Case Study - Nike

History

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 $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 McEnroe’s 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 person’s 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.

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