Nike

INTRODUCTION

Founded in 1964 through an investment of $500 each by Phil Knight and Bill

Bowerman, the company (then called Blue Ribbon Sports--BLS) has evolved from being

an importer and distributor of Japanese specialty running shoes to becoming the world

leader in the design, distribution and marketing of athletic footwear.

Our business model in 1964 is essentially the same as our model today:

We grow by investing our money in design, development, marketing and

sales and then contract with other companies to manufacture our products.4

According to company legend, Nike’s business model was developed by Knight

while attending Stanford Business School in the early 1960s. Knight realized that while

lower-cost, high-quality Japanese producers were beginning to take over the US

consumer appliance and electronic markets, most leading footwear companies (e.g.,

Adidas) were still manufacturing their own shoes in higher-cost countries like the United

States and Germany. By outsourcing shoe production to lower-cost Japanese producers,

Knight believed that Blue Ribbon Sports could undersell its competitors and break into

this market. As a result, Blue Ribbon Sports began to import high-tech sports shoes from

Onitsuka Tiger of Japan. As sales increased to almost $2 million in the early 1970s, BLS

parted ways with Onitsuka and began to design and subcontract its own line of shoes.

The Nike brand was launched in 1972, and the company officially changed its name to

Nike, Inc. in 1978.

Nike developed a strong working relationship with two Japanese shoe manufacturers,

Nippon Rubber and Nihon-Koyo, but as costs/prices increased in Japan over the course of

the 1970s (due to a combination of a tighter labor market, the impact of the first Oil Crisis on Japan’s economy, and a shift in the dollar/yen exchange rate as a result of the

so-called “Nixon shock”),5 Nike began to search for alternative, lower-cost producers.

During these same years, Nike opened up...