In this article, let's take a look at NIKE, Inc. (NKE), the giant in the sport business, and see if this is an appealing investment opportunity or not.
Nike is the strongest player in the industry, and we all know this top position is not easy to maintain because the industry has evolved steadily over the past four or five decades. Moreover, the competition is high with few barriers to entry, which means that well-known brands or new competitors could grow quickly helped by innovation. In such scenario, the only way is to reach differentiation to justify higher prices. Among the reasons for this admirable position, three of them are: size, brand image and competitive advantages. I believe the company will maintain its leadership because it plans to continue making efforts to innovate with focus on marketing campaigns as well as distribution strategies. For example, the improved version of Nike Flyknit Free, situated Nike in a higher level. All the above are drivers for long-term growth of the company. Furthermore, in this industry there is something that is true: higher innovation means higher prices. The company also plans to lower costs through supply chain and reaching efficiencies could have greater impact in margins. Also, propaganda strategy with top athletes generates consumer confidence and long-term credibility to the brand. Continue Reading »