Case Analysis: How a Strategy Change Led to Nike’s Formation.
Study the case and answer the questions.
Case Study 1. How a Strategy Change Led
to Nike’s Formation
Nike, the world’s most famous athletic company, didn’t start out by making A i r
Jordans. In fact, it didn’t make shoes at all. It distributed them.
Nike actually began as company called Blue Ribbon. It was founded in 1964 by
Phil Knight, a runner from Oregon, along with his former college track coach,
Bill Bowerman. At the time, the running shoe market was dominated by the
German firms Adidas and Puma. However, Knight and Bowerman had become
intrigued by new lighter, lower-cost running shoes made in Japan. Bowerman
had always tinkered with shoe designs to try to make his runners faster.
Meanwhile, Knight had just earned an MBA from Stanford University and was
looking for a way to combine what he l o v e d – sports-with work. So, the two
men each chipped in $500, and began importing and selling Tiger-brand shoes
(now Asics) made by the Japanese company Onitsuka.
Blue Ribbon’s start wasn’t glamorous. Bowerman and Knight began by selling
the shoes out of their cars at local track meets. But runners liked the new
lighter shoes, and the company started earning a profit. Eventually the
business did well enough it was able to hire some employees, most of whom
were passionate runners like the owners.
For about a decade Blue Ribbon’s strategy worked well. Business grew, and the
company even opened its own store in Santa Monica, California. But by 1971,
the firm was facing a crisis. Bowerman wanted Onitsuka to make a lighter shoe
he had designed; Onitsuka wasn’t interested. Moreover, Knight believed
Onitsuka was looking for other distributors to cut Blue Ribbon out of the
business.
What did Knight and Bowerman do? They designed their own shoe called “the
Nike” and began selling it. Executives at Onitsuka were enraged by the move.
They immediately stopped selling shoes to Blue Robbin and sued it to boot.
At that point, it looked like it might be the end of the road for Blue Ribbon.
There wasn’t much of a market for the Nike shoes yet. The company was still
young and in debt, and a lawsuit would be expensive to fight.
Knight gave Blue Ribbon’s employees the bad news. But instead of throwing in
the towel, he laid out a new vision and mission for the firm: “This is the
moment we’ve been waiting for,” Knight recounts telling them in his
bestselling book, Shoe Dog. “No more selling someone else’s brand. No more
working for someone else. Onitsuka has been holding us down for years. Their
late deliveries, their mixed-up orders, their refusal to hear and implement our
design ideas-who among us isn’t sick of dealing with all that? … If we’re
going to succeed, or fail, we should do so on our own terms, with our own ideas
– o u r own brand.”
After the initial shock wore off, relief swept across Blue Ribbon’s employees.
Not only were they undaunted by the new mission, but they were energized
and excited about it. Their future lay in their own hands, and they would find a
way to achieve it. They immediately began formulating new strategies and
plans.
Knight thinks the culture and agility of the company were major reasons why
Nike became the success it is today. Most, i f not all, of its employees were
scrappy competitive types. “Each of us was willing to do whatever was
necessary to win,” he says. “And i f ‘whatever was necessary’ fell outside our
area of expertise, no problem. Not that any ofus thought we wouldn’t fail. In
fact, we had every expectation that we would. But when we did fail, we had
faith we’d do it fast, learn from it, and be better for it … Taking a chance on
people-you could argue that’s what it’s all been about.”
Questions
1. Who is ultimately responsible for formulating a firm’s strategy-its
managers, its employees, or both?
2. What strategy execution problems do you think Knight and Bowerman
might have faced i n their effort to make Nike successful?
Sources: Frank Kaiman, “Nike, Phil Knight and the Power of Shared Purpose,”
Talent Economy (January 26, 2017), http://wwwtalenteconomy.com; Andy Gould,
“Three Lessons for Entrepreneurs from Nike ‘Shoe Dog’ Phil Knight,” Motley Fool
(January 17, 2017), http://fool.com; Lara O’Reilly, “Eleven Things Hardly Anyone
Knows about Nike,” Business Insider (November 4, 2014),
http://www.businessinsider.
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