Nike 2013 Annual Report Download - page 7

PART I
International Operations and Trade
Our international operations and sources of supply are subject to the usual
risks of doing business abroad, such as possible revaluation of currencies,
export and import duties, anti-dumping measures, quotas, safeguard
measures, trade restrictions, restrictions on the transfer of funds and, in
certain parts of the world, political instability and terrorism. We have not, to
date, been materially affected by any such risk, but cannot predict the
likelihood of such material effects occurring in the future.
In recent years, uncertain global and regional economic conditions have
affected international trade and caused a rise in protectionist actions around
the world. These trends are affecting many global manufacturing and service
sectors, and the footwear and apparel industries, as a whole, are not immune.
Companies in our industry are facing trade protectionism in many different
regions, and in nearly all cases we are working together with industry groups
to address trade issues and reduce the impact to the industry, while
observing applicable competition laws. Notwithstanding our efforts, such
protectionist measures, if implemented, could result in increases in the cost of
our products, which may in turn adversely affect our sales or profitability as
well as the imported footwear and apparel industry as a whole.
We monitor protectionist trends and developments throughout the world that
may materially impact our industry and engage in administrative and judicial
processes to mitigate trade restrictions. In Brazil, we are actively monitoring
for dumping investigations against products from China and other countries
that may result in additional anti-dumping measures and could affect our
industry. We are also monitoring for and advocating against other
impediments that may increase customs clearance times for imports of
footwear, apparel and equipment. Moreover, with respect to trade restrictions
targeting China, which represents an important sourcing and consumer
marketing country for us, we are working with a broad coalition of global
businesses and trade associations representing a wide variety of sectors to
help ensure that any legislation enacted and implemented (i) addresses
legitimate and core concerns, (ii) is consistent with international trade rules,
and (iii) reflects and considers China’s domestic economy and the important
role it has in the global economic community.
Where trade protection measures are implemented, we believe that we have
the ability to develop, over a period of time, adequate alternative sources of
supply for the products obtained from our present suppliers. If events
prevented us from acquiring products from our suppliers in a particular
country, our operations could be temporarily disrupted and we could
experience an adverse financial impact. However, we believe we could abate
any such disruption, and that much of the adverse impact on supply would,
therefore, be of a short-term nature, although alternate sources of supply
might not be as cost effective and could have an ongoing adverse impact on
profitability.
Competition
The athletic footwear, apparel, and equipment industry is highly competitive in
the United States and on a worldwide basis. We compete internationally with
a significant number of athletic and leisure footwear companies, athletic and
leisure apparel companies, sports equipment companies, and large
companies having diversified lines of athletic and leisure footwear, apparel,
and equipment, including adidas, V.F. Corp., Puma, Li Ning and Under
Armour, among others. We also compete with a number of vertical retailers
such as Lululemon and Uniqlo. The intense competition and the rapid
changes in technology and consumer preferences in the markets for athletic
and leisure footwear and apparel, and athletic equipment, constitute
significant risk factors in our operations.
NIKE is the largest seller of athletic footwear, apparel, and equipment in the
world. Important aspects of competition in this industry are:
•Product quality; performance and reliability; new product innovation and
development; and consumer price/value;
•Consumer connection and affinity for brands and products, developed
through marketing and promotion; customer support and service;
identification with prominent and influential athletes, coaches, teams,
colleges and sports leagues who endorse our brands and use our
products; and active engagement through sponsored sporting events and
clinics; and
•Effective distribution of products, with attractive merchandising and
presentation at retail, in store and online.
We believe that we are competitive in all of these areas.
Trademarks and Patents
We utilize trademarks on nearly all of our products and believe having
distinctive marks that are readily identifiable is an important factor in creating a
market for our goods, in identifying our brands and the Company, and in
distinguishing our goods from the goods of others. We consider our NIKE®
and Swoosh Design®trademarks to be among our most valuable assets and
we have registered these trademarks in almost 170 jurisdictions. In addition,
we own many other trademarks that we utilize in marketing our products. We
continue to vigorously protect our trademarks against infringement.
NIKE has an exclusive, worldwide license to make and sell footwear using
patented “Air” technology. The process utilizes pressurized gas encapsulated
in polyurethane. Some of the early NIKE AIR®patents have expired, which
may enable competitors to use certain types of similar technology.
Subsequent NIKE AIR®patents will not expire for several years.
We also file and maintain many U.S. and foreign utility patents, as well as
many U.S. and foreign design patents covering components, manufacturing
techniques and features used in various athletic and leisure footwear, apparel,
athletic equipment, digital devices and golf products. These patents expire at
various times, and patents issued for applications filed this year in the U.S. will
last until 2027 for design patents and until 2033 for utility patents.
We believe our success depends primarily upon our capabilities in design,
research and development, production, and marketing rather than exclusively
upon our patent position. However, we have followed a policy of filing patent
applications for the United States and foreign patents on inventions, designs,
and improvements that we deem valuable.
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