Just Doing It

Blue Ribbon Sports opened its doors for business in the wintry months of 1964. That is, its car doors. Operating primarily to distribute Japanese running shoes, the small venture attempted to turn a profit by selling running shoes to University of Oregon track athletes. To minimize costs, Phil Knight and Bill Bowerman sold their wares directly out of the trunks of their cars, attending track and field competitions in order to reach their target consumers. As more and more collegiate runners began adopting the shoes, Bowerman began creating his own waffle-soled shoe. Growing profits allowed Blue Ribbon Sports to simultaneously open their own location near the University of Oregon and launch their first line of footwear, naming it for the Greek goddess of victory, Nike. Sporting the famous Swoosh, the shoes sold exceptionally well. In 1978 Blue Ribbon Sports officially changed their name to Nike, and by 1980 the company had a 50% market share of all athletic shoes sold in the United States. By sponsoring big time athletes and developing an award-winning marketing campaign, Nike continued to expand into the athletic merchandise market (Vann, 2008).

Today, Nike is one of the most admired companies in the world. Having grown to be the largest seller of athletic apparel and footwear in the world, the company ranks 184th on the Forbes 500 list of the largest firms in the United States (Forbes.com 2008) Nike has gone from distributing another firm’s shoe to producing their own line of products designed for track and field, basketball, football, and many others. In addition, Nike designs and sells complimentary athletic wear, including jerseys, apparel, and sports equipment (Nikebiz.com 2008). Relying on well-known athletes to endorse their products, Nike has become as internationally recognizable as Coca Cola and McDonald’s.

Nike’s headquarters are still in Oregon, where Knight and Bowerman began their sales forty years ago. However, the growing company has seen its international presence expand Nike’s international reach to almost every corner of the globe. With over 500 offices in forty-five different countries, Nike’s move towards a globalized production chain was spurred by an industry trend to outsource labor to developing third world countries (Nikebiz.com 2008).

Globalization may be defined as the inexorable integration of markets, nation-states, and technologies in a way that enables individuals and corporations to reach around the world farther, faster, deeper, and cheaper than ever before. We are currently living in an era of globalization, one that has led to an intensification of the role of international trade in the world economy. Globalization and international business are likely to expand significantly over the next few decades because of strategic essentials for commerce and the world’s environmental transformations that facilitate growth. Businesses globalize for many reasons including the acquisition of resources, finding new markets, and to better compete with their rivals (Griffin & Pustay, 2007).

Another key motivation for globalization is the occasion for a company to take advantage of its distinctive strengths, or core competencies, that have developed in its home market (Griffin & Pustay, 2007). In Nike’s case, and in many others, the firm has outsourced production to nations with low labor costs and an excess of unskilled labor. When entering the markets of these developing nations, companies take on controversial issues such as ethical standards and social responsibility in their offshore factories. These are the obligations that an institute undertakes to protect and enhance the society where it functions; they are often very complex and raise issues such as child labor, worker’s abuse, and other unacceptable labor practices. As a company with many offshore manufacturing sites, Nike has been continually scrutinized due to their factory conditions (Griffin & Pustay, 2007).

“Internationalization has given rise to a whole new form of company” (Vollman, 2005). Nike is a leading firm in the international marketplace, as the world’s single largest sportswear and apparel manufacturer. The concept of internationalization details a firm with little focus on manufacturing but extensive attention to product design and marketing; Nike is a perfect example (Vollman, 2005). Manufacturing firms around the world have been developed to support companies such as Nike. After product design and testing in their home markets, Nike and other industry leaders outsource the fabrication of their merchandise to cheap labor markets such as China, Indonesia, Pakistan, Vietnam, Bangladesh, Cambodia, and other lesser developed countries.

The athletic footwear and apparel industry has been globalized for longer than many other industries, and is becoming more so all the time. As retail changes all over the world, sports marketing is becoming more competitive. Nike is the market leader in North America; they have grown throughout China, and are in the process of introduction and growth in the Indian and Russian markets. In 2003, for the first time in history, Nike’s international sales exceeded US sales. Unlike many corporations, Nike never stops growing; the company is limitless and is exercising managerial and entrepreneurial advantages and skills to continually stay ahead of the competition (Tsenkov, 2008).

Nike currently wholly owns four brand subsidiaries: Hurley International MMC, Converse Inc., Cole Haan Holdings Inc. and NIKE Golf (nikebiz.com, 2008). The company finalized the sale of its Bauer Hockey subsidiary to Kohlberg & Company and W. Graeme Roustan for $200 Million in February 2008 (Yahoo Finance, 2008). Nike also partly owns many other companies; in December 2007, the company purchased 19.9% of Umbro plc shares, a large European-based sportswear and soccer company. Collectively, these subsidiaries currently represent about $2 Billion of Nike’s annual revenues, and have more than doubled their contribution over the last five years (Tsenkov, 2008). Nike estimates that its subsidiaries will represent about 25% of target revenue growth by 2011(nikebiz.com, 2008). The changes that Nike Company makes in its subsidiary portfolio are always with profit optimization and growth potential in mind.

With regards to advertising, Nike does not use a traditional method but rather exercises its immense money supply and world famous brand name to push competition out. Nike was designed and continues to be driven by the spirit of entrepreneurship. In an attempt to compete with Nike, Adidas bought Reebok in 2005. The acquisition greatly increases the competitor’s market share, as Adidas expands in North America and Reebok