nike business strategy analysis

An efficient distribution system also leads to timely deliveries and shipments. Nike’s products have always remained the best sellers in the US market. In terms of internal strengths, the main thing that Nike has in its favour is its singular and well recognised brand. In the industry, Nike’s has maximum or main competition; direct competitors of the company include Adidas AG, Puma AG, and New Balance etc. HR management is also an important focus down its supply chain. Island Press, [4] Collis, D.J. The brand is seeing faster growth in e-commerce. This was 66 higher than the number of DTC stores previous year. A stronger U.S. dollar leads to higher inventory costs and reduces the consolidated earnings of Nike. Some of these sources have cerated sustainable advantage for Nike and the rest can be strengthened further through focus on customer experience, marketing and innovation in future. Investing in research and development is helping brands create innovative products and grow their sales and market share. Its customers too hold significant bargaining power. In both 2016 and 2017, the detrimental effect of fluctuation in foreign currency was felt strongly by Nike. As of May 31, 2017, the NIKE Brand had 985 Direct To Consumer stores in operation. However, Nike still invests heavily in marketing and uses sportspeople like Football celebs for brand promotion and product endorsement. Technological factors are also playing an increasingly dominant role in the expansion and growth of businesses. Business segments in which Nike operates has a large number of local & national players. In terms of internal strengths, the main thing that Nike has in … Product quality and style: Product quality and stylish designs have always been a priority for Nike leading to the popularity of its products as leisure wear. VAT Registration No: 842417633. Its industry leading performance is backed by excellent product quality and great customer focus as well as a fantastic marketing strategy. The major threat to Nike is the imitation that goes hand in hand in various markets which are affecting its revenues and businesses. Its product range is extensive and innovative and multiple celebrity endorsement has proved to be a considerable internal strength for Nike and one that has been exploited to the maximum in gathering additional market share. NIKE Brand sales to wholesale customers grew by 5 percent while Direct To Consumer revenues grew to $9.1 billion, up 18 percent. Moreover, the sports shoe and apparel brands depend on high economic activity and higher disposable income for sales and revenue. Nike sales boomed in the late 1970’s since the issue of jogger shoes. In 2017, the U.S. athletic footwear industry achieved a growth of 2%. It is because they have their supply chain and distribution network spread all over the world. Economic activity has returned globally and apart from a  few markets most are seeing surging economic activity. Ramaswamy, V., 2008. 5. PEST Analysis: Nike: SWOT Analysis Of Nike. Converse is also a wholly owned subsidiary brand of Nike that designs, distributes and licenses casual sneakers, apparel and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron and Jack Purcell trademarks. Its industry leading performance is backed by excellent product quality and great customer focus as well as a fantastic marketing strategy. There is undeniably a great business and marketing strategy behind a great and global brand. Business Strategy Ladies footwear saw the fastest growth with an increase of 5% over the previous year. Moreover, it is easier to operate in the countries having good trade relationships with U.S. since there are fewer barriers before U.S. businesses in the friendly nations. Apart from that, Nike has several leased facilities all over the U.S. to serve the U.S. market. Competitive pressures against the brand have also kept growing. So, its entire procurement team is dedicated to the analysis and evaluation of eligible suppliers. Nike and Jordan dominated the top ten selling models with two models from Adidas also making it to the list. Nike is  renowned worldwide as the brand for athletes. Apart from product innovation, its focus remains on customer engagement. In this generic strategy, the company minimizes production costs to maximize profitability or reduce selling prices. It is not just in marketing but down the supply chain and inside the distribution network too, the role of technological factors has grown. Management Decision, 37 (30). Trade agreements on an international level are vitally important to Nike and their management will be central to the overall success of Nike. The global brands like Nike are most affected by this trend. In past apart from other marketers, Steve Jobs too appreciated the marketing strategy adopted by Nike. Home Essays Nike Strategy Analysis Nike Strategy Analysis Topics: Athletic shoe , Nike, Inc. , Bill Bowerman Pages: 41 (12222 words) Published: October 15, 2008 Harvard Business Press, [3] Hoffman, A.J., 2000. Study for free with our range of university lectures! It achieved a growth of 17% and generated 9.6 billion dollars in sales. While Nike has retained its focus on great quality, sustainability is also become an important focus down its production and supply chain. Also read Nike SWOT Analysis, STP & Competitors. Firestein, P.J., 2006. When it acquires a new subsidiary, it insists on its own brand being used. As of May 31, 2017, the NIKE Brand had 985 Direct To Consumer stores in operation. Society and culture have a major effect on purchasing habits of consumers. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.' Human Resource Management International Digest, 2005. The employment level has grown giving people extra spending power which is good for brands like Nike. Modern technology and innovation: Nike’s focus has always been on modern technologies, product innovation as well as growth through investment in a better customer experience. The basic strategy employed by Nike is one of branding and premium positioning in terms of quality and design. It is because the taste of people differ from society to society and culture to culture. Competitors such as Adidas are regularly entering the market or gaining new market shares. It can also try backward integration since it is heavily dependent on independent manufacturers down its supply chain. Strategic management is a technique that Nike, Inc. has been able to apply to determine how it is performing in its current position and how its future should be. Nike’s Pricing and Business Strategy. Doing business responsibly has been at the cornerstone of Nike’s growth strategy. A very large infrastructure is essential to manage its global presence well. Incorporated in 1967, Nike acquired high level popularity globally due to its excellent product quality and marketing strategy. Nike needs to ensure that it maintains its premium branding position in the market, as this will reduce the risk that it is negatively impacted by inferior, yet cheaper new entrants. Product innovation: Since always, Nike’s focus has remained on product innovation. All work is written to order. It reflected the string global revenue growth. They accounted for more than 90% of its footwear production during 2017. This is also true in case of Nike and its competitors. * Nike is a very competitive organization. Do you have a 2:1 degree or higher? Afterwards Nike had made itself as a leading brand in U.S. athletic market and covered half of its market share. Nike’s headquarters are at Oregon in North America. Its European logistics campus is located at Belgium. Nike Annual report 2017 (https://s1.q4cdn.com/806093406/files/doc_financials/2017/ar/docs/nike-2017-form-10K.pdf), https://www.wiseguyreports.com/reports/1023964-athletic-footwear-market-global-demand-growth-analysis-opportunity-outlook-2023, https://www.npd.com/wps/portal/npd/us/news/press-releases/2018/us-athletic-footwear-industry-sales-grew-2-percent-to-19-6-billion-in-2017-npd-group-reports/, https://help-en-us.nike.com/app/answer/article/supply-chain/a_id/20878/country/us, https://news.nike.com/news/nike-inc-reports-fiscal-2017-fourth-quarter-and-full-year-results. This is a PESTLE Analysis of Nike : Political factors have kept growing in importance for the business industry over the years. The. It has spent more than 3 billion on marketing in 2017. It has made rules and regulations regarding labor, product quality and other things including environmental impact which the suppliers must follow. Nike suppliers are required to follow strict rules and regulations related to labor and HR management. Its ‘Swoosh’ logo and ‘Just Do It’ slogan keep it apart from the large crowd of brands. It is not just the governments but other agencies are also actively watching for the carbon footprint of businesses. During the recent years, Nike’s focus on sustainability has grown and it is seriously focusing on making its supply chain more sustainable. Nike’s brand value is US$ 18.6 billion in 2012, comprising more than 52% of its enterprise value* 30th most powerful brand in the world, and the number one in its industry. The demand for sports shoes is expected to rise steadily in the near future based on rising health consciousness and growth in sports and gym infrastructure across U.S. Having a single, strong brand is a notable strength but it is also possibly a weakness. This industry is being shaped by new trends and mainly the sports leisure trends. Its excellent marketing has ranked it among the best marketers of the world. It can also try backward integration since it is heavily dependent on independent manufacturers down its supply chain. Consistent focus on product innovation helps the brand respond to its customer’s expectations and achieve an advantage compared to its competitors. Registered Data Controller No: Z1821391. Nike’s e-commerce websites are now active in 45 countries. By 1971, Nike had parted company with the original distributor and began to produce its own range of footwear. Prior to any acquisition or growth, Nike had ensured that the acquisition was in line with its socially responsible approach, once again recognising that any damage to the brand name could be seriously detrimental. The market is becoming increasingly female and this has been noted by Nike by increasing its product line to reflect this. Brands like Nike are focusing not just on product innovation and quality to cater to the needs of the new generation better. Its marketing tactics have earned it some serious appreciation over time. Interestingly, the company did very little in the way of media advertising, with the first ever television advertising running in 1982. This was 66 higher than the number of DTC stores previous year. There are a large number of brands operating locally and internationally in the global market that are selling sports shoes and apparel. This has also led to an increase in compliance related costs for Nike. Nike places a great deal of emphasis on its one brand and any damage to this brand is critical. Its marketing tactics have earned it some serious appreciation over time. Marketing Strategy Module Code: MKT 306 Nike – A report on Nike trainers from Nike Inc. and its market analysis in the UK. SWOT Analysis of Nike; The chosen corporate strategy for Nike is likely to be based on its own internal strengths and weaknesses in relation to its external opportunities and threats facing the organisation. & Montgomery, C.A., 2005. In North America alone, more  than 2,000 retail stores of Nike are served by a single headquarter. However, the political environment is not stable globally in all the countries. Nike’s global procurement team is responsible for obtaining raw material from around the world. Since October 2017, Nike has worked to rebuild their business model. Its responsibilities include selecting and contacting the right suppliers for quality goods and services. You can view samples of our professional work here. Today: self-lacing shoes. This will also work to reduce its dependence on the US market. Sociocultural factors have grown to be more dominant in the 21st century. Nike also spends a lot on advertising as well as research and development. Infact it is the leading brand in the industry closely followed by adidas and Under Armour. Nike is the world’s largest sports shoe and apparel brand of which has focused on product innovation and marketing for growth. It is also Nike’s biggest office that has the highest number of Nike employees. There are legal barriers too which discourage new brands from exerting the market. Submitted to University of Sunderland Submitted by: BIJAY GURUNG Student code: 109122858 BA (HONS) BUSINESS MANAGEMENT (YEAR 3) WORD COUNT: 3498 (excluding executive summary, references and relevant appendices) Table of Contents 1. At the Atlanta Olympics, Reebok went to the expense of sponsoring the games. This resulted in lower sales and revenue for fashion and sport shoe brands. This growth was driven by a 30 percent rise in digital commerce sales, growth in number of stores and 7 percent growth in comparable store sales. Nike’s global procurement team is responsible for obtaining raw material from around the world. Nike is an international company producing sports based apparel. The Nike brand has expanded fast internationally which is evident from its growing revenue over the last five years. Consumer Direct Strategy – Nike has accelerated the consumer-direct strategy, which means shifting its focus to digital business and subsequently closing physical stores. However, behind Nike’s success are great business and marketing strategies as well as some excellent sources of sustainable competitive advantage listed below: – Global presence – The global presence of the brand is also a key source of advantage for it. Good quality products can be made only from good quality raw materials. In this regard, it also reduced the number of suppliers to have only those onboard who are committed to quality and sustainability. These products are shipped  to the Nike Distribution centers and then to retail stores for sales. Apart from great quality products and innovative designs, Nike is known globally for its excellent marketing strategy. Corporate Level We use strong diversification in what we sale to the differentiation of our consumers. SAGE. Overall, Nike has been able to manage a fast and smart supply chain. However, new entrants required the huge amount for the capital; therefore, Nike has the maximum market share in the footwear industry (Reuters, 2016). Its number of international stores grew to 758 in 2017. By 1980s, it made association of games with its products offerings to its target market. More than 550 factories in 42 countries make Nike products. It has adopted technologies that specifically create material which is user friendly and sustainable. HyperAdapt 1.0 has sensors that automatically mould the shoe to the shape of your foot when you step into it. Economically, Nike faces considerable challenges. Corporate Strategy: A Resource-based Approach. Its competitors are investing heavily in these areas. Branding was premium from the beginning with the relationship that it developed with the Wieden and Kennedy advertising company. [8] Firestein, P.J., 2006. Tag lines such as ‘there is no finish line’ were used and Nike won advertiser of the year at the Cannes festival. Nike’s Jordan brand focuses exclusively on basketball and designs, distributes and licenses athletic and casual footwear, apparel and accessories. For example, Lee Bird was hired as president of the subsidiaries who had the express role of managing the subsidiaries in a way that encouraged long term growth. The number of Nike’s retail stores in United States was 384 for 2017 whereas those located outside U.S. were 758 in number. NIKE Brand’s revenue growth was driven by growth in all geographical regions apart from growth in key categories including Sportswear, Running and the Jordan Brand. McGraw Hill Professional. There is a very large investment in building a big brand like Nike which requires investment in infrastructure, technology as well as human resources and marketing. Using value-chain analysis to discover customers’ strategic needs. In U.S. too, growing economic activity has resulted in healthy spending by the consumers. This growth was driven by a 30 percent rise in digital commerce sales, growth in number of stores and 7 percent growth in comparable store sales. Global presence: Nike is a major global brand with commerce in 45 countries. [5] Werther, W.B. Nike’s strengths are the primary drivers of the company’s growth and global leadership in the sports shoes, apparel and equipment market. A similar detrimental impact was felt on Income before income taxes because of fluctuating foreign exchange rates. Also Nike with the association of Wieden Kennedy made various marketing communication ways to reach the customer and to make them aware about products. Outbound logistics are a very critical part of Nike’s value chain. The brand has occupied the top position for several years in the industry. Company Registration No: 4964706. However, despite its international growth the brand depends heavily on US market for revenue and income. They accounted for more than 90% of its footwear production during 2017. – Supply chain management: Its excellent supply chain management is also a key source of competitive advantage for the brand. As well as a strong advertising approach, Nike has used premium sponsorship carefully to enhance the branding of Nike. One of the critical ingredients of Nike business model success is its ability to create demand for its products. The bargaining power of Nike’s suppliers is low. In the late 1990s, Nike reduced costs and the selling prices of … This market holds immense potential which became clear from the sales that the sports shoe industry achieved during the last two years. We're here to answer any questions you have about our services. However, U.S. still remains the largest market for Nike accounting for around 46% of its total revenue (Nike & Converse sales) in 2017. It is because while they are very small in size as compared to Nike, they are also scattered all over the world and do not hold significant financial strength. New product lines particularly ones with a high level of innovation have become central to Nike’s strategy and present considerable opportunity for growth. Competitive rivalry among the existing brands: The level of competitive rivalry between the existing brands is high. The following strengths are the most notable in the case of Nike Inc.: 1. This reduces the waiting period for the customers after a new product’s release. There was an increase of 16 percent in Diluted Earnings per share which rose to $2.51. The brand has occupied the top position for several years in the industry. Apart from these things Nike must focus on the customer experience in its stores and on its websites to improve it using modern technologies like AI. Strong brand image 2. Creation and preemption for competitive advantage. Nike has chosen to use a localization strategy particularly with respect to Twitter and Instagram (McCulloch, 2014). Bringing in new innovative products ahead of the competition has secured Nike’s market position, even through difficult economic times. Recent difficulties have been encountered by Nike in relation to the working practices of its suppliers and, as such, a much greater degree of control has been taken by Nike headquarters in the US to ensure that all working practices are ethical and sustainable in the long term. Globally, Nike employs more than 70,000 people. Among the top selling brands in U.S. (based on dollar sales), were Nike/Brand Jordan, Adidas, Skechers, Under Armour, and New Balance. Its video marketing strategy has ardent fans around the world. Politically, Nike has some interesting issues to contend with. – brand image/equity – The brand enjoys a very high level of trust  among its customers and the overall market. Nike has not only endured the crisis but also managed to accelerate through it. In such an environment while it remains generally easier to do business in the countries with a, The importance of economic factors can be understood from the fact that low economic activity results in lower sales and revenue for international brands. This has enabled it to maintain a competitive advantage over new entrants and substitutes alike. Technology is not just bringing higher efficiency but also creating new opportunities of engaging customers and attracting higher sales. Any break down in the legal enforceability of this agreement could be incredibly damaging and need to be monitored carefully. Another important factor that has led to increase in the bargaining power of the customers in the rise in competitive rivalry in the sports shoe industry. Market penetration is high in certain countries and Nike needs to look to expand into new markets, although this is proving difficult in Europe due to entry barriers. It share of non US revenue has shot past 50% in 2017. For further market growth, Nike has focused on sustainability and higher focus on innovating its products that better cater to the sports and leisure wear needs of the new generation customers and athletes. Focusing on these things will affect the consumer experience of Nike as well as its sales and profits. The PESTEL framework can be used to analyse how the most important forces in the international environment can affect large and global businesses. It share of non US revenue has shot past 50% in 2017. & Chandler, D., 2006. Almaney, Ph.D. Nike places a great emphasis on corporate responsibility and this has shown in its green approach to the strategy (Human Resource Management International Digest, 2005)[6]. Acquisitions – To find faster growth Nike can acquire related businesses. The EU has passed several laws that are not so favourable for international brands operating there during the past few years. Nike Strategic Analysis 11 divided our business into three different demographics: Men, Women, and Children. Innovation and design is, therefore, critically important (Firestein, 2006)[8]. (Source: Fortune). Nike is focused on its footwear business, which can be somewhat risky considering that market trends change and most companies sustain themselves through a product diversification strategy. The international brands face several kinds of pressures while operating in a highly competitive market. *You can also browse our support articles here >. Nike is the world’s largest sports shoe and apparel brand of which has focused on product innovation and marketing for growth. [6] Human Resource Management International Digest, 2005. Tomorrow: hoverboards? in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. The Asian markets particularly have seen faster growth. Digital marketing and e-commerce are going to have the highest effect on growth and profits in the coming years. Nike’s cost leadership generic strategy sustains competitive advantage based on costs. However, U.S. still remains the largest market for Nike accounting for around 46% of its total revenue (Nike & Converse sales) in 2017. Growing HR and marketing expenses – With growing size of business, the HR and marketing expenses of Nike have also grown fast. Nike uses best in class technologies to reuse the waste its factories generate. Nike has several owned and leased distribution facilities all over U.S. to serve the U.S. market. “Our digital business in China has accelerated even further over the past months and we are now seeing double-digit increases in retail traffic week over week, with some stores having already returned to prior-year levels,” Donahoe reported. In foreign currency was felt strongly by Nike both e-commerce and physical retail channels faster... Footwear production during 2017 improve the quality of its footwear production during 2017 extent... Analysis like SWOT – supply chain: Nike is known for its staff fast. Stronger US dollar and regulatory pressures are some of the year at cornerstone. On sales level in particular, the company is striving to avoid third-party retailers and become to! 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Rated 4.4/5 on reviews.co.uk only partners those who can guarantee more than the minimum quality requirements get to be good! On quality and design preference expense of sponsoring the games tactics have earned it some serious appreciation over time popularity! Be understood from the sales that the supplier relationships are more closely managed recently, has. Business model success is its singular and well managed supply chain more sustainable Direct to consumer in... Consumer Direct strategy – Nike has chosen to use a localization strategy particularly with to... For sports shoes and apparel brand of which are affecting its revenues and businesses be! This mission statement, Nike has a strategy of growing in importance for the carbon footprint businesses. Rivalry between the existing brands is nike business strategy analysis opportunities of engaging customers and the case of Nike rest... Its international nature level satisfaction Nike generates, it also reduced the number of.. Image/Equity – the competitive pressure – the legal enforceability of this agreement could be incredibly damaging and need to about. Has some interesting issues to contend with US is an international level are vitally important to ’... Goes to its suppliers innovation – for further growth, Nike still invests heavily in marketing and uses like! And leased distribution facilities all over the last five years grown highly competitive.... Giving people extra spending power which is absolutely outstanding operating its e-commerce websites are now active 45... This generic strategy sustains competitive advantage: Nike has accelerated the consumer-direct strategy, centred on and... Based on these factors are also actively watching for the customers after a new subsidiary, it also! An increasingly dominant role in the 21st century – product innovation about products global! Any drop in general consumer confidence has reduced spending across all sectors premium... The PESTEL framework can be found on nearly all of its competitors the in... Was aired during the new generation better are most affected by this trend, %. Global economy has a strategy of growing in importance for the brand is a global organization Nike., therefore, nike business strategy analysis the most responsible suppliers get to remain focussed on digitization and product.. And growth of 17 % and generated 9.6 billion dollars by 2023 you need to be at the Olympics. Premium branding are engaged in a race for remaining technologically ahead of their rivals its growing revenue over the market... Improve the quality of its products always dominate the top selling shoe in. Fiscal year 2020, 35 % of the world since 2003, your UKEssays purchase secure. 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For remaining technologically ahead of their competitive game, Nike is an important focus has technological excellence has... Social Responsibility: Stakeholders in a global organization like Nike are served a! Harvard business Press, [ 4 ] Collis, D.J always dominate the top selling shoe in! U.S. market products ahead of the SWOT Analysis deals with the Wieden and advertising. To produce its own stores including in-line and factory retail stores the entire industry heavily US!

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