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ENVIRONMENTAL SCANNING OF

NIKE

Nike is now the brand leader of sport and has produced a wide range of sports
commodities in all sports fields since1972. Nike was founded by Phil Knight and Bill Bowerman
in 1964 and was called Blue Ribbon Sports (BRS). In 1971, Knight launched a new design of
footwear which was named “NIKE’’ and put the new logo ‘’Swoosh” which was designed by
Carolyn Davidson, a student at Portland State University, on the side of the shoes. Sales have
been increasing from $2,000 million to $16,000 million between 1990 and 2007. Nike knew
what its customers want, and what customers’ favorites are. Nike has a clear product positioning
in the market, the customer considers Nike is leading the field and makes customers more willing
to purchase Nike rather than other brands.
Nike’s marketing strategy is the key element of its success. A well-organized grouping of
the 4 Ps (Product, Price, Place and Promotion) has led to Nike becoming a giant in the sports
industry. Nike sells a number of sport products that include basketball, tennis, football, cricket,
golf and so on. The product range suits all ages, people and both sexes, whether children or
adult, male or female. In addition, customer can get not only sports equipments, but also apparels
in the Nike shop. The products are produced by contracted factories; the majority of these
factories are located in the Asia region in order to decrease the manufacturing cost. Besides,
Nike has a wide range of products; customers can purchase on different price levels. Nike’s
branches are located in more than 110 countries in the world and more than 18,000 retailers in
the United States. This means customers can easily find a shop to buy the goods in. Moreover
“Nike Town” and the on-line shop provide all categories of goods and a fast delivery service.
The key investment in Nike’s promotion is advertising; they spend about 3% to 10% of their
annual revenue on it. No matter what the advertisement or who the celebrity, they attempt to
have the best imagination and quality for their customers. No matter how the market changed,
Nike always knew their strengths, weaknesses, opportunities and threats and how to remain
global leader in the industry.

ENVIRONMENTAL SCANNING
STRENGTHS
Nike’s major strength is its strong brand image and recognition worldwide; it is one of the
leading sportswear manufacturers. Everyone is familiar with the term “just do it” Their products
are seen as quality worldwide and are more popular because of its advertising and promotion.
They have strong customer base and consumer loyalty. Nike’s competitiveness in the sporting
industry is also a major strength. They are always improving their advertising and promotion
methods and are constantly ahead of their competitors. They are constantly improving and
growing their product range. Nike is also in a strong financial position, with minimum long term
debts. They do not tie-up cash in buildings and manufacturing. They are constantly increasing
productivity by switching their production to the cheapest available place, at the highest quality
levels.

WEAKNESS
Nike as well as other brands has been portrayed negatively because of poor wages and working
conditions in its overseas factories. This bad public image could lead loss of existing customers,
and potential customers switching to more ethical brands. The sportswear industry is very price
sensitive, all competitors prices are about the same. Nike has its Nike shops and the selling of
its products direct to the consumers’ conflicts with other resellers of the brand. Most of Nike’s
earnings are derived from selling into retailers. And retailers attempt to pass some of the price
competition onto Nike, which decreases Nikes’s profits.

OPPORTUNITIES
Nike’s main opportunity is product development. Developing their product range make them
more competitive. Products tend to go out of fashion quickly and Nike can introduce new
products fast. Consumers will desire the newest and latest products from Nike. They can also
diversify into other parts of the industry; there are always new sectors of the market to reach.
Increase in internet shopping will reduce the cost and improve prices making them competitive.

THREATS
There is a threat of consumers leaving Nike, as they have a bad ethical image. Also using
celebrities can be a gamble as they might also cause negative images like Kobe Bryant and the
sexual assault case. Also increases and decreases in foreign exchange can affect their business.

INTERNAL ENVIRONMENT
ORGANISATIONAL STRUCTURE
DYNAMIC,LOOSELY COUPLED (ORGANIC) NETWORK 1
Also called ‘Outsourcing based Network Organisation’
Here core group of experts manages the outsourcing process closely. This forms a hub & spoke
type of organization consisting of many contracts. It could create a control problem with contract
organizations.

PRODUCTION
Nike follows the integrated production policy. The use of an integrated production network that
links consumption and production analyses and place-based conditions accomplishes this goal.
This integrative approach allows for more thorough investigations of firm networks, the regions
where they interact, the labor upon which they depend, and the consumers that influence their
behavior. Furthermore, investigating ‘feedback loops’ between these facets provides a means of
understanding how reforms along production networks are mediated.
The actual production facilities of nike are owned by South Korean and Taiwanese companies
that manufacture the products under contract with Nike because of cheap labour. The bulk of
Nike products are manufactured in China, Thailand, and Indonesia, though some components or
products involving more complex technology are manufactured in South Korea or Taiwan. In
1995, a Korean company opened up a major new facility in Vietnam, giving that country also a
significant share of Nike' s production.
Nike is the leader in the multinational for zero waste product design. Nike uses recyclable
polymers, water-based solvents, and fabric woven from used soda bottles.

FINANCE
Nike has the aggressive financial structure and its stocks and shares are a high profitable one.
The net income for this financial year (up to May 2010) is 1,906,700 which is 25% more than
the last financial year.

MARKETING
Nike's marketing strategy is an important component of the company's success. Nike is
positioned as a premium-brand, selling well-designed and expensive products. Nike lures
customers with a marketing strategy centering around a brand image which is attained by
distinctive logo and the advertising slogan: "Just do it". Nike promotes its products by
sponsorship agreements with celebrity athletes, professional teams and college athletic teams.
However, Nike's marketing mix contains many elements besides promotion. They are
1. Advertisement
2. Beatles song
3. Minor Threat ads
4. Chinese Threat ads
5. Sponsorship

RESEARCH & DEVELOPMENT


Nike has an underground research lab full of evil geniuses toiling to create the newest and most
advanced designs and technology in the sneaker business. It’s true that Nike’s research lab has
grown up considerably from its early days with Bill Bowerman and a waffle iron to create the
Nike Waffle Racer. Today, it commands approximately 13,000 square feet containing some
state-of-the-art research equipment.

While all of this sounds complicated, research is primarily divided into three parts:

Biomechanics

How the body moves.

Physiology

How the body works, especially under stress.

Sensory/Perception

The evaluation of how a product works, feels, and wears; how a person feels when wearing the
shoes.

The Nike Sports Research Laboratory is located on the Nike campus in Portland, Oregon in the
United States of America. Nike’s research team has spent more than 16 years dreaming,
researching, developing and testing the possibility of attaching springs to the bottom of an
athlete’s foot. Nike Shox, the most acclaimed technological development makes the dream a
reality (“Nike”). Therefore, by advancing in technology, Nike holds a competitive edge in the
market.

EXTERNAL MICRO ENVIRONMENT


SHARE HOLDERS – Peoples who are buying shares

COMPETITORS – Reebok,Adidas,Puma

CUSTOMERS – All over the world

MARKET INTERMEDIARIES – No such factor. Only through nike outlets and


dealers.
EXTERNAL MACRO ENVIRONMENT
(PESTLE)
POLITICAL
Nike’s international operations are subject to the usual risks of doing business abroad, such as
possible revaluation of currencies, export duties, quotas, restrictions on the transfer of funds and,
in certain parts of the world, political instability. Nike’s products manufactured overseas and
imported into the United States and other countries are subject to customs duties collected by
customs authorities. Nike is unable to predict whether additional customs duties, quotas or other
restrictions may be imposed on the importation of our products in the future. The enactment of
any such duties, quotas or restrictions could result in increases in the cost of our products
generally and might adversely affect the sales or profitability of Nike and the imported footwear
and apparel industry as a whole. Nike has become one of the multinational companies that
represent businesses in the society under attack by a wide choice of protest or campaign
journalists. The issues that Nike faces are those of human rights and conditions for workers in
factories in developing countries. The company has been subject to critical coverage of the often
poor working conditions and exploitation of cheap overseas labour employed in the free trade
zones where their goods are typically manufactured. The forced labour camp like conditions in
some overseas production plants led to several boycotts, together with coining the alternative
name “swooshtika” for the company’s swoosh logo. Nike is also seen as insincere because while
their advertisements show women as powerful in the United States, they are seen to demoralize
those in the factories in East Asia. Also in regards to wages, Nike argues that they do have fair
wages according to the different countries and their cost of living instead of paying the United
States dollar equivalents.

ECONOMICAL
The economic environment consists of factors that affect consumer purchasing power and
spending patterns. Economics factors include business cycles, inflation, unemployment, interest
rates, and income. Changes in these major economic variables have a significant impact on the
marketplace. Nike is impacted by these economic variables greatly as these things cannot be
controlled. Such things as consumer-expenditure and family incomes play an important role in
the marketing strategy and are an important part of Nike’s advertisement campaigns (Buck
Annual Report).

TECHNOLOGICAL
Technology has a tremendous effect on life-styles, consumption patterns, and the economy.
Advances in technology can radically alter existing industries and because of the industries
competitive nature each company makes their own advances, and then copyrights them. Nike’s
research team has spent more than 16 years dreaming, researching, developing and testing the
possibility of attaching springs to the bottom of an athlete’s foot. Nike Shox, the most
acclaimed technological development makes the dream a reality. Therefore, by advancing in
technology, Nike holds a competitive edge in the market. Nike has also taken the lead in by
being the first market with its e-commerce web site. Its web site offers online purchasing, a
complete description of its product lines, store locations, and many more features to reach its
market. NIKEID enables online customers to design key elements of the shoes they purchase.
The goal for applying this system is to create a seamless flow of information shared by any
browser using Nike employee around the world. Using this, employees can reduce time for
getting information and they can obtain the information about their company and product
anywhere. As a result, Nike increased more than 40% of their global sales.

INTERNATIONAL
The demographic environment tells marketers who can be potential customer in terms of size,
density, location, age, sex, race, occupation, and other statistics. Changes can result in significant
opportunities and threats presenting themselves to the organization and major trends for
marketers include worldwide explosive population growth (Kotler and Armstrong). All of these
can provide Nike with the tools and assets it needs to promote its products in different areas of
the world and gain a bigger share of the market globally. The industry has realized the influx of
women’s sport players and is preparing to accommodate such an increase and as women increase
their consumption the younger generation is decreasing because of the popularity of other
footwear.
ENVIRONMENTAL
Environmental consciousness has a strong presence in Western Europe and Japan, as well as in
the United States. Currently, Nike has been “… pursuing product sustainability for more than a
decade. From increasing the use of water-based solvents in footwear manufacturing and working
to keep greenhouse gas emissions in check, to supporting organic cotton and turning old shoes
into new sports surfaces, Nike’s commitment to sustainability is part of our Considered ethos”
(“What led us to Nike Considered”). It can be said then that Nike does not suffer environmental
issues.

SOCIO-CULTURAL
It is important for Nike to understand the sociocultural environment which is made up of forces
that affect society’s basic values, perception, preferences, and behaviours with changes affecting
customer behaviour, which affects sales of products. Nike targets the social values of
achievement, self-actualization, individualism, and conformity with slogans as “Just Do It!”
becoming a cornerstone of Nike advertisements. Because Nike targets individuals in athletic
fields, they find it necessary to attack the emotions of success and self-fulfilment.

These are the various environmental factors related to “NIKE”.


REFERENCE
WWW.NIKE.COM

WWW.ALLFREEESSAYS.COM

WWW.MARKETINGPRACTICE.BLOGSPOT.COM

WWW.OPPAPERS.COM

WWW.SCRIBD.COM

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