Nike Essay
There are many ways to gauge the value of a firm usually by using the Net Present Value (NPV) method. By valuing the investment projects and companies a firm can also hope to understand another firms profitability. Choices and options lead to profit, depending on whether the right choices or options are available. Therefore, those same choices and options can and should be evaluated for profitability just as a company would be evaluated for profitability. Valuing these options does not mean a new venture for Nike, it means a new opportunity for growth through process improvement.
In order for Nike to increase its stock market value it will need to concentrate on either Growth Options or Flexibility options. Growth Options require a company to make small investments in any future business opportunity, but without the risk of commitment. Flexibility Options require the company to concentrate on the design of projects and plants that permit adaptation. Nike has the resources to follow either strategy to increase their market value. Because Nike is the designer and producer of athletic gear and shoes, I would recommend the Flexibility option of valuing the company. By avoiding commitment to the complete project, therefore, options such as avoid, modify, scale up or abandon the project are still an option. The Flexibility option of valuation closely resembles a research and development strategy. Lack of commitment means reduced risk.
Nike can employ either of these strategies in order to increase their market value and reduce risk through the avoidance of commitment. Setting performance targets and forecasting and trending with historical data will also assist Nike with their effort in increasing market value. To ensure continued market growth, Nike will also need to continuously evaluate their choices and make sure that their strategy is still efficient and furthering the company. Linking profit to enterprise value is also important to ensure investor