UNIT NO & TITLE: - 32 & BUSINESS STRATEGY

QUALIFICATION: - PEARSON BTEC LEVEL 5 HND BUSINESS

YEAR: - 2018-2020

PREPARED BY: - PIYUSH BANG

REPORT LO1 TO LO4

ASSESSOR NAME: - NEIL SEQUEIRA

1|PAGE
 INDEX

SR.NO TOPIC PAGE NO

1 Introduction to the subject.
2 Introduction to the company.
3 LO1: Analyse the impact and influence which the macro
environment has on an organisation and its business strategies.
4 P1: Applying appropriate frameworks analyse the impact and
influence of the macro environment on a given organisation and
its strategies.
5 M1: Critically analyse the macro environment to determine and
inform strategic management decisions.
6 LO2: Assess an organisation’s internal environment and
capabilities
7 P2: Analyse the internal environment and capabilities of a given
organisation using appropriate frameworks.
8 M2: Critically evaluate the internal environment to assess
strengths and weaknesses of an organisation’s internal
capabilities, structure and skill set.
9 LO3: Evaluate and apply the outcomes of an analysis using
Porter’s Five Forces model to a given market sector
10 P3: Applying Porter’s Five Forces model evaluate the competitive
forces of a given market sector for an organisation.
11 M3: Devise appropriate strategies to improve competitive edge
and market position based on the outcomes.
12 LO4: Apply models, theories and concepts to assist with the
understanding and interpretation of strategic directions available
to an organisation
13 P4: Applying a range of theories, concepts and models, interpret
and devise strategic planning for a given organisation.
14 M4: Produce a strategic management plan that has tangible and
tactical strategic priorities and objectives.
15 LO1, LO2, LO3 & LO4: D1: Critique and interpret information
and data applying environmental and competitive analysis to
produce a set of valid strategic directions, objectives and tactical
actions.
16 Conclusion
17 Reference/ Webliography
18 Bibliography

2|PAGE
 INTRODUCTION TO THE SUBJECTS

https://bohatala.com/wp-content/uploads/2018/02/Consultancy.jpg

“STRATEGY” can be defined as a method or a plan that helps business/organization bring

out the desired results, therefore, “BUSINESS STRATEGY” can be defined as a method or
a plan that guides a business/organization in the proper selection of resources and the
optimum application of the same, in-order to obtain a competitive advantage. Hence, it is
more concerned about how a business/organization acts/competes in a particular market. It
3|PAGE
also consists of taking strategic decisions such as planning, setting goals, etc. which further
lead to the choice of the products, needs of the customers, business opportunities, etc. In
simple terms, it can be described as a plan that says where a business/organization wants to
go and how it can get there.

BCG Matrix, Porters 5 forces, Michael Porters business strategies, Ansoff Matrix, PESTLE,
SWOT analysis they all have really improved my knowledge and taken it a step ahead.

INTRODUTION TO THE COMPANY

https://i.pinimg.com/originals/02/67/d7/0267d77d511d75d0de6c807e284af33c.jpg

Nike, Inc. is an American multinational corporation that is engaged in the design,

development, manufacturing, and worldwide marketing and sales of footwear, apparel,
equipment, accessories, and services. The company is headquartered
near Beaverton, Oregon, in the Portland metropolitan area. It is the world's largest supplier
of athletic shoes and apparel and a major manufacturer of sports equipment, with revenue in
4|PAGE
excess of US$24.1 billion in its fiscal year 2012 (ending May 31, 2012). As of 2012, it
employed more than 44,000 people worldwide. In 2014 the brand alone was valued at $19
billion, making it the most valuable brand among sports businesses. As of 2017, the Nike
brand is valued at $29.6 billion. Nike ranked No. 89 in the 2018 Fortune 500 list of the
largest United States corporations by total revenue.

The company was founded on January 25, 1964, as Blue Ribbon Sports, by Bill
Bowerman and Phil Knight, and officially became Nike, Inc. on May 30, 1971. The
company takes its name from Nike, the Greek goddess of victory. Nike markets its products
under its own brand, as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Blazers, Air
Force 1, Nike Dunk, Air Max, Foamposite, Nike Skateboarding, Nike CR7, and subsidiaries
including Brand Jordan, Hurley International and Converse. Nike also owned Bauer Hockey
(later renamed Nike Bauer) from 1995 to 2008, and previously owned Cole
Haan and Umbro. In addition to manufacturing sportswear and equipment, the company
operates retail stores under the Niketown name. Nike sponsors many high-profile athletes
and sports teams around the world, with the highly recognized trademarks of "Just Do It" and
the Swoosh logo.

LO1: Analyse the impact and influence which the macro environment has on an
organisation and its business strategies.

P1: Applying appropriate frameworks analyse the impact and influence of the macro
environment on a given organisation and its strategies.

Working as a corporate strategy manager for Nike. I am going do appropriate framework and
the impact and influence of the macro environment on a given strategies.

MACRO ENVIRONMENT
Definition: “A macro environment is a set of external conditions that affect a business’
development efforts either positively or negatively. These elements are considered
uncontrollable and they have an impact in the company’s overall performance”.
https://www.myaccountingcourse.com/accounting-dictionary/macro-environment

5|PAGE
 https://i.ytimg.com/vi/y9RDg_JMmPc/maxresdefault.jpg

These factors are classified as macro because they are realities affecting the economic
system as a whole and not just the company’s immediate market. Some of these elements are
economic growth, inflation, social conditions, interest rates, government policies,
technological developments and climate changes, among others. Each of them have a
different impact in the way businesses perform and they also demand strategies to be
formulated to deal with the threats and seize the opportunities that this macro environment is
currently offering. A company’s flexibility to adapt quickly to external changes is definitely
a great attribute, since it can react positively and shape its business model around new
paradigm shifts.

This guarantees the business’ sustainability over time, since macro environments are very
dynamic. The PESTLE (Political, Economic, Socio-cultural, Technological, Legal and
Environmental) analysis is one of the most popular tool employed to have a better
understanding of an organization’s macro environment.

MACRO ENVIRONMENT
POLITICAL In the estimation of some observers, Nike has benefited
considerably from the growth-orientated policies of the US
government, which has maintained low interest rates, currency
exchange stability, and internationally competitive tax
arrangements. Politically, large companies such as Nike also face
high levels of pressure to produce footwear of a high quality level,
due to the ever changing health/fitness policies present in the UK.
ECONOMIC Nike has used its established brand equity to take advantage of
growing consumer demand in emerging economies. Nike has
defended the CSR critiques by arguing that it has provided
employment in otherwise underdeveloped economies, and paid the
established local rate for labour.
CULTURAL In the macro-economic sense, Nike (and its competitors in the
sportswear sector) are the beneficiaries of a growing societal
obsession with health and fitness. Nike was caught up in the
ongoing debate around globalisation, perceived by many pressure

6|PAGE
 groups to be ‘Increasing the inequalities of political power and
influence, as well as highlighting new dimensions of inequality’.
From the 1990s onwards, Nike adopted the standard industry
practice of outsourcing much of its skilled, semi-skilled and
unskilled manufacturing to emerging economies, including those
in the Asia Pacific region.

TECHNOLOGICA Innovative footwear design and the uprise of Nike ID, a website
L where customers can personalise their Nike Footwear at varying
prices depending on what they choose. This adding value to their
market as it is the leading personalisation website in the footwear
industry.
Consumers will be able to make contact-less payments via mobile
phone platforms. These processes may however accelerate the
speeding-up of the deterioration of the workforce, reducing the
amount of employment on offer.

LEGAL Countries with a common law legislative framework (i.e. the

United Kingdom and United States tend to favour a less
interventionist approach that supports the interests of
shareholders. Meanwhile, states which have code-orientated legal
systems (e.g. Germany, France and Spain), tend to acknowledge
wider stakeholder interests.
NATURAL Launching its initial sustainability policy in the early 1990s, Nike
appointed 100 ‘sustainability champions’ to oversee pilot projects
in various aspects of its business, such as the reduction of carbon
emissions and elimination of waste.

 APPLICATION OF FRAMEWORKS
1. SWOT ANALYSIS.

7|PAGE
https://forbesbooks.com/wp-content/uploads/2019/04/bigstock-Business-Concepts-Swot-
Analys-248893528-480x480.jpg

 STRENGTHS IN THE SWOT ANALYSIS OF NIKE

1. Nike is the world’s no. 1 shoemaker. It designs and sells shoes for a variety of sports
including baseball, golf, cheerleading, volleyball, tennis and football.
2. Nike uses a “Make to Stock” customer order which provides a fast service to
customers from available stock.
3. Nike operates Nike Town shoe and sportswear stores, Nike factory outlets and Nike
Women shops. Nike sells its products throughout US and in more than 180 countries.
4. Nike is strong at research and development, as is evidenced by its evolving and
innovative product range. They then manufacture wherever they can produce high
quality product at the lowest possible price.
5. Nike is a global brand. It is the number one sports brand in the World. Its famous
‘Swoosh’ is instantly recognizable, and Phil Knight (Founder and CEO) even has it
tattooed on his ankle.

 WEAKNESSES IN THE SWOT ANALYSIS OF NIKE

1. 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.
2. The retail sector is very price sensitive. However, most of its income is derived
from selling into retailers. Retailers tend to offer a very similar experience to the
consumer. So margins tend to get squeezed as retailers try to pass some of the
low price competition pressure onto Nike.

8|PAGE
 OPPORTUNITIES IN THE SWOT ANALYSIS OF NIKE
1. 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 consumers
that wear Nike product do not always buy it to participate in sport. In youth culture
especially, Nike is a fashion brand. This creates its own opportunities
2. There is also the opportunity to develop products such as sport wear, sunglasses and
jewellery. Such high value items do tend to have associated with them, high profit
3. The business could also be developed internationally, building upon its strong global
brand recognition. There are also global marketing events that can be utilised to
support the brand such as the World Cup (soccer) and The Olympics.

 THREATS IN THE SWOT ANALYSIS OF NIKE

1. Nike is exposed to the international nature of trade. It buys and sells in different
currencies and so costs and margins are not stable over long periods of time. Such an
exposure could mean that Nike may be manufacturing and/or selling at a loss. This is
an issue that faces all global brands.
2. The market for sports shoes and garments is very competitive. Competitors are
developing alternative brands to take away Nike’s market share.

2. PESTLE ANALYSIS.

9|PAGE
 https://blog.learningtree.com/wp-content/uploads/2018/06/shutterstock_602615699-1.jpg

 POLITICAL FACTORS
Due to US Sanctions on Iran, Nike the American footwear and apparel manufacturer and
marketers will unable to produce the equipment to Iranian football team. According to a
company statement, “Sanctions applicable to Nike have been in place for many years and are
enforceable by law”. By this corporation can have a negative brand image in the minds of
Iranian and other consumers.

The recent Nike campaign “Just Do It”. The Ad displayed Colin Kapernick; face with a
tagline “Believe in something, even if it means sacrificing everything”. This player Colin
Kapernick has some past issues of Injustice and racism. Nike should stay away from
any political issues that affect customer emotions and create controversies.

 ECONOMIC FACTORS
Economic recession is the biggest threat Nike might face in the near future. The US and
Asian economic recession can affect Nike since the company is manufacturing its products
in Asia and the US. During the recession time labor and material cost also face an increase.

Nike has a competitive market, generating more revenue means low labor cost. It has to
maintain the low labor cost, though increases in many countries and can affect the revenue
generation.

10 | P A G E
Over the years Nike has a balanced stock performance i.e. growth in EPS and revenue. But
no stock is risk-free even the Nike. An increase in competitors and currency movement can
negatively affect Nike performance.

 SOCIAL FACTORS
Nowadays, people are more and more health conscious. People don’t compromise on diet
and health-related issues. People are joining fitness clubs that have a positive impact on the
footwear industry. When people join a fitness club they will need shoes, appeals and other
fitness equipment and Nike is the number one choice in the fitness industry for long.

Nike has failed to address and improve the poor working conditions for labors, low wage
rate and factories conditions in different countries of Asia. This is known as the sweatshop.
Due to social media platforms consumers have more access globally and this part of the
problem is not good for Nike. It can badly affect Nike brand image and sales.

 TECHNOLOGICAL FACTORS
Using technological innovations give brands a competitive advantage. Technology can be
valuable when developing a product, inventory management system, accounting systems and
interacting with customers and development. Here are some technological factors affect
Nike.

Nike’s leadership status is mostly relying on the implementation of information technology

in different field from designing, production, marketing to distribution.

In today’s competitive market social media connect companies with customer faster than
ever. Nike is embracing every social media platform in brand building strategies.

 LEGAL FACTORS
Legal factors affect large business globally and Nike is one of them. Though Nike is always
trying to comply with international laws it is not possible all time. Like in America and
Western world laws and regulations are friendly for business like footwear industry.  Asian
countries have complicated laws to comply with.

Product quality laws are also different from country to country. In past years Nike faced
many lawsuits of labor abuse, low wage and bad working conditions. Legal issues always
affect your brand image and brand reputation.

11 | P A G E
  ENVIRONMENTAL
The importance of environmental issues is gradually increasing.  Environmental issues affect
Nike as well.

Mostly Nike’s mass production factories are creating pollution and other environmental
issues. Chinese Environmental campaigners were blaming many largest clothes and apparels
suppliers including Nike and Adidas. These companies are creating a negative impact, not
only polluting the air but also poisoning Chines Rivers like Yangtze and Pearl Rivers.

Nike was able to respond positively and promised to ensure environmental friendly policies
by its suppliers.

I have tried to provide relevant information about Nike Pestle analysis and external
environment analysis. Despite the fact that Nike has maintained its brand image and strong
financial position it should comply all the laws and regulation. If you have any other factors
related to Nike external environment, please let us know.

12 | P A G E
LO2: Assess an organisation’s internal environment and capabilities.
P2: Analyse the internal environment and capabilities of a given organisation using
appropriate frameworks.

Working as a corporate strategy manager for Nike. I am going do the internal environment
and capabilities of a given organisation using appropriate frameworks.

SWOT ANALYSIS

https://tallyfy.com/wp-content/uploads/SWOT-Analysis-1024x689.png

 STRENGTHS
Brand Image: A strong brand image is a key strength for any brand. Over time, Nike has
built a strong image as an ethical and customer oriented business. It is an innovative brand
that is also known for its excellent marketing and for good quality products. Most of Nike’s
fame depends on its stylish products and a well-crafted marketing strategy. Its swoosh logo
sets it apart from the crowd of businesses. Nike’s focus on innovation and ethics has resulted
in stronger reputation and faster growth.

Excellent Marketing capabilities: Marketing can be a source of competitive advantage in

this era. A very large part of the entire battle is being fought in marketing and marketing
capability of a brand determines its sales and revenue. Not just Nike, its competitors are also
focusing heavily on marketing. Apart from innovative marketing and advertising, the brand
spends a heavy sum on marketing. In 2016 and 2017, it spent $3.2 and $3.3 Billion on
marketing. Nike is now relying increasingly on digital and social media advertising.

Financial strength: Financial clout also becomes a key strength for any brand in the
21st Nike’s position is much stronger than its competitors financially. In the fiscal year 2017,
the brand achieved record growth in revenues and earnings per share despite continuing
foreign currency headwinds. Its revenues grew by 6% over 2016 to $34.4 billion in 2017. Its
net income increased by 13% and Diluted Earnings per share by 16% to $2.51.

13 | P A G E
International presence: Nike’s International presence has grown fast. Its number of non US
retail stores has climbed to 758. Total number of Nike brand factory stores is now 642 and
that of brand in line stores is 71. The number of Converse stores internationally has also
grown to 45. The total number of Non US stores is now double that of the US stores.

Large and well managed supply chain and distribution network: A large and well
managed supply chain and distribution network is also among the key strengths of Nike. For
a well-known sports shoe and apparel brand, Nike has a quite big and well managed supply
chain and distribution network. It relies almost totally on independent manufacturers for the
production and supply of its products. The brand works with more than 500 suppliers across
42 nations and has strategic partnership with 363 apparel factories in 37 countries and 127
footwear factories in 15 countries. Asia has the highest number of Nike suppliers and
especially in China, Indonesia and Vietnam. The brand has 1142 stores internationally of
which around a third are in US and two third outside US. The brand has Nike and Converse
websites in 45 countries and is working on new innovative models to extend its reach closer
to the customers.

 WEAKNESSES:
Overdependence on the US market: The brand still depends heavily on the US market for
sales and revenue. In 2017, close to 46% of its revenue came from inside US and around
54% from outside US. While the brand has expanded fast overseas, the US market is its
biggest source of income.

Increasing marketing and overhead operating expenses: Rising competition in the spots
shoe and apparel market has caused an increase in the marketing related expenses of Nike. In
2016 and 2017, it spent more than 3 Billion on marketing. There was a rise of more than 60
million in marketing expenses of Nike from 2016 to 2017. Operating overhead expenses for
2016 and 2017 were higher than 7 Billion for Nike.

 OPPORTUNITIES
Digitization and product innovation: For further growth, the brand must continue to retain
its focus on digitization and product innovation. Digital marketing and ecommerce both will
affect its growth and profits. Its competitors are also investing in these areas and they will
continue to affect the consumer experience of Nike as well as its sales and profits.

Acquisitions: Acquisitions can also be a good method to find growth faster. The brand can
grow faster by acquiring related businesses.

International expansion: International expansion can also be great for faster growth. Nike
is currently operating its ecommerce websites in only 45 countries. It can exploit both
ecommerce and physical retail channels for international expansion. Asia is particularly a
fast growing market full of space and opportunities for market growth.
14 | P A G E
Backward integration: Nike currently relies totally on independent manufacturers for the
production and supply of its products. It can either acquire a few of them or build some of its
own which will help it have a more agile and stronger supply chain and find faster growth.

 THREATS
Stronger US dollar hurting earnings: A stronger US dollar has an adverse effect on the
earnings of Nike.  A stronger US dollar increase inventory cost and reduces the consolidated
earnings of Nike. In both 2016 and 2017, the detrimental effect of fluctuation in foreign
currency was felt by Nike. It felt a detrimental impact of $542 million and $1,985 million on
its consolidated revenues for 2017 and 2016 respectively. A similar detrimental impact was
felt on Income before income taxes because of fluctuation in foreign exchange rates which
was close to around $115 million and $449 million for 2017 and 2016 respectively.

Increased competitive pressure: The competitive pressure over Nike has also kept
increasing requiring higher investments in marketing as well as operations. Adidas and
Under Armour are also investing heavily in innovation and marketing creating competitive
pressure on Nike. To manage the competitive pressure Nike will have to retain its focus on
product quality, innovation and supply chain management.

Growing HR and marketing expenses: With growing business, the HR and marketing
expenses of Nike have also grown. It spent more than 3 billion on marketing in 2017. The
company is also experiencing higher wage related and compensation expenses.

Higher legal pressures: The legal pressures over businesses have grown globally leading to
higher pressure related to ethics and compliance. This has also led to an increase in
compliance related costs for Nike. Failure to comply with regulatory standards can lead to
financial and reputational risks.

15 | P A G E
 ANSOFF’S MATRIX
Ansoff’s matrix is a tool that helps identify five key growth areas for Nike’s product and
market strategic direction.

https://www.su
perheuristics.com/wp-content/uploads/2018/08/Ansoff-Matrix-Usage.png

Market Penetration: Increased relationship marketing and segmentation to maximise

consumer satisfaction.

Product Development: Relationship marketing can have the most impact in the market by
giving consumers what products they want and appealing to customers’ physical and
psychological needs.

New Market: China, Russia, India & Brazil all potential ‘multi-billion dollar markets.

Market Development: Formula One will increase Nike’s presence in these new markets
with China and Brazil hosting races and India represented on the grid with Force India
Racing Team.

Diversification: Such diversification into the unknown can constitute ‘real strategic growth
by providing entry into a new market’. An element of high risk exists where a product and
market are unknown thus high quality research is mandatory for success.

16 | P A G E
LO3: Evaluate and apply the outcomes of an analysis using Porter’s Five Forces model
to a given market sector.
P3: Applying Porter’s Five Forces model evaluate the competitive forces of a given
market sector for an organisation.

Working as a corporate strategy manager for Nike. I am going do porter’s five forces model
the competitive forces of a given market sector for the Nike.

NIKE PORTER’S FIVE FORCES ANALYSIS

Nike is known as a brand of sports shoes mainly. However, it also makes athletic apparel and
gear.  The recent years have been quite profitable for the brand. It is because of the at leisure
trends and for the high demand during the Olympics. Nike’s Just do it slogan and the
Swoosh logo set it apart from the crowd of brands. In history, it has kept signing the best
athletes for endorsing its brand and products. Here is a Porter’s five forces analysis of Nike.
Michael E Porter had developed this strategic tool in 1980. It analyses five important forces
that affect the state of competition in an industry and its profitability. These forces are there
in every industry and market. The tool can be used to understand the state of competition and
reduce competitive pressure.

THERE ARE PORTER’S FIVE FORCES ARE AS FOLLOW:

1. BARGAINING POWER OF SUPPLIERS: LOW

2. BARGAINING POWER OF BUYERS: LOW TO MODERATE
3. THREAT OF SUBSTITUTES: LOW TO MODERATE
4. THREAT OF NEW ENTRANTS: LOW
5. LEVEL OF COMPETITIVE RIVALRY: STRONG

17 | P A G E
 0
https://cdn.visual-paradigm.com/guide/strategic-analysis/what-is-five-forces-analysis/02-
five-forces-model.png

 BARGAINING POWER OF SUPPLIERS: LOW

The bargaining power of Nike’s suppliers is low. Its products are made globally in 42
countries in 620 factories. While individual suppliers are small in size, they do not have the
ability of forward integration either. This reduces the chances of competition from suppliers.
Moreover, the number of suppliers is high and they are scattered throughout the world. It is
why individual suppliers cannot exert any pressure on Nike. The brand sets standards for its
suppliers to comply with. If a supplier does not adhere to the standards, Nike can easily
switch to another. However, in such a case, the supplier would be losing a major source of
revenue. Overall, Nike holds strong control over its suppliers and audits them regularly
through third party auditors for compliance.

“Nike requires its finished goods suppliers to verify they are sourcing materials from vendors
that are compliant with Nike’s Restricted Substances List (RSL) and with the principles and
guidelines outlined in Nike’s Code of Conduct. Nike is also working towards mapping and
understanding impacts further up the supply chain, to develop standards for upstream
suppliers of contracted manufacturers. Nike’s Supply Agreements also explicitly require
Suppliers to comply with all local and country-specific labor laws” (Nike Supply chain
disclosure).

Thus, the overall bargaining power of Nike suppliers is low.

18 | P A G E
  BARGAINING POWER OF BUYERS: LOW TO MODERATE
The bargaining power of Nike’s buyers is low to moderate. The number of its competitors is
not so small if not very large. Apart from Adidas and Under Armour, there are other
competitors like Puma and Reebok. There are many other local and international brands also
that compete with Nike. The switching costs for customers are low. To some extent this
force is moderated by the quality and marketing of Nike’s products. Nike focuses on
performance and design. It is why it has been able to build good customer loyalty. This
reduces the bargaining power of individual buyers which is low to moderate.

 THREAT OF SUBSTITUTES: LOW TO MODERATE

The threat of substitute products is moderate for Nike. It is because a large number of
competing brands make similar or matching products. There are several brands in local and
international markets that make low priced shoes compared to Nike. These brands offer
lower priced substitute products for Nike. To some extent this threat is moderated by the
quality and design of Nike products. Overall, the threat from substitute products is moderate.

 THREAT OF NEW ENTRANTS: LOW

The threat of new entrants for Nike can be considered low to moderate. It is because while
the investment for starting the business is not very large, still there are other requirements
that are not easy to fulfil. Any new competitor may have to start at a local or small level
initially. Apart from production, there are marketing, distribution and supply chain
management that require investment, skilled workers and time. Building a brand image and
equity are also difficult. These factors moderate the threat from the new entrants. For any
new brand, it is not possible to create the kind of brand image like Nike overnight. It takes
time, efforts and capital investment. Nike’s strong position in the market mitigates the threat
to a large extent. Based on these factors the threat from new entrants is low. While
investment for production may be low, developing a notable brand can be time consuming
and requires a lot of capital investment.

 LEVEL OF COMPETITIVE RIVALRY: STRONG

The level of competition in the sports industry is strong. Some of the major competitors of
Nike are Adidas, Under Armour and Puma. The industry has grown saturated and the
existing players are engaged in tough competition for deeper market penetration and to
snatch away market share from each other. Brands invest a lot in marketing and other things.
The number of top players and direct competitors of Nike is low, however that makes the
competition even intense. Overall, the level of competition in the industry is strong.

19 | P A G E
LO4: Apply models, theories and concepts to assist with the understanding and
interpretation of strategic directions available to an organisation.

P4: Applying a range of theories, concepts and models, interpret and devise strategic
planning for a given organisation.

Working as a corporate strategy manager for Nike. I am going applying a range of theories,
concepts and models, interpret and devise strategic planning.

APPLICATION OF THEORIES, CONCEPTS & MODELS

THEORIES

1. PATH-GOAL THEORY
Path-Goal Theory was first penned by Martin Evans in the year 1970 and was further
developed by Mr. House. This theory is based on specifying a leader’s style that is best
according to the work environment, also proving to be beneficial for the employees, helping
them achieve desired goals.

The four types of leadership styles are as follows:-

A. DIRECTIVE
The leader in NIKE states specific goals for now i.e. he/she might tell the employees what
they are expecting. For e.g. the leader might set goals such as development of new shoes,
offers for the same, etc. This is his/her basic expectations, now how to achieve the goal is up
to the employee. It can be done by making promising designs, using innovative technologies,
etc.

B. SUPPORTIVE
The leader in NIKE supports the employees i.e. by helping them develop their work-related
skills. For e.g. the leader might help the employees in developing a new quote of prices, etc.

C. PARTICIPATIVE
The leader in NIKE makes the employee go through a training program which also helps
him/her have an interaction with them and understand them. Also, he wouldn’t mind any
comments, feedback/suggestions, etc. For e.g. each and every department has their own
training and development session and once they are done, they can point out to the changes
they want or to the decisions being taken for the organization.

20 | P A G E
 D. ACHIEVEMENT
The leader in NIKE shows his confidence in an employee, as well as the team. He/she’ll will
set a goal that they’d want an employee/team to achieve in a specific time span. For e.g. if
the leader expects new electric cars, he’ll give the employee/team 2/3 month time to develop
the blue print for the same and will also guide you through it.

2. CONTINGENCY THEORY
Contingency theory is that where the leaders in NIKE makes/takes decisions based on the
situation. A leader takes appropriate action based on most important details of the situation.
Leaders may want to utilize an approach that includes participation from workers or an
autocratic approach i.e. control over all decisions and a little input from the workers.

Contingency theory can be used in NIKE as it’ll help the leader and his/her team in creating
a more effective plan and adapt to the wide range of internal/external factors. It will also
provide a learning experience and by using these experiences it’ll help employee/team to
handle other situations in future too. Also, that it’ll help meet the project needs quickly.

21 | P A G E
 CONCEPTS

1. PRODUCT PORTFOLIO STRATEGY [BOSTON CONSULTING GROUP

(BCG) MATRIX].
Nike is one of the rare brand that established itself and become popular because of its pop
culture in 20th century. In the late twentieth century Nike got prominent as one of the most
amazing sporting brand across the globe, and created a most powerful amazing impacts on
the consumer’s mind. The initial and effective growth strategy was to import from Japan,
and sell in the host country, however, after the strong competitors’ intervention such as
Puma, Adidas etc. Nike started its own production unit that is involved in manufacturing
high quality shoes in low rates, to earn the high market share (Nike, 2018).

Nike’s operating segment are apparel, equipment, and footwear with the operating regions in
Europe, Africa, Middle East, US, Americas and Asia Pacific. It introduces the “Swift
technology”, which helps in increasing the track times to 1.13%. Soccer or football wear is
Europe’s1. For better understanding the Nike’s market position and to analyze that whether
it is able to capitalize the products, BCG matrix is used for dividing the different segments of
the products and benchmark the performance to the strongest competitors. Here is the BCH
matrix of Nike;

https://brandtruthaust.files.wordpress.com/2015/08/bcg-growth-share-matrix.jpg

22 | P A G E
 A. CASH COWS
These are the product that are the market leader, and bring more of the revenue in the
company, as compare to the cash they consume. These have more market share as compare
to market growth. This provide cash for turning the question mark in cash cow products.
Hardware, equipment and apparels are the cash cow of Nike. The market growth rate of
apparel and hardware are 7.67% and -0.43%, however, market shares are 1.12 and 0.93. Nike
endorse many famous celebrities like Rihanna for the advertisement purpose to expand the
women’s segment, and bring more designs and products in the women category.

B. STARS
These products generate highest amount of cash and have highest market growth of the
company, but there is the possibility of these products turning into cash cow for the
company, if the growth strategies are not sustained properly. Footwear are the Nike’s start
item, which has 16.07% of market growth and 1.97% of market share. Nike SHOX has also
introduced different types of footwear and still it continues towards boom. It profit recover,
and growing to 30% to reach around $1.2 billion. Nike’s footwear are famous across the
globe as the most qualitative item, and many famous athletes use it.

C. QUESTION MARKS
These are the problem child of the company, which have the more market growth as
compare to market share, however, if the effective strategies are made by the company and
use efficiently, then the products can be converted into cash cow. Converse, Jordan and
Hurley are considered as the question mark of the company. These are the brands which are
involve in the manufacturing of the apparel and accessories of the Nike. Converse is almost
out of the town, because many athletes switch to competitors or stop using it. Hurley and
Jordan need effective strategies as they both have the potential to grow and increase the
sales.

D. DOGS
These are the products which are at breakeven point for the company, as they do not
consume much cash nor they generate enough profit. For Nike Skateboarding (Nike SB) are
categorized in the dog quadrant, as it is not considered as the core skateboarding brand in the
skateboarding community and did not get much support from the people. Still it is operating,
as Nike is the sports brand and Skateboarding is one of the sub category of sports.

23 | P A G E
 2. STRATEGIC MANAGEMENT
Strategic management is a technique that Nike, Inc. has been able to apply to determine how
it is performing in its current position and how its future should be. This has greatly helped
the managers to lay a plan for the organization and take it where they want it to be. The
management employs strategic management components such as vision, environmental
analysis, strategy creation, strategy implementation, and strategy assessment (Nike, Inc.,
2009).

Nike has set business plans through strategic management in order to assess its business
areas. It is a process which managers build strategies to get better results in performance.
This involves studying the competitors’ techniques, both in the current and future. The
Company has utilized strategic management tools which have supported it to examine itself
in the present and perceive how its future will be. Strategic management acts as a road map
to show managers the best direction to follow for the organization to be where it is supposed
to be. The tools employed for strategic management include mission statement, SWOT
analysis, SMART goals and benchmarking.

Mission statements help to make clear how the organization is observed and how it will be
perceived in the future. The organization reflects on how it will be different from other
competitors like Reebok in the market place. SWOT analysis has been applied to find out the
organizations strengths, weaknesses, prospects and risks.

Affirm that this has supported the organization to take advantage of its strengths and reduce
the impact of its weaknesses. SWOT analysis has assisted the management to consider other
external factors such as new openings and risks to be avoided.

SMART goals ensure that the goals and objectives laid down are specific, assessable,
achievable, appropriate, and timely. SMART goals are essential for Nike’s management
because they have enabled the company to get rid of frustrations due to unrealistic goals. The
management has been specific to establish whether the set goals have been met.

Measuring enables the management team to gauge whether they are about to reach their
goals and if not close to the goals, how much time and work is remaining in order to get
there.

Benchmarking is another tool that is employed to scrutinize and adapt to the best processes
from other organizations around the globe. As explained earlier, managers have been able to
improve the organizations performance to meet its goals and to be at the competitive edge
over its competitors.

24 | P A G E
Other techniques that have been used in project management include program evaluations;
this helps the company to evaluate a project from start to end. This has supported the
management to ascertain the time left to for the completion of the projects. Nike utilizes
these projects and programs to reach its goals and achieve its objectives.

The Company uses break even analysis technique to decide on the number of products to sell
to break even and grow to be profitable. That game theory is applied in the market to
conclude how the customers will react and it does this either through increase in prices or
introduction of new products.

Financial control techniques like budgets, audits, and financial breakdown are efficient in
controlling and balancing the cost of business. Budgets are employed to manage the
organizations income and expenditure as well as allocation of resources to different activities
and projects.

25 | P A G E
 MODELS

1. VRIO ANALYSIS 
Nike, Inc. is an American global business organisation committed in the production, design
and selling of clothes, sportswear, accessories and services. This article aims to analyse the
VRIO of Nike. VRIO stands for Value, Rarity, Imitability and Organisation. It is a strategic
internal analysis framework used to assess an organisation’s resources and capabilities that
offer a competitive advantage. 4 resources and capabilities have been identified to analyse
the VRIO of Nike and these are: Brand image, Product innovation, Fit technology and
Supply chain management.

This internal analysis will help you understand whether those resources and capabilities are
valuable, rare, costly to imitate and exploitable as well as the kind of competitive advantage
and performance they offer.

Nike VRIO analysis Table

https://miro.medium.com/max/855/1*wjUIaoOmAJ2ETk9iOBiaXQ.png

A. Brand image
Nike’s brand image is the company’s main strength and it is valuable because it enables Nike
to be recognised by its consumers, it gives the company a better impression, builds customer
trust and causes consumers to buy their products continually. Many people buy Nike
products because a lot of athletes wear Nike so they make the brand more popular and
26 | P A G E
attractive. Nike’s brand image is rare, the company’s overall consumer review is about five
stars whilst the overall consumer review of its competitors is lower. Customers are satisfied
with the quality of Nike’s products. It is costly to imitate Nike’s brand image, it would entail
much work and time. Nike improved its brand image by studying and listening to its
consumers and athletes to make products based on their expectations. Nike is exploiting its
brand image by building value, introducing new products and making its products more
attractive. Brand image provides a sustained competitive advantage because it meets all the
VRIO criteria. It also offers above normal performance.

B. Product innovation
Nike’s product innovation is valuable because it brings about a production edge for the
company and allows Nike to enter markets quicker and grow smoothly. Its product
innovation is not rare because companies like Adidas and Reebok also produce innovative
products. It is costly to imitate Nike’s product innovation, it would require much investment.
For instance, Nike’s product innovation cost about 1.74 billion in 2006. Nike exploits
product innovation by maintaining its partnership with athletes and teams, attracting more
athletes and maintaining its number one position among its competitors. Nike’s product
innovation provides a sustained competitive advantage because it meets all the VRIO
requirements. It also provides above normal performance.

C. Fit Technology
Fit technology is valuable because it allows athletes to exercise more comfortably and longer
by taking off the sweat and keeping them dry. It also allows Nike to make more sales and
attract more athletes. It is not rare because Adidas and Reebok also manufactures dry-fit
clothes, Adidas named it Climacool, and Reebok the PlayDry. It is not costly to imitate it
because the majority of the fabric is Polyester which is common and affordable. Nike
exploits its fit technology by introducing it in countries where it is not common and
providing a wide range of dry-fit clothing for various types of sports. Nike’s fit technology
offers a sustained competitive advantage and normal performance.

D. Supply chain management

Supply chain management is valuable. Nike has been manufacturing its products in countries
like China and Vietnam where the labour cost is cheap so, this allows the company to make
its products cheaply and save more money. Supply chain management also enhances Nike’s
customer service as products are delivered faster. It is not rare because Adidas makes its
products available at the right time and delivers them to customers on time by operating with
its team within the company and outside suppliers. It is not costly to imitate it because it
does not require much except buildings, manufacturing materials and workers that are
willing to work for less than five dollars a day. Nike is exploiting supply chain management

27 | P A G E
by improving its supply chain network and adjusting to new markets. Supply chain
management provides a sustained competitive advantage and normal performance.

2. BLUE OCEAN STRATEGY

There has been a lot of discussion and consideration when it comes to the red or blue ocean
approach to marketing strategies for businesses both already established and newly founded.
Red oceans refer to the known market space – all the industries in existence today. In red
oceans, industry boundaries are clearly delineated and accepted, and the competitive rules of
the game are known. Companies try to outperform their rivals to grab a greater share of
existing demand, usually through marginal changes in offering level and price.

As the market space gets crowded, prospects for profits and growth are reduced products
become commodities, and cut-throat competition turns the red ocean bloody. On the other
hand, the blue ocean approach uses a strategy to create new demand. Therefore, under the
Reconstructionist view, attention shifts from supply to demand, from a focus on competition
to a focus on value innovation―that is, the creation of innovative value that will unlock new
demand. With this new focus in mind, it is possible to systematically look across established
boundaries of competition and reconstruct existing elements in different markets to create all
new market space.

 Blue Ocean Strategy & Importance

Competing in overcrowded industries is no way to sustain high performance. The real
opportunity is to create blue oceans of uncontested market space, making the competition
irrelevant. A blue ocean strategic move can create brand equity that lasts for decades. A blue
ocean is created in the region where a company’s actions favorably affect both its cost
structure and its value proposition to buyers. Cost savings are made from eliminating and
reducing the factors an industry competes on. Buyer value is lifted by raising and creating
elements the industry has never offered. Over time, costs are reduced further as scale
economies kick in, due to the high sales volumes that superior value, without the competition
generates.

28 | P A G E
 https://www.clearpoints
trategy.com/wp-content/uploads/2018/05/Red-ocean-VS-blue-ocean-strategy.png

 Blue Ocean Move

The blue ocean strategy is one of the latest business ideas in the world. Even though it was
created recently, it immediately gained recognition among experts, and presidents and
directors of many companies. Blue ocean strategy is a strategy that differs significantly from
most business strategies. Blue ocean, denotes all the industries not in existence today—the
unknown market space, where there is no current competition. In blue oceans, demand is
created rather than fought over. There is opportunity for growth that is both profitable and
rapid. Blue Ocean is an analogy to describe the wider, deeper potential of market space that
is not yet explored. EBay would be a good example of blue ocean strategy. EBay was the
first of its kind to initiate a service of online auctions reaching an enormous target market
that had never been targeted before in this manner by offering an online auctioning service to
customers from the convenience of their homes.

 Alternative Red Ocean

Move Red oceans are all the industries in existence today—the known market space. In the
red oceans, industry boundaries are defined and accepted, and the competitive rules of the
game are known. Here companies try to outperform their rivals to grab a greater share of
product or service demand. Red ocean strategy is designed to gain the greatest possible
number of customers and to sell as many of their products. Companies that select this
strategy do not create a new service without competition, they advertise their products in
every way possible. The fight between competing companies is constant. Some of these
companies are trying to create exclusive product lines to increase the range of their brand but
never consider stepping outside of their comfort zone and bringing a new strategy to the
table by creating a service that has not yet been marketed in order to increase profit without
the worries of competition. An example of a company that uses the red ocean strategy would
be Nike.

29 | P A G E
Nike jumped into the market ready to compete amongst already existing competitors not on a
mission to create a service that was without competition. Once Nike was in the market and
above its competition, it could now venture into other ocean strategies to continue to be
innovative, creative, and provide a service to their current market as well as look for services
to uncharted markets. Red Ocean Pros: If you are a successful company like Nike, you are
already at the top of the chain and your services are still continuously sought after; so
providing a new service that doesn’t currently exists doesn’t necessary mean profit and
sustainability. Nike wasn’t the first athletic shoe provider. There was competition that
existed before Nike became known.

Nike was able to enter a market using the red ocean strategy approach and add creativity and
innovation to an athletic industry that was already established and climb to the top without
the blue ocean approach. Red Ocean Cons: As the market space gets crowded, prospects for
profits and growth are reduced. Products become commodities or niche, and cutthroat
competition turns the red ocean bloody. Hence, the term red oceans. The red ocean, players
want to produce products and provide services cheaper and better than the competition but
that doesn’t always mean the product they offer are in-fact better than products of their
competitors.

BUSINESS STRATEGIC
Look deep inside Nike’s brand strategy and you’ll find the classic story of the hero’s
journey.  But Nike puts a devious twist on their brand story by turning the customer into both
the hero and the villain.

Nike advertising is one of the most effective emotional branding examples in the marketing
world today. Their customer loyalty is off the charts, all thanks to the Nike brand strategy
and masterful application of emotional branding. Today, we look at Nike’s marketing
strategy and how they use the centuries-old archetype of Heroism to tell their story

1. Nike Advertising and Emotional Branding

Nike brand strategy is to build a powerful brand – so powerful that it inspires fervent
customer loyalty from people literally all over the world. This is because Nike advertising
uses the emotional branding technique of archetypes in its advertising – more specifically,
the story of the Hero. It’s an age old tale, a tale of a hero pitted against a great foe, and after
a great struggle, emerging triumphant. In a way, you could say that Nikes marketing strategy
is thousands of years old, and has been inspiring customer loyalty the entire time.

2. Building Customer Loyalty with Heroism

30 | P A G E
Nike advertising isn’t the only group that uses the Hero archetype to inspire customer
loyalty. Many other companies use this emotional branding technique to great effect. In most
cases, the foe is external. The most common story of the hero is that of a man of humble
origins setting out to defeat a great evil – one far more powerful than he – and, against all
odds, emerging triumphant. This same pattern could apply to, say, a home security system
against a house fire, or an antacid against heartburn. As long as there is a clearly identified
enemy and a clearly identified hero, the emotional branding can begin.

3. Nike Brand Strategy

Nike advertising takes the common hero story and turns it on its head. Instead of inspiring
customer loyalty by singling out an external enemy, it pulls out the stops and focuses on
an internal foe – our laziness. Nike advertising knows just how often we battle with our lazy
side. Every morning when that alarm goes off and it’s still totally dark outside, the battle
begins. When we choose how long to run, the battle continues. This is how Nike marketing
uses emotional marketing to inspire customer loyalty. They know that while some people
may identify with an external foe, all people identify with an internal one.

Nike brand strategy is excellent on this end because not only is the internal foe someone we
can all hate, the hero is the viewer! In one way or another, we are all the hero of our own
story, and Nike marketing has long since identified that feeling – and used it to inspire
timeless customer loyalty.

 Conclusion
A company must master its traditional markets using conventional strategic planning tools. It
will always be a competitive advantage to successfully incorporate the red ocean approach
and beating the competition. Red oceans will always matter and will always be a fact of
business life. Businesses that tend to only focus on the red ocean approach must accept the
key constraining factors – limited terrain and the need to beat an enemy in order to succeed –
and to deny the distinctive strength of the business world: the capacity to create a new
service and gain a new market space that is uncontested. In order to sustain high
performance, companies must create their own blue oceans, and make the competition
irrelevant! Even though the blue ocean strategy is uncharted territory, and no measurements
or feedback exists, it can be considered a risky approach that’s why many businesses today,
get in business using one approach and sustain business or rebrand their business with the
implementation of both strategic approaches.

31 | P A G E
32 | P A G E