Case Study- Nike Globalization

In 1962, most of the sports shoes sold in the USA came from Germany. At that time, a young man by the name of Phil Knight was training with a running coach by the name of Bill Bowerman. He was also studying Accounting, and dreaming of the day that he would run his own business. He was developing his business model as he progressed he planned to bring in cheaper, imported shoes from Japan to compete with the German shoes. This was the beginning of a company called Blue Ribbon Sports. Today, we know that company as Nike. The partnership started simply enough. Bowerman and Knight each contributed contributed $500 so that they could buy the first shipment of shoes. By 1965, Steve Prefontaine was also a part of the company. At the time he was a middle distance running champion of some note. It quickly became apparent that the association of the Blue Ribbon shoes with a successful athlete was helping to sell the apparel. This was adopted as part of the business model, and it remains the key marketing strategy used by Nike to this day. Today, Nike is famous for the swoosh logo which adorns all of their clothing and footwear items. The swoosh was first introduced in 1971. Today it is one of the most recognised marketing symbols in the world at the time it cost $35, and it was developed by a graphic design student named Carolyn Davidson. By 1978, Nike was able to secure their first major signing from that time on, John McEnroe would wear Nike shoes whenever he played tennis. It was an arrangement that would last until McEnroes retirement from professional tennis in 1984. In that year, a basketball prodigy was signed to the Nike label, and the brand became instantly recognisable all over the world. The basketball players name was Michael Jordan. In the meantime, Steve Ovett became the first person to win an Olympic gold medal wearing Nike shoes; a feat achieved at the 1980 Moscow Olymic Games in the 800m. Although it might seem strange today, when the Air Jordan shoes were first introduced, they were banned by the National Basketball Association. This is because the air in the sole was deemed to provide an unfair advantage to the athletes who wore them. Rather than causing problems for the company, the resulting publicity made a significant contribution to the sales of that product. Soon after, Nike capitalised on this situation by making the air cushion in the sole visible through clear windows on the side of each shoe. The Nike Air Max (as it was called) was partly responsible for helping Nike sales to exceed US$1 billion for the first time in 1986.

Throughout their growth, Nike never lost sight of the business model which had been developed in the 1960s. As new sports stars began to emerge, many were offered lucrative contracts. Tiger Woods was first signed in 1996. Stars based in other countries were also signed. For example, Shane Warne has maintained a long association with Nike in Australia, and the entire Indian cricket team also has contracts. Runners, swimmer, hockey players, cyclists Nike is willing to sign sports stars from any area and in any sport. However, not all of the contracts are the same size....in 2003 LeBron James (a US based basketball player) signed a contract worth US$87 million. In 2006, Nike reported annual turnover in excess of US$15 billion. Today, they make more than 50% of their sales outside the US market. It is also true that they have maintained their desire to innovate. For example, Nike was the first shoe company to team up with Apple to produce a running shoe that can monitor a persons running performance via an iPod. From a company that began selling imported Japanese shoes out of the back of a van, Nike today is a true multinational corporation.

Today, Nike is based in Oregon in the United States. They have over 29,000 direct employees around the world, but this is really no indication of the true number of people employed due to business generated by Nike. It is estimated that a further 650,000 people are employed in the manufacture of Nike products. It should be noted, however, that this work is completed by companies which are under contract to Nike they are not actually employees of the business. The simple beginnings of the company which were outlined on the previous page disguise the complex structure which is in operation today. Nike is an enormous company which has grown from annual sales of US$8,000 in 1962 to the US$15 billion that it earns today. After starting out importing shoes from one manufacturer, today they organise for the production of a complete line of sporting apparel; from shoes to ice skates, and from track suits to team jerseys. The company is owned by public shareholders, as it was floated on the New York Stock Exchange in 1980. The day to day operation of the business is managed by a board of directors. After Bill Bowerman passed away in 1999, Phil Knight became the chief executive officer. Today, he remains important in the running of the company, but the position of CEO has been adopted by Mark Parker. The administrative arm of the company operates on 178 acres in Oregon in the United States. There are sixteen key buildings in this expansive set up, and each one is named after a key athlete who helped to make the Nike brand what it is today.

In addition to the Nike brand, the company has also managed to acquire some other brands of sporting apparel. For example, the Converse brand is owned by Nike, and so are the Starter and Team Starter brands. There are over seven hundred factories around the world that are exclusively licensed to produce Nike products. These factories are not formally part of the Nike company structure, because they operate under contract conditions. On the other hand, there are over 29,000 people all over the world who are directly employed by Nike. These people are involved in the distribution, warehousing, display and sales of Nike products in many countries. The company is very proud of the fact that it has received numerous awards over an extended period of time. In both 2006 and 2007, Nike was named one of the top one hundred employers in the United States by Fortune Magazine. In 2004, 2005 and again in 2006, Nike was recognised as the best company for people who like to catch public transport to work. Aligned with this, in 2007, the World Wildlife Fund commended Nike for reducing their carbon dioxide emissions to 13% below their 1998 levels. Also in 2007, Nike was recognised as one of the best places to work for gay, lesbian and bisexual employees. The list is far more extensive than is suggested here; Nike is a very well regarded company.

Q1. Discuss Globalization