Financial Analysis of Nike’s Income Statement- 1995-2001
There is fluctuation in the profit margin as the company fails to maintain its profit on a consistent basis, instead the profit fluctuates. For instance, the net profit margin rises to 8.5% in 1996 and 8.7% 1997, and fell sharply to 4.2% in 1998. It later maintained a steady increase from 5.1% in 1999 to 6.4% in 2000, but fell suddenly to 6.2% in 2001. The Gross profit on the other hand also fluctuates as it increased to 2,563.9 in 1996 (39.6% increase) and 3,683.5 in 1997 (40.1 % increase). Then it fell down to 3,487.6 in 1998 and 3,283.4 in 1999 The fluctuation in profit margin especially the sharp decrease to 4.2% in ...view middle of the document...
Such companies will not give room for promotion and career advancement since their growth and sustainability is hanging on a balance. Also stakeholders like distributors, suppliers and shareholders will tend to withdraw as the company fails to maintain its growth in terms of revenue and profitability.
These could also affect the market share as seen in Nike’s market share which fell from 48% in 1997 to 42% in 2001. Inability to maintain a steady growth especially in revenue, income and profitability affects , employees, investors and other stakeholders in the company. The fall in market share could have resulted from new or existing competitors in the market. These competitors could have provide new incentive, great promotional pricing and discounts, and these could have make them converts Nike’s customers to theirs. Also, Nike could have failed to meet customers’ satisfaction and challenges, and expectations which competitors are able to meet.
Moreover, I nability to satisfy and increase customers demand will result in low or fall in market share. Also, lack of awareness of what competitors are offering, non-improvement of customers to strengthen customers relationship, inability to investigate and explore new opportunities for growth, taking customers for granted in their vital role in company’s existence and many more will result in a huge fall in market share which cripples profitability and company’s existence.
Lack of awareness of this factor could have crippled Nike’s profitability and led to a fall in its market share during this period.
For Nike to boost its revenue, maintain and increase its profitability and gain a good portion of the market share, we will recommend the following:
The company should find out why and what led to the fall in its market share and reason for the inconsistent growth in its revenue, income and profitability. profitability. The problem should be thoroughly investigated and a clear cut resolution should be implemented.
Nike needs to be aware of what compettors are offering and develop a more athletic shoe products and other product brands that will beat the competitors brand with an affordable price that will make it regain its leadership in the market. Also the company needs to develop a unique brand, labeling and logo that...