Make sure to download the correct image for your Nexus phone. In my case it's "yakju" for the Galaxy Nexus "maguro" (yakju-jwr66y-factory-09207065.tgz).
I downloaded the yakju archive and extracted the .tgz with 7za:
curl -k -O https://dl.google.com/dl/android/aosp/yakju-jwr66y-factory-09207065.tgz
7za x yakju-jwr66y-factory-09207065.tgz
7za x yakju-jwr66y-factory-09207065.tar
So, no clearly I didn't have the driver for the phone yet: Device Manager shows the Nexus phone as "Unknown USB Device (Device Descriptor Request Failed)".
At this point, I decided to put the phone into fastboot anyway and see if I could flash the factory image without the Samsung driver (hint: no, it didn't work):
To use adb.exe and fastboot.exe, I just used the Android SDK in my Android Studio installation. I added the sdk/platform-tools folder to my PATH and put the device into fastboot mode:
adb reboot bootloader
Now the phone is in fastboot mode (while in "fastboot mode" you can "flash" the Android firmware, i.e. modify the system image / operating system):
However, as I feared, fastboot.exe couldn't see the phone, because the Samsung driver wasn't installed, i.e. when I ran "fastboot devices" no devices were listed. While in fastboot mode, Device Manager now shows the phone as "Other Devices" -> "Android 1.0":
I downloaded Samsung_USB_Driver_for_Mobile_Phones_v18.104.22.168.exe from Samsung's website.
During the process of installing the Samsung USB driver I had to reboot my Windows 8.1 a few times (and I also had to take the battery out of the phone once to get it out of fastboot mode because the phone seemed to hang).
I right-clicked on the "Android 1.0" device and clicked "Update Driver Software...". Then I selected "Let me pick from a list of device drivers on my computer" and then selected the "SAMSUNG Android Phone" from the list:
And on the next screen I selected "SAMSUNG Electronics Co., Ltd." -> "SAMSUNG Android ADB Interface":
Windows confirms that the Samsung driver is installed OK:
After updating the "Android 1.0" device's driver to "Samsung Android ADB Interface", Fastboot now shows the device:
C:\temp\yakju-jwr66y> fastboot devices
Now run flash-all.bat from the downloaded factory image folder. That's it! That batch file runs fastboot.exe a few times to install the new factory image. Now Android 4.3 is installed successfully on the Nexus phone.