Case Study: Nike

kpi’s

• net profit: fell by 5.7%, dropping from $6 billion in 2022, to $5.7 billion in 2024

• market share: dropped from 17.1% in 2022 to 16.4% in 2024

• number of sales: dropped by 10%, with annual revenue dropping from 51.3 billion in 2023 to 46.3 billion by the end of 2024

• website hits: jan 2024: 108.1m, dec 2024: 102.5m

  • might be indicative of strong competition and less consumer interest in nike

proactive change

• nike has been proactive in establishing more direct-to-consumer channels through the establishment of more nike retailers and greater investment in their website for digital sales

• nike did this because they assumed that consumers were likely to want greater convenience and therefore want to purchase athletic apparel at home

• also thought they could capitalise on consumer trends that indicated that consumers liked going to brand retailers to get a fuller brand experience

• this allowed them to remove the additional mark-up that sports apparel retailers would place on nikes products, which meant nike could either charge lower prices or earn more profit by selling directly to consumers

effectiveness of proactive change

• nike’s strategy failed because as a result the shelf space at large sporting retailers became occupied by nikes competitors, giving those brands much larger exposure to consumers, thereby increasing brand awareness

• moreover as covid restrictions fell, more consumers started to visit sports apparel retailers instead of shopping directly with nike, this is because consumers wanted to see a wider array of brands in one place

reactive change

nike has been reactive by making the following changes:

• increasing their investment in innovation, especially in core lines such as running, basketball, soccer, and training

• developing new simplified designs to meet consumer trends

• reduced their workforce to reduce costs and arrest the decline in their profit

• develop closer relationships with sports apparel retailers to gain more brand shelf space and prominence

driving forces

• shareholders: nike shareholders are seeing a fall in share price and expect nike to make changes to increase sales and net profit

• managers & employees: want career advancement / recognition and higher wages and are likely to want changes to prevent more redundancies

• competitors: such as hoka and on are innovating new apparel / shoes and selling for cheaper prices so nike need to change to adapt

• pursuit of profit: nike is a public listed company and aims to maximise profit - this pushes them to make changes to increase sales and net profit

• technology / innovation: in automation, 3d printing, spray technology to manufacture shoes have been on the rise (e.g. on’s spray tech can make a set of shoes in 3 min); nike might need to adapt by adopting more efficient design and manufacturing technology

• societal attitudes: have changed. consumers are spending less on tangible physical products and spending more on experiences. They also have changed their spending habits and are less willing spend due to the rise in the cost of living. They also want simpler and uncomplicated designs.

restraining forces

• managers & employees: at nike were happy with high profits resulting in strong career advancement and recognition during COVID and did not push for change. They were largely complacent.

• time: developing new innovative apparel / shoes takes time and this may have restrained nike from adapting quickly

• organisational inertia: nike is one of the world’s most successful companies of all time and had exceedingly high profits during the COVID period. their direct-to-consumer strategy seemed effective, and their wide range of old designs were selling well. This meant that they probably thought they don’t have to make significant changes

• financial considerations: nike may also have been enjoying high profits which they didn’t want to reinvest into innovation – this financial consideration may have restrained change

porter’s generic strategy

• nike is mostly engaged in differentiation

• their products are relatively expensive and are considered premium

• this has made nike customer loyal over the years

• nike has traditionally reinvested a large amount of their profit to develop innovative products (e.g, fly knit shoes) and to market an elite sporting image

• however nike’s differentiation strategy has not been effective recently due to greater consumer price sensitivity, lack of innovation, competition from other premium producers such as on.

• Nike may have to engage in far more innovation, that is product performance focused to reestablish their dominance in the use of a differentiation strategy

• nike has not differentiated themselves as effectively as historically with consumers perceiving less value in their older products

• nike might need to differentiate less by making simpler cheaper apparel and shoes, but this might tarnish their image as a premium producer