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Hello, dear readers of Valery Kharlamov’s blog! In 1993 Phil Knight, the founder of Nike, was declared the most powerful person in the world of sports. And this was the first time that a person received such a title not for sports merit, but for the quality production of equipment and shoes. The history of Nike is very interesting, with ups and downs, as, in principle, it should be in the world of big business.
History
The first business of the founders of the company
It all started in 1960, when founders Phil Knight and Bill Bourman felt the lack of quality shoes. Knight was a runner for the University of Oregon, and as a student, he couldn’t afford the then current Adidas brand. The price for them was too high, but it was necessary to perform, and not just to compete, but to win. And Bill was his trainer, so the problem of good and affordable equipment also worried him. Local companies provided their products at quite good prices, but they were not at all suitable for competitions and intensive training, falling apart almost immediately and causing severe muscle pain.
One day, while looking for the right “running shoes,” as they used to be called, Phil realized that at the moment he owns the world of Adidas and Reebok sports shoes, and there is no other alternative available to them. Therefore, the niche of quality products at average, real prices is free. So he decided to create his own business, but for the first time he did not have enough finances. And since the idea was actively supported by Bill, they jointly organized a company, giving it the name Blue Ribbon Sports.
In 1963, Phil found Onitsuka in Japan and entered into an agreement with them to supply running shoes at a very reasonable price. By the way, at that moment, Blue Ribbon Sports was not officially listed anywhere, since it did not exist yet, but Knight managed to sign as its head. The first sales were made from a van, because the guys did not have money to open their own store. They made $8 in a year, which was a significant amount at the time. For example, Adidas sneakers were sold for $30, and goods from local stores for $5.
The emergence of the name and logo
In 1964 they invited Jeff Johnson, a successful sales manager, to join. He did not like the name at all, because it was not just pronounced, but also remembered. He was looking for something consonant, short and symbolic, which would be worthy of a world brand. And it turned out to be the name of the goddess of victory Nike, only it is read a little differently than we are used to, it will be correct [nike]. Thanks to Jeff, sales really went up, so much so that they were able to afford to open a store and move away from the van business.
In 1970, there were already several such stores, and in 1971 the guys received their first million, having won recognition and success. By the way, this year one young student Carolyn Davidson, having received a fee of $30, came up with a logo for Nike. Only at first he looked a little different from what we are used to seeing him. “Swoosh” (the so-called checkmark) hid the letters Nike behind it, then they were on top, and these days they have completely disappeared. And symbolized «swoosh» one wing of the goddess.
Onitsuka, seeing the rapid success of its customers, decides to buy the rights to their brand, and when refused, threatens to act against the rules, entering the world market in order to force them out altogether. Phil decided not to give in, but simply terminate the contract with another supplier, Nisho Awai. Onitsuka, by the way, tried to turn the threats into reality by renaming itself in 1977 to ASICS, familiar to many today. The name is an abbreviation in Latin, which translates as «A healthy mind in a healthy body.»
Scaling
These complexities proved to be very beneficial both for the founders and for the brand itself. Phil admitted later that he was even glad that everything happened this way, otherwise his corporation would not have reached such proportions. To avoid such situations in the future, the guys decided to start their own production. Only in order for their brand to become a leader in the global market, they had to come up with something completely innovative and different from the others. Bill helped out the business by looking at the waffle iron in the kitchen. Its grooved surface inspired the creation of sneakers with exactly the same grooved sole. Such an innovation was to the taste not only of ordinary buyers, but also of sports stars who began to use them in preparation for the Olympics.
A year later, in 1972, the profit was already 3 million, and in 1973, Nike’s management decided to open its own factory for the manufacture of sports products, employing 250 people. This helped increase revenue by 2 million, as well as make the brand recognizable in neighboring countries.
The development of Nike provided an innovative approach to product advertising. Jeff, Bill and Knight decided to bring new models to the world just before the start of any significant competitions and games. Because the best advertising will be the athletes with whom they conclude an agreement. After all, fans are ready to do a lot in order to be like their idols. And watching how fashionable Nike products look on fans, people who are far from sports will want to have the same products in their wardrobe, bright and comfortable.
In 1977, the financial turnover was $25 million, which necessitated expansion. Now they own several more factories in the US, as well as in Asia.
Fateful Decisions
In 1978, taking into account the problems and shortcomings of their main rival, Adidas, Nike management launched the production of children’s sneakers, adding some women’s models as well. He also signed an agreement with John McEnroe, the most popular tennis player in those years, which consisted in the fact that he had to wear only their products for every game.
By the way, nike management made a fateful decision in 1979, which influenced their stunning success today, namely to use the technology invented by Frank Rudy. After leaving NASA, he went on to develop a shock-absorbing midsole cushion that half of humanity wears, known as the Nike Air Cushion. Frank initially offered this technology to many corporations, but was rejected by everyone, only Phil and Bill were interested.
Competition
In 1982, an agreement was signed with the English football club Aston Villa. A year later, sales began to fall, this is due to the fact that firms such as Puma, Asics and Adidas began to compete actively in the market. Knight also decided to retire a bit and transferred management rights to the vice president of the corporation. But due to falling profits, he had to return to the chair of the CEO.
1984 was also a significant year. A model of basketball shoes designed specifically for the well-known Michael Jordan appeared on sale. In those years, he was at the peak of popularity, and everyone wanted to wear the same sneakers as his. This line was named after the Air Jordan basketball player. Only now the basketball league decided that the shoes attracted too much attention to themselves with their flashiness, so they forbade Jordan from using them during matches. This restriction has added its own plus for the promotion of the brand. Michael, despite the prohibitions, continued to comply with the rules of the agreement, simply paying fines of $1000 each time.
Crisis in the company
1985 turned out to be unprofitable, and the heads of the corporation had to make drastic changes to cope with the crisis. They decided to reduce the staff, as well as the product line, again investing all their strength and finances in advertising. A year later, the financial situation not only leveled off, but also brought the first billion.
To capture the attention of buyers and win competition from firms that were a little ahead, Nike began creating the beloved AirMax sneakers with a visible air chamber. Their owners could see how everything is arranged inside. This decision brought tremendous success, and the «air chamber» became Nike’s hallmark. As well as the slogan «Just Do It».
There are several legends about its origin, the most interesting of which has a sad origin. In 1977, the murderer Gary Gilmour, who was sentenced to death, shouted “Let’s do it” to the executioners in order not to languish in anticipation of death. This inspired Dan Wyden, who was just doing advertising and brand promotion.
There were many obstacles that the management of the corporation had to cope with. For example, once, in the 90s, a group of teenagers, seeing a popular logo on the shoes of their peers, killed him for profit. A little later, rumors began to appear that children were involved in the factories, which caused a stir and a lot of criticism.
Advertising and company expansion
In the future, Nike adheres further to its strategy of attracting famous athletes and teams to advertise the product. They signed contracts with new basketball star Charles Barkley, the Chicago Bulls and golfer Tiger Woods. Since the 1990s, the so-called Niketown stores have been actively opening. Thanks to this, in 1998 the corporation’s turnover was almost $ 10 billion. In 1999, active media exposure strengthened its position in the market, online sales appeared, and video clips delighted viewers. One of them, about Ronaldinho, even won the Silver Lion at the Cannes Film Festival.
In 2004, Phil leaves his post, replaced by William Perez, but not for long, because two years later Mark Parker becomes the head. Because Perez did not have enough experience in running such a large company, but had to act quickly and decisively, because Reebok failed and merged with Adidas, becoming a very serious competitor. Yes, and periodic scandals over the use of labor in factories in Asia sometimes called into question their activities in the future.
In 2007, the rights to Umbro, a sportswear brand, were acquired. After all, almost every player flaunted the emblem of Umbro during the game, and this decision helped to bypass giant rivals and bring in another 18 billion.
Today, in addition to shoes and clothing, Nike produces gadgets for tracking calorie loss during sports, reflective jackets, hats, thermal underwear and a host of useful, stylish and high-quality products, becoming one of the world’s best manufacturers of sports goods.
Conclusion
And that’s all for today, dear readers! For inspiration on your own accomplishments, I recommend looking at the article “Real success stories of big business with a worldwide reputation and how they started”.
The material was prepared by Zhuravina Alina.