Week 6 Assignment 2
Ebony Reid
Strayer University
BUS 499 Business Administration Capstone
Dr. Grizzel
Dr. Gardner
August 18, 2019
Found in the year 1954, Nike is an American multination company that specializes in the manufacture of athletic equipment, accessories, athletic wear, apparel, and providing footwear. The key goal of the company is to supply wearable and exceptional products that come in handy in enhancing better performance in sports (1). This paper will discuss the industry in which Nike operates in based the strategies it can use to build on its strengths and opportunities and those it can use to deal with the threats and weaknesses.
Five forces of competition
The two segments of the general environment that would rank highest in their influence on Nike are threats of new entrants and the level of competitive rivalry.
Threat of new entrants
In case new firms come in the market, they are likely to disrupt the industry environment of Nike, especially due to the company high pricing strategy. With the current technological advancement, it is likely that new companies will be looking to venture in the apparel, sports shoes, and equipment market as a way of making profits (1). Most of these companies may decide to sell their products at a lower price, thus leaving customers with a favorable choice compare to how Nike sells its products. With the U.S. facing hard times in how it deals with other countries politically, other companies may jump in and take advantage. For instance, following the U.S. sanctions on Iran, Nike lost the chance of producing equipment for the Iranian football team, which was a huge deal (2).
Level of competitive rivalry
The company faces tough competition from different brands, especially from Adidas and Reebok. Both of these companies deal with similar goods like Nike, although they have different customers from different parts of the globe (1). In the sports industry, the level of competition is strong. Furthermore, the industry has grown with the current players engaging in tough competition and seek to snatch away the market share from each other.
Evaluation
In the recent past, Nike has successfully been able to deal with the two threats successfully, although much need to be done to deal with them completely. To address these forces, the company has engaged in extensive research and development, whereby it creates more unique products that aid in maintaining its brand image. The company keeps improving its product every year to ensure that it does not lag behind its competitors. Furthermore, Nike has continually engaged in social media marketing, which has worked on its favor, given that their products are well known to their customers (1). For instance, the company recently engaged in the 'Just Do It' campaign where different customers posted their photos with the caption and helping the company to increase its popularity among the consumers.
Future improvements
To address these forces in the future, Nike needs to ensure that they continue with innovative plans which ensure that its products are top notch and can compete in the increasingly competitive markets. Furthermore, the company should ensure that it takes its operations reaches untapped markets such as those in Africa and Asia so as to enhance its sales (2). In most cases, the company is likely to experience less pressure in the less competitive market despite the fact that there may be fewer returns available. Overseas markets will help in increasing the number of sales made, which will consequently increase the company’s profits.
External threat and opportunities
The key threat facing Nike today is increased competition from both existing and upcoming companies. The company operates in a highly competitive market, which means that it has to keep up with what the other players are doing for it to continue succeeding in the market. Particularly, the company faces competition from Adidas and Puma, especially in the sale of apparel, athletic footwear, and equipment (2). Despite its global presence, the main opportunity that Nike should take advantage of is the emerging markets. There are emerging markets, especially in the rapidly growing economies such as China, Brazil, and India. Such markets have the potential of driving future earnings growth for the company.
Threats and Opportunities Strategies
To deal with the threats of incoming competition, the company must ensure that it diversifies its operation to deal with more than one equipment or service and to ensure that customers continue to depend on it as much as possible. With more diversification, more customer can depend on Nike as they go to store, especially when dealing with athletic equipment, which will make the brand stronger in terms of who it attracts (2). It is important that Nike engages in aggressive marketing to attract more customers and increase the demand for its products across the globe. By increasing sales in these markets, Nike can be able to improve its brand image and deal with the increased competition from rival companies (2). By realigning its product portfolio, Nike can appeal to customers in the emerging markets and increase their share of the market and continue increasing its customer base in the next few years.
Strength and weaknesses
Nike’s greatest strength is the company’s huge customer base whereby the company has millions of customers across the globe who loyally follow its trends and take part in its events. Based on the huge customer base, Nike has successfully reached a huge market making over $115.19 in terms of sales as of 2018 (1). Another strength of Nike is the fact that it has a global presence with approximately 1100 stores and factories across the globe, which means that it is able to serve its customers with absolute niche and convenience. Based on its global presence, the company has risen to become one of the most recognized brands in the world, which means that it is an easy choice for its customers (1). Nike has an iconic relationship and partnership with Michael Jordan, thus ensuring that its products are widely acknowledged and loved by customers all over the world.
On the other hand, Nike's biggest weakness is its over-reliance on the U.S. market despite the fact that it is already established globally. The company depends on the U.S. market in terms of revenue and sales, with over 42 percent of its sales coming from the U.S. market (1). Such dependence can be catastrophic in case the U.S. market end up collapsing. Another weakness is the poor labor conditions offered by the company especially in foreign countries including low wages, unsafe working conditions, and child labors thus putting it in the spotlight for the wrong reasons (3). The company also has pending debts despite its prosperous income statement, which means that the company may end up facing financial threats in the future. Lastly, given that Nike retailers hold about 60-70 percent of its stock, it is clear that they have a stronger hold on the company pricing thus leaving the company with a weak stance to its sensitivity against pricing (1).
Strategy
To maximize to its strengths, Nike can engage in more collaborations with well-known brands so as to provide a wider range of products to its customers and to ensure that the customers are fully satisfied with the products. As seen with its collaboration with Jordan, Nike has a potential of increasing its sales in case its large customer base access more improved products. With new and improved products in the market, the company can make more sales and ultimately more profits. On the other hand, to fix its most significant weaknesses, Nike should first ensure that its operations in different parts of the globe adhere to the rules and regulation of the land so as to correct the notion that the company has poor labor conditions (3). Such a bad image may limit the company's success in the market, given that some potential customers may decide to disregard their association with it. Furthermore, it should extend its operations in other countries across the globe to lower its over-reliance on the U.S. market by engaging in social media marketing and opening stores in other parts of the world. By improving its status in other parts of the world, Nike can ensure continued operation and profits even if the U.S. market collapse or experience a recess.
Resources, Capabilities and core competencies
Nike has both tangible and intangible resources that play a key role in its operation and success. The tangible assets mostly fall under physical assets, financial assets, organizational and technological resources. The physical assets include land, research centers, equipment, distribution facilities, machinery, and buildings. Financial assets mostly entail the company’s strong financial position, which has continued to experience constant growth (1). Technological resources are mostly patents and trades, while the organizational resources are the loyal customer base as well as the company’s distribution network. On the other hand, some of the company’s intangible assets include human resources, reputation resources, and innovation resources. The human resource entails approximately 55,000 employees across the globe as well as the powerful research team that gives the company a strong base for operation (2). Innovation resources include knowledge transfer, dynamic technological innovation design as well as an online website while the reputation resource includes logos, brand name, and distinctive trademarks. Nike’s core competencies entail its effective marketing strategy as well as the company’s innovative product design. Both of these elements ensure that the company has value and benefits to the customers and that the products are hard to imitate (1). On the other hand, Nike’s core capabilities entail its creative and innovative product design and the fact that the company focuses on its corporate values on innovation and technology.
Sources
1. Pandey, B. C. (2017). Nike Inc-Complete Analysis: SWOT, PESTLE, and Marketing strategy. BookRix.
2. Li, M., MacIntosh, E. W., & Bravo, G. A. (2012). International sport management. Champaign, IL: Human Kinetics.
3. Rothaermel, F. T. (2013). Strategic management: concepts. New York, NY: McGraw-Hill Irwin.