Nike INC Strategic Analysis

Executive summary
Bill Bowerman and Phil Knight founded Blue Ribbon Sports in 1964 now known as Nike Inc.
The basic aim of the company was to distribute high quality and low cost Japanese athletic shoes
to American consumers and an attempt to break the dominant German industry. Nike has become
the worlds largest and leading supplier of athletic shoes and apparel. Today Nike do not only
manufactures athletic shoes but also distributes sports apparel, sports goods and other sports
equipments and accessories. The primary target market regions are United States, Europe and
Asia Pacific but Nike has its distribution over 100 countries. Nike has over 20,000 retailers,
factory outlets, Nike stores, Cole Haan stores and online web based stores to sell its sports and
leisure products. Due to the quality product, design innovation and extensive marketing, Nike
dominates the market with a 33% global market share. (Enderle, 2000). Nike holds a market
share of 40.87% in sports goods and Sportswear Company worldwide. (Lopez, 2014) Nike has
18000 retailers in USA and 56% of its sales are abroad. (Lopez, 2014).
Nike designs, develops and markets footwear apparel and equipment for men, women and
children. Its top selling products are footwear for running, basketball, tennis, soccer, football,
baseball, bicycling etc.

Nike Strategic Analysis

Introduction
Nike has mainly three strategic business areas; footwear, sports apparel and sports equipment.
The strongest SBU is the footwear where Nike holds a market share of 35% but it is still
struggling to compete with companies like Puma and Adidas in the areas of apparel and
equipment. According to the current fiscal year inventories are up 41%, revenues are up 18%
and earnings per share 19%. In todays global market Nike grows as a high demand brand.
Nikes mission is to bring innovation to all athletes and inspiration to others by providing quality
products. Nike has clear goals to excel I technological advancements in sports good for which
the company was founded. They dont desire diversity but aim for being the best in the industry.
Strategic Evaluation
As a multinational company Nike does business worldwide and is also influenced by numerous
environmental factors that define how the company functions.
Environmental Analysis
Competition: The sports goods market is continuously growing and Nike has a few large
competitors. Companies such as Puma and Adidas are big sporting goods companies and have a
good market share too. So the greatest threat to Nike is to differentiate itself from these
competitors and provide high quality product with responsibility
Technology: Nike holds a top position in the sports industry by providing sportswear technology
to its limit. The company converts its resources to quality and fulfills its customers needs. Nike
believes in innovation and cutting edge technology and this is how it is able to maintain its
market share.
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Nike Strategic Analysis

Customers: A major part of the success of Nike is the perception that the consumers have of the
brand. The company wants to establish brand loyal customers who prefer Nike over all its
competitors. Nike creates an image to its customers that they are not just buying sports good but
they are choosing premier sports brand. So Nike is not only selling a product its actually selling
an image of a premier brand. (Gonzalez, 2011)
Suppliers: One of the factors that distinguish Nike from its competitors is that outsources a
number of its products. Nike takes a lot of its material from different suppliers and also has other
manufacturers who get hold of the material and build the final product. Due to this production
cycle Nike need to keep a close eye on its supply system because any political or environmental
changes in any region can have a huge effect on the company.
Economic: A downfall in economy is very critical for Nike because the suppliers tend to increase
prices and in such a situation the customers are also not willing to spend on unimportant products
such as sports goods. So its a huge threat for companies like Nike. But at the same time the good
news is that in a strong economic environment the brand will prosper and the stock prices will
also rise.
SWOT Analysis
Strengths
Global Brand: The biggest strength of Nike is its high quality product and brand recognition.
Nike is the strongest and valuable brand in the sports industry. The Swoosh logo is immediately
recognized globally. Nike uses an effective marketing strategy such as promoting brand name
with the best athletes from the football and basketball such as Michael Jordan. Last year, alone in

Nike Strategic Analysis

a US every one out of two basketball shoes carried the Jordan brand. Nike has maintained its
brand quality and image which is the reason behind companys continuous success over decades.
Strong Research and Development: Nike has a strong research department and it takes the design
and development very seriously. Nike believes that its effective research and development is a
main factor for its success. Technical innovation in the design of the footwear improves the
performance of the athletes and reduces the chances of injuries. The company has a specialized
staff in the areas of exercise physiology, biomechanics and other such related fields. Nike also
has a board of advisors which include trainers, athletes, orthopedists and coaches who guide
about the design and suggest improvements. (Dalavagas, 2015).
Low Cost Manufacturing: Nike has outsourced a number of its products and this overseas
manufacturing is not under control so its a dependency for the company. Since Nike outsources
most of its products so almost all of its footwear is manufactured outside United States by
independent manufacturers. During the fiscal year 2014 China, Vietnam and Indonesia
manufactured approximately 28%, 43% and 25% of total Nike footwear. It also has
manufacturers in India, Argentina, Mexico and Brazil. Customer satisfaction is a key strength of
Nike as it has a relationship building with its customers. (Mathew, 2015)
Weaknesses
High Pricing: Nike is a premium brand and holds a strong position in the market thus has higher
profits. As compared to its competitors, the prices of Nike footwear are higher which makes Nike
products out of reach for most of the common customers worldwide. Also in times of economic
recession where the buying power is limited to essential products, there is a decline in the

Nike Strategic Analysis

demand as well. Nike has high product price as compared to its competitors such as Adidas.
(Gonzalez, 2011) (Dalavagas, 2015)
Perception of poor Labor Practices: Its not long ago that Nike faced immense criticism for its
poor labor practices and working conditions. Although in the past 20 years Nike has improved its
condition for over a million workers but still many of its workers in developing countries still do
not meet the standard of the company. Nike itself accepts the fact that the company is still
concerned about the low wages of some of its workers in developing countries. Safety is also an
issue because incase of any disaster the company will have to face the consequences
Opportunities:
Innovative Products: As mentioned in the strengths section, focus of Nike in research and
development makes it in the front line in the product innovation. Products such as FuelBand is
a technology that monitors the physical activity was not as successful as it was thought but it
still hoped for a next big thing from the company.
Emerging Markets: Nike has its presence in a number of emerging markets with growing
economies like India, China and Brazil. China accounts for 9% of the revenues in 2014.
(Dalavagas, 2015) Nike believes that this percentage will rise as the company will increase its
brand in this region. Nike should increase its growth of global footwear market in these regions
as they r report high growth rate than some of the developed countries over the past years.
Success of Nike depends on its performance of big three SBUs of the sports industry; footwear,
sports apparel and equipment. The greatest opportunity Nike has is to grow in the league
sponsorship of sports which it is already catering such as Football League and Rugby Football
League of England. (Gonzalez, 2011)
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Nike Strategic Analysis

A next step could be expansion of its products and include the emerging sports market like
skiing, motocross, snowboarding and more extreme sports. Nike has taken the opportunity and
has started to move into new sports market such as Nike SB brand (skateboarding shoes) and
Nike Snowboarding. (Gonzalez, 2011)
One of the biggest opportunities for Nike is the non-sport customers. Nike also aims to expand
its range for women footwear and also aim to target the fashion trends and develop a fashion
brand image. Nike also focuses on increase in the number of sports events like Olympic and
FIFA (Lopez, 2014).
Finally Nike needs to involve itself with art and culture to promote its sportswear. (Gonzalez,
2011).
Threats:
Fierce Industry Competition: There are a number of significant athletic and leisure footwear
companies within United States and around the globe thus making the sporting industry very
competitive. The biggest threat to Nike is dealing with fierce industry competition, especially its
competitors such as companies like Puma and Adidas especially after the acquisition of rebook
by Adidas, the rivalry is intensified. Some of the companies have diversified their products and
have included leisure sports apparel and equipment such as LULU (luluemo) and UA (Under
Armour). The latest technology trends and emerging brands constitute a major threat to Nike. If
the competitors have more attractive and appealing products which draw the customers attention
towards them, this could affect the companys business. (Dalavagas, 2015)
Volatile Currency: Since Nike outsources majority of its production so it has less control over its
production process. Majority of companys sales are outside United States so the company has to
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Nike Strategic Analysis

face fluctuation in the currency. As the Us Dollar has recently strengthened risk factor has
increased and this continues to be a constant threat to the company. (Dalavagas, 2015)
Economic Recession: No company can ignore the effect of economic rescission so does Nike
faces this great threat of economic downfall as people are not willing to spend in such situation
and the company has to pay the price. (Gonzalez, 2011)
Dealing with External Factors
Marketing Strategy
Nike was ranked 25th in branding all over the world in 2010, largely as a result of extensive
marketing. As a result of this brand recognition and better market position the sales of the
company substantially increased. In 2010 fiscal year an increase of .3% in footwear and an
increase of 3.8% in other areas were observed. (Gonzalez, 2011)
Nike has worked hard and has carried out huge campaigns with super stars of sports such as
Michael Jordan and Rafael Nadal.
Quality Assurance and Customer Service
The success of Nike in the sporting industry largely depends on the emphasis it puts on the
technical and innovative sides. Research and development at Nike is done very critically where
full time employees are hired in engineering, exercise physiology, biomechanics and other fields.
Nike has developed new technologies like Nike Free and Nike + and is keeping its customers
happy with the reliability, innovation and quality of the product.

Nike Strategic Analysis

Competitive Positioning
Nike has a competitive advantage in the market because of the design innovation and supreme
technology. Nike establishes the idea that its product is the best amongst all its competitors in
terms of high quality and better performance. Nike gains the market share through its brand loyal
customers who feel that there is no alternative other than Nikes product. New technologies and
innovative products attract new buyers to purchase the product.
Nike has also attached its brand to some of the worlds famous athletes to promote the idea that
Nike creates the best product for the best player. This is a key competitive advantage that none of
the other retailers claim that their product is used by the worlds top players and also purchased
by an average customer. Tiger Woods the most famous player in the golf is sponsored by Nike,
similarly Cristiano Ronaldo, one of the best soccer player and Lebron James a top basketball
player are all sponsored by Nike.
Nike and Adidas have almost the same strategies but implements in different ways. Nike focuses
the American market whereas Adidas focuses the European side. (Lopez, 2014)
Nike Competitive Strategy
Nike has a combination of two competitive strategies
1. Best Cost Provider strategy: As Nike outsources most of its products to other
manufacturers outside United States, its cost efficient
2. Broad Differentiation Strategy: Key elements focused by Nike are the product design,
quality, brand marketing and product development. Nike differentiates its products in
different segments of people such as women, men and children. It also differentiates by

Nike Strategic Analysis

offering a range of accessories and apparel like skates, gym bags and gloves. (Lopez,
2014)
Ethical and Social Responsibility
Nike went through a tough time at the turn of the century where it was involved in few child
labor scandals. Nike faced the problem head on and improved its ethical standards. After a
decade we saw that the company launches its new approach and improved its ethical,
environmental and social responsibility.
For example Nike is working to improve its factories conditions, where almost 800,000
employees work. Nike has created a code of conduct that improves the standards in these
factories. Nike has also established a code of ethics, code of social responsibility by creating
more environment friendly facilities and reduces in carbon.
Environmental organizations have recognized this effort and recently Environmental Protection
Agency awarded Nike with Earth Advantage Design Certificate. Improving its environmental
and ethical practices Nike has been able to achieve better brand value and great reputation .
(Gonzalez, 2011)
Acquisition
In case of acquisition to benefit Nike, it is better to look for a company that helps to expand into
new markets such as more action sports and athletic equipment. Nike do not need to acquire
another footwear company as it will not be of much help in the long run. Nike needs to look for
company which will help it in the areas where Nike is itself struggling for market share. By a

Nike Strategic Analysis

detailed study of the organizations strengths and weaknesses, it can be identified that which
would be a growing company and also favorable for Nike to enter in a new industry.
For example if Nike wants to expand its share in the equipment industry it can acquire some
business involved in snowboarding or skiing which is a sport with large customers who are
interested in more expensive equipment. But any step towards expansion must be evaluated
critically because expanding outside the athletic business involves a huge risk of becoming too
large in its own capacity and may result in mismanagement.
Conclusion
Nike is a leader of the global sportswear market focusing on footwear and apparel. The company
remains a dominant force in the worldwide market and has a massive demand both in the
developed and developing markets. Companys expansion in the emerging markets will lead to a
strong growth in the coming years. Nikes commitment to new technologies and its focus on
R&D will enhance its growth. In 2014 the company noticed a fast growth by its high quality and
technological products but it is planning to widen its scope by focusing on womens products and
introducing fashion products. Nike also focuses to emerge in growing markets such as China.
(Euromonitor, 2015) All said Nikes strengths outweigh its threats and weaknesses. (Dalavagas,
2015).
Recommendations
Nike already has a strong market position in the footwear and apparel business. A simple
recommendation would be to expand the operations of the equipment department. In this way
Nike will be able to increase its market share and come up with some new products which will
be profitable for the company in the future decades.
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Nike Strategic Analysis

The athletic equipment industry is evolving constantly and today sports are not just a traditional
game between two teams and seeing who will score more points. As the modern sports have
changed like the snowboarding, skateboarding and skiing, the needs of the modern athlete have
also changed. Consumers are turning towards emerging sports where the equipment has a very
important role for example according to Snow sports Industry of America, snowboarding and
skiing have 24,230,000 participants in America alone. According to a report by Consumer News
and Business Channel (CNBC) in 2009, Lacrosse is seen to be the most fast growing sport in
United States. A report by Sports Goods Manufacturers Association in 2010 says that few most
popular sports in America paintball, skating and skateboarding attract over 40 million
participants.
Sports equipment industry is a field which is rapidly growing in the past decade and will grow in
the future as well. Sports that involve expensive equipment have the potential to bring large
profits for companies like Nike. For example where a customer is paying $400 for a soccer
cleats, the same customer will not hesitate to pay $1400 for a snowboard too. Expanding its
range of sport equipment and targeting the athletes in new extreme sports will enable Nike to
increase its profit by selling products to customers who are willing to spend more on high priced
sports good. (Gonzalez, 2011)
Nike corporate strategy should focus on innovation and emphasize on research and development
to be profitable in the long run. This will help reduce the athletes injuries and also help in the
performance of the athletes and provide comfort too. Nike should also extend its products in the
sports injury segment as a complimentary offering. (James, 2011)

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Nike Strategic Analysis

Reference
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Gabriel Gonzalez, Gary Gonzalez, Kaden Anselmo. (2012). Nike Environmental & Strategic
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Nike Strategic Analysis