Nike & Acquisitions

Nike Inc. Chief Executive Officer Mark Parker said the world’s largest maker of athletic shoes will pursue acquisitions and partnerships as it goes after the growing middle class in developing markets such as China. Annual revenue will climb 41 percent by 2015, also helped by store openings and the expansion of existing product lines, executives said. The company will look to build brands like Converse and Umbro.

China is the company’s biggest growth opportunity, said Willem Haitink, vice president of the Nike brand in greater China. It accounted for 9.7 percent of Nike’s revenue in the third quarter ended Feb. 28, and helped the company post its first sales growth in five quarters. The country’s economy grew 8.7 percent last year, compared with a 2.4 percent contraction in the U.S.

Among various deals, Converse is one of the most important acquisitions. It is the fourth of Nike's biggest wholly owned subsidiaries, joining Bauer Nike Hockey, Cole Haan and Hurley International.

As management claims "Converse brand brings broader access to a broader consumer base, increasing our ability to reach consumers at all levels. It's definitely a complement to our product offering."

It is important to mention that Nike Management prefers horizontal and related acquisition. Such strategy enables company to target different customer preferences diversify product failure risks and of course increase the profits. "While there is a lot of growth in the Nike brand, we also want to grow Nike Inc.'s portfolio," said Joani Komlos, Nike spokeswoman. Nike as gigantic sport goods manufacturer already established very challenging entry barriers for new comers. Nike’s increased market power also threatens its major competitors, which have to be very careful in competitive rivalry not to lose the market share to Nike.

Even though Nike actively spends funds for acquiring businesses there is a chance that after some time acquisition strategy wouldn’t be as successful as they are right now. Such rapid growth may cause difficulties with synergy, decrease efficiency of management and as a result affect the profitability. Simply, company becomes too large and loses flexibility which is so important for successful operation in global environment.