Compare And Contrast Cost Structure Of Nike

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Comparing NIKE’s Cost Structure
Keeping a tight grip on costs is critical to any company’s profitability and for shareholder returns. Some of NIKE, Inc.’s (NKE) margins are lower than those of its competitors. The company’s gross profit margin, in particular, has trailed that of its rivals Under Armour Inc. (UA), VF Corporation (VFC), Lululemon Athletica Inc. (LULU), and Adidas AG (ADDYY).
Looking at the graph below we see that, Nike Cost of Goods Sold and SG&A expenses in percentages of revenue declined from 2012 to 2015. So we here assuming that its cost structure remains same for women segment and continues to declining in near future. Under this assumption Nike can able to increase its revenue as well as could achieve its target in women …show more content…

In this generic strategy, the company minimizes production costs to maximize profitability or reduce selling prices. Also, Nike’s differentiation generic strategy will provide unique products. For example, the company integrates cutting-edge designs for its shoes. The combined cost leadership and differentiation generic strategies will boost Nike’s performance in the global industry. A strategic objective based on the cost leadership generic strategy will grow the company’s competitive advantage through new technologies to reduce production costs and the differentiation generic strategy will maximize Nike’s profit margins, such as on new sports …show more content…

The firm should plan to continue along these lines to expand its top line.
NIKE’s shift to direct-to-consumer pays off
NIKE’s should invest significantly in expanding its retail foot-print through its direct-to-consumer strategy. This includes both bricks-and-mortar retail and digital commerce. Currently, revenues to wholesalers make up about ~78% of the sales mix. Retail sales generally have higher margins. An increase in the ratio of retail sales would positively impact NIKE’s gross margin.
NIKE’s efforts on the cost side include the use of new and lean manufacturing technologies such as Flyknit and waterless dyeing, which save costs. It’s also trying to minimize the impact of adverse currency movements by setting up an internal trading company.
Variables that could threaten NIKE’s Business Model
While the outlook appears rosy for NIKE, Inc. in women segment, there are some thorns, too, that could challenge the company’s ability to achieve its financial and operational targets. Some of these factors are discussed

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