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NIKE, incorporated on September 8, 1969, is engaged in the design, development, marketing and selling of athletic footwear, apparel, equipment, accessories and services. The Company’s operating segments include North America, Western Europe, Central ; Eastern Europe, Greater China, Japan and Emerging Markets. The Company’s portfolio brands include the NIKE Brand, Jordan Brand, Hurley and Converse. The Company sells its products to retail accounts, through its retail stores and Internet Websites, and through a mix of independent distributors and licensees across the world. The Company’s products are manufactured by independent contractors.
Nike strategic Analysis
As of May 31, 2016, the Company focused its NIKE brand product offerings in nine categories: Running, NIKE Basketball, the Jordan Brand, Football (Soccer), Men’s Training, Women’s Training, Action Sports, Sportswear (its sports-inspired lifestyle products) and Golf. Men’s Training includes its baseball and American football product offerings. The Company also markets products designed for kids, as well as for other athletic and recreational uses, such as cricket, lacrosse, tennis, volleyball, wrestling, walking and outdoor activities. The Company’s athletic footwear products are designed primarily for specific athletic use. Its products are also worn for casual or leisure purposes. The Company also sells sports apparel. The Company also markets apparel with licensed college and professional team and league logos.
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What kind of strategy should Nike employ in the immediate future? Let’s take a look at the SWOT analysis we have prepared.
SWOT Analysis of Nike
Nike strengths and weaknesses
Nike is the most valuable sports brand in the world. Its “Swoosh” logo is instantly recognizable around the globe. Its long partnership with legendary basketball player Michael Jordan has driven strong sales of the company’s basketball sneakers, including the retro business, which makes up about half of the Jordan shoe business. In fact, one of every two basketball shoes in the U.S. last year carried that Jordan brand. Nike’s ability to maintain and enhance its iconic brands has allowed it to enjoy continued success for decades.
Nike has a strong and wide supplier base worldwide, which helps the company in meeting its customers’ needs efficiently. Nike’s belief in “diversity drives innovation” has helped in gaining competitive advantage and its well-planned supplier diversity program has had a major impact in the way they conduct their business. Its apparel manufacturing takes place in the 13 different countries and the company’s Nike brand apparel is also manufactured in 34 countries by various independent contract manufacturers. The company incurs relatively lesser operational costs as all of its footwear is produced in low-cost nations such as China, Vietnam, Indonesia, and Thailand. During the financial year 2009, these countries manufactured 36%, 36%, 22% and 6% of total NIKE brand footwear, respectively.
Also, rapid innovation processes are a core factor in Nike’s ability to create cutting edge designs for its athletic footwear, equipment and apparel.
Labor controversies continue to plague Nike’s business, especially in considering production facilities in developing countries. This weakness negatively impacts the company’s brand image. Also, even though Nike Inc. has expanded its product mix through the years, the resulting product lines are still limited in capturing a larger share of the sports shoes, equipment and apparel market. Moreover, the company suffers from the limited presence in developing markets, partly because of issues with pricing, imitation and patent protection. This weakness limits Nike’s global growth. Based on this part of the SWOT Analysis, Nike Inc. must improve its policies and strategies in the areas of labor and employment, product mix development, and penetration in developing markets.
The organization does have a diversified range of sports products. However, the income of the business is still heavily dependent upon its share of the footwear market. This may leave it vulnerable if for any reason its market share erodes.
Nike was also reported to have applied child labor in Pakistan and Cambodia to produce soccer balls. It was positioned as a subject of criticism by anti-globalization groups due to its unruly and exploited manner that was quite a disaster for its reputation.
Product development offers Nike many opportunities. The brand is fiercely defended by its owners whom truly believe that Nike is not a fashion brand. However, like it or not, consumers that wear Nike product do not always buy it to participate in sport. Some would argue that in youth culture especially, Nike is a fashion brand. This creates its own opportunities since product could become unfashionable before it wears out i.e. consumers need to replace shoes.
One of the biggest opportunities for Nike is from the emerging markets of China and India where the Billion Plus new consumers are now aspiring to western lifestyles which mean that they would be more receptive to brands like Nike. As the company is associated with premium branding and segmentation, it can be said that capturing the “emerging market newly affluent consumers’ prize” could well be a game-changer for the company. Read about Brand imitation
Additionally, there is an opportunity to create niche brands for other consumer segments that are looking for more affordable pricing. Other premium brands have been able to produce other product lines under the primary brand without diluting the brand’s existing attributes so Nike could be able to follow the same strategy.
The athletic footwear, apparel, and equipment industry is highly competitive, both in the United States and around the globe. There are several significant athletic and leisure footwear companies and sports equipment firms that produce similar products. Some of the primary ones are Puma and Adidas. Other large companies have diversified their product lines to include athletic and leisure footwear, sports and lifestyle apparel, and equipment, including Under Armour and lululemon. The rapid changes in technology and consumer preferences constitute significant risk factors for Nike. Too, demand for Nike’s products depends on the relative popularity of various sports and fitness activities, as well as changing design trends, so any major shifts in these trends could temper business results. If competitors have more success attracting customers with more appealing footwear or apparel, this would also hurt business prospects.
Athletic wear goes out of fashion. While the popularity of yoga pants and sneakers is often cited as a fashion trend, Morgan Stanley analysts believe that shoppers are hooked on casual comfort. Women in their 20s and 30s are largely driving the “athleisure trend,” in which customers buy leggings with the intent of wearing them to the gym, errands, and brunch. The analysts believe that shoppers will continue to choose this kind of apparel over denim. But if consumers start shifting toward a more formal look again, Nike’s sales could slow down. Given how fickle shoppers are, this threat is something for Nike to consider.
This SWOT Analysis of Nike Inc. shows that the company has the strengths needed to support its global leadership in the sports footwear, equipment, and apparel market. However, the company must address concerns regarding competition and labor practices.
- Reuters Profile Nike Inc.
- ‘We Blew It’: Nike Admits to Mistakes Over Child Labor [https://www.commondreams.org/headlines01/1020-01.htm]
- Nike faces 3 obstacles that could threaten its global domination [http://www.businessinsider.com/risks-to-nikes-business-2015-6]
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