Porters Five forces of Nike

Powers of Customers

In the industry of Nike, the consumer’s powers to purchase products are in a moderate state. Therefore, for Nike’s consumers, footwear and apparel are essential items that are high on demand. In most cases, Nike’s consumers are price-sensitive because and intend to purchase products that are cheaper in price. Additionally, people have become more knowledgeable regarding the quality of the products. Therefore, Nike’s consumers will prefer to purchase products that are higher in quality and affordable in price. The power of consumers was moderate before the outbreak of COVID 19 in the world. However, at present, the consumer’s purchasing powers have become low because of the effect of COVID 19. The decline in the economy of the countries worldwide has also hampered the purchasing power of the consumers, as there was also a massive decline in the income level of every working in the world (eyorekon-kevin.medium.com, 2020).

Power of Suppliers

In Nike’s industry, the main suppliers are the manufacturers as it provides items such as sportswear and sports shoes, and many more. In order to reduce the cost of materials and labor, the industry of Nike has been cooperating with the producers of developing countries. It is because Nike has been entered into outsourcing contracts with suppliers such as China, Mexico, and India. Therefore, the bargaining of the suppliers with the companies is not much required, as there are numerous suppliers for substitute items all over the world. Therefore, it can be said that the suppliers’ power in the industry is moderately low. However, as per the fact that the impact of COVID 19 on the industry has been in a negative way, the rate of suppliers has decreased to the fullest. Hence, the suppliers’ bargaining power has disappeared as the suppliers are not fully available at present.

Threats of New Entrants

In general, the threats for the new firms to enter the market are very low in the case of Nike’s industry. However, the survival of the new entrance is difficult. It is because the initial threat is price competition. The large industry will try to attract the customers by providing a certain rate of discounts on the products, which is not possible for some of the small-scale industries. Secondly, the threat will be regarding brand images. The new firms will not be able to spread the brand image in the market as much as Nike will. Therefore, even if there are entrances of new firms, it will not exceed the Nike industry because the consumers will not be familiar with the new brand and hence will mostly prefer Nike. However, the outbreak of coronavirus has stopped any of the new companies from entering the market anytime sooner. Therefore, it can be said that there are no threats to the new entrance in the market as of now (eyorekon-kevin.medium.com, 2020).

Threat of Substitute Products

In the case of Nike, the dangers of any substitute products are considerably low as well as moderate. It is because a huge number of competing brands such as Adidas and Under Armour manufactures items, which are the same and matching. Therefore, in the international market, many brands exist to manufacture products with low price trainers than Nike’s industry. These brands provide lower-cost substitute products for Nike. As compared to all the brands, the quality and structure of Nike’s products overcome this threat. However, at present, the pandemic situation because of the COVID 19 has led the firm to face various losses and difficulties. Hence, the threat of substitute products is higher, as the consumers are seeking products that are cheaper in price. It can also be said that at present, the consumers prefer more of the substitute goods, as it comes at a lower price. It has occurred mostly because of the decline in the income level of most people worldwide due to COVID 19.

Competitive Rivalry

As per the fact that Nike falls under the category of the sports industry, the industry has a strong level of competition in the market. There are numerous competitors of Nike, namely, Puma, Under Armour, and Adidas. The industry of sports has enhanced in a saturated form, and the recent players are participating in tough competition for deeper market penetration and attainment of the share market from one another. Therefore, in general, the industry of Nike is surrounded by numerous world-famous companies, which made the firm difficult to compete at certain points. However, because of the impact of coronavirus, there has been a loss in all the companies, and hence it has become more difficult for Nike to cover up the loss within the competitive market (eyorekon-kevin.medium.com, 2020).

Figure 2: Porters Five Forces of Nike

Source: (panmore.com, 2020)

Recommendations

After the company is highly affected by the COVID 19 outbreak, the firm can use some of the measurable steps to overcome the losses. The recommendations for the company are as follows:

Discount on Products

It has been analyzed that sales have decreased to a higher rate in the industry of Nike. Therefore, to attract more consumers and earn more profit, the company can provide a certain rate of discount on the prices of different products to the consumer. It would be one of the most useful steps that the company could use to cope up with the pandemic. Discount provided to the consumers will enable those consumers to purchase more of the products in this situation because people are seeking more of the lower price of products in good quality. Therefore, in this way, the company will be able to attract consumers as well as make more money at the same time.

Decide to Change

The previous business strategies will not be suitable and appropriate for the company to overcome the coronavirus’s losses and damages. Therefore, it is necessary for the firm to change for the better and adopt some new strategies to help the firm run its business in an effective and efficient way (Inc.com, 2020).

Conclusion

In conclusion, it can be said that the industry of Nike has been impacted by the outbreak of COVID 19, largely. The company has faced heavy losses as the sales of the industry have declined by a higher rate, which has led the company to face much shortage of cash as well. Generally, all the companies from different sectors have faced immense losses in their business, making it difficult for these companies to cope with the pandemic situation. Therefore, the overall assignment has highlighted the present situation of Nike’s industry and the impact of coronavirus in the same company. Hence, as per the analysis of Porter’s Five Forces of Nike, it has been concluded that the company has been immensely affected by the pandemic from every aspect of the business. There has been an effect of COVID 19 in the company’s consumer behavior regarding its purchasing power, affecting the suppliers, which has made it more difficult for the company to run its business in the emerging market. The assignment has also included measurable recommendations, which can be used by the company to overcome the losses.

Reference

eyorekon-kevin.medium.com, 2020. Nike, Inc. Porter’S Five Forces Analysis. [online] Medium. Available at: <https://eyorekon-kevin.medium.com/nike-inc-porters-five-forces-analysis-a2031a7ed9c2> [Accessed 17 November 2020].

panmore.com, 2020. Nike Inc. Five Forces Analysis (Porter’S Model) – Panmore Institute. [online] Panmore Institute. Available at: <http://panmore.com/nike-inc-five-forces-analysis-porters-model> [Accessed 17 November 2020].

Inc.com, 2020. 10 Steps To Recovering After A Business Failure. [online] Inc.com. Available at: <https://www.inc.com/john-rampton/multi-millionaire-to-broke-10-steps-to-recover-from-failure-and-achieve-greater-.html> [Accessed 17 November 2020].