Type: Process Essays
Sample donated: Merle Warner
Last updated: December 30, 2019
NAME: NAVPREET SINGH STUDENT ID : G1749271WSUBMISSION DATE: 12-JANUARY-2018 WORD COUNT: 2443ContentsExecutive Summary 3Introduction 3History 41. PEST Analysis 41.1 Political factors 51.
2 Economic Factors 5The Danger of Retreat and Rivalry 61.3 Social Factors 61.4 Technological Factors 7SW0T Analysis 8OPPORTUNITIES & THREATS 82.1 OPPORTUNITIES 8Taking full advantage of the emerging markets 8Product Expansion 82.2 THREATS 10Intense Competition 10Recession 113. Conclusion 124. References 13Executive SummaryNike,Inc., a buyer items organization, takes part in the plan, advancement, and advertising of footwear, attire, hardware, and adornment items around the world.
It plans athletic, easygoing, and relaxation footwear for men, ladies, and kids. The organization’s footwear items incorporate running, preparing, ball, soccer, don propelled urban shoes, and youngsters’ shoesIntroductionOne of the most leading sports goods retailers, Nike Inc. is an American multinational corporation, it designs, creates and sells apparel, footwear, equipment and accessories and other services, the world over. It majorly aims to manufacture sportswear and athletics products. And it also holds prominence in the recreational and casual clothes market.It was initially named as Blue Ribbon sports in the year 1964, later developed into Nike, Meaning the Greek goddess of victory Inc on 30th May 1970.
In 2014, Nike was known worldwide as the most valuable brand among all sports business. Also, was recognized with its logo ‘Just do it’.Industry Apparels, Footwear, AccessoriesHeadquarters Washington County, Oregon, USAArea Served WorldwideAnnual Revenue The US $32.4 billion (2017)Founder Phil Knight, Bill Bower manPresident and CEO Mark Parker, Products Athletic footwear, apparel, sports equipment and other recreational products with separate lining for men, women, and kidsNumber of Employees 74,000 (2017)Source: 2017 Annual Results Nike IncHistoryThe organization was established on January 25, 1964, as Blue Ribbon Sports, by Bill Bowerman and Phil Knight, and formally moved toward becoming Nike, Inc. on May 30,1971. The organization takes its name from Nike, the Greek goddess of triumph. Nike showcases its items under its own particular image, and also Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Blazers, Air Force 1, Nike Dunk, Air Max, Foamposite, Nikes skateboarding, and auxiliaries including Brand Jordan, Hurley International and Converse. Nike likewise possessed Bauer Hockey (later renamed Nike Bauer) in the vicinity of 1995 and 2008, and beforehand claimed Cole Haan and Umbro not with standing producing sportswear and gear, the organization works retail locations under the Niketown name.
Nike supports some prominent competitors and games groups the world over, with the very perceived trademarks of “Take care of business” and the Swoosh logo.1. PEST Analysis On NikePEST analysis refers to all the macro-environmental factors that are necessary for strategic management.
It is an acronym which when expanded includes six factors when the company is contemplating to launch or upgrade a service or a product.The factors are:• Political• Economic• Social• TechnologicalThe significance of all these factors can be different for different companies or industries but overall they play a crucial role in deciding the future action of every organization.1.
1 Political Factors•Favorable Government PoliciesThe government policies always have a huge impact on the companies specifically those that operate globally. The US government has always certainly initiated growth-oriented policies which have supported this company to grow and expand internationally•Political Unrest in Some Asian countriesMost of the factories of Nike, Inc. are situated in the developing Asian countries such as China, Vietnam and Indonesia. But the political situation in Thailand in the last few years was a big concern for the management of Nike, Inc. where it’s had its 35 factories located. The situation is somewhat same in Vietnam, Indonesia and parts of China as well, as any form of protest, political instability or social unrest can disturb the supply chain of Nike, Inc.Country Number of Factories (2014)China 195Indonesia 40Vietnam 65Thailand 35•Changes in International LawIn last one decade, the international law has become even more stringent with the increasing threat of terrorism. To counter these illegal activities within their territory many countries have change their rules and regulations,.
1.2 Economic FactorsThe Danger of Retreat and Rivalry Nike, Inc. requirements to devise an arrangement how it can handle another worldwide financial subsidence.
Being a market pioneer, Nike, Inc. can be influenced altogether as it encountered in the most recent decade (2008-09). Last time, it was seen that amid the subsidence that purchasers supplant Nike with some other brand which offers similar items at a lower cost. In this way, the danger of retreat dependably paired affects Nike, Inc•Rise in Production Cost and Labor IssuesThe labor issues are very common in the factories of Nike, Inc. recently.
In April 2014, Nike, Inc. experienced the biggest strike as most of the factories in China stopped its manufacturing because of low wages. It had a significant effect on the productivity as well as the revenue of the company.•Fluctuating Profit MarginsNike performs all its business at a global level. Hence, the stability of currency exchange and international interest rates is crucial for the continuous growth of its profit margins.
However, the higher inflation rate at the domestic level (USA) with the fluctuating currency rates with respect to the Dollar always has adverse effects on the yearly profit margins•Acquisitions and SubsidiariesNike, Inc. has acquired many companies which function within its domain of footwear and apparel industry, it started in the year 1988 when it took over Cole Han (New York Times). And Since then, it has purchased many companies to strengthen its grounding internationally. 1.3 Social Factors•Consumers Becoming More Brand ConsciousIn this modern era, most of the customers have became brand conscious. They associate Nike, Inc. with quality and status.
This increase in brand awareness has been beneficial for the business of Nike, Inc. to grow better. It was the first company that introduced innovation in the footwear and apparel industry.•Consumers Becoming Health and Fashion ConsciousEvery year the number of people visiting the nearest gym to maintain their health, body and physique is increasing tremendously.
This rise has certainly helped Nike, Inc. in some way in order to boost up its sales as they turn to buy footwear and apparel for them to look athletic. Some of the consumers also associate Nike, Inc.
with fashion and leisure (About.nike.com, 2016). They are interested buying Nike, Inc.
products. This awareness among the people would apparently help Nike, Inc. in the long run.•Increase in Female ConsumersNike, Inc. has devised the key strategy to grow their business in the next few years by targeting the increasing number of female customers. As a part of the strategy, it has appointed Amy Montage as the head of its business in the year 2013 (Forbes, 2014). The business in the women line grew by nearly 12% to $5 billion in the year 2013.
The company envisages that the revenue from this segment will reach $7 billion by the year 2017. The enormous potentiality of this segment has encouraged the company to introduce various products exclusively for women. Nike, Inc. projects that soon 25% of its total revenue would be generated by the female consumers itself.•Working Conditions at FactoriesNike, Inc. is often accused of its dangerous working environment in its factories in many countries. It has been alleged that it’s using sweatshops to produce footwear and apparel since the 1970s.
Initial denials from the authorities itself made the situation even more complicated which affected its image globally (Businessinsider.com, 2015).1.4 Technological Factors•InnovationNike, Inc.
is often regarded as the Apple Inc. of apparel and footwear. It is regarded as the pioneer to introduce various products which amazed the whole world. It has always adopted the latest technology for their products; this innovation not only helped them to set ahead from their competitors but also refined and improved the production process (About.nike.com, 2016). It is also one of the global brands which took a revolutionary step to reduce the usage of chemicals and other raw materials which are detrimental for the environment. The latest popular product introduced by Nike, Inc.
is Fly knit Racer which received acknowledgment globally.•Marketing TechniquesWith the worldwide ascent in deals and effect, Nike, Inc. has additionally adjusted their advertising techniques to achieve their clients and forthcoming customers. The expansion in promoting focusing on the computerized medium more than the customary channels is one such advance. Nike, Inc. utilizes online media and applications to achieve the clients and promote their diverse items. Over the most recent couple of years, the market for web-based shopping has extended which has given Nike, Inc.
the chance to expand their base around the world. Presently, Nike, Inc. does not need to rely on their stores and establishments outlets to offer their prominent footwear and attire. For the year 2015, Nike, Inc. detailed a 55% expansion in deals through web contrasted with a year ago. The figures touched $1.
19 billion intersections the billion check out of the blue through the web deals. It was $767 million in the financial year 2014 (Internetretailer.com, 2015). SW0T Analysis On NikeThis analysis is conducted in order to access the various factors affecting Nike Inc; it studies its performance and strategies in terms of all the external and internal factors that affect the working of Nike. Generally known as the SWOT analysis, it consists of strengths, Weaknesses, Opportunities and threats, the basis of its short-term and long-term strategic direction.
Below is a brief analysis done on the external factors influencing Nike, Inc.OPPORTUNITIES & THREATS2.1 OPPORTUNITIESTaking full advantage of the emerging marketsIn the 21st century, countries like China, India, South Africa and Brazil showed high economic growth when European and American economies plunged. Customers in these nations had huge interest in western brands and had high disposal incomes Source: 2016 Annual Results Nike Inc.
Though Nike, Inc. has already ventured into these nations, still the potentialities have not been fully exploited. The primary strategy that Nike, Inc. adopted to become a sports leading brand was to capture the most famous sports of those nations and advertisement by the prominent sports professionals which actually proved to be beneficial.Product ExpansionNike, Inc. is one of only a handful couple of brands which burn through a great many dollars in innovative work. As they reign in footwear, clothing and games and wellbeing hardware, it gives them extensive chance to expand their scope of items.
It needs to enhance the item extend with unique accentuation on frill and furthermore associations with other marked organizations to fortify its position (Nikevision.com, 2013). As the inclinations of the clients tend to change each year, item development would keep up their hang on a piece of the overall industry. Initiatives towards Better EnvironmentNike is ranked among the top two companies for being climate-friendly, just after Canon (Reuters.com, 2016).
Nike, Inc. uses particular strategies to initiate recycling, phasing out usage of chemical components, proper precautions to safeguard health of laborers working in factories earned them reputation and praised globally.Potential in E-Commerce TradeBefore the major advancements that took place in the IT and communication industry, Nike only explored the option of brick and mortar selling, i.
e. either through their own retail store or franchises but with the transformations in IT sector, it can now boast sales and enhance its customer base by offering such a wide range of its products over the Internet (Internetretailer.com, 2015). .2.2 THREATSIntense CompetitionNike, Inc. operates in such an industry that is highly competitive, still has a better position in terms of market share as opposed to its rival companies, but it faces tough competition from Adidas, Puma and other reputed brands. The competition gets tougher as these brands also produce a similar range of products (statista.
com, 2016). Revenue in Billion USD$ The above chart depicts the stiff competition between the major brands of the industry. In the footwear section, Nike is the leader of the industry but it receives continuous challenges from Adidas and Puma.Fluctuating International MarketsMajority of the products manufactured by Nike, Inc.
are made in the factories situated outside the USA, meaning, they conduct transactions in various financial currencies. It increases their vulnerability to any fluctuations in foreign currency exchange rates, also increases the cost, affects the operations and adversely affects business with independent manufacturers of Nike, Inc Perilous Supply Chain ManagementFor an international company like Nike, Inc., it is very challenging to reach its consumers and make the delivery of the products properly and timely. Despite the fact that Nike, Inc. acquires no factories for the production of its footwear and apparels, it still makes up to 90% of its revenues.
The manufacturing of these products is entirely outsourced to third parties, which requires raw materials from independent contractors. Though it helps in improving profit margins and reduces inventories but it is also a major risk factor in the whole supply chain management system. For example: This complex supply chain failed in February 2001 and Nike, Inc. suffered a loss of over 100 million US dollars.
RecessionNike, Inc. is known for its massive advertising spending, endorsements and sponsorships. But in the last decade (2007-08), when the world was in recession, Nike had to cut its costs by reducing the advertising budget and also by decreasing the total workforce by 4% (NYTimes.com, 2009). The recession not only affected the company internally but the economic conditions of the customers also worsened as they went to buy footwear and apparel from the brands with lower pricesNIKE, INC. NET INCOME, IN MILLIONS OF DOLLARS In can be clearly seen as to how the annual revenue of Nike, Inc.
suffered in two years successively (2009 and 2010) which were also the recession years. The growth rate was negative as it earned less, especially witnessing a tremendous fall in the sales in North America and European markets. Hence, every global recession pose a serious threat for this company Nike, Inc.3.
ConclusionNike is a global brand aiming at providing sports products to its customers by offering a range of products in a highly competitive and fragmented market. Nike, Inc. It has hundreds of stores worldwide. In order to excel in the market it must assess its external and competitive environment. This will reveal the key opportunities and will be able to take full advantage of its potentialities and the threats it must take care of.
The above analysis done brings order and structure to otherwise random information. The information derived from the analysis gives more direction to the various strategies that should be adopted by NIKE, Inc. It was able to identify what opportunities it needed to work on. The case study showed the Political, social, economic and technological factors that are associated with the company.
Its passion combines design, premium quality products, economical use of its resources, responsibility for the people and the environment. Nike became an apparent example of a leading example in developing a sustainable business.4. References-: Canon tops list of climate-friendly companies. (2007). Reuters. Retrieved 10-January-2018, from http://www.
reuters.com/article/environment-climate-companies-dc-idUSN1840883720070619?feedType=RSS-: Forbes Welcome. . Forbes.
com. Retrieved 10-January-2018, from http://www.forbes.com/sites/greatspeculations/2014/08/26/how-nike-can-grow-its-womens-business/#637d58ca5068-: How Nike Solved Its Sweatshop Problem(2013).
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businessinsider.in/How-Nike-Solved-Its-Sweatshop-Problem/articleshow/21122639.cms-: How Nike will grow e-commerce to $7 billion.
(2015) Retrieved 10-January-2018, from https://www.digitalcommerce360.com/2015/10/29/how-nike-will-grow-e-commerce-7-billion-5-years-: In recession, Nike is likely to cut marketing. (2009). Nytimes.
com. Retrieved 10-January-2018, from http://www.nytimes.com/2009/02/12/business/worldbusiness/12iht-nike.4.
20150218.html?_r=0-: Nike annual web sales top $1 billion for the first time (2015). Retrieved 10-January-2018, from https://www.
digitalcommerce360.com/2015/06/26/nike-annual-web-sales-top-1-billion-first-time/-: Revenue from footwear segment of Nike, A. (2016).
Footwear/shoe revenue Nike, Adidas & Puma 2012-2016 | Statistic. Statista. Retrieved 10-January-2018, from https://www.statista.com/statistics/278834/revenue-nike-adidas-puma-footwear-segment/