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Introduction

Nike is an American multinational corporation that is engaged in the design, development,


manufacturing, and worldwide marketing and sales of footwear, apparel, equipment, accessories,
and services. The company is headquartered near Beaverton, Oregon, in the Portland metropolitan
area. It is the world's largest supplier of athletic shoes and apparel and a major manufacturer of
sports equipment, with revenue in excess of US$24.1 billion in its fiscal year 2012 (ending May 31,
2012). As of 2012, it employed more than 44,000 people worldwide and of May 31, 2014, Nike had
roughly 56,500 employees worldwide. In 2014 the brand alone was valued at $19 billion, making it
the most valuable brand among sports businesses. As of 2017, the Nike brand is valued at $29.6
billion.
The company was founded on January 25, 1964, as Blue Ribbon Sports, by Bill Bowerman and Phil
Knight, and officially became Nike, Inc. on May 30, 1971. The company takes its name from Nike, the
Greek goddess of victory. Nike markets its products under its own brand, as well as Nike Golf, Nike
Pro, Nike+, Air Jordan, Nike Blazers, Air Force 1, Nike Dunk, Air Max, Foamposite, Nike Skateboarding,
and subsidiaries including Brand Jordan, Hurley International and Converse. Nike also owned Bauer
Hockey (later renamed Nike Bauer) between 1995 and 2008, and previously owned Cole Haan and
Umbro. In addition to manufacturing sportswear and equipment, the company operates retail stores
under the Niketown name. Nike sponsors many high-profile athletes and sports teams around the
world, with the highly recognized trademarks of "Just Do It" and the Swoosh logo.
The company is the largest seller of athletic footwear and apparel in the world. It focuses its Nike
Brand product offerings on eight key categories: Running, Basketball (including the Jordon brand),
Football (Soccer), Men’s Training, Women’s Training, Action Sports, Sportswear, and Golf. It also
markets products designed for children, along with other recreational uses, including cricket,
lacrosse, walking, and wrestling.
Nike sells its products through retail accounts, Nike-owned retail stores, internet websites, and
independent distributors and licensees throughout the world. Nearly all of Nike’s footwear and
apparel products are produced outside the United States, while equipment goods, including bags,
socks, sport balls, eyewear, timepieces, bats, and golf clubs, are produced both domestically and
abroad.
Background History
Nike, Inc. formerly called (1964–78) Blue Ribbon Sports; American sports wear company
headquartered in Beaverton, Oregon. It was founded in 1964 as Blue Ribbon Sports by Bill Bowerman,
a track-and-field coach at the University of Oregon, and his former student Phil Knight. The company
was founded with just $1,200 in the bank.They opened their first retail outlet in 1966 and launched
the Nike brand shoe in 1972. The company was renamed Nike, Inc., in 1978 and went public two
years later. By the early 21st century, Nike had retail outlets and distributors in more than 170
countries, and its logo—a curved check mark called the “swoosh”—was recognized throughout the
world.
Knight had originally wanted to call the company "Dimension 6." The Nike name comes from
the Greek goddess of victory, and it’s pronounced "NY'-kee." Nike's first employee, Jeff Johnson,
came up with the name.
The first Nike shoes were made inside a waffle iron. Bowerman’s first eureka moment for
footwear innovation came in 1971, when he and his wife were making waffles for breakfast: It sparked
an idea for a grooved pattern on the sole of trainers to help athletes grip running tracks. It spawned the
“Nike Waffle Trainer,” patented in 1974 (at the expense of his wife Barbara's waffle iron).
According to Otis Davis, a student athlete whom Bowerman coached at the University of
Oregon, who later went on to win two gold medals at the 1960 Summer Olympics, Bowerman made
the first pair of Nike shoes for him. Says Davis, "I told Tom Brokaw that I was the first, Bill Bowerman
made the first pair of shoes for me. People don't believe me. In fact, I didn't like the way they felt on
my feet. There was no support and they were too tight. But I saw Bowerman make them from the
waffle iron, and they were mine."
From the late 1980s Nike steadily expanded its business and diversified its product line through
numerous acquisitions, including the shoe companies Cole Haan (1988; sold in 2012) and Converse,
Inc. (2003), the sports-equipment producer Canstar Sports, Inc. (1994; later called Bauer and sold in
2008), and the athletic apparel and equipment company Umbro (2008; sold in 2012). In 1996 the
company created Nike ACG (“all-conditions gear”), which markets products for extreme sports such
as snowboarding and mountain biking. In the early 21st century Nike began selling sports-technology
accessories, including portable heart-rate monitors and high-altitude wrist compasses.
Part of Nike’s success is owed to endorsements by such athletes as Michael Jordan, Mia Hamm,
Roger Federer, and Tiger Woods. The NikeTown chain stores, the first of which opened in 1990, pay
tribute to these and other company spokespersons while offering consumers a full range of Nike
products. In the 1990s the company’s image briefly suffered from revelations about poor working
conditions in its overseas factori
Nike swoosh was designed by Portland State University student Carolyn Davidson, for just $35
(just over $200 in today's currency). At a later stage she was given stock that is now worth more than
$640,000.
The slogan “Just Do It” was inspired by serial killer Gary Gilmore, who said “let’s do it” just before he
was executed by a firing squad in 1977.
The world’s largest Nike store is not in its US homeland but on London’s Oxford Street. It cost
£10.5 million to build the store, which spans three levels and roughly 42,000 feet. It was constructed
around the theme of a town square.
Mission and vision:
A company’s mission statement states the general courses of action for business
development, while the vision statement gives a picture of the future condition of the business. In
Nike’s case, the corporate mission statement is a prominent guide for strategic formulation.
However, the corporate vision statement requires development to suit Nike’s aims and business
situation. As a leading producer of sports shoes, apparel and equipment, Nike Inc. must maintain
vision and mission statements appropriate to the business and global market.
Nike, Inc.’s vision statement needs development to address what the business represents and wants
to strategically achieve in the future. On the other hand, Nike’s mission statement is appropriate for
its business situation as a global producer and retailer of athletic shoes, apparel and equipment.

Nike’s Vision Statement:

Nike’s CSR vision statement includes the company and its consumers as major participants
in the desired future goal of sustainability. The corresponding strategic objectives are implied in the
“sustainable economy” component of the vision statement. The third component of Nike’s CSR vision
statement reinforces sustainability by stating, “people, profit and planet are in balance.” This CSR
vision statement shows that, aside from being a manufacturer of athletic shoes and related products,
Nike is also concerned with the sustainability and balance needed to ensure that everyone benefits
from the business.

Nike’s Mission Statement

Nike Inc.’s official mission statement is “to bring inspiration and innovation to every athlete
in the world.” The company furthers that everybody is an athlete, based on Nike founder Bill
Bowerman’s statement, “If you have a body, you are an athlete.” This mission statement represents
the company’s strategic goal of reaching out to the global sports shoes, apparel and equipment
market. The following main components are in Nike’s mission statement:

 Inspiration
 Innovation
 Every athlete in the world

As a leading manufacturer of sports shoes, apparel and equipment, Nike Inc. inspires people
to adopt a winner mindset, which is covered in the “inspiration” component of the mission
statement. The company’s slogan “Just Do It” represents this inspirational goal. Also, Nike’s mission
statement emphasizes innovation. This component is applied through the company’s strategy of
continuous improvement of products through new technologies. The “every athlete in the world”
component indicates that Nike’s mission statement pushes the company to target every consumer
around the world. Thus, the company’s athletic shoes are designed to attract and satisfy a wide
variety of market segments.
Nike, Inc. lacks a suitable corporate vision statement. However, the company’s vision
statement for corporate social responsibility is a good start. This vision statement offers considerable
information about Nike’s business activities and strategic objectives. However, it does not address all
areas of the business as a whole. Thus, the company needs to develop and publish an appropriate
vision statement for the corporation to inform employees and investors about what the entire
business aims to become in the future, with reference to the global market for athletic shoes,
apparel, and equipment.
Nike’s mission statement adequately outlines the general strategic directions of the business.
This mission statement also remains relevant to the current situation of the company. It is expected
to continue its relevance even in the years to come, considering that the components “inspiration”
and “innovation” are essential for Nike to maintain its competitiveness amid tough global
competition. Thus, Nike can keep using its current mission statement to guide its strategies as a
global sports shoes, apparel and equipment company.
STRATEGY
Nike's Generic Strategies:
Nike Inc.’s generic strategy for competitive advantage emphasizes product mix diversity. A
generic strategy, according to Michael Porter, defines how a business achieves and maintains its
competitiveness. On the other hand, Nike’s intensive growth strategy reflects the company’s focus on
innovation to develop the business. An intensive strategy shows how a company grows. Founded in
1964, Nike Inc. has grown to become one of the biggest players in the global athletic shoes, apparel
and equipment market. To keep its position and competitive advantage, Nike must ensure that its
generic strategy and intensive growth strategies are always suited to current business conditions.
Nike Inc.’s generic strategy (based on Michael Porter’s model) is appropriate for its diverse
product lines, ensuring competitive advantage. The corresponding intensive strategies grow Nike’s
global sports shoes, apparel and equipment business.
Nike Inc. uses a combination strategy for its competitive advantage. This type of strategy
includes two or more of the generic strategies from Porter’s model.
The following are the generic competitive strategies implemented in Nike’s combination
strategy:

 Cost Leadership Strategy


 Differentiation Strategy

1. Cost Leadership Strategy:

Nike’s cost leadership generic strategy sustains competitive advantage based


on costs. In this generic strategy, the company minimizes production costs to maximize profitability
or reduce selling prices. In the late 1990s, Nike reduced costs and the selling prices of its athletic
shoes and other products. This generic competitive strategy helped the company regain its
competitiveness, especially against Adidas.

2. Differentiation Strategy:

Nike’s differentiation generic strategy provides unique products. For


example, the company integrates cutting-edge designs for its shoes. The combined cost leadership
and differentiation generic strategies boost Nike’s performance in the global industry. A strategic
objective based on the cost leadership generic strategy is to grow the company’s competitive
advantage through new technologies to reduce production costs. A financial objective based on the
differentiation generic strategy is to maximize Nike’s profit margins, such as on new sports shoes.

Nike's Intensive Strategies


1. Product development:

Nike’s primary intensive growth strategy is product development. This


intensive strategy involves the introduction of new products to grow sales revenues. For example,
Nike’s mission statement highlights innovation applied through new designs for shoes and related
products. New technologies enhance the products and set them apart from the competition. In
product development, these products remain attractive despite changing consumer preferences.
Thus, this intensive strategy supports Nike’s differentiation generic competitive strategy via product
innovation. A suitable strategic financial objective based on this intensive growth strategy is to
increase Nike’s market share through cutting-edge technologies integrated in the design of sports
shoes, apparel and equipment.

2. Market Penetration:

Nike’s secondary intensive growth strategy is market penetration. In this


strategy, the company grows by increasing sales revenues in existing markets. For example, Nike
increases its stores and retailers in the United States to sell more athletic shoes to American
consumers. However, market penetration is just a secondary intensive growth strategy because the
company already has significant presence in the global market. The cost leadership generic
competitive strategy empowers Nike to penetrate markets based on product affordability. A strategic
objective linked to market penetration is to increase Nike’s market presence by increasing the
number of authorized retailers. In addition, a financial objective related to this intensive growth
strategy is to increase Nike’s sales revenues through more sales to sports enthusiasts in current
markets.

3. Market Development:

One of Nike’s supporting intensive growth strategies is market development.


This strategy facilitates the company’s growth by targeting new markets or market segments. For
example, Nike enters new markets in Africa and the Middle East to increase its shoe sales revenues.
Alongside product development, the company applies the market development intensive growth
strategy by investing in new technologies to penetrate new market segments, such as segments
composed of bodybuilders. However, the saturation of Nike stores and retailers around the world
means that this intensive strategy has only a supporting role in the company’s growth. The generic
competitive strategy of differentiation helps the company enter new markets, based on product
attractiveness. A strategic financial objective under this intensive growth strategy is to increase Nike’s
profitability by entering new markets in Africa and the Middle East.

4. Diversification:

Diversification is the least significant in Nike’s intensive strategies for growth.


This strategy involves developing new businesses to achieve growth. Nike implemented this intensive
strategy in its early years, such as when it introduced apparel and sports equipment to its product
mix. Initially, the Nike brand was on athletic shoes only. Diversification can support Nike’s generic
competitive strategy of differentiation through new businesses that supply materials for product
innovation in the athletic shoes, apparel and equipment business.
Strategic Decision Areas of Operations Management
These areas pertain to the main decisions in managing streamlined
operations and productivity that effectively address business goals and objectives. Nike’s operations
management considers talent management, product development, and total quality management as
some of the most important variables in these strategic decision areas.

1. Design of Goods and Services:


This strategic decision area deals with the design of Nike’s athletic footwear and other products. The
operations management objective is to ensure that product design aligns with organizational
capabilities and business goals. In this case, Nike Inc. focuses on designs based on advanced
technology and current market preferences.

2. Quality Management:
Nike emphasizes quality in its processes and products. The objective in this strategic decision area is
to satisfy consumers’ expectations about product quality. The company’s operations management
addresses this concern through high quality standards and the application of total quality
management (TQM) in the production of sports shoes, equipment and apparel.

3. Process and Capacity Design:


This strategic decision area requires that Nike’s operations management must prioritize streamlining
and efficiency of production. The objective is to ensure adequate, effective, and efficient production.
At Nike, operations managers apply continuous improvement strategies to support the company’s
production goals and needs based on market dynamics.

4. Location Strategy:
Physical location is the typical concern in this strategic decision area of operations management. The
objective is to optimize costs and efficiency through proximity to employees, suppliers and the target
market. In the case of Nike Inc., the operations managers apply a corporate strategy that chooses
production facility locations based on costs and nearness to the most significant markets. For
example, Nike Inc. has sports shoe suppliers in Southeast Asia because of the cost advantage based
on cheaper labor in the region.

5. Layout Design and Strategy:


Nike’s operations management deals with the layout design of its facilities. The objective in this
strategic decision area is to optimize workflow based on human resources, capacity requirements,
technology, and inventory requirements. Nike’s operations managers apply corporate layout design
and strategy to company-owned facilities only. For example, the firm uses office layouts where
employees can move easily. The factories that produce the athletic shoes, apparel and equipment are
not under Nike’s control in terms of layout design and strategy.

6. Job Design and Human Resources:


Human resource adequacy and maintenance are the objective in this strategic decision area of
operations management. Nike Inc. satisfies this concern through internal leadership development,
along with coaching and mentoring. The company also has regular evaluations of job assignments to
ensure person-job fit.
7. Supply Chain Management:
Nike has excellent supply chain management, which facilitates efficient production to support the
global sports shoes, apparel and equipment business. The objective in this strategic decision area of
operations management is to align the supply chain with the company’s overall strategic aims. Nike
Inc. satisfies this objective through supply chain automation and optimization of transport distances
among suppliers, production facilities, distributors and retailers.

8. Inventory Management:
The objective in this strategic decision area is to maintain operations management that minimizes
inventory costs while maximizing its effectiveness and efficiency. Nike’s operations managers apply
the perpetual method of inventory management, which involves continuous monitoring and
movement of inventory from the supply chain to the distributors and retailers.

9. Scheduling:
Nike’s scheduling approach is primarily concerned with corporate operations and the coordination of
the supply chain with distribution and retail operations. In this strategic decision area of operations
management, the aim is to maximize resource utilization. Nike Inc. managers satisfy this aim through
automation. Corporate office schedules are standardized, while supply chain schedules are adjusted
according to the conditions of the market. Nike applies changes to the supply chain based on market
demand for its athletic footwear, equipment and apparel.

10. Maintenance:
Nike’s maintenance strategy considers adequacy of all resources. Adequacy of human resources,
facilities and capacity is the objective in this strategic decision area. Nike’s operations management
implements continuous recruitment programs to support HR needs, as well as reward programs and
career development strategies for maximum retention of employees. For facilities, the company has
dedicated teams to regularly evaluate facility and equipment integrity and requirements. The
companies that manufacture Nike shoes, apparel and equipment are responsible for their own
maintenance.
Nike Inc.’s organizational culture

Organizational culture is the combination of


traditions, habits, values, and behavioral
expectations among employees.
Nike Inc.’s organizational culture promotes
creativity and innovation, highlighting the role of
corporate culture in the company’s global
success.
Nike Inc.’s organizational culture
Nike Inc.’s organizational culture supports business resilience and capability. Organizational
culture is the combination of traditions, habits, values, and behavioral expectations among
employees. Nike’s workers are given a set of instructions, rules and expectations on how to do their
jobs, with consideration for their relations with customers and other employees. This approach
ensures that the company maintains its corporate culture, which partly contributes to the success of
the business. As one of the giants in the global athletic shoe, apparel and equipment market, Nike Inc.
continues its policies and strategies to promote an organizational culture that reinforces business
resilience and competence.
Nike has an organizational culture that encourages human resources to behave in ways that
address business objectives. Training programs are designed to uphold such corporate culture that
aligns with the Nike brand image for sports footwear, apparel and equipment.

Features of Nike’s Organizational Culture


Nike’s organizational culture is centered on creativity and innovation to provide products
that suit current consumer preferences. The company is known for cutting-edge sports shoes, apparel
and equipment. The following main characteristics of Nike’s corporate culture sustain business and
market competence:

 Talented
 Diverse
 Inclusive

Talented:
Nike Inc. understands that talent and innovation go hand-in-hand. This feature of the organizational
culture emphasizes the need to provide human resource support for product development and
internal services in the corporation. As such, Nike uses training programs to maintain employee
talent. The company also has coaching and mentoring programs. These approaches are based on the
strategy that develops and enables leaders within the organization for Nike’s global growth. The
purpose of this characteristic of Nike’s corporate culture is to sustain talent and infrastructure
necessary for producing some of the world’s most popular athletic shoes, equipment and apparel.

Diverse:
Diversity is continually developed in Nike’s organizational culture. The company believes that this
feature of the corporate culture leads to a dynamic workforce. Diversity promotes Nike’s creativity,
innovation, brand image and, consequently, competitive advantage. The company maintains diversity
through HR programs, such as the Speak Up! program which facilitates sharing of ideas among
workers. This feature of the corporate culture maximizes Nike’s product development cycles,
especially in creating new designs for its sports shoes, apparel and equipment.

Inclusive:
Nike Inc. emphasizes inclusiveness in its organizational culture. The purpose of this cultural
characteristic is to minimize barriers to employee performance. Nike’s strategy uses inclusiveness as a
tool for optimal performance, diversity and talent development. The company supports this feature
of the corporate culture through a team-based approach to management. In addition, Nike employs a
number of programs, such as Bias to Breakthrough (a program for removing barriers to creativity) and
NCourage (a set of employee networks for cultural awareness and community building). This feature
of the organizational culture minimizes problems in Nike’s workforce and supports streamlining
athletic shoes, apparel and equipment design and production processes.
An advantage of Nike’s organizational culture is its support for new product development. The
characteristics of this culture ensure that the company continues its competitive advantage in the
global sports shoes, equipment and apparel market. Also, the diversity and inclusiveness features of
Nike’s corporate culture help develop employee morale. However, a disadvantage is the potential
reduction in managerial efficiency. The organizational culture facilitates employee involvement,
although it also increases the workload of Nike’s managers. A suitable recommendation is for Nike to
increase its investment in managerial personnel to balance the effects of its corporate culture.
Nike Inc.’s organizational structure

A company's organizational structure is the


composition and system design applied on the
interconnections among employees, groups, and
divisions of the business.
Nike Inc.’s organizational structure’s characteristics
facilitate control and flexibility in the business.
Nike Inc.’s organizational structure
Nike Inc.’s organizational structure reflects the abilities and limits of the business in its
operations. A company’s organizational structure is the composition and system design applied on
the interconnections among employees, groups, and divisions of the business. In Nike’s case, the
corporate structure highlights the need to address differences among regional markets. As such, the
company has developed its organizational structure to enable adjustments in dealing with market
differences. As one of the leading players in the athletic footwear, apparel and equipment industry,
Nike Inc. serves as an example of how regional variations must be included in business strategies.
Nike Inc. has an organizational structure that facilitates regionalization of business strategies. The
characteristics of this organizational structure provide Nike with flexibility to address consumer
preferences for organizational structure athletic shoes, apparel and equipment in regional markets.
Geographic organizational Structure:
Nike has a geographic divisional. This structure is based on the company’s needs in its global
organization and regional markets. The following characteristics are notable in Nike’s organizational
structure:

 Global corporate leadership


 Semi-autonomous geographic divisions
 Global divisions for Converse and brand licen
Global Corporate Leadership:
Nike’s organizational structure has global corporate leadership, which involves corporate managers.
The managers have offices in the company’s headquarters in Oregon, USA. They decide for the global
organizational structure of Nike. For example, the Global Sports Marketing group releases new
athletic shoe marketing campaigns for worldwide marketing. Through this feature of Nike’s
organizational structure, decisions are easily implemented throughout the company.
Semi-Autonomous Geographic Divisions:
Geographic divisions are a major organizational structure characteristic of Nike, Inc. The company’s
operations are divided into segments based on regional markets. Each regional division’s managers
optimize operations in the regional sports shoes, apparel and equipment market
Global Divisions for Converse and Brand Licensing:
Nike’s organizational structure also has two global divisions: one for the Converse brand and another
for brand licensing. One global division is responsible for managing the worldwide operations of
Converse, which is another footwear brand and subsidiary of Nike Inc. Another global division is
responsible for licensing the Nike brand. This characteristic of the organizational structure offers
control for brand licensing and the operations of Converse.
Five Forces Affecting Nike

A Five Forces Analysis of Nike Inc. reveals the most


significant forces shaping the company’s strategies.It
shows that the external factors in the industry
environment highlight the significance of competition,
customers, and substitutes.
Five forces (External Factors Affecting Nike's Business)
A Five Forces Analysis of Nike Inc. reveals the most significant forces shaping the company’s
strategies. Michael Porter developed the Five Forces Analysis model to understand the effects of
external factors on businesses. In Nike’s case, these five forces point to competition as one of the
most significant external factors. Founded in 1964, the company manages to retain its leading
position in the international industry environment. However, the forces and corresponding external
factors enumerated in this Five Forces Analysis must remain among the strategic considerations of
Nike Inc.
There are a wide variety of external factors that determine the strengths or intensities of forces
impacting Nike Inc. However, based on this Five Forces Analysis, the following are the intensities of
these forces currently influencing Nike’s performance and industry environment in the athletic
footwear, equipment and apparel market:

 Competitive rivalry or competition (Strong Force)


 Bargaining power of buyers or customers (Moderate Force)
 Bargaining power of suppliers (Weak Force)
 Threat of substitutes or substitution (Moderate Force)
 Threat of new entrants or new entry (Weak Force)

Competitive Rivalry or Competition with Nike Inc. (Strong Force):


Competition determines how Nike Inc. maintains its share of the sports
footwear market. This element of the Five Forces Analysis shows how competition influences the
industry environment and the performance of individual firms. The following external factors create
the strong force of competitive rivalry in Nike’s case:
o Low market growth rate (strong force)
o High aggressiveness of firms (strong force)
o Moderate number of firms (moderate force)
The low market growth rate is partly due to firms’ high market penetration and market saturation.
This condition creates a strong force, as Nike and other companies compete for a market that grows
slowly. In relation, firms are highly aggressive in competing for bigger market shares. Also, there are
only a moderate number of firms that significantly impact Nike. Based on this element of the Five
Forces Analysis, the external factors that lead to strong competition requires Nike Inc. to focus on
market development and product development to ensure competitive advantage and a growing
share in the global athletic shoes, apparel and equipment market.

Bargaining Power of Nike’s Customers/Buyers (Moderat


Nike’s customers directly affect business performance. This element of the Five
Forces Analysis shows how consumers determine business competitiveness and the industry
environment. In Nike’s case, the following external factors contribute to the moderate bargaining
power of customers:
o Low switching costs (strong force)
o Moderate substitute availability (moderate force)
o Small size of individual buyers (weak force)
The low switching costs make it easy for customers to buy sports shoes other than those from Nike.
The moderate availability of substitutes also enables customers to buy other products instead of
always buying from Nike. However, the small size of individual customers minimizes their individual
forces on the company. These external factors lead to the moderate bargaining power of customers.

Bargaining Power of Nike’s Suppliers (Weak Force):


Suppliers affect Nike’s business through the availability of raw materials. This
element of the Five Forces Analysis tackles suppliers’ influence on firms and the industry
environment. Following external factors create the weak bargaining power of suppliers:
o High overall supply (weak force)
o Large population of suppliers (weak force
o Moderate size of individual suppliers (moderate force)
The high supply minimizes the effects of individual suppliers’ actions on Nike’s business. Similarly, the
large population of suppliers reduces the impact of individual suppliers’ demands on large companies
like Nike Inc. The moderate size of individual suppliers supports a moderate degree of suppliers’
influence. Nonetheless, this element of the Five Forces Analysis shows that Nike experiences only a
weak force representing the bargaining power of suppliers. As such, suppliers are among the least
significant concerns determining Nike’s strategies in the sports shoes, equipment and apparel
industry environment.

Threat of Substitutes or Substitutio (Moderate Force)


Substitutes pose significant threat against Nike’s performance as a leading
player in the global athletic shoes market. This identifies the force of substitution on the business and
the industry environment. The following are the external factors that maintain the moderate threat
of substitution against Nike Inc.:
o Moderate availability of substitutes (moderate force)
o Moderate performance per price of substitutes (moderate force)
o Low switching costs (strong force)
The moderate availability of substitutes imposes a moderate force against Nike, as customers have
considerable alternatives to Nike’s products. In relation, customers have a moderate likelihood of
considering substitutes because of the moderate performance of substitutes compared to Nike’s
sports shoes, apparel and equipment. The low switching costs further add to that likelihood.
Nonetheless, this element of the Five Forces Analysis shows that substitutes exert only a moderate
force against Nike Inc.

Threat of New Entrants or New Entry (Weak Force)


New entrants or new firms can disrupt Nike’s industry environment. This identifies
the extent of new entrants’ influence on firms in the sports shoes, apparel and equipment market.
The following external factors contribute to the weak threat of new entrants against Nike Inc.:
o High cost of brand development (weak force)
o High economies of scale (weak force)
o Moderate cost of doing business (moderate force)
The high cost of brand development makes it difficult for new entrants to succeed in competing
against large firms like Nike Inc. Also, the high economies of scale provide Nike with a competitive
edge against new entrants, considering the company’s global production and distribution network for
its athletic shoes, apparel and equipment. The moderate cost of doing further limits new entrants’
ability to disrupt the industry environment. Based on this element of the Five Forces Analysis, the
threat of new entry is a minor concern for Nike Inc.
SWOT Analysis

A SWOT Analysis of Nike outlines how these strengths


relate with the company’s weaknesses, opportunities
and threats. Nike Inc.’s SWOT analysis highlights
capability to maintain leadership in the sport shoes
apparel and equipment market.
SWOT Analysis
Nike Inc.’s leadership in the global sports shoes, equipment and apparel
market shows the significance of its strengths in competing against other giants like Adidas. A SWOT
Analysis of Nike outlines how these strengths relate with the company’s weaknesses, opportunities
and threats. Established in 1964 as Blue Ribbon Sports, Nike Inc. is now one of the world’s biggest
players in the athletic footwear market. An understanding of the company’s strengths and
weaknesses (internal strategic factors), and weaknesses and threats (external strategic factors) yields
insights on how a manufacturing and retail business can achieve global success despite tough
competition.
Nike Inc.’s SWOT Analysis emphasizes the importance of product development to maintain a
competitive edge. However, the results of this SWOT Analysis point out some possible new strategic
directions to further enhance Nike’s global performance and leadership.

Nike’s Strengths (Internal Strategic Factors)


Nike’s strengths are the primary drivers of the company’s growth and global leadership in the sports
shoes, apparel and equipment market. This component of the SWOT Analysis deals with the internal
strategic factors that support business development and competitiveness. The following strengths are
the most notable in the case of Nike Inc.:

o Strong brand image


o Rapid innovation processes
o Extensive global and low cost production
Strong Global Brand:
Nike is the most valuable sports brand in the world. Its “Swoosh” logo is instantly recognizable
around the globe. Its long partnership with legendary basketball player Michael Jordan has driven
strong sales of the company’s basketball sneakers, including the retro business, which makes up
about half of the Jordan shoe business. In fact, one of every two basketball shoes in the U.S. last year
carried that Jordan brand. Nike’s ability to maintain and enhance its iconic brands has allowed it to
enjoy continued success for decades.
Rapid Innovation Process:
Nike takes its research, design, and development efforts very seriously, and it believes this is one of
the key factors for its success. Technical innovation in both the design and manufacturing process of
its footwear, apparel, and athletic equipment has helped the company continue to produce better
products, which have enhanced athletic performance and reduced injuries. The company has its own
staff of specialists in the areas of biomechanics, chemistry, exercise physiology, and related fields,
and also uses advisory boards made up of athletes, coaches, trainers, orthopedists, and other experts
who consult with Nike about designs, materials, and concepts for products and improvements.
Extensive Global and Low Cost Manufacturing:
Virtually all of Nike’s footwear is manufactured outside of the United States by independent contract
manufacturers who operate multiple factories. In fiscal 2014, Vietnam, China, and Indonesia
manufactured roughly 43%, 28%, and 25% of total Nike Branded footwear. It also has operations in
Argentina, Brazil, India, and Mexico. The low cost of producing products in these countries continues
to boost the bottom line.
Nike’s Weaknesses (Internal Strategic Factors)
Weaknesses could disrupt Nike’s growth trajectory in the sports shoes, apparel and equipment
market. This component of the SWOT Analysis addresses the internal strategic factors that prevent or
reduce business performance. In the case of Nike Inc., the following weaknesses are the most
significant:

o High prices
o Labour controversies
Labour cotroversies:
It wasn’t long ago that Nike was facing intense criticism of its labor practices and work conditions.
However, over the past 20 years, it has undertaken efforts to improve conditions for its roughly one
million contract workers. While conditions have improved, many of its factories in developing
countries still do not meet Nike’s own standards. The company itself has acknowledged that the low
wages for some of its workers remains a concern. Safety issues at certain locations are also an issue.
If some type of disaster were to occur at one of its facilities, this would no doubt hurt the company’s
image.
High Prices: Due to its strong brand, Nike can typically command a premium on the products it sells,
which in turn supports higher margins and profitability. However, the cost of its footwear is higher
than most of its competitors, which make its products out of reach for many customers around the
globe, particularly in emerging markets. There is also the risk of declining demand when an economy
falls into recession, as consumers have lower discretionary spending for non-essential items.

Opportunities for Nike Inc. (External Strategic Factors)


Nike Inc. has opportunities to enhance its performance in the athletic footwear market. The external
strategic factors that facilitate business growth are covered in this component of the SWOT Analysis.
The following are the major opportunities in the case of Nike Inc.:

o Increase market presence in developing countries


o Production of more innovative products
Emerging Markets:
While Nike already has a presence in many emerging markets, we believe that there is still significant
growth potential there. Rapidly growing economies like China, along with other emerging markets
like India and Brazil, have the potential to drive future earnings growth. While China accounted for
roughly 9% of 2014 revenues, the company believes this figure will rise as it continues to enhance its
brand image there. It is also realigning its product portfolio to better appeal to Chinese customers’
tastes and preferences. All told, we think Nike should be able to increase its share of the global
footwear market by continuing to grow its base in these regions, which have been reporting higher
growth rates than developed markets for the past few years.
Production of More Innovative Products:
Given Nike’s focus on R&D, as mentioned in the strengths section of this analysis, the company is
typically on the forefront on product innovation. While products like FuelBand, a wearable
technology that monitors physical activity, may not have been as successful as hoped, Nike still has its
eye on the next “big thing”. The company’s brand strength, coupled with its focus on R&D, should
allow it to remain at the forefront of new technologies in the footwear and wearable technology
space.
Threats Facing Nike Inc. (External Strategic Factors)
Even though Nike is one of the major players in the sports shoes, equipment and apparel market,
some threats could limit or reduce the company’s performance. This component of the SWOT
Analysis deals with the external strategic factors that negatively impact business performance. The
following threats are most notable in Nike’s case:

o Tough competition
o Currency volatility
Competition:
The athletic footwear, apparel, and equipment industry is highly competitive, both in the United
States and around the globe. There are several significant athletic and leisure footwear companies
and sports equipment firms that produce similar products. Some of the primary ones are Puma and
adidas. Other large companies have diversified their product lines to include athletic and leisure
footwear, sports and lifestyle apparel, and equipment, including Under Armour (UA) and lululemon
(LULU). The rapid changes in technology and consumer preferences constitute significant risk factors
for Nike. Too, demand for Nike’s products depends on the relative popularity of various sports and
fitness activities, as well as changing design trends, so any major shifts in these trends could temper
business results. If competitors have more success attracting customers with more appealing
footwear or apparel, this would also hurt business prospects.
Currency Volatility:
Since the majority of Nike’s sales are generated outside of the United States, the company is exposed
to significant currency fluctuations. The recent strengthening of the U.S. dollar has hurt reported
results, due to the foreign amounts being translated into U.S. dollars for reporting purposes. While
the company does have certain hedges in place, they are designed to lessen the impact of
unfavorable exchange rates, not fully eliminate the risk. The dollar is expected to continue to
strengthen in the coming months, so this will remain a concern for the near term
This SWOT Analysis of Nike Inc. shows that the company has the strengths needed to support its
global leadership in the sports footwear, equipment and apparel market. However, the company
must address concerns regarding competition, labor practices, imitation and patent protection. Thus,
it is recommended that Nike Inc. must reform its strategies in these areas. The company must also
collaborate with government units to address patent protection issues.