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Since Nike hit its peak market capitalisation of US$300 billion on 1 Nov 2021, today Nike’s market capitalisation has dropped 64% to US$95 billion from its peak (as of 5 June 2025).

What happened and is there an opportunity here?

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The rise of Nike

Nike was founded by Phil Knight and Bill Bowerman who both were track athlete. Before that, both of them already started a business of importing Onitsuka Tiger shoes from Japan to resell it in the US. Phil and Bill will also give suggestions/designs to Onitsuka Tiger team to redesign/modify the shoes.

However, Onitsuka Tiger was slow in implementing their suggestions, so Phil and Bill launched their own brand, Nike in 1971. Nike achieved revenue of US$2 million in its first year, US$14.1 million in 1976 and US$270 million in 1980. Huge growth.

Because of Phil and Bill’s close relationship with athletes in the US, they gave many athletes Nike shoes and when these athletes won championships, Nike will get free publicity. Nike first found of success was in the running category, which then expanded to the basketball and tennis category.

In 1980, Nike went IPO with Phil selling its share to cash out approximately US$18 million. Their biggest competitor at that time was Reebok shoe, which was big in gymnastics, tennis, and basketball segment. Reebok sales were higher than Nike at one point.

After the IPO, Nike’s plan was to expand into the sports apparel segment and casual shoe market. They failed in both, resulting in Nike needed to write off their inventory (22 million pairs of shoes sold at deep discounts) due to bad demand and their first ever quarterly loss in 1984 (and another subsequent quarterly loss to stop the bleed).

Nike’s turning point came in the period of 1985 to 1990s, where Nike hit 3 gold mines:

1. Successfully signed Michael Jordan in 1985 and created the iconic “Air Jordan" sub-brand;

2. Introduced Air Max product line in 1987, an iconic innovation by their R&D team; and

3. “Just do it” campaign in 1988 to appeal to a wider audience, other than their niche elite athletes audience.

Since then, Nike found their success formula and copy pasted this whenever they enter a new sport segment or a new country:

1. Sponsor and hire the top athletes as brand ambassadors;

2. Sponsor big sports events;

3. Impactful campaign for branding; and

4. Innovate and R&D on technology to continuously introduce new great product.

Growth in Nike revenue and profit follows with this strategy.

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Nike Business Model

Nike generates sales from 2 main sources:

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