories. Regular audits are carried out in each of its factories to make sure no children are employed. In addition, Nike has signed the United Nations’ Global Compact which is “an initiative launched…to encourage businesses to implement certain human rights, labor and environmental principles.” In 1, Nike put into action a Code of Conduct that deals exclusively with labor rights. The company also joined President Bill Clinton’s Fair Labor Campaign and created a labor practices department in 16. To improve the well being of workers, Nike employed micro-credit programs, adult education, and better factory monitoring. Nike also hired an audit firm to make sure contractors in Vietnam, China, South America, and Indonesia adhered to the labor standards that had been set. “Nike now claims it is a market leader not only in shoe design but also in labor standards.”
process to ensure proper working conditions, “third-party auditors are used in countries where the company does not believe it has personnel with the necessary expertise to judge working conditions.”5 Reebok has recently developed software with SAP, a logistics software supplier, that allows them to track human rights issues in developing and undeveloped countries. The software will allow Reebok to monitor workers’ wages and even the number of hours each employee works.6 A computerized tracking system such as this will enable Reebok to respond faster and more effectively to any human rights issues that might arise. In 17, the Department of Labor released its first “Trendsetters Report”, which is “ a list of retailers and manufacturers who have taken action to combat sweatshops and ensure that their shelves are stocked with only ‘No Sweat’ garments.”7 Reebok was among the companies that made the list. Companies mentioned on the list were found to have a strong commitment to would only worry about issues when the issues arose. After the company saw the amount of pressure that Nike was under to address labor issues, Adidas decided to put a human rights policy into action. Adidas, though, did not use the program to effect public relations, but rather used it as a defensive tool. ’We see our human rights policy as a natural part of being good corporate citizens,’ says one executive. ‘Emphasising it would only detract from our brand.’10 Most of the action the company takes about concerns that arise is interactive, meaning they wait until a problem is reported to solve it. “The group plans to take a more proactive role in the future.”10 This way the company could fix any problem before it really becomes a problem. Husselbee is currently working with activists and campaigners to come up with plans of action to “provide independent confirmation of progress (or lack of it).”10 By imploring this type of strategy, Adidas gains a lot of credibility when it comes to dealing with
The media is starting to see that Nike has made a solid effort to improve labor issues and that the changes they have made are having a positive effect. Numerous newspapers have reported that labor conditions have improved in Nike’s factories. As a result of the actions Nike has taken to deal with the voices of dissent, their sales figures have been steadily increasing since the slump in 18. Nike has made a sincere effort to improve working conditions for its employees in undeveloped countries, and this translates directly to increased sales figures.
labor laws. These companies comply with law enforcement when violations are found and also monitor work conditions strictly to ensure no human rights violations. Reebok’s company website shows a strong commitment to human rights as well. “We believe that we all have a responsibility to understand human rights, to expose injustice, and to support efforts that ensure dignity and rights for all human beings. The business practices we have developed and implemented around the world and our history, are a reflection of our commitment.” It appears that Reebok is more effective at dealing with any negative opinion that may arise from any of its labor practices. Even though most protest against Reebok is eclipsed by protest against Nike, Reebok effectively deals with issues that surface concerning labor and human rights. protest. Adidas is making strides to respond to concerns regarding their labor practices. But ultimately they need to develop a set of standards that all their factories must abide by. They should also develop a reliable system to monitor the conditions in their factories.
Advertising campaigns
Advertising is a huge part of the athletic shoe industry. Companies spend a large portion of their revenue on advertising. A lot of pressure is put on the companies to come up with new and successful advertising campaigns. If a campaign fails, the companies sales suffer as a result. NIKE
Nike has always been an industry leader when it comes to advertising. Their ad campaigns are known all over the world as being widely successful. Nike is truly a trendsetter when it comes to advertising, not just for shoes, but for the advertising industry as well. In June, Phil Knight, CEO and co-founder of Nike, will be named advertiser of the year for the second time (the first being in 14) at the Cannes International Advertising Festival. After gaining some steam and noting steady increases in sales, Nike started to establish itself in the industry. “Into this Eastern establishment came this weird new cultish… sensibility a definite west by northwest, New Age-y, maniacal, running/fitness/discipline subculture. The company was all about the clarity of matching technology to athletic performance-and, in the ads, showing the passion that resulted.”11 By going against the norms in advertising, Nike was able to distance itself from other shoe makers and thus establish strong customer core. There are many aspects of advertising that have REEBOK
Unlike Nike, Reebok has not really been known for their revolutionary advertising. During the early 0s, the battle for market share in the athletic footwear industry was a heated one, but after Nike took the lead, the market shares have remained fairly constant, with Nike far in the lead. Nike dominates big name athletes to endorse its products, so Reebok has decided to focus on non-athletes, namely hip-hop artists, to create their own signature collections. This strategy seems to be working for the company so far. Reebok has realized that if they were to succeed in the market, they had to focus on selling to the urban teenage male. Reebok launched its Rbk campaign, which moved away from the Reebok image and attempted to establish one that would get the attention of the urban teenage male. To go along with its new hip-hop urban image Reebok signed Allen Iverson to release his own shoe collection, which has become a top seller for the company. Reebok has also recently moved beyond athletes to sign rappers Jay-Z and 50 Cent in hopes to tap into their popularity. ADIDAS
Adidas uses strategies used by both Nike and Reebok to market their products. The company plans on raising their global media spending by up to 0%. Like Nike, Adidas signs athletic superstars to endorse their products. Recently they signed All-Star Tracy McGrady to a lifetime deal and also signed Tim Duncan of the San Antonio Spurs. Most of Adidas’ advertising is geared toward the European market since about 65% of their sales are made there. They recently signed soccer sensation David Beckham to an endorsement contract to boost sales in England and across Europe.16 Beyond using big stars to endorse their products, Adidas has rode the retro wave to bring back its trademark logo, the Trefoil. Retro styling is making a big impact on the footwear industry. Consumers associate the Trefoil with retro styling, and because of its recent resurgence, the logo is becoming more popular. Adidas has shifted a bit from performance and is now focusing on retro style. 17 As long as Adidas realizes the retro fad is most likely a fleeting one, they should
brought Nike success. Its use of famous celebrity athletes in advertising their products is unrivaled by any other company. Through clever ad campaigns, Nike was able to “humanize athletes.”11 Nike placed famous athletes that seemed almost “untouchable” in often humorous situations. Many of the athletes would mock and poke fun at themselves, making them seem more human and less untouchable. Ads with Bo Jackson, Michael Jordan, and Charles Barkley are just a few that demonstrated this concept and were exceptionally successful at doing so. Company advertising in the shoe industry changes with different social and economic trends. Nike, on the other hand, often creates their own trends with their advertisements. The current throw back jersey craze sprouted from Nike’s basketball ads set in Rucker Park, in Harlem, that recreated pick-up games played there in 175. Nike’s use of technology in advertising is among the best in the world. The advertisements are The strategy seems to be working well for Reebok. Jay-Z’s Reebok line has become the fastest selling product ever for the company. Critics of this strategy say that Reebok is running a risk associating themselves with the unpredictable rap industry. The popularity of the stars they sign on may wane within the near future, but that’s a risk they’re willing to take.1 On October 7, 00, Reebok made a big move concerning their marketing and advertising by hiring Sonny Voccaro, former marketing guru for Nike. Voccaro is responsible for signing big names like Michael Jordan, Kobe Bryant, and Tracy McGrady to endorsement deals. Voccaro is a big addition to the Reebok staff and will most likely do great things for their advertisement campaigns. Reebok is currently launching a $50 million global campaign that focuses on its vector logo. Through the campaign “Reebok is hoping to create an iconic connection to its brand mark.”15 Reebok is hoping to make the vector seen as a symbol not have any problems with sales. If too much focus is taken away from the performance aspect of their products and put instead on retro styling, Adidas could lose a lot of customers due to inadequate athletic products. The company should ride the retro wave for a while but realize that the performance qualities of their products is a permanent consumer draw.
“so well-executed that the editing is about twice as good as it has to be.”11 Use of the best technology enables Nike to create ads that truly grab a consumers attention, which could make them think about buying Nike the next time they go shopping for a pair of shoes. Nike’s new “Speed” campaign puts the focus on individual athletes and their stories. The spots focus on runners and the determination they exhibit. 1 Nike’s current strategy still focuses on signing big name athletes to sell their products. This strategy appears to be extremely successful for Nike, as they are currently have the top market share in the industry. Compared to Reebok and Adidas, Nike has a definite advantage when it comes to contracts with big name athletes. Michael Jordan, Derrick Jeter, Warren Sapp, and now Lebron James, who currently signed a $0 contract with Nike, are just a few of the big names Nike has contracts with. of authenticity and performance. Reebok wants to do for the vector what Nike did for the Swoosh. Reebok hopes that their $450 million contract with the NFL and NBA to be their official apparel suppliers will put the vector out there for everyone to see. The company feels that if everyone sees the vector connected all over the NFL and NBA, they will associate it with a quality product.15 Reebok’s strategy of moving toward more of a hip-hop and urban feel seems to be working for them so far, but as the popularity of the people they have signed diminishes, which it most likely will if the hip hop industry stays true to current trends, then they will have spent millions of dollars on successfully short lived campaigns. Nike has the right idea signing athletes; although there will be a few busts, for the most part the stars remain popular. As for promoting the vector, Reebok is moving in the right direction. If they can manage to get consumers to associate their logo with quality and performance, they will ultimately sell more products.
Factory Distribution
Distribution is simply the way in which a company gets its product to the consumer. Successful companies have found an optimum way to distribute their products. NIKE
Nike has developed superior control of its distribution channels. “Nikes distribution is as about as tight as you can make a consumer goods-oriented business.”1 The company has developed a Futures program to remove a good portion of inventory risk associated with distribution. A retailer puts in a non-cancelable order months ahead of scheduled delivery. This system helps Nike predict the demand for a product and also assures the buyer will have an adequate supply. Almost 0% of US footwear is ordered under the Futures program. Nike improves distribution efficiency and output by improving its distribution facilities, most notably their recent improvements to their Memphis distribution center. State of the art conveyors and sorters were installed to achieve a higher throughput. “This is now the kind of system befitting an industry leader.”0 The measures taken toward improvement have more than doubled the amount of product that is distributed from the facility. Order accuracy has risen to .8% as a result of the new system. ADIDAS
In 16 Adidas had quite a scare concerning the distribution of its merchandise. The problem occurred with the company’s automated distribution system and almost brought distribution to a stand still. Adidas has since entered into a long term agreement with Caliber Logistics to distribute footwear in the United States. Adidas Canada has made many improvements in distribution. In 17 they made a transition from paper based distribution to a fully automated one. After the addition of Salomon and Taylor Made to the Adidas name, the company had to move two and a half times more inventory. The change to a fully automated distribution system made it easier for the company to handle the influx. Implementation of the fully automated system has cut distribution costs in half as well as made a significant improvement in order accuracy. Adidas has immensely improved its distribution since the mid 0’s. Now customers and retailers can get the product they want when they want it. A smoother operating distribution system will REEBOK
Reebok is taking big steps toward improving their distribution system. A state of the art distribution center has been set up in Massachusetts. The center is controlled by a new warehouse management system that allows for products to be distributed more effectively. This new system has improved employee productivity and kept the inventory accuracy rate high. Reebok realizes that to stay competitive in the industry, their distribution system needs to be nearly flawless. Any problems with distribution could have a negative effect on overall sales.
The system put in at the Memphis plant is truly trendsetting. With that kind of attention to their distribution centers, Nike will minimize any problems that may arise from distribution. A continued effort by Nike to make advancements and improvements in their distribution will ultimately lead to improved financial figures. enable Adidas to keep up with Nike in terms of product availability.
Ability to Innovate
A company’s ability to innovate can distinguish it from other companies in the industry. An innovative company will set itself apart from its competitors by constantly coming up with new products and new ways of doing things. In an industry as fickle as footwear, being innovative is key to a company’s success. NIKE
Nike has been a leader in innovation in the footwear industry. The creative directors have developed the Design Ethos, which sets parameters for Nike’s approach to design throughout the entire company. There are four design functions at Nike footwear, equipment, apparel and identity. Each group contains individual groups, such as men’s basketball, and each of these has its own design team. “Over the years Nike has learned from hard experience that what the athlete likes and what the consumer likes are often not the same thing.”4 Many of Nike’s designs are created for the consumer, not just for professional athletes. That doesn’t mean that the product is inferior in any way in terms of performance, it just means that Nike factors in the wants of normal consumers into their designs. “Our designs are required to perform for elite athletes as well as for everyday athletes,’”4 says one executive. Nike has a big research and development department available REEBOK
for the designers to use in developing new products. Nike set up the Advanced Innovation Team to continually and totally innovate for the company. The team has the responsibility “to enforce the idea that design is not just about simple evolution. The focus for AIT was real innovation -- solving a problem in a brand new way.”4 For the team, innovating starts even before a design is made for a new product. They must look at other factors, such as how different textiles perform, to set the groundwork for an innovative design. John Hoke, Nike global director for footwear says, “From my perspective the true beating heart of Nike is innovation, therefore insight is the fuel for our imagination and creativity. It is the genesis point of all our ideas at Nike.”4 Nike’s approach to innovation puts it well ahead of the pack in terms of both sales and product innovation/development. The company’s commitment to innovation will ensure it future success.
Main Customer Groups
While looking at the different trends and styles of present day athletic footwear, we can further our research within the product and look at the different customer groups that our three companies focus their attention towards. We are primarily looking at the three different companies and the rules of style that may apply to a specific customer group for this product. In some cases, the customer group that they are focusing on may greatly impact the demand for the product because of different influences whether it is there income level, influence of childhood, or even there changing preference of a specific product.
Footwear is classified within many different categories, which makes the research of specific athletic footwear more difficult. For example, we are focusing on the companies of Nike, Adidas, and Reebok, and all of these companies make numerous styles of shoe lines. They range from golf cleats to soccer cleats to cross-country shoes. So when trying to determine the main customer groups, each line of shoes is basically broken down within the group that the specific product is directed towards. So when looking at the different types of customer groups within the athletic footwear industry, some of the key customer demographic trend are broken up into different generations of tastes in style.
The industry of footwear can be broken up into three main customer groups, which are the Baby Boomers, Generation X, and Generation Y. These customer groups do not have much in common except for their love of shoes and the different tastes in the new fashion trends of footwear. These three generations are broken down as follows Baby Boomers are from ages 5-5, Generation Y are consumers from 4-1, and Generation X is consumers from -. As we develop ideas about the main customer groups within the footwear industry we can conclude that the Baby Boomers account for 1% of the population, which is equal to about 81 million consumers. Generation Y is the second largest group that accounts for 8% of the population which represents about 75 million consumers. The smallest customer group is Generation X, they comprise about 17% of the population, which equals about 46 million consumers.1 Collected information from many consumer surveys rates Nike high among the consumers of Generation Y and X. Nike has become more appealing among younger consumers and has shifted away from the Generation of the Baby Boomers.
Nike and many other large shoe industry retailers are shifting there marketing direction from the Baby Boomers to the younger consumers of Generation X and Generation Y. There are many reasons to why the industry is trying to change their target market to younger viewers. As people become older many of there attitudes, priorities, and time obligations have decreased their ambition for shopping. Now that many of the Baby Boomers are within there forties and fifties, many of there priorities have shifted towards the future, in a sense that they need to save for retirement, different tuition payments for there children, and also different healthcare necessities that are important to them and there family. Lets say a consumer from the Baby Boomers generation was going to purchase some shoes, they are more likely to have a longer life span with those shoes then someone who is within there teenage years. Younger consumers put more wear and tear on their shoes than someone who is about 40 or 50. Many companies within the footwear industry know that the spending power of the Baby Boomers has not come to a halt. In Fact, there is still a very prosperous market out there, but the key is finding it. One way that the industry is trying to increase the spending among the Baby Boomers generation is by offering clothing lines in a more conservative style and also in a wide variety of sizes.
As mentioned before, the more present day trends of the footwear companies are geared on marketing to Generation Y. Many companies within the industry have come to the conclusion that by establishing trends among Generation Y, there becomes a greater vision and influence in future product design. By the influences of Generation Y, its impact does not only affect that specific consumer group, but filters to other Generations like X and also the younger brothers and sisters of Generation Y. It has always been said throughout the industry that teenagers show a great amount of brand loyalty to there apparel manufacturers. That is why many manufacturers try to establish a marketing ploy that influences children who want to dress like their older siblings or elders. So if they get them while they are young, they are more likely going to see profits from the children within the future.
Generation Y
Ages 4-1 Generation X
Ages - Baby Boomers
Ages 5-5
Growth Rate
(10-000) 80,61,468-
71,87,755=
8,7,71/
71,87,755=
.114 ,81,74-
4,175,=
-,84,08/
4,175,=
-.07607 8,86,47-
6,801,8=
0,04,40/
6,801,8=
.1885
Size of the group relative to the total population and is that changing 75 million consumers representing 8% of the population. The group of Generation Y has been increasing at a rate of 11% 46 million consumers representing 17% of the population. The group of Generation X has been decreasing at a rate of 7% 81 million consumers representing 1% of the population. The Baby Boomers have been increasing at a rate of %
Income Levels4
(000-001) Median Income
Male
000 $,546
001 $,01
Female
000 $7,60
001 $7,467 Median Income
Male
000 $0,54
001 $0,510
Female
000 $1,04
001 $1,47 Median Income
Male
000 $78,61
001 $7,444
Female
000 $45,80
001 $46,606
Unemployment Rate Changes5
Generation Y in the year 00, there were ,61,000 people unemployed.
In 001, the unemployment rate average for 16 & over was 4.7%. In 00 the unemployment rate average was 5.78
Generation X in the year 00, there were ,0,000 people unemployed.
In Summary of the unemployment rate of 001was 4.7 percent and in 00 the average unemployment rate was 5.78 The unemployment rate for this generation was 4.1 percent in the first quarter, up from .4 percent three years earlier. The overall jump in that period 4.0 percent to 5.8 percent.
Psychographic 1 Generation Y grew up with strong fashion statements by the media. This can attribute to the fact that this consumer group sows more brand loyalty. Generation X consumers are the type of shoppers that bounce from different high-end stores to the mass marketing stores. Baby Boomers have reached a point in their life in which their priorities have shifted. They are concentrating more on tuition payments, mortgage, and other relative expenses. Modern Trends and styles do not affect this type of consumer group as much.
Psychographic Many of the consumers within Generation Y have developed a mind set of “Spend, Spend, Spend”, which in all paints a picture for many retailers in the future. Generation X is said to fit the description of being very conscious of their style. They are trying to present a look that is impressive to other peers, which makes them feel like dressing up for many occasions. Retailers are trying to get these consumers back into spending more on the modern styles and trends. By doing this, retailers are trying to shift these styles to more of a conservative look. By producing a more conservative look, it will captivate more of the characteristics found within the consumer look.
Factors Occurring in the Environment External to the Industry
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies are withdrawing from Indonesia and Korea due to stronger labor unions, as well as the fact that labor is much cheaper in China than it is in the two aforementioned countries. In Tangerang, Indonesia, for example, the minimum wage rose from 40,000 rupiah/month up to 58,000. (1)() In 16 Indonesia was the hotbed for shoe production in Asia. Now, due to its reputation for “lawlessness and chaos” as well as expensive labor, Nike and Reebok have shut down factories in Korea and Indonesia and relocated to places such as China. Other companies such as Puma won’t even start up business here. These moves will surely raise more issues with those concerned about the treatment of smaller countries by large American corporations. This is the opposite effect of sweatshop issues, because it is eliminating many of them, but consequently is crushing a huge part of Indonesia’s economy. Korean companies are finding ways to counter this exodus and keep the industry alive. (1) Nike has been forced to relocate, moving out of Indonesia, which was once the primary place for their shoe production. Indonesia was once the site of 8% of Nike’s shoe production, which then dropped to 0% in 00, and possibly down to 6% with the closing of its Dosen plant. This will look bad for Nike as people will believe they are being careless about the treatment of its workers by leaving thousands jobless. (1) (1)
Dhume, Sadanand. “Just Quit It.” Far Eastern Economic Review, September 1, 00.
()
Min, Kim Jung. “A New Spring In Its Step.” Far Eastern Economic Review, February 1, 00.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
SARS, a deadly fast-spreading strain of pneumonia, has disrupted the travel to and from Asia, as it is at its most prominent in China, Hong Kong and Taiwan. This in turn has made it more difficult for the shoe industry to coordinate production and control quality. (4) If SARS turns into an even more major epidemic than it already is, it will play a huge role on the way business is done with Asia. Considering the fact that shoe inspections will increase once shipped, the outcome of SARS will “add friction to the cost of doing business in Asia.” This in turn will show up in the price of the product. (5) Nike realized a lot from the SARS outbreak. The impact of SARS had huge impacts for Nike, as it lost employees in Asia, encountered difficulty in coordinating production, and also had to deal with West Coast port closures. As Ray Knight states SARS gave “global business a wake-up call as to just how quickly markets can be squelched by unexpected circumstances.” (6) (4)
Standard and Poors Current Environment http//www.netadvantage.standardandpoors.com/
(5)
Maiello, Michael. “Aftershock.” Forbes, vol. 171 no. . Apr. 8, 00. p. 44-46.
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Major shoe companies have faced heat in the form of boycotts and protests for the supposed running of “sweatshops” in smaller countries where labor is extremely cheap. Companies such as Nike have been said to rudely mistreat their employees and force them to work in terrible conditions. (7) For much of the industry, sweatshop scandals help them because most of the time they have to do with Nike. However, as Reebok pulls a large percentage of their production from Indonesia, many worry that the change in locations in the chase for lower wages will make abuse charges prevalent once again. (7) Nike has battled with accusations that it runs sweatshops for roughly 1 years now. Nike is currently in a U.S. Supreme Court battle in order to gain first amendment rights to defend itself. Nike is trying to earn the right to defend itself, after it had been sued for supposedly defending itself with lies. Any accusations questioning the responsibility of Nike as a corporate citizen is attention that they would like to avoid at all cost. (8) (7)
Ellis, Kristi. “Global Labor Pains Advocates Worry Abuse Will Rise as Factories Relocate.” FN, 58 (40), October 14, 00.
(8)
“Courtside with Nike.” http//arizonarepublic.com
May 6, 00.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The sluggish economy has forced major forces in the shoe industry to take major action, way more than in the past when the economy was a little more stable. Results of this include buyouts of smaller companies, as well as pushing sales in other countries that currently have stronger economies. () The athletic shoe industry is one of the most recognizable global markets. Reebok, Adidas and Nike are all recognizable no matter what country you’re in due to the endorsements of major American and International athletes. The direction that the sluggish economy has forced the industry to take will only make it that much more dominant once the American economy recovers. () Nike has been forced to place a little more emphasis on ventures other than that of marketing the new Jordans, for instance. In Ray Knight’s letter to the shareholders he discusses the fact that Nike placed major focus on product, advertising, and getting management caught up to sales. All of these were achieved and because of this Nike will be stronger once the economy begins to recover. The good news is, as Standard and Poor’s predicts, is that GDP increased .% in the second quarter and that it will pick up in the second half to achieve .5% for the year. (6)() ()
Standard and Poor’s Industry Profile. http//www.netadvantage.standardandpoors.com/
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The current industry sees the internet playing an increasingly important role in the sales, marketing, and global reach of major athletic shoe companies. (10)(11)(1) If one visits any of the big three company’s websites, it can link to 18 countries on Reebok’s site, on Adidas’ and 16 on Nike’s. The websites also give the opportunity for customers to contact the company as well as buy products from the website without having to go to the store looking for a particular product that might not be in stock. (10)(11)(1) Nike by far has the most extensive website of any of the three major brands. While Adidas and Reebok do have impressive sites, the Nike site is incredible in its extensiveness. Nike also offers a new product called the NikeId in which you can create your own shoe, custom made for the customer. The internet is an excellent tool for reaching customers and broadening the scope of the company. (1) (10)
www.adidas.com
(11)
www.reebok.com
(1)
www.nike.com
Factors Relating to Industry Actions
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The athletic shoe industry has begun to take notice of the need to give women attention in this market. Women need active footwear and apparel as much as men do, thus the advent of new stores and extended women’s product lines by many of the major shoe companies. (1) Various companies are opening stores strictly for women. These companies, such as Nike, Adidas, Puma, and Champion, are expanding their lines to incorporate enough products to open a store, or boutique within a larger store, that focuses strictly on women. Dick’s opened two women’s only stores in Buffalo and Albany under its brand name Ativa. In order to be successful, these women’s stores are believed to need a wide selection of merchandise and exceptional customer service. (1) Nike Goddess, a website that has been functioning since 10, has been opened as a store in a few locations and Nike plans to expand on this idea by opening more stores. These stores will either be separate stores, or boutiques within larger stores. Lady Foot Locker will incorporate Nike Goddess into its 600 stores, Nordstrom will incorporate it in its department store, and Macy’s will get a smaller version of the store this year. This is nothing but a good thing for Nike as it will only expand its market and try to double its sales to women by mid-decade. (14) (1)
Ryan, Thomas J. “Girl Talk.” Sporting Goods Business 6, no. 6 (Jun 00) p. 18.
(14)
Warner, Fara. “Nike’s women’s movement.” Fast Company no. 61(Aug. 00) p. 70-75.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies are searching overseas for big name athletes to endorse their products, and thus expand their market in order to drive sales. () The recent U.S. economic downturn has caused people within the United States to buy less of the really expensive athletic shoes such as the new $00 Jordans. For this reason, and the basic idea of just driving sales to a wider market, the major companies have worked on gaining endorsements from major international athletes. Reebok has recently won its first ever endorsement battle with Nike by winning away Yao Ming in a newly signed endorsement deal. This should give them a huge leg-up in the Chinese footwear market where Basketball is the second most popular sport in the country. (15) Nike has realized that by signing major athletes from sports around the world, they can increase sales and market themselves on a much larger scale. Nike has signed the likes of Ronaldo, the Brazilian soccer player, and sponsors such National soccer teams as Brazil, Korea, and Manchester United of the English Premiere League. Because of this, Nike has seen International sales exceed domestic sales for the first time as they reached 51%. (6) ()
Standard and Poor’s Industry Profile. http//www.netadvantage.standardandpoors.com/
(15)
Aoki, Naomi. “Reebok Signs Top Basketball Player Away from Nike.” Knight-Ridder Tribune Business News. October 4, 00.
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies have begun to restructure their relationships with major retailers, as well as form relationships with new companies. One reason for this being so is that certain shoe companies give the retailers an opportunity to increase their profit margins by selling their shoes. (16) Seeing that Nike in many cases creates the trends for this industry, it is easy to understand how their battle with Foot Locker has created an opportunity for companies such as Reebok and Adidas. After the dispute between Nike and Foot Locker, where Foot Locker cleared many Nikes off of their shelves, Reebok and Adidas benefited greatly due to the fact that it cleared $50 million worth of shelf space for companies such as themselves. (17) Many thought that Nike would suffer from the problems that them and Foot Locker had seeing that Nike would have to find a new home for $50 million in marquee product. However, Nike has aligned with mall-based retailers such as Footaction and The Finish Line, directly competing with Foot Locker and doing just fine. Nike also combined with The Finish Line for three TV co-op spots this year to push the two companies. (18) (16)
Carr, Bob. “Has Nike won its battle with Foot Locker?” Sporting Goods Business 6, no. 6 (Jun 00). p 10.
(17)
Ryan, Thomas. “Hot off the shelf.” Sporting Goods Business 5, no. 11 (Nov 00). p 0.
(18)
“Finish Line, Nike team again retailer’s inventory of Shox Status shoes shines in humorous spot.” http//rdsweb.rdsinc.com
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Due to the slowdown of the U.S. economy as of late, major footwear companies are seeking to buy smaller ones in order to bolster their own sales and eliminate potential competition. (1) Demand for shoes will probably remain constant even when a larger line buys out a small one. However, many companies that have the means to buy a smaller one are simply doing so to try and keep up with the larger behemoths. By doing so, companies grab market share and can use another products label to help their cause. (0) Nike has recently bought out classic shoemaker Converse, for $05 million, in order to gain additional market share as well as reaching the retro market of the shoe industry, which is becoming increasingly popular. They plan on running it as a separate entity and not change the traditional Converse shoes. This will certainly mean a big boost in sales for Nike. (1) (1)
Standard and Poor’s Industry Trends. http//www.netadvantage. standardandpoors.com
(0)
Ryan, Thomas. “Hungry for Profits.” Sporting Goods Business, 6 no. , Feb 00. p 4.
(1)
Schlosser, Julie. “Nike Goes Old School.” Fortune, 148 no. , August 11, 00. p 150.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Major shoe companies keep trying to come up with the newest and most interesting advertising/marketing campaigns in order to push their product to customers in a way that sets them apart from the rest. () One example of this trend is the way that Reebok has created another way of battling Nike for superstar athletes, that being to market shoe lines from non-athletes such as hip-hop artists Jay-Z and 50 cent. These artists will gain Reebok some “street” credibility as the create signature collections for Reebok extension Rbk. () Nike will most likely have to counter this move assuming that the direction Reebok is taking has huge success. Nike has always gained endorsements solely from athletes, but it may stand to learn something from Reebok if they find success. Nike may face some problems competing with Reebok seeing that Reebok now has Allen Iverson and Yao Ming as well. ()
Devaney, Polly. “Reebok shoots from the hip-hop in sneaker wars.” Marketing Week. July 1, 00. p1.
Summary of the State of the Company and of the Industry
Footwear Industry
The athletic footwear industry is a market where three top manufacturers dominate Nike, Adidas, and Reebok. The three companies alone together control nearly 70% total market share (Section I part 1). As large as the markets are, there are many new entrants that have made successful forays into the market as new entrants (Puma), however, the overall cost and feasibility are greatly debatable which makes the footwear industry a rather difficult market to enter. One important note about the Footwear industry that is worthy to mention is the underlying nature of footwear as a consumer product. Athletic footwear is much as necessity as it is a discretionary purchase (Section I part 1). This notion is where the industry has risen to levels that provide tremendous value for its consumers. It is no surprise, thus, that much of athletic footwear sales have primarily been attributed to branding and image. Such proves to be the driving factor that has ultimately sustained sales. The current state of the industry has been in its maturity phase for some time. Nike holds the lions share of the market and continues to dominate.
Company Strengths
There are various strengths that Nike is endowed with. Most notably, Nike is the largest manufacturer of athletic footwear and apparel in the world. In terms of footwear, Nike enjoyed control of nearly 4.% of the entire footwear market in 000 at nearly 8 billion dollars (Section I part 1). That is more than both its number two and number three competitors combined! This dominance has helped Nike to become the athletic colossus that it is today. Nikes branding also directly contributes to its advantage due to Nikes ability to not only market shoes, but allows the consumer to take on the vicarious roles of the numerous celebrity endorsers that promote Nike in the first place. Nike has virtually invented the notion of the celebrity endorsement with the likes of Pete Sampras and Andre Agassi in Tennis; Michael Jordan in Basketball; and the recent acquisition of teen basketball sensation Lebron James who signed with Nike for a reported $0 million (Section Part ). The ability to throw enormous amounts of money to these athletes has given Nike a comparative advantage over the number and . In addition, Nikes financial soundness has proven stable through economic cycles. Nike has enjoyed higher margins of sales compared with that of its immediate competition (Section Part 1) and although sales have slumped in the recent economic downturn, Nike appears on its way to regaining profitable levels.
Company Weaknesses
Though Nike enjoys the title of being the largest athletic footwear and apparel manufacturer in the world, it goes without saying that Nike has had its share of company weaknesses. An analysis of the house of quality reveals an opportunity that seems to consistently be overlooked by not just Nike, but from Adidas and Reebok as well. This stems from the inability (or lack of effort) to market to the large baby boomer segment (Section 4 Part 4, c). What would appear to be a market that looks for comfort, price and quality (Section 4 Part 4, c) seems to be a sorely underdeveloped niche that Nike (As well as others) could take advantage of. On other notable weakness is not as readily apparent but a major concern nonetheless. This weakness has to do with Nikes shear size. Being the biggest on the block is not without its trade offs. Nike has had to work hard for its place in the market but adjusting to global pressures, social pressures, and being stuck in branding an expensive shoe leads to limited options in dealing with an environment constantly influx (Section Part ). Nike has made slow adjustments to react to all of these issues on many fronts and Nike is definitely without its critics (Especially from human rights activists groups).
Company Opportunities
One major opportunity that Nike has homed in on regards the foray into the womens market. Nike has made a push to market to women with new product lines, distribution centers, and web stores (Nike Goddess) that are exclusively marketed to women (Section 5). Another way that Nike has been able to take advantage is underpinned with the recent acquisition of Converse (Section a). Such a move is telling of Nikes value of the recent trend for the demand for trendy retro products. The acquisition was intended to position Nike by leveraging the throwback lifestyle. With the current stable demand for such products, Nike is able to reap the benefits by acquiring a company whose entire legend is embodied with a solid retro history (Converse Chuck Taylor All Stars). Not deviating far from that emphasis on trends is the decision to reproduce older shoe models that were conceived of decades ago. The hip hop community has been a driving factor in sales with the surge in popularity of the Air Force One model shoe. In fact, the shoe has been resurrected in multi-platinum record sales from the song Air Force Ones by rap singer Nelly. Nike has thus had the fortunate situation to be in a position to cash in on such opportunities.
Company Threats
Nikes most immediate threats stem from environmental factors. The SARS epidemic in Asia has been a prime example of how Nikes company can be affected by conditions in far flung places like Asia. The implications of the epidemic were large in scale in that Nike has had to close ports on the West Coast and take other actions to deal with the virus (Section V). Another trend that has left a sour taste in the mouth of Nike involves the human rights pressures to improve working conditions and to directly deal with the sweatshops that Nike has been accused of (Section V). Such controversies have placed CEO Phil Knight in the role as global villain which can detract from Nikes impression on the public and overall performance. Increasing expenses of relocation, improving factory working conditions and dealing with negative publicity has led Nike to a take on a defensive position on an ongoing basis.
Balanced Scorecard
Financial Measures Process Measures
• Profit margin
• Cost of sales as a percentage of total sales
• Return on equity
• Market share
• Return on investment • Percentage of deliveries made within a specified number of working days from the date of order
• Average number of defects per shoe at final inspection
• Labor cost and usage per 1000 defect free units
• Percentage of shipments received on promised date but after the promised time
• Average time to adjust to change orders.
Organizational learning and Organization Development Measures Customer Satisfaction Measures
• Average delivery time to distribution centers
• Periodic employment performance reviews
• Quality circles utilized to rate internal team based performances
• Time spent dealing with bottlenecks within supply chain
• Ongoing inventory of distribution channels Segments are Generation Y
Generation X
Baby Boomers
• Average dollar amount spent on athletic footwear per year in each segment
• Average distance traveled to purchase Nike products
• The percentage of customers within each segment that value the quality of the product
• Average number of repeat customers that purchased Nike products.
• The percentage of customers who purchase Nike products based on image
Nike’s Current Strategies and Goals
Nike has in placed several strategies that encompass improving growth and profits in a variety of areas. The struggling economy has not changed Nike’s attitude towards growth. One strategy that Nike focuses on, in continuing to help the company grow is Person Marketing. Nike has been using the best athletes, and sports teams (or clubs) all over the world to help market their products. The regenerative nature of sports has allowed Nike to sign new upcoming stars like LeBron James, Carmelo Anthony, Lleyton Hewitt, Michael Vick and others. These are the athletes that will push Nike beyond their expectations and will set the standards for the next generation to exceed. Nike’s second greatest source of potential lies with the products the company is working on. Nike’s design team is constantly developing new concepts in speed and agility to give athletes the latest innovative equipment to improve performance. The third strategy that Nike uses, perhaps the most important, is advertising and marketing. These two components capture the essence of the product and the attention of consumers around the world.
These strategies support the financials especially profit margin and market share. Under consumer measures Nike’s strategies also support the percentage of customers who purchase Nike products based on image.
Nike
Remy Ajluni
Adam Brook
Anthony Colletti
Elizabeth Crompton
Conrad Pilewicz
Michael Ramos
Current nature and structure of the athletic footwear industry
The athletic footwear industry is a highly competitive environment where the top four manufacturers hold over 70% of the market share. The barriers to entry into the industry are comparatively low, as anyone with new creative design ideas can produce and market their product, but the success of smaller companies is oftentimes shaky. Brand loyalty, ample capital, and broad based sourcing create an environment where the bigger companies such as Nike and Reebok have little trouble maintaining market share. Nike enjoys the largest share, with 4.% of the nearly $8 billion market in the year 000. Reebok was second with 11.%, Adidas had 10.8%, and New Balance had .6% of the market. The remaining 5% must be divided among the numerous smaller companies fighting for a shot at survival.
One of the important characteristics of the footwear industry is the fact that the product is necessary to consumers, yet very much a discretionary purchase as well. The actual structure of athletic shoes does not change very much from season to season. The design and fashion aspects are what significantly differentiate one product from another. Due to these factors, athletic shoe purchases are largely dependant on economic conditions. When the economy is good and consumers are enjoying plenty of disposable income, they are more likely to make new purchases to update their shoe collections. When there is a shorter supply of income, consumers will put off purchases until they are absolutely necessary and the price of the shoes is low enough.
Currently, the athletic shoe industry is performing well. Overall footwear spending in the United States has decreased in recent years, but athletic shoe sales are increasing. In 001 $15.1 billion was spent on footwear while in 00 the industry experienced a 5% decrease to $40.56 billion. In the athletic sector, consumer sales have increased. The number of shoes sold in 00 was 7% higher than 001 sales, reaching 48.6 million pairs. Although sales are up, manufacturers are still looking for additional opportunities because the average price paid has decreased from $8.0 in 001 to $6.61 in 00 or a 4.% loss. These conditions of added sales but declining prices have led to fairly slow growth in the industry.
Because the US market has reached its maturity, manufacturers are looking at the opportunities in foreign markets as the next step for growth. The US population growth rate is extremely low, 1% per year, but the populations of developing countries are exploding. The abundance of opportunity in foreign markets has allowed the footwear industry to thrive when domestic growth is nearly non-existent.
Within the footwear industry, manufacturers typically produce their product and use their distribution channels to circulate the goods to retailers and, ultimately, consumers. Some companies such as Nike have opened a limited number of retail stores themselves to diversify sales channels and lower dependence on retailers. Retail stores by manufacturers allow them to more effectively maintain contact with the consumer and collect feedback, but are not currently a feasible route of distribution for the industry on a large scale. Manufacturer’s relationships with retailers are pivotal. The retailers have significant power over the manufacturers. By lowering the amount of inventory that they hold, retailers have shifted the inventory risk to manufacturers. Also, because they are the main routes of transmission, retailers have significant leverage over manufacturers on many aspects of the industry such as pricing, product labeling, or cooperative advertising where both share costs.
Key factors that influence success
Brand awareness is one of the biggest assets that an athletic shoe company can have. Consumers are constantly exposed to endless advertising and marketing campaigns for never-ending product lines. If a company is able to establish brand awareness, they will have a significant advantage in grabbing consumer’s attention and, therefore, market share. In today’s society where consumers have significantly less time to shop and compare, brand awareness is critical. If an established brand name effectively conveys the messages of quality and dependability, consumers will automatically go to that brand relying on the image that has been created when they don’t have time to shop around.
Manufacturing efficiency is something that companies are constantly striving for as well. Athletic shoe manufacturers must balance the costs of labor, raw materials, shipping, import tariffs, and technological advancements. In an effort to keeps costs down, the industry has been looking to overseas sourcing. Favorable legislation regarding foreign manufacturing has led to a huge increase in foreign sourcing. In order to diversify supply and production lines, manufacturers have spread out their operations over many areas to avoid over concentration in one region. With this strategy, if one country or region experiences problems that interrupt production, the affected company is not completely out of options and can still accomplish production.
Distribution channels dictate who a company’s customer will be and how they will get the product. The footwear companies must choose their channels carefully because they want to make the product available, yet remain true to their image and goals. Retailers account for the largest percentage of sales, so manufacturers must be especially careful with their relationships with them. If a disagreement arises between manufacturer and retailer, the manufacturer could face potentially extensive problems getting the product to market. A recent example of this occurred between Foot Locker and manufacturer Nike. In an attempt to carry more of the lower cost shoes that consumers are demanding, Foot Locker cut back on their high-end purchases from Nike significantly. Nike, in turn, had to look for other outlets for their signature lines.
The ability of companies in the industry to shorten their design, development, production, and distribution cycles is vital to success. In the past, retail stores could carry a product months in advance of a projected need, but now consumers want to buy closer to when they actually experience the need for the good. With the shortened cycles, manufacturers can place more of an emphasis on styling and keep up with the changes in fashion.
Technological advancement is becoming more and more of a player in the footwear industry. With computer-aided design (CAD), companies have been able to successfully shorten their design to distribution cycle to only a few months. Previously, the new product development phase oftentimes took years. Also, new technology has facilitated new quick-response programs that link retailers with manufacturers to allow the retailer to have the correct inventory when it is needed called EDI. Immediately after a sale is made, electronic point of sale scanners read the information related to the sale such as price, product, size, etc. and notify the manufacturer of the sale. With this, the manufacturer is able to accurately modify production to fit consumer demand. Also, retailers are not required to hold as much inventory with this system, which lowers costs for them and, ultimately, consumers.
Demand cycles
While footwear is definitely a necessity for the general population, most footwear purchases are discretionary. Shoe design does not significantly alter in fundamental structure from season to season, so any additional purchase by the consumer is probably for fashion or style reasons. Due to the largely subjective nature of athletic footwear purchasing, the success of the industry is dependant on the current economic cycle. When consumers are concerned about future economic conditions, they will put off their purchases until their confidence rebounds. As can be seen by the graph below, consumer confidence hit its peak around 000 and has been fluctuating ever since. After the events of September 11, 001 and then when consumers were concerned about impending war in Iraq, confidence drastically dropped, but was able to rebound somewhat. Industry sales in 000 were around $. billion, dipped to $8. billion in 001 largely due to the drop in consumer confidence after September 11, and began to recover in 00 to a little over $ billion.
In addition to the amount of confidence that consumers have for the future, the amount of disposable income available to them directly affects how much is spent on athletic footwear. When consumers experience a drop in disposable income, discretionary purchases such as footwear are put off. One general exception to this trend within the industry is due to the fact that teenagers account for a large portion of industry sales in the athletic footwear sector. Teenagers are responsible for % of all athletic shoe purchases and are typically not as concerned with the costs of goods as older consumers are. When adults are saving as much as they can, teens will still spend any disposable income that they have. Also, teens are more willing to pay for the higher priced shoes while adults are reluctant to buy the specialty goods.
U.S. Department of Commerce Bureau of Economic Analysis
Competitive forces affecting the industry
-Potential new entrants
The footwear industry includes moderate barriers to entry. Any person with a design that interests consumers can outsource their production to an independent manufacturer and can potentially enter the market. The capital and distribution channels that are required for success make it difficult for the smaller entrants to flourish though. The top manufacturers absolutely dominate the industry, with Nike holding over 40% alone.
-Bargaining power of Buyers
Buyers in the athletic footwear industry enjoy a great deal of power. Consumers have shown again and again that they will simply wait until prices reach a level they feel is reasonable before making a purchase. Nearly 40% of all shoe purchases are made through discount stores. Also, consumers are able to make informed decisions about a purchase through utilization of Internet websites. The bargaining power of retailers is also a problem for footwear manufacturers. In recent years, retailers have begun to hold fewer inventories, forcing manufacturers to pay for increased inventory levels on their end. Manufacturers must also make sure that retailers are selling the product in accordance with the desired image of the shoe. Nike has recently experienced a disagreement with their largest retailer Foot Locker due to pricing disagreements. As a result, Foot Locker significantly reduced its high end purchases from Nike and Nike decided to shift their high end product sales elsewhere.
-Bargaining power of Suppliers
The materials for footwear production are relatively easy to obtain. To keep costs low, manufacturers have begun widening their supply channels to ensure that they are not depending too much on one source. The recent SARS outbreak is one example why suppliers are diversified. Many manufacturers relied on China to supply low cost goods for manufacturing. When the outbreak made traveling to the area impossible, manufacturers had to find alternative ways to get supplies such as utilizing the Internet.
-Threat of substitute products
Athletic footwear manufacturers must constantly be aware of the threat of substitute products available to the consumer. The major manufacturers such as Nike, Adidas, and Reebok hold a majority of market share but are far from the only choices that consumers have. There are numerous other options for athletic shoe purchases. Although brand loyalty allows some measure of constancy for the manufacturers, if the design does not match the current trend, consumers will simply buy one of the many alternatives.
-Rivalry among competitors
Rivalry among competitors is high. Overall, the product that all manufacturers offer is basically the same. Differentiation of the product is vital for success. Consumers have many options to choose from and manufactures have to tailor their marketing strategies to catch part of the market. The advertising dollars that are spent in the hopes of differentiation are staggering… In 000, Nike spent over $10 million on advertising alone. In a recent deal with LeBron James, a basketball player, Nike beat out Reebok with a $0 million offer. In turn, Reebok took on year old Mark Walker as part of their “the future of basketball” advertising campaign. Finally, in another odd twist of the competition between the athletic shoe companies, Kobe Bryant broke an $8 million deal with Adidas and was going to sign with Nike. Although the relationship between Bryant and Nike disintegrated due to recent events, this just illustrates the lengths that competitors go to in order to outdo each other.
Industry Location on the Product Life Cycle
The athletic footwear industry is in the maturity stage of the PLC. The product itself has become very similar across the board because the wishes of the consumer have been well established. Since the market is fixed, additional profits come only by taking those profits directly from a competitor. The intense competition between competitors in the market is obvious, as that is the only way to succeed at this stage of the product life cycle.
00 sales � 001 sales = 08-804 = 1.5%
001 sales 804
Company location on the BCG
-Nike
Nike is positioned at the cow position on the BCG matrix.
PLC 8-488.8 = .04 or 4.%
488.8
target co sales = 8 = 1.56
Relative Market Share nearest competitor(adidas) 67.7
-Adidas
Adidas is located at the star position on the BCG matrix.
PLC = 67.7-578.87 = .176 or 17.6%
578.87
Adidas = 67.7 = .0
Market Share Reebok 17.87
-Reebok
Reebok is at the cash cow position on the BCG matrix.
PLC 17.87-.88 = .045 or 4.5%
.88
Reebok = 67.7 = .8
Market share Adidas 7718.66
Industry trends
Trend Implications for the industry Implications for target company Citations
Product line diversification. Manufacturers are producing a much wider variety of products for more segments of customers. Retail stores, wider customer base, more revenue Standard and Poor’s Industry Profile for Apparel & Footwear
Overseas production and sourcing Lower material and labor costs as well as a diversified network of production and supplies to ensure stability if one source is rendered unavailable or unusable. Lower production costs and less risk of losing revenue if one region experiences problems.
Foreign sales With the US market at maturity, companies are looking overseas to utilize the vast opportunity in foreign markets. Nike sales in the foreign sector are growing at a much faster rate than those in the US leading to higher profits.
Diversified distribution channels Products are readily available at multiple places, thereby reaching a broader customer base. May dilute the product’s image if put into channels that do correspond with the desired image.
Lower retail inventories Retailers are not carrying as much inventory, leaving that responsibility with the manufacturers. Nike must assume more inventory risk and carry the extra costs associated with inventory. The Wall Street Transcript Interview with John Shanley on athletic footwear companies, 1/7/0.
Response to negative public opinion of labor practices
“Rapid globalization and the unfettered quest for lowest-- cost production-coupled with the value clash between affluent countries and those in the very early stages of industrialization” has lured many companies to manufacture their products in under developed countries. Much protest has arisen concerning companies’ labor practices in these countries. Consumers are becoming more conscious of a company’s reputation and are making purchases based on their opinion of the company. “In fact, a recent MORI poll commissioned by the Co-operative Bank suggests that a third of consumers are `seriously concerned with ethical issues. Within the past year, over half of us have bought a product or recommended a company on the basis of its reputation.”
NIKE
Nike has been a target for protest since the early 10s. Many activists, students and unions have alleged that Nike’s labor practices are unfair and their treatment of workers is inhumane. When compared to Adidas and Reebok, Nike receives the majority of the attention from protestors and activists. After many years of such protest, Nike’s reputation eventually became tarnished and in 18 the company reported a 50% decline in profits from the previous year. On its website, Nike responds to the issues of its labor practices “Nike is committed to being a responsible corporate citizen. We work to improve the lives and working conditions of all workers. We dont own these factories, but we take pride in our relationships with them. Nikes relationship with its contract factories is guided by our Code of Conduct and the Code Leadership Standards, a set of labor, health and environmental standards.”4 In response to all the protest, Nike has been developing a formal factory monitoring program.
REEBOK
Reebok has lived in Nike’s shadow since 10, when the industry giant surpassed Reebok in sales. As a result, Reebok has not been under the extreme scrutiny that Nike has faced. There are those opposed to Reebok’s labor practices nonetheless. Doug Cahn, director of human rights programs for Reebok, says “Theres a correlation between factories producing good-quality products and those with good working conditions.5 Reebok seems to have taken the human rights issue to heart. To ensure that production standards were compliant with human rights, Reebok formed a task force to establish international standards concerning labor practices. The task force drew on information from outside the company to form standards, which made sure the standards developed were very effective. Internationally accepted standards were looked at along with standards set forth by the United Nations. Reebok sends auditors, often unannounced, to check factory conditions. The company also uses a type of double check ADIDAS
In 1, Robert Louis-Dreyfus was appointed chairman of Adidas. He brought with him radical change concerning the manufacture of Adidas products. Dreyfus decided that the company should focus more on marketing and branding and less on production, so he closed the majority of the plants in Western Europe and moved most of the production, 0%, to Asia, Southern Europe and Northern Africa. As a result of this shift, Adidas has been criticized for having poor working conditions in their factories. Criticism has put pressure on Adidas to monitor their factory working conditions more closely. Whereas Nike has its Code of Conduct, and Reebok has its Human Rights Production Standards, Adidas has no code of conduct concerning the treatment of workers in their factories. In January of 1, Adidas appointed David Husselbee as the new director of social and environmental affairs. Up until Husselbee was hired, Adidas concerned themselves with human rights issues on a makeshift basis. They
The program was designed to monitor working conditions and treatment of workers in Nike factories. Regular audits are carried out in each of its factories to make sure no children are employed. In addition, Nike has signed the United Nations’ Global Compact which is “an initiative launched…to encourage businesses to implement certain human rights, labor and environmental principles.” In 1, Nike put into action a Code of Conduct that deals exclusively with labor rights. The company also joined President Bill Clinton’s Fair Labor Campaign and created a labor practices department in 16. To improve the well being of workers, Nike employed micro-credit programs, adult education, and better factory monitoring. Nike also hired an audit firm to make sure contractors in Vietnam, China, South America, and Indonesia adhered to the labor standards that had been set. “Nike now claims it is a market leader not only in shoe design but also in labor standards.”
process to ensure proper working conditions, “third-party auditors are used in countries where the company does not believe it has personnel with the necessary expertise to judge working conditions.”5 Reebok has recently developed software with SAP, a logistics software supplier, that allows them to track human rights issues in developing and undeveloped countries. The software will allow Reebok to monitor workers’ wages and even the number of hours each employee works.6 A computerized tracking system such as this will enable Reebok to respond faster and more effectively to any human rights issues that might arise. In 17, the Department of Labor released its first “Trendsetters Report”, which is “ a list of retailers and manufacturers who have taken action to combat sweatshops and ensure that their shelves are stocked with only ‘No Sweat’ garments.”7 Reebok was among the companies that made the list. Companies mentioned on the list were found to have a strong commitment to would only worry about issues when the issues arose. After the company saw the amount of pressure that Nike was under to address labor issues, Adidas decided to put a human rights policy into action. Adidas, though, did not use the program to effect public relations, but rather used it as a defensive tool. ’We see our human rights policy as a natural part of being good corporate citizens,’ says one executive. ‘Emphasising it would only detract from our brand.’10 Most of the action the company takes about concerns that arise is interactive, meaning they wait until a problem is reported to solve it. “The group plans to take a more proactive role in the future.”10 This way the company could fix any problem before it really becomes a problem. Husselbee is currently working with activists and campaigners to come up with plans of action to “provide independent confirmation of progress (or lack of it).”10 By imploring this type of strategy, Adidas gains a lot of credibility when it comes to dealing with
The media is starting to see that Nike has made a solid effort to improve labor issues and that the changes they have made are having a positive effect. Numerous newspapers have reported that labor conditions have improved in Nike’s factories. As a result of the actions Nike has taken to deal with the voices of dissent, their sales figures have been steadily increasing since the slump in 18. Nike has made a sincere effort to improve working conditions for its employees in undeveloped countries, and this translates directly to increased sales figures.
labor laws. These companies comply with law enforcement when violations are found and also monitor work conditions strictly to ensure no human rights violations. Reebok’s company website shows a strong commitment to human rights as well. “We believe that we all have a responsibility to understand human rights, to expose injustice, and to support efforts that ensure dignity and rights for all human beings. The business practices we have developed and implemented around the world and our history, are a reflection of our commitment.” It appears that Reebok is more effective at dealing with any negative opinion that may arise from any of its labor practices. Even though most protest against Reebok is eclipsed by protest against Nike, Reebok effectively deals with issues that surface concerning labor and human rights. protest. Adidas is making strides to respond to concerns regarding their labor practices. But ultimately they need to develop a set of standards that all their factories must abide by. They should also develop a reliable system to monitor the conditions in their factories.
Advertising campaigns
Advertising is a huge part of the athletic shoe industry. Companies spend a large portion of their revenue on advertising. A lot of pressure is put on the companies to come up with new and successful advertising campaigns. If a campaign fails, the companies sales suffer as a result. NIKE
Nike has always been an industry leader when it comes to advertising. Their ad campaigns are known all over the world as being widely successful. Nike is truly a trendsetter when it comes to advertising, not just for shoes, but for the advertising industry as well. In June, Phil Knight, CEO and co-founder of Nike, will be named advertiser of the year for the second time (the first being in 14) at the Cannes International Advertising Festival. After gaining some steam and noting steady increases in sales, Nike started to establish itself in the industry. “Into this Eastern establishment came this weird new cultish… sensibility a definite west by northwest, New Age-y, maniacal, running/fitness/discipline subculture. The company was all about the clarity of matching technology to athletic performance-and, in the ads, showing the passion that resulted.”11 By going against the norms in advertising, Nike was able to distance itself from other shoe makers and thus establish strong customer core. There are many aspects of advertising that have REEBOK
Unlike Nike, Reebok has not really been known for their revolutionary advertising. During the early 0s, the battle for market share in the athletic footwear industry was a heated one, but after Nike took the lead, the market shares have remained fairly constant, with Nike far in the lead. Nike dominates big name athletes to endorse its products, so Reebok has decided to focus on non-athletes, namely hip-hop artists, to create their own signature collections. This strategy seems to be working for the company so far. Reebok has realized that if they were to succeed in the market, they had to focus on selling to the urban teenage male. Reebok launched its Rbk campaign, which moved away from the Reebok image and attempted to establish one that would get the attention of the urban teenage male. To go along with its new hip-hop urban image Reebok signed Allen Iverson to release his own shoe collection, which has become a top seller for the company. Reebok has also recently moved beyond athletes to sign rappers Jay-Z and 50 Cent in hopes to tap into their popularity. ADIDAS
Adidas uses strategies used by both Nike and Reebok to market their products. The company plans on raising their global media spending by up to 0%. Like Nike, Adidas signs athletic superstars to endorse their products. Recently they signed All-Star Tracy McGrady to a lifetime deal and also signed Tim Duncan of the San Antonio Spurs. Most of Adidas’ advertising is geared toward the European market since about 65% of their sales are made there. They recently signed soccer sensation David Beckham to an endorsement contract to boost sales in England and across Europe.16 Beyond using big stars to endorse their products, Adidas has rode the retro wave to bring back its trademark logo, the Trefoil. Retro styling is making a big impact on the footwear industry. Consumers associate the Trefoil with retro styling, and because of its recent resurgence, the logo is becoming more popular. Adidas has shifted a bit from performance and is now focusing on retro style. 17 As long as Adidas realizes the retro fad is most likely a fleeting one, they should
brought Nike success. Its use of famous celebrity athletes in advertising their products is unrivaled by any other company. Through clever ad campaigns, Nike was able to “humanize athletes.”11 Nike placed famous athletes that seemed almost “untouchable” in often humorous situations. Many of the athletes would mock and poke fun at themselves, making them seem more human and less untouchable. Ads with Bo Jackson, Michael Jordan, and Charles Barkley are just a few that demonstrated this concept and were exceptionally successful at doing so. Company advertising in the shoe industry changes with different social and economic trends. Nike, on the other hand, often creates their own trends with their advertisements. The current throw back jersey craze sprouted from Nike’s basketball ads set in Rucker Park, in Harlem, that recreated pick-up games played there in 175. Nike’s use of technology in advertising is among the best in the world. The advertisements are The strategy seems to be working well for Reebok. Jay-Z’s Reebok line has become the fastest selling product ever for the company. Critics of this strategy say that Reebok is running a risk associating themselves with the unpredictable rap industry. The popularity of the stars they sign on may wane within the near future, but that’s a risk they’re willing to take.1 On October 7, 00, Reebok made a big move concerning their marketing and advertising by hiring Sonny Voccaro, former marketing guru for Nike. Voccaro is responsible for signing big names like Michael Jordan, Kobe Bryant, and Tracy McGrady to endorsement deals. Voccaro is a big addition to the Reebok staff and will most likely do great things for their advertisement campaigns. Reebok is currently launching a $50 million global campaign that focuses on its vector logo. Through the campaign “Reebok is hoping to create an iconic connection to its brand mark.”15 Reebok is hoping to make the vector seen as a symbol not have any problems with sales. If too much focus is taken away from the performance aspect of their products and put instead on retro styling, Adidas could lose a lot of customers due to inadequate athletic products. The company should ride the retro wave for a while but realize that the performance qualities of their products is a permanent consumer draw.
“so well-executed that the editing is about twice as good as it has to be.”11 Use of the best technology enables Nike to create ads that truly grab a consumers attention, which could make them think about buying Nike the next time they go shopping for a pair of shoes. Nike’s new “Speed” campaign puts the focus on individual athletes and their stories. The spots focus on runners and the determination they exhibit. 1 Nike’s current strategy still focuses on signing big name athletes to sell their products. This strategy appears to be extremely successful for Nike, as they are currently have the top market share in the industry. Compared to Reebok and Adidas, Nike has a definite advantage when it comes to contracts with big name athletes. Michael Jordan, Derrick Jeter, Warren Sapp, and now Lebron James, who currently signed a $0 contract with Nike, are just a few of the big names Nike has contracts with. of authenticity and performance. Reebok wants to do for the vector what Nike did for the Swoosh. Reebok hopes that their $450 million contract with the NFL and NBA to be their official apparel suppliers will put the vector out there for everyone to see. The company feels that if everyone sees the vector connected all over the NFL and NBA, they will associate it with a quality product.15 Reebok’s strategy of moving toward more of a hip-hop and urban feel seems to be working for them so far, but as the popularity of the people they have signed diminishes, which it most likely will if the hip hop industry stays true to current trends, then they will have spent millions of dollars on successfully short lived campaigns. Nike has the right idea signing athletes; although there will be a few busts, for the most part the stars remain popular. As for promoting the vector, Reebok is moving in the right direction. If they can manage to get consumers to associate their logo with quality and performance, they will ultimately sell more products.
Factory Distribution
Distribution is simply the way in which a company gets its product to the consumer. Successful companies have found an optimum way to distribute their products. NIKE
Nike has developed superior control of its distribution channels. “Nikes distribution is as about as tight as you can make a consumer goods-oriented business.”1 The company has developed a Futures program to remove a good portion of inventory risk associated with distribution. A retailer puts in a non-cancelable order months ahead of scheduled delivery. This system helps Nike predict the demand for a product and also assures the buyer will have an adequate supply. Almost 0% of US footwear is ordered under the Futures program. Nike improves distribution efficiency and output by improving its distribution facilities, most notably their recent improvements to their Memphis distribution center. State of the art conveyors and sorters were installed to achieve a higher throughput. “This is now the kind of system befitting an industry leader.”0 The measures taken toward improvement have more than doubled the amount of product that is distributed from the facility. Order accuracy has risen to .8% as a result of the new system. ADIDAS
In 16 Adidas had quite a scare concerning the distribution of its merchandise. The problem occurred with the company’s automated distribution system and almost brought distribution to a stand still. Adidas has since entered into a long term agreement with Caliber Logistics to distribute footwear in the United States. Adidas Canada has made many improvements in distribution. In 17 they made a transition from paper based distribution to a fully automated one. After the addition of Salomon and Taylor Made to the Adidas name, the company had to move two and a half times more inventory. The change to a fully automated distribution system made it easier for the company to handle the influx. Implementation of the fully automated system has cut distribution costs in half as well as made a significant improvement in order accuracy. Adidas has immensely improved its distribution since the mid 0’s. Now customers and retailers can get the product they want when they want it. A smoother operating distribution system will REEBOK
Reebok is taking big steps toward improving their distribution system. A state of the art distribution center has been set up in Massachusetts. The center is controlled by a new warehouse management system that allows for products to be distributed more effectively. This new system has improved employee productivity and kept the inventory accuracy rate high. Reebok realizes that to stay competitive in the industry, their distribution system needs to be nearly flawless. Any problems with distribution could have a negative effect on overall sales.
The system put in at the Memphis plant is truly trendsetting. With that kind of attention to their distribution centers, Nike will minimize any problems that may arise from distribution. A continued effort by Nike to make advancements and improvements in their distribution will ultimately lead to improved financial figures. enable Adidas to keep up with Nike in terms of product availability.
Ability to Innovate
A company’s ability to innovate can distinguish it from other companies in the industry. An innovative company will set itself apart from its competitors by constantly coming up with new products and new ways of doing things. In an industry as fickle as footwear, being innovative is key to a company’s success. NIKE
Nike has been a leader in innovation in the footwear industry. The creative directors have developed the Design Ethos, which sets parameters for Nike’s approach to design throughout the entire company. There are four design functions at Nike footwear, equipment, apparel and identity. Each group contains individual groups, such as men’s basketball, and each of these has its own design team. “Over the years Nike has learned from hard experience that what the athlete likes and what the consumer likes are often not the same thing.”4 Many of Nike’s designs are created for the consumer, not just for professional athletes. That doesn’t mean that the product is inferior in any way in terms of performance, it just means that Nike factors in the wants of normal consumers into their designs. “Our designs are required to perform for elite athletes as well as for everyday athletes,’”4 says one executive. Nike has a big research and development department available REEBOK
for the designers to use in developing new products. Nike set up the Advanced Innovation Team to continually and totally innovate for the company. The team has the responsibility “to enforce the idea that design is not just about simple evolution. The focus for AIT was real innovation -- solving a problem in a brand new way.”4 For the team, innovating starts even before a design is made for a new product. They must look at other factors, such as how different textiles perform, to set the groundwork for an innovative design. John Hoke, Nike global director for footwear says, “From my perspective the true beating heart of Nike is innovation, therefore insight is the fuel for our imagination and creativity. It is the genesis point of all our ideas at Nike.”4 Nike’s approach to innovation puts it well ahead of the pack in terms of both sales and product innovation/development. The company’s commitment to innovation will ensure it future success.
Main Customer Groups
While looking at the different trends and styles of present day athletic footwear, we can further our research within the product and look at the different customer groups that our three companies focus their attention towards. We are primarily looking at the three different companies and the rules of style that may apply to a specific customer group for this product. In some cases, the customer group that they are focusing on may greatly impact the demand for the product because of different influences whether it is there income level, influence of childhood, or even there changing preference of a specific product.
Footwear is classified within many different categories, which makes the research of specific athletic footwear more difficult. For example, we are focusing on the companies of Nike, Adidas, and Reebok, and all of these companies make numerous styles of shoe lines. They range from golf cleats to soccer cleats to cross-country shoes. So when trying to determine the main customer groups, each line of shoes is basically broken down within the group that the specific product is directed towards. So when looking at the different types of customer groups within the athletic footwear industry, some of the key customer demographic trend are broken up into different generations of tastes in style.
The industry of footwear can be broken up into three main customer groups, which are the Baby Boomers, Generation X, and Generation Y. These customer groups do not have much in common except for their love of shoes and the different tastes in the new fashion trends of footwear. These three generations are broken down as follows Baby Boomers are from ages 5-5, Generation Y are consumers from 4-1, and Generation X is consumers from -. As we develop ideas about the main customer groups within the footwear industry we can conclude that the Baby Boomers account for 1% of the population, which is equal to about 81 million consumers. Generation Y is the second largest group that accounts for 8% of the population which represents about 75 million consumers. The smallest customer group is Generation X, they comprise about 17% of the population, which equals about 46 million consumers.1 Collected information from many consumer surveys rates Nike high among the consumers of Generation Y and X. Nike has become more appealing among younger consumers and has shifted away from the Generation of the Baby Boomers.
Nike and many other large shoe industry retailers are shifting there marketing direction from the Baby Boomers to the younger consumers of Generation X and Generation Y. There are many reasons to why the industry is trying to change their target market to younger viewers. As people become older many of there attitudes, priorities, and time obligations have decreased their ambition for shopping. Now that many of the Baby Boomers are within there forties and fifties, many of there priorities have shifted towards the future, in a sense that they need to save for retirement, different tuition payments for there children, and also different healthcare necessities that are important to them and there family. Lets say a consumer from the Baby Boomers generation was going to purchase some shoes, they are more likely to have a longer life span with those shoes then someone who is within there teenage years. Younger consumers put more wear and tear on their shoes than someone who is about 40 or 50. Many companies within the footwear industry know that the spending power of the Baby Boomers has not come to a halt. In Fact, there is still a very prosperous market out there, but the key is finding it. One way that the industry is trying to increase the spending among the Baby Boomers generation is by offering clothing lines in a more conservative style and also in a wide variety of sizes.
As mentioned before, the more present day trends of the footwear companies are geared on marketing to Generation Y. Many companies within the industry have come to the conclusion that by establishing trends among Generation Y, there becomes a greater vision and influence in future product design. By the influences of Generation Y, its impact does not only affect that specific consumer group, but filters to other Generations like X and also the younger brothers and sisters of Generation Y. It has always been said throughout the industry that teenagers show a great amount of brand loyalty to there apparel manufacturers. That is why many manufacturers try to establish a marketing ploy that influences children who want to dress like their older siblings or elders. So if they get them while they are young, they are more likely going to see profits from the children within the future.
Generation Y
Ages 4-1 Generation X
Ages - Baby Boomers
Ages 5-5
Growth Rate
(10-000) 80,61,468-
71,87,755=
8,7,71/
71,87,755=
.114 ,81,74-
4,175,=
-,84,08/
4,175,=
-.07607 8,86,47-
6,801,8=
0,04,40/
6,801,8=
.1885
Size of the group relative to the total population and is that changing 75 million consumers representing 8% of the population. The group of Generation Y has been increasing at a rate of 11% 46 million consumers representing 17% of the population. The group of Generation X has been decreasing at a rate of 7% 81 million consumers representing 1% of the population. The Baby Boomers have been increasing at a rate of %
Income Levels4
(000-001) Median Income
Male
000 $,546
001 $,01
Female
000 $7,60
001 $7,467 Median Income
Male
000 $0,54
001 $0,510
Female
000 $1,04
001 $1,47 Median Income
Male
000 $78,61
001 $7,444
Female
000 $45,80
001 $46,606
Unemployment Rate Changes5
Generation Y in the year 00, there were ,61,000 people unemployed.
In 001, the unemployment rate average for 16 & over was 4.7%. In 00 the unemployment rate average was 5.78
Generation X in the year 00, there were ,0,000 people unemployed.
In Summary of the unemployment rate of 001was 4.7 percent and in 00 the average unemployment rate was 5.78 The unemployment rate for this generation was 4.1 percent in the first quarter, up from .4 percent three years earlier. The overall jump in that period 4.0 percent to 5.8 percent.
Psychographic 1 Generation Y grew up with strong fashion statements by the media. This can attribute to the fact that this consumer group sows more brand loyalty. Generation X consumers are the type of shoppers that bounce from different high-end stores to the mass marketing stores. Baby Boomers have reached a point in their life in which their priorities have shifted. They are concentrating more on tuition payments, mortgage, and other relative expenses. Modern Trends and styles do not affect this type of consumer group as much.
Psychographic Many of the consumers within Generation Y have developed a mind set of “Spend, Spend, Spend”, which in all paints a picture for many retailers in the future. Generation X is said to fit the description of being very conscious of their style. They are trying to present a look that is impressive to other peers, which makes them feel like dressing up for many occasions. Retailers are trying to get these consumers back into spending more on the modern styles and trends. By doing this, retailers are trying to shift these styles to more of a conservative look. By producing a more conservative look, it will captivate more of the characteristics found within the consumer look.
Factors Occurring in the Environment External to the Industry
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies are withdrawing from Indonesia and Korea due to stronger labor unions, as well as the fact that labor is much cheaper in China than it is in the two aforementioned countries. In Tangerang, Indonesia, for example, the minimum wage rose from 40,000 rupiah/month up to 58,000. (1)() In 16 Indonesia was the hotbed for shoe production in Asia. Now, due to its reputation for “lawlessness and chaos” as well as expensive labor, Nike and Reebok have shut down factories in Korea and Indonesia and relocated to places such as China. Other companies such as Puma won’t even start up business here. These moves will surely raise more issues with those concerned about the treatment of smaller countries by large American corporations. This is the opposite effect of sweatshop issues, because it is eliminating many of them, but consequently is crushing a huge part of Indonesia’s economy. Korean companies are finding ways to counter this exodus and keep the industry alive. (1) Nike has been forced to relocate, moving out of Indonesia, which was once the primary place for their shoe production. Indonesia was once the site of 8% of Nike’s shoe production, which then dropped to 0% in 00, and possibly down to 6% with the closing of its Dosen plant. This will look bad for Nike as people will believe they are being careless about the treatment of its workers by leaving thousands jobless. (1) (1)
Dhume, Sadanand. “Just Quit It.” Far Eastern Economic Review, September 1, 00.
()
Min, Kim Jung. “A New Spring In Its Step.” Far Eastern Economic Review, February 1, 00.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
SARS, a deadly fast-spreading strain of pneumonia, has disrupted the travel to and from Asia, as it is at its most prominent in China, Hong Kong and Taiwan. This in turn has made it more difficult for the shoe industry to coordinate production and control quality. (4) If SARS turns into an even more major epidemic than it already is, it will play a huge role on the way business is done with Asia. Considering the fact that shoe inspections will increase once shipped, the outcome of SARS will “add friction to the cost of doing business in Asia.” This in turn will show up in the price of the product. (5) Nike realized a lot from the SARS outbreak. The impact of SARS had huge impacts for Nike, as it lost employees in Asia, encountered difficulty in coordinating production, and also had to deal with West Coast port closures. As Ray Knight states SARS gave “global business a wake-up call as to just how quickly markets can be squelched by unexpected circumstances.” (6) (4)
Standard and Poors Current Environment http//www.netadvantage.standardandpoors.com/
(5)
Maiello, Michael. “Aftershock.” Forbes, vol. 171 no. . Apr. 8, 00. p. 44-46.
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Major shoe companies have faced heat in the form of boycotts and protests for the supposed running of “sweatshops” in smaller countries where labor is extremely cheap. Companies such as Nike have been said to rudely mistreat their employees and force them to work in terrible conditions. (7) For much of the industry, sweatshop scandals help them because most of the time they have to do with Nike. However, as Reebok pulls a large percentage of their production from Indonesia, many worry that the change in locations in the chase for lower wages will make abuse charges prevalent once again. (7) Nike has battled with accusations that it runs sweatshops for roughly 1 years now. Nike is currently in a U.S. Supreme Court battle in order to gain first amendment rights to defend itself. Nike is trying to earn the right to defend itself, after it had been sued for supposedly defending itself with lies. Any accusations questioning the responsibility of Nike as a corporate citizen is attention that they would like to avoid at all cost. (8) (7)
Ellis, Kristi. “Global Labor Pains Advocates Worry Abuse Will Rise as Factories Relocate.” FN, 58 (40), October 14, 00.
(8)
“Courtside with Nike.” http//arizonarepublic.com
May 6, 00.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The sluggish economy has forced major forces in the shoe industry to take major action, way more than in the past when the economy was a little more stable. Results of this include buyouts of smaller companies, as well as pushing sales in other countries that currently have stronger economies. () The athletic shoe industry is one of the most recognizable global markets. Reebok, Adidas and Nike are all recognizable no matter what country you’re in due to the endorsements of major American and International athletes. The direction that the sluggish economy has forced the industry to take will only make it that much more dominant once the American economy recovers. () Nike has been forced to place a little more emphasis on ventures other than that of marketing the new Jordans, for instance. In Ray Knight’s letter to the shareholders he discusses the fact that Nike placed major focus on product, advertising, and getting management caught up to sales. All of these were achieved and because of this Nike will be stronger once the economy begins to recover. The good news is, as Standard and Poor’s predicts, is that GDP increased .% in the second quarter and that it will pick up in the second half to achieve .5% for the year. (6)() ()
Standard and Poor’s Industry Profile. http//www.netadvantage.standardandpoors.com/
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The current industry sees the internet playing an increasingly important role in the sales, marketing, and global reach of major athletic shoe companies. (10)(11)(1) If one visits any of the big three company’s websites, it can link to 18 countries on Reebok’s site, on Adidas’ and 16 on Nike’s. The websites also give the opportunity for customers to contact the company as well as buy products from the website without having to go to the store looking for a particular product that might not be in stock. (10)(11)(1) Nike by far has the most extensive website of any of the three major brands. While Adidas and Reebok do have impressive sites, the Nike site is incredible in its extensiveness. Nike also offers a new product called the NikeId in which you can create your own shoe, custom made for the customer. The internet is an excellent tool for reaching customers and broadening the scope of the company. (1) (10)
www.adidas.com
(11)
www.reebok.com
(1)
www.nike.com
Factors Relating to Industry Actions
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
The athletic shoe industry has begun to take notice of the need to give women attention in this market. Women need active footwear and apparel as much as men do, thus the advent of new stores and extended women’s product lines by many of the major shoe companies. (1) Various companies are opening stores strictly for women. These companies, such as Nike, Adidas, Puma, and Champion, are expanding their lines to incorporate enough products to open a store, or boutique within a larger store, that focuses strictly on women. Dick’s opened two women’s only stores in Buffalo and Albany under its brand name Ativa. In order to be successful, these women’s stores are believed to need a wide selection of merchandise and exceptional customer service. (1) Nike Goddess, a website that has been functioning since 10, has been opened as a store in a few locations and Nike plans to expand on this idea by opening more stores. These stores will either be separate stores, or boutiques within larger stores. Lady Foot Locker will incorporate Nike Goddess into its 600 stores, Nordstrom will incorporate it in its department store, and Macy’s will get a smaller version of the store this year. This is nothing but a good thing for Nike as it will only expand its market and try to double its sales to women by mid-decade. (14) (1)
Ryan, Thomas J. “Girl Talk.” Sporting Goods Business 6, no. 6 (Jun 00) p. 18.
(14)
Warner, Fara. “Nike’s women’s movement.” Fast Company no. 61(Aug. 00) p. 70-75.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies are searching overseas for big name athletes to endorse their products, and thus expand their market in order to drive sales. () The recent U.S. economic downturn has caused people within the United States to buy less of the really expensive athletic shoes such as the new $00 Jordans. For this reason, and the basic idea of just driving sales to a wider market, the major companies have worked on gaining endorsements from major international athletes. Reebok has recently won its first ever endorsement battle with Nike by winning away Yao Ming in a newly signed endorsement deal. This should give them a huge leg-up in the Chinese footwear market where Basketball is the second most popular sport in the country. (15) Nike has realized that by signing major athletes from sports around the world, they can increase sales and market themselves on a much larger scale. Nike has signed the likes of Ronaldo, the Brazilian soccer player, and sponsors such National soccer teams as Brazil, Korea, and Manchester United of the English Premiere League. Because of this, Nike has seen International sales exceed domestic sales for the first time as they reached 51%. (6) ()
Standard and Poor’s Industry Profile. http//www.netadvantage.standardandpoors.com/
(15)
Aoki, Naomi. “Reebok Signs Top Basketball Player Away from Nike.” Knight-Ridder Tribune Business News. October 4, 00.
(6)
Knight, Raymond. “00 Nike Chairman’s Letter to Shareholders.”
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Shoe companies have begun to restructure their relationships with major retailers, as well as form relationships with new companies. One reason for this being so is that certain shoe companies give the retailers an opportunity to increase their profit margins by selling their shoes. (16) Seeing that Nike in many cases creates the trends for this industry, it is easy to understand how their battle with Foot Locker has created an opportunity for companies such as Reebok and Adidas. After the dispute between Nike and Foot Locker, where Foot Locker cleared many Nikes off of their shelves, Reebok and Adidas benefited greatly due to the fact that it cleared $50 million worth of shelf space for companies such as themselves. (17) Many thought that Nike would suffer from the problems that them and Foot Locker had seeing that Nike would have to find a new home for $50 million in marquee product. However, Nike has aligned with mall-based retailers such as Footaction and The Finish Line, directly competing with Foot Locker and doing just fine. Nike also combined with The Finish Line for three TV co-op spots this year to push the two companies. (18) (16)
Carr, Bob. “Has Nike won its battle with Foot Locker?” Sporting Goods Business 6, no. 6 (Jun 00). p 10.
(17)
Ryan, Thomas. “Hot off the shelf.” Sporting Goods Business 5, no. 11 (Nov 00). p 0.
(18)
“Finish Line, Nike team again retailer’s inventory of Shox Status shoes shines in humorous spot.” http//rdsweb.rdsinc.com
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Due to the slowdown of the U.S. economy as of late, major footwear companies are seeking to buy smaller ones in order to bolster their own sales and eliminate potential competition. (1) Demand for shoes will probably remain constant even when a larger line buys out a small one. However, many companies that have the means to buy a smaller one are simply doing so to try and keep up with the larger behemoths. By doing so, companies grab market share and can use another products label to help their cause. (0) Nike has recently bought out classic shoemaker Converse, for $05 million, in order to gain additional market share as well as reaching the retro market of the shoe industry, which is becoming increasingly popular. They plan on running it as a separate entity and not change the traditional Converse shoes. This will certainly mean a big boost in sales for Nike. (1) (1)
Standard and Poor’s Industry Trends. http//www.netadvantage. standardandpoors.com
(0)
Ryan, Thomas. “Hungry for Profits.” Sporting Goods Business, 6 no. , Feb 00. p 4.
(1)
Schlosser, Julie. “Nike Goes Old School.” Fortune, 148 no. , August 11, 00. p 150.
Trend Implications for the athletic shoe industry Implications for Nike Source of Information
Major shoe companies keep trying to come up with the newest and most interesting advertising/marketing campaigns in order to push their product to customers in a way that sets them apart from the rest. () One example of this trend is the way that Reebok has created another way of battling Nike for superstar athletes, that being to market shoe lines from non-athletes such as hip-hop artists Jay-Z and 50 cent. These artists will gain Reebok some “street” credibility as the create signature collections for Reebok extension Rbk. () Nike will most likely have to counter this move assuming that the direction Reebok is taking has huge success. Nike has always gained endorsements solely from athletes, but it may stand to learn something from Reebok if they find success. Nike may face some problems competing with Reebok seeing that Reebok now has Allen Iverson and Yao Ming as well. ()
Devaney, Polly. “Reebok shoots from the hip-hop in sneaker wars.” Marketing Week. July 1, 00. p1.
Summary of the State of the Company and of the Industry
Footwear Industry
The athletic footwear industry is a market where three top manufacturers dominate Nike, Adidas, and Reebok. The three companies alone together control nearly 70% total market share (Section I part 1). As large as the markets are, there are many new entrants that have made successful forays into the market as new entrants (Puma), however, the overall cost and feasibility are greatly debatable which makes the footwear industry a rather difficult market to enter. One important note about the Footwear industry that is worthy to mention is the underlying nature of footwear as a consumer product. Athletic footwear is much as necessity as it is a discretionary purchase (Section I part 1). This notion is where the industry has risen to levels that provide tremendous value for its consumers. It is no surprise, thus, that much of athletic footwear sales have primarily been attributed to branding and image. Such proves to be the driving factor that has ultimately sustained sales. The current state of the industry has been in its maturity phase for some time. Nike holds the lions share of the market and continues to dominate.
Company Strengths
There are various strengths that Nike is endowed with. Most notably, Nike is the largest manufacturer of athletic footwear and apparel in the world. In terms of footwear, Nike enjoyed control of nearly 4.% of the entire footwear market in 000 at nearly 8 billion dollars (Section I part 1). That is more than both its number two and number three competitors combined! This dominance has helped Nike to become the athletic colossus that it is today. Nikes branding also directly contributes to its advantage due to Nikes ability to not only market shoes, but allows the consumer to take on the vicarious roles of the numerous celebrity endorsers that promote Nike in the first place. Nike has virtually invented the notion of the celebrity endorsement with the likes of Pete Sampras and Andre Agassi in Tennis; Michael Jordan in Basketball; and the recent acquisition of teen basketball sensation Lebron James who signed with Nike for a reported $0 million (Section Part ). The ability to throw enormous amounts of money to these athletes has given Nike a comparative advantage over the number and . In addition, Nikes financial soundness has proven stable through economic cycles. Nike has enjoyed higher margins of sales compared with that of its immediate competition (Section Part 1) and although sales have slumped in the recent economic downturn, Nike appears on its way to regaining profitable levels.
Company Weaknesses
Though Nike enjoys the title of being the largest athletic footwear and apparel manufacturer in the world, it goes without saying that Nike has had its share of company weaknesses. An analysis of the house of quality reveals an opportunity that seems to consistently be overlooked by not just Nike, but from Adidas and Reebok as well. This stems from the inability (or lack of effort) to market to the large baby boomer segment (Section 4 Part 4, c). What would appear to be a market that looks for comfort, price and quality (Section 4 Part 4, c) seems to be a sorely underdeveloped niche that Nike (As well as others) could take advantage of. On other notable weakness is not as readily apparent but a major concern nonetheless. This weakness has to do with Nikes shear size. Being the biggest on the block is not without its trade offs. Nike has had to work hard for its place in the market but adjusting to global pressures, social pressures, and being stuck in branding an expensive shoe leads to limited options in dealing with an environment constantly influx (Section Part ). Nike has made slow adjustments to react to all of these issues on many fronts and Nike is definitely without its critics (Especially from human rights activists groups).
Company Opportunities
One major opportunity that Nike has homed in on regards the foray into the womens market. Nike has made a push to market to women with new product lines, distribution centers, and web stores (Nike Goddess) that are exclusively marketed to women (Section 5). Another way that Nike has been able to take advantage is underpinned with the recent acquisition of Converse (Section a). Such a move is telling of Nikes value of the recent trend for the demand for trendy retro products. The acquisition was intended to position Nike by leveraging the throwback lifestyle. With the current stable demand for such products, Nike is able to reap the benefits by acquiring a company whose entire legend is embodied with a solid retro history (Converse Chuck Taylor All Stars). Not deviating far from that emphasis on trends is the decision to reproduce older shoe models that were conceived of decades ago. The hip hop community has been a driving factor in sales with the surge in popularity of the Air Force One model shoe. In fact, the shoe has been resurrected in multi-platinum record sales from the song Air Force Ones by rap singer Nelly. Nike has thus had the fortunate situation to be in a position to cash in on such opportunities.
Company Threats
Nikes most immediate threats stem from environmental factors. The SARS epidemic in Asia has been a prime example of how Nikes company can be affected by conditions in far flung places like Asia. The implications of the epidemic were large in scale in that Nike has had to close ports on the West Coast and take other actions to deal with the virus (Section V). Another trend that has left a sour taste in the mouth of Nike involves the human rights pressures to improve working conditions and to directly deal with the sweatshops that Nike has been accused of (Section V). Such controversies have placed CEO Phil Knight in the role as global villain which can detract from Nikes impression on the public and overall performance. Increasing expenses of relocation, improving factory working conditions and dealing with negative publicity has led Nike to a take on a defensive position on an ongoing basis.
Balanced Scorecard
Financial Measures Process Measures
• Profit margin
• Cost of sales as a percentage of total sales
• Return on equity
• Market share
• Return on investment • Percentage of deliveries made within a specified number of working days from the date of order
• Average number of defects per shoe at final inspection
• Labor cost and usage per 1000 defect free units
• Percentage of shipments received on promised date but after the promised time
• Average time to adjust to change orders.
Organizational learning and Organization Development Measures Customer Satisfaction Measures
• Average delivery time to distribution centers
• Periodic employment performance reviews
• Quality circles utilized to rate internal team based performances
• Time spent dealing with bottlenecks within supply chain
• Ongoing inventory of distribution channels Segments are Generation Y
Generation X
Baby Boomers
• Average dollar amount spent on athletic footwear per year in each segment
• Average distance traveled to purchase Nike products
• The percentage of customers within each segment that value the quality of the product
• Average number of repeat customers that purchased Nike products.
• The percentage of customers who purchase Nike products based on image
Nike’s Current Strategies and Goals
Nike has in placed several strategies that encompass improving growth and profits in a variety of areas. The struggling economy has not changed Nike’s attitude towards growth. One strategy that Nike focuses on, in continuing to help the company grow is Person Marketing. Nike has been using the best athletes, and sports teams (or clubs) all over the world to help market their products. The regenerative nature of sports has allowed Nike to sign new upcoming stars like LeBron James, Carmelo Anthony, Lleyton Hewitt, Michael Vick and others. These are the athletes that will push Nike beyond their expectations and will set the standards for the next generation to exceed. Nike’s second greatest source of potential lies with the products the company is working on. Nike’s design team is constantly developing new concepts in speed and agility to give athletes the latest innovative equipment to improve performance. The third strategy that Nike uses, perhaps the most important, is advertising and marketing. These two components capture the essence of the product and the attention of consumers around the world.
These strategies support the financials especially profit margin and market share. Under consumer measures Nike’s strategies also support the percentage of customers who purchase Nike products based on image.
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