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A. Current Situation

1. Current Performance

Nike Inc. was incorporated in 1967 under Oregon state laws, US, where it has its world headquarters in Beaverton. The company engages in the design, development, marketing, and selling of athletic services, equipment, footwear, and accessories like bags, protective equipment, socks, etcetera. The company is the world’s largest seller of athletic apparel and footwear. Nike product categories range from running, training and sportswear, football, the Jordan Brand, and Nike basketball. Nike also markets other recreational, outdoor, athletics, and kidswear. Nike has a total of 338 retail stores and seven significant distribution centers in the United States, accounting for 39% of its total revenues. In the international arena, it operates a total of 758 non –US retail stores distributed across 51 countries, including China, Russia, South Africa, and Canada. Its supplier base includes 329 apparel companies in 38 countries and 122 footwear companies across twelve countries. Nike recorded a decline of 38% in sales revenues in the fourth quarter of the year 2020 following the Covid 19 pandemic to 6.3 billion dollars. its gross margins and net incomes also declined by a similar percentage (37.3 and 36% respectively), leading to a net loss of 790 million dollars. However, its digital sales increased by 75%, forming a whopping 30% of the Nike total revenues, and over 90% of its stores have since reopened. The total liquidity at the end of the fiscal year 2020 in ma was 12.5 billion dollars. Nike has always been available in the Fortune 500 ranking list for the last 22 years and joined the Fortune 100 list holding position 85 (Fortune 500, 2020)).

2. Strategic Posture

a. Mission

Nike's mission statement is to inspire and deliver innovations to all people across the globe, whom it refers to as athletes. Nike believes that everybody should be inspired by the amazing and innovative products it aspires to deliver (Nike, 2020).

b. Objective

Nike Inc. looks forward to’ just doing it’ by remaining a consumer connected, unique, and authentic brand. Nike aims at coming up with groundbreaking innovations that are close to none through its passion for sports. It wants to establish the future for sports and make the sports an everyday habit. People are at the center of Nikes activities, and it aims at enhancing their lives through community events sponsorships, environmental conservations, among other initiatives

c. Strategies

The company places a high emphasis on the quality, reliability, and performance of its products. It relies on research and development to deliver innovative and new product styles tht are responsive to consumer value and price needs. It also looks to create consumer identity and affinity with the brand through sponsorship of sporting clinics and events, identification with celebrities and public figures like prominent sporting personnel such as Eliud Kipchoge, consumer service and support, social media interactions, marketing, and digital and promotional experiences. It also carries out effective sourcing and distribution of its products either in-store or via digital platforms where it attractively presents and merchandises its range of products (Hill et al., 2019).

d. Policy

Best buy has a chain of policies and procedures that inform its day to day operations. Some of the policies include the code of ethics, company bylaws, diversity and inclusion policy, global community and social impact policy, human rights policy, sustainability policy, corporate social responsibility policy, among other policies.

B. Corporate Governance

1. Board of Director

The company Board of Directors consists of Philp Hampson Knight, who is the co-founder and the Chairman-Emeritus of the company, Mark Parker is the executive chairman while the CEO and the company president is John Donahoe. Cathleen Benko is the executive director, John Connors and Elizabeth Comstock are compensation committee directors, Timothy Cook is the company's lead independent director, and Thasunda Brown is the independent director. Other independent directors include Allan Graf, Peter Henry, Travis Knight, Mitchelle Peluso, and John Rodgers, Jr (SEC, 2020).

2. Top Management

The top management is lead by John Donahoe, who is the company president and CEO. The chief operating officer is Andy Campion, Matthew Friend, the EVP, and chief financial officer, Hillary Krane – EVP, chief administrative officer & general counsel, Monique Matheson –EVP and chief human resource offer and Heidi O'Neil, the president of consumer and marketplace.

C. External Environment

1. Natural Environment

Nike is cognizant of natural disasters such as wildfires, disease outbreaks like Covid 19, tsunamis, hurricanes, earthquakes, and other disasters and extreme weather conditions and their impacts, which has in the past disrupted and could affect its operations.

2. Societal Environment

a. Economic

The company is affected by increasing uncertainty in the economic environment such as highly volatile foreign exchange, global recession from Covid 19, and increased competition in the footwear, apparel, and equipment industry from large companies like Adidas, Puma, ASICS, Anta, among others.

b. Technological

Nike is aware of the dynamic and rapidly changing technology that threatens its intellectual properties, hardware and software systems, and its way of doing business. Nike has thus embraced innovations to stay ahead in technology and leverage the digital production, marketing, and sales platforms brought by technology through its global technology and transformation team. It introduced 3-D printing technology in the US to assist in designing and producing new innovative products.

c. Political-Legal

The companies engage in international operations that are affected by domestic and foreign policies, trade restrictions, political instability, safeguard measures, quotas, anti-dumping measures, fund transfer restrictions, and increases in import duties. Recent years have seen heightened protectionist actions across the globe, affecting its many services and manufacturing operations. These actions have resulted in increased cost of production and operations that directly affects its profitability and sales operations. The recently adopted trade policies in the United States, such as new and potential tariffs on imported goods, are threatening Nike operations as most of its production plants are located outside the US. The retaliatory actions of countries affected by those tariffs like China are also hurting its business. The company must also adhere to the US Foreign Corrupt Practices Act and other laws instituted by every jurisdiction.

d. Sociocultural

Many people have begun to realize the benefits of health and wellness and are replacing their sedentary lifestyle for more active lifestyles. This offers hope for a considerable increase in demand for Nike products. The global population is also expected to increase, which adds to the customer base of Nikes products. Consumer tastes and preferences are also on the changing trajectory, which calls for more relationship management and connection mechanisms beyond the point of sale. Its various community initiatives, including the distribution of Covid 19 protective equipment, sponsorship activities, among others, are ways in the right direction (Camillo et al., 2018)!

D. Internal Environment

1. Corporate Structure

Nike has a corporate matrix structure with several divisions divided into subsidiaries and which every division and subdivision reports to its global headquarters in Oregon. It has a European, Asia Pacific, and American divisional headquarters, all reporting to the world headquarters. The decisions have the autonomy to make their own decisions, but these decisions are limited by the overall company goals with close supervision to ensure consistency in all divisions. The employees are divided according to geographical division, customer base, and product specifications.

2. Corporate Culture

Nike believes in diversity, inclusion, and empowerment of its teams. Nike is committed to establishing and maintaining a favorable and enabling environment where all employees can achieve their full potentials through a constant learning model where employees are developed and trained to bring out their best. Nike encourages diversity and sharing of ideas through the hiring of diverse teams and program initiatives like speak up! It is committed to inclusion and condemns all sorts of discriminations based on sexuality or sexual orientations, racial or ethnic lines, religion or social status, economic or political status, etcetera.

3. Corporate Resources

a. Marketing

Nike aims at creating consumer identity and affinity with the brand through sponsorship of sporting clinics and events, identification with celebrities and public figures like prominent sporting personnel such as Eliud Kipchoge, consumer service and support, social media interactions, marketing, and digital and promotional experiences. It has a marketing slogan of 'just do it.' Nike utilizes direct marketing strategies through its in-store and digital platforms. It holds almost half of the US athletic footwear market (48%), with a share of 96% in the baseball footwear segment (SEC, 2020).

b. Finance

Nike has substantial financial resources with a reported revenue base of 37.4 billion dollars in the fiscal year ending May 2020. Though this was a decline of 2%, its revenues were glowing at double digits prior to the pandemic. Its digital sales are also on the rise, recording an increase of 47% in the fiscal year 2020. Nike also is highly liquid, holding a whopping 12.5 billion in cash and cash equivalents. It also has short-term investments of 8.8 billion dollars. Nike's attractive financial outlook also enables the company to secure financing in a short period of time in case of any need. This is seen from a two billion dollar credit facility it secured amidst the coronavirus pandemic to enhance its liquidity index. Its dividend per share grew by 11% in 2020 and repurchased shares totaling 159 million dollars during the last quarter of the 2020 fiscal year. Nike has a huge market capitalization of 198 billion dollars.

c. R&D

Nike heavily invests in research and development to keep up with the industrial pace. This is what drives company innovations that are second to none. Any change in technology is adopted, keeping the company ahead in the digital arena.

d. Operation

Nike uses both direct and converse direct to customer operations, distribution and manufacturer strategic partnerships and licensing agreements, among other ways. It has its operations spread across continents in 51 countries.

e. Human Resource

At the end of May this year, Nike had about 75, 400 full time and part-time employees spread across its different stores across the world. Nike is committed to establishing and maintaining a favorable and enabling environment where all employees can achieve their full potentials. This is why its operations have never been affected due to employees' industrial actions. The company is also committed to employees' safety and welfare, especially in these desperate times, and provided them with protective equipment and continued paying them despite its stores' closure.

f. Information Systems

Nike heavily relies on information networks and systems like third-party service systems and the internet in most of its activities, from product design, manufacturing, distribution, sales, analysis, and reporting, to all other business and retail activities and operations. It operates a transaction processing system (TPS), Administration Information System (AIS), etcetera (Nike, 2020).

E. Analysis of Strategic Factors

Situational Analysis (SWOT)

a. Strengths

First, Nike is an iconic brand that is highly recognized globally, with a total global footwear industry share of about 31%, making the company quite competitive. Its brand name is simple, unique, and memorable. It also has a deep connection with customers established through its sponsorship, high-quality associations, social media activities, etcetera. The company is also committed to innovations that are second to none. The company boasts of its highly competent, trained, and diverse teams that are at the center of its innovation, excellent service delivery, and acts as brand ambassadors giving it’s a competitive advantage. The company has also leveraged the rapid changes in technology that offers it a digital advantage over other companies. The company also is proud of its speedy initiatives that use capabilities such as demand sensing capabilities and express lane initiative, which has allowed the company to maintain a robust supply chain network that delivers products to the consumers' next doors. Nike has a matrix organizational structure that enables uniformity in product delivery while safeguarding every division's needed flexibility (Nike, 2020).

b. Weaknesses

Nike product demand is affected by seasonality with first and third quarters recording hue sales volume, unlike other quarters. The company also relies on high-quality endorsers of its products like influential athletes, celebrities, politicians, and other public figures, which may harm the business if the associations/ endorsements are not sustained. Nike also relies on sponsorship activities to promote the brand, which in recent past have increased in cost affecting its balance sheet. Nike also sells the majority of its products outside the US, which pities the company against high volatilities and increased risks in the international market like inflations beyond its control. Most of the products are oversea sourced, and a disruption in supply chain operations like the one brought by the current pandemic may significantly delay and hamper its operations. It also leads to the increased cost of production as products are transported over large geographical locations. Nike also relies heavily on counterparty financial institutions, contract manufacturers, and distributors leading to less control of its operations that may be detrimental to the company in case of any failures. It also does not call for collateral in its credit activities with customers, thus increasing its financial leverage risks. Also, it relies heavily on network and information systems such as the internet, and any failure or issue may affect its financial and operational condition and damage its reputation (SEC, 2020).

c. Opportunities

Covid 19 has been Nikes consumer direct offense strategy stress test that has confirmed its employability. This allows for a faster transformation of Nike in defining the future marketplace. There is also an increased demand for health and wellness across the world, and Nike is strategically placed to deliver just that. There are still more emerging markets that Nike can take advantage of, especially in China, India, Africa, and Brazil. Technology is here to stay, and more solutions can be delivered through technology. This has been demonstrated by increasing digital sales, which offers hope for more future sales if exploited. It can expand its product to include wearable technology and encroach the sports fashion industry that is still underexploited. Nike can also tap into the changing consumer tastes and preferences and expand its product lines to suit the needs.

d. Threats

First, the Covid 19 pandemic has been and continues to pose a great danger to Nike's operations. The containment measures put across all Nikes different operating countries have resulted and continue to result in business shutdowns, cancellation of sporting activities, and deteriorated financial and economic conditions leading to a decline in discretionally consumer spending translated directly in corporate sales and profitability. The pandemic has also affected the supply chain activities, which harms the company operations besides resulting in the bankruptcy of its wholesale customers. There is also increased cybersecurity risks resulting from remote work arrangements. The uncertainty in global economic conditions has resulted in high volatility in prices of commodities and products, exposure to fluctuations in foreign exchange rates, etcetera, which poses a great risk to Nike's operations. There is also high competition in the industry globally, both in-store and across digital platforms, coupled with rapid technology changes that affect the company pricing, sales, and other operations. Technology is threatening to drive out most of its brick and motor stores (Camillo et al., 2018).

F. Strategic Alternatives and Recommended Strategy

1. Strategic Alternatives

a. Online Retail Expansion

Covid 19 has proved the value and the potential embroiled in the digital infrastructure. Many customers are moving online, and the need to explore and expand online presence. Nike's online sales have already increased by 75% and form 30% of its total revenue.

b. Consumer Direct Offense Strategy (CDO)

CDO strategy looks towards doubling its direct consumer connections, speed, and innovation. This includes focusing its operations on twelve cities and ten countries and consolidating its operations from six to four regions, which would involve laying off two percent of its employees base to increase efficiency and propel its growth.

c. BRICS Operational expansion

Nike should follow the leading analyst's firms like Goldsman Sach that have projected exponential growth in BRICS (Brazil, Russia, India, China, and South Africa) economies until 2050. It needs to expand its operations in these economies (Hill et al., 2019).

2. Recommended Strategy

Nike Inc. Should adopt the CDO strategy as it has already tested and proved that the strategy is working.

References