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Abstract
The study considers the case of the Nike Company, which is a multinational corporation that is involved in design, development, manufacturing, marketing and the sale of footwear for athletics, apparel, accessories, equipment and services. This study aimed at a strategic analysis of the organization. This involves external and internal analysis including PESTEL, five forces analysis, stakeholders’ analysis, inner strengths, weaknesses and SWOT analysis. Four generic building blocks of competitive advantage, distinctive core competencies, differentiation strategy and strategic alliances in the company were discussed. The company faces the study of significant problems were outlined, and the recommendations that will assist the company in dealing with the issues.
Introduction.
Nike Inc. Company is a multinational corporation that is involved in design, development, manufacturing, marketing and the sale of footwear for athletics, apparel, accessories, accessories equipment and services. The headquarters of the company is situated in Portland, metropolitan. The company’s product is sold in their on retail accounts. The company also involves the use of independent distributors who are in more than 120 countries in the world. The company’s footwear products are mainly produced specially for athletic use. However, their products are always worn for casual purposes. The products are designed for specific and particular sports use for both male and female.
The company has a total of over 75,000 employees worldwide as per the statistics from 2019. The company operates in several segments that include: North America, Europe, Middle East, Africa and China. The company also sponsors sports teams and athletes with high profile across the sports. The Nike Inc. products are of its brand, different other brands and subsidiaries. It’s valued to be of about $29.6billion as the year 2017.
SWOT Analysis.
SWOT is the (strengths, weakness, opportunities and threats) framework that’s used to evaluate an organization’s competitive position in the market while developing a strategic plan. It involves the assessment of both internal and external factors while taking into consideration the current and future factors on the same (Gürel, 2017).
External analysis
The external or macro-environment includes all the factors that affect the company but are out of its direct control. These factors entail social, economic and political factors with their analysis, often referred to as pest analysis. The Nike Inc. industry is greatly affected by factors taking place in the environment and has undergone dramatic and rapid changes in the recent past (Gürel, 2017). Current and potential opportunities.
Nike Inc. Company has opportunities which mainly involve improvement of the athletic footwear products in the market. This is because the sport has become an integral part of many people’s lives since people want to adopt a healthier lifestyle. Therefore, the company can improve its employment practices to enhance its brand image (Gürel, 2017). The company can also mix its branding of the products to attract new and more consumers, especially the non-athletics (SHTAL, 2018). The company can also adopt new policies and strategies which will enable it to maintain its spot as the leading athletic footwear and equipment producer.
Threats
The threats existing within the market would hinder the company’s performance. The main risk is competition from other organizations. Rapid technological innovations would be employed to contain the competition pressure from other companies. Weak legal systems in developing countries make it hard to curb imitation (SHTAL, 2018). The company should aim at expanding its area of operation to such countries to provide genuine goods to its customers. The company should also be able to comply with the industrial regulations to protect and maintain its reputation. As to many other global brands, Nike Inc. is too faced with challenges due to fluctuations in foreign exchange currency. Hence, significantly affecting its revenue collection, inventory and net income.
Internal analysis
Internal /microenvironment entails the factors that directly affect the performance of an organization. It is referred to the as competitive environment because it explains the relationships amongst organizations and the main factors that affect the relationship (Gürel, 2017).
Strengths
The strengths are the main factors that contribute to the company’s development and global production of sports shoes and equipment. The analysis of its strengths involves the strategic factors that contribute to business development and competitiveness. The main element is that the Nike Inc. company enjoys a good reputation as the number one producer of sports footwear and equipment (SHTAL, 2018). The company is involved in rapid innovation within the market to produce designs for athletics footwear and equipment. The innovation mainly consists of creating better designs to meet the customer’s design and align itself with fashion changes with time. Nike Inc. enjoys its global production and distribution of its products to maintain its market dominance.
Weaknesses.
This component negatively affects the trajectory of Nike Inc.’s growth as a company in the production of sports footwear and equipment. The part aims at the strategic factors within the organization that would hinder its business performances. The company heavily relies on the United States as its primary revenue on sales producer, which was at 42% by the year 2018. The controversies arising due to labour issues are the central nightmares affecting the business. This negatively affects the company’s reputation within the market (Gürel, 2017). The company is also limited in its product mix to take into considerations the larger share of its products. The company is also limited in selling its products within specific areas. This limitation is mainly in developing countries hence restrict its growth. Therefore the Nike Inc. company should improve its policies in the areas of labour, product development, and spreading to developing countries.
PESTEL Analysis.
It involves PESTEL analysis, analysis of the macro environment of the Nike Inc. company. These factors include; political, economic, social, technological, environmental and legal factors that affect the macro environment of the organization (Brohi, 2016). The differences in the macro-environment factors can directly affect the company and also other competitors within the market. These macro environment factors affect the porter five forces that model the strategy and competitive landscape.
Political
Favourable government policies have always initiated the growth of the company internationally. Proper trading regulations and stable governments have also positively impacted the growth of the organization (Gürel, 2017). As the Nike Inc. company is known for producing environmentally friendly products, it is rewarded considerable tax benefit mostly in the United States. However, the political instability in some developing countries (Asia) has become a significant concern in the growth and development of the company within the region by disturbing the supply chain of its produce (Brohi, 2016). Due to changes in international laws because of the rise in terrorism, some countries have imposed tariffs on imported products to protect the indigenous produce. This becomes a significant threat to Nike Inc. on those respective countries.
Economic factors
There is a rise in production cost in many countries due to the increase in living standards which in turn reduces the profit margins of the company. Labour issues are mainly witnessed as strikes arranged due to low wages relative to living standards. These labour strikes portray a negative image of the company as workers complain of poor and harsh working conditions hence affecting negatively company’s growth (Gürel, 2017). The issue of global economic recession can be appropriately handled to avoid customers change in taste and preference to use other brands which are of the same product at a lower price. Nike Inc. can also acquire companies that produce the same products within the market as it acquired the New York Times in 1988 (Brohi, 2016). The purchasing of many companies strengthens the base of the company in the world.
Social factors
Generally, consumers have become brand conscious. Therefore they would like to use products of quality and stature. This increase in product awareness has increased the company’s growth. Also, there is an increase in consumer health and fashion-conscious. The number of people going to the gym has increased exponentially (Brohi, 2016). This has indirectly boosted the sales of the Nike Inc. company for it’s a requirement for one to buy footwear that is athletic when visiting the gym. Most of the youth have considerably associated Nike Inc. with fashion and leisure, thus increased interest in buying Nike Inc. products. There is also an increased number of female customers in the past years which led to Nike Inc. to announce a new technique in designing and selling shoes (Gürel, 2017).
Technological factors
Nike Inc. is always regarded as a pioneer of footwear products in the market globally. It employs the latest technology in producing their products. Innovation has helped them stay ahead of their competitors and augmented their production process. The company has embraced technology with the use of digital media when advertising their products. In the recent past, the company has expanded its online platform hence increasing its base worldwide. For instance, the sales rose by 55% through the web in the year 2015.
Legal factors
The company has filed various lawsuits against competing companies for copying market plans and product designs by use of previous employees. The company was accused of using child labour in some countries to prepare soccer balls. The company took measures to curb the practices, but it had already destroyed its reputation and had to face legal cases globally (Ahmed, 2016). Also, some labourers claimed to receive lower wages relative to their standards. There is counterfeited brands of Nike Inc. products globally. This negatively affects the annual revenue collection by the company (Brohi, 2016). Nike Inc. can develop strategies to ensure that their products are not as widespread as the counterfeit products to protect the company’s reputation.
Environmental factors
Due to the increase in global warming concerns, companies are encouraged to reduce the wastes that are harmful to the government. Different countries have developed laws to guide innovation and manufacturing to reduce carbon emissions and reduce waste on supply chain (Brohi, 2016). Several Nike Inc. factories are located in china with the area becoming a pollution concern. Its government has been forced to implement laws to guide in the manufacturing process, which have, in turn, increased the cost of the production process (Ahmed, 2016). The company is also contributing to the reduction of greenhouse emissions in the entire value chain. It’s achieved by the introduction of new technology that has limited or no carbon emissions.
Nike Inc. five forces analysis
Bargaining power by suppliers
The bargaining power of the suppliers of Nike Inc. Company is relatively low. This is because compared to Nike Inc., they are small and unevenly distributed globally with limited financial strength. Most of the Nike Inc. supply is from Asia for raw materials and cheap labour (Wiśniewski, 2018). The rules set by Nike Inc. requires that their mergers meet the set standards and regulations which are challenging to match hence low bargaining power.
Bargaining powers by customers
In the recent past, the customers bargaining power is on the rise across the globe. Therefore, most of the organizations such as Nike Inc. control is handled by the customers. This has led to companies to focus on innovation and customer tastes and preferences when producing the products
(Jiang, 2019). The existence of competitive industries of the same product has increased customer bargaining power. Most companies are designed with better customer experiences in keeping hold of their customers.
Threats from substitute products
This arises from the existence of brands that sell similar products. There is an increase in several brands that operate both globally and locally sport of sale shoes and equipment. However, Nike Inc. company experiences not much competition from such products due to its brand image and customer loyalty plus trust (Wiśniewski, 2018).
Threats from the new entrance
The Nike Inc. company is receiving low-level threats from other small companies since its the leading brand in the market. To counter Nike Inc. brand, a new company has to invest in infrastructure, marketing and human resource the same as or more than Nike Inc., which is almost impossible (Jiang, 2019). There also exist legal barriers in the production process that discourage new entrants; hence their level of threats is always low.
The competitive rivalry among the existing brand.
Nike Inc. experiences a high level of competition from the existing brand such as Adidas. As much there is a limited number of same brands there is a very high level of game this is because the companies are investing heavily in marketing, research and development, product quality and innovation (Wiśniewski, 2018).
Competitive advantage.
Innovation: Innovation offers new and different ways to tackle challenges. It’s essential because of the changing tastes and preferences of the customers. Nike Inc. focuses on innovation by investing in research and development to gain know-how of customers tastes and fashion changes (Brohi, 2016).
Customer loyalty: the brand enjoys customer loyalty based on the level of satisfaction it provides. Their brand is designed to meet customers’ specific requirement.
Product quality: the Nike Inc. brand is globally recognized for high-quality products in the market compared to its competitors. Therefore the company enjoys a competitive advantage since the quality of the product cannot be matched (Brohi, 2016).
Efficiency: Nike Inc. has provided online service to their customers. They can order and buy products from the Nike Inc. website. The platform also allows the customers to specify the features of the products that they want. The company has produced brands for different sports in specific regions (Gürel, 2017).
Distinctive competencies of Nike Inc.
Nike Inc. is globally known for its brand of sports shoes and equipment. The company focuses on the application of modern technology in its production and supply chain process. It also focuses on product innovation to suit the customers’ requirements and growth through investment in better customer experience (Rehman, 2017). It always prioritizes the product quality and the style of designs. This is aimed at youth who prefer their products due to popularity as leisurewear. It has distinct marketing capabilities hence differentiating them from the competitors. They use digital platforms in advertising and selling their products (Brohi, 2016). Their marketing methods are ranked as the best in the world.
Differentiation strategy
This is a principle that’s is used to set a company aside based on specific elements within it. The plan by Nike Inc. is a company that produces the company achieves this by focusing on their line of production to produce quality products that meet customer preferences (Mahdi, 2015). Their objective is defined, which is to provide athletes with the equipment for them to succeed. Their one-line produce focus enables them to develop efficient networks of the suppliers and manufacturers who would supply high-quality materials (Brohi, 2016).
Strategic alliances
Nike Inc. had entered a coalition with apple to blend music and sports. This led to the creation of (Nike Inc.+ipod) line of products. This enabled both companies to capture new markets. It also allowed the creation of a cooperative, competitive advantage, which mainly focuses on their differences in an innovative, profitable way (Jie, 2009).
Globalization
The company is already operating on a global scale but limited to some countries. Therefore, it would be better if it extended its operation to the various countries that are not receiving their products directly (Torelli, 2019).
The main problems are competition from the existing brands in the new markets. These brands are of cheaper and known to the local people. However, Nike Inc. can employ its excellent reputation, quality of products and its financial muscles to compete with the existing brands. The prices of Nike Inc. products are relatively higher, mostly in countries that they entirely import Nike Inc. finished products (Torelli, 2019). The company, therefore, should consider setting up industries in such countries if all the production requirements can be met. This will reduce the cost of the produce.
Conclusion
Nike Inc. is the largest company in the production of sports shoes and equipment’s that mainly focuses on product innovation and marketing for its growth. It uses perfect marketing strategies that have enabled it to outdo other brands from the market. The company enjoys digital marketing platforms in more than 45 countries. However, its revenue collection is mainly from the US market. The regulatory measures put in place by different countries and differences in foreign currencies are the major threats to the company. Due to its success, there is competitive pressure from similar brands that are aiming at the same. For the company to maintain its growth rate, it should focus on better ways of product innovation and marketing. The company also can focus on customer tastes and preferences to improve the quality of their produce.
References.
Gürel, E., & Tat, M. (2017). SWOT analysis: a theoretical review. Journal of International Social Research, 10(51).
SHTAL, T. V., BURIAK, M. M., AMIRBEKULY, Y., UKUBASSOVA, G. S., KASKIN, T. T., & TOIBOLDINOVA, Z. G. (2018). Methods of analysis of the external environment of business activities. Revista ESPACIOS, 39(12).
Brohi, H., Prithiani, J., Abbas, Z., Bhutto, A., & Chawla, S. (2016). Strategic Marketing Plan of Nike Inc.
Ahmed, R. R. (2016). „Strategic Marketing Plan of Nike Inc. “. ResearchGate, Indus Institute of Higher Education.
Wiśniewski, R. (2018). A project of implementing a new product on the Polish market by Nike (Doctoral dissertation, Instytut Organizacji Systemów Produkcyjnych).
Rehman, Z. (2017). An assessment of brand reputation as an attitudinal construct at Nike: a female consumer perception analysis (Doctoral dissertation).
Mahdi, H. A. A., Abbas, M., Mazar, T. I., & George, S. (2015). A Comparative Analysis of Strategies and Business Models of Nike, Inc. and Adidas Group with particular reference to Competitive Advantage in the context of a Dynamic and Competitive Environment. International Journal of Business Management and Economic Research, 6(3), 167-177.
Jie, X. U. E. (2009). The Practice and Enlightenment of Non-competitive Strategic Alliance——A Case Study Based on the Cooperation between Apple and Nike Company [J]. East China Economic Management, 6, 43-45.
Torelli, C. J., & Oh, H. (2019). Cultural identities in the era of globalization: implications for consumer behaviour. In Handbook of Research on Identity Theory in Marketing. Edward Elgar Publishing.