Nike Inc.: Courting Witnesses Around the Globe

Chinese consumers represent huge growth potential for athletic shoe and apparel maker

NBA superstars such as Yao Ming, LeBron James and Kobe Bryant are almost as popular in China as they are in the United States. In fact, interest has become so strong that a group of Chinese investors struck a deal with the Cleveland Cavaliers to own up to 15% of the team, according to a May 26 report in The Wall Street Journal.

Wherever such sports trends take hold, apparel and footwear manufacturer Nike Inc. is sure to follow. Whether it's the famed "Witness" marketing campaign associated with James or the memorable Michael Jordan commercials during the 1980s and '90s, the Beaverton, Ore.-based company has a knack for leveraging celebrity athletes to push their products.

Nike's entry into the 2009 IW 50 Best Manufacturing Companies list comes at a time when the company is experiencing major growth in China, even as other markets worldwide declined in its fiscal third quarter.

Third-quarter 2009 sales in China rose about 10% over the year-earlier period on top of 50% growth achieved during the same quarter last year, said Chief Financial Officer Don Blair during an investors presentation in April.

Nike Inc.
At A Glance


Nike Inc.
Beaverton, Ore.
Primary Industry: Apparel
Number of Employees: 35,000
2008 In Review
Revenue: $18.6 billion
Profit Margin: 10.11%
Sales Turnover: 1.50
Inventory Turnover: 4.49
Revenue Growth: 14.10%
Return On Assets: 17.62%
Return On Equity: 26.81%
"China to me is still one of the great opportunities for the long-term," said Blair in a presentation transcript... "We certainly have seen growth moderate a bit in China but are absolutely excited about the long-term there."

Blair noted that one of the keys to attracting the Chinese consumer is designing and marketing products that meet their tastes.

"We measure consumer preference in connecting with the Chinese consumer, and we do that both through global assets like LeBron James or Kobe Bryant or the Human Race or Nike+ or even NikeiD," he said. "Chinese consumers can create their own product online with NikeiD. That really drives a deeper connection that I think creates competitive advantage for us versus Adidas or any of the other competitors we face in China.

Overall, the third quarter presented Nike with many of the same challenges other manufacturers have faced since the recession began. Profit for the three months ended Feb. 28 declined 47% to $243.8 million, or 50 cents per share. Revenue fell 2% to $4.4 billion.

Nike began a restructuring process in February that three months later resulted in about 1,750 job cuts, or 5% of the total workforce.The same day Nike announced the layoffs, the company introduced a new lightweight training shoe that was inspired by the Air Trainer shoes popular in the 1980s.

Meanwhile, the company, which manufacturers all of its products outside the United States, continues to take heat from advocacy groups for its labor practices.

On May 21 a student group from the University of Washington flooded the UW president's office to protest the school's contract with Nike, according to a report in the Seattle Post-Intelligencer. The group, called Student Labor Action Project, or SLAP, claims factory owners are withholding $1.5 million in severance payments to workers at two closed Honduran factories that along with other products produced Nike apparel featuring UW logos, the Post-Intelligencer reported.

The school has already cut ties with Russell Corp. over alleged ethics violations after SLAP led a similar movement.


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