Posted: May 25th, 2022
Financial Management Nike
Nike has been identified as one of Forbes’ ‘fast growth companies’ (Moreno 2004). This is despite its relatively old age for a youth-focused company, and several scandals regarding the ethics of its production strategies. Nike pursues a model of aggressive growth, striving to keep costs low while still addressing the unique needs of its traditional, athletic, style-conscious core consumer. The company’s current financial goal is to generate $12 billion of cumulative free cash flow from operations through 2015. Nike hopes to sustain high single-digit revenue growth, mid-teens earnings per share growth, and expand its returns on capital. It seeks to enrich shareholders and also expand its portfolio of high-performing brands (Nike introduces 2015 global growth strategy, 2010, Sneaker News).
To create a more lean supply chain, and cut the costs of eliminating ‘middlemen,’ Nike has begun to place greater emphasis on its direct-to-consumer business. It will open 250-300 new NIKE stores worldwide over the next five years (Nike introduces 2015 global growth strategy, 2010, Sneaker News). Using stores that only sell Nike products is of great advantage to the company, given that it can solely emphasize the Nike brand within the store, and eliminate extraneous costs that can keep the prices of its shoes higher, as would be the case in a generic store like the Sports Authority.
Using the Internet to market to consumers has been a core aspect of the Nike brand. Internet marketing is a way to reach the consumer with the company’s message and ethos with far fewer costs than would exist at a brick-and-mortar store. Because its consumer demographic is so youthful, this has provided Nike with an excellent way to merge its product branding strategy with cost savings for the company. Unique products and features are able to be obtained only online, once again encouraging consumers to avoid non-Nike retail stores and instead use the Internet for low-cost, direct-to-consumer operations. Nike consumers can custom-build the look and sports-specific features of shoes online, for example.
Because of its youth-oriented focus, Nike must constantly innovate, in terms of its products. Examples of such innovation include new shoes like the Nike Free, which are intended to profit off of the new ‘barefoot running’ craze, shoes that allow for distance to be tracked via GPS, and clothing that allows the users to wear Nike-specific iPods that combine music listening with speed, distance, and workout planning features. Nike’s goal is always to have enough money to invest in R&D while still having enough profits to show substantial gain for shareholders. This ensures that it is still viewed as a ‘hot’ and profitable company in which to invest, according to the financial press.
By fusing its brand image and marketing strategies, Nike has been able to manage its finances effectively. A youth-oriented, direct-to-consumer model is reinforced by its emphasis on Nike-specific stores and online retailing. Online retailing allows consumers to ‘tailor’ the Nike experience to their needs, ensuring that Nike’s international expansion goals are met. For example, a net-surfer from Latin America can buy European football gear, even though this might be of little interest to an American teen. Nike creates a different image for every facet of the website, and for every geographical location, enabling it to use advertising dollars effectively and to suit the new Nike generation’s demand for a customized experience. Financial management is not simply about having an eye on the bottom line, it means using strategies in a manner that works with the organization’s overall goals and image. This is clearly the case for Nike.
Moreno, Kasia. (2004, February 6). Companies with successful growth strategies. Forbes.
Retrieved July 15, 2011 at http://www.forbes.com/2004/02/06/cz_km_0206sf.html
Nike. (2011). Official Website. Retrieved July 15, 2011 at http://store.nike.com/us/en_us/
Nike introduces 2015 global growth strategy. (2010, May 6). Sneaker News.
Retrieved July 15, 2011 at http://sneakernews.com/2010/05/06/nike-introduces-2015-global-growth-strategy/
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