Analysis of Nike Submitted by: Ayesha Ikram

Nike:
The company was founded as Blue-Ribbon Sports on January 25, 1964, by Bill Bowerman and
Phil Knight, and officially became Nike, Inc. on May 30, 1971. Nike is a multinational American
Corporation that is involved in designing, developing, marketing, manufacturing and sales of
apparel, footwear, equipment and accessories worldwide. Nike is the largest seller of athletic
footwear and apparel worldwide. It has 18,000 retail outlets in the US. The top selling products
of Nike are for cross-training, women’s shoes and basketball. It also designs footwear for
bicycling, baseball, football and soccer. 98% of the footwear is manufactured outside the US that
is in China, Vietnam, Indonesia and Thailand.

SWOT Analysis:
Strengths:

• High quality of the products

• Brand Recognition
• Marketing strategy is effective
• Distribution chain is strong
• Innovation Capacity
• Research & Development
• Strong customer base
• Customer satisfaction and relationship

Weaknesses:

• Manufacturing is outsourced which leads to overseas dependency

• Market share in US is decreasing
• Product prices are higher as compared to Adidas
• Retail presence is medium
• Exposure to currency

Opportunities:

• Product innovation has increased demand

• Expansion into emerging markets
• Increase in the number of sports events like Olympics
• Women athletes segment is growing
• Developing its fashion brand image
• Targeting non-sport customers
Analysis of Nike Submitted by: Ayesha Ikram

Threats:

• Economic Recession
• Intense competition in the industry
• Revenue is based on customer’s disposable income
• Currency fluctuations
• Competitors developing substitute brands to take over Nike’s market share

Five Forces Analysis:

Threat of New Entrants:

• Threat of new entrants is low

• There are high barriers to entry
• Brand name is strong and well established
• High marketing and R&D costs are associated
• Selling footwear is competitive and barriers to entry is low
• Cheap copies come from the far East
• Nike has a competitive edge against new entrants due to the economies of scale
• The threat of entry is high due to low manufacturing costs associated with apparel
• New entrants have low capacity to enter the market an established brand like Nike, Puma
and adidas have the market share and people are loyal to these brands
Threat of Substitutes:

• This threat of substitute products is low.

• Customer substitutes for athletic footwear are low (boots, flip flops)
• Few substitutes as footwear like sandals don’t have much substitutes
• Athletic footwear attracts a specific targeted market hence people who are looking for
shoes to run will not buy sandals and boots
• Some consumers may choose to wear t-shirts and trousers instead of Nike’s sportswear
clothing

Bargaining power of customers:

• Nike serves customers via both direct consumer channels and distribution
• Bargaining power is held by some wholesale consumers
• End Users however have low level of bargaining power
• Customer might also choose other brands and switch
• Nike’s customers can switch to other brands due to low switching costs
Analysis of Nike Submitted by: Ayesha Ikram

Bargaining power of suppliers:

• Third parties outside US manufacture Nike’s footwear and Apparel

• Nike’s manufacturing is done in China, Vietnam and Indonesia
• Supplier switching costs is significant
• Nike’s suppliers have the power to build their own brands. They have a moderate
bargaining power.

Intense Rivalry:

• Nike has intense competition in the market of footwear, apparel and equipment as
companies like Puma and adidas are also manufacturing and selling the same
products.
• Nike’s market share is reduced due to competition from adidas
• Competition is also intense as the number of top players in the market is low

Nike’s Competitive Strategies:

Nike’s strategy is a combination of two strategies which are:

Cost Leadership Strategy:

• Nike outsources manufacturing of its products from China, Vietnam and Indonesia which
are provide low labor costs and this achieve economies of scale.
• Also, the competitive scope of Nike is broad as it has different products for the different
market segments

Differentiation Strategy:

• Nike focuses on product differentiation through elements such as design of products,

brand advertising, quality products and product development
• Nike differentiates its athletic products by three ways:
• It manufactures products for three segments that is men, women and children
• It manufactures apparel like gym wear, gym bags and gloves
• Nike sells other products aside from athletic products like electronic devices and school
supplies
Analysis of Nike Submitted by: Ayesha Ikram

Capabilities and Resources of Nike:

Tangible Resources:

Physical assets: land and buildings

Financial assets: financial position is strong with good ROA

Technological assets: these are the patents like Nike Air, Nike Zoom
Organizational Resources: loyal customer base

Tangible Resources:
Human Resources: strong research team, industrial designers

Innovation Resources: technological innovation design

Reputation Resources: brand image, brand equity, brand name, “Just do it” brand mantra

References:
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Investopedia
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