Business Analysis Nike

The company was founded in 1964 by a student of Phil Knight, middle-distance runner at the University of Oregon team, and his coach Bill Bowerman. Initially it was called Blue Ribbon Sports and specialized in the order of athletic footwear in Asian countries and resell them in the U.S. market. Upon graduating Knight wrote a paper that proposed quality running shoes could be manufactured in Japan. But his letters to manufacturers in Japan and Asia have gone unanswered. In January 1964 Knight and Bowerman having invested in the business by $ 500, ordered 300 pairs of running shoes from a Japanese company Onitsuka Co.

The first retail Nike location was opened in 1966, in Santa Monica, California. Nike officially became a hit and went public in 1978. Nowdays Nike's main headquarters is located in Beaverton, Oregon. Footwear and apparel products are produced outside the United States, while equipment products are produced both in the United States and abroad. (Nike Annual Report 2009) The research draw intention that Nike already gained 31% market share globally from their annual report on 2011 (Bloomberg.com, 2011).

From that report Nike also expected higher number of total market share globally. the company also boosting forecast of the revenues in some specific area like China, Russia, and also North America. Nike use the strategies like celebrity endorsement by using some iconic athletes to be the icon or brand ambassador of their current product, for example, in 1985 when Nike signed up Nike signed up then-rookie guard Michael Jordan as a spokesperson. Jordan was still an up-and comer, but he personified superior performance. Nike’s bet paid off—the Air Jordan line of basketball shoes flew off the shelves and revenues hit over $100 million in the first year alone (CNBC.com, 2010).

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Competitive Analysis

Porter five forces analysis Industries differ widely in their business makeup, competitive situation, and growth potential. There is need for different sport management strategies in different areas. Michael Porter uses the idea of five competitive forces to analyze the competitive environments which are:

• Threat of substitutes: Buyers propensity in this industry was relatively low. Because of there are little alternatives to substitute the basketball shoes like slippers, boots, dress shoes, etc. But consumers don’t likely to substitute the goods due to performance specification. A real basketballs athlete will not be use boots when they are playing in the match. There are no real substitute goods to basketball shoes that they produce. Therefore, the threat of substitutes is low.
• Threat of new entrants: due to the large scale Nike relatively can control the market share (by predatory pricing for example). The Nike brand is well known globally and plays a major role in consumer decision making by favoring internet and E-commerce. The company have invest millions dollar to construct their online shopping. By these strategies new firms also have to spent lot of money to gained customer attention. Therefore, the barrier of entry by new firms was low.
• Bargaining power of suppliers: Nike uses to controlling the suppliers to make sure they are not depending on them by turning to another manufacturer company if there are anything problems with their product so they can press the faith from customer by retaining the loyalty because of the goods stock. The company is using private contractor to produce their goods. There are some issues with the factories laborer for example that binding with the good quality of their product. But they try to avoiding the issues by transparency of giving license to their manufacturer as seen from their website.
• Bargaining power of buyers: there a large number of buyers that continuously buying basketball shoes according to upgrading the performance specification and also the current style of the shoes itself. Therefore, Nike should continuously market their product by promoting it and also coming with other strategies like promotion. So, they will keep the number of customer satisfaction to gaining the loyalty of the customer to not buying from other firms (e.g. Reebok, Fila, And1, etc).
• Rivalry among competing firms: (Michael E. Porter, 1980) calls this "the scrambling and jockeying for position”. Businesses compete for customers by price, quality, and speed (responding to new styles and models and getting these products quickly to retailers). Thus are many strategies that they had to use to be competitive with other firms. All of them had to anticipate the move of their competitors and respond it quickly (by using another strategy) to becoming competent with other firms. In this case, both these firms have high the rivalry among other competitors in the footwear industry especially for basketball shoes that they both also produce. Both of them had been used the internet and e-commerce to boost the purchase number globally. Online selling has enlarged the reach for these firms allowing them to increase sales while minimizing operating costs.

The SWOT Analysis

Strengths Weakness

• Its a number one brand globally with holding the largest number of total market share.
• Nike has no factories. It does not tie up cash in buildings and manufacturing workers. This makes Nike very efficient.
• Nike is a highly successful developer and supplier of athletic and sports wear and by 1998, the company controlled over 40% of the footwear market in the United States (Vogel 2006)
• Negative image portrayed by poor working conditions in the factories.
• The income of the business are heavily dependent on footwear industry.In 1996, life magazine published a story about child labour in Pakistan which featured a young boy stitching a Nike Soccer ball (Vogel 2006)

Opportunities Threats

• There is also opportunity to develop products such as sport wear, sunglasses to gain higher profits.
• Increase female participation on the celebrity endorsement.
• New technology and innovation to stay at the top of the market.
• The market for footwear and apparel is very competitive. Competitors are making alternative brand to take away Nike’s market share.
• Nike always face threats from human rights campaigners
• Nike sells its products in different regions which are characterized by economic instabilities and this considerably reduces the profit margins (Adam 2009)

PEST Analysis

Political

The government must create economic policies that will foster the growth of businesses. Nike, fortunately, has been helped by the US policies which enable it to advance its products. The support accorded to Nike by the US government, particularly in the general macroeconomic stability, low interest rates, stable currency conditions and the international competitiveness of the tax system, form the foundation critical to Nike’s growth. But outside US Nike being more unfortunate when they bond by the issue of wages in child labor in some third world country.

Economic

In economy, the biggest threat for Nike would be economic recession. During recession, Nike’s growth will be adversely affected. The US economy is experiencing a downturn before. Consumer purchases are slowing down. Currently, Nike's feeling the effect of the economic recession. The Asian economic crisis also affects Nike since its goods are manufactured in Asia. The labor costs and material prices are going up. Read how does Nike position their products in the marketplace

Social

People are nowadays being aware of what happens inside the firms and it also making perception through them. Nike, however, failed to foresee problems brought about by their manufacturer problem by using child as labor and also poor conditions of the factory conditions at production locations in Asia. This cause bad publicity and declining the number of their sales as society and consumers are demanding for more socially responsible companies.

Technology

Nike joins into technology by using some perfect idea by making exclusive partnership with Apple Inc. With making Nike+ (Plus) application technology includes a sensor that runner put into their running shoes and a receiver. Then, the receiver will capture his or her mileage, calories burned. It is one of greatest innovation that Nike had been made. With this technology the nike+ now considered as a world’s largest running club.

Market Segment Identification

Market segmentation is about dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors who might require separate products or marketing mixes, a market segment comprises of individuals who think on the same lines and have similar interests. Nike should try to use some techniques to segment, their own market in to reach consumers in different markets . By doing the geographic segmentation, demographic segmentation, psychographic segmentation, and behavioral segmentation.

• Geographic segmentation. Nike has performed their first seller in USA. Nowadays Nike is on multinational company that sells their product globally or all over the world. When it first time entering overseas market the company have to classified the market specifically base on the regional and also not classified it in each country because of efficiency and they believe that the region usually have a same norms, culture, and also demographic and etc. The company classified the product by region differentiate like Middle East, north America, South America, Europe, Africa, Asia. By the region itself Nike calculating the typical styles that they like and also different way to promote the product.
• Demographic segmentation. It means segmenting the market by gender, age, and class segment. Nike is segmenting their product to athletes, both male and females generally from the ages of 15 to 35. The target markets are to people who enjoying high quality sport goods. But nowadays, Nike also produce sneakers and footwear that following the current styles through specifically category of their footwear. So, kids and mature people are now also enjoying their products because of the convenience of the shoes itself
• Psychographic segmentation. It is based on customer’s lifestyle, activities, interests, and opinions etc. By using this segmentation Nike is doing the same act, for example, the company is shown as more eco friendly firms in order to making a good perception to customer. But sometimes, Nike is being trap by issue with labor that also make customer things that the firm was only thinking of their profit. But suddenly the situation was changing when they come up with sneakers that following the current lifestyle, so, the more customers will come to bought both of their products.
• Behavioral segmentation. It is based on actual consumer buying behavior for particular products. Customers are segmented on the basis of their attitude towards brand loyalty, or user status indicating the first time buyers, potential buyers, benefits sought etc. it is also including the quality of the product itself. It is explaining the reasons why customer keep purchase the products.

Value Chain Analysis

Strategy is the art of creating value. Analyzing the events that add value and those that are not important, because the company can achieve high returns, if the value created is more than the costs incurred for the specified value. The fact that Nike is working in numerous regions of the world requires for a critical analysis of the value chain in the global context. Nike's value chain contains seven primary activities. These activities are Technology Development, Product Design, Component Manufacturing, Assembly, Marketing, Distribution and Retail Sales.

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