The Main Drivers Behind Nike's Growth

Analyse their strategic choices with their options- why they made the choices that they did and recommendations. Has their strategic focus changed? Analyse areas where Nike went wrong, why did they go wrong, and what are the solutions? Look for critical success factors, matches and mismatches. Identify any key areas that have affected Nike.

Use the following tools of analysis e.g. swot analysis, pestle, value chain, porter's 5 forces, shareholder matrix, resource view, 4 p's, BCG matrix.etc and others to come to your answer. Nike operates within the sports footwear and apparel market. Originally designing and producing running shoes, their portfolio has broadened to include a wide range of sports and leisure wear. This is all endorsed by top sporting personalities. This environment is fairly stable although terrorism and Sars has affected consumer confidence and supply networks.

Mission Statement
In its mission statement Nike expresses that it requires doing business in a responsible way, leading to sustainable financial growth. With the advances in technology, HR practices, the well informed and trained work force, there is very little left to differentiate organisations. Being seen to go further than the minimum required on social issues can attract and retain customers. This green cleansing attracts attention to the organisation; they are viewed as caring and social responsible (Mullins, L. 2005). A report, on the business practices of Nike through its supply chain accused the organisation of being involved in poor working conditions, violations of labour rights, low wages and harassment of its workforce. Nike takes these reports seriously. On the basis of the research findings the company has intensified the monitoring of its suppliers (Hummels, H and Timmer, D.2004) Past options: To build its business with all of its partners based on trust, teamwork, honesty and mutual respect; this is expected to be returned, expecting business partners to operate on the same principles. Rationale: Nike does not want to only do what is required by law, but also do what is expected of a leader Future Options: Review and monitor closer the actions of business partners Rationale: To prevent bad publicity, which can damage the organisation Critical Success Factor: To demonstrate to consumers the high value within the organisation to CSR. Change of Focus: Theorist: Hummels, H and Timmer, D.2004 agreed that these reports were needed, Although Mullin, L. 2005 stated that it could be just green washing Nikes Function Past options: The company focus on design and development Rationale: This reduces long term debt has the benefit of not tying capital up in plant and equipment Future Options: Rationale:

virtually all of its production takes place outside of the United States. 1998:28). Therefore by Nike concentrating on their stakeholders it has placed Corporate Social responsibility high on their agenda. T. Past options: Produce goods in the Far east Rationale: Keeps costs down Future Options: Vietnam and China Rationale: New trade agreements. Nike's headquarters are in America. K. Shareholder matrix Surrounding all organisations are stakeholders. (1993) that ³the ultimate purpose of a company should be serving the interests of its shareholders´ (Friedman. G & Scholes J 2004. . The organisation has to demonstrate transparency in all actions and reporting. This can cause conflict with the shareholders. G & Scholes J 2004 agreed that this was a cost effective method of production Production Within several of these countries there have been problems with production.Critical Success Factor: Reduced size of premises therefore reduced costs. this primary characteristic is accepted as contra-distinctiveness from the shareholder value. Products are viewed as innovative Change of Focus: Theorist: Johnson. Common in stakeholder theory is compromises on both sides that can obviously haze over differences. however. Vital to have innovative employees. present sites are switching manufacturing to electrical goods Critical Success Factor: Maintaining current standards. because it identifies the sources of a corporation's social obligations and its set of stakeholders´ (Jones (1995) cited in Rowley. power and interest towards the organisation Mendelow (1991) considered a matrix that classifies the level of power and interest a stakeholder has in an organisation. it cannot be assumed that their level of interest will remain the same (Mendelow (1991) cited in Scholes. distribution and political problems. Although once each group of stakeholders is recognised. Johnson. closer working relationships. retaining customer loyalty by guaranteed standard of product Change of Focus: A shift to a more managed production Theorist: All organisation need to watch changes in political and economical factors in their outsourcing. & Johnson. these are new production venues that Nike could explore. This was discussed by Friedman. J 1997:198). With the change in relationship between the USA and Vietnam and China. Jones (1995) argue that the ³stakeholder framework is practical for considering business and society issues. (1993) Value Chain Nike's supply chain provides a clear view of the extent of the global nature of the company. all with varied levels of authority.

Nike made itself heavily dependant on one retailer Footlocker. they would gain more control over production. Distribution and Retailers Nike has a strong network of retailers in 200 coutries world wide through distributors. G & Scholes J 2004. the supply chain. licensees and sudsiduaries. Many of these materials used in production are available in the locations which the manufacturing takes place. i. agreed that Nike can be too far from the site of production Past options: Target USA Rationale: Demand and growth for footwear in the US was rapid. These are well established channels.e. When Footlocker reduced their purchasing form Nike. Past options: Outsourcing of all production Rationale: Reduced costs Future Options: Outsource with stronger control Rationale: Speed up reporting of any problems in production.Nike's supply chain upstream begins with the materials used in the production of its products. consistency and value Change of Focus: Although still outsourcing. Critical Success Factor: Organic growth as well as by acquisition. reduces purchasing or ceases trading (Johnson. G & Scholes J 2004). new markets need to be identified to prevent decline in sales. If withdrawn they may find an alternative product Change of Focus: Closer working partnerships . they were heavily dependant on one out let chain Rationale: To sell top of the range products Future Options: To negotiate partnerships deals that allow for the choice of product for the retailer Rationale: To prevent sudden withdrawal of products Critical Success Factor: Customer being able to rely on source of product. it created a reduction in turnover in the short term. representing 10% of their revenue. G & Scholes J 2004. Past options: Although they have numerous retailers. Johnson. Organisations that are over dependant on one retailer are open to cash flow problems. if the retailer switches suppliers. Within the USA there are 18000 stores that retail nike products. goodwilltherefore there is a match is CSF to succeed Change of Focus: Maybe have to target marketing in a different way Theorist: When markets are reaching saturation. also brand name. but some specialised materials have to be imported to the manufacturing company. quality. Future Options: Future option is to enter EU markets Rationale: To expand into growing markets as US is near saturation. the greater the distance the slower the reporting of problems Critical Success Factor: Reduce problems associated with distance. Theorist: Johnson.

by advertising and targeting the audience. G & Scholes J 2004) Nike Branding Past options: Global brand Rationale: Consumers are willing to pay a premium price for. as they imply credibility. Johnson. Theorist: By tailoring marketing to the customer needs Nike has been successful in the past and continues to be today (Johnson. this is in terms of brand development.Theorist: Organisations that are over dependant on one retailer are open to cash flow problems. but can also ship overnight when needed. G & Scholes J 2004 Nike has a ³futures´. Change of Focus: Theorist: Any change or threats within the markets could leave them overstocked (Groucutt. J. if the retailer switches suppliers. Future Options: When companies are bought trade under their name Rationale: Moving into a new market with a brand that is already global you can reduce cost of introductory and follow-up marketing programs. always knowing what is needed in production Future Options: Rationale: Critical Success Factor: This is responsive to the market trends. Although the ³futures´ method is currently working for Nike. allowing growth in new diverse markets Theorist: significant scales of economy are achieved Aaker 2000. selling world wide from the web targeting Generation Y. et al 2004) Sales In addition. the single currency and the trade rules make entry difficult for large organisations. Past options: Futures ordering system Rationale: A 6 month lead time for product orders. Past options: Target the US Rationale: Growing market. Critical Success Factor: Ensures customer loyalty and to widen portfolio Change of Focus: Concentrating on core products as Nike. reduces purchasing or ceases trading. but can also help retailers plan stock. Ensuring accurate and quick picking of the customers order Change of Focus: Shift to global marketing. but is now reaching saturation Future Options: Target new markets. including e-commerce Rationale: To avoid a reduction in sales Critical Success Factor: Entry to the markets. packaging and manufacturing . consumer sales outside of the United States exceeded sales in the United States in 2003 with only 43% of the company's sales coming from the US In Europe there are difficulties in entering the market. high quality and up-to-date global trend.

not just the item. In the case of Nike. Adidas. People are buying into an ideal. Price is related to Product. there was a move into new sports areas away from the running heritage. J. Trends within the industry have increased the number of female consumers. is directly linked to the price. it's packaging and overall image. Nike's target audience has moved from more masculine towards female and Generation Y. J. price conscience consumers. With advertising Nike has targeted segments of the market. Consumers believe that there is a link between quality of a product and the price. and constant changing market trends and fads have all been attributing factors in how a manufacturer responds. The amount each personality has received is considered high. However. therefore maintenance of the relationship between brand images. et al 2004). :: Strengths Product Range Capacity for innovation Distribution expertise Single Brand . customer awareness and loyalty. and Reebok. G & Scholes J 2004). Brand Management. this costly.Marketing Sports personalities have endorsed the Nike product. through the characteristics of the brand. for example. Highly focused brand includes Nike. Models used in Analysis Swot analysis This analysis will summarise key issues from the business environment and the strategic capacity of Nike. Past options: Sports personalities have endorsed the Nike product. Nike should review their advertising policies (Groucutt. quality and price have to be consistent (Johnson. Consumers question what they are getting for their money. Future Options: To chose personalities that appeal to a wider audience Rationale: To reduce advertising costs Critical Success Factor: Change of Focus: Theorist: Groucutt. This can be used to judge future strategic options. although with numerous different sports and countries targeted Rationale: To target all types of sport by choosing personalities which are at the top of their sports. there is evidence that a brand will widen its target market as it reaches a greater level of maturity. although with numerous different sports and countries targeted this has been costly. they target a precise market. This forces the competitors to market their products in the same way. et al 2004 4ps The athletic shoe industry is highly competitive as well as a demanding market where fierce competition.

Stars endorsement Contract manufacturing Large portfolio of products :: Weaknesses Single Brand Too many stars endorsement Contract manufacturing Spread portfolio of products Reliant on retailers Reduction of target market :: Opportunities New Markets E commerce Research and development Increase product line Product diversification Change target market New manufacturing countries :: Threats Competition Fashion Trends Contract manufacturing and copying of product (intellectual property) Consumer lifestyle changes Competition Bad press associated with Nike Outlets cancelling orders Sars Pestle This will consider environmental influences on the organisation. :: Political Striking dock workers Political unrest in the production countries Terrorism in the home country :: Economic Slow down in the economy Reduction in consumer confidence Barriers of entry to the EU Contract manufacturing :: Socio-cultural Brand conscious consumers Change in buying habits in younger people . both in the past and with future strategic plans.

Although there are now problems arising from these factories. :: Substitutes When required for professional use there is no substitute goods. and Providing an efficient global supply chain with local implementation Porter¶s 5 forces This model is used to identify the sources of competition. . There has been and increase in women purchasing the shoes. the team responsible for the implementation of Nike Supply Chain (NSC) began with a set of specific. Potential Entrants Other sportswear manufacturers expanding their portfolio Cheap copies from the Far East :: Buyers The buyers of sports footwear have changed in the past decade. labour and political unrest causes delays in manufacturing and shipping of the goods. but as a fashion item there are many other goods that could be purchased. Generation Y has a different tastes and purchasing methods. :: Suppliers Using production facilities in the Far East has give Nike economies of scale.Generation Y prefers other types of footwear Increase in the female share of the market Corporate social responsibility :: Technological Speed of change of product Design Ability Speed of News reporting :: Environmental Re use a shoe Sustainability philosophy Climate impact :: Legal Threaten action by underage workforce Poor employment record Corporate social responsibility Contract manufacturing and copying of product (intellectual property) Trade agreements Supply Chain Like every large IT undertaking. information and product quality. Improving service to meet customer/consumer needs. stated goals: Enhancing Nike¶s ability to respond to changing conditions. they are switching to making there own goods. Improving process. Reducing inventory and capital investment risk. and how to gain advantage over them. New York Doyle. sponsoring sporting leagues Adidas have recovered from the problems that plagued them. This places them in the Cash Cows category on the Matrix. Feb 1997. Harlow Hummels. D. L. (2001) Brands in the balance meeting the challenges to commercial identity Pearson Education. D. introducing endorsement by sports personalities.Vol. Hemmel Hempstead Johnson. Cash cows market growth has slowed. Bibliography Aaker. offering more choice of shoe. and Environmental Information Journal of Business Ethics Jun 2004Vol.powerfulwords. (2003) Differentiating Stakeholder Theories Journal of Business Ethics Aug 2003. http://www. Oxford Drawbaugh. J. BCG matrix Nike is established within its markets.(2004) Investors in Need of Social. (2005) (7th Edition) Management and Organisational Behaviour Prentice Hall. London Groucutt. covering a wide range of sports. J. (1998) Innovation in marketing Butterworth-Heinemann.46 Rowley. A prescription for value Journal of Business Ethics. Mar 1998 Welch. and the products hold a fairly stable market share.Vol. G & Scholes J (2004) (6th Edition) Exploring Corporate Strategy Prentice Hall. (1997) Business ethics in theory and practice: Diagnostic notes.:: Competitive Rivalry Reebok.52. T (1998) A normative justification for stakeholder theory Business and Society. Pearson. K. J. (2000) Brand leadership Free Press.php . and have a good product mix.H and Timmer. 1 Kaler. Hemmel Hempstead Mullins. benefiting from economies of scale. Ethical. Iss. et al (2004) Marketing Essential Principals and New realities Kogan & Page. Great Britain Johnson J & Scholes K (1997)(4th Edition)Exploring Corporate Strategy Prentice Hall.

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