Nike Globalizing the Sportswear Industry Case Study Solution
Nike strategy
Evaluate Nike’s business strategy and its competitive advantage.
Nike’s business strategy focuses on two key areas, first, it is Deepening the relationship with the consumers. Company’s main focus is to create the long-term relationship with the consumer by providing the products according to its needs. As Nike is the first company that is providing customize products to its customers, it gives an opportunity to its customers that they can order the products according to their specific needs. This is how thecompany is creating the long-term relationship with the consumers.
The second area of its strategy is delivering the superior and innovative products to its customers, thecompany is focusing on bringing innovation in their products, as according to them, technical innovation in the design of the footwear, apparel and athletic equipment that reduces the chances of injury and maximize the efforts.
Above strategies provide Nike, the competitive advantage in its industry. As its first mover advantage in providing the customized products has also become the competitive advantage, not any other company provides these sort of customize products. No doubt, competition in the apparel and shoes is very intense in the United States, acompany such as Adidas and Reebok are providing tough competition to the company but apart from that Nike has got its sustainable competitive advantage.
Human resource is one of the prominent resources that helps the company to get the competitive advantage in the industry, the company has the specialists in the field of engineering, exercise, industrial design and bio mechanics that helps the company to produce the highly innovative product by looking at different needs and wants of the consumer.
Assess the stock’s value
Discounted cash flow method shows that company’s equity value per share is $96.12 but is currently trading at $71.02. We have found this number by using some of the assumptions that the long-term growth of the company would be 5%. The cost of capital is 10% (Refer to the Excel).
Ratio Analysis:
Profitability Ratios:
Profitability ratios express the ability of the company in generating earnings in relation to the expenses. In analyzing the profitability position of the company we generally calculate gross profit and a net profit ratio of the company. (Osteryoung, Constand, & Nast, 1992)
The gross profit margin of Nike was 37.4% in 1999 while it becomes 42.9% in 2004, other profitability ratios include that is 5.1% in the fiscal year 1999 and further, it becomes 7.7% in the year 2004. Return on assets that is found out by dividing net income by the total assets, in the year 1999 it is 8.6% and it increases to 12% in the fiscal year 2004. Return on equity is another profitability, it shows that how much company earn on the $1 of the equity, in the fiscal year 1999, it is 13.5% and further it increases to 19.8% in the fiscal year 2004.
NIKE GLOBALIZING THE SPORTSWEAR INDUSTRY Harvard Case Solution & Analysis
Liquidity Ratios:
Liquidity ratios reveal the ability of the company to pay out its obligation. In analyzing the liquidity position of the company we mainly calculate current ratio, quick ratio and interest coverage of the company. (Kirkham, 2012)
The quick ratio of the company was 1.2 in 1999 while it became 1.667 in 2004 along with this the current ratio also increases from 2.256 in the year 1999 to 2.744 during these five years.....................
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