Case Study 2, Nike

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Category: Business and Industry

Date Submitted: 02/05/2013 08:50 PM

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Mini Project

Nike, INC


I decided to go with Nike, Inc. Nike is an international athletic apparel company. Nike reports sales in North America, Western Europe, Central & Eastern Europe, Greater China, Japan, Emerging Markets, and other Global Brand Divisions. There are countless operating risks the Nike faces on a daily basis.

Nike is highly dependent on their distribution system. Nike distributes products to customers directly from the factory and through distribution centers located throughout the world. Thier ability to meet customer expectations, manage inventory, complete sales and objectives depends on their operation of their distribution facilities and the expansion of additional distribution facilities. Nike is also dependent on timely performance of services by third parties. The shipment of product to and from distribution facilities is key for the success of Nike. Other issues such as IT interruption could also present problems. Any significant failure in distribution facilities could result in an adverse affect on business.

“We rely significantly on information technology to operate

our business, including our supply chain and retail

operations, and any failure, inadequacy, breach,

interruption or security failure of that technology or any

misappropriation of any data could harm our reputation or

our ability to effectively operate our business.”

There are other operational risks as well. Below is a list of a few operational risk that Nike faces;


Maintain a high quality product

Taxes (change in Tax laws)

Currency exchange rate fluctuations

Lack of consumer spending

Nike is almost entirely financed by equity. The debt to total capitalization ratio is only 2%.

Beta equals:

  | Nike |

Beta Unlevered | 1.25 |

Market Value of Equity | 4,644,300,000.00 |

Debt | 228,000,000.00 |

Market Value of Firm | 4872300000 |

D/E Ratio | 4.91% |