Essay on Introduction to Long Term Financial Planning

During the ten years of steady growth the brand’s sales rose to $21 billion, making it the largest sporting goods manufacturer in the world earning 30% more than its nearest competitor, Adidas. Today, Nike’s strategic goals include affirming and strengthening of the company’s position as the number one manufacturer of sports equipment in America, taking a strong position in new dynamic markets, moving in the direction of expanding the number of served international markets, improving profitability through better inventory management and product quality (Shoesgroups, 2010). In this paper, we aim to reveal the ways Nike organizes its financial planning, in particular regarding the achievement of company’s long-term financial goals, as well as assess the effectiveness of such approach to long-term planning.

Thus, the mission of Nike is to awaken the desire of all who are interested in sports (Nike Inc., 2012). Nike Company continues to promote an active lifestyle and develop a line of accessories designed for doing sports. While the mission gives general guidance, direction of the organization’s activity, the goals are specific conditions of the individual characteristics of the organization, the achievement of which is desirable for it in the course of its activities. The objectives of the organization are divided into long-term, medium-term, short-term:

Nike’s long-term goals: increasing the share in sportswear market and grow to $23 billion by the end of 2015 (Shoesgroups, 2010; Nike Inc., 2012).

Nike’s medium-term goals: improving the quality and convenience of clothes through the introduction of new technologies and developments.

Nike’s short-term goals: reduction of production costs.

Under the contemporary condition in the market, setting of such long-term goals is particularly important for the company. Though Nike has recently gained significant revenues and reputable place in the sportswear segment, in the game of brands “he biggest” rarely means “the best.” In this game, niche players are actively cut circles around the lumbering giants – particularly sluggish in the digital world. Such upstarts as Under Armour and Lululemon have already got a rapidly growing audience, and smaller players such as Quiksilver and Vans have made a career based on a new generation of teenagers. Not to mention the fact that the merger of Adidas and Reebok in 2006 brought a new serious opponent to the arena. Therefore, in its financial planning the company has chosen the approach of investing in innovative technologies in both production and marketing in order to reach the increase of the share in the sportswear market.

For instance, in high-technology production, the company is now paying special attention to the development of Nike Digital Sport – the new unit established in 2010. In particular, it deals with the development of devices and technologies that enable people to conduct their own statistics, regardless of what sport they are engaged in. The most famous product created here is called Nike+: a sensor which tracks the personal performance of each sportsman developed together with Apple (Strategic coopetition of global brands, 2011). At present the invention is tested by about five millions of runners. Recently, Digital Sport released its first device based on the development of Nike+: FuelBand bracelet counting energy loss during exercise. High hopes are also pinned on Nike+ Kinect Training exclusively presented on Kinect for Xbox 360 as elite level home training developed by NIKE and Microsoft team (Nike Inc., 2012).

In their turn, the company’s spending on television and print advertising in the U.S. over the past three years decreased by 40% – despite the fact that Nike’s overall marketing budget has been steadily increasing, and reached a record $2.4 billion last year (Cendrowski, 2012). Instead of advertising campaigns of the 80’s, promoting products labeled with the well-recognizable mark, Nike now has an extensive repertoire of interactive elements that allow the company to communicate directly with consumers – whether it’s a bracelet that counts the energy loss, the billboard in the size of a 30-storey building in Johannesburg projecting the messages from the Nike fans on Twitter, or a promotional video filmed by the Oscar nominee and shown for the first time not on TV in prime time, but on Facebook.

According to experts, Nike believes that in its further long-term financial goals it will be able to do without any major advertising campaign on television. The reason is simple: Nike follows the consumer: and it is a 17-year-old teenager who spends on shoes 20% more money than an adult, and he prefers surfing the Internet communities to watching TV. Nike not just thinks that it will cope without television: the company says that the digital world allows it to be as close as possible to its customers – this is the main strategy of Nike.

In 2010 the company spent about $ 800 million to “non-traditional” advertising (Cendrowski, 2012). According to Advertising Age, this advertising budget is much higher than those allocated to advertising by other American brands. The company has hired dozens of new engineers, so they developed a technology for online interaction. Also, the brand has decided to reconsider its sponsorship of the World Cup and the Olympics (over $ 100 million) and concentrated all efforts on advertising campaigns on the Internet. The result of these efforts is amazing. So far, Nike’s maximum audience while watching matches of the World Cup was 200 million people. Now, considering all sites and all pages of the social networks, this number is growing daily (Cendrowski, 2012; Nike Inc., 2012).

In this way, it could be said that people at Nike have their fingers on the pulse of time and are closely monitoring consumer’s preferences. With the improvement of its art to promote the brand, the company turned its face to the world where there is less talk and more actions, to the world which, if you think about it in this way, could change everything. Further investment of Nike in technology and marketing innovations are supposed to bring significant revenues and contribute to achieving long-term goals of increasing its market share in the conditions of severe competition in this segment.