NIKE Inc. is an American multinational company that designs, develops, markets and sells sports shoes, clothing, equipment and accessories worldwide. NIKE Inc. was first founded in 1964 by Phil Knight and Bill Bowerman as Blue Ribbon Sports: Phil Knight was a middle-distance runner who came from Portland and trained under track and field coach Bill Bowerman who was looking for ways to improve his students. performance and tried to improve his shoes in his spare time. After many challenges and setbacks, they found success with Nike Air technology in 1979, and the company went public in 1980. Soon their brand became very popular among fitness enthusiasts, and by 1982 they had become the No. 1 supplier of athletic sport. /Training shoes in America. Nike's brand logo 'Swoosh' and the slogan 'Just Do It' have become a widely recognized symbol in American homes. In 1985, they went on to design custom shoes for an NBA rookie named Michael Jordan, and his growing popularity allowed Nike's sales to set new records. Soon after, Nike began designing clothing and other cross-training accessories. They have signed contracts with various international teams, including the Brazilian football team and the U.S. men's and women's soccer team. In 1996, they registered Tiger Woods, also a rookie golfer, for $5 million a year. The rest, as they say, is history.

Nike sells shoes, clothing, and sports accessories in thousands of stores around the world. In total, there are more than 900 million products sold every year. In 2018, Nike generated more than $36 billion in sales and employed more than 63,000 people worldwide.

But due to stiff competition, Nike is steadily losing market share in the segment it has long dominated: Basic Running sneakers, which are priced below $100. Nike's share of the North American running business fell 0.2% to 57.9% through May last year, while Under Armour's market share rose to 2018.2% from 8.3% in 5. Adidas' share of the run also increased to 4.8%. from 3.4% last year to today.

The weakness in what Nike calls "basic running" categories was discussed in its latest earnings call in March. "In the running category, basic shoes don't perform as well as we'd like, especially in North America," said Trevor Edwards, Nike brand president. In a private meeting with the vice presidents of marketing and sales, he suggested that the company should focus on higher-priced, performance running shoes and abandon its "basic" line of running shoes. The data for each product group and for the most recent period in total are as follows:

Air Max	weather Jordan	Nike Basic	Sum
Sales units	150.000	335.000	165.000	650.000
Sales revenue	68.850.000 $	122.275.000 $	40.920.000 $	232.045.000 $
Factory Variable costs	35.550.000 $	66.866.000 $	25.377.000 $	127.793.000 $
Factory Fixed Costs	8.962.500 $	19.513.750 $	9.735.000 $	38.211.250 $
Sales expenses	14.370.000 $	29.078.000 $	12.507.000 $	55.955.000 $
Operating profit	9.967.500 $	6.817.250 $	$(6.699.000)	10.085.750 $

NOTE: All sales expenses are fixed.

Necessary

Using Excel, develop an analysis that can help Trevor make decisions about the future of the Basic series. Specifically: (a) Calculate the contribution margin currently produced by each product group (round

1. the amount per unit is 2 decimal places).
2.  (b)what would be the short-term impact of the reduction of the base line on operating profits? 
3. (c) Should this line be dropped? Why or why not?
4. Using the spreadsheet you developed in requirement 1, determine if your response will change if Basic shoe sales are expected to fall by 80%.
5. Using the spreadsheet that you developed in connection with Requirement 1, determine the change in short-term operating income that would occur if the Basic row was stopped and the resources allocated to Basic were used to increase sales by 10% on each of the other two rows. .
6. Again, using the spreadsheet you developed in connection with requirement 1, determine the sales increase (in unit, rounded up to the nearest integer) in the Air Max series that will be required to maintain total short-term operating income if the Basic series is discontinued. .
7. Considering your responses to requirements 1 through 4, consider the overall competitive environment facing Nike Inc. and make recommendations regarding the firm's strategic position and direction at this time.

Answer rating: 100% (QA)

a Contribution margin per unit for each product group Air Max 68850000 35550000 8962500 14370000 150000 11295 Jordan 122275000 66866000 19513750 29078... View the full answer