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Tue Jul 25 2023
NikeApparelAthletic ShoesSports MarketingEntrepreneurshipManufacturingBrand Positioning


Nike is the largest apparel business in the world, with over $50 billion in revenue. Its success is attributed to breakthrough innovation, profound advertisements, sponsorship deals, and brand positioning. This episode explores Nike's history, entrepreneurship, challenges, growth, manufacturing, branding, marketing strategies, and future outlook.


Nike's success is driven by a combination of breakthrough innovation, profound advertisements, sponsorship deals, and brand positioning.

The company's focus on product quality and athlete endorsements has helped it become the largest apparel business in the world.

Nike's early years were marked by entrepreneurship and challenges in financing and manufacturing.

Phil Knight and Bill Bowerman started Blue Ribbon Sports as an importer and reseller of Japanese track shoes. They faced financing challenges and relied on rapid growth to secure funding.

Nike revolutionized sports marketing by sponsoring athletes and signing major sports teams.

The company's partnerships with athletes like Michael Jordan and teams like the NBA have helped establish Nike as a leading brand in the athletic apparel market.

Nike's growth strategy includes expanding into new markets and leveraging scale economies.

The company focuses on major cities, offers personalized products, and prioritizes growth over profit. It has successfully captured a significant share of the women's market.

Nike faces challenges in labor practices and competition from other brands.

The company has taken steps to improve labor conditions but continues to face criticism. Competitors like Adidas have struggled, while niche brands have found success in specific markets.

Nike's future outlook is uncertain, with concerns about its direct-to-consumer strategy and competition.

The company's CEO succession plan and reorganization have raised questions about its focus on individual sports and athletes. However, Nike remains a dominant player in the athletic apparel market.


  1. Nike's History and Success
  2. Early Years and Entrepreneurship
  3. Entering the Athletic Apparel Market
  4. Founding of Blue Ribbon Sports
  5. Partnership with Bill Bowerman
  6. Early Challenges and Growth
  7. Financing and Expansion
  8. Innovation and Branding
  9. Jogging Movement and Growth
  10. Venture Capital and International Expansion
  11. Manufacturing and Branding Challenges
  12. Creating the Nike Brand
  13. Innovation and Growth
  14. Sports Marketing and Expansion
  15. Expanding the Brand and Labor Issues
  16. Marketing and Sponsorships
  17. Air Jordans and Brand Growth
  18. Marketing and Growth Strategies
  19. Direct-to-Consumer Strategy
  20. Nike's Business Model and Scale
  21. Women's Market and Financials
  22. Sports Sponsorships and Market Size
  23. Manufacturing and Growth Strategies
  24. Marketing and Branding Strategies
  25. Competition and Future Outlook

Nike's History and Success

00:00 - 07:21

  • Nike is the single largest apparel business in the world today, with over $50 billion in revenue.
  • Nike's success is attributed to a combination of breakthrough innovation, profound advertisements, sponsorship deals, and brand positioning.
  • The podcast hosts have been planning this episode for years and it was voted by the listeners as the next topic.
  • There are three books that provide insights into Nike's history: 'Shoe Dog' by Phil Knight, 'Just Do It' by Donald Katz (founder of Audible), and 'Swoosh' by JB Strasser and Laurie Beckland.
  • 'Shoe Dog' tells the story of Blue Ribbon Sports, which later became Nike. It starts with Bill Bowerman becoming the head track coach at the University of Oregon.
  • Bill Bowerman was a legendary figure who coached several Olympic teams and turned the University of Oregon into a prestigious track program.
  • Nike's success can be attributed to their focus on both product

Early Years and Entrepreneurship

07:03 - 14:31

  • Bill Bowerman, the track coach in American history, coaches the first American sub four-minute Mylers and turns the University of Oregon into the most prestigious track program in America.
  • Phil Knight, a talented middle-distance runner, joins the University of Oregon as a freshman.
  • Phil Knight describes himself as an okay runner and is not given much encouragement by Coach Bowerman.
  • Phil Knight likely chose Oregon because he wouldn't be a star there and he is known for being introverted.
  • Despite his introverted nature, Phil Knight endows Stanford Business School's Knight Management Center and gives a nervous graduation speech.
  • Coach Bowerman focuses on rest for his runners and experiments with modifying shoes using unconventional materials like snake skin or fish skin.
  • After graduating from Stanford Business School, Phil Knight takes an entrepreneurship course where he writes the business plan for Blue Ribbon Sports (later Nike).
  • Phil Knight draws inspiration from the camera market to disrupt the athletic

Entering the Athletic Apparel Market

14:04 - 21:07

  • Chuck Taylor All-Star Technology is a canvas shoe, but the market had shifted to leather upper shoes.
  • Basketball shoes were not popular yet, the market was focused on running shoes.
  • Phil Knight's idea to apply Japanese low-end disruption to the athletic apparel market didn't receive much notice or praise.
  • The existing market for track shoes was small and not very interesting.
  • Adidas was founded by Adolf Dostler, also known as Adi Das, in the 1920s.
  • Adi Dassler provided track cleats to Olympians and Jesse Owens won the 1936 Olympics wearing Adidas shoes.
  • After World War II, Adi Dassler's brother Rudy started a competing company named Puma.
  • Phil Knight wanted to sell Japanese track shoes in the US and undercut Adidas.
  • Phil traveled to Japan and observed that Tiger brand shoes were the best. He visited Onitsuka, the company that made Tigers,

Founding of Blue Ribbon Sports

20:45 - 27:43

  • Phil Knight comes up with the name Blue Ribbon Sports for his company, with conflicting stories about its origin.
  • Phil claims to be a US businessman and pitches importing shoes from Onituka to the Japanese company.
  • He falsely states that the US track shoe market could be worth $1 billion, when it is actually much smaller at around $100-200 million.
  • The branded athletic shoe market in the US today is valued at $130 billion.
  • Knight convinces Onituka to send him shoe samples by wiring them $50, but they don't arrive for almost a year.
  • Phil starts working as an accountant while waiting for the samples to arrive.
  • Finally, in late 1963, Phil receives the samples and decides to become the US distributor for Onituka's track and field shoes in the Western United States.
  • He hires his sister part-time and plans to sell shoes out of his car at track meets on the West Coast.

Partnership with Bill Bowerman

27:13 - 33:44

  • He thinks, 'Oh, if I could get Bill to put his runners in tigers, then that would be great marketing for me.'
  • The company that would eventually become Nike started as an importer and reseller of someone else's product.
  • Phil Knight approached Bill Bowerman with the idea of distributing Onitsuka shoes in the US market.
  • Bowerman agreed to the partnership and wanted 51% ownership in the company.
  • Bowerman's eagerness to partner with Knight may have been influenced by his previous attempts to purchase shoes directly from manufacturers.
  • Scott Reams, a former Nike historian, discovered letters where Bowerman expressed interest in improving running shoes years before partnering with Knight.
  • Knight and Bowerman each invested $500 to finance their first shipment of inventory from Onitsuka.
  • Knight sold the shoes at track meets around the Pacific Northwest out of his car.

Early Challenges and Growth

33:18 - 40:17

  • Phil Knight and Bowerman put in $500 each to finance the first shipment of inventory
  • They sell shoes out of the back of their car at track meets
  • Sales are successful and they reinvest profits into more inventory
  • The business has low profit margins due to high import costs
  • Jeff Johnson becomes the first full-time employee and plays a crucial role in Nike's growth
  • Running was not popular at the time, but Johnson had an irrational passion for it
  • Blue Ribbon Sports faces financing challenges as they need loans from regional banks
  • Bankers are risk-averse and see rapid growth as dangerous
  • Phil Knight believes that growth is essential for business survival

Financing and Expansion

39:49 - 46:35

  • Equity is the book value of assets minus liabilities
  • Banks only loan money based on known equity, limiting growth
  • Phil Knight takes a job teaching accounting at Portland State
  • Meets Penny Parks, who becomes his wife and bookkeeper for Blue Ribbon Sports
  • Meets Carolyn Davidson, an art student he hires for part-time design work
  • Introduces Blinkist as a new sponsor offering condensed books
  • Blue Ribbon Sports revenue doubles each year from 1966 to 1967

Innovation and Branding

46:11 - 53:01

  • Nike's revenue doubled every year from a low base in the late 1960s.
  • Bill Bowerman, co-founder of Nike, wanted R&D access and came up with the idea for a breathable shoe using nylon instead of leather.
  • Onitsuka agreed to make the shoe, and it was named Cortez after a suggestion by Bowerman.
  • The nylon uppers were a huge innovation and the Cortez became popular as a lifestyle shoe.
  • Bowerman wrote a book about jogging, which helped start the fitness movement in America.

Jogging Movement and Growth

52:35 - 59:32

  • Nike Cortez's became popular during the birth of the jogging movement, exemplified by Forrest Gump running across America.
  • Blue Ribbon had built a brand and distribution network, allowing them to get shoes onto people's feet.
  • By 1970, Blue Ribbon was doing over half a million dollars in annual sales.
  • Phil Knight asked for a $1.2 million line of credit to finance inventory but was rejected by the bankers.
  • The concept of enterprise value didn't exist at that time, limiting companies' ability to grow through debt.
  • Phil Knight kept the company leveraged at a high ratio of debt to assets, relying on rapid growth to pay off loans and secure more funding.
  • Nike positioned itself as a growth company from its inception.
  • Despite the challenges, enduring the system stacked against them was critical for Nike's success.
  • To raise money, Phil Knight considered doing a small public offering and changed the company name to sports-tech

Venture Capital and International Expansion

59:02 - 1:06:09

  • Financing for business in the form of equity capital assigns a valuation to the company and takes potential future growth into account.
  • Equity investing is popular in Northern California tech companies.
  • Proto venture capitalists are not interested in sports tech.
  • Blue Ribbon Sports fails to attract investors initially.
  • Phil Knight raises money from families of Blue Ribbon employees, including Bob Woodell.
  • Convertible debt is used for pre-IPO financing.
  • Phil Knight learns about Japanese trading companies and their unique financing model.
  • Nisha O'Ei, a Japanese trading company, becomes a godsend for Blue Ribbon Sports.
  • Negotiations with Nisha O'Ei focus on aligning interests without compromising control.
  • Nisha O'Ei offers to finance all of Nike's inventory, raising concerns for Phil Knight.
  • Ultimately, the deal with Nisha O'Ei proves to be beneficial due to their knowledge of Japanese manufacturers.

Manufacturing and Branding Challenges

1:05:46 - 1:12:53

  • Nisha Oui offers to finance all of Phil Knight's orders with Japanese manufacturers, which could benefit both parties.
  • Phil Knight makes the mistake of informing Itzuka about the financing offer, leading to Nisha introducing him to manufacturers in Japan and encouraging him to create his own brand.
  • Crusoe is a cloud infrastructure provider that specializes in AI training and inference, offering better cost performance trade-offs than traditional providers.
  • Crusoe uses wasted energy from oil fields and renewable energy areas to power their data centers, reducing greenhouse gas emissions.
  • Crusoe can locate their data centers where energy is abundant instead of near internet hubs due to the nature of AI workloads.
  • Blue Ribbon faces challenges with financing their inventory after being kicked out by their bank, leading them to consider other distributors and receive a buyout offer from Itzuka.
  • Itzuka offers to buy 51% of Blue Ribbon for book value, which

Creating the Nike Brand

1:12:26 - 1:19:23

  • $5, which also she said she spent way more than 17 and a half hours, but it was just kind of coming up with some price to charge.
  • Nike gave her 500 shares when they went public. The stock is now worth $7 million.
  • Phil Knight confirmed that she held onto the shares until at least 2016 or 2017.
  • The factory in Mexico called Nike headquarters to inform them that the shoes were ready to be boxed and shipped, but they needed a model name for the shoes.
  • After brainstorming various ideas, Jeff Johnson suggested the name Nike, inspired by the winged Greek goddess of victory.
  • The initial batch of Nike football cleats had quality issues as they cracked in freezing temperatures.
  • Despite the setbacks, Nike continued its operations and signed a deal with Nisha UI for financing and manufacturing relationships in Japan.
  • In exchange for financing, Nisha UI received a 4% royalty on all shoe sales by

Innovation and Growth

1:18:59 - 1:25:42

  • Bill Bowerman discovers a glued shut waffle iron in the trash heap and uses it to create the waffle soles for Nike shoes.
  • The waffle trainers become a hit shoe for Nike, especially when worn by the University of Oregon football team on their new astroturf field.
  • Nike's revenue increases from half a million dollars to 3.2 million dollars in their first full year as an independent brand.
  • The success of Nike's shoes is not just due to margin expansion, but also because people trust the company and Bill Bowerman's designs.
  • Steve Prefontaine, a generational runner at Oregon, becomes an iconic figure for Nike and runs in their shoes despite AAU rules against paid endorsements.
  • Phil Knight employs Prefontaine as a corporate employee of Nike with no responsibilities but allows him to run fast, creating great publicity for the brand.
  • Nike invents sports marketing and becomes defined by its

Sports Marketing and Expansion

1:25:17 - 1:32:00

  • Nike invents sports marketing with athlete sponsorship
  • Nike introduces the Nike Futures Program to finance orders
  • Nike becomes a wholesaler, selling to retail chains
  • Nike starts outsourcing manufacturing globally
  • Currency issues lead Nike to find other countries for production
  • Nike opens factories and sells in China, opening the country for the industry
  • The downside of cheap shoes is low wages and poor working conditions in factories
  • Nike faces criticism for mishandling labor issues but takes steps to improve
  • Question remains about the line of acceptability in labor practices

Expanding the Brand and Labor Issues

1:31:51 - 1:39:22

  • They did a lot of work to clean up their act, including creating new standards for factory partners, publishing supplier lists, and conducting third-party audits of factories.
  • They made investments in R&D and invented non-toxic glue that they shared with competitors.
  • The question of acceptability is interesting when the lines are blurry. Are 75-degree factories or $3 wages acceptable?
  • Nike chose to prioritize maximizing margins over labor conditions in the 90s, which led to exploitation.
  • People were surprised by Nike's actions because other companies were doing the same thing.
  • Nike's customers felt betrayed because the brand represented greatness but didn't hold themselves to high standards.
  • In 1974, Nike experienced significant growth and settled legal battles with Onizuka for $400,000.
  • The court case with Onizuka brought Rob Strasser into Nike as in-house counsel.
  • Strasser was instrumental in expanding sports marketing sponsorships and signing up athletes like Ili Nastasi and half the NBA

Marketing and Sponsorships

1:38:55 - 1:46:03

  • Nike signs up multiple college basketball coaches and teams to wear Nike gear, sparking controversy
  • The Washington Post criticizes Nike for commercializing college athletics
  • Iowa coach Lud Olsen requests to join Nike after being mistakenly included in the article
  • Strasser expands the strategy to college football, signing big coaches and schools for low prices
  • Nike's sports marketing strategy focuses on running, basketball, and tennis as the only sports that matter
  • The goal is not just to sell shoes but to establish Nike as a brand
  • Revenue doubles year over year in the late '70s, reaching $150 million in sales by 1979
  • Frank Rudy, inventor of Air Sole Tech, joins Nike despite initial skepticism from Phil Knight
  • Rudy's airbag technology becomes a key feature in Nike shoes

Air Jordans and Brand Growth

1:45:38 - 1:53:18

  • Tinker Hatfield, a shoe designer, meets with Michael Jordan to discuss his preferences for a new basketball shoe
  • Jordan wants a lightweight shoe that is comfortable and performs well on the court
  • Tinker presents the Jordan 3 to Jordan, which meets all of his specifications
  • The Jordan brand becomes its own subsegment within Nike, with its own products and advertising
  • The renegotiated deal guarantees at least $18 million for Jordan over seven years
  • Jordan brand sales skyrocket, earning him over $100 million in total from the contract
  • The Jordan brand becomes a luxury brand with high-priced shoes
  • The Jordan brand is currently the fastest growing part of Nike, generating billions in revenue annually
  • Jordan earns over $300 million per year from the Jordan brand at a 5% royalty rate

Marketing and Growth Strategies

1:52:56 - 1:59:40

  • Michael Jordan's passive work now keeps the brand alive, while Nike reaps most of the brand equity.
  • The rise of ESPN and SportsCenter provided free advertising for Nike through athletes like Michael Jordan.
  • In 1988, Nike launched the Just Do It campaign and diversified outside of running.
  • Nike's market cap hit $1 billion in 1988 and continued to grow in the early 90s.
  • Labor challenges and controversies affected Nike's market cap in the late 90s and early 2000s.
  • Kobe Bryant switched from Adidas to Nike after being unhappy with Adidas shoes.
  • LeBron James signed with Nike in 2003, further improving their image.
  • In 2006, Tim Cook joined Nike's board and helped them understand digital technology.
  • Nike launched the Nike+ iPod in 2006, which paved the way for future digital products.

Direct-to-Consumer Strategy

2:06:12 - 2:13:06

  • Nike started building a relationship with customers through technology and a suite of services.
  • They shifted their acquisition strategy to focus on acquiring technologies instead of brands.
  • Nike operates four mobile apps with 500 million users per quarter.
  • They transitioned from retail relationships to a direct strategy, operating and retail stores.
  • Nike is twice the size of Adidas and a leader in apparel personalization.
  • The secondary market for sneakers has become a billion-dollar category, but Nike has chosen not to capture that value.
  • Nike intentionally sells limited edition sneakers at lower prices, allowing them to be resold at much higher prices on the secondary market.

Nike's Business Model and Scale

2:06:36 - 2:13:48

  • Nike intentionally keeps their products attainable and affordable for everyone, even though they could sell items worth more than $500.
  • The swoosh logo is likely tattooed on more bodies globally than any other company logo.
  • Nike focuses its marketing strategy on major cities to be accessible to taste makers and young people.
  • Nike prioritizes growth over harvesting profit dollars.
  • Nike values brand presence and ubiquity, willing to trade off profit for it.
  • Nike leverages scale economies for outsized profitability.
  • Nike is a $51 billion revenue business growing at 10% year over year.
  • Sales to women alone are bigger than all of Lululemon's revenue.

Women's Market and Financials

2:19:21 - 2:26:27

  • Nike's sales to women alone are bigger than all of Lulu Lemons revenue.
  • Nike has lagged in developing products for women.
  • Nike's revenue is $50 billion, with $8.6 billion coming from women's sales.
  • About 60% of Nike's business is still wholesale, while 40% is direct-to-consumer.
  • Nike's gross margin profile is 44%, lower than luxury brands like LVMH and Hermes.
  • Nike has $6.4 billion in operating income and a 12.5% operating margin.
  • The company has $8.5 billion in inventory and $10.7 billion in cash and equivalents.
  • Nike has had 30 consecutive quarters of increasing dividend payouts.
  • Footwear generates almost three times the revenue of apparel for Nike.
  • Men's products, including the Jordan brand, account for about two-thirds of Nike's sales.

Sports Sponsorships and Market Size

3:20:43 - 3:27:56

  • Nike is the official uniform supplier of the MLB, NFL, and NBA.
  • Nike pays to make the jerseys that the players wear as a sponsorship.
  • Most NBA jerseys sold to fans are replicas made by fanatics with the Nike swoosh on them.
  • Nike's deal with the NFL alone is worth $200 million a year.
  • The athletic shoe market is worth $130 billion.
  • Nike staged an event with shoes that make you 4% faster, breaking some rules for competitive running.
  • Nike is a growth company that breaks rules and pushes boundaries.
  • Outsourcing manufacturing in Asia was both Nike's strength and weakness.
  • Nike has a highly fragmented manufacturing ecosystem for footwear.

Manufacturing and Growth Strategies

3:33:54 - 3:41:26

  • The manufacturing of footwear is highly fragmented, similar to the semiconductor industry.
  • Nike manufactures the nitrogen-filled airbags for their shoes in Oregon and ships them to Asian manufacturing facilities.
  • Most shoes are made outside the US, even those claimed to be made in the US.
  • Nike took a highly leveraged route in its early years, betting everything on debt and avoiding equity investors.
  • Nike's strategy is to create pinnacle products for athletes and build brand loyalty within niche athletic communities.
  • The brand then extends into the broader market by offering products that allow consumers to participate in the athletic experience.
  • Nike has successfully made both high-end and affordable products without compromising their belief in making pinnacle products.
  • Athletes have become like Netflix shows, with people following their lives on social media as if it were reality TV.
  • Marketing individual athletes has proven more effective than marketing teams.

Marketing and Branding Strategies

3:47:17 - 3:54:00

  • Individual athletes, not teams, are the key to marketing in the NBA.
  • The NFL is a better business as a league than the NBA, but the NBA creates more value.
  • Basketball is advantageous for marketing because people can buy and wear basketball shoes.
  • Nike differentiates its prestige models from commodity products with its brand.
  • The Nike Monarchs are a commodity product that is differentiated by the Nike brand.
  • Nike's success comes from building an enduring brand and effective marketing.
  • Nike's strategy is to celebrate athletes, while Adidas focuses on sponsoring celebrities.
  • Nike refused to associate with Kanye West due to their athlete-focused strategy.

Competition and Future Outlook

3:47:42 - 3:54:00

  • Adidas has experienced a significant decline in net income, with a $500 million write down attributed to the Yeezy brand.
  • Nike has strategically placed its brand in popular culture, particularly music, without relying on rapper sponsorships.
  • Nike's CEO succession plan is uncertain after Mark Parker retires, and the new CEO John Donahoe may be a temporary solution.
  • Nike underwent a reorganization to align teams with how they interface with the outside world, focusing on men's, women's, and kids' categories.
  • There is concern that Nike may have lost focus on individual sports and their athletes' journeys due to the reorganization.
  • Competitors like Brooks and Hoka have been successful in niche markets within running while Adidas has struggled.
  • Basketball has become Nike's equivalent of Disney animation today, and there is no sign of slowing down in this category.