Competitive Intelligence

Competitive Intelligence Report

Mario Echeverria Morante

Student Supply Chain Analytics

RUID: 212001486

Rutgers Business School

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Nike Inc

Nike is the largest supplier of athletic footwear and apparel in the world
It is currently ranked 35th in the S&P 500 and owns 43.7% of the athletic brands market
Employs over 79,000 people

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Industrial Trend - Industry Total Size

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Apparel and Footwear generate revenue substantially greater than Textiles. Apparel has been able to out perform Footwear in the U.S. the gap has steadily closed. It is also important to note that while many businesses declined during COVID-19, Footwear did not experience a steep decline and was able to bounce back completely the following year. This may be due to the injection of stimulus checks that increased consumer spending in 2020.

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Industrial Trend - Profitability

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This profitability analysis also demonstrates the ability of footwear to stay constantly profitable even during COVID. Apparel suffered the highest dips in profit margins most likely due to an increase in inventory due to the pandemic. It is also important to note Textiles consistent downward trajectory. This may be due to companies looking for alternatives to making apparel. Textiles is currently the biggest producer of waste on the planet, and as companies look to become more sustainably conscious, they are beginning to move away from textiles to produce the same products.

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Trend Analysis

In my trend analysis you can see that within Textiles, Apparel, & Luxury Goods, Footwear has been pretty much the leader for profitability within the industry for the past 5 years, beating out Textiles and Apparel, Accessories & Luxury Goods.
Risks within the industry include declining performance through time. Gross Margin has remained level with brief periods of decline. While Operating and Net Margin have steadily decreased substantially. Although they are steadily getting back to peak periods many factors are to be considered such as economic health of the consumer. Textiles especially has consistently decreased performance. Growth is also a risk as it seems this industry experiences very little growth.
Potential within the industry is the ability to stay consistent with performance. Regardless of declining metrics, this industry seems to find its way back to its peak performance or remain level over time.
Some of the economic drivers for this industry include the economic health of the consumer and prices of raw materials used in the production of these items. As time passes, different combination of materials are being used to produce these products. This would also be an environmental driver as companies look for ways to reduce waste produced by textiles.

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Concentration and Competition Intensity - Total Revenue

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While there seems to be an increase in Footwear companies entering the industry, Nike still holds about 70% of the market. The other 8 major companies have competed for the remaining 30% of the market in the U.S.

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Concentration and Competition Intensity - Total Revenue

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Apparel tells a different story as there is no major market share owners in this industry. Many companies have been able to establish themselves in the market, decreasing the share of those companies that dominated the industry in 2015. 2016 was a big year for entrants into the industry.

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Concentration and Competition Intensity - Total Revenue

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Textiles appears to have the same 4 companies dominating the space. It also appears as if UNIFI INC is slowly grabbing more of the industry from the other 3 competitors.

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Competition Intensity

Footwear - Nike is the biggest company in the US owning about 70% of the market. While a few companies have been able to enter the footwear industry, it seems as though they are competing for the small percentage left by Nike.
Apparel - While a few years ago there were very few companies with an even distribution of the market, currently no particular company owns a majority of this market, making it extremely competitive. It has also welcomed many new players, reducing the share of the bigger companies.
Textiles - The most monopolized within this industry. There are four key players with two owning over 85% of the market. This would seem the hardest industry to enter, especially for smaller companies.

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U.S. Supply Chain

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The most profitable segment of the supply chain in the U.S. is the end product at 0.11. The least profitable is Diversified Metals & Mining at -2.33. Raw materials required for the production are usually sourced to other countries which may explain these numbers.

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Global Supply Chain

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Globally, raw materials are the most profitable segment of the supply chain specifically Coal & Consumable Fuels. The least profitable being the end product at 0.02.

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Value Chain

The most valuable segment in the US within the value chain is the end product. Footwear has the highest net margin within the value chain making it the most attractive.
Outside of the US footwear is has the lowest net margin. The most valuable segments of the supply chain are the natural resources used in the production of these products. Natural resources tend to be monopolized which would make it difficult to expand into those markets.

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Profit Frontier

Due to Nike's almost 70% market share in Footwear in the U.S., comparing it to its closest competitor Adidas (Germany) was important in understanding whether Nike's operations were really outperforming all of the other companies in the Footwear industry.
The top 2 companies in each country were Nike & Skechers (U.S.) and Adidas & Pumas (Germany). While Nike produced substantially more revenue than all of its competitors, Adidas was able to outperform it in profits as they were able to generate similar operating income with fewer costs. Pumas and Skechers performed similarly in all categories.
While Nike generates the highest revenue in the U.S. it sits in the middle in regards to return on assets and operating margin. This may be due to varying trends in the U.S. market that Nike has not been able to capitalize on.

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Revenue vs. Cost

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Because of Nike's massive market share in the Footwear industry, comparing it is very difficult as it out performs all of its competitors. The country with its closest competitor is Germany which is home to Adidas and Pumas. Pumas 2nd largest in Germany is performs similarly to the U.S.'s second best performing company, Skechers. While #1 & #2 companies for these countries are relatively close, U.S. companies perform substantially better than the rest of the companies in Germany.

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Profit vs. Cost - Operating Income

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Again I will compare each countries top 2 performing companies. While Nike does generate more operating income than Adidas $3.1 million compared to $2.9 million respectively, Nike has almost $11 million more in costs compared to Adidas. Here Skechers outperforms Pumas slightly with less operating income but with all lower costs meaning more profits.

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Profit vs. Total Assets - Operating Income

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Again here Adidas is proving to make more use of its assets with higher profits with fewer assets than Nike. This is an indicator that Nike is not as efficient when generating profits from its larger assets.

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Operating Margin vs. Revenue

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Nike's market share is once again evident in this analysis as it generates more revenue than all of the other U.S. companies combined. The difference is the operating margin. Nike sits in the middle of the top 9 U.S. companies, performing better than 4 and worse than 4 of its competitors.

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Return on Assets vs. Liability Asset Ratio

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Nike has been able to maintain a liability ratio under 1.0 which is important for companies. Nike again sits in the middle of the pack, performing worse than 4 of its competitors in regards to return on assets. The best performers for return on assets are Deckers, Crocs, and Steve Madden.

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Enterprise Ranking

Nike is ranked #1 in revenue generation compared to its U.S. competitors. Nike generates more revenue than all other U.S. based companies combined. Its ranking drops when comparing return on assets. Nike is ranked 5th for return on assets putting it directly in the middle compared to its competitors.

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Enterprise Ranking - Total Revenue

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When analyzing Enterprise ranking, again Nike generates revenue higher than all other U.S. companies combined.

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Enterprise Ranking - Return on Assets

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When analyzing ranking based on return on assets Nike falls in the middle of the pack, underperforming to 4 of its competitors.

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KPI Examination

Where am I positioned among peers in the same industry? Nike is within normal ranges compared to its competitors within Footwear. It does perform on the lower side for both Total Revenue Growth Rate and Operating Income Growth Rate. This may be due to its size compared to its competitors and the competitors ability to capitalize on fashion trends. While Nike has a low operating income growth rate, lowering costs must be carefully examined as it has already faced backlash for using sweat shops to manufacture its products to maintain low production costs.

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KPI Examination

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When analyzing KPI, due to Nike's market share in the footwear industry, it has been able to maintain normal status indicators throughout the board except in Growth. Nike is ranked low for both Total Revenue Growth Rate and Operating incoming Growth Rate. This may be due to the size of the company compared to its competitors. As mentioned earlier another reason may be due to the trends its competitors have been able to capitalize in that have allowed these companies to growth rapidly within the industry.

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Enterprise Diagnosis

Strengths/Weaknesses
Value Driver Analysis
Breakdown Analysis

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Strengths/Weaknesses

Nike's current strengths compared to its competitors is its size which has allowed it generate the highest revenue/operating income. It has also been able to maintain a stable increase in revenue and operating income as well as keeping itself financially healthy by maintaining low short and long term risk ratios.

Nike's weaknesses include it's Gross, Operating, and Net margins as well as its return on assets compared to its competitors. While its standing is in the middle of the group, costs are obviously an issue for Nike that may need to be addressed to increase its margins.

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Enterprise Comparison - Size

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When comparing Size, Nike (Orange) outperforms every single one of its competitors in every single category, mainly due to the size of its market share.

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Enterprise Comparison - Profitability

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When comparing profitability, Nike (Orange) now sits in the middle of the group being outperformed in every category by Deckers, Crocs, and Skechers.

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Enterprise Trend - Size

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This enterprise trend analysis allows us to see that most companies within this industry have been able to steadily increase profits over time except during 2019 (COVID). Also important to note, Nike experienced the largest drop and growth in operating income compared to its competitors after 2019 but is slightly decreasing in operating income. This may be due to inflation that has reduced consumer spending compared to increased consumer spending when stimulus checks were being distributed.

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Enterprise Trend - Financial Health

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Allbirds currently has the best short term financial health which is probably due to its drastic decrease in its Liability Asset ration. While Crocs has had the biggest growth out of any Footwear company, these charts indicate it has the worst long-term risk as well as an increasing liability asset ratio.

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Value Driver Analysis

While during the first two years of my analysis showed that a higher return on asset generally meant a lower liability to asset ratio, this was reversed in 2021. Crocs Inc massive increase in return on assets compared to its competitors also resulted in a high liability to asset ratio. This could be due to Crocs Inc wanting to capitalize on its growing popularity and needing to fund its increase in demand.

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Value Driver Analysis

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When reviewing this value driver analysis, in 2019 and 2020, higher return on assets generally meant a lower liability asset ratio which was flipped in 2021. This may be due to the jump from Crocs Inc. While its return on assets performs far higher than any other company, it seems as though it is mostly funded by debt. This maybe due to Crocs wanting to capitalize on its rise of popularity in the past few years.

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Breakdown Analysis

Nike has a higher COGS than industry average while having a lower Property, Plant, and Equipment cost relative to its size compared to its competitors. This may be due to its outsourcing of production to other countries.

Nike also has higher SG&A costs compared to the industry average. Due to its market share and the size of Nike as a brand, much more may be spent on selling and promoting that brand compared to the other companies in the industry.

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Enterprise Breakdown - Revenue

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The breakdown analysis shows us that Nike has a higher COGS than the industry average while Skechers and Deckers has been able to maintain COGS on the lower side. All three companies have been able to maintain lower 'Other Costs' below industry average while also exceeding SG&A expenses compared to industry average.

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Enterprise Breakdown - Detailed Assets

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Detailed assets allows us to see how these businesses run their business. Nike has a lower Property, Plant, and Equipment cost than industry average even with though it generates the highest revenue compared to all other companies in the industry. This is probably due to its outsourcing of production to other countries. Skechers has a lot higher Property, plant, and equipment cost probably due to keeping production in house. Deckers has the highest Cash ratio. Both Skechers and Deckers have been able to maintain lower than industry average in Inventory while Nike's is higher which may be due to its size compared to its competitors.

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Summary

Nike is the largest company in the industry by a large margin but underperforms in Gross, Net, and Operating margins as well as Return on Assets compared to its competitors and also lacks in growth.
Nike is and remains financially healthy compared to its competitors and relative to its size which is an indication of consistency performance by the company.
Nike's stock price relative to its competitors did paint the correct picture. While it has been able to remain consistent, many companies are growing at a greater rate. They are also able to produce better profit margins. To become more competitive, Nike must reevaluate its strategy. This may mean looking at and reacting to trends more effectively to capitalize. It also means reducing its COGS but in ways that do not affect its image. Obviously Nike cannot grow as quickly as these other companies due to its already high market share but increasing profit margins is very possible.

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Competitive Intelligence

Primary Modal