Thomas White Global Investing
Global Players

Global Players

October 2010

Mark Parker, CEO, Nike

“We have a responsibility as a global brand that is well recognized around the world, to actually use our position to be something of a catalyst, not just doing what we can do but to help influence others.”

— Mark Parker, 2010

Running is perhaps the most basic form of exercise. And deciding to run is easy enough. But choosing the right shoe? That is where Mark Parker the CEO of Nike comes in. His job is to help people buy the correct footwear in the athletic shoe market, which was worth $192.3 billion in 2008. Preferably, the right shoe should be a Nike.

Parker is a Nike veteran. Originally called Blue Ribbon Sports, the company changed its name to Nike after the Greek goddess of victory in 1978. A year later, a gangly, six-foot-four champion athlete joined the company. At around 23 years, Parker, a political science graduate, was hired to work at the company’s R&D facility as a product tester and designer. At Nike, Parker experimented with different shoe designs, cutting the soles of his shoes to test new materials.

Parker impressed the company with his creativity and innovation. In 1982, he unveiled Pegasus, a line that remains popular even today. Four years later, Parker and a colleague introduced the first cross-trainer. This shoe attracted the attention of tennis legend John McEnroe, who used Parker’s cross-trainers for the remainder of his career. Another of Parker’s patented inventions, Visible Air technology, debuted in 1987. Shoes sporting this patented heel were preferred by athletes such as Michael Jordan, inspiring the “Air Jordan” shoe. By 1990, aided by Parker’s improvements, Nike’s revenues were catapulted to $2.2 billion, from just $270 million in 1980.

Along with Nike’s stature, Parker too had come into his own, becoming vice president of consumer product marketing by 1997. By now, Parker was responsible for creating and fostering an entire brand culture. Singers, various designers, DJs and artists all began to be seen in a Nike. Capitalizing on the shoes’ ‘cool’ factor, Parker began to attract a network of graffiti and hip hop artists like Kanye West into the Nike stable. These Nike shoes did not take long to be sold out, and were later sold as collectibles and under a limited supply disclaimer.

Such clever marketing strategies paid off, and by the end of 2000, Nike revenues stood at $9 billion. Apart from focusing on Nike’s product design, Parker now sought to extend its reach. For quite a long time, Parker had been trying to dip his toes into the lucrative but insulated action sports market. This area was known as extreme sports, including games like skateboarding, skiing and surfing. In 2002, he obtained his chance. In one of the few but carefully considered Nike acquisitions, Parker negotiated to purchase Hurley, a hugely successful surfing apparel brand. High on an aggressive acquisition spree, in 2004, Nike then acquired Savier, a skateboarding apparel and accessories brand. Today, the company expects sales of its rapidly growing action-sports division to double to $1.2 billion in the next five years.

But that is not to say that the brand that made running fashionable had forgotten its roots. In 2003, Nike also had acquired Converse, in a bid to leverage the iconic basketball shoe’s 80-year-old unflagging demand and fan following.

Parker expects Nike’s revenue to jump more than 40% to around $27 billion by 2015.

With these acquisitions behind him, Parker now began to focus on a long-term strategy. In 2007, he identified running, basketball, football, women’s fitness, men’s training and sports culture as Nike’s six core categories that were expected to account for more than 75% of the company’s growth. Furthering his plan was the Parker-driven takeover of Umbro, the U.K. based football brand.

Parker also sought to make Nike’s core businesses eco-friendly, but the initiative was not motivated by mere corporate social responsibility. Going eco-friendly also was a cost-cutting exercise. By this time, Nike, like most other companies, was being pummeled by the financial downturn. The company’s second quarter results in 2009 showed a 4% dip to $4.4 billion. Parker’s remedies included slashing Nike’s workforce by 5% in 2009 and reducing excesses by 17% over the next ten years. As a result, Nike’s Air Jordans are now made out of crushed bits of discarded Nike sneakers, while the Brazilian football team for the 2010 World Cup sported jerseys made of recycled material.

Parker is evidently good for the company. “He’s much better equipped than I was to deal with running a big company,” compliments Nike’s Chairman Phil Knight in USA Today. Ever since the 55-year-old Parker took over as CEO in 2006, Nike’s brand value ranking has leapt to the 25th slot in 2010 from the 31st, according to brand consultancy firm Interbrand. Move over Greek goddesses. Nike now bows to a new god of victory, Mark Parker.





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