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Research on Federal Securiies Laws Disclosure history assignment example: history assignment example

Federal Securiies Laws Disclosure: Pros and Cons

Federal securities laws disclosure: pros and cons

Economic agents were traditionally forced to generate funds by themselves. Upon stating up a business entity, the owner was required to possess most of the capital and would collect the additional necessary one through loans from either individuals or specialized institutions. Gradually, the capital requirements became more easily to satisfy as the incidence of financial institutions increased. In other words, banks supported the development of the business sector through the granting of loans to economic agents in all stages of development.

Within the modern day era, economic agents are presented with yet another means of collecting capital — the issuing of stocks. The issuing of shares is based on the principles of the company issuing a valuable paper for which the individual or corporate investor pays a specific amount of money. Upon completion of the fiscal year, the economic agent that initially issued the stocks is able to participate in the distribution of the company profits.

Today, issuing equity is a highly common and popular means of raising capitals. But aside from the advantages it generates, it is also characterized by the fact that it involves a tedious and expensive legislative process. Specifically, it is legally required of the economic agents issuing stock to complete a wide array of procedures through which to disclose company information to the current and prospective investors.

In the era of information and in a time in which investors already know company information before it is actually released by the firm, a question is being raised relative to the actual need for the disclosure procedures. The current project seeks to respond to this question.

2. Problem statement

As the economic agents decide to raise capitals through equity, they are requested by the federal legislation to complete a series of disclosures about the internal state of the company. And these disclosures have to be carried out throughout the entire period in which the company has publicly traded stocks. This specifically means that periodically, the firm will have to invest resources in researching, constructing and disclosing reports to the investors.

The process is extremely tedious and it is also highly expensive. And at the internal level, it creates operational inefficiencies as staffs have to be taken out of their regular positions and tasks in order for them to handle the disclosure procedures. At a fiscal level — which is best able to offer a depiction of the costs involved for firms — it was estimated that the small and medium size firms come to spend 0.036 per cent of their total revenues on disclosure procedures. In 2007, a study found that a small and medium size enterprise is estimated to pay $0.7 million per annum for disclosure operations. Two years before this study, different researchers had estimated annual disclosure costs at 0.4 trillion.

The procedures of disclosure were initially created in order to provide investors and prospective investors with the information necessary in making a business decision. In other words, the main scope of the disclosures is that of ensuring transparency and easy access to information. Today however, this access to information is increased as it is supported by the impressive developments within the Information Technology industry. In this order of ideas, it is often the case that the information presented by the companies in their disclosure documents arrives at a time at which the players in the financial market are already aware of its contents. Otherwise put, the disclosure documents are mere and expensive confirmations of the information already public and known by the investors.

Another issue is raised by the fact that it is uncertain who actually reads the disclosure documents. Also, it is undetermined whether the documents generate an actual and measurable impact upon the price of stocks. This information is useful in the context in which the average time for which a share is held is of 22 seconds. It is as such possible that the owner of a share for 22 seconds does not spend time and energy reading the disclosure documents.

Based on this new context and features of the investment market, a question is being posed relative to actual need for the disclosure documents. In order to identify a final answer, emphasis would be placed on the following questions:

Do the benefits of disclosures outweigh their costs?

Do the disclosures impact the total mix of information in the market place?

Do the disclosures impose discipline upon the organizations?

3. Raising capital through equity

Equity borrowing is a more and more common form of raising capitals and this is due to the numerous advantages it generates.

A first advantage of equity funding is revealed in comparison to the alternative to equity funding, namely raising capital through bank loans. In the case of a bank loan, the company has to make specific payments at specific dates. Equity funding is however more flexible as the company will not have to make monthly payments nor will it be pressured by the bank to bring in collateral and sign restrictive contracts. Within equity funding, raising capital and repaying it is more flexible in the meaning that the dividends are only paid at the end of the fiscal year and are dependable on the profits generated. In other words, while in the case of loan funding, the company has to pay the rate and the interest regardless of its development, in the case of equity funding it only pays dividends if it registers profits.

Another advantage of equity funding is that it can generate continuity. More specifically, when the investors — the equity holders — are convinced of the firm’s long-term sustainability and when they start to witness economic growth, they are likely to further invest. Additionally, some of the investors might possess useful knowledge and expertise they could offer the firm and as such further support its development (Business Link).

Equity funding is often used as a form of employee motivation. In this order of ideas, organizational leaders decide to allow the employees to purchase company stocks and as such share in the company profits. This technique allows the employees not only to increase their earnings, but also creates a context in which they unify their personal goals with the overall goals of the entity. Subsequently, the staff members are more motivated and enhance their performances in supporting the company to attain its objectives.

Despite the advantages however, equity funding is also characterized by a wide array of limitations, presented throughout the following lines:

The fact that third parties outside the firms invest their money in the organization gives them rights to intervene in the decision making process. In other words, the economic agent raising funds through securities is bound to lose part of the control over the business decisions. The actual control possessed by the investors depends on the company in the meaning that the more capital it raises through equity, the more control it will transfer to the share holders. Another risk is that as destination of their money, the firm is expected to promote the interests of the share holders and it can be subjected to lawsuits if it is suspected of breaching this commitment (Peavley).

Another important disadvantage pegged to equity funding is based on the legal perception of the capital. In the case of funding through bank loans, the borrowed capital and the payments made to the bank in repaying the loan are perceived as debt and as such not subjected to taxes. In the case of equity however, the dividends paid to the share holders are perceived as profits and as such subjected to taxation. This as such means that funding through equity is more expensive than funding through bank loans.

4. In favor of the disclosure laws and procedures

A major argument against the disclosure procedures is that they are redundant in the modern day context in which information is easily and readily accessible to investors and prospective investors. Nevertheless, it has to be noted that despite this increased access to information, not all investors and prospective investors are computer literates so that they are able to easily and efficiently access the company information. Additionally, the investors are often busy people who do not have time to dig up information about the company from various sources, but they need centralized reports which integrate all the information necessary to making investment decisions.

Another counter-argument of disclosures is that they present information which is already known by the public. As it has been just mentioned however, not all players in the financial market have the time and the resources to browse the internet and the specialized media in search for relevant information on their investments. But even if they did have the time and the resources to research the company, they would still require confirmation for the truth and the validity of the data collected. In other words, however redundant, the disclosure reports are official documents that state the company’s position as well as bring confirmations to the investors.

In a different note, the disclosure documents are also advantageous for the economic agents as they allow them to centralize information and present it to the stockholders in a clear and concise manner. This specifically means that the companies can use the disclosure documents to ease the minds of any distressed investors who might have heard a rumor. In other words then, the disclosure documents allow the company to consolidate its reputation and reduce the power of negative rumors in the industry and in the market.

And this ability is generated not only by the presentation of the official figures which testify to the organizational statements, but also by the fact that the disclosure documents are prepared by the firm and the firm can as such integrate information which puts the company in a favorable light. This could for instance mean that the employees editing the disclosure reports could restate the company’s mission, values and commitment to the well-being of the customers, employees, the general public, the community they serve, the environment and so on. Additionally, they can also discuss the efforts they have made since the previous disclosure agreements have been issued and present these efforts and strategies in a means which appeals to the investors.

It has so far been established that the disclosure documents increase the access of investors to information and improve company image to as such generate increases in the perception of the company and improvements in its role with the external environment. But aside from these however, disclosure documents also generate internal benefits. In this order of ideas, the preparation of the disclosure documents allows the company to carefully review its decisions, strategies and resources. In this line of thoughts, it could be said that the preparation of the disclosure documents represents an internal process of control and evaluation. This subsequently means that the company reveals an increased ability to prepare for its internal audits, as well as the audits conducted by the Securities and Exchange Commission.

Otherwise put, the creation of the disclosure documents allows the company to recognize any errors, inconsistencies or any other problems at its internal level. As it identifies these issues, it is also able to correct them. Otherwise, the problems might be directly discovered by the reviewing authorities and the firm could be fined or suffer other types of repercussion for failure of legislative compliance. Additionally, the financial disclosures create a context in which the economic agent reviews and corrects legal breaches, but also ethical issues (U.S. Department of the Interior). In other words, it helps it create a more balanced and moral workplace, which in turn stands increased chances of attaining its objectives in a reliable manner.

In the category of both ethical and well as legal issues, the conflicts of interest are also a valid reason in favor of continuing to create disclosure documents.

“The public financial disclosure system is designed to reveal actual and potential conflicts of interest” (U.S. Office of Government Ethics).

Conflicts of interest could be highly damaging for the economic agent as they could lead to corruption or other morally unsound decisions and actions. These in turn could materialize in breaches of legal stipulations or the loss of trust by the various stakeholder categories involved or witnessing the conflict of interest materialize. The creation of the disclosure documents then develops a setting in which the economic agents can quickly identify and resolve conflicts of interests and as such not suffer the negative repercussions.

5. Against the disclosure laws and procedures

As it has been mentioned throughout the Problem statement section, the creation of disclosure documents and procedures is complex and tedious and it even appears as redundant within the modern day community. Today’s investors have easy access to the Internet, to company websites and to the media. This specifically means that they gain quick and easy access to company information. If for instance a publicly traded economic agent merges with another entity, acquires a smaller economic agent or invests in another company, the firm would immediately inform the media and the stakeholders of these decisions. But these would have to be reassessed and reintegrated within the disclosure documents to as such result in redundancies. In other words, the disclosure documents are unnecessary in today’s community and they represent repetitions of the information with which the public is already familiar.

A second limitation of disclosures is that they generate additional costs for the economic agent. The expenditures associated with disclosure operations have yet to be fully measured and comprehended, but it is generally accepted that they grew in time as the demands for disclosure increased. In other words, minimum disclosure requirements imply lower levels of costs. Throughout the recent decades however, the Sarbanes-Oxley Act and other additions made to the disclosure legislation have increased the demands, to subsequently materialize in an increase in the efforts made by economic agents and their consequent increase in disclosure costs.

“Typically, disclosers’ costs increase with the amount, scope and level of detail of information they provide to users. For example, firms providing financial information incur costs in gathering, processing and releasing that information that rise with the stringency of disclosure requirements. The more information required and the more frequently reports must be created, the higher the costs. The average incremental costs of disclosure requirements under the Sarbanes-Oxley accounting reform law were originally estimated by the SEC to be ninety thousand dollars, but more recent estimates put the number at many multiples above that” (Fung, Graham and Weil, 2007).

Aside from the expenditures incurred, the need to comply with the disclosure requirements also generates organizational inefficiencies. This limitation is explained by the fact that the company employees are retrieved from their traditional positions and asked to focus on the disclosure requirements. This means that the traditional core tasks of the employees are neglected for a period of time, with the immediate impact of organizational inefficiencies.

Overall then, aside from being redundant, the disclosure documents also consume high amounts of organizational resources. In turn, this means that the companies come to possess fewer resources to further invest. In other words, the investment budgets are decreased due to the disclosure requirements. In such a context, the economic agents are prevented from fully researching and developing their products and services. Ultimately, the very development of the business community and of the industries is delayed through the disclosure procedures. And this in turn impacts the final consumer at two different levels:

The firm has to recuperate its costs and will most likely integrate it within the retail price of the products to as such force buyers to pay higher prices, and secondly

The firm inefficiencies will delay the creation of higher quality products and services which better satisfy the changing needs of the consumer base.

Another disadvantage of the disclosure procedures is that they could harm the levels of business competitiveness for the economic agents. This is explained by the fact that the company could disclose important strategic information. In the hands of its competitors, this information on the organizational strategies could harm the company. Also, in the case of a public entity disclosing, its reputation could be negatively affected.

“However, disclosers face still more significant costs associated with competitive or political risks arising from reporting — for example, the risk of a company revealing strategic information useful to competitors or a politician exposing herself in the thick of an election to potential embarrassment because of a particular campaign donor. Providing more detailed information may also open the discloser to grater pressure from certain user groups to adopt costly change policies” (Fung, Graham and Weil, 2007).

Aside from the risk of reveling valuable information to the competition, detailed disclosure also generates the risk of proving too much information to stakeholders. The most relevant example at this stage is represented by the share owners, who do have the right and ability to intervene in the decision making process. They could as such demand that the organization followed a different course of action than that already decided upon by the firm. The most challenging feature of this outcome is that the share owners are seldom business people with an increased analytical ability to make long-term sustainable and responsible decisions. Their emotions could as such interfere with the decision making process and could lead to negative outcomes at the organizational level.

Overall then, it has to be noted that the disclosure procedures generate not only the limitations of increased expenditures for the economic agents, but also industry wide delays in developments, negative impacts upon the customers and the endangerment of the competitive position. All these counter-arguments of disclosure drive the individual to declare against the procedures, but one must not forget about the benefits of disclosure. In order to make the final decision, a discussion is launched throughout the following section.

6. Decision

In order to make the final decision, it is essential to review the arguments in favor and against disclosure documents and procedures in a more schematic presentation. The lines below serve this purpose. Specifically, the advantages of the federal securities disclosure refer to:

The ability to ensure investors’ access to information

The ability to confirm information already existent about the firm

The ability to deny rumors

The ability to promote company efforts and as such enhance organizational reputation

The ability to conduct internal evaluations and controls

The ability to prepare for audits by the Securities and Exchange Commission, and last

The ability to identify conflicts of interest and maintain high ethical standards.

In terms of the disadvantages of federal securities law disclosure, these refer to the following:

The redundant feature as the documents only confirm what is already known by the players in the financial market

The costs associated with the gathering, processing and presentation of the information

The creation of operational inefficiencies

The limitation of the investment opportunities

The generation of negative impacts upon the consumers

The exercising of pressures from the external environment.

In a numeric presentation, the advantages of disclosure outweigh the disadvantages of financial disclosure to which stock issuing firms are obliged. Nevertheless, such a comparison and measurement of the advantages and disadvantages is insufficient as each feature is different and generates more or less severe outcomes. The table below reveals the arguments against and in favor of disclosure and assigns a coefficient of importance to each argument. 1 represents the least important and 5 stands for most important.


Coefficient of importance


Coefficient of importance


Ensure investors’ access to information





Brings conformation





Controls rumors


Operational inefficiencies



Improve reputation


Decreased investment opportunities



Internal evaluation


Negative consumer impacts



Preparation for SEC audits


External pressures



Identification and elimination of conflicts of interest


Total points of importance assigned



The addition of the points of importance leads to the clear conclusion that the federal system should maintain the law on disclosure upon equity issuing; and this because the advantages significantly outweigh the limitations. In order to better understand the rationale behind this statement, it is important to note the assumptions on which the coefficients of importance were assigned. These refer to the following:

If investors do not gain sufficient access to information they will not trust the firm and will not, as such, invest in it

Despite the already existence of the information, it is essential for the firm to confirm or infirm it

The economic agents are in sustained need for reputation boosters

Errors can damage the firms especially when identified by external auditors

Ethics infringements and conflicts of interest can also damage and have to be adequately controlled

Redundancy is notable, but a mere price to pay for the rest of the advantages

Costs are the largest impediment to disclosures

The operational inefficiencies created, the reduction in investment capabilities and the impacts on and from the external environment are also less important as they can be managed through other channels.

All in all, the final finding indicates a high utility of disclosure documents and the sustained need to maintain them due to the multitude of benefits they generate. In order to cope with the pressures of creating the disclosure documents and complying with the disclosure legislation, economic agents should integrate technologic developments to a more extensive level. For instance, it is advised that they integrate information systems which centralize all financial information, organize and process it in a manner in which the workloads of the financial staff members are significantly reduced. While such a system would initially involve expenditures with the purchase, implementation and employee training, it would also generate long-term savings.

Such an approach is also advisable at the level of the financial market in the meaning that a centralized information system should be created and it should integrate all disclosed information and official communicates by the firms traded on the stock exchange market. Such an approach would generate efficiencies for the current and prospective investors and it would also increase information transparency and improve the relationship and communications between the business agents and the investors. The information system to centralize the information would be created and maintained by the financial market operator and it would demand economic agents to disclose:

“All announcements, released on a real-time basis and in a full-text searchable archive. The Exchange may require listed companies to submit electronically via a secure internet-based system;

All annual and interim reports

All shareholder circulars” (Barnes, 1999).

7. Conclusion

The contemporaneous business society is thriving as a result of numerous developments, such as advancements in Information Technology, but also the increasing access to capitals. In the search for borrowed funds, economic agents have to decide between bank loans or equity, each of the tools revealing its own benefits and limitations. One specific element pegged to equity funding is the need to comply with the federal securities law disclosure. Specifically, firms have to periodically create documents on their internal status, but these procedures are time consuming, expensive and redundant. In spite of these limitations however, disclosure procedures also generate a wide array of benefits, such as internal strengths and improved controls or improved relationship with the stakeholders.

In light of both advantages and disadvantages, the initially posed questions can be answered: Yes, disclosure procedures are still valid and applicable and they should be maintained. At the level of the three specific issues raised at the commencement of the project, the following answers are retrieved based on the completed effort:

The benefits of disclosure outweigh the costs

The disclosures impact the total mix of information in the market place by confirming information and infirming rumors

Disclosures impose firms a specific sense of discipline.

Ultimately, since the shortages of the disclosure system were recognized, recommendations are made to integrate IT systems to a higher degree and create a unified system to centralize all information issued by publicly traded economic agents.


Barnes, C., 1999, Opacity, the Asian way? Stock exchange responsibilities on disclosure, Apollo Investment Management, last accessed on May 19, 2011

Fung, A., Graham, M., Weil, D., 2007, Full disclosure: the perils and promise of transparency, Cambridge University Press

Peavler, R., Debt and equity financing, About, last accessed on May 19, 2011

Equity finance, Business Link, last accessed on May 19, 2011

Financial disclosure, U.S. Department of the Interior, last accessed on May 19, 2011

Public financial disclosure: a reviewer’s reference, Second edition, U.S. Office of Government Ethics, last accessed on May 19, 2011

Bank of America SWOT Analysis a level history essay help

Bank of America SWOT Analysis

Analysis of Strengths, Weaknesses, Opportunities and Threats

Bank of America (BAC: NYSE) continued to face significant challenges to overcoming the significant losses accumulated during FY2009 and 2010. Most significant was the $-48.1B loss in Cash Flow in FY2009 and the rapid increase in Sales, General and Administrative (SG&A) expense, rising to $43.7B in FY2009 from $28.4B in 2008. For a full analysis of growth profitability and financial ratios for Bank of America please see Appendix A. In the midst of these formidable challenges, Bank of America continues to have the strengths of being one of the leading financial services businesses in the world with a brand that is recognizable and brings in new customers at a steady rate, in addition to have diversified revenue streams that stabilize the company’s currently challenging economic condition. The balance sheet continues to improve over time as is shown in the analysis presented in Appendix A. The weaknesses of Bank of America continue to be their Global Card division, and the difficulty of completing the Merrill Lynch merger as well. Opportunities include TARP repayments increasing profitability and wealth management business benefitting from the Merrill Lynch acquisition. In addition, investments in emerging markets show significant potential. Threats include regulatory changes that will most likely increase compliance spending and alter business plans, competition for retail deposits will increase funding costs, and increases in FDIC insurance premiums and other proposed fees will affect margins over the long-term.


Bank of America (BAC: NYSE) is the nation’s largest bank with operations in 50 states and 30 foreign countries and has continually grown through mergers and acquisitions that has led to their competing in six core businesses. These six business units include deposits, global card services, home loans & insurance, global banking, global markets, and global wealth & investment management (GWIM). Bank of America continues to invest heavily in information systems and technologies to enable greater levels of automated customer service to drive down their operating costs (Schultz, 2010). Included in these efforts are selective uses of Six Sigma business process re-engineering services to streamline and make more efficient their core business processes (McKenney, Mason, Copeland, 1997). Bank of America continues to be plagued with a very low level of customer satisfaction that were in part driven by their decision to concentrate more on internal efficiency and less on customers getting their transactions and banking done more efficiently (McKenney, Mason, Copeland, 1997) (Gonzalez, Mueller, Mack, 2008). This mindset has completely reversed in the last three years and today Bank of America is one of the leading banking institutions to invest in information technologies including secure mobile banking (Valentine, 2011). Despite these investments in advanced customer service technologies increase lifetime customer value, Bank of America continues to recover financially from the challenging times they faced during the FY2010 timeframe when Net Revenue or Sales dropped from $119B to $110B from 20098 to 2010. Net Income plunged from $6.2B in 2009 to -2.2B in 2010 and the Trailing Twelve Months (TTM) level is currently at -$3.3B with projected Sales of $105B. Operating cash flow is at $58.8B with a -$4.4B cash flow on a TTM basis.

Analysis of Strengths, Weaknesses, Opportunities and Threats


Bank of America is recognized as one of the leading brands in financial services globally, with a market value of their brand in the hundreds of billions of dollars (Schultz, 2010). This brand equity translates into the ability to move into adjacent services including data mining and analysis with relatively high levels of agility and focus, ensuring that new ventures are quickly started and gain customer bases as a result (Schultz, 2010). The banks’ brand is continually strengthened and supported by the reach of operations across 50 states and service to customers in 150 countries, with offices or operations based in 44 of these countries. As of the latest filings the company has with the U.S. Securities and Exchange Commission (SEC) the company claims to have 53 million consumer and small business accounts and operates over 18,000 ATMs in the U.S. alone. Current SEC filings also show that the company has 6,100 retail outlets and banking locations and supporting a total of nearly 29M transactions on a weekly basis for its customer base. All of these operations advantages are possible given the top-of-mind awareness the bank has as a leading financial services institution and its continual commitment to improve business processes over time (AlSagheer, 2011).

A second significant strength the company has are its ability to maintain a diverse series of revenue streams and stabilize earnings and revenues in its core business segments. Based on an analysis of the filings the bank has made with the SEC, it can be seen that global card services continues to contribute nearly one out of every four dollars in revenues the bank generates (approximately 25% of total revenue in FY 2009 and 2010). The strength of these revenue streams is also seen in how diverse they are from a percentage of revenue stand point as well. The global wealth & investment management (GWIM) sector of the business continues to stay profitable and a significant proportion of total revenues, generating 14.9% in the latest fiscal year. Additional lines of business include global banking which generated 18.9% of total revenues, global markets with 16.9%, home loans & insurance at 13.9% and deposits at 11.5%. This diversity of revenue sources is also one of the catalysts of economic stability shown in Appendix A, Growth Profitability and Financial Ratios for Bank of America Corporation (2001 — 2010).

A third core strength of the company is its continuing balance sheet strength and the support it has received from the federal government. The strengths the company has based on its diverse revenue streams is also reflected in its diverse asset base within business units as well (Segev, Porra, Roldan, 1998). In addition, Bank of America has continually strengthened its capital through a series of funding strategies in FY2009 and 2010 that has increased capital by $57 billion. Despite the challenging condition of Net Income and above the lien expenses including SG&A, the Bank of America continues to stay financially viable based on a strong mix of lending and funding sources globally.

Another major strength of the Bank of America continues to be its commitment to continually improve the customer service experience for its customers through the use of investment in technology and the latest generation of database and data mining technologies (Orr, 2005). This includes the leading investments the bank is making in the area of mobile commerce and banking on smartphones, tablet PCs, Apple iPhones and Google Android devices (Valentine, 2011). The Bank of America invests in these technologies to gain greater business process improvements with the goal being to increase customer satisfaction and responsiveness over time (AlSagheer, 2011).


The acquisition of Countrywide and Merrill Lynch in FY2008 and 2009 respectively have cost Bank of America more than their capital; it has also cost them their focus as well. The takeover of Countrywide brings a very high debt load and liability to the bank, with a very high dependence on the domestic U.S. economy, where Countrywide had written 92% of their loans. In addition the lack of record keeping and accounting accuracy on the part of Countrywide has led to many lawsuits for Bank of America, including several with the U.S. Government showing that the bank willingly allowed fraud to continue despite internal audits knowing that the action from the acquired company were unethical and illegal (Gonzalez, Mueller, Mack, 2008). The impact on Bank of America’s customer service reputation based on the unorganized and often completely inaccurate records that Countrywide kept led eventually to a federal investigation of Countrywide lending practices (Kapner, Baer, 2011). All of the activity around the Countrywide acquisition led eventually to the development of U.S. Senate hearings to track down just exactly how Countrywide would mislead consumers to take loans, often getting refinancing they did not need or could not afford. Bank of America has since moved beyond these challenges and has been able to get the U.S. Senate investigations of Countrywide completed. In addition, the acquisition of Merrill Lynch turned out to be a major distraction to the company as well. The markets for the services that Merrill Lynch sells require intensive expertise in tailoring asset-backed securities and investment vehicles to companies and high net worth individuals over the long-term. This area of the Merrill Lynch business turned out to be the most profitable however and will take years for the bank to realize any of the financial gains from this acquisition. Today it is a significant drain in the company’s resources, as can be seen from an analysis of the financial statements and SEC filings the company has provided in the investor relations area of their website.


Bank of America has many potential opportunities that are beginning to emerge as the Countrywide and Merrill Lynch problems get resolved. One of the most significant opportunities is to benefit from the TARP repayments that will significantly increase profitability in the short-term. Bank of America was one of the largest recipients of the troubled assets relief program (TARP) which was created in 2008. The U.S. Government made the terms of the TARP program very favorable to the bank. As a result, in December, 2009 the bank was able to repurchase all shares of TARP Preferred Stock. Paying off TARP quickly saved the bank over $25M which would have been cash outflow as dividend payments. As a result of choosing to pay this off quickly, the bank will be able to move closer to profitability.

Second, the wealth management business unit has significant potential due to the acquisition of Merrill Lynch and LaSalle, the U.S. subsidiary of ABN Amro. These two acquisitions bring a much greater depth of services and product depth to the company, in addition to much greater diversity of clients globally. It also provides the wealth management business unit with the opportunity to upsell and cross-sell specific services to corporate and high net worth clients as well. The Bank of America has also been a global leader in using quality management techniques to optimize the performance and gains possible from the wealth management and investment programs (AlSagheer, 2011). Using constraint-based modeling and quality management approaches typically used in business process management (BPM) and business process reengineering (BPR) the bank has been able to continually improve the yields on their investment and also coordinate across the many investments they have available in this business unit.

Another significant opportunity is the rapid adoption of mobile e-commerce and banking within global communities, many of which Bank of America already have established operations in (Valentine, 2011). Given the rapid ascent of Google’s Android operating system and the dominance of the Apple iOS operating systems, this area will continue to fl9urish as the majority of banking today is actually done online,. Not in person (Valentine, 2011)


The greatest potential threat to the Bank of America are the regulatory changes that the U.S. And foreign governments continue to evaluate and pass into law. These regulatory requirements are costly to comply with, requiring millions of dollars’ in IT investments over time (McKenney, Mason, Copeland, 1997). The costs of compliance and reporting will continue to increase however, creating an even greater strain on the bank’s profitability over time.

Another significant threat is that of Federal Deposit Insurance Corporation (FDIC) insurance premiums increasing over time, becoming more costly to pay. The many bank failures during the 2008 and 2009 timeframe have raised the costs of premiums for the banks that are still solvent. This has led to higher costs for not only insurance, but also for the systems internally for managing them (AlSagheer, 2011).

The Bank of America has been able to successfully navigate very difficult economic conditions globally and stay solvent, while also completing two major acquisitions during the same time. The bank continues to recover from both the economic downturn and the transactions with reduced cash flow as shown in the analysis in Appendix A. The strengths and opportunities that the Bank of America has combined have the potential to transform the company and make it profitable again by the FY2012 timeframe. Based on an analysis of their financials and from analyzing the assessment by their senior management team.

The recommendations for Bank of America center on increasing the lifetime customer value of existing base and attracting new, high net worth customers for the future. Increasing the investments in mobile-based technologies will significantly increase the level of convenience for both existing and new potential clients, as will the support for paperless transactions using Android and iOS-based camera phones (Valentine, 2011). Second, the bank needs to concentrate on trimming its asset base of unprofitable operations. There are, according to the SEC document that the bank has filed, nearly 2,000 branches that cost more to operate vs. The revenue they produce. The bank needs to continually use the concepts of Six Sigma and quality management top trim back all operations that are not profitable today, just as they have done on an isolated basis at just the strategy level in the past (AlSagheer, 2011). The continued growth of the bank’s global reach needs to also continually be accentuated and strengthened over time as well. An area where the bank could expand significantly on a global level in addition to becoming more multichannel based in terms of business and personal banking. The Bank of America must also continue to trim its SG&A expenses through the use of profitability analysis and continued pruning of unprofitable operations.

Appendix A:

Growth Profitability and Financial Ratios for Bank of America Corporation

(2001 — 2010)


AlSagheer, A. (2011). Six Sigma For Sustainability In Multinational Organizations. Journal of Business Case Studies, 7(3), 7-15.

Gonzalez, M., Mueller, R., & Mack, R.. (2008). An Alternative Approach in Service Quality: An e-Banking Case Study. The Quality Management Journal, 15(1), 41-58,7.

Suzanne Kapner, & Justin Baer. (2011, May). BofA to cut $850bn bad loan book in half.

James L. McKenney, Richard O. Mason, & Duncan G. Copeland. (1997). Bank of America: The crest and trough of technological leadership. MIS Quarterly, 21(3), 321-353.

Orr, Bill. (2005). A growing array of Internet banking services. American Bankers Association. ABA Banking Journal, 87(12), 47.

Schultz, R.. (2010). Adjacent Opportunities: The Local Remedy. Emergence: Complexity and Organization, 12(3), 155-157.

Arie Segev, Jaana Porra, & Malu Roldan. (1998). Internet security and the case of Bank of America. Association for Computing Machinery. Communications of the ACM, 41(10), 81-87.

Valentine, L. (2011). Smart phones alter banking landscape. American Bankers Association. ABA Banking Journal, 103(5), 32-34,36,46.

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Electronic Waste

Adoption of Cross-Functional Teams in Electrical and Electronic Waste (E-Waste) Management

Creating teams across departmental and functional boundaries of an organization is essential if the most complex, challenging objectives are going to be attained. Cross-functional teams designed to capitalize on the unique strengths of each department often require its participants to hold two or more roles or series of tasks and responsibilities. Experts in engineering, product development, product management or services are often recruited into cross-functional teams due to their levels of expertise. This presents a challenge however in keeping existing initiatives, strategies and programs moving forward because of the dual responsibilities that key members of these functional departments have in cross-functional teams. Managing cross-functional teams takes a unique leadership skill set that can balance the needs of team members who have many responsibilities in their primary roles, in addition to the responsibilities that being a member of a cross-functional team demands. This apparent conflict of roles can be minimized through transformational leadership strategies and techniques that seek to create consistency across both roles (Feng, Jiang, Fan, Fu, 2010).

Due to headcount reductions and massive layoffs, cross-functional organizations that rely on this matrixed structure have become commonplace in global business (Dayan, Basarir, 2010). Compounding the severity of headcount reductions has also been the priority of getting organizations into compliance with sustainability and green initiatives (Boks, Stevels, 2007). A critical area of sustainability and green initiatives continues to be planning product lines and services for compliance to government regulations on how best to manage electrical and electronic waste (Kunert, 2005). Cross-functional teams have emerged as critically important to company’s efforts to attain a high degree of compliance to electrical and electronic waste management initiatives globally (Mascle, Zhao, 2008) (Zhu, Sarkis, Lai, Geng, 2008).

The intent of this analysis is to illustrate why it is critical for organizations to rely on cross-functional teams to attain their objectives for managing electrical and electronic waste management. When taken as a lifecycle-based approach that includes Design for Environment (DfE), the use of cross-functional teams successfully can launch, sustain, support and discontinue products that are in compliance to electrical and electronic waste management standards. Making sustainability or environmental compliance a core part of new product development also ensures a higher level of compliance to electrical and electronic waste management standards (Albino, Balice, Dangelico, 2009). For all of these benefits to be attained however, it takes a concerted effort on the part of organizations to integrate Design for Environment (DfE) processes and systems into their Product Lifecycle Management (PLM) systems and into their product management strategies (Boks, Stevels, 2007). Given how diverse the skills sets are that are required to manage the entire product lifecycle management process, cross-functional teams are the only viable alternative for attaining sustainability and green initiatives organization-wide.

Why Collaboration Is Essential for E-Waste Initiatives to Succeed

By their very nature, the processes organizations rely on to attain their e-waste goals and objectives are highly collaborative. The point has been made of how collaborative the Product Lifecycle Management (PLM) process is, which to succeed requires intensive coordination and synchronization across the functional areas of an organization. The catalyst of PLM strategies that ensures they stay in compliance to e-waste compliance goals and objectives is the Design for Environment (DfE) processes defined later in this analysis. For PLM strategies to have a foundation on which to build upon however, it is essential for the supply chain partner and processes be consistent with the sustainability objectives that an organization is trying to reach. This is really the external cross-functional team of an organization. The supply chain is a broader cross-functional team that needs to be managed to specific sustainability and e-waste program objectives as well. The most critical process from an e-waste perspective is the use of the supply chain for reverse logistics. The areas of reverse logistics concentrate on creating a tight integration at the process and system level with a manufacturer to attain e-waste objectives over the long-term. (Dowlatshahi, 2000). Cross-functional teams within an organization are heavily relied on suppliers and the entire supply chain to provide assistance in keeping in compliance to e-waste initiatives and programs. This is a knowledge management issue and the greater the level of it in a cords-functional team, the greater the level of supplier integration and performance (Chae, 2009). For a reverse logistics strategy to be effective, it must take into account the unique and highly specific knowledge of an organization. Only through the use of a cross-functional team can any organization communicate accurately, succinctly and quickly with supply chain partners so they can get into compliance with e-waste goals and objectives. Manufacturers are seeing significant cost and revenue gains from perfecting their reverse logistics processes while also attaining their e-waste strategic plans and objectives (Dowlatshahi, 2000). Studies of the use of cross-functional teams to attain the difficult goals of integrating DfE into PLM strategies also show that the primary catalyst is knowledge, not necessarily cost reduction or just business process management and re-engineering that makes these complex strategies succeed (Mascle, Zhao, 2008).

Knowledge is the catalyst of successful e-waste program performance. It is also best captured, managed and applied to complex problems and strategies including e-waste compliance and cost reduction through cross-functional teams. Attempts to use knowledge management systems and platforms have failed due to lack of adoption and resistance to change they push on the experts whose participation in them is crucial (Chang, Chen, Lin, Tien, Sheu, 2006). Supply chain planning, coordination, management and optimization all are foundational areas of how suppliers make the attainment of e-waste initiatives succeed. The catalyst for all these coordination points outside of an organization is knowledge, and that is precisely why cross-functional teams are critical to companies attaining their e-waste strategic plans and objectives.

In analyzing just how critical the knowledge from cross-functional teams are to the attainment of e-waste objectives, consider the complexity of the reverse logistics process as shown in Figure 1, Reverse Logistics process Workflows.

Figure 1: Reverse Logistics Process Workflow

Source: (Dowlatshahi 2000,

Manufacturers rely on reverse logistics to reduce long-term operating and production costs, attain higher levels of e-waste compliance including recycling a progressively higher level of their products, and the use of sustainability programs for packaging re-use. As a result of these three objectives being successfully attained in many high tech manufacturers specifically (Lau, Wang, 2009), reverse logistics is now the most important supply chain process that manufacturers concentrate on to attain e-waste initiatives.

As can be seen from Figure 1, Reverse Logistics Process Workflow, this process is heavily dependent on the level of knowledge and intelligence within an organization. The use of cost/benefit analysis tools and databases of results, transportation and warehouse management systems and strategies which are among the most complex in any organization, and supply management all require intensive expertise to be integrated into reverse logistics processes. The use of cross-functional teams to bring the critical insight and expertise to these areas literally makes them achievable or not. Without cross-functional teams and the expertise inherent in them, reverse logistics — a core aspect of any e-waste program — would not be accomplishable. Adding in the two remaining functional areas of remanufacturing/recycling and packaging completes process areas of reverse logistics. Each of these areas of a reverse logistics strategy also has a corresponding series of steps to make e-waste processes successfully replicated over an entire manufacturing organizations’ supply chain.

To the extent any organization can infuse a high degree of knowledge and insight into these processes and share that intelligence with suppliers is the extent to which they will be trusted or not (Cheng, Yeh, Tu, 2008). While critics and detractors of cross-functional teams often criticize them for not being more equitable in the distribution of work across matrix-based organization, the heard reality is that the expertise they deliver can make the difference between an organization being seen as credible or not. In this context, insight and intelligence leads to not only greater supply chain flexibility and agility between suppliers and buyers (Chang, Chen, Lin, Tien, Sheu, 2006) but also accelerates transactions through greater trust (Cheng, Yeh, Tu, 2008).

Do cross-functional teams matter to e-waste initiatives and programs’ success? Without question, they are an essential catalyst to their success given how critical the role of the company- and industry-specific knowledge they possess. There is literally no other organizational strategy or approach to managing resources apart from cross-functional teams for bringing together the diverse, in-depth and extensive intelligence necessary for companies to attain their e-waste goals and objectives. It is not just the cross-functional team that ensures the success of e-waste programs however; it is the knowledge, insight, expertise and experiences they have that can transform an entire supply chain and PLM strategy to attain e-waste initiatives.

Put Cross-Functional Intelligence to Work in PLM Strategies

Supply chains encompass the most complex relationships manufacturers have a direct impact on attaining compliance to WEEE and RoHS Standards (Kunert, 2005) while also accelerating the new product development process through effective PLM strategies (Green Whitten, Inman, 2007). Cross-functional team dynamics require leaders who can be transformational in their ability to communicate compelling missions, goals and objectives for the teams, not just managing by action item lists and project plans (Santa, Ferrer, Bretherton, Hyland, 2010).

The best cross-functional teams then have a level of passionate intensity about them; they see the much greater result they are attempting to accomplish as worth the sacrifices they need to attain them (Feng, Jiang, Fan, Fu, 2010). Nowhere is this more prevalent than in the area of new product development and introduction (NPDI), especially in high tech manufacturing where product lifecycles are so rapid (Boks, Stevels, 2007). In the leading high tech companies including Cisco, Hewlett-Packard, IBM and others, sustainability engineering, product development engineering, packaging, repackaging and remanufacturing all have their experts on cross-functional teams to share their expertise and insight to make sustainability initiatives accomplishable through better use of internal knowledge (Albino, Balice, Dangelico, 2009). Cross-functional teams are the foundation that makes the NPDI process attainable (Boks, Stevels, 2007). It would literally not be possible to launch a new product, complete a given product or service strategy, create and sustain new distribution channels, or attain a level of performance on DfE product designs without cross-functional teams. Insights and intelligence, expertise and experience, when applied with an intensity of focus on a given goal, are what make manufacturers successful with their new product development cycles. Table 1 provides an overview of the DfE Benefits and Impact Analysis including the anticipated environmental impact and corresponding cost reduction opportunities are as well.

Table 1: DfE Benefits and Impact Analysis

DfE Engineering & Product Development Goal

Anticipated Environment Impact

Reduction in Costs Possible

Reduction in overall footprint of the printer (at HP) or device including product weight

Reduces lifetime energy consumption; less end-of-life waste

Significant reduction in sourcing and quality management costs; lower logistics costs; potential for higher production yields

Energy STAR compliance

Significant reduction in energy use; less greenhouse gases, reduction in carbon dioxide generation

Significant cost reductions in end-user product lifecycle operating expenses

Engineer in greater product reliability and quality

Less material costs, less waste for landfills due to better reverse logistics of product components

Lower Total Cost of Ownership; lower lifetime product costs

Packaging design biodegradability and reverse logistics

Reduce the impact of high tech products have on landfills

Using reverse logistics processes rely on outbound packaging materials as part of delivered product; also return of consumables using packaging

Optimizing Bulk Pack Configurations

Minimize carbon-based impact of transportation

Significant reduction in materials and logistics costs

Design for Recycling (DfR)

Reduction of per unit costs due to reuse of components

Lower compliance costs through designed-in use of materials; lower overall manufacturing costs

Design for Disassembly (DfD)

Higher recycle rates due to more intuitive disassembly and recycle designs

Reduce recycling costs; design supports reverse logistics process of re-using packaging

Sources: (Mascle, Zhao, 2008) (Boks, Stevels, 2007)

High tech manufacturers clearly have much to gain from adopting DfE-based criteria in the development, production, service and recycling of their products. The reduction in costs possible impact each area of a company’s supply chain, from initial sourcing and supplier coordination to lowering production costs by being able to attain higher levels of product quality. DfE’s many benefits are so compelling that Hewlett-Packard today invests an average of $60M in supply chain planning for new products to attain these goals (Chang, Chen, Lin, Tien, Sheu, 2006). The returns on that investments are so significant for Hewlett-Packard that they also lead the high tech industry with the largest percentage reduction in their carbon footprint as well (Boks, Stevels, 2007). High tech manufacturers have organizational cultures that are highly focused on metrics of performance, especially in the areas of innovation, new product development, and compliance to environmental requirements (Markley, Davis, 2007). As a result of the HP culture being one that concentrates on measuring performance, the impact of cross-functional teams on their compliance to WEE, RoHS and other global environmental compliance requirements is considered among the best in the world (Varmazis, 2006). HP also evaluates each supplier as to their level of contributions to compliance to the sustainability and e-waste initiative goals and objectives the company sets every year (Varmazis, 2006). These scorecards are used for evaluating the level of compliance to supplier quality levels that HP’s cross-functional teams set to ensure the highest levels of quality are attained in HP products and services. HP relies on cross-functional teams to create, evaluate, enforce and help suppliers attain the levels of performance necessary to keep quality levels as high as possible. HP, like many high tech manufacturers, have found that to the extent to which DfE design goals are achieved in their product designs is the extent to which they can reap the financial benefits of being in compliance. As Table 1 shows, the ability of any manufacturer to attain the benefits reduction in costs requires intensive reliance on all the knowledge and intelligence in an organization — in short how effective they are in using cross-functional teams to make the DfE process as engrained into their PLM and new product development processes.


The role of cross-functional teams as a knowledge catalyst is unassailable and proven when the results of reverse logistics and DfE programs are assessed in manufacturing industries, the most significant results achieved in high tech manufacturing. Cross-functional teams are the catalysts of expertise, experience, insights and intelligence that companies need to make their new product development, supply chain and services strategies pay. Compliance to WEEE, RoHS and other global compliance standards (Kunert, 2005) is often seen as a cost, yet forward-thinking companies including HP see these standards as a way to increase their competitive strength in product design, services and supply chain performance. HP is making compliance pay with cross-functional teams that deliver the needed knowledge to make them successful. Without cross-function team’s contributions, the benefits of reverse logistics and DfE would not be attainable. Managing cross-functional teams to results in sustainability and e-waste strategies requires transformational leadership and the ability to manage and resolve the conflicts that arise from the role conflict inherent in this approach (Dayan, Basarir, 2010). Yet for all the conflict of having experts on a cross-functional team with two different and often conflicting roles and sets of responsibilities, the results attained are worth it (Markley, Davis, 2007) as shown by the result achieved in reverse logistics and DfE results attained (Mascle, Zhao, 2008).


Creating cross-functional teams to manage e-waste programs is an emerging area of best practices in high tech manufacturing that HP is pioneering with impressive results (Varmazis, 2006). Assessing the impact of cross-functional teams in strengthening e-waste programs that encompass reverse logistics and DfE initiatives the following recommendations are offered. First, concentrate on the supply chain partnerships and relationships, defining standards of e-waste management and process controls to ensure components and assemblies are in line with increasingly higher standards of sustainability and compliance to global standards. These standards will be used throughout the product development process to ensure compliance to DfE standards as well. Second, define the supplier quality management audit standards and enforce them through supplier audits. Third, start creating a cross-functional team initially of the supplier quality management, engineering, finance, accounting, services, product management and marketing teams. This cross-functional team will be focused on managing the supplier-to-fulfillment processes inside manufacturing to ensure compliance to e-waste programs. Each of these functional areas have an impact on the level of production needed to meet demand, how much demand is created through marketing, and the services costs associated with them as well. Fourth, the corss-functional team needs to define its objectives for supply chain management and adherence to supplier audit criteria, in addition to defining how DfE objectives will be attained. This can be a time-consuming process and often is iterative in nature. Having the cross-functional team define these areas however gives them ownership of the process and leads to greater levels of success as a result. Fifth, have the cross-functional team define a balance scorecard to measure its performance over time. Have them also define the metrics that will be used on the balance scorecard as well. Once completed, post to the company Intranet site and have the data fed to the scorecard in real-time if possible. Sixth, have the cross-functional team concentrate on the PLM cycles and the new product development projects underway to infuse DfE design objectives into them while also coordinating with suppliers to ensure compliance. Seventh, have regular design and supplier audit meetings with the cross-functional teams to see if the compliance objectives for e-waste are being achieved. Eighth, concentrate on the measures of DfE compliance attained using real-time data feeds to accompol8ish this. This data set will be the “compass” that will guide the development of the DfE strategies over time throughout the PLM processes and systems over time. Ninth, create pro forma financial statements to measure monetarily the value of the reverse logistics and DfE intiatives on overall performance. Tenth, hold quarterly review sessions to evaluate the success of programs and look for areas of improvement.



Why Collaboration Is Essential for E-Waste Initiatives to Succeed

Put Cross-Functional Intelligence to Work in PLM Strategies





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Nike manufactures and markets sports Paper gcse history essay help

Nike manufactures and markets sports apparel and equipment on a global scale. They operate in 160 different countries, and have revenues of $18.6 billion. Yet, they are a growth company. Without any significant acquisition, they have consistently grown revenues and profits over the past several years by shifting emphasis on brands they own in growth sectors.

Nike’s marketing strategy revolved around two concepts – premium positioning and everyone with a body is an athlete. These concepts drive their strategies, including endorsements from the world’s most popular athletes, and the development of products for both the serious athlete and the mass market.

Financially, Nike is strong. They are liquid and are on a steady growth trajectory. They are, however, underleveraged. The company derives significant strength from its global production and logistics network. Despite this, the company faces many threats, both competitive and economic.

Nike is well-positioned to defend against these threats. Their move into growth sectors of the market shows savvy. It is recommended that their convoluted organizational structure to reduce operational duplication. They should also adjust their capital structure to make it more efficient. It may also be time for Nike to make a major acquisition, capitalizing on slumping equity markets to strengthen their defenses against economic downturn and competitive threats. If Nike is able to make these adjustments and strategic recommendations, they are in a good position to maintain their steady growth trajectory for years to come.


Nike is in a strong position to address these threats. It is recommended, however, that they take steps to shore up their operational efficiency. This may require a less convoluted organizational structure. The time may have come for Nike to make a major acquisition as well, to take advantage of depressed stock markets and strengthen their defenses against a maturing core market. By making a few operational adjustments and possibly an acquisition, Nike can continue on its growth trajectory for several more years

Nike was founded in 1968 and has grown into a global powerhouse. The companies designs, manufactures, markets and retails athletic footwear, apparel and equipment. Based out of Beaverton, Oregon, Nike today operates in 160 countries and has 32,500 employees. The company is involved in most sports, and also makes some casual footwear. Major competitors include Adidas, Puma, New Balance and Reebok. Nike sells products mainly under its own name, but also owns Umbro, a major soccer brand; Cole Haan, a casual wear subsidiary; Converse, another athletic brand; and Hurley, a player in the board sports industry.

In recent years, Nike has enjoyed substantial success. They have increase revenues, margins and profits consistently, expanding their market share in the process. Their Nike Golf, Cole Haan and Hurley lines have enjoyed tremendous success, the last two with record revenues last year. The firm has strong growth in several key emerging markets, such as China, Brazil and Russia. The company acquired premier soccer brand Umbro and is in the process of integrating that business into the Nike family. Nike has had a couple of failure, however. They have recently divested two of their businesses, Starter and Bauer. The latter, a major hockey equipment manufacturer, represented a major failure for Nike as they failed to make any headway into that sport, and the balance of power shifted towards Reebok, forcing Nike out of the business.

Nike’s revenues in 2008 were $18.6 billion. Of these revenues, 43% were derived from the United States market, and 57% derived from international markets. The U.S. market was worth an estimated $19.33 billion in 2006, giving Nike an approximate market share in the U.S. Of 41%. Nike characterizes itself as a growth company, a claim borne out in their net profit figures, which have increased steadily in the past few years. The company’s diluted EPS has increased 113% in the past five years.

Nike is the U.S. And global market leader in the broad category of athletic apparel. Nike has expanded its market share in recent years, and is the market leader in its six core businesses – basketball, running, football, men’s training, women’s training and sportswear.


According to the website, Nike’s corporate portal, the mission statement for Nike is “To bring inspiration and innovation to every athlete in the world.” Central to this mission is Nike’s definition of the term athlete. In the formative days of the company, co-founder Bill Bowerman defined athlete the following way: “If you have a body, you are an athlete.” That definition is at the heart of Nike’s business model, and has been central to their vision and consequently to their spectacular growth. Envisioning every person as an athlete changed the company’s perspective of their target market. This in turn laid out their growth potential, and guided product and marketing strategy development. Ultimately, this concept helped change the perspective of the American consumer with regards to the definition of the term. Nike’s ability to market its definition of “athlete” and its ability to consistently develop products that help bridge the gap between the traditional view and the Nike view has been critical to their ascendency as a major global apparel company.

Nike does not have a vision statement as such, but CEO Mark Parker illustrates the company’s vision in its 2008 Annual Report. Nike sees itself as a growth company, driven by innovation and industry leadership. Nike sees itself as deriving success from its immersion into each sport’s culture, building deep relationships with consumers that help to drive Nike’s innovation. The company has a strong vision of growth in the future, including further penetration of international markets, and the addition of more product lines. The firm views itself as defined by “epic moments” such as championships and individual triumphs, and their vision is to bring this power – the power of sport – to the mass market


Nike approaches its business with several key strategies. With regards to businesses, they focus their efforts on six main segments of the market. Their core groups amount to over 70% of the sports apparel industry in the United States. Each group operates autonomously, with its members immersing themselves in the sport and the culture. This is done to help them stay on the cutting edge of trends, and achieve first-mover advantages. Nike prefers to be an innovator of new product and design ideas, and views this is a central part of its business plan.

Nike has several key operational strategies. Procurement is focused on low-cost production centers. This helps Nike to develop high margins for their products. China is the largest producer of Nike goods, at 36%. This is followed by Vietnam (33%), Indonesia (21%) and Thailand (9%). In several countries, Nike produces footwear domestically. Production is widely dispersed, with the largest plant producing just 6% of footwear. All told, Nike uses nearly 700 factories in 52 countries.

Nike attains a degree of market saturation by retailing through multiple channels. They operate 260 of their own stores, but also retail through other athletic stores, department stores and other channels as appropriate. Nike has begun in recent years to increase licensing of its brand, extending its portfolio beyond athletic ware and expanding brand exposure.

Functional Points of Emphasis

Nike sees itself as an innovator in research and development, and views the field as an area where they can gain competitive advantage. Their strategy of cultural immersion allows them to get a sense of the direction in which a particular market is going. This information is then combined with product development teams. Nike uses a wide range of synthetic materials, along with natural rubber and leather. Technological development focuses on aspects of performance, durability, and weather resistance. The industry in the U.S. is trending towards casual wear, which should reduce Nike’s research and development costs as a percentage of sales, since this will decrease focus on the high-tech performance aspect of product development.

Nike has a multifaceted marketing strategy. A key aspect of their success is the use of celebrity endorsements. Elite athletes such as Michael Jordan and Tiger Woods have propelled Nike in their respective segments. The company prefers to build long-term relationships with these athletes. Jordan, for example, still works with Nike years after his retirement. The firm uses multiple channels to sell its products, including its own branded stores, resulting in a significant degree of market saturation. A recent move towards increased branding of non-athletic products has helped Nike increase its brand proliferation.

To facilitate sales, Nike operates several regional sales offices. They have 18 such offices in the United States. They also employ 6 independent sales representatives for specialty products like golf and skating. The company uses a mix of their own sales channels, plus independent distributors. For much of the world, Nike runs its sales operations in a manner similar to the way they run sales in the U.S. Over four dozen countries have their own sales offices.

Nike finances its growth through a balanced capital structure, with emphasis on retained earnings. They have a debt-equity ratio of 59%, of which long-term debt is just $441 million, or 9.5% of total liabilities. Their retained earnings, on the other hand, total $5.073 billion. The heavy use of retained earnings is partially explained by their view of themselves as a growth company. While they pay a dividend, Nike prefers to re-invest much of its profits back into expansion. They do not feel that the market has matured sufficiently to stop their aggressive growth strategy. Another consideration in their capital structure is the cost of capital. On account of its low volatility, Nike has a low cost of debt, approximately 6.8% using CAPM. Their long-term debt is primarily a revolving credit facility. The rate, based on their a+ rating, is LIBOR + 0.15%, which would equate to 4.12% based on the October 15th price of the 1-year LIBOR. If anything, Nike could become more financially efficient by increasing their use of debt financing.

Nike places strong emphasis on human resources. They have won several awards for their workplace environment and benefits. The company offers extensive athletic facilities, particularly at it Beaverton headquarters. Employees receive paid sabbaticals, and there is a job-sharing program. Consequently, Nike has positioned itself as an employer of choice, with applications in 2007 amounting to 1680% of their U.S. workforce.

Nike’s operations are spread widely throughout the globe. The organizational structure is a matrix. The company is broken down along functional lines. Sales offices are dispersed geographically. Furthermore, each of the six major product line segments receives its own unit. This complex structure is set up to leverage the benefits of close relationships between unit staff and their particular area of expertise. It requires, however, significant coordination. To date, Nike has been able to achieve the level of coordination and communication necessary to maintain such a structure. Nike’s ability to leverage benefits from this structure is a significant source of competitive advantage.

Nike’s information systems are moderately developed. The company has strong capabilities in transmitting and interpreting data. The systems are well-built for coordination among different units. Nike does not have sophisticated it needs, as their industry is relatively low on technological development. The exception to this is supply chain management. In this area, Nike is heavily dependent on sophisticate it systems.

With 700 production facilities and tens of thousands of retail outlets, Nike has complex logistics requirements. They have a complex transportation network that brings product from their facilities to their largest markets. Nike employs the use of large distribution centers to coordinate their shipping needs. Their suppliers are responsible for procurement to Nike specs. Sanctions, tariffs and other trade barriers account for many of Nike’s logistical challenges. To overcome these, they produce locally for some markets. In other markets, Nike has been forced to find alternate sources, such as was the case when the EU had significant trade restrictions on Chinese goods prior to China’s ascension into the WTO.

Organizational Assessment


Nike has several strengths from which it derives considerable competitive advantage. The first is the value of its core brand. The Nike brand has become established worldwide as a symbol of the athletic ware market. Nike is a market leader is many major countries, especially in its core U.S. market. The Nike brand is associated with quality, and represents the everyday approachability of athletic endeavor. Furthermore, the swoosh symbol is one of the world’s most recognizable trademarks. The company has been forced to defend this trademark vigorously, illustrating its value. Few if any competitors can match Nike’s brand recognition, especially on a global scale.

Another strength is their distribution network. Nike’s ability to manage its production costs is largely dependent on its ability to procure from locations around the world. A Nike production contract is lucrative, and prestigious. The company’s ability to effectively and efficiently manage its global logistics is one of its main competitive advantages. Additionally, the ubiquity gained by Nike’s use of multiple retail channels in the domestic market is facilitated by a robust ordering system and effective domestic logistics management.

The company’s secondary brands are another source of strength. With Umbro, they have a dominant brand in the world’s most popular sport. This will provide Nike with significant growth opportunities in many of the world’s emerging markets, and increase Nike’s market share in both emerging markets and Europe. The Cole Haan and Hurley brands are strong, recording record revenues and pre-tax incomes in fiscal 2008. The Converse brand also had a strong fiscal 2008-year. These secondary brands all form part of Nike’s ambitious growth strategy over the next few years.

Nike’s retail strategy is another source of strength. The Nike retail stores provide high visibility, while the network of other stores provides saturation. By making Nike products so widely available, the company has been able to facilitate their growth and dominant market share. Their large, established network of regional sales offices also contributes to this strength, as they enable the company to manage its logistics, and focus sales on regional trends. The ability of Nike to keep in tune with market developments has allowed them to consistently remain ahead of the market.

Nike’s ability to secure endorsements from the highest-profile athletes has been instrumental in their success. Athlete endorsements are a major component of marketing in the athletic wear industry. Some of Nike’s success can be directly attributed to their ability to sign athletes such as Michael Jordan, Kobe Bryant Tiger Woods and Roger Federer. So important are such endorsements that Nike abandoned the hockey market when Reebok signed Sidney Crosby.

Nike’s ability to consistently sign the most popular, successful and highest-profile athletes is a key strength that drives their marketing program.

For all its strengths, Nike does have several key areas of weakness. One is their capital structure. Nike has relied on retained earnings to drive their expansion. However, their cost of equity is higher than their cost of debt. In essence, Nike is paying too much for their investments. There are risks associated with increasing debt, and the ideal debt ratio will vary from firm to firm, but Nike’s current structure is inefficient. Moreover, their financial position is sufficiently strong that increasing debt and thereby lowering their cost of capital, would not pose any significant risks provided the increases were reasonable and incremental. In their 2008 annual report, Nike stated that improving working capital efficiency was one of their short-term goals.

Another weakness is cost duplication. This is a function of their complex matrix structure. Within this structure, there are areas of overlap, where two different units are performing essentially the same, or very similar tasks. For Nike, this reduces operational efficiency and unnecessarily increases costs. If the company can streamline its operations to eliminate duplication, it can lower these costs.

Another weakness is that Nike still experiences seasonality in its revenue streams. This can make matching of revenues and expenses difficult. More balanced revenue streams would help Nike improve its operational efficiency. Moreover, it highlights an overdependence on seasonal lines. As lucrative and successful as these lines are, Nike can improve its bottom line if it can better spread their revenue streams out over the year.

Lastly, Nike has a weakness in its ownership structure. The surviving co-founder, Phil Knight, is the beneficial owner of 90% of Class a shares, which if converted would give him 18% of Class B shares. This amount of ownership concentration presents a risk to shareholder value in that Mr. Knight has the capacity to significantly depress Nike’s share price should he choose to liquidate his holdings. Either a more balanced ownership structure or stronger anti-dumping provisions would better preserve shareholder value.

For such a dominant company, Nike has a significant number of opportunities available to it. The market for athletic apparel is not yet mature in the core U.S. market, and is still in a strong growth stage in many parts of the world. Moreover, Nike’s expansion to date has largely been confined to the athletic apparel industry. Both of these factors, as well as some internal factors, are responsible for the multitude of growth opportunities Nike has.

One important opportunity is casual wear. As of 2006, this was the second-largest component of the athletic apparel business, and those numbers do not even reflect aspects of casual wear that are so far removed from athletics as to be considered an entirely separate category. Of the five billion-dollar components of the sports apparel industry in 2006, casual wear was the only growth segment. Nike has entered the segment with Cole Haan, but does not have a commanding market share. There is substantial room for growth in this segment.

Overseas growth represents another significant market opportunity. Nike has an established presence in 160 nations worldwide and sales office in over 50. Other than Canada, international markets are in various stages of growth from nascence to rapid growth. Due to Nike’s established presence overseas, these markets represent a significant long-term growth opportunity. Nike can leverage the celebrity power of its internationally recognized stars to promote the growth of its core sports, particularly basketball and golf. Nike apparel sales will piggyback overall growth in these sports worldwide.

Nike still has opportunities to improve its internal operations. In particular, they can expand their advantages in supply chain management. Already a source of competitive advantage for Nike, they can build upon their existing strengths through further investment in it, and continuing to shift production to the lowest-cost sources. They must also be proactive in responding to the challenges that stem from fuel price shocks, which represent a long-term risk considering the extent to which Nike is reliant on global transportation networks.

There are many threats to Nike’s market dominance and its profitability. One threat is increasing competition. This owes to several factors. Few of Nike’s competitive advantages are genuinely sustainable. Competitors realize this, and can adopt or mimic many of Nike’s defining traits. Also, there has been some consolidation in the industry. This naturally increases the intensity of competition. Another factor increasing competitive intensity is that some of the largest apparel markets and segments are showing signs of slowing growth. Companies will inevitably compete more intensely if there is no growth in the marketplace. Also, because Nike is the world leader in the industry, they are a natural target for competitors seeking to steal market share or establish themselves.

Increasing transportation costs represent another threat to Nike. Though the price of oil has declined significantly in the past few months, the spike that occurred from February to July is representative of a future filled with oil price shocks. Many analysts believe the world is at or past peak oil, meaning most reserves have already been discovered. The implications for a firm like Nike that has extensive global logistics systems if significant. As fuel prices rise, transportation costs will increase the cost of goods sold, decreasing margins. Nike’s entire production and logistics system has been developed around easy, cheap global shipping, and rising fuel prices are a threat to this underlying assumption.

Nike is also threatened by a drop-off in any of their core competencies. The company’s astonishing success has been the result of a confluence of factors. Essentially, Nike is very good at a lot of different things. Should they experience a reduction in their research and design effectiveness, disruptions in their production and distribution network, or experience an inability to procure top-level endorsement talent, the company would be weakened. While it would take a catastrophic set of circumstances to cripple the company, to falter in any of its key areas of strength would reduce profitability and create opportunity for a competitor to steal market share.

As their products are positioned at a premium level, Nike is susceptible to economic slumps. Leading indicators predict economic slowdown in the United States and other developed markets, if not outright recession. Typically, in tough economic times, consumers reduce their spending. The more premium a brand’s position is, the more they suffer the impacts of economic downturn. Nike is only positioned at a moderately premium level, but they are still subject to suffering on account of prolonged economic slump or recession. This is especially important in light of the fact that the company is positioned as a growth firm, with optimistic targets and price/earnings ratio that indicates some expectation of growth in the market. The slumping economy represents a significant threat to shareholder value.

As with any international company, Nike is susceptible to exchange rate risk. That 43% of Nike’s revenues are from the U.S., but almost all of its production is overseas represents significant exchange rate exposure. This exposure is made worse by the fact that America’s high dependency of foreign oil essentially ties the value of the U.S. dollar to the price of oil, in an inverse relationship. The volatility of oil prices of late has been matched by a high degree of volatility in the dollar. This impacts the bottom line because it makes it more difficult to implement adequate hedging programs. As a result, Nike is not able to genuinely hedge their exchange rate exposure, and that could have a damaging impact on their bottom line.

Another threat to Nike, in particular with respect to their growth potential in emerging markets, is the threat represented by counterfeiting. Intellectual property laws in two of Nike’s major emerging markets, China and Russia, are notoriously porous and what laws do exist are seldom enforced. Counterfeits in these countries and others reduce Nike’s market share potential, adversely impact its price points, and reduce the value of its brands.

Even in more developed markets, Nike has been forced to vigorously defend its brand and the swoosh trademark.

Strategy Analysis

Nike has adopted a broad differentiation strategy. They have a broad range of buyers, and have attempted to differentiate themselves in the marketplace. The broad buyer range stems directly from their definition of “athlete.” This fundamental approach has encouraged Nike to develop products for a broader range of consumers than was common for athletic apparel companies when Nike was starting. As they expand further into casual wear, this broad segmentation becomes even more evident.

Over the years, Nike has attempted to differentiate itself from its competitors. Despite being a mass market company, Nike has taken the approach of being a market leader and innovator. They have pursued numerous avenues for differentiation. One example is the six core product line groupings that they have. This allows Nike to maintain a strong, direct focus on each of those lines. From this flows another point of differentiation, the premium positioning. Nike has positioned themselves above most of their competitors. This has been done both with premium pricing and with endorsements. Nike’s endorsement strategy has been to sign deals with the most elite athletes and leverage those deals by producing an enormous body of advertising and promotion featuring those athletes. By using the best, Nike connotes that image of itself as the best.

Another point of differentiation for Nike is that of a company uniquely dedicated to sport. From the athletic facilities at their head office, their athletic-related human resource policies, event sponsorships, and marketing that speaks directly to the desires of the everyday athlete, Nike has cultivated an image of a firm completely dedicated to their craft, and that of their customers as well.

The number of differentiation points for Nike is essential. None of these points is entirely unique to Nike, and certainly none of them are sustainably unique. In order to achieve the premium differentiation they seek, Nike has no choice but to build a portfolio of differentiating factors. This provides some insulation in that competitors cannot simply match them in one area, they must match Nike in all of the areas. Failure to do so will allow Nike to maintain its differentiation.

Policy Analysis

Nike’s corporate direction is strong, and well-suited to their industry conditions. Nike views itself as a growth company. The industry in the United States grew slowly in 2006, just 2.5%, but there are some strong growth sectors. The skateboarding sector grew 45.1% that year. Casual wear grew 4.5%. These two segments are represented by fast-growing Nike subsidiaries. This is facilitated by Nike’s growth outlook. They could be complacent in their stagnant core markets, given their dominant market position, but instead they are investing heavily in growing market sectors.

According to the 2008 Annual Report, the main thrust of Nike’s strategic focus over the next year will be operational efficiency, by making improvements in their production and distribution networks, optimizing their capital structure, and implementing other cost-reduction tactics. Given that their core market is headed towards maturity, Nike’s cost-reduction and product differentiation strategy is appropriate.

Business Ethics

Nike has a strong record of ethical practices. They have won numerous awards for their corporate citizenship. These include being named one of the world’s most ethical companies by Ethisphere Magazine; one of the world’s top sustainable stocks by Sustainable Business magazine; and #3 in Best Corporate Citizens by CRO Magazine. The company has carved some unique philanthropic paths, such as Girl Effect.

Social Responsibility

Nike is considered by unbiased observers to be a socially responsible firm. As with any highly visible company that operates production centers overseas, Nike has been a target, however. The core of the complaints about Nike factories seems to be that the work is dull and the conditions unpleasant, which is consistent with factory work anywhere at any point in history. Nike has a code of conduct for all of its suppliers. They work with the Global Alliance to monitor their factories, and have maintained plants in Taiwan and South Korea despite rising wages and working standards that make those plants less cost-competitive.

Practices and Procedures

Nike has a set of codes of conduct, and ethical codes. The company has demonstrated that it takes social responsibility and philanthropy seriously. They have been free from any accounting scandal or any major ethical issue in the past decade. In founding and financing the Global Alliance for Workers and Communities, Nike has done more for worker rights than most companies in its position.

Financial Analysis

An analysis of Nike’s income statement reveals significant financial strength. Top line revenues have increased an average of 10.4% over five years. Their gross margin is 45.67%, an increase over the 43%-ish range they have held for the past several years. Nike’s other margins are equally strong, outperforming the industry and sector averages significantly. They have improved their operating margin and net margin over the past five years, indicating a pattern of not only sustained revenue growth but sustained margin growth at all levels. Over the same period they have decreased their tax rate from 34.7% to 24.75%. The result of these improvements has been a substantial increase in earnings per share. Their EPS is $3.73, whereas five years ago it was $1.79, an improvement of 21.6% per year. On the whole, Nike’s income statement reveals a company that has been able to build significant revenue increases and cost reductions, despite a maturation trend in its core markets.

Nike has a very strong balance sheet. They carry a limited amount of debt, mostly short-term. Their long-term debt consists of a revolving line of credit, priced 0.15% above LIBOR. Nike’s debt ratio is 37.1% and their debt-to-equity ratio is 58.9%. If anything, Nike is underleveraged, and could increase the efficiency of their capital structure by increasing their long-term debt. Over the past five years, they have held their debt at a relatively stable level, although long-term debt as a percentage of total debt is less than half of what it was five years ago.

Since Nike has little debt, it is a very liquid company. Nike’s current ratio is 2.70; their quick ratio is 1.96; and their cash ratio is 0.642. All of these figures are well above industry and sector averages. The current ratio is similar to where it was five years ago, but the quick and cash ratios are much higher today, because Nike has shifted the weighting of its current assets, increasing cash as a percentage and decreasing inventories. Nike’s inventory turn is merely average, at 4.57 times, slightly less than the sector averages.

An examination of Nike’s cash flow reveals steady growth, but at a slower rate than is found on the income statement. Cash flow from operating activities has increased steadily over the past five years, but at 5.5% per year, a much slower rate that either revenues or net income. Nike’s overall cash flow has been generally strong, however, with 2007 and 2005 being the strongest recent years. Of note is that Nike has in the past five years retired almost $2.6 billion of its stock. The company has steadily increased its dividend over this time as well. Despite that, the dividend yield remains low, reinforcing the company’s commitment to growth.


Proposed Future Strategies

Nike has enjoyed success in expanding their product mix in recent years. The Cole Haan and Hurley brands have been huge, and their recent purchase of Umbro gives them another strong core brand around which to build. In terms of product mix, Nike should leverage their investment in Umbro to expand their soccer-related mix over the next few years. Another recommendation in terms of product mix would be to move towards more adventure sports apparel. Hurley represents a move in that direction. Nike should follow that move by extending their roster in that direction, moving into more REI-type segments of the market.

Marketing has always been one of Nike’s strengths. Their strategies and execution over the past several years leave little to be desired. The most important thing for Nike in terms of marketing is to stay the course. They will need to find a new top-line athlete or two to help support Umbro, and likewise could improve the prestige of their Hurley athletes, but otherwise making significant changes to Nike’s marketing is not recommended.

Nike’s technological development is focused on its logistics and production management functions. They have been able to forge a competitive advantage out of their it in these areas. More emphasis should be placed on it development in this area, to help deal with the challenges of an environment subject to fuel price shocks that are likely to increase in frequency and intensity.

Nike’s distribution network is strong, but there is room for improvement. The biggest risk factor is the cost of transportation, which threatens to negate some of the cost savings accruing from overseas production. It is proposed that Nike begins now to develop long-term strategies to bring production centers closer to their major markets, shortening the distribution chain and reducing costs in the process.

Nike faces several critical strategic threats. The company has managed these threats well thus far. However, Nike is facing maturation of its core U.S. market. Mitigating the effects of this will require several operational thrusts. One is continued cost reduction. Another is revisiting its manufacturing strategy, to see if there are cost savings to be found at that level, even if it means shifting the geographic focus of production. Nike must also consider shifting the balance of competition in their business.

In terms of alliances, Nike is in a position to be a buyer. The natural course of a maturing market is increased consolidation. Nike should consider taking advantage of the slumping equity markets to take out one or two key competitors, thereby building market share and reducing competition. At present, they run the risk of having their size advantage negated, should their smaller competitors begin to merge. An acquisition at this time would give Nike sufficient size to ward off any future threats. Additionally, the timing is good now. With stock prices at a low ebb, they may be able to find a bargain.

Another policy that should be adopted is to increase aggressiveness in defending their trademark. Their name and marks have substantial value, yet are subject to extensive counterfeiting. With 700 factories, it is reasonable to assume some of them are involved. Worse, counterfeiting is epidemic in two of Nike’s most promising emerging markets, Russia and China. Nike needs to step up its efforts in dealing with the authorities in these countries regarding their intellectual property rights, especially in China which is responsible for 36% of Nike’s production.

Required Changes

Nike’s organizational structure is complex, comprised of a variety of operating groups based on brand, geography and sport. It is recommended that Nike streamline its organizational structure. The different components of the matrix overlap at times, creating cost inefficiencies and increase the risk of command chain confusion. Nike should move towards a structure where the sport groups are subordinated, and the matrix only features brands and geography. Functional roles would then be run by each brand. This structure will still require corporate oversight from head office, but would be simpler to manage. The sport departments have proven valuable, but subordinating them cleans up the structure, while allowing them to continue their valuable marketing work.

In the United States, Nike has a well-develop corporate culture that suits its needs. They have been named as one of the top 100 places to work by Fortune magazine. The main cultural issue that Nike faces is that with regards to their overseas suppliers. Nike could assuage many of the complaints about the working conditions at their suppliers’ factories by instilling some of the Nike culture into those workplaces. The major obstacle is that these factories produce goods under a variety of brands, not all of which are Nike. However, Nike has the opportunity to generate significant goodwill by instilling their powerful culture in these workplaces.

In terms of resources, Nike’s expansion plans will require financing. It is recommended that in the near time Nike improve their capital efficiency by using debt to finance some of this growth. This will lower Nike’s cost of capital, and increase their debt ratio. Another resource issue for Nike regards global procurement. The company has considerable flexibility in their procurement and it is recommended that they bring some of their production closer to their markets, in order to hedge against fuel price volatility. They must also hedge against exchange rate risk, since the U.S. dollar’s value is inversely proportional to the price of oil, and crude prices are highly volatile and subject to major shocks.

Policy-wise, Nike should continue its focus on growth, but should adopt a much larger strategic shift towards growth by acquisition. Many of their core markets are maturing, which will result in an increase in the intensity of competition. The implications of this for Nike are that their competitors will eye the merger and acquisition route as a means to counter Nike’s dominant market size. Acquisition of a major competitor could deal a death blow the aspirations of all other players in the market.

Another policy that Nike should adopt is to leverage Umbro’s image and distribution channels to help grow many of Nike’s other brands. Some of their brands have little strength outside of the U.S., meaning that they have good growth potential in other parts of the world. Nike should capitalize on soccer’s global appeal to help move products in their other lines.

Conclusion and Summary

By all accounts, Nike is a very well-run company. They have strong financials, a dominant market position, and a strong track record of growth. They are an employer of choice, and have developed a model that has allowed them to maintain a premium position in the face of intense competition. Nike has few weaknesses, and none of them are a significant threat to their operations, profits or growth. They must, however, address several key threats in their external environment if they hope to achieve their growth objectives.

Nike’s core strengths are in its production/logistics, and in its marketing. That base assessment, that what Nike is best at is making products and selling them, reveals a simplicity in their strategy that belies their complexity. There is nothing simple in managing 700 suppliers and bringing their output to 160 countries through all manner of different retail channels. Nike’ operational systems are at the core of their sustained success.

In terms of marketing, Nike is a phenomenon. They own one of the most widely-recognized trademarks in the world. At the core of their marketing success has been their ability to secure endorsements from the world’s most successful and popular athletes. Yet the reason for their dominance lies in their core view of an athlete. This conceptual shift, that everyone with a body is an athlete, has driven them to the mass market, and allowed for them to consistently find new markets for their products.

Nike still views itself as a growth company. There are still opportunities on the table for Nike, and they are poised to exploit them. Yet, there is room for operational improvement as well. The company’s structure is unwieldy and prone to duplication. Their capital structure is inefficient. They have a roster of new and emerging brands whose power has yet to be leveraged on the global scale.

Thus, Nike can be a growth company. They will face numerous challenges to their ambitions in the next few years. Global economic instability, fuel price shocks, and intensifying competition as their core markets mature all put Nike’s growth trajectory at risk. They may be forced to acquire a competitor in order to solidify their position, or they may be able to achieve their goals simply through adjustments to their operations that trim fat and reduce duplication. In either case, Nike is well positioned to face these challenges, a result of their operational strengths, solid financial position and marketing prowess.

Works Cited

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Some financial information, ratios from Reuters. Retrieved October 21, 2008 at

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Reuters, retrieved October 21, 2008

Cohen, Marshal (2007). USA: Athletic footwear is significant portion of overall footwear market. Fibre 2 Fashion.

2008 Annual Report

Baker, Mallen. (2008). Nike.