Jeremy Burk

Towson University
MNGT481: Spring 2015

Table of Contents

Five Forces........................................................................... 3
Internal Analysis...................................................................3
SWOT................................................................................... 4
Recommendations................................................................5
Exhibit 1: Five Forces............................................................7
Exhibit 2: VRIO Analysis........................................................8
Exhibit 3: SWOT Analysis.......................................................9
References.........................................................................10

Five Forces
As seen in Exhibit 1, Nike is currently in a good situation when looking
at the five forces, though intense and rising competition are threats
that the company is currently facing. While suppliers currently have
low bargaining power, consumers have moderate power due to the fact
that they can simply buy a shoe from one of the many other brands if
they so choose. This goes hand in hand with the moderate threat of
substitute products Nike faces. There are hundreds of brands of shoes
out there, and while many create successful products that can be
viewed as substitutes, there are still many who will argue that there
are no substitutes for Nike products. While many companies attempt to
enter the sports apparel or athletic footwear industries, rarely any are
able to compete at the same level that Nike is, due to their global
brand recognition and long standing in each industry.

Internal Analysis
One of Nikes most important resources is the high cash flow it receives
due to endeavors in several different industries. As of February 2015,
Nikes free cash flow is over 1.8 billion dollars, in comparison to Under
Armours, which was -245 million respectively (Nike Free Cash Flow, 1).
Nikes approach to innovation is unique and has proved to be a
valuable tool for the organization. By continuing to push different
boundaries in the footwear, apparel, and several other industries, Nike

has managed to remain relevant in all different fields. Both their high
quality products and global brand recognition help Nike secure longterm customers who tend to stay loyal to the brand. If Nike can
maintain these resources and continue to capitalize them, they can
expect to continue to see the same level of success they currently do.
To see the implications for competitiveness and a full VRIO analysis,
see Exhibit 2.

SWOT
Nike is in a strong competitive position right now, and if it continues to
build on its strengths, and take advantage of its opportunities, it will
continue to grow in both the apparel and footwear industries.

One of Nikes biggest strengths is their global brand recognition. Nike

has managed to become a household name in not only the United
States, but globally as well. This has proved to be an extremely
valuable strength for Nike as they have continued to grow in their
original industries, while also having the following to branch out into
other industries such as the consumer electronics industry. Nike
currently does not face many threats, other than Under Armours
recent push in the athletic apparel industry and footwear industry, and

because of this, it can continue to take risks and be innovative, without

risking its position in the market.
Even though Nike continues to have extremely high advertising costs,
they still continue to see high profits and the advertising appears to be
worth the high investment. A big chunk of the money spent on
advertising is used to bring in globally known athletes to promote their
products. While the cost is high to acquire these athletes, the
implications that is has globally are grand and are helping keep Nike
competitive in the global market.

With little competition and extremely high brand awareness, Nike

should continue to reign as the leader in the footwear industry, and
continue to grow steadily within the apparel industry. To see a full list of
Nikes strengths, weaknesses, opportunities and threats, see Exhibit 2.

Recommendations
Based on the research conducted, Nike should continue to make
innovative products within the athletic shoe industry. Currently, Nike
controls the market in this industry and this is largely due to their
innovative products and most recently, their minimalistic shoe lines
that have seen great success. Nike As long as they continue to produce
high quality athletic footwear and remain innovative, they will likely
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have the market cornered for a long period of time and continue to see
high cash flow from sales in this industry.

While Nike has a strong hold over the athletic shoe industry, they still
face competition in the sports apparel industry. Under Armour has a
unique line of performance apparel products that are worn by athletes
all across the world and their recent marketing efforts have helped
them secure the number two spot in the apparel industry (Nike vs.
Under Armour, 1). Under Armour product lines such as heat gear, cold
gear, and all-season gear have all been the go-to for athletes in a wide
variety of sports over the past several years. While Nike has made an
effort to create similar products, they still have not been able to reach
the same number of people that Under Armour has within this line of
clothing. It is recommended that Nike make a serious push to compete
with Under Armour in this field, whether that be finding new suppliers
of materials, or bringing in external sources that can help Nike create a
product similar to Under Armours. Remaining strong in the sports
apparel industry is important for Nike because they are relying heavily
on their success in the athletic footwear industry, and boosting their
apparel sales well help take away some of the risk Nike currently faces.

In order for Nike to continue to grow, it is also recommended that they

start to push for forward integration within their organization.

Bypassing certain retailers is one-way Nike can save money, while also
making the final consumer happy. With the recent emergence of
eCommerce, Nike needs to amplify their web presence and look to
make a larger percentage of their sales through direct Internet selling.
Using promotions such as free shipping and free returns is a way to
help consumers feel more comfortable with the online purchasing
process and these are the little things Nike must do if they plan to
make a major change such as this. Eliminating smaller retailers who
cannot purchase in large volumes is another way to push for forward
integration. By opening more of their own stores, they can bypass
certain retailers and save themselves even more in the long run.

Exhibit 1: Five Forces

High

Moderate

Low

Threat Of New Entrants

Bargaining Power of Buyers

Bargaining Power of
Suppliers

Threat of Substitutions

Intensity of Rivalry

Exhibit 2: VRIO Analysis

Exhibit 3: SWOT Analysis

References

McNew, Bradley Seth. "Nike Inc vs. Under Armor Inc: The
2015
Matchup." Fool.com. N.p., 12 Feb. 2015. Web. 5 May
2015.

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"NIKE INC -CL B (NKE:New York): Financial Statements."

Bloomberg.com. Bloomberg, n.d. Web. 6 May 2015.
Mourdoukoutas, Panos. "How Nike Wins." Forbes. Forbes
Magazine, 28
Sept. 2014. Web. 4 May 2015.
"Executives." About Nike - Executives. N.p., n.d. Web. 6 May
2015.
"Nike Through The Lens Of Porter's Five Forces -- Trefis."
Trefis. N.p., 2
Dec. 2013. Web. 3 May 2015.
"Nike Free Cash Flow (Quarterly):." Nike Free Cash Flow
(Quarterly)
(NKE). N.p., Feb. 2015. Web. 5 May 2015.
Stock, Kyle. "Is Nike Spending Too Much on Superstars?"
Bloomberg.com. Bloomberg, 20 Mar. 2014. Web. 8 May
2015.

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