The impact of Nike on the international markets in comparison to the local markets - Essay Example

? Task Introduction Nike, Inc. is a firm that deals with design, improvement and marketing of different shoe types. Nike is regarded as the best seller in athletic shoes as well as athletic attire around the world. The company vends its commodities to retailers via its own retailer stores, internet marketing as well as through autonomous distributors and other licensed individuals and groups. The company vends approximately 18,000 retail records in the US through its retailers and distributors. The shoes that the firm deals in are specifically for athletic purposes. In addition, it makes other athletic shoes and attires for different games such as football and baseball. The company also vends other sporting accessories such as sporting or gaming bags and other protective gear utilized in various games. The company faces numerous competitions from similar industries since the industry portrays high competition. Nike faces these competitions in various areas such as product benefits and technologies. Other competitions emerge in the pricing, production cost and consumer services. The principal competitors within this industry are Puma and Adidas, which offer the company numerous challenges in maintaining their high profile and sales. Since the adoption of Nike, in 1978, the company has extensively grown into a global company specialized in footwear and other products related to sports. The financial analysis of the corporation through scrutiny of its financial, income statements, as well as, balance sheets allows reviewing of the company financial health and other achievements over the years. Over the period, since the company establishment, the management of Nike has generated value for the shareholders through the progression of the company’s operations in overseas nations in an extensive manner. The company’s trading and earnings have surpassed the Wall Street approximations with respect to FY 06 (Stilga, 2006). The income for the company hit approximately $15 billion while its income per share hit a high up by 18 percent. In the last 5 years, the compounded rate per split elevated by 20 percent while the average of the gross margins came to 42 percent (Stilga, 2006). In the precedent year, the company’s margins were 44 percent seeing an enormous rise in profits. Currently, the company’s management has optimized the wealth for its shareholders although the company performance in Nike’s footwear has declined. The footwear performance in the sector generated an average of approximately 14.25 percent whereas the progression in stock reached 10.48 percent (Stilga, 2006). In view of performance for the management, the performance can be considered not noteworthy provided the augment in share value serves as the point of reference. The Price to Book relative amount for Nike is 3.97 whereas the segment in which the corporation operates has a relative amount of 3.96. Similarly, the company has a Price to Tangible Book relative amount of about 4.26 whereas the sector that Nike operates presents a relative amount of about 4.44 (Stilga, 2006). The brand name and image of Nike is considered the strength of the company thus the competitive advantage. In addition, to the brand name and image of the company, the company has acquired other strong points in global operations. The company’s processes in international markets have gradually expanded coupled with innovations and creativity in fresh products. The operational expansions in global markets can also be ascribed to the capability in relating with its consumers. As a multinational company, Nike has impacted on almost all nations although it overseas ventures have raised concerns over claims in exploitation of its employees. The company gains a lot of revenues from global markets than its receives from the internal markets. The international operations of the company earned approximately $6.5 billion as compared to $5.1billion from its local or internal markets. Therefore, the international operations of the company seem to be the driver to towards Nike’s triumph. Nike’s global operations are categorized into three dissimilar regions that offer the company the opportunity to gain numerous markets for its products. In relations to sales, EMEA region throws in approximately $4.3 billion of the overall returns that the company obtains. The company obtains approximately $2.5 billion from footwear, $1.5 billion for the attires and approximately $284.5 million for the equipments that the company manufactures, considering these revenues (Stilga, 2006). The American region offers revenue for the company although it is the smallest. It offers approximately $624 million returns for the company with $412 million throwing in for footwear and $166 for the sporting attires. In the equipment transactions, the company obtains around $47 million offering numerous employment opportunities for the populace in the countries involved with the brand. In 2011, the company its stock priced at $85.73 with the twelve month operating scope being $64.43-$94.23 (Rivera, 2011). The dividends with respect to the shares stood at $0.31, therefore, making certain analysts deliberate on a hold opinion. The company has presented a net income of about $6.45 million, which is considered high in relation to the previous year 2010, which saw a net income of around $5.59 million (Rivera, 2011). This implies that the company progressed collectively in order to achieve these triumphant results. In view of the balance sheet, the firm presents a $0.752 million increment in the assets accounts relative to the year 2010. These changes can be accredited to the rise in operations mainly in the international markets where the company has put extensive emphasis. Similarly, the liabilities and stockholder justness progressively augmented indicating further success in the company’s undertakings. In 2011, cash flow offered by the operations declined relative to the preceding year 2010. The principal supply of the working cash flow was found to be approximately $2.1billion. Monetary resources utilized for investment purposes declined to $1billion relative to $1.3 in the previous year. This was attributed to fewer buying, for the short-term business ventures in 2011 than other years. Money utilized in the funding of the economic activities within the company augmented to $2 billion in the same year compared to $1.1 billion that was evident in 2010 (Rivera, 2011). This increment in the funding of these actions can be ascribed to the augment in share repurchases and the remuneration of dividends. Additionally, the augment in money utilized for financial undertakings can be attributed to counterbalance that occurred through an augment in the notes payable. Consequently, the cash flow experienced in the operations of the company was lower than the net income in 2011 although it was considerably elevated than the net income that transpired in 2010 (Rivera, 2011). The company has considerably increased its operating capital by around $0.11billion compared to the year 2010. The profit margins of the company dropped in 2011 owing to elevated input expenditures and the elevated transportation expenses coupled with a reduced blend of licensee revenues (Rivera, 2011). Among the competitors, Nike has managed to beat them in the sales and other areas although companies such as Adidas have aimed at closing in the space generated by the excellent performance of the Nike brand in the Global markets. Nike seems to have a competitive advantage above the rest of the firm such as puma and Adidas. This is in terms of vending or transaction that the firm undertakes in the sporting world. Similarly, Puma has also taken measures to ensure it closes in the space relative to performance of the company. In 2011, Puma’s management realized their target in sales by achieving 3 billion pounds in the consolidated transactions. This was the first time the company managed to reach this amount thus indicating that the company has indeed resolved to close in the space portrayed by both Adidas and Nike. The company’s working income was approximately 333.2 million pounds, thus presenting 8.6% increase, for the previous year while the working capital was 534 million pounds. The income statement of Adidas indicates that the revenues increased by around 5% in the second quarter of 2011. The revenues stood at 3.064 billion pounds indicating that these two companies, which are considered the competitors of the global brand Nike, are determined to reduce the gap that Nike has created through excellent sales and performances. In order for Nike to elevate its sales and further, its excellence in the production of sport related materials, Nike has made innovative moves with Apple leading to the introduction of Nike+. Nike+ offers customers the Nike shoes together with iPod nano as well as a Nike+ iPod games supplies. Conclusion Nike has significantly impacted on the international markets in comparison to the local markets thus gaining numerous purchases in the recent times. In return, these purchases can be considerably attributed to the triumph of the corporation in the global markets as compared to the rival firms such as Puma and Adidas. Additionally, the company’s introduction of innovations with technological companies such as Apple has assisted in retaining its loyal customers over some time. References Rivera, Y. (2011). Nike Annual Report 2011. Retrieved from: Stilga (2006). Nike Financial Analysis. Retrieved from < http://blogs.indews.com/business/nike_financial_analysis_1.php > Read More