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Supply Chain Management of Nike - December 29th, 2010

Supply Chain Management of Nike : Nike, Inc. (NYSE: NKE) is a major publicly traded sportswear and equipment supplier based in the United States. The company is headquartered near Beaverton, Oregon, which is part of the Portland metropolitan area. It is the world's leading supplier of athletic shoes and apparel[4] and a major manufacturer of sports equipment with revenue in excess of US$18.6 billion in its fiscal year 2008 (ending May 31, 2008). As of 2008, it employed more than 30,000 people worldwide. Nike and Precision Castparts are the only Fortune 500 companies headquartered in the state of Oregon, according to The Oregonian.

The company was founded in January 1964 as Blue Ribbon Sports by Bill Bowerman and Philip Knight,[1] and officially became Nike, Inc. in 1978. The company takes its name from Nike (Greek Νίκη pronounced [nːkɛː]), the Greek goddess of victory. Nike markets its products under its own brand as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Skateboarding and subsidiaries including Cole Haan, Hurley International, Umbro and Converse. Nike also owned Bauer Hockey (later renamed Nike Bauer) between 1995 and 2008.[5] In addition to manufacturing sportswear and equipment, the company operates retail stores under the Niketown name. Nike sponsors many high profile athletes and sports teams around the world, with the highly recognized trademarks of "Just do it" and the Swoosh logo.


Freedom of Association. We are updating Nike's Code and Code Leadership Standards to make clearer the responsibility of contracted factories to respect their employees' right to freedom of association and collective bargaining to the extent permitted by local law. This includes the right to form and join trade unions and other worker organizations of their own choosing without harassment, intimidation, interference or retaliation. Where national law restricts freedom of association, the contracted factories are required to facilitate alternate means to individually and collectively engage with their employees and for employees to express their grievances and protect their rights regarding working conditions and terms of employment.

The updated requirements will also address the obligation to comply with any local laws providing special protection to employees or worker representatives engaged in union activities, a prohibition on disciplining employees having engaged in legal strikes, the duty to bargain in good faith and honoring the terms of any negotiated collective bargaining agreement.

Responsible Transitions. We are updating Nike's Code Leadership Standards to include worker protections in the event of factory closure or retrenchment. These steps include standards for factories that include, at a minimum, notice, consultation, severance and collective bargaining.

Contracted manufacturers are also required to make payment to workers of retirement or severance funds, in compliance with local law. This requirement includes contracted manufacturers facilitating payments of social security provisions to which the employee may be entitled, such as unemployment insurance, and accurate record keeping on payment into and maintenance of funds to ensure workers are protected.

In addition, contracted manufacturers are encouraged to go beyond what is required by law or collective bargaining to provide outplacement or retraining assistance, additional financial support, medical benefits and assistance in obtaining government benefits. The contractor is encouraged to provide these either directly or in coordination with governments, NGOs or third parties.

Developing/Enabling Competitive Supply Chains. NIKE, Inc. recognizes the need for a well-coordinated and efficient supply chain for its business and the industry. Because the supply chain spans multiple jurisdictions from raw materials to production to shipping to retail and, ultimately, to consumers, a consistent and mature public policy position is needed.

We support policies that deliver efficient, cost-effective delivery of NIKE, Inc. products in a responsible manner. Our efforts concentrate on ensuring efficient transport, security and safety of NIKE, Inc. products throughout the supply chain. In addition, we advocate for policies that help to ensure that NIKE, Inc.'s supply chain - from factory to consumer - operates in a manner that considers both people and the environment at each step of the way. We work with a number of bodies to advocate for these policies. These include national governments, industry associations and NGOs.

Infrastructure in Vietnam. Nike has played a leadership role, along with other businesses and multilateral development organizations, in supporting infrastructure development in Vietnam. Nike created and led a public-private partnership that offered an Infrastructure Exchange Program for Vietnamese government officials. The first component of the program involved having key Vietnamese government officials visit a Nike footwear factory in Vietnam and subsequently physically follow the movement of finished products from the factory to the port. The group traveled to southern China, an area well known for its development of physical infrastructure. They also visited Singapore to see world-class port facilities and operations and learn about infrastructure planning and financing. Each component included presentations and dialogue with experts in various fields.

We believe improved infrastructure, specifically roads and ports, will lead to additional investment and job creation in Vietnam, thereby improving economic opportunities and the standard of living.

Improved roads and related infrastructure lead to more efficient transport of goods, contribute to a decrease in traffic congestion, and reduce emissions and related pollution. These improvements benefit businesses, including Nike, that contribute to job creation and economic development. This model of cooperation is an example of how the private sector can work with other key stakeholders on important development issues and opportunities.


Nike Inc.'s (NKE ) Innovation Kitchen is a throwback to the company's earliest days. Located on the ground floor of the Mia Hamm building on Nike's 175-acre headquarters campus in Beaverton, Ore., the Kitchen is where Nike cooked up the shoes that made it the star of the $35 billion athletic footwear industry. In this think tank for sneakers, designers find inspiration in everything from Irish architecture to the curving lines of a Stradivarius violin. One wall displays models of every Air Jordan ever made, while low-rise cubicles are littered with sketches of new shoes. The Kitchen is off limits to most visitors and even to most Nike employees. The sign on the door says, only half in jest: "Nobody gets in to see the cooks. Not nobody. Not no how."


This is where, nearly 20 years ago, Nike star designer Tinker Hatfield came up with the Air Jordan -- the best-selling sports shoe of all time. Right now, Hatfield and his team are tallying the results of the Athens 2004 Olympic Games. Hatfield and his design geeks produced an array of superfast sneakers for the Games, including the sleek track spike called Monsterfly for sprinters and the Air Zoom Miler for distance runners. As befits a global company, Nike's sponsored athletes hailed from all over the world. They took home a lot of hardware from Athens, including 50 gold medals and dozens more silver and bronze. In the men's 1,500-meter run, for instance, Hicham El Guerrouj of Morocco grabbed gold, Bernard Lagat of Kenya took the silver, and Rui Silva of Portugal won the bronze. All wore the Air Zoom Miler, while U.S. sprinter Shawn Crawford won the 200-meter gold in a pair of Monsterflys. And Nike apparel had its day in the sun, too. The top four finishers in the men's 100-meter race all wore the sign of the Swoosh.

GOING ESTABLISHMENT
The most telling events for Nike didn't take place on the track, however. The brash guerrilla marketer, famous for thumbing its nose at big-time sporting events, was showing a new restraint. Eight years ago in Atlanta, Nike ambushed basketball sponsor Champion (a brand of Sara Lee Corp.) by sneaking giant Swoosh signs into the arena. When the cameras panned the stands, TV audiences saw the Nike logo loud and clear, while Champion had nothing. Nike has even signed up to become an official U.S. Olympic sponsor in four years in Beijing, and it has toned down its anti-Establishment attitude. For good reason: These days, Nike is the Establishment when it comes to global sports marketing. With revenues exceeding $12 billion in fiscal 2004, the company that Philip H. Knight started three decades ago by selling sneakers out of the back of a car at track meets has finally grown up.

The kind of creativity that led Bill Bowerman, the University of Oregon track coach who co-founded the company with Knight, to dream up a new kind of sneaker tread after studying the pattern on his wife's waffle iron, is still revered at Nike. When it comes to the rest of the business, however, it's a whole new ball game. Gone are the days when Nike execs, working on little more than hunches, would do just about anything and spend just about any amount in the quest for publicity and market share. Scott Bedbury, a former Nike marketing chief, recalls pitching his advertising budget to Knight back in 1987. He was asking for a huge increase, from $8 million to $34 million and was prepared to make his case. Instead, Knight asked him the one question he hadn't prepped for: "How do we know you're asking for enough?" That year, Nike spent a jaw-dropping $48 million. The brash innovator of sports marketing may still open the checkbook wide -- as it did when it signed basketball phenom LeBron James to a $90 million endorsement contract last year, but those grand gestures are far fewer at the new Nike.

In the past few years, the company has devoted as much energy to the mundane details of running a business -- such as developing top-flight information systems, logistics, and (yawn) supply-chain management -- as it does to marketing coups and cutting-edge sneaker design. More and more, Nike is searching for the right balance between its creative and its business sides, relying on a newfound financial and managerial discipline to drive growth. "Senior management now has a clear understanding of managing the creative process and bringing it to the bottom line. That's the big difference compared to the past," says Robert Toomey, an equity analyst at RBC Dain Rauscher Inc. in Seattle.

BUSINESSLIKE -- AND UNCOOL?
In the old days, Nike operated pretty much on instinct. It took a guess as to how many pairs of shoes to churn out and hoped it could cram them all onto retailers' shelves. Not anymore. Nike has overhauled its computer systems to get the right number of sneakers to more places in the world more quickly. By methodically studying new markets, it has become a powerhouse overseas -- and in new market segments that it once scorned, such as soccer and fashion. It has also beefed up its management team. And after stumbling with its acquisitions, Nike has learned to manage those brands -- Cole Haan dress shoes, Converse retro-style sneakers, Hurley International skateboard gear, and Bauer in-line and hockey skates -- more efficiently. Indeed, part of Nike's growth strategy is to add to its portfolio of brands.

To many of the Nike faithful, those sorts of changes smacked of heresy. Lebron James is cool. Matrix organization and corporate acquisitions aren't. But cool or not, the new approach is working. In fiscal 2004, ended May 31, Nike showed just how far it had elevated its financial game. It turned in a record year, earning almost $1 billion, 27% more than the year before, on sales that climbed 15%, to $12.3 billion. What's more, orders worldwide were up a healthy 10.7%. In North America orders rose 10% following eight stagnant quarters.

That performance has pleased investors, who now see a company where earnings are less volatile and less fad-driven, yet still growing rapidly enough to spin off lots of cash. In the past fiscal year, Nike's free cash flow totaled $1.2 billion, and its return on invested capital was 22%, up from only 14% four years ago. The company boosted its dividend by 43% last fall and completed a $1 billion share repurchase. It plans to buy back $1.5 billion more in shares over the next four years. The result: Nike stock recently traded at about 78, up 37% in the past year vs. a 9% rise in the Standard & Poor's 500-stock index. The truth is, the onetime corporate rebel is edging toward blue-chip respectability. Who'd have figured?

Nike believes its newfound discipline will enable it to meet its targets of 15% average annual profit growth and revenue growth in the high single digits. Wall Street shares that optimism. Says John J. Shanley, an analyst at Susquehanna Financial Group, an institutional broker in Bala Cynwyd, Pa.: "Nike is probably in the best financial position it has been in in a decade." In fact, some analysts believe Nike is poised to become a $20 billion company by the end of the decade.

That would have seemed laughable just a few years ago -- sales started falling after hitting the $9.6 billion mark in 1998. Even before Nike's superstar endorser and basketball great Michael Jordan retired from the game in 2003, Nike's creative juices seemed to have run dry. Air Jordans at $200 were collecting dust on store shelves as buyers seeking a different look began switching to Skechers (SKX ), K-Swiss (KSWS ), and New Balance shoes. Nike wrestled with accusations that it exploited Asian factory workers. Ho-hum new sneakers and troubled acquisitions didn't help. Nike, eager to regain its old momentum, bumped up production -- only to end up pushing more sneakers into the market than the customers wanted to buy. As for financial discipline? Well, just consider this: From 1997 to 1999, Nike didn't even have a chief financial officer. "We had a bit of a burning platform," says Donald W. Blair, the executive whom Knight recruited from PepsiCo Inc. (PEP ) to fill the position.

It was during those tough times that Phil Knight, who had disengaged from Nike in order to travel and pursue other interests, came back to the company. The year was 1999. Co-founder Bowerman had died, and Nike was floundering. Knight, now 66, needed to set things straight. Standing before thousands of employees at a company meeting, he admitted that the managers who were running the place had failed. And he went on to blame himself. "He said he wasn't as engaged as he should be, and he said there were things he could do better," recalls Steve Miller, Nike's former global sports marketing director, who was there. "I was personally stunned he would be so open about his failings." Knight, whose son died in a scuba diving accident earlier this summer, declined to speak to BusinessWeek.

Knight has been hailed as a visionary for his company's breakthrough design, technology, and marketing prowess. In the 1980s and '90s, Knight forever changed the rules of sports marketing with Nike's huge endorsement contracts and in-your-face advertising. Mixing marketing and pop music is commonplace now. But Nike created a small furor in 1987 when it used the Beatles' Revolution in ads to sell cross-training sneakers.

Still, when his iconoclastic company faltered, Knight looked beyond the technology and marketing antics that had served it well in the past. Upon his return to the company five years ago, his first order of business was to put together a new executive team. Knight drew on some Nike veterans, executives who carry the heritage and culture of Nike's early years. But he also recruited some key players from far outside Nike and its industry. CFO Blair, who came aboard in 1999, was lured from Pepsi, while Mindy F. Grossman was plucked from Polo Ralph Lauren Corp. (RL ) the next year with the mission of redefining Nike's $3.5 billion global apparel business. The-day-to-day boss, Chief Operating Officer Thomas E. Clarke, now runs Nike's new business ventures division.

Knight made his boldest management move in 2001, when he named two longtime Nike insiders, creative brand and design wonk Mark G. Parker and operations maven Charles D. Denson, as co-presidents. With Grossman and Blair providing an outsider's perspective and with Parker and Denson steeped in the company's culture, Knight hoped to achieve a balance between the old and the new, the creative and the financially responsible. The unusual co-president structure was hardly Business 101, and many observers figured the new team wouldn't last. Few believed co-presidents could survive the inevitable political maneuvering and clash of egos.

SUCCESSION SWEEPSTAKES?
No matter what else Knight intended, it also looked very much as if he had set up a horse race among those most likely to succeed him. Knight, who owns 80% of Nike's voting stock, and about 36% of the common shares, has never said when or even if he will retire or what will happen to his voting stock on his death. Speculating on his eventual departure has been the topic of water-cooler conversations for nearly a decade. The succession issue remains the single biggest question at the company, although the new management structure has gone a long way toward assuring investors that the bench is deep.

Possibly because there was little time for politicking or backstabbing, given Nike's plight, Parker, Denson, and the rest have mostly steered clear of those pitfalls and focused on shoring up Nike's weaknesses. "There are aspects of this culture that are incredibly powerful and strong," says Parker, citing design and marketing. "But we needed to get after the basic pieces of the business: operating principles, financial management, supply-chain renovation, and inventory management."

In the old days at Nike, the culture encouraged local managers to spend big and to go flat-out for market share instead of profitability. In Paris, for instance, the company spent lavishly for a soccer park at the 1998 World Cup to promote itself. Analysts estimate, conservatively, that it was more than $10 million over budget. The cost, which Nike never disclosed, caused Wall Street to start asking whether anyone was in charge.

So Parker and Denson engineered a matrix structure that breaks down managerial responsibility both by region and product. Because the company pumps out 120,000 products every year in four different launch cycles, local managers always had plenty of choice -- but also plenty of ways to screw up. Under the matrix, Nike headquarters establishes which products to push and how to do it, but regional managers are allowed some leeway to modify those edicts. The matrix won't guarantee that another fiasco like the Paris soccer park cannot occur, but it makes it a lot less likely.

FILLING THE ORDERS
Nike also overhauled its supply-chain system, which often left retailers either desperately awaiting delivery of hot shoes or struggling to get rid of the duds. The old jerry-built compilation strung together 27 different computer systems worldwide, most of which couldn't talk with the others. Under Denson's direction, Nike has spent $500 million to build a new system. Almost complete, it is already contributing to quicker design and manufacturing times, and fatter gross margins -- 42.9% last year, up from 39.9% five years ago. Nike says that the percentage of shoes it makes without a firm order from a retailer has fallen from 30% to 3%, while the lead time for getting new sneaker styles to market has been cut to six months from nine.

Meanwhile, Nike has started paying serious attention to its handful of acquisitions, once treated as more of an afterthought. After buying up Cole Haan almost 15 years ago, Nike struggled to add any real value at the dress-shoe outfit. But lately, Nike managers have figured out that by giving their acquired brands some independence, rather than forcing Nike's testosterone-laced corporate culture on them, they can achieve better results. "We've learned to let those brands pull resources and expertise out of the mother ship as opposed to pushing the mother ship onto the brands," Blair says. Nike doesn't break out results for each sub-brand, but the group's sales grew 51%, to $1.4 billion last year. With nearly a quarter of the sales growth, Converse was the star.

That still-modest portfolio of different brands helps to lessen the company's dependence on hit shoes and could help Nike turn in a more consistent performance. That's why Nike is eager to snap up complementary brands as they become available. In mid-August it paid $43 million for Official Starter Properties, licensors of sneakers and athletic apparel whose brands include the budget-level Shaq label. "What we're trying to do is move toward more of a consumer, noncyclical model," says Blair. "The key is trying to find the right balance of discipline, innovation, creativity, and structure."

Nike has also had to grapple with the touchy topic of sweatshop labor at the 900-odd independent overseas factories that make its clothes and sneakers. When Nike was getting pummeled on the subject in the 1990s, it typically had only two responses: anger and panic. Executives would issue denials, lash out at critics, and then rush someone to the offending supplier to put out the fire. But since 2002, Nike has built an elaborate program to deal with charges of labor exploitation. It allows random factory inspections by the Fair Labor Assn., a monitoring outfit it founded with human rights groups and other big companies, such as Reebok International Ltd. and Liz Claiborne Inc., that use overseas contractors. Nike also has an in-house staff of 97 which has inspected 600 factories in the past two years, grading them on labor standards. "You haven't heard about us recently because we have had our head down doing it the hard way. Now we have a system to deal with the labor issue, not a crisis mentality," says Maria S. Eitel, Nike vice-president for corporate responsibility.

It's overseas, in fact, where most of Nike's sales now come from. Last year, for the first time, international sales exceeded U.S. sales -- still the company's single largest market. Under Grossman, Nike is making sports fashion a core business, something unthinkable until recently inside Nike's male-dominated culture. Thanks to stylish athletic wear -- think tennis star Serena Williams at the U.S. Open -- Nike's worldwide apparel sales climbed 30% in three years, to $3.5 billion in fiscal 2004.

Of course, Nike still faces challenges. After several years of red-hot growth, European sales of higher-priced shoes have started to slide. In the U.S., retro-sneaker makers like K-Swiss, Diesel, and Puma are filling a rising demand. And adidas-Salomon has redoubled efforts to attack the North America basketball market, where Nike has a 60% share. Taking a leaf from Nike's book, Adidas just signed three NBA all-stars: Tracy McGrady, Tim Duncan, and Kevin Garnett, each of whom will have his own sneaker. On the technology front, Adidas has unveiled the Adidas 1, a $250 shoe slated for December that has a computer chip that automatically adjusts the fit as the wearer runs.

Nike aims to keep pace in the techno-battle with Nike Free, a shoe still being tested, that makes runners feel as if they were barefoot. It's inspired by the barefoot runners of Kenya, who have proved that shoeless training builds strength and improves performance. Meanwhile the company continues to refine its Shox technology -- a special cushioning system first developed for runners, which is now becoming a top seller in categories from running to basketball to cross training. The shoes, which sell for up to $135 a pair, helped put to rest the idea that high-priced sneakers no longer sell well in the U.S.

SWIFTEST KICK
Nike has also shown it can grow by expanding into new markets. When the U.S. hosted the World Cup in 1994, Nike's global soccer sales were $45 million. But a team of executives persuaded Knight that soccer was the company's future. Today, soccer sales are nearly $1 billion, or 25% of the global market. This year, for the first time, Nike's share of the soccer shoe market in Europe, 35%, exceeded Adidas, at 31%. Nike has achieved that fast growth in part by using the same outsize marketing tactics that made it big in the U.S. It paid the prestigious Manchester United club an unprecedented $450 million over 14 years to run its merchandising and uniform operation.

Just before this summer's European soccer championships, Nike launched its Total 90 III, a sleek shoe that draws inspiration from cars used in the Le Mans 24-hour road race. Nike realized that millions of kids around the globe play casual pickup soccer games in the street and developed the shoe especially for them. That insight does not impress soccer purists. "Nike is selling a lot of the Total 90 street shoes and is including them in the soccer category," huffs Adidas CEO Herbert Hainer. "They are trying to turn the business model into a lifestyle." He's right, of course. Just as Nike made basketball shoes into an off-the-court fashion statement, its Total 90s have become fashion accessories for folks who may never get closer to a soccer pitch than the stands.

What's the lesson? Let other companies worry about the traditional boundaries between sport and fashion. Nike has built its empire by transforming the technology and design of its high performance sports gear into high fashion, vastly expanding its pool of potential customers. If competitors want to get hung up on what exactly Nike's selling, that's O.K. with the folks in Beaverton. It's all Nike to them.
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Re: Supply Chain Management of Nike - July 6th, 2015

Nike is the ginormous brand so, it would be highly knowledgeable to know added information based on Nike.

Customer Relationship Management of Nike, Inc

Marketing Mix of Nike

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Human Resource Management of Nike

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Re: Supply Chain Management of Nike - December 29th, 2015

Quote:
Originally Posted by netrashetty View Post
Nike, Inc. (pronounced /ˈnaɪkiː/) (NYSE: NKE) is a major publicly traded sportswear and equipment supplier based in the United States. The company is headquartered near Beaverton, Oregon, which is part of the Portland metropolitan area. It is the world's leading supplier of athletic shoes and apparel[4] and a major manufacturer of sports equipment with revenue in excess of US$18.6 billion in its fiscal year 2008 (ending May 31, 2008). As of 2008, it employed more than 30,000 people worldwide. Nike and Precision Castparts are the only Fortune 500 companies headquartered in the state of Oregon, according to The Oregonian.

The company was founded in January 1964 as Blue Ribbon Sports by Bill Bowerman and Philip Knight,[1] and officially became Nike, Inc. in 1978. The company takes its name from Nike (Greek Νίκη pronounced [nːkɛː]), the Greek goddess of victory. Nike markets its products under its own brand as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Skateboarding and subsidiaries including Cole Haan, Hurley International, Umbro and Converse. Nike also owned Bauer Hockey (later renamed Nike Bauer) between 1995 and 2008.[5] In addition to manufacturing sportswear and equipment, the company operates retail stores under the Niketown name. Nike sponsors many high profile athletes and sports teams around the world, with the highly recognized trademarks of "Just do it" and the Swoosh logo.


Freedom of Association. We are updating Nike's Code and Code Leadership Standards to make clearer the responsibility of contracted factories to respect their employees' right to freedom of association and collective bargaining to the extent permitted by local law. This includes the right to form and join trade unions and other worker organizations of their own choosing without harassment, intimidation, interference or retaliation. Where national law restricts freedom of association, the contracted factories are required to facilitate alternate means to individually and collectively engage with their employees and for employees to express their grievances and protect their rights regarding working conditions and terms of employment.

The updated requirements will also address the obligation to comply with any local laws providing special protection to employees or worker representatives engaged in union activities, a prohibition on disciplining employees having engaged in legal strikes, the duty to bargain in good faith and honoring the terms of any negotiated collective bargaining agreement.

Responsible Transitions. We are updating Nike's Code Leadership Standards to include worker protections in the event of factory closure or retrenchment. These steps include standards for factories that include, at a minimum, notice, consultation, severance and collective bargaining.

Contracted manufacturers are also required to make payment to workers of retirement or severance funds, in compliance with local law. This requirement includes contracted manufacturers facilitating payments of social security provisions to which the employee may be entitled, such as unemployment insurance, and accurate record keeping on payment into and maintenance of funds to ensure workers are protected.

In addition, contracted manufacturers are encouraged to go beyond what is required by law or collective bargaining to provide outplacement or retraining assistance, additional financial support, medical benefits and assistance in obtaining government benefits. The contractor is encouraged to provide these either directly or in coordination with governments, NGOs or third parties.

Developing/Enabling Competitive Supply Chains. NIKE, Inc. recognizes the need for a well-coordinated and efficient supply chain for its business and the industry. Because the supply chain spans multiple jurisdictions from raw materials to production to shipping to retail and, ultimately, to consumers, a consistent and mature public policy position is needed.

We support policies that deliver efficient, cost-effective delivery of NIKE, Inc. products in a responsible manner. Our efforts concentrate on ensuring efficient transport, security and safety of NIKE, Inc. products throughout the supply chain. In addition, we advocate for policies that help to ensure that NIKE, Inc.'s supply chain - from factory to consumer - operates in a manner that considers both people and the environment at each step of the way. We work with a number of bodies to advocate for these policies. These include national governments, industry associations and NGOs.

Infrastructure in Vietnam. Nike has played a leadership role, along with other businesses and multilateral development organizations, in supporting infrastructure development in Vietnam. Nike created and led a public-private partnership that offered an Infrastructure Exchange Program for Vietnamese government officials. The first component of the program involved having key Vietnamese government officials visit a Nike footwear factory in Vietnam and subsequently physically follow the movement of finished products from the factory to the port. The group traveled to southern China, an area well known for its development of physical infrastructure. They also visited Singapore to see world-class port facilities and operations and learn about infrastructure planning and financing. Each component included presentations and dialogue with experts in various fields.

We believe improved infrastructure, specifically roads and ports, will lead to additional investment and job creation in Vietnam, thereby improving economic opportunities and the standard of living.

Improved roads and related infrastructure lead to more efficient transport of goods, contribute to a decrease in traffic congestion, and reduce emissions and related pollution. These improvements benefit businesses, including Nike, that contribute to job creation and economic development. This model of cooperation is an example of how the private sector can work with other key stakeholders on important development issues and opportunities.


Nike Inc.'s (NKE ) Innovation Kitchen is a throwback to the company's earliest days. Located on the ground floor of the Mia Hamm building on Nike's 175-acre headquarters campus in Beaverton, Ore., the Kitchen is where Nike cooked up the shoes that made it the star of the $35 billion athletic footwear industry. In this think tank for sneakers, designers find inspiration in everything from Irish architecture to the curving lines of a Stradivarius violin. One wall displays models of every Air Jordan ever made, while low-rise cubicles are littered with sketches of new shoes. The Kitchen is off limits to most visitors and even to most Nike employees. The sign on the door says, only half in jest: "Nobody gets in to see the cooks. Not nobody. Not no how."


This is where, nearly 20 years ago, Nike star designer Tinker Hatfield came up with the Air Jordan -- the best-selling sports shoe of all time. Right now, Hatfield and his team are tallying the results of the Athens 2004 Olympic Games. Hatfield and his design geeks produced an array of superfast sneakers for the Games, including the sleek track spike called Monsterfly for sprinters and the Air Zoom Miler for distance runners. As befits a global company, Nike's sponsored athletes hailed from all over the world. They took home a lot of hardware from Athens, including 50 gold medals and dozens more silver and bronze. In the men's 1,500-meter run, for instance, Hicham El Guerrouj of Morocco grabbed gold, Bernard Lagat of Kenya took the silver, and Rui Silva of Portugal won the bronze. All wore the Air Zoom Miler, while U.S. sprinter Shawn Crawford won the 200-meter gold in a pair of Monsterflys. And Nike apparel had its day in the sun, too. The top four finishers in the men's 100-meter race all wore the sign of the Swoosh.

GOING ESTABLISHMENT
The most telling events for Nike didn't take place on the track, however. The brash guerrilla marketer, famous for thumbing its nose at big-time sporting events, was showing a new restraint. Eight years ago in Atlanta, Nike ambushed basketball sponsor Champion (a brand of Sara Lee Corp.) by sneaking giant Swoosh signs into the arena. When the cameras panned the stands, TV audiences saw the Nike logo loud and clear, while Champion had nothing. Nike has even signed up to become an official U.S. Olympic sponsor in four years in Beijing, and it has toned down its anti-Establishment attitude. For good reason: These days, Nike is the Establishment when it comes to global sports marketing. With revenues exceeding $12 billion in fiscal 2004, the company that Philip H. Knight started three decades ago by selling sneakers out of the back of a car at track meets has finally grown up.

The kind of creativity that led Bill Bowerman, the University of Oregon track coach who co-founded the company with Knight, to dream up a new kind of sneaker tread after studying the pattern on his wife's waffle iron, is still revered at Nike. When it comes to the rest of the business, however, it's a whole new ball game. Gone are the days when Nike execs, working on little more than hunches, would do just about anything and spend just about any amount in the quest for publicity and market share. Scott Bedbury, a former Nike marketing chief, recalls pitching his advertising budget to Knight back in 1987. He was asking for a huge increase, from $8 million to $34 million and was prepared to make his case. Instead, Knight asked him the one question he hadn't prepped for: "How do we know you're asking for enough?" That year, Nike spent a jaw-dropping $48 million. The brash innovator of sports marketing may still open the checkbook wide -- as it did when it signed basketball phenom LeBron James to a $90 million endorsement contract last year, but those grand gestures are far fewer at the new Nike.

In the past few years, the company has devoted as much energy to the mundane details of running a business -- such as developing top-flight information systems, logistics, and (yawn) supply-chain management -- as it does to marketing coups and cutting-edge sneaker design. More and more, Nike is searching for the right balance between its creative and its business sides, relying on a newfound financial and managerial discipline to drive growth. "Senior management now has a clear understanding of managing the creative process and bringing it to the bottom line. That's the big difference compared to the past," says Robert Toomey, an equity analyst at RBC Dain Rauscher Inc. in Seattle.

BUSINESSLIKE -- AND UNCOOL?
In the old days, Nike operated pretty much on instinct. It took a guess as to how many pairs of shoes to churn out and hoped it could cram them all onto retailers' shelves. Not anymore. Nike has overhauled its computer systems to get the right number of sneakers to more places in the world more quickly. By methodically studying new markets, it has become a powerhouse overseas -- and in new market segments that it once scorned, such as soccer and fashion. It has also beefed up its management team. And after stumbling with its acquisitions, Nike has learned to manage those brands -- Cole Haan dress shoes, Converse retro-style sneakers, Hurley International skateboard gear, and Bauer in-line and hockey skates -- more efficiently. Indeed, part of Nike's growth strategy is to add to its portfolio of brands.

To many of the Nike faithful, those sorts of changes smacked of heresy. Lebron James is cool. Matrix organization and corporate acquisitions aren't. But cool or not, the new approach is working. In fiscal 2004, ended May 31, Nike showed just how far it had elevated its financial game. It turned in a record year, earning almost $1 billion, 27% more than the year before, on sales that climbed 15%, to $12.3 billion. What's more, orders worldwide were up a healthy 10.7%. In North America orders rose 10% following eight stagnant quarters.

That performance has pleased investors, who now see a company where earnings are less volatile and less fad-driven, yet still growing rapidly enough to spin off lots of cash. In the past fiscal year, Nike's free cash flow totaled $1.2 billion, and its return on invested capital was 22%, up from only 14% four years ago. The company boosted its dividend by 43% last fall and completed a $1 billion share repurchase. It plans to buy back $1.5 billion more in shares over the next four years. The result: Nike stock recently traded at about 78, up 37% in the past year vs. a 9% rise in the Standard & Poor's 500-stock index. The truth is, the onetime corporate rebel is edging toward blue-chip respectability. Who'd have figured?

Nike believes its newfound discipline will enable it to meet its targets of 15% average annual profit growth and revenue growth in the high single digits. Wall Street shares that optimism. Says John J. Shanley, an analyst at Susquehanna Financial Group, an institutional broker in Bala Cynwyd, Pa.: "Nike is probably in the best financial position it has been in in a decade." In fact, some analysts believe Nike is poised to become a $20 billion company by the end of the decade.

That would have seemed laughable just a few years ago -- sales started falling after hitting the $9.6 billion mark in 1998. Even before Nike's superstar endorser and basketball great Michael Jordan retired from the game in 2003, Nike's creative juices seemed to have run dry. Air Jordans at $200 were collecting dust on store shelves as buyers seeking a different look began switching to Skechers (SKX ), K-Swiss (KSWS ), and New Balance shoes. Nike wrestled with accusations that it exploited Asian factory workers. Ho-hum new sneakers and troubled acquisitions didn't help. Nike, eager to regain its old momentum, bumped up production -- only to end up pushing more sneakers into the market than the customers wanted to buy. As for financial discipline? Well, just consider this: From 1997 to 1999, Nike didn't even have a chief financial officer. "We had a bit of a burning platform," says Donald W. Blair, the executive whom Knight recruited from PepsiCo Inc. (PEP ) to fill the position.

It was during those tough times that Phil Knight, who had disengaged from Nike in order to travel and pursue other interests, came back to the company. The year was 1999. Co-founder Bowerman had died, and Nike was floundering. Knight, now 66, needed to set things straight. Standing before thousands of employees at a company meeting, he admitted that the managers who were running the place had failed. And he went on to blame himself. "He said he wasn't as engaged as he should be, and he said there were things he could do better," recalls Steve Miller, Nike's former global sports marketing director, who was there. "I was personally stunned he would be so open about his failings." Knight, whose son died in a scuba diving accident earlier this summer, declined to speak to BusinessWeek.

Knight has been hailed as a visionary for his company's breakthrough design, technology, and marketing prowess. In the 1980s and '90s, Knight forever changed the rules of sports marketing with Nike's huge endorsement contracts and in-your-face advertising. Mixing marketing and pop music is commonplace now. But Nike created a small furor in 1987 when it used the Beatles' Revolution in ads to sell cross-training sneakers.

Still, when his iconoclastic company faltered, Knight looked beyond the technology and marketing antics that had served it well in the past. Upon his return to the company five years ago, his first order of business was to put together a new executive team. Knight drew on some Nike veterans, executives who carry the heritage and culture of Nike's early years. But he also recruited some key players from far outside Nike and its industry. CFO Blair, who came aboard in 1999, was lured from Pepsi, while Mindy F. Grossman was plucked from Polo Ralph Lauren Corp. (RL ) the next year with the mission of redefining Nike's $3.5 billion global apparel business. The-day-to-day boss, Chief Operating Officer Thomas E. Clarke, now runs Nike's new business ventures division.

Knight made his boldest management move in 2001, when he named two longtime Nike insiders, creative brand and design wonk Mark G. Parker and operations maven Charles D. Denson, as co-presidents. With Grossman and Blair providing an outsider's perspective and with Parker and Denson steeped in the company's culture, Knight hoped to achieve a balance between the old and the new, the creative and the financially responsible. The unusual co-president structure was hardly Business 101, and many observers figured the new team wouldn't last. Few believed co-presidents could survive the inevitable political maneuvering and clash of egos.

SUCCESSION SWEEPSTAKES?
No matter what else Knight intended, it also looked very much as if he had set up a horse race among those most likely to succeed him. Knight, who owns 80% of Nike's voting stock, and about 36% of the common shares, has never said when or even if he will retire or what will happen to his voting stock on his death. Speculating on his eventual departure has been the topic of water-cooler conversations for nearly a decade. The succession issue remains the single biggest question at the company, although the new management structure has gone a long way toward assuring investors that the bench is deep.

Possibly because there was little time for politicking or backstabbing, given Nike's plight, Parker, Denson, and the rest have mostly steered clear of those pitfalls and focused on shoring up Nike's weaknesses. "There are aspects of this culture that are incredibly powerful and strong," says Parker, citing design and marketing. "But we needed to get after the basic pieces of the business: operating principles, financial management, supply-chain renovation, and inventory management."

In the old days at Nike, the culture encouraged local managers to spend big and to go flat-out for market share instead of profitability. In Paris, for instance, the company spent lavishly for a soccer park at the 1998 World Cup to promote itself. Analysts estimate, conservatively, that it was more than $10 million over budget. The cost, which Nike never disclosed, caused Wall Street to start asking whether anyone was in charge.

So Parker and Denson engineered a matrix structure that breaks down managerial responsibility both by region and product. Because the company pumps out 120,000 products every year in four different launch cycles, local managers always had plenty of choice -- but also plenty of ways to screw up. Under the matrix, Nike headquarters establishes which products to push and how to do it, but regional managers are allowed some leeway to modify those edicts. The matrix won't guarantee that another fiasco like the Paris soccer park cannot occur, but it makes it a lot less likely.

FILLING THE ORDERS
Nike also overhauled its supply-chain system, which often left retailers either desperately awaiting delivery of hot shoes or struggling to get rid of the duds. The old jerry-built compilation strung together 27 different computer systems worldwide, most of which couldn't talk with the others. Under Denson's direction, Nike has spent $500 million to build a new system. Almost complete, it is already contributing to quicker design and manufacturing times, and fatter gross margins -- 42.9% last year, up from 39.9% five years ago. Nike says that the percentage of shoes it makes without a firm order from a retailer has fallen from 30% to 3%, while the lead time for getting new sneaker styles to market has been cut to six months from nine.

Meanwhile, Nike has started paying serious attention to its handful of acquisitions, once treated as more of an afterthought. After buying up Cole Haan almost 15 years ago, Nike struggled to add any real value at the dress-shoe outfit. But lately, Nike managers have figured out that by giving their acquired brands some independence, rather than forcing Nike's testosterone-laced corporate culture on them, they can achieve better results. "We've learned to let those brands pull resources and expertise out of the mother ship as opposed to pushing the mother ship onto the brands," Blair says. Nike doesn't break out results for each sub-brand, but the group's sales grew 51%, to $1.4 billion last year. With nearly a quarter of the sales growth, Converse was the star.

That still-modest portfolio of different brands helps to lessen the company's dependence on hit shoes and could help Nike turn in a more consistent performance. That's why Nike is eager to snap up complementary brands as they become available. In mid-August it paid $43 million for Official Starter Properties, licensors of sneakers and athletic apparel whose brands include the budget-level Shaq label. "What we're trying to do is move toward more of a consumer, noncyclical model," says Blair. "The key is trying to find the right balance of discipline, innovation, creativity, and structure."

Nike has also had to grapple with the touchy topic of sweatshop labor at the 900-odd independent overseas factories that make its clothes and sneakers. When Nike was getting pummeled on the subject in the 1990s, it typically had only two responses: anger and panic. Executives would issue denials, lash out at critics, and then rush someone to the offending supplier to put out the fire. But since 2002, Nike has built an elaborate program to deal with charges of labor exploitation. It allows random factory inspections by the Fair Labor Assn., a monitoring outfit it founded with human rights groups and other big companies, such as Reebok International Ltd. and Liz Claiborne Inc., that use overseas contractors. Nike also has an in-house staff of 97 which has inspected 600 factories in the past two years, grading them on labor standards. "You haven't heard about us recently because we have had our head down doing it the hard way. Now we have a system to deal with the labor issue, not a crisis mentality," says Maria S. Eitel, Nike vice-president for corporate responsibility.

It's overseas, in fact, where most of Nike's sales now come from. Last year, for the first time, international sales exceeded U.S. sales -- still the company's single largest market. Under Grossman, Nike is making sports fashion a core business, something unthinkable until recently inside Nike's male-dominated culture. Thanks to stylish athletic wear -- think tennis star Serena Williams at the U.S. Open -- Nike's worldwide apparel sales climbed 30% in three years, to $3.5 billion in fiscal 2004.

Of course, Nike still faces challenges. After several years of red-hot growth, European sales of higher-priced shoes have started to slide. In the U.S., retro-sneaker makers like K-Swiss, Diesel, and Puma are filling a rising demand. And adidas-Salomon has redoubled efforts to attack the North America basketball market, where Nike has a 60% share. Taking a leaf from Nike's book, Adidas just signed three NBA all-stars: Tracy McGrady, Tim Duncan, and Kevin Garnett, each of whom will have his own sneaker. On the technology front, Adidas has unveiled the Adidas 1, a $250 shoe slated for December that has a computer chip that automatically adjusts the fit as the wearer runs.

Nike aims to keep pace in the techno-battle with Nike Free, a shoe still being tested, that makes runners feel as if they were barefoot. It's inspired by the barefoot runners of Kenya, who have proved that shoeless training builds strength and improves performance. Meanwhile the company continues to refine its Shox technology -- a special cushioning system first developed for runners, which is now becoming a top seller in categories from running to basketball to cross training. The shoes, which sell for up to $135 a pair, helped put to rest the idea that high-priced sneakers no longer sell well in the U.S.

SWIFTEST KICK
Nike has also shown it can grow by expanding into new markets. When the U.S. hosted the World Cup in 1994, Nike's global soccer sales were $45 million. But a team of executives persuaded Knight that soccer was the company's future. Today, soccer sales are nearly $1 billion, or 25% of the global market. This year, for the first time, Nike's share of the soccer shoe market in Europe, 35%, exceeded Adidas, at 31%. Nike has achieved that fast growth in part by using the same outsize marketing tactics that made it big in the U.S. It paid the prestigious Manchester United club an unprecedented $450 million over 14 years to run its merchandising and uniform operation.

Just before this summer's European soccer championships, Nike launched its Total 90 III, a sleek shoe that draws inspiration from cars used in the Le Mans 24-hour road race. Nike realized that millions of kids around the globe play casual pickup soccer games in the street and developed the shoe especially for them. That insight does not impress soccer purists. "Nike is selling a lot of the Total 90 street shoes and is including them in the soccer category," huffs Adidas CEO Herbert Hainer. "They are trying to turn the business model into a lifestyle." He's right, of course. Just as Nike made basketball shoes into an off-the-court fashion statement, its Total 90s have become fashion accessories for folks who may never get closer to a soccer pitch than the stands.

What's the lesson? Let other companies worry about the traditional boundaries between sport and fashion. Nike has built its empire by transforming the technology and design of its high performance sports gear into high fashion, vastly expanding its pool of potential customers. If competitors want to get hung up on what exactly Nike's selling, that's O.K. with the folks in Beaverton. It's all Nike to them.
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