Finance Long-Term Financial Planning and Nike for Capstone Project

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Finance

Long-Term Financial Planning and Nike

For any company to be successful it is essential that the company and its' management determine what they are going to do, and how they are going to do it; this is the very core of strategic planning (Lynch, 2011). Part of this is the setting of long-term goals and objectives in a financial planning context. The importance of the long-term goal setting and objective setting can be seen by looking at a successful firm such as Nike.

Nike is a well-known sports brand, it has been highly successful and in the last ten years the revenue of the firm has more than doubled, and the earnings per share have been increased by an average of 15% per annum (Parker, 2013). This is an impressive growth rate, which is much higher than the industry average; sales on sales growth in 2013 was 7.7% compared to 2012, with a net profit margin slightly above the average at 10.45% compared to the industry average at 10.34% (MSN Money 2013). While firms may be successful if they are lucky, it is generally accepted that there needs to be planning for a firm to be successful in the long-term. Long-term goal setting is a part of this, and the success at Nike may be seen as the result of an aggressive growth strategy that the company has pursued as well as a commitment seven years previously the CEO to make the firm more "nimble and strong" (Parker, 2013).

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Over the last seven years the firm has undertaken a great deal of change, many of the changes have been strategic and appear to be focused on some of the core goals of the organization, including the desire to grow revenue and increase profit. Over the last decade many input costs have increased, but the firm has undertaken actions that have created internal efficiency and supported profitability. One of these strategies is the constant reviewing of the outsource suppliers which manufacture the majority of the good sold under the Nike brands, currently 42% of the goods are manufactured in Vietnam, 30% in China and 26% in Indonesia (Nike, 2013). The fact that the firm uses outsourcing and the way this has been chosen is evidence of the setting of long-term financial goals and objectives; the strategy is an effective cost saving tactic that reduces production costs as well as frees the firm from many of the overheads associated with such large scale manufacture; the decision on this….....

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