Nike principles

1. Our business is change.

2. We’re on offense. All the time.

3. Perfect results count—not a perfect process. Break the rules; fight the law.

4. This is as much about battle as about business.

5. Assume nothing. Make sure people keep their promises. Push yourselves; push others.

Stretch the possible.

6. Live off the land.

7. Your job isn’t done until the job is done.

8. Danger Bureaucracy Personal ambition Energy takers vs. energy givers Knowing our

weaknesses Don’t get too many things on the platter

9. It won’t be pretty.

10. If we do the right things, we’ll make money damn near automatic.

Knight was right about number 10. By 1980, with 2,700 employees and revenues of $270 million,

Nike had surpassed Adidas and dominated the U.S. market.

New Statements for New Missions

By the mid-1980s, however, Nike was toppled from the top spot by a new rival—Reebok. Women

had discovered Reebok’s soft leather shoes and its sales took off, while Nike’s declined. To regain

its top place, Nike needed a new mission—namely, “Crush Reebok.” It worked—Nike soon

regained industry leadership—but the lead was a little too narrow for Phil Knight’s comfort. So he

issued a new mission statement: Nike, he announced, would be “the world’s leading sports and

fitness company.”

It was a seemingly strong, visionary statement, but there was one problem: By this point, Nike

already was the world’s leading sports and fitness company. Striving to be what it already was

wasn’t particularly forward-looking, and not the sort of “goal” to drive a company and motivate its

employees to achieve new and better things. So Knight revised his mission statement: Nike’s goal,

he stated, was “to bring inspiration and innovation to every athlete in the world.” And to make

things clear, he put an asterisk after “athlete” and recalled something that his cofounder, Bill

Bowerman, had said decades earlier: “If you have a body, you are an athlete.” So Nike’s new (and

current) missions statement is:

To bring inspiration and innovation to every athlete* in the world.

*If you have a body, you are an athlete.

This statement performs nicely the basic functions of both a mission—a declaration of what a firm

is and stands for now—and a vision—a statement of what it will be in the future.

About Nike Case 3.2 (modified)

Doing Business in the Land of 2.6 Billion Feet

Before making a commitment to do business in a particular country, you need to ask yourself

a basic question: Is there an unmet need in this nation that my company can meet?

Undoubtedly you’d also study up on the country’s culture, and there’s always a chance that,

whether the country is or isn’t a promising consumer market, its culture may not be congenial

to your product offerings. If your prospects look bleak on both counts, what would you do?

Most companies would just walk away and look for opportunities elsewhere. But not Nike.

Americans have dreamed of penetrating the elusive China market since traders began

peddling opium to Chinese addicts in exchange for tea and spices in the 19th century. War

and communism conspired to keep the Chinese poor and Westerners out. But with the rise of

a newly affluent class and the rapid growth of the country's economy, the China market has

become the fastest growing for almost any American company you can think of. Although

Washington runs a huge trade deficit with Beijing, exports to China have risen 76% in the

past three years. According to a survey by the American Chamber of Commerce, 3 out of 4

U.S. companies say their China operations are profitable; most say their margins are higher in

China than elsewhere in the world. “For companies selling consumer items, a presence here is

essential,” says Jim Gradoville, chairman of the American Chamber in China.

The Chinese government may have a love-hate relationship with the West — eager for

Western technology yet threatened by democracy — but for Chinese consumers, Western

goods mean one thing: status. When Nike encountered obstacles in China in the 1990s, it

wasn’t deterred. Instead it set out to create a market for its products by changing China’s

culture. A bold move, but then Nike has long been regarded as a bold company.

The Country That Didn’t Do Sports

With 2.6 billion feet in China, Nike certainly had an incentive to go after the large market.

Economically and demographically, conditions were favorable: The Chinese economy was

growing rapidly, a new middle class (with more leisure time) was emerging, and because of

the country’s one-child policy, parents were unusually willing to lavish only children with

expensive items. Although political control remained stringent, Chinese citizens were

enjoying new economic freedoms and expanded personal choices. Most important, Chinese

consumers were eager to buy high-quality Western products, in large part because they’d

come to signal status. Unfortunately, however, Nike had no products of particular interest to

the Chinese consumer. The Chinese didn’t do sports. In other words, sports played no

important role in their culture. To sell sports-oriented products, Nike would have to get

Chinese consumers interested in sports—any sport, at least to start. It would have to change

Chinese culture.

A Little Cheerleading and a Little Hip-Hop

Nike decided on basketball. Terry Rhoads, then Nike director of sports marketing in China,

got the ball rolling (so to speak) by donating basketball equipment to high schools and giving

them money to open their courts to the public at night. He set up tournaments and founded

basketball leagues in various cities. To get generally reserved Chinese spectators into the right

spirit of the games (which were televised), he’d blast recorded cheering sounds.

It worked.

Basketball caught on in China. The National Basketball Association started broadcasting

Matthew Forney, “How Nike Figured Out China,” Time Online, November 2004 (September 18, 2005), at

www.time.com/time/globalbusiness/article/0,9171,1101041025-725113-1,00.html, 1. 2

games in China, and Nike dispatched Michael Jordan as a goodwill ambassador for both the

sport and the company. When a new professional basketball league started up, Nike signed

top Chinese athletes and sponsored every team.

But cracking the market in a big way seemed impossible. The company had its share of horror

stories too, struggling with production problems (gray sneakers instead of white), rampant

knock-offs, then criticism that it was exploiting Chinese labor. Why would the Chinese

consumer spend so much on a pair of sneakers? So, the next step was to convince teenagers

(and their parents) to buy Nike shoes that cost almost as much as the average middle-class

family made in a week. To accomplish this task, Nike created a series of ads urging teenagers

to seek out new experiences; its Chinese Web site introduced them to hip-hop music, and its

marketing campaign delivered the familiar Nike message—“Just Do It.”

Nike’s efforts paid off. Basketball was a hit in China. Some players (notably Yao Ming and

Yi Jianlian) emerged as celebrities, and Nike shoes attained the status of “cool.” Sales

mounted, and Nike now boasts 10 percent of the market in athletic footwear, apparel, and

equipment (followed closely by Adidas and the Chinese footwear manufacturer Li-Ning).

Today, more than 1,200 stores across China sell Nike products exclusively, and 10 more are

added each day.

The Problem with Slaying Dragons and Kung Fu Masters

One of Beijing's leading DJs, Gu Yu got hooked on the hip-hop culture brought by Nike.

Now, with a friend of his they sell limited-edition Nikes unavailable in China. To Beijing's

several hundred “sneaker friends” scoring rare soles and playing banned music are part of a

rebellious experience. “Because of the government, Chinese aren't allowed access to a lot of

these things,” says Gu's partner, Ji Ming, “but with our shop and Nike-style music, they can

get what they want.”

Nike’s success in China indicates the power of the brand, but the road wasn’t without a few

bumps. By Chinese standards, its ads were considered controversial, and at least one TV

commercial, which featured NBA star LeBron James slaying a dragon and a kung fu master,

managed to offend a lot of people. Again, the issue was cultural: Dragons symbolize Chinese

culture and kung fu masters are figures of national pride. Older consumers and government

officials demanded that the ad be pulled (it was—immediately), but despite the controversy

(or because of it), it became quite popular among younger Chinese. (In Singapore, a small

island nation that prides itself on neatness, graffiti-like posters of James on the walls of 700

bus terminals riled commuters and government officials, but once again, Nike got the desired

effect: Teenagers saved Nike the trouble of removing them by collecting them as souvenirs.

)

The next challenge for Nike in China will be the 2008 Olympics, which are slated for the

capital of Beijing. As the entire nation focuses on the games, 21 of China’s 28 Olympic

squads will be wearing the swoosh. This time, however, the company won’t have to pipe in

prerecorded cheering.

About Nike Case 10.1:

Athletic Shoes, Apparel, and Equipment: Nike’s Industry

From Sneakers to Athletic Shoes

Athletic shoes are one of the century’s most successful products. American teens buy

about three pairs each year and adults the equivalent of 1.8 pairs.

The first version of the

athletic shoe (then called “sneakers”) appeared in nineteenth-century England.

Upper-crust Britons, who wore soft-soled footwear for croquet, cricket, and other lawn

sports, called them “sand shoes.”

But it was the American inventor Charles Goodyear

who made the modern sneaker possible. Using his patented “vulcanization” process,

Goodyear created footwear that you and I would recognize as sneakers—shoes with

rubber soles and canvas tops. By 1897, active Americans could buy sneakers from the

Sears catalogue for 60 cents a pair.

By the early twentieth century, there was a small but viable sneaker industry. It consisted

mostly of rubber companies concentrated in the northeast, where U.S. Rubber was

manufacturing sneakers for kids and Converse Rubber was making “basketball shoes.” A

sneaker industry was also emerging in Europe, where Reebok (founded in England in

1895) was producing “running shoes.” The sneaker industry grew at a slow but steady

pace through the 1940s. It hit its stride in the 1950s and 1960s, when both leisure time

and sports participation increased and school dress codes were relaxed. Suddenly

sneakers were socially acceptable for general wear, and sales jumped dramatically

(especially sales of imported sneakers). But even the giant leap forward of the 1950s and

1960s gave little indication of the monumental changes that lay ahead at the dawn of the

1970s.

Jogging as an Import Product

While on a run with a group of locals in a hilly section of New Zealand, a fit Bill

Bowerman (Phil Knight’s running coach at the University of Oregon and future business

partner) found himself out of breath and at the back of the pack. He was embarrassed

that he couldn’t keep up with the runners, even those who were much older. He soon

discovered their secret: Rather than moving at a quick pace, the runners engaged in an

easygoing style which, as Bowerman soon learned, was called “jogging.” Bowerman

brought the technique back to Oregon and began offering jogging classes—not for his

collegiate runners, but rather for ordinary, sedentary Americans. Then he coauthored

Jogging: A Physical Fitness Program for All Ages, a bestseller that helped usher in the

jogging movement, which, in turn, changed forever the way Americans thought about

physical activity.

1Athletes and the Ath-Leisure Market

During the 1970s, more and more Americans, spurred by an increasing interest in health

and physical fitness, began to participate in some type of physical activity. Millions of

men and women took up jogging or some other form of aerobic exercise. A booming

market opened up to companies that could supply all these new sports enthusiasts with

shoes that would put them on the track to better health and shape while keeping them safe

from injury. Sneakers would no longer do: Americans wanted to jog through their

neighborhoods and nearby parks in cushioned athletic shoes made out of light materials.

In addition to the fitness revolution, the 1970s market for athletic shoes was buoyed by an

increased desire for comfort and style in footwear. A new group of consumers—the

so-called “ath-leisure market”—wanted “authentic” athletic shoes even though they

didn’t intend to wear them for sports or anything else overly strenuous. More important,

this market was even larger than the “sports-participation” market: Today, analysts

calculate that about 80 percent of all “athletic” shoes are purchased by people who don’t

wear them for athletics.

The new athletic shoes were a lot more expensive than the old canvas and rubber-sole

sneakers, but with lighter materials and such features as air bags and waffle soles (both of

which were Nike innovations), they were technologically far superior. They were made

not by the old-line sneaker makers, but rather by “performance shoe” companies such as

Nike, Reebok, and Adidas. These companies flourished because they established brand

names and captured the endorsements of celebrity athletes. And, of course, they became

extremely adept at advertising and other forms of brand promotion.

Apparel and Sports Equipment

Strong brand awareness also provided a springboard into the market for apparel: The

industry soon discovered that people who identified with a particular brand of shoe could

also be interested in clothing from the same company. Germany’s Adidas took the first

step, entering the European apparel market in the 1960s, and by the 1980s, most of its

competitors had added apparel to their product mixes. Today, sales of athletic apparel

represent a sizable and growing share of the business of companies that once specialized

in athletic shoes.

Brand awareness also helped the same companies enter the sports-equipment and

accessories market. By the 1990s, their brands were appearing on sport watches, eyewear,

athletic bags, and dozens of other products. Sports-related products now account for a

small but growing portion of the industry’s total business.

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