Nike Inc.: Firm Description, Market Structure, and Business Strategy

Running head: NIKE INC.
Nike Inc.
Name of the Student
Name of the University
Author Note

1NIKE INC.
Table of Contents
2. Written Report.............................................................................................................................2
2.a. Firm Description...................................................................................................................2
2.b....................................................................................................................................................3
i. TOPIC 1: Agency Theory.............................................................................................................3
ii. TOPIC 2: Market structure (SET analysis) and Game theory.....................................................6
Market structure (SET analysis)..................................................................................................6
Outline of the main industry in which the firm competes.......................................................6
Structure of the market in which the firm competes................................................................7
SET assumptions of the market...............................................................................................7
Main competitors and their key characteristics (size, key financial figures, market share)....7
Game theory.................................................................................................................................8
Strategic interaction in Nike Inc.’s industry modeled with prisoner’s dilemma (e.g., price
wars)........................................................................................................................................8
Strategic interaction in Nike Inc.’s industry modeled with entry game..................................8
iii. TOPIC 3: Business Strategy & Corporate Strategy...................................................................8
References......................................................................................................................................14

2NIKE INC.
2. Written Report
2.a. Firm Description
Nike Inc. is a major multinational organization that deals with retail products like
apparel, footwear, accessories, equipments and their services. The company had been founded in
the year 1964 on January 25, by Phil Knight and Bill Bowerman. Since the time of its foundation
till this day, Nike Inc. has been able to cover up so much finance that from a small scale industry,
it has become one of the leading industries in the world now. The finances of the organization
has risen to such a level that the organization has even declared a profit rise of over 13 per cent
in the year 2013 over a global market order of the Nike merchandises (Al Badi, 2015). On
November 2015, the company had even declared that the organization would most likely to
initiate a share buyback of about 12 billion USD, along with that it would initiate a two for one
spilt in the stocks. The total earnings of the organization by the fiscal year 2018 is said to be
around 1.933 billion USD, with the revenue generated in the annual year of about by 36.397
billion USD. Nike's shares traded at over 72 USD per share, and its market capitalization was
valued at over 114.5 billion USD in October 2018 (Editorial, 2018).
The products of the organization focus mainly on the varied ranges of sports products and
equipments. The first product that Nike had ever produced was track running shoes. They usually
focused on the development, production, manufacturing and export of sports shoes, but had later
shifter focus to the other sports products based on apparels and equipments. These products
include jerseys, shorts, shoes, baselayers, cleats, and many others. The organization does not just
focus on a single range of sports product but manufactures sports good for different other sports
as well. Nike used to maintain a simple brand logo representing a simple V-shaped sign that
were used for the development and manufacture of all the products by the company. As a result

3NIKE INC.
of the unique quality and product range, Nike gained immense popularity in the retail industry as
a product developed for the sports environment. Gradually, the logo of Nike started to become a
status symbol and the success in sports industry reflected into the urban life of the youth.
The shift of demand urged the company to manufacture apparel and retail goods for the
urban fashion as well. The onset of 1980s thus saw the beginning of a new era of Nike products
being manufactured for the urban fashion and hip-hop fashion. Soon the American youth started
showcasing the apparels manufactured by Nike with shell suits, Air Jordans, baseball caps, Air
Force 1 and Air Max running shoes (Editorial, 2018).
The Marketing strategy of Nike involves the promotion of the ingenious products with
the help of sponsorship agreements including the celebrity athletes, college athletic teams and the
professional teams. Nike Inc. got more popular through its marketing strategy to the entire world
with television commercials, use of the songs by Beatles in the advertisements, new media
marketing and bagging a uniform deal NBA (Editorial, 2018). Nike is the official sports apparel
provider to many sports teams bagging their uniform deal as well.
2.b.
i. TOPIC 1: Agency Theory
Agency Relationship issues between Converse and Nike Inc.
Relationship between principal and agent companies is guided by the principal-agent
agency theory. When a company gives legal authority to another company for using its brand
name to sell their products in the market, agency relationship develops between the two
companies (Pepper & Gore, 2015). However, agency relationship problem exist between
companies for unaligned goals or varying risk level that are solved by agency theory. The