The bargaining power of customers in the 21st century has kept rising fast and the case is same with Nike. Rapid growth through careful acquisitions has enabled Nike to achieve considerable market penetration across developed countries. In 2017, the U.S. athletic footwear industry achieved a growth of 2%. â Customer loyalty: Based upon the high level satisfaction Nike generates, it enjoys high customer loyalty than its rivals. Registered office: Venture House, Cross Street, Arnold, Nottingham, Nottinghamshire, NG5 7PJ. The legal net has kept growing stiffer and stiffer for international businesses. Company Registration No: 4964706. The largest number of Nike suppliers are located in Asia. For example, Lee Bird was hired as president of the subsidiaries who had the express role of managing the subsidiaries in a way that encouraged long term growth. Market share and customer base: The market share of Nike among the sports shoe brands is the largest and it has the largest customer base of all of them. This was 66 higher than the number of DTC stores previous year. & Montgomery, C.A., 2005. Its excellent marketing has ranked it among the best marketers of the world. US is an important market for most of its competitors too including Adidas, Under Armour, Skechers and New Balance. [7] Crain, D.W. & Abraham, S., 2008. The management employs strategic management components such as vision, environmental analysis, strategy creation, strategy implementation, and strategy assessment (Nike, Inc., 2009). They make some really fun ads that people love sharing and talking about. Corporate Strategy: A Resource-based Approach. The glory that, â brand image/equity â The brand enjoys a very high level of trust, Nike revenue for fiscal year 2017 rose 6 percent to 34.4 Billion dollars, up 8 percent on a. NIKE Brand sales to wholesale customers grew by 5 percent while Direct To Consumer revenues grew to $9.1 billion, up 18 percent. These factors are also dominant in the area of marketing. Apart from that, Nike has several leased facilities all over the U.S. to serve the U.S. market. The global brands like Nike are most affected by this trend. At the Atlanta Olympics, Reebok went to the expense of sponsoring the games. Nike, IKEA and IBM’s outsourcing and business strategies: Profits and perils. For further market growth, Nike has focused on sustainability and higher focus on innovating its products that better cater to the sports and leisure wear needs of the new generation customers and athletes. Some of the main core competencies of Nike are as follows: Brand name: Nike is a globally renowned brand of sports shoes, apparel and equipment. Its industry leading performance is backed by excellent product quality and great customer focus as well as a fantastic marketing strategy. Nike Success. The brand is present globally and each of its offices caters to large geographical areas of several countries. [8] Firestein, P.J., 2006. It can also try backward integration since it is heavily dependent on independent manufacturers down its supply chain. Threats are constantly present in the sports market. However, Adidas was one with fastest growth rate with its sales having grown at 50 percent. Nike has used a chain of regional distribution centers to service its retail stores. Marketing capabilities: Nikeâs excellent marketing capabilities differentiate it from the crowd of brands. Corporate Level We use strong diversification in what we sale to the differentiation of our consumers. Business level strategy analysis/recommendations Nike’s major competitors consist of companies such as Adidas, Under Armor, and Rebook. Environmentally, Nike has had an interesting background. A very large part of Nikeâs supply chain is located in Asia and this is because apart froth availability of raw materials, labor is cheap there. Nike has not only endured the crisis but also managed to accelerate through it. By 1980s, it made association of games with its products offerings to its target market. These forces can have a direct impact on their sales and profits. Converse is also a wholly owned subsidiary brand of Nike that designs, distributes and licenses casual sneakers, apparel and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron and Jack Purcell trademarks. Technologies like AI have grown very important to design. Whilst Nike managed to recover from this by acting swiftly to remove such suppliers, this offered competitors opportunities to gain market share from the company, during this time of crisis. Apart from that, Nike has several leased facilities all over the U.S. to serve the U.S. market. But far from being the result of a desperate pandemic-induced pivot or some happy accident, the seeds of Nike’s current resilience were planted deep into its strategy several years ago. In 1982, the first television advert was aired during the New York Marathon. Law is also a dominant factor in the area of international business. The five forces look at the barriers to entry in the market, the extent of rivalry that exists in the market, the relative power of suppliers and the relative power that buyers have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. Human Resource Management International Digest, 13 (3). Nike Annual report 2017 (https://s1.q4cdn.com/806093406/files/doc_financials/2017/ar/docs/nike-2017-form-10K.pdf), https://www.wiseguyreports.com/reports/1023964-athletic-footwear-market-global-demand-growth-analysis-opportunity-outlook-2023, https://www.npd.com/wps/portal/npd/us/news/press-releases/2018/us-athletic-footwear-industry-sales-grew-2-percent-to-19-6-billion-in-2017-npd-group-reports/, https://help-en-us.nike.com/app/answer/article/supply-chain/a_id/20878/country/us, https://news.nike.com/news/nike-inc-reports-fiscal-2017-fourth-quarter-and-full-year-results. Nike however, remains a dominant name in this market whose sales and revenue have grown steadily over the past five years. The importance of economic factors can be understood from the fact that low economic activity results in lower sales and revenue for international brands. Strategic Corporate Social Responsibility: Stakeholders in a Global Environment. There are also untapped markets for Nike to consider entering, in developing countries that are able to spend more money than was previously possible. â Marketing capabilities: Nike is known as one of the best marketers in the entire industry. Collis, D.J. It is because they have their supply chain and distribution network spread all over the world. Strategic management is a technique that Nike, Inc. has been able to apply to determine how it is performing in its current position and how its future should be. Co-creating value through customers’ experiences: the Nike case Strategy & Leadership, 36 (5). The threat of new entrants is moderately low which is because while brands enter at a smaller and local level, it is generally very difficult to build a major market leading brand from a small investment. As well as maintaining a wide range of products, the company has also been at the forefront of design, bringing in the latest in footwear technology, namely the Air Zoom Yorker, which is a shoe weighing 30% less than competitors’ shoes. Free resources to assist you with your university studies! There are a large number of brands operating locally and internationally in the global market that are selling sports shoes and apparel. Higher legal pressures â The legal pressures have grown globally causing higher pressure related to compliance on international businesses. Top design ability and high quality products have been the central factor to Nike’s success. This is a PESTLE Analysis of Nike : Political factors have kept growing in importance for the business industry over the years. Its main strategic suppliers for footwear are 127 footwear factories located in 15 countries. No plagiarism, guaranteed! Sales across menâs and kidâs footwear grew by 1% each. The major threat to Nike is the imitation that goes hand in hand in various markets which are affecting its revenues and businesses. ii. SWOT Analysis of Nike; The chosen corporate strategy for Nike is likely to be based on its own internal strengths and weaknesses in relation to its external opportunities and threats facing the organisation. Any break down in the legal enforceability of this agreement could be incredibly damaging and need to be monitored carefully. A very large infrastructure is essential to manage its global presence well. In fact, as of 2017 Nike spent over $3.3 billion in demand creation campaigns. However, despite its international growth the brand depends heavily on US market for revenue and income. Using value-chain analysis to discover customers’ strategic needs. Product innovation: Since always, Nikeâs focus has remained on product innovation. 5. Apart from their own manufacturing and distribution processes, Nike also keeps a watch over its supply chain partners since they have remained a source of problems rising from environmental issues in the past. These are two specifically important areas that have brought it to the point it has reached today. The new challenge facing Nike is to maintain this position, despite recent bad publicity relating to its suppliers. & Montgomery, C.A., 2005. By 1971, Nike had parted company with the original distributor and began to produce its own range of footwear. Nike has more offices in Europe, Middle East, Africa, Greater China, Asia Pacific and Latin America. The sports shoe industry has grown highly competitive in the recent years with pressure increasing from the likes of Adidas and Under Armour. Focusing on these things will affect the consumer experience of Nike as well as its sales and profits. Competitors such as Adidas are regularly entering the market or gaining new market shares. Nike is renowned worldwide as the brand for athletes. this reflected the growth in Net Income and declining weighted average diluted common shares outstanding. Nike suppliers are required to follow strict rules and regulations related to labor and HR management. Global presence: Nike is a major global brand with commerce in 45 countries. Consistent focus on product innovation helps the brand respond to its customerâs expectations and achieve an advantage compared to its competitors. All these factors mean lower bargaining power of the suppliers against the brand. Incorporated in 1967, Nike acquired high level popularity globally due to its excellent product quality and marketing strategy. Prior to any acquisition or growth, Nike had ensured that the acquisition was in line with its socially responsible approach, once again recognising that any damage to the brand name could be seriously detrimental. Brands are engaged in a race for remaining technologically ahead of their rivals. Failure to comply with regulatory standards can lead to financial losses as well as, Political factors have kept growing in importance for the business industry over the years. Marketers are utilising these factors to formulate local marketing strategies and to grow market share and customer base in specific markets. Currently, Nike is supplied by 127 footwear factories in 15 nations and 363 apparel factories in 363 nations. Nike places a great emphasis on corporate responsibility and this has shown in its green approach to the strategy (Human Resource Management International Digest, 2005)[6]. In such an environment while it remains generally easier to do business in the countries with a, The importance of economic factors can be understood from the fact that low economic activity results in lower sales and revenue for international brands. Nike did not. Nike used to operate under the strategy of “Guerrilla marketing” to promote its products, a strategy and concept that they had to abandon and change once they overpassed Looking at the political, economic, social, technological, legal and environmental factors surrounding Nike will allow the choice of business strategy to be seen much more clearly. This has also led to an increase in compliance related costs for Nike. [6] Human Resource Management International Digest, 2005. They are also designing better customer experiences to retain these customers. Nike is an international company producing sports based apparel. One of the critical ingredients of Nike business model success is its ability to create demand for its products. It has established a culture and environment which fosters diversity and inclusion. Tag lines such as ‘there is no finish line’ were used and Nike won advertiser of the year at the Cannes festival. Nikeâs e-commerce websites are now active in 45 countries. As of May 31, 2017, the NIKE Brand had 985 Direct To Consumer stores in operation. In order to remain relevant in the market, Nike uses the competitive and different pricing strategy from those of Adidas. To retain its growth rate, the brand must retain focused on product innovation and marketing. Nike has very few shops of its own and, therefore, relies on retailers more heavily than would be considered ideal[3]. [5] Werther, W.B. Submitted to: A.J. This particular strategy appears to work well on generating responses not only to new product launches, but also to opportunities for online purchases, in-store … It is because they have their supply chain and distribution network spread all over the world. It is because the taste of people differ from society to society and culture to culture. The PESTEL framework can be used to analyse how the most important forces in the international environment can affect large and global businesses. The suppliers who are willing to go beyond the minimum standards and can follow the sustainability rules strictly are allowed to be a part of Nikeâs supply chain. Using value-chain analysis to discover customers’ strategic needs. Any drop in general consumer confidence has reduced spending across all sectors and premium sports brands have suffered as a consequence. It is not just the governments but other agencies are also actively watching for the carbon footprint of businesses. When it acquires a new subsidiary, it insists on its own brand being used. Nike’s Pricing and Business Strategy. Technologies like AI have grown very important to design superior customer experience whether it is in-store shopping experience or online shopping. The buyers of Nike products are becoming increasingly discerning in their approach. It share of non US revenue has shot past 50% in 2017. Technology is not just bringing higher efficiency but also creating new opportunities of engaging customers and attracting higher sales. If you need assistance with writing your essay, our professional essay writing service is here to help! Nike has several owned and leased distribution facilities all over U.S. to serve the U.S. market. Nike has a strategy of growing in a way that is responsible and ensures long term financial growth. Nike is still the premium brand in sports apparel and has maintained this by being at the cutting edge of design technology, particularly in relation to sports shoes. Nike has a healthy dislike of is competitors. The effect of legal factors on businesses has kept growing as compliance related burdens have kept adding to their manufacturing costs. Its main strategic suppliers for footwear are 127 footwear factories located in 15 countries. In this regard, it also reduced the number of suppliers to have only those onboard who are committed to quality and sustainability. For this reason, Nike rightly takes a strategy of ensuring that it remains at the forefront of design technology when it comes to sports equipment fending off any potential substitutes. Focusing on specific markets and their consumersâ tastes helps predict trends better and can have a healthy effect on sales level in particular markets. Nikeâs headquarters are at Oregon in North America. The remaining comprised equipment and the Converse Brand. Nike is headquartered in a state of art building that has a lake and more excellent and extraordinary facilities for its staff. It is also having an adverse effect on the earnings of Nike. Its industry leading performance is backed by excellent product quality and great customer focus as well as a fantastic marketing strategy. More than 550 factories in 42 countries make Nike products. In order to maintain this mission statement, Nike has ensured that it has maintained socially responsible policies throughout its growth. One of the ways that this has been achieved is to have key individuals in critical roles within Nike and the subsidiaries. Recently, that has come under fire with the revelation that some suppliers were using less than suitable suppliers. Nike is the worldâs largest sports shoe and apparel brand of which has focused on product innovation and marketing for growth. Outbound logistics are a very critical part of Nikeâs value chain. SAGE. Being recognised as a world expert of design and sports apparel has been the central basic strategy for Nike and has proved to be very successful both in design and retail, expanding its scope both in terms of geographic location and type of product (Brown & Eisenhardt, 1998)[2]. This growth was driven by a 30 percent rise in digital commerce sales, growth in number of stores and 7 percent growth in comparable store sales. What was not immediately obvious from using the Ashoff Matrix to analyze these businesses that comprise the other category was their high growth, expanding market share, and increasingly high levels of cash generation. Werther, W.B. They accounted for more than 90% of its footwear production during 2017. Island Press, [4] Collis, D.J. This component of the SWOT Analysis deals with the internal strategic factors that support business development and competitiveness. It has made rules and regulations regarding labor, product quality and other things including environmental impact which the suppliers must follow. McGraw Hill Professional. Also Nike with the association of Wieden Kennedy made various marketing communication ways to reach the customer and to make them aware about products. Sociocultural factors have grown to be more dominant in the 21st century. The largest number of Nike suppliers are located in Asia. Its responsibilities include selecting and contacting the right suppliers for quality goods and services. It generated 19.6 billion dollars in sales and its unit sales grew by 2%. Its e-commerce websites are active in more than 45 countries. In terms of internal strengths, the main thing that Nike has in its favour is its singular and well recognised brand. In both 2016 and 2017, the detrimental effect of fluctuation in foreign currency was felt strongly by Nike. Digital marketing and e-commerce are going to have the highest effect on growth and profits in the coming years. Moreover, the sports shoe and apparel brands depend on high economic activity and higher disposable income for sales and revenue. Nike has several owned and leased distribution facilities all over U.S. to serve the U.S. market. Since then Nike market also expanded to Asia in 1982 when India hosted the Asian Games. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! While Nike has retained its focus on great quality, sustainability is also become an important focus down its production and supply chain. Since October 2017, Nike has worked to rebuild their business model. Nike mainly utilises two sales channels â physical and online. The. Reference this. Creation and preemption for competitive advantage. Well recognised sports individuals such as Serena Williams and Tiger Woods further enhanced their brand image, publicly. McGraw Hill Professional. 15th Jun 2018 During the recent years, Nikeâs focus on sustainability has grown and it is seriously focusing on making its supply chain more sustainable. From environmental to labor and product quality related there are several laws, several of which differ from market to market and affect businesses deeply. [2] Brown, S.L. Its industry leading performance is backed by excellent product quality and great customer focus as well as a fantastic marketing strategy. There is undeniably a great business and marketing strategy behind a great and global brand. Also read Nike SWOT Analysis, STP & Competitors. Footwear & Apparel Industry external analysis: Below is a SWOT analysis listing Nikeâs key strengths, weaknesses, opportunities and threats: Increasing marketing and overhead operating expenses: Rising competition in the sports shoe and apparel market has resulted in an increase in Nikeâs marketing related expenses. In a bid to regain its edge, Nike, in 1987, launched a new product called Air Max. Nike's competitors had by then developed their business in this segment. Other Interesting Facts 10. This industry is being shaped by new trends and mainly the sports leisure trends. Registered Data Controller No: Z1821391. The demand for sports shoes is expected to rise steadily in the near future based on rising health consciousness and growth in sports and gym infrastructure across U.S. Competitive pressures against the brand have also kept growing. Nike brand is the most valuable among sports businesses Of the companys $18.4 billion in revenues in 2009, 90% was attributable to merchandise emblazoned with either the Nike or Nike Golf logos. It has adopted technologies that specifically create material which is user friendly and sustainable. Products sourced from these suppliers are sent to various markets through the regional offices and distribution centers of Nike. The overall threat from substitute products is moderate which is because of Nikeâs brand image as well as trust and customer loyalty. Growing HR and marketing expenses â With growing size of business, the HR and marketing expenses of Nike have also grown fast. Its video marketing strategy has ardent fans around the world. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com. Strategy & Leadership, 36 (4). In this regard, it also reduced the number of suppliers to have only those onboard who are committed to quality and sustainability. In terms of internal strengths, the main thing that Nike has in … Nike is the leading brand in sports shoes and apparel industry. In the industry, Nike’s has maximum or main competition; direct competitors of the company include Adidas AG, Puma AG, and New Balance etc. Nike sales boomed in the late 1970’s since the issue of jogger shoes. It was revealed that certain suppliers were using child labour as a way of keeping costs down. In fiscal year 2020, 35% of its Nike brand revenue comes from online sales. Its own stores including in-line and factory retail stores and its websites and mobile sales channels sell to the customers directly. Its product range is extensive and innovative and multiple celebrity endorsement has proved to be a considerable internal strength for Nike and one that has been exploited to the maximum in gathering additional market share. Investing in research and development is helping brands create innovative products and grow their sales and market share. SAGE. Competing on the Edge: Strategy as Structured Chaos. It is because while they are very small in size as compared to Nike, they are also scattered all over the world and do not hold significant financial strength. PEST Analysis: Nike: SWOT Analysis Of Nike. It has spent more than 3 billion on marketing in 2017. It can exploit both e-commerce and physical retail channels for faster overseas expansion. The total detrimental impact on Income before Income taxes was close to around $115 million and $449 million for 2017 and 2016 respectively. ISS 395. Strategy & Leadership, 36 (4). Also, Nike is in the industry which is by and large affected by the product life cycle which means that sometimes it’s very difficult for the company to respond to the fad timely. Nike Brandâs revenue was 32.2 Billion dollars, up 8 percent. Branding was premium from the beginning with the relationship that it developed with the Wieden and Kennedy advertising company. As of 2017, over 60% of revenues came from footwear and over 28% in apparel. Market penetration is high in certain countries and Nike needs to look to expand into new markets, although this is proving difficult in Europe due to entry barriers. Strategic Corporate Social Responsibility: Stakeholders in a Global Environment. [1] Ramaswamy, V., 2008. Brand image and size: Nike has a very good brand image in the sports shoe industry. Brown, S.L. In such a way, the company is striving to avoid third-party retailers and become closer to the end user. In particular, the under-age workforce has been active in pursuing legal actions against the companies. Nike’s first self-lacing shoes, HyperAdapt 1.0 . The threat of substitutes is also important to determining where the company is positioned in the market and what strategy is most suitable (Crain & Abraham, 2008)[7]. Looking for a flexible role? The bargaining power of Nikeâs suppliers is low. We're here to answer any questions you have about our services. Recent difficulties have been encountered by Nike in relation to the working practices of its suppliers and, as such, a much greater degree of control has been taken by Nike headquarters in the US to ensure that all working practices are ethical and sustainable in the long term. Political issues such as strikes on a national or local scale can cause havoc to Nike’s supply chain. 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