NIKE SHOE MARKET ANALYSIS Empire of Nike Milestone Two Chrystal Kitowski Southern New Hampshire University NIKE SHOE MARKET ANALYSIS Last 5 years Sales figures for Nike

NIKE SHOE MARKET ANALYSIS Empire of Nike Milestone Two Chrystal Kitowski Southern New Hampshire University NIKE SHOE MARKET ANALYSIS Last 5 years Sales figures for Nike “Fiscal 2015 was an outstanding year for NIKE,” said Mark Parker, President and CEO, NIKE, Inc. “Our consistent growth is fueled by our connection to the consumer and our ability to deliver innovation at an unprecedented pace and scale. At no time in our history has the growth potential been greater for NIKE.” Let’s take a look at the graph below this is the last 5 years of sales figures for Nike By looking at the graph Nike has had a steady growth every year in sales. Revenues for NIKE, Inc. rose 10 percent to $30.6 million, up 14 percent on a currency-neutral basis. NIKE SHOE MARKET ANALYSIS Supply & Demand Analysis Let’s take a look back during Nike’s first fiscal quarter of 2010, NASDAQ reported that orders were up 10% over the same period the prior year. Management noted rising demand, with the exception of Japan and Western Europe (Google Finance, 2013). Whereas demand dropped slightly in the fiscal second quarter of 2010, worldwide orders of Nike products still grew 9% over the previous quarter. Analysts reported that better than expected retail numbers showed demand increasing in China, Western Europe, and the United States (Cheng, 2010). Both of the earning reports and market analysis indicated that Nike was going to have a strong year and demand would increase throughout the year (Cheng, 2010). However, in December 2010, both demand for Nike products fell as production costs increased. Nike CEO Mark Parker explained that, “Near term, there are some continuing macroeconomic challenges. As supply and demand find a new normal in the recovering economy, our industry is going to experience margin pressure due to rising input costs” (“Nike CR Report,” n.d.). . These reports negatively affected growth estimates and stock value for Nike, and had an adverse effect two of its main retailers, Foot Locker, and Finish Line. Concerns about rising inventory levels and decreased demand caused both retailers stocks to drop slightly (Cheng, 2010). In a review of Nike’s 2012 Annual Statement, revenues for the company were down 1% from the prior year. Nike also indicated that their inventory supply was down 13% from 2011 (Nike, 2013). This is an indication that Nike needed to reduce supply to come in line with the decreased demand. NIKE SHOE MARKET ANALYSIS Elasticity of Demand What is price Elasticity? Price Elasticity of Demand a measure of the relationship between a changes in the quantity demanded of a particular good and a change in its price. The price elasticity of demand is calculated by diving the percentage change in quantity demanded by the percentage change in price. . (Guthrie, 2012) A firm will calculate elasticity and first determine whether it is even elastic or if it is inelastic. A firm will consider raising the price on a product that is in demand and with using elasticity make an assumption as to how much more money they will make by raising the price. If the elasticity is too high, the company will actually lose money by raising the price because the demand is not there. When the demand grows, the more products sell, but when the price goes up, the demand falls. When a product has substitutes, the product has more elasticity. The reason for this is fairly simple, if there are good substitutes, and one company raises the price, the consumers will get the substitutes that are cheaper. When this happens, the demand goes way down, yet the price goes up. The company will not make money when there are too many substitutes. According to an analysis of Nike by Cheng, “…consumers of Nike-Adidas sports gear are relatively inelastic to price since that expenditure forms a small part of their total expenditure. The demand curve in such a market is kinked and so is inelastic to price decreases; firms don’t gain a substantial number of customers by reducing prices.” (Cheng, 2010) In addition to this Nike has a product with no competition the Air Jordan. Since the launch of the line, the Air Jordan brand has dominated the market and demand has remained high. Collectors of Jordan’s often pay hundreds of dollars for the newest releases and retailers often have NIKE SHOE MARKET ANALYSIS “Sneaker heads” spending the night outside their doors for a chance to purchase the latest pair (US Athletic, 2011). This type of demand is, perfectly inelastic. Devoted consumers are willing to pay any amount of money to add just one more pair to their ever-growing collections. It is mind blowing how devoted consumers are to their beloved brands (“Nike CR Report,” n.d.). Research indicates that Nike’s price changes are inelastic; the failing economy in 2008-09 had an effect on the demand of Nike’s products. Both revenues and inventory were down, indicating that Nike has responding to the slight decrease in demand by reducing supply (Wright Report, 2011). As mentioned in the Market Supply, Demand, and Elasticity sections, Nike has been partnered with Michael Jordan since 1985 to develop and sell his signature line of shoes. For nearly 30 years this footwear line has dominated the industry. For example, in 1980 they held 50% of the market share; in 2011 it was a staggering 95% (Holmes, Stanley, Bernstein, 2010), (“Nike CR Report,” n.d.). Due to the uniqueness of their product, Nike could set their pricing with little regard to the rest of the athletic footwear industry. (“Nike CR Report,” n.d.) When the original Air Jordan was released in 1985, it retailed at $65 – which, at the time, was the most expensive basketball shoe on the market (Air Jordan Shoe). Currently Air Jordan’s are selling as a “retro” line for a retail price of $100 (Holmes, Stanley, Bernstein, 2010). Over the years, the line has only become more popular. In 2011, 1,000 Jordan fans overwhelmed a local mall when they lined up at midnight to purchase a pair of Space Jam sneakers priced at $175 (Air Jordan Sneaker). The hype continued on eBay, where a single pair of original Air Jordan’s was recently listed at $4,999.99 (Google Finance, 2013). Clearly, Nike has found a way to command the market share and created a product that truly differentiates itself from the competition. NIKE SHOE MARKET ANALYSIS Prices and profits of many of Nike’s footwear lines have risen since 1995; however Nikes costs have stayed relatively the same. NIKE SHOE MARKET ANALYSIS References: Cheng, Andria. “Greater Customer Demand Sends Nike to New High – MarketWatch.” MarketWatch – Stock Market Quotes, Business News, Financial News. Retrieved from http://www.marketwatch.com/story/nike-jumps-after-results-promisecontinued-demand-2010-03-18 Forbes. (2012, April). Nike financial applications. Retrieved from http://finapps.forbes.com/finapps/statements/info Google Finance (2013, Feb 18). Retrieved from http://www.google.com/finance# Guthrie, D. (2012, March 9). Building Sustainable and Ethical Supply Chains. Retrieved from http://www.forbes.com/sites/dougguthrie/2012/03/09/building-sustainable-and-ethical-supplychains/ Holmes, Stanley, and Aaron Bernstein. “The New Nike.” BusinessWeek – Business News, Stock Market & Financial Advice. Retrieved From http://www.businessweek.com/magazine/content/04_38/b3900001_mz001.htm Nike CR Report. (n.d.). Retrieved from http://www.nikeresponsibility.com/report/content/chapter/business-overview NIKE FY2015 Annual Report. (n.d.). Retrieved from http://s1.q4cdn.com/806093406/files/doc_financials/2015/ar/index.html NIKE SHOE MARKET ANALYSIS US Athletic Retail Market Report, 2011 Edition. (2011, Fall). Retrieved from http://www.prolog.org/10333892-us-athletic-retail-report-by-koncept-analytics.pdr Wright Report: Nike Inc. Company Profile. (2011, Fall). Retrieved from http://http://wrightreports.ecnext.com/comsites/bin/comsite5pl?

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