Assignment 1 - BCG Matrix
Dustin Gregoire
Professor Xu
BUS 260
Thursday, February 7, 2019
BCG Matrix - Nike
What’s the point of using the BCG matrix? The BCG matrix is very useful for companies to analyze their business brand portfolio, its potential, and adjusting their strategies to reach their business goals. Some of these strategies might be to discontinue a less popular item or increase production on a rising star. In this BCG matrix, one will find multiple Nike products. Why Nike? Personally, I prefer Nike products over the other competitors. In addition to this, I’ve always thought that the Nike brand was very well advertised, along with having an amazing social media presence. That leads me to why I am researching more into Nike. From the type of items Nike produces, I will be analyzing the Nike Footwear line, the Nike Apparel line, and lastly the Nike Equipment line. I used information from Nike’s 2016 & 2017 annual reports, along with annual reports from 2017 made by Adidas, Puma, and Under Armor.
Before looking at the BCG matrix I produced for Nike’s three production lines, one should understand what the four symbols in the matrix mean. Stars are on the top right of the graph, cash cows on bottom right, question marks on top left, and lastly dogs on bottom left.
Stars: Has a high-growth market and a high market share. These products require more resource investments. Over time, stars can transition to become cash cows.
Cash Cows: Has a low-growth market and a high market share. Due to already receiving heavy investment, cash cows typically have excess resources that can be used on question marks.
Question Marks: Has a high-growth market but low market share. These products tend to require high resources in order to maintain and have a chance to increase their market share. Two choices face question marks: invest from cash cows in hopes of making these products stars, or discontinue them?
Dogs: Has a low-growth market and low market share. Despite being able to sustain themselves, dogs typically are phased out unless they boost sales for another product or stay competitive with rival companies.
With these basic terms defined, here is the BCG matrix for Nike’s three lines: footwear, apparel, and equipment. Data was collected from the annual reports of Nike, and their closest competitors, Adidas, Puma, and Under Armor. All annual reports were from 2017, with the exception of using a 2016 annual report for Nike as well.
Nike specializes in footwear, apparel, and equipment. Their rivals similarly are all in the same lines of business. Two of Nike’s most popular lines, footwear and apparel, find themselves in a healthy spot in-between question marks and stars. This means that both Nike Footwear and Nike Apparel have high-growth markets and are high market share products. Nike Footwear has a market share of 54.83%, with it’s closest competitor, Adidas, at 36.65%. Nike Apparel is similar, with a 41.33% market share with it’s closest competitor, also Adidas, at a 37.61% market share. In addition, both growth rates for the footwear and apparel lines are promising, with the former having a 6.09% market growth and the latter with a 6.47% market growth. Investing in such products would be a good idea for Nike and to investors. One can see this happening in real life, with Nike investing in advertising with celebrities such as Michael Jordan, Derek Jeter, and LeBron James, for their footwear and apparel lines. It’s clear however, that Nike Footwear and Nike Apparel both provide huge profits for Nike: $21,081,000,000 from footwear and $9,654,000,000 from apparel in 2017 alone.
Moving onto the third and final product line, it appears Nike Equipment is considered more of a dog than a cash cow. This is because of their low-growth market rate and their medium market share. Nike Equipment has a market share of 36.82%, with their closest competitor, Adidas, not being that far behind with a market share of 30.59%. The fact that the equipment line is not as dominant as the other two lines are, coupled with the disappointing -4.75% market growth decrease, leaves a lot to be wanted. The way that Nike Equipment is placed on the chart could also leave it close to becoming more of a dog, but only if the market share of the product line goes down over time as well. If Nike sees it fit, they could consider using some resources that would have been used for Nike Equipment and shift it towards other products they might have in the works. In my opinion, I believe Nike should invest more in their equipment line, and perhaps make it as iconic as their apparel line is.
When it comes to the general sportswear industry, Nike seems to be leading it very comfortably. Revenue-wise, combining footwear, apparel, and equipment totals, Nike leads it’s closest competitor, Adidas, by $8,097,747,980 which is about a 33% revenue growth. Nike should, in my opinion, keep using their profits to widen the gap between them and Adidas by signing more famous athletes, and reaching out to new demographics with social media. The BCG matrix is very useful for a company like Nike to see which of their product lines excel and which ones need more evaluation.
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DATA:
https://s1.q4cdn.com/806093406/files/doc_financials/2017/ar/docs/nike-2017-form-10K.pdf 24/85
Nike Footwear (2017): $21,081,000,000 / 38,450,491,450 = 54.83% market share
Nike Apparel (2017): $9,654,000,000 / 23,360,916,500 = 41.33% market share
Nike Equipment (2017): $1,425,000,000 / 3,870,147,271 = 36.82% market share
https://s1.q4cdn.com/806093406/files/doc_financials/2016/ar/docs/nike-2016-form-10K.pdf 23/85
Nike Footwear (2016): $19,871,000,000
Nike Apparel (2016): $9,067,000,000
Nike Equipment (2016): $1,496,000,000
Nike Footwear (2016 -> 2017): (21,081,000,000 / 19,871,000,000) * 100 = 6.09% market growth
Nike Apparel (2016 -> 2017): (9,654,000,000 / 9,067,000,000) * 100 = 6.47% market growth
Nike Equipment (2016 -> 2017): (1,425,000,000 / 1,496,000,000) * 100 = -4.75% market decrease
https://www.adidas-group.com/media/filer_public/6a/69/6a690baa-8430-42c5-841d-d9222a150aff/annual_report_gb-2017_en_secured.pdf 107/238
Adidas Footwear: $14,092,839,350 / 38,450,491,450 = 36.65% market share
Adidas Apparel: $8,785,485,350 / 23,360,916,500 = 37.61% market share
Adidas Equipment: $1,183,927,320 / 3,870,147,271 = 30.59% market share
https://annual-report-2017.puma.com/wp-content/uploads/PUMAGB2017_EN.pdf 123/127
Puma Footwear: $2,238,812,100
Puma Apparel: $1,634,310,150
Puma Equipment: $815,381,951
http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_UAA_2017.pdf 46/116
Under Armor Footwear: $1,037,840,000
Under Armor Apparel: $3,287,121,000
Under Armor Equipment: $445,838,000
Professor Xu
BUS 260
Thursday, February 7, 2019
BCG Matrix - Nike
What’s the point of using the BCG matrix? The BCG matrix is very useful for companies to analyze their business brand portfolio, its potential, and adjusting their strategies to reach their business goals. Some of these strategies might be to discontinue a less popular item or increase production on a rising star. In this BCG matrix, one will find multiple Nike products. Why Nike? Personally, I prefer Nike products over the other competitors. In addition to this, I’ve always thought that the Nike brand was very well advertised, along with having an amazing social media presence. That leads me to why I am researching more into Nike. From the type of items Nike produces, I will be analyzing the Nike Footwear line, the Nike Apparel line, and lastly the Nike Equipment line. I used information from Nike’s 2016 & 2017 annual reports, along with annual reports from 2017 made by Adidas, Puma, and Under Armor.
Before looking at the BCG matrix I produced for Nike’s three production lines, one should understand what the four symbols in the matrix mean. Stars are on the top right of the graph, cash cows on bottom right, question marks on top left, and lastly dogs on bottom left.
Stars: Has a high-growth market and a high market share. These products require more resource investments. Over time, stars can transition to become cash cows.
Cash Cows: Has a low-growth market and a high market share. Due to already receiving heavy investment, cash cows typically have excess resources that can be used on question marks.
Question Marks: Has a high-growth market but low market share. These products tend to require high resources in order to maintain and have a chance to increase their market share. Two choices face question marks: invest from cash cows in hopes of making these products stars, or discontinue them?
Dogs: Has a low-growth market and low market share. Despite being able to sustain themselves, dogs typically are phased out unless they boost sales for another product or stay competitive with rival companies.
With these basic terms defined, here is the BCG matrix for Nike’s three lines: footwear, apparel, and equipment. Data was collected from the annual reports of Nike, and their closest competitors, Adidas, Puma, and Under Armor. All annual reports were from 2017, with the exception of using a 2016 annual report for Nike as well.
Nike specializes in footwear, apparel, and equipment. Their rivals similarly are all in the same lines of business. Two of Nike’s most popular lines, footwear and apparel, find themselves in a healthy spot in-between question marks and stars. This means that both Nike Footwear and Nike Apparel have high-growth markets and are high market share products. Nike Footwear has a market share of 54.83%, with it’s closest competitor, Adidas, at 36.65%. Nike Apparel is similar, with a 41.33% market share with it’s closest competitor, also Adidas, at a 37.61% market share. In addition, both growth rates for the footwear and apparel lines are promising, with the former having a 6.09% market growth and the latter with a 6.47% market growth. Investing in such products would be a good idea for Nike and to investors. One can see this happening in real life, with Nike investing in advertising with celebrities such as Michael Jordan, Derek Jeter, and LeBron James, for their footwear and apparel lines. It’s clear however, that Nike Footwear and Nike Apparel both provide huge profits for Nike: $21,081,000,000 from footwear and $9,654,000,000 from apparel in 2017 alone.
Moving onto the third and final product line, it appears Nike Equipment is considered more of a dog than a cash cow. This is because of their low-growth market rate and their medium market share. Nike Equipment has a market share of 36.82%, with their closest competitor, Adidas, not being that far behind with a market share of 30.59%. The fact that the equipment line is not as dominant as the other two lines are, coupled with the disappointing -4.75% market growth decrease, leaves a lot to be wanted. The way that Nike Equipment is placed on the chart could also leave it close to becoming more of a dog, but only if the market share of the product line goes down over time as well. If Nike sees it fit, they could consider using some resources that would have been used for Nike Equipment and shift it towards other products they might have in the works. In my opinion, I believe Nike should invest more in their equipment line, and perhaps make it as iconic as their apparel line is.
When it comes to the general sportswear industry, Nike seems to be leading it very comfortably. Revenue-wise, combining footwear, apparel, and equipment totals, Nike leads it’s closest competitor, Adidas, by $8,097,747,980 which is about a 33% revenue growth. Nike should, in my opinion, keep using their profits to widen the gap between them and Adidas by signing more famous athletes, and reaching out to new demographics with social media. The BCG matrix is very useful for a company like Nike to see which of their product lines excel and which ones need more evaluation.
-----------------------------------------------------------------------------------------------------------------------------
DATA:
https://s1.q4cdn.com/806093406/files/doc_financials/2017/ar/docs/nike-2017-form-10K.pdf 24/85
Nike Footwear (2017): $21,081,000,000 / 38,450,491,450 = 54.83% market share
Nike Apparel (2017): $9,654,000,000 / 23,360,916,500 = 41.33% market share
Nike Equipment (2017): $1,425,000,000 / 3,870,147,271 = 36.82% market share
https://s1.q4cdn.com/806093406/files/doc_financials/2016/ar/docs/nike-2016-form-10K.pdf 23/85
Nike Footwear (2016): $19,871,000,000
Nike Apparel (2016): $9,067,000,000
Nike Equipment (2016): $1,496,000,000
Nike Footwear (2016 -> 2017): (21,081,000,000 / 19,871,000,000) * 100 = 6.09% market growth
Nike Apparel (2016 -> 2017): (9,654,000,000 / 9,067,000,000) * 100 = 6.47% market growth
Nike Equipment (2016 -> 2017): (1,425,000,000 / 1,496,000,000) * 100 = -4.75% market decrease
https://www.adidas-group.com/media/filer_public/6a/69/6a690baa-8430-42c5-841d-d9222a150aff/annual_report_gb-2017_en_secured.pdf 107/238
Adidas Footwear: $14,092,839,350 / 38,450,491,450 = 36.65% market share
Adidas Apparel: $8,785,485,350 / 23,360,916,500 = 37.61% market share
Adidas Equipment: $1,183,927,320 / 3,870,147,271 = 30.59% market share
https://annual-report-2017.puma.com/wp-content/uploads/PUMAGB2017_EN.pdf 123/127
Puma Footwear: $2,238,812,100
Puma Apparel: $1,634,310,150
Puma Equipment: $815,381,951
http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_UAA_2017.pdf 46/116
Under Armor Footwear: $1,037,840,000
Under Armor Apparel: $3,287,121,000
Under Armor Equipment: $445,838,000
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