Implementing Nike's Corporate Diversification

Magazine Cover of Nike President and CEO Mark Parker

Being a global conglomerate that's highly diversified in the athletic textile markets, Nike must be agile within their corporate governance to best exploit their separate divisions with their shared economies of scope.  Plus being a Fortune 500 company whose stock is traded in great volume, they must be leery of not only focusing on internal success but to appease outside equity holders who want to benefit from their capital investment by maximizing the current and future present value of Nike's cash flows. 

Nike does this like many other diversified firms with a multidivisional organizational structure, or M-form.  Nike has a diverse and esteemed Board of Directors, Nike's "creator" as its Senior Executive, a knowledgeable and experienced Corporate Staff, and is broken down divisionally across its many brands and further specialized by function and geographic specialties.

At the top, Nike's Board of Directors consists of twelve individuals but only two of which are internal managers: Chairman of the Board and Founder of Nike, Philip Knight, and President and Chief Executive Officer of Nike, Mark Parker.  The other ten individuals reflect Nike's goal of placating their outside equity holders' initiatives with highly regarded members from outside of the firm.  These Nike "ten" are comprised of senior executives (from companies such as GE, Microsoft, Apple, FedEx, Lilly, TV One, and Starbucks), intellectuals (a senior counselor and partner of a acclaimed Oregon law firm and the VP/Chancellor of the University of Illinois), and even a Hall of Fame college basketball coach (from Georgetown University).  From there the Board is organized into subcontinental: audit, compensation, corporate responsibility, executive, finance, and nominating and corporate governance.

The success of Nike's diversification is through the monitoring and prescribed bonding activities of this group.  By looking at Nike's growing global market shares and the continual increases in economic value added every year (Dzombak, 2011), Nike's organizational structure from the top down is doing just that.


Reference:

Dzombak, Dan. "Nike's Management Is Creating Value." Fool.com. The Motley Fool, 11 Feb. 2011. Web. 05 Apr. 2012. <http://www.fool.com/investing/small-cap/2011/02/11/nikes-management-is-creating-value.aspx>.