BUSINESS ENVIRONMENT

CIA-2

BCG MATRIX OF NIKE

DONE BY: AMEN FIROZ (1910803)

CLASS: 1BCOMHSF
SUMBITED TO: DR ANAND SHANKAR RAJA
 DEPARTMENT OF COMMERCE

CHRIST (Deemed to be University)

Bengaluru - 560029

Name Amen Firoz

Class 1 BCom Hon SF
Subject Business Environment
Register Number 1910803
CIA 1 Written assignment
Date of Submission July 8th 2019
Learning Outcome
I Learned about BCG matrix and how it
helps companies to evaluate the potential of
their brand.

Uniqueness in this assignment

Skills used while doing this

assignment RESEARCH SKILLS, TYPING SKILLS
AND DECISION MAKING.

How this assignment will help

you incorporate professional I have learned to identify the
skills potential for something and how
to s

Major Understanding
HISTORY OF NIKE:
Originally called Blue Ribbon Sports (BRS), Nike was founded by a University
of Oregon track athlete Phil Knight and his coach Bill Bowerman. Nike initially
operated in Eugene as a distributor for Japanese shoemaker Onitsuka Tiger.
In 1964, BRS sold 1,300 pairs of Japanese running shoes grossing $8,000. By
1965 the struggling company had acquired a full-time employee, and sales had
reached $20,000. In 1966, BRS opened its first retail store, located at 3107 Pico
Boulevard in Santa Monica, California near by a beauty salon, so they no longer
needed to sell inventory from the back of their cars. In 1967, due to fast growth
in sales, BRS expanded retail and distribution operations on the East Coast,
in Wellesley, Massachusetts. By 1971, the relationship between BRS and
Onitsuka Tiger was coming to an end. BRS started a launch of its own line of
footwear, which would bear the famous Nike Swoosh designed by Carolyn
Davidson. The Swoosh was first used by Nike on June 18, 1971, and was
registered with the U.S. Patent and Trademark Office on January 22, 1974.

NIKE:
Nike, is an American multinational corporation that is engaged in the design,
development, manufacturing, and worldwide marketing and sales of sports
footwear, apparel, equipment, accessories, and services.

The company’s headquarters is located near Beaverton, Oregon, in the Portland

metropolitan area. It is the world's largest supplier of athletic shoes and apparel.
INTRODUCTION TO BCG MATRIX:

BCG Matrix is a business tool, which uses relative market share and
industry growth rate factors to evaluate the potential of business brand
portfolio and suggest further investment strategies. BCG matrix is a
framework created by Boston Consulting Group to evaluate the strategic
position of the business brand portfolio and its potential. It classifies
business portfolio into four categories.

 QUESTION MARKS - They hold a low market share in fast

growing markets using large amount of cash and incurring losses.
It has the potential to gain market share and become a star, which
could later become cash cow. Question marks does not always
succeed and even after a large amount of investments they struggle
to gain market share and eventually become dogs.
 STARS - Stars operate in high growth industries and maintain high
market share. They are both cash generators and cash users. They
are the primary units in which a company should invest its money,
 because stars are expected to become cash cows and generate
positive cash flows
 POOR DOGS - Dogs hold low market share compared to
competitors and operate in a slowly growing market. they are not
worth investing in because they generate low or negative cash
returns but, some dogs may be profitable for long period of time,
they may provide synergies for other brands or SBUs
 CASH COWS - Cash cows are the most profitable brands and
should be “milked” to provide as much cash as possible. Cash
cows are usually large corporations or SBUs that are capable of
innovating new products or processes, which has a chance to
become new stars.

BCG MATRIX OF NIKE:

SWOT Analysis for NIKE

STRENGTH

 Supply chain management, since it does not own any physical locations it
can move and outsource to improve operations with more ease. Also it
practices a ‘make to stock’ strategy in its supply so it is able to provide
customers with the most readily and fashionable available goods.
 Brand Equity, since it controls the largest market share in its industry and
sells high-end premium products to consumers. It is able to retain top
athletes such as Lebron James, who adds to consumers taste. It understands
as well which athletes to cover and how to exploit value from athletics
 R&D, the firm invests heavily in product development and it’s able to offer
premium products. It employs top doctors, specialists and scientists from
around the world to develop enhanced performance athletic wear.
 WEAKNESS

 Nike charges very high prices for its products, which lowers the
purchasing power of the consumer. As Nike enters more emerging market
countries, consumers will be much more price sensitive, especially those
in poorer population sets. It also sells heavily to retails who themselves are
price sensitive also.
 Poor consumer perception from labour practices, Nike’s image can be
damaged as a result of its methods to outsource to cheaper alternative
manufacturers who are more known for poor labour practices. A poor
public image can hurt Nike’s sales.

OPPORTUNITIES

 Emerging markets, while markets in OECD nations like America have

become more saturated Nike still has much room to grow in bigger
population countries like China and India. Its product characteristics would
need to be adjusted to fit the tastes of those in China’s economy for
example, and it can use its strong R&D to do so.
 Product development, since the company is known for innovation.
Furthermore, it can use its financial resources to acquire or merge with
innovative smaller brands.

THREATS

 International trade, it trades in 180 countries and is heavily exposed to

exchange rate risks and other varying risks from global trade.
 Competition is very high in Nike’s industry which can squeeze its margins.
For example, Under Armour and adidas are brands gaining high popularity.
 General market trends can change over time, and thus Nike must constantly
innovate to stay on top.
CONCLUSION
The strong brand equity and financial health of Nike creates great value play in the
long run. Using a SWOT analysis and BCG Matrix, we can determine the best
product segments and key advantages that Nike is offering to investors. The three
main segments that Nike competes in are ‘star’ or ‘cash cow’, showing how strong
of a market position and revenue it generates from them.