Phil Knight Managing Nike's Trasformation

In 1983 Phil Knight decided to leave the company in Woodell's hands. That was because Knight had to work on a manufacturing project in China. In 1893 NIKE was a successful firm; they had 34% of the market share and their sales were growing constantly, from $14.1 million in 1976 to $867.2 million in 1983 (Exhibit 1, Phil Knight: CEO at NIKE).

Woodell had been worked for NIKE since 1967 as the World Wide Marketing Director. He deeply knew the company culture and Knight line of conduct. He seemed to be the natural Knight's successor.

Question 1

When Knight left NIKE, the company had to face its first big transition; NIKE had to survive without its CEO and founder. In order to avoid confusion into the company, knight thought Woodell was the right person to run the company, however in less than one year NIKE had to face its biggest crisis. At the beginning Woodell thought to run the company as Knight had done since then, basically his policy was "to get done the things that needed to get done". However NIKE was not the perfect company it seemed; there were a number of problems. In his first half as CEO, Woodell decided to focus his attentions on some of the most significant problems: NIKE's brand softness, inventory issues, managing people. Another important issue that Woodell had to face was to decide how to deal with the new segment of aerobics. NIKE was not fast enough to compete with Reebok in this new sector: while NIKE was designing a new prototype of a aerobics shoe, Reebok was already offering to women models. Moreover NIKE's prototype was not even adequate to NIKE's quality standards. This was the first mistake Woodell made; he should either immediately enter the new segment, take time to design a high quality aerobic shoe, or just ignore this new segment. However, the biggest problems that Woodell had to face were the excessive inventory, between January and March 1983 NIKE over-built 2 million pairs per month, and his relationship with the company's seniors. As the case says "Woodell saw the growing inventory as a cancer that was going to eat the company alive […] He was also aware that many people within NIKE had strong personal ties to manufacturers in Asia and were reluctant to cut factory orders". Woodell, as oppose to Knight, wanted to create a working environment where responsibility and decision making was shared between all managers. However it seemed that Woodell was not able to answer back to other arguments. This behavior made it difficult for Woodell to make fast decisions and to have power over the company; Woodell was probably overawed by Knight's image. Another issue that Woodell might had faced was his physical condition; since he was paralyzed, he might have not transmitted the strength that NIKE's managers were used with Knigh. However, Woodell did not have all the responsibility for NIKE's 1983 crisis; a big part of the responsibility has to be shared with Knight. When the formal CEO left the company he left Woodell on his own, without giving and guideline and without being present for the biggest issue. Knight basically left one day telling Woodell he was in charge.

In order to avoid all these problems, Knight should had left a guideline to Woodell, he might even had to make it clear with all seniors that Woodell was in charge of NIKE. If Knight had time it would had been a wise idea to follow Woodell for the first months in order to give him advice and to better understand if he really was the right man. On the other hand, Woodell got stuck on his own "share the responsibility" policy. It seemed that he was not confident enough with his own decision making. He wanted to make anyone happy without arguing. In order to run a company like NIKE Woodell should had been more fast in making decision and also more risk-taking. And sometimes he had to be more strict with the others managers.

Question 2

In September 1984, Knight felt that it was time for him to return to be NIKE CEO. He had to fix many problems taking the decisions that Woodell was not determined enough to take.

The first important change that Knight brought was to reduce the inventory and to have operating costs under control. By May 1985 inventory stockpile decrease from 22 million pairs to 9.8 million.

Another Knight's main move was to reduce NIKE's workforce by 10%, and to close 5 of 30 suppliers-owned plants. Many would say that this was an unethical behavior. However, from Milton Freidman's point of view, a General