Tuesday, November 17, 2015

Week 13 - Strategic Alliances/Mergers and Acquisitions

Nike's Strategic Alliances

As mentioned in earlier posts, Nike has had some very profitable and some not so profitable strategic alliances.  Noted in our text this week, there are major upsides to alliances, mergers and acquisitions as well as major downfalls.  In my opinion, my larger companies at one time or another have most likely or will more than likely experience both sides of the coin.

For Nike, as I've already discussed some of the acquisitions and divestment (Cole Haan and Umbro), I'd like to chat more about the more successful alliances Nike has built.  I consider all of the athlete endorsements quite major portion of their business, and I would call those strategic alliances that are very successful.  It would seem incredible beneficial to both parties.

Let's take Michael Jordan for example, because why wouldn't we take the biggest and best as an example??!  Back in the day, Jordan was an exceptional basketball player.  Nike had a vision to develop, manufacture and sell a line of basketball kicks.  Enter, a very successful alliance.  For Jordan, it was a chance (I imagine) to keep his legacy alive, earn a dollar or two after his body gave up on the court.  For Nike, it was an awesome image to affix to shoes, apparel and equipment.  Who wouldn't want to be like Mike??

Some of the potential pitfalls of course are still there, and it's always risky to form a partnership, especially over the years.  In my example, this has been a very profitable long term successful alliance.  Something could have or could go wrong with either Nike's manufacturing/distribution/promotion side, and of course something could go wrong for Michael Jordan causing a negative backlash (think Michael Vick...horrible).

There are always risks, everything in business is somewhat of a gamble whether it's all on your own or creating alliances, mergers or acquiring new business.  That's somewhat the thrill of it and part of the game.

Saturday, November 14, 2015

Week 12 - Implementing Corporate Diversification

Implementing Corporate Diversification

As in my previous week's blog, I mentioned the core strength of Nike's implementation of diversified strategies.  This week, I will dive deeper into why and how they might go about achieving successful corporate strategies.  I believe there to be many internal core competencies Nike capitalizes on to ensure their year over year success.

Nike partakes many of our chapters lessons and applies them with gusto.  For example, Nike's hierarchy is a matrix organization that impresses upon leadership at all levels.  They start by separating the business units by category such as Running, Women's Training, Golf, etc.  Each category has a general manager with goals and accountability.  These managers also work cooperatively across many category activity leaders that handle public relations, brand communications, events, etc.  The activity leaders also work across multiple categories supporting the various "sports" from a "global" perspective.  They are able to be consistent across the company in any decision making this way.

Another aspect that Nike takes seriously to ensure their vision of diversification strategies take hold is by impressing a sense of bond.  It is one company working through individual sports for the greater good of the company as a whole.  They encourage, plan and host bonding days throughout the organization worldwide.  Bringing together employees from all levels and categories and business functions to collaborate and truly brings the brand alive.

Finally, another important activity Nike implemented to ensure all employees were a part of the team was the issuance of bonuses, at every single level of the organization.  Some companies only bonus certain levels of management, excluding lower levels of employees.  Nike pays all employees based on their band/tier percentage as well as company and individual performance.  They believe everyone plays a role and without full efforts from all, where would they be?  I believe this also gives everyone skin in the game, as they say.  Peer to peer encouragement is a pretty valuable tool to ensure everyone is  pulling their share.


Friday, November 13, 2015

Week 11 - Diversification Strategies

Nike's Diversification Strategy

Hands down, when you look at Nike from a total perspective they have a related corporate diversification strategy.  Over the years, Nike has invested or divested in company's that share the marketplace and/or are complimentary to their product lines.

Hurley Intl and Converse are two great examples of a great fit from a related diversification strategy standpoint.  Hurley accesses the same athletic culture of consumers as Nike core categories, but with a focus on surf and water sports.  This similar, but different consumer allows Nike to utilize similar factory and distribution channels as other categories of business.  Also, on the Converse side of business, Nike is able to realize like-type consumers via a different product from their competitive basketball and fashion lines.

Some of the more recent divestitures include Cole Haan and Umbro, which began as a diversification strategy and possibly a complimentary business opportunity.  Unfortunately, my guess is the manufacturing and distribution of Cole Haan line of business is just too different from Nike's core business.  I'm inclined to believe the consumer differences and additional costs associated with a line of business costs the company more than it was able to bring in.  In the press release,

“The decision to divest of Cole Haan allows us to sharpen our focus on opportunities with the highest potential for strong returns, and to make sure the brands within the Nike portfolio are the most complementary to the Nike Brand,” Mark Parker, the chief executive of Nike, said in a statement.

Nike's ability to seek strategies that diversify and expand their reach, as well as recognize relatively quickly when there is a miss in strategy, is a core strength in their leadership abilities.  I look forward to watching where, or rather how, they leap up to their $50B in Sales by 2020 plan.




References
http://dealbook.nytimes.com/2012/11/16/nike-to-sell-cole-haan-to-apax-partners-for-570-million/?_r=0