Organizational Behavior and Leadership In the 21st Century Nov 14

Nike Company- Porter's Forces Draft of 3 Forces

Institutional Affiliation

Course

Professor

Due

Nike Company- Porter's Forces Draft of 3 Forces

Force #3

Threats of Substitute Products and Services

A substitute refers to a product or service that may be used instead of an industry’s product to achieve the same or comparable results (Porter, 2008). A firm's ability to make money is constrained by the existence of substitute goods and services.

prices.

(a) What is the availability of other products that a customer can purchase from outside the industry?

Because comparable alternatives are rather easy to find, consumers can choose to forego Nike’s items in favor of, say, non-athletic shoes. Customers have more options thanks to the availability of replacements (Adamkasi, 2019). They are not confined to a single choice but are free to investigate several possibilities that may better meet their requirements, interests, or financial constraints.

(b) What is the buyer's propensity to substitute?

The customer's likelihood to substitute product is minimal. Nike has positioned the brand in such a manner that it attracts new customers and keeps existing ones.

(c) Threat of Substitute Products/Services = High or Low - possibly moderate (Explain)

Possibly moderate. Buyers have options, like non-athletic shoes and casual apparel, which exerts a moderate impact on Nike. Additionally, numerous options have a reasonable price-performance ratio, which indicates that substitute footwear and apparel offer satisfactory functionality and quality for the money (Rowland, 2023). Moreover, the low to moderate switching costs indicate that buyers may transition from Nike items to replacements with reasonable ease.

(d) Consumer switching cost = high or low? (Explain why)

Low. The switching costs and hassle for clients to move to the other brand are minimal. Clients have more options available to them when there are more sellers in the market (Adamkasi, 2019). As businesses in a competitive market work to make their products more appealing and user-friendly, switching costs tend to decrease.

Force #4

Bargaining Power of Suppliers (DEFINE According to Porter)

Powerful suppliers can extract more profit from the market by raising prices, reducing product variety, or passing on rising production costs to consumers (Porter, 2008). A supplier team is more powerful, they are in large numbers compared to the industry they are operating in.

(a) Differentiation of inputs

Nike is able to distinguish its inputs and lessen the influence of supplier power by maintaining tight relationships with its suppliers, emphasizing creativity and sustainability, broadening its supplier base, and engaging in modern technology and ethical procurement (Adamkasi, 2019). These steps strengthen Nike's position as an industry champion in sportswear and athletic gear by guaranteeing a steady supply of materials and preserving product quality.

(b) Switching costs of suppliers and firms in industry

The supplier switching costs are minimal. This is because since different firms may provide the goods that Nike requires to make their products.

(c) Threat of backward integration by firms in the industry

Although there is always the risk of backward integration in the footwear sector, well-established companies like Nike have several benefits that make them difficult to compete with (Rowland, 2023). These entail economies of scale, brand acknowledgement, distribution networks, and innovation abilities.

(d) Availability of substitute suppliers

One element influencing the bargaining strength of suppliers is the accessibility of substitute providers. Nike often works with numerous suppliers for every line of goods, allowing some flexibility and lowering dependent on a single provider.

(e) Bargaining Power of Suppliers = High or Low - possibly moderate (Explain why)

Low. The negotiating power of suppliers over their organization's access to supplies is reduced when there is a significant number of supplies (low force). In addition, numerous suppliers are comparatively small in contrast to the athletic goods giant's supply network (low force) because of the low to moderate supplier concentration (Rowland, 2023). However, with a reasonable number of suppliers, athletic goods companies have a moderate amount of leverage to negotiate with. Suppliers to Nike have low negotiating power due to the foregoing reasons.

Force #5

Bargaining Power of Buyers (Customers)

Customers with bargaining power can reduce prices, increase demands for superior service and quality (and hence costs), and play businesses off one another in order to extract more value for themselves (Porter, 2008). These factors decrease the profitability of a firm.

(a) When are the customers in an industry powerful?

When consumers have bargaining power over other players in an industry it is when they are considered to be powerful (Rowland, 2023). At this time, they can use that position to drive down prices.

(b) Ability to backward integrate,

Buyer backward integration is not a major concern. This is due to the fact that consumers cannot produce Nike goods on their own (Rowland, 2023). Nike may have created unique supplier agreements, a complicated production procedure, a requirement for specific manufacturing skills, or access to proprietary equipment which limits the possibility of backward integration.

(c) Switching costs

Customers have low to moderate switching costs. The term "switching costs" refers to the time, money, and hassle involved in making a switch from one brand or provider to another. There are no major monetary costs for the client to consider while making the changeover. The changeover from one offering to another is straightforward.

(d) Bargaining leverage

The competition in the industry is high. Several different companies produce equivalent goods, so consumers have a wide range of options to select from (Adamkasi, 2019). The price consciousness offers purchasers more influence in negotiations.

(e) Buyer sensitivity to changes in price

The sportswear market is highly sensitive to pricing changes. Price is typically a deciding issue for buyers, especially when those buyers are individual customers. They will shop around for the greatest deal possible by comparing pricing across brands and stores.

(f) Bargaining Power of Buyers (Customers) = High or Low - possibly moderate (Explain why)

Possible moderate. Buyers may easily switch to Nike's rivals since switching costs are low to moderate. Buyers can choose to purchase alternatives (substitutes), like non-athletic shoes, rather than from the firm (substitutes are somewhat available). Clients have more influence when they have simple access to traditional and digital points of purchase (Rowland, 2023). Nevertheless, lower buyer concentration is an indication of the moderate size of individual consumers and their orders of Nike goods.

References.