Porters Five for Nike

Bargaining
power of
suppliers:
Low

Threat of Bargaining
Level of substitutes: power of
competitive low to buyers: low
rivalry: moderate to
Strong
moderate

Threat of
new
entrants:
Low

Rivalry : High

Who are the competitors?

Adidas

Under Armour

Puma

Asics

The level of competition rivalry is really strong as leading brands like Adidas, Asics, Puma and Under
Armor are in competition

Supplier bargaining power: Low

By using third party factory to produce their products as well as disforest parties in different
countries is low as no company holds 6% of the product production. Labor in third world factories is
cheap and since the taxes and regulations for such countries are low, the bargaining power of
supplier becomes quite less.

Threats to new entrants: Low

Entrants need a large sum of cash to perform research and development and to keep it sustainable.
Nike is a strong company with strong ethics and to switch to a new brand is difficult for the customer
Bargaining power of customer: High

The wholesale buyer is able to pursue other company like Nike, UA, Reebok, Champion and Asics to
give them products at an affordable price. However, the bargaining power of end customer is low as
individuals do not have high bargaining power.

Threat of substitutes: Moderate

Nike improves the product quality by and by which makes it difficult for the counterfeit and other
leading brand to replicate as time passes.

STP for Nike

S: to bring inspiration and innovation to every athlete or sports enthusiast in the world

Age: 15-40, tweens and teens

Gender: Men and women

T: Sports enthusiasts of urban areas and high income groups

P:

SWOT Analysis

Strength

Nike uses a “Make to Stock” customer order which provides a fast service to customers from
available stock.

Nike is strong at research and development, as is evidenced by its evolving and

innovative product range. They then manufacture wherever they can produce high quality product
at the lowest possible price.

Huge customer base

Weakness

The income of the business is still heavily dependent upon its share of the footwear market. This
may leave it vulnerable if for any reason its market share erodes.

The retail sector is very price sensitive. However, most of its income is derived from selling into
retailers. Retailers tend to offer a very similar experience to the consumer. So margins tend to get
squeezed as retailers try to pass some of the low price competition pressure onto Nike.

Poor labor condition in foreign countries

Opportunities

The brand is fiercely defended by its owners whom truly believe that Nike is not a fashion brand
however consumers that wear Nike product do not always buy it to participate in sport. In youth
culture especially, Nike is a fashion brand. This creates its own opportunities

There is also the opportunity to develop products such as sport wear, sunglasses and jewellery.
Such high value items do tend to have associated with them, high profit

Innovation in products: Products like wearable technology that monitors physical activities, is the

first step in building innovative technology products. Combining technology with athletic wear can
prove to be beneficial as it is an aspect of the fashion industry that still hasn’t been explored much

Threats

Nike is exposed to the international nature of trade. It buys and sells in different currencies and so
costs and margins are not stable over long periods of time. Such an exposure could mean that Nike
may be manufacturing and/or selling at a loss. This is an issue that faces all global brands.

The market for sports shoes and garments is very competitive. Competitors are developing
alternative brands to take away Nike’s market share.

Counterfeit products

Competitive pressure

Market budget pressure