HR7003 Managing Financial and Human Resources for Sustainable Business Success

Introduction

Nike is one of the renounced brand plays a major role in sports and athlete clothes industry. It was established in 1962 under the partnership of Bill bower man and Phil knight and improved significantly each year through its innovation and dedication to maintain its quality and service all over the world. It has the largest market share in sportswear and athlete robe, which leads to positive impact to the industry. Nike being the one of the top biggest company in the sneaker market with a holding of more than thirty percent of the overall market in the footwear industry have been consistent in maintaining its goodwill and diversification of its products from time to time. Nike tagline “Just do it” have captured millions of Nike’s fans all over the world. Nike primary attention is upon the gratification upon needs and the requirement of the global athlete by serving them with their best quality of apparel, accessories and other equipment. The main emphasis of Nike in manufacturing the shoe are its quality and durability. It is designed as per the basis of sports which makes it special and unique of its own kind and giving competitive edge in the market. It is being sold in more than 110 countries with more than thousands outlets all over the world wide.

In the domain of athletic shoes and apparel, Nike has successfully sustain to be the market leader. The target market is not changed as the youth of today generation are the fans of the athletes and the sporting activities. They try to follow the same and the style never goes out of it. It has always lays importance in maintaining it goodwill by multiple collaboration, social media post, blogs , for promoting its content and be aware of the demand of the people and try to fulfill it through its innovation. It has widen its activities by diversification of its products and this is the reason being ranked in the one of the largest seller of the footwear globally. Being directly selling through its website by direct to consumer process , it is further being recommended and preferred by all , which makes it as one of the good investment options for the investors.

Nike has various athletes which serves as brand ambassador for them. Sports, being the social activity creates a social buzz in social media. Nike have one of the highest followers in footwear industry, as they always focus on customer satisfaction and its productivity. The brand has been endorsed by the famous personalities including Tiger wood, Kobe Bryant, Michael Jordan, which add value to its business as people have immense faith and love towards them. Nike mostly get connected with young personalities for the brand marketing as a result , youth group get motivated ,  as they purchase more of footwear and the apparel , indirectly helps in sales promotion. Young celebrity easily attract the people as they can connect with them easily (Pillay, D. H. (2019). 

The SWOT analysis of Nike is as its strength in its brand recognition by all, effective marketing strategy, strong research and development, distributional channel and enhance relationship with the customers. Its weakness is mainly overseas manufacturing dependency leading to pressurize medium retail presence, decreasing United States market share, by currency exposure. Its opportunity has been increased due to the number of sports events such as Olympics, FIFA, developing its brand image, increase demand of its products and expansion in emerging market. Though it has few threat such as economic recession, fluctuation in the currency, industry competition (Gürel, E. and Tat, M., 2017)

The PESTLE analysis of Nike for the environmental framework is effective and efficient. Political factors plays an important role in order to sustain in the market as it determine the growth and relationship with other country. As Nike provide medium range products too, so it is less venerable to the economic factors. As the generation is moving towards healthy environment which means abundant of sports, indirectly boosting sales of Nike in the market. Technology plays an important role as with the rise in the social media, it’s become important to be updates and innovate accordingly. In order to long run in the market all the legal formalities to be fulfilled and tax consideration should be focused without any negligence. As the environmental issues are rising day by day so it should be kept in mind that  The company should not be any means harm the nature , society  and be ecofriendly and sustainable development with its products and services (Alsaffar, H., 2020.)

Financial information of the company provides a summary and the status of the company in the market. It initiates from the accounting information and it is displayed on the financial statement of the company. Hence by the help of this information, it helps in accessing the performance of the company and decision making. By the help of ratio analysis on the basis of liquidity ratio, profitability ratio, working capital management, shareholder return a summary of Nike performance can be analyzed. In this assignment, the database is used from the internet, of its yearly annual report, leading to financial analysis performance along with discussion of the multiple non-financial factors too, which directly or indirectly impact the decision making of the investors. Ratio analysis helps in proper evaluation and performance of the company.

Financial data helps in providing us the critical insight of any company to the investors. Along with financial data there are various other factors such as social responsibility, environmental responsibility. Nike has always being focused about its social and environmental responsibilities by giving competitive edge in the market and fulfilling all its responsibilities. It even acknowledge to work in a competitive environment. The growth and achievement of Nike is basically due to its innovation and use of advanced information technology, being updated about the demands in the market and developing the channel of directly to the consumer marketing helps them to maintain their position in the market. All the data used in the calculation are being taken from Nike’s balance sheet, income statement, and few from cash flow statement too.

Liquidity Ratio

Liquidity ratio is mainly used to access the ability of the company to pay the debt obligation and margin of safety. It can further be used to analyze the company ability to convert assets into cash. It measures the short term liquidity, so its plays an immense role for the short term creditors. It can be classified as follows:-

1. Current Ratio
2. Quick Ratio

Profitability Ratio

It helps to evaluate the ability of the company to generate the earnings relative to its revenues, assets, equity capital and other expenses of the company using data for a specific period of time. Higher the ratio it is beneficial for the company. It reflects the success of the company and further helps in comparing its profit from the previous years and as well as from its other competitive company. Some the ratio which help in evaluating the profitability are as follows:-

1. Gross Profit Margin
2. Net profit Margin
3. Return on equity
4. Return on assets
5. Operating profit margin

Working Capital Management

Working capital management helps in measuring liquidity, efficiency from its operations and short term long term financial health of the organization. Some of its types are as follow to s:-

1. Receivable turnover
2. Inventory turnover
3. Asset turnover

Shareholder Return

It reflects the return on the shareholder equity on the basis of the investment they have made. Some of the ratio which help in measuring the efficiency of the organization are as follows:-

1. Price Earnings Ratio
2. Price to sales ratio
3. Price to book value

The detail analysis of Nike’s performance from its previous year analysis on the basis of financial information in its annual report. We will be analyzing between 2018, 2019, 2020 years performance of Nike in the comprehensive manner.

Current Ratio

Current asset is evaluated by dividing current assets by current liabilities. The current ratio were declined from 2018 to 2019, but again there was improvement from the year 2019 to 2020. Ideal current ratio is 2:1.As the current ratio for the year 2018, 2019, and 2020 are 2.51, 2.10, and 2.48 respectively.

 

Quick ratio

Quick ratio is calculated by summation of (cash and cash equivalents, short term investments, receivables,) divided by the current liability. The quick ratio were declined from 2018 to 2019, but again there was improvement from the year 2019 to 2020. Ideal quick ratio is 2:1. As the quick ratio for the year 2018, 2019, 2020 are 1.64, 1.39, and 1.598 respectively.

 

Gross profit Margin

Gross profit margin basically reflects the revenue incurred covering all the operating and other expenditures. Gross profit margin increased from 2018 to 2019 by 43.84% to 44.67% and then deteriorated in 2020 resulting in 43.42 %.

 

Net profit Margin

It is evaluated by dividing net income from its revenue Nike’s net profit margin have been increased from 2018 to 2019 from 5.31% to 10.30% respectively and there after deteriorated in 2020 to 6.79%

 

Return on equity

Return on equity is calculated by dividing net income from its shareholder’s equity. Nike’s return on equity have been increased from 2018 to 2019 from 19.7 to 44.57 respectively and there after deteriorated in 2020 to 31.52.

 

Return on assets

Return on assets is calculated by dividing net income from its total assets. Nike’s return on assets have been increased from 2018 to 2019 from 8.58 to 16.99 respectively and there after deteriorated in 2020 to 8.10.

 

Operating Profit margin

Operating profit margin is evaluated from operating income divided by its revenue. There has been continuous decline in the operating margin from 2018 to 2019 to 2020 by 12.21 to 12.20 to 8.33 respectively. Hence Nike Inc. have to work in its operating margin in an efficient manner.

 

Receivable turnover

Receivable turnover is evaluated by dividing revenue from its receivable. Nike Receivable turnover deteriorated from 2018 to 2018 from 10.41 ti 9.16 and then increased in the year 2020 exceeding 2018 record leading to 13.61.

Inventory turnover

An inventory ratio is calculated by dividing cost of goods sold to it inventory.  There has been continuous decline in the year 208 to 2019 to 2020 from 3.86 to 3.85 to 2.87 respectively. It indicates that the company is holding its stock more than the time it was assumed, to be sold. Inventory turnover reflect the times the inventory is sold in the market and is replaced in a certain period of time.

 

Asset Turnover

It is evaluated by dividing revenue or total sales to its average assets. There has been slight rise in the year 2018 to 2019 that is from 1.62 to 1.65, but thereafter decreases to 1.2 in the year 2020. As it is decreasing it reflects Nike organization is losing its efficiency to utilize the assets and generate revenue or increase sales for the company.

 

Profit earnings ratio

It helps us in reflecting the investors invest in stock of its income. There has been decrease in the profit earnings ratio from 2018 to 2019 which is 62.01 to 30.47 and thereafter increase in the year 2020 to 60.58.

Profit to book ratio

The profit to book value is one of the market indication about the company required rate of return to the company actual required rate of return. There has been continuous decline in the Nike profit to book ratio from 2018 to 2019 to 2020.

 

Capital asset pricing model helps in concentrating the return from the risks availed by assets based on the company systematic risky level. Hence it cannot be eliminated by the process of diversification. By CAPM model it helps in evaluating rate of return, variance and covariance, Systematic risk commonly known as beta and further rate of return. The price given by CAPM is the long term equilibrium price of the asset. It can be further describe as the risk required in order to return trade of the securities. Internal management of the company determines the performance of the organization, by evaluating net profit after tax to the total cost of capital, overall determine the profitability of the company. Economic spread, Cost of capital, economic profit margin , net operating profit after tax are some of the measure to evaluation of the company performance .As the financial information summarize all the accounting information of a company , it gives us data in a simplified manner. It act as an effective tool for measuring the performance of the company.

Conclusion

Nike, as a brand itself has its own recognition and have a market value of its own. It has gone through many changes in the years passing by leading to evolution. As its main target is of young generation and beating its competitor company like reebok, Adidas, Puma .It emphasis on maintaining the quality, increasing the value of the shareholder, customer and even the partners. As the main objective is to maximize the profit with minimization of resources. As the market is volatile, footwear industry have grown rapidly. Due to its flexibility and innovation of the products it is being accepted all over the world. Nike is also known as human asset as employees being motivated with the athletically background, which makes it unique and competitive in the market. Due to its organizational culture and brand image it leads to sustainable competitive advantages.

The organization should emphasis more on non-sports activity too for its promotion including entertainment industry for its marketing technique. They focus mainly on sneakers, they should focus on other footwear’s like casual footwear to expand it market and increase the sale of the products. As now Nike is focusing more on online trading of goods directly to the customers, they should focus on the website designing, making it user friendly and using the latest updated technology for the maintenance of its sites, Nike should focus on its urban and casual runner as it is slowly losing its grasp.

Nike main focus on its innovation by emphasis on research and development in order to be profitable in the long term, eliminate or reduce the injury of the athletes. They help in athlete performance by providing them maximum comfort. Nike strength is its brand recognition by all, effective marketing strategy, strong research and development, distributional channel and enhance relationship with the customers. Its weakness is mainly overseas manufacturing dependency leading to pressurize medium retail presence, decreasing United States market share, by currency exposure. Its opportunity is increases in the number of sports events such as Olympics, FIFA, developing its brand image, increase demand of its products and expansion in emerging market. Though it has few threat such as economic recession, fluctuation in the currency, industry competition.

Based on the survey it is being found that the 125 of its customers prefer Nike brand due to its price, 16% of the customer prefers Nike due to is durability, as they feel that it is long lasting. 18% of the customer choose Nike due to its comfortability and reputation in the market.17% of its client prefer due to its design and 19% prefer because of its quality. Hence we can conclude that there are many reasons to prefer Nike which has made it a reputation and goodwill all over the world.

The most important element of their work is to contribute to the environment by providing a  healthier community by fulfilling human needs through  sustainable products .By collaboration all over the world , they have evolve their leadership strategy across the world. Their goal is to refine their innovation and action plans leading to fulfill each individual demand. By focusing more on their corporate social responsibilities they can further improve their market share  as they sell their products in more than 200 countries, have dozen of brand associated with it. Nike have served more than millions of people with thousands of its products as a result of which Nike is in top 10 position consistently in footwear industry by serving the customers with innovative products globally.

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