Strategic Case Analysis
48
10% of Nike’s sales worldwide. Nike also has its own Internet
store, www.niketown.com.
How are the margins on these channels?
Not relevant to the case we are pursuing.
I understand that gross margins will be the same if Nike
decides to add Costco etc. as a new distribution channel.
What I wanted to compare was the net margins on these
channels with the net margin Nike would make from
Costco and other whole-sellers. If for this distribution
segment, net margins will be higher, for example, that will
be an important part of the decision criteria for solving
this case.
Sure, Nike has a gross margin of 44%, and a net margin of
9.3% for the latest financial year. So, are you suggesting that
Nike should calculate the net margin for the Costco portion of
its business to see if it will be higher than 9.3%?
Yes.
Good, what other factors would constitute your decision
criteria for the case at hand?
Yes, for competitive analysis purposes, it would be good to
know what kind of margins Adidas enjoys for the Costco
segment vis-ŕ-vis the overall business, as far as footwear
market is considered. Also, do we have any data on what
product lines are being pushed by Adidas through Costco?
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