Nike SWOT Analysis 2018

Introduction:

Nike, Inc., formerly (1964–78) Blue Ribbon Sports, American sportswear company headquartered in
Beaverton, Oregon. It was founded in 1964 as Blue Ribbon Sports by Bill Bowerman, a track-and-field
coach at the University of Oregon, and his former student Phil Knight. They opened their first retail
outlet in 1966 and launched the Nike brand shoe in 1972. The company was renamed Nike, Inc., in 1978
and went public two years later. By the early 21st century, Nike had retail outlets and distributors in
more than 170 countries, and its logo—a curved check mark called the “swoosh”—was recognized
throughout the world.

From the late 1980s Nike steadily expanded its business and diversified its product line through
numerous acquisitions, including the shoe companies Cole Haan (1988; sold in 2012) and Converse, Inc.
(2003), the sports-equipment producer Canstar Sports, Inc. (1994; later called Bauer and sold in 2008),
and the athletic apparel and equipment company Umbro (2008; sold in 2012). In 1996 the company
created Nike ACG (“all-conditions gear”), which markets products for extreme sports such as
snowboarding and mountain biking. In the early 21st century Nike began selling sports-technology
accessories, including portable heart-rate monitors and high-altitude wrist compasses.

Part of Nike’s success is owed to endorsements by such athletes as Michael Jordan, Mia Hamm, Roger
Federer, and Tiger Woods. The NikeTown chain stores, the first of which opened in 1990, pay tribute to
these and other company spokespersons while offering consumers a full range of Nike products. In the
1990s the company’s image briefly suffered from revelations about poor working conditions in its
overseas factories.

Nike is known as the biggest and best sports shoe and apparel brand in the world. It designs and sells
products in nine key categories. While its products are mainly designed for athletic use, they have also
grown popular world wide as leisure wear. The brand focuses on two important things – product
innovation and product quality. Nike was incorporated in 1967. It acquired global popularity based on its
excellent product quality and marketing strategy. Its swoosh logo is easily identifiable among the large
crowd of brands. The brand has expanded fast internationally which is evident from its revenue. It share
of non US revenue has shot past 50% in 2017. Its main strategic suppliers for footwear are 127 footwear
factories located in 15 countries. Its largest number of suppliers are located in Asia which accounted for
more than 90% of Nike’s footwear production in 2017.

Competition in the athletic footwear, apparel and equipment industry has grown intense and it is why
all brands are investing in digitization, product innovation and things like AI for a better customer
experience and higher satisfaction for consumers. Nike also spends a lot on advertising as well as
research and development. This is a SWOT analysis listing the brand’s key strengths, weaknesses,
opportunities and threats.

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 Billions 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.

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 Billions 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.

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.

Conclusion:

Nike is the biggest sports shoe and apparel brand of the world which has focused on product innovation
and marketing for growth. Its excellent marketing capabilities have held it apart from the crowd of
brands. Its e-commerce websites are now active in 45 countries. However, despite its international
growth the brand still relies heavily on US market for revenue and income. A stronger US dollar and
continued tightening of the regulatory net are some of the most important threats before the brand.
Competitive pressures against the brand have also kept rising. To retain its growth rate, the brand must
retain focused on product innovation and marketing. It can also try backward integration since it
depends heavily on independent manufacturers in its supply chain.

Nike Inc.’s growth partly depends on external conditions. These conditions are outlined in this
PESTEL/PESTLE Analysis of the company. The PESTEL/PESTLE Analysis model identifies the external
factors that present opportunities and threats in the remote or macro-environment. In the case of Nike
Inc., the PESTEL/PESTLE Analysis enumerates such external factors that influence the company’s
strategic decision-making processes. As one of the major firms in the global sports shoes, apparel and
equipment market, Nike Inc. must address these external factors to ensure business dominance in the
industry, especially when considering the presence of aggressive competitors like Adidas.

A PESTEL/PESTLE Analysis of Nike Inc. identifies key issues that the company must include in its strategic
formulation. To maintain its position in the athletic shoes market, Nike Inc., must address the
opportunities and threats based on the external factors that shape the conditions of its remote or
macro-environment.

Political Factors Affecting Nike’s Business

Nike’s sports shoe business is subject to the effects of the political landscape. This component of the
PESTEL/PESTLE Analysis model deals with governmental influence on the remote or macro-environment
of businesses. The following political external factors determine some of Nike’s strategies:

Stable political climate in most major markets (opportunity)

Expanding free trade policies (opportunity)

Improving government support for infrastructure (opportunity)

Stable political conditions in most major markets present opportunities for Nike to grow its business in
these areas. Also, expanding free trade policies facilitate better market penetration overseas. Moreover,
improving government support for infrastructure, especially in developing countries, gives Nike more
opportunities to expand its operations in these markets. Based on the political external factors in this
component of the PESTEL/PESTLE Analysis, Nike Inc. experiences opportunities to improve its market
presence and global expansion in the sports footwear, apparel and equipment market.

Economic Factors Important to Nike Inc.

Nike’s business performance depends on the state of economies where it sells its athletic footwear,
equipment and apparel. This component of the PESTEL/PESTLE Analysis model identifies the economic
concerns that affect the remote or macro-environment of the business. The following economic external
factors are significant in determining Nike’s performance:

Economic stability of developed markets (opportunity)

Rapid growth of developing markets (opportunity & threat)

Slowdown of the Chinese economy (threat)

Developed markets like the United States are relatively stable, thereby proving Nike Inc. with the
opportunity to continue its slow but stable growth in these countries. The company also has
opportunities to rapidly grow by increasing its operations in high-growth developing countries.
However, the rapid growth of developing markets also threatens Nike by increasing labor costs in the
company’s supply chain and production facilities. In addition, the slowdown of the Chinese economy
threatens Nike’s performance, which is now significantly dependent on the Chinese market for sports
shoes, apparel and equipment. The economic external factors in this component of the PESTEL/PESTLE
Analysis show that Nike Inc. must emphasize global expansion strategies while devising new ways to
capture growth in developing countries.

Social/Sociocultural Factors Influencing Nike’s Business Environment

Social issues impact the attractiveness of Nike’ athletic shoes, apparel and equipment. This component
of the PESTEL/PESTLE Analysis model deals with the effects of social conditions on the firm’s remote or
macro-environment. In Nike’s case, the following sociocultural external factors are most significant:

Increasing individual wealth in developing countries (opportunity)

Increasing emphasis on product safety (opportunity)

Improving positive attitudes about leisure (opportunity)

In developing countries, Nike has opportunities to tap consumers with increasing individual wealth. Also,
the company has opportunities to develop safer products and use marketing campaigns that highlight
the safety of its sports shoes, equipment and apparel. Nike can also adopt new product development
strategies to address needs for products for leisure activities. Based on the external factors in this
component of the PESTEL/PESTLE Analysis, Nike Inc. has considerable opportunities for product
development and business growth.

Technological Factors in Nike’s Business

Nike’s business changes according to technologies available for business processes and athletic
footwear, apparel, and equipment. This component of the PESTEL/PESTLE Analysis model identifies the
technological conditions that lead to significant change in the remote or macro-environment of
companies. The following technological external factors affect Nike Inc.:

Increasing R&D investment among firms (threat)

Rapid technological obsolescence (opportunity & threat)

Widespread use of mobile technology (opportunity)

The increasing R&D investment among firms threatens Nike, as these competing firms aim to develop
more technologically advanced sports shoes, equipment and apparel. Rapid technological obsolescence
also threatens Nike by putting pressure on the company to increase its product development efforts.
Nonetheless, this external factor provides opportunities for Nike to integrate advanced technologies in
its products. In relation, the company has opportunities to integrate mobile technologies in its products
to capture consumers who frequently use mobile technologies, such as mobile apps and online tools.
The external factors in this component of the PESTEL/PESTLE Analysis show that Nike faces considerable
threats as well as opportunities based on new and changing technologies.

Ecological/Environmental Factors that Impact Nike Inc.

Ecological issues influence Nike’s remote or macro-environment. This component of the PESTEL/PESTLE
Analysis model deals with the impact of ecological concerns on business performance. In the case of
Nike and its sports shoes, apparel and equipment, the following ecological external factors are notable:

Expanding environmental law (opportunity)

Climate change (opportunity)

Increasing sustainability strategies among firms (threat & opportunity)

Expanding environmental law creates opportunities for Nike to improve its environmental and
sustainability programs, which are currently recognized as among the best in the industry. The company
also has the opportunity to use these programs to address climate change, which affects supply chains
and the appropriateness of Nike sports shoes and apparel in certain regions. The increasing
sustainability strategies of firms threaten Nike by imposing more pressure for increased sustainability
efforts throughout the industry. Nonetheless, this external factor provides the opportunity for Nike to
further improve its sustainability standing. This component of the PESTEL/PESTLE Analysis indicates
Nike’s opportunities to improve the environmental impact of its business.

Legal Factors in Nike’s Business

Legal terms influence businesses like Nike. This component of the PESTEL/PESTLE Analysis model
considers the effects of laws or regulations on the remote or macro-environment of businesses. In Nike’s
case, the following legal external factors are important in the sports shoes, apparel and equipment
business:

Improving employment law in developing countries (threat & opportunity)

Expanding consumer law in developing countries (opportunity)

Expanding health and safety regulations (opportunity)

Improving employment law in developing countries is a threat because it leads to an increase in labor
costs in areas where many of Nike’s production facilities are located. However, this external factor also
provides an opportunity for the company to apply higher standards for labor and employment. In
addition, Nike has the opportunity to improve its brand image by highlighting customer satisfaction in
marketing its sports shoes, apparel and equipment. Similarly, the company has opportunities to improve
its health and safety measures to address expanding health and safety regulations. Based on this
component of the PESTEL/PESTLE Analysis, Nike Inc. has major opportunities to improve its brand image
and corporate reputation.

Nike’s PESTEL/PESTLE Analysis – Recommendations

Nike Inc. must address a variety of opportunities shown in this PESTEL/PESTLE Analysis. It is
recommended that Nike must pursue a more aggressive approach to international expansion based on
free trade policies, with focus on high-growth developing countries. This action can help address the
potential decline of Nike’s performance in the Chinese market. Another recommendation is for the
company to invest more in research and development (R&D) to tap potential demand for sports shoes,
apparel and equipment integrated with advanced computing technologies. The external factors in this
PESTEL/PESTLE Analysis also highlight the importance of improving Nike’s sustainability and
employment practices. These actions address regulatory and sociocultural concerns and, consequently,
improve Nike’s brand image and corporate image.

Demographic Variables: Demographic segmentation is a factor used by Nike to target individuals

according to their age, life-cycle stage, gender, occupation, and generation. Although with apparel and
sports the market can be broad, for the most part Nike primarily targets consumers who are between
the ages of 15-40. The company caters to both men and women athletes equally, and is placing an
increasing focus on tweens and teens to build long-term brand loyalty. Nike addresses this segment by
deploying marketing campaigns about young adults striving to be like their athlete idols. For example,
right before the 2014 World Cup Nike developed a video starring important Nike sponsored soccer
athletes with teenage soccer players. Nike has recently launched a variety of women’s lines to tap into
the fast growing women’s segment. Currently only 20% of Nike’s revenues are based on sales of
products targeted at women, but this number is expected to grow significantly in the coming years.

Nike does not target consumers based on race, ethnicity, religion or social class. However, given the
high-price of the company’s products, it does use the income and education as targeting variables.
Geographic Variables: Nike uses geographic segmentation to market nations, regions, cities, and
population density differently. For example, in the United States Nike focuses on American football and
baseball and creates and deploys many advertisements and marketing campaigns about football and
baseball products using athletes specific to those sports. However sports tend to vary by region, so it is
unlikely to see American football or baseball commercials in Europe. Instead, you are more likely to see
Soccer, where Nike uses soccer stars to market Nike’s products. Similarly, in India, you are more likely to
see cricket, and rugby in England or Australia. Nike’s largest markets are North America followed by
Western Europe and China. In these geographies Nike’s marketing efforts are largely focused on urban
areas with high market densities.

Behavioristic Variable Targeting based on this attribute is the genius of Nike. While Nike occasionally
focuses on lauding particular product attributes, the company largely focuses on how their products
make consumers FEEL. The benefit expectations of the company’s products are clearly defined: You are
an athlete. Nike products make you feel athletic! In addition, with behavioral segmentation, Nike seeks
to build customer loyalty. When customers develop loyal behaviors towards a specific company, the
company reaps rewards by accruing incremental sales and market share. In such competitive market like
the one Nike participates in, it is important to gain and retain consumer loyalty. By providing consumers
with quality, choice and innovation the company excels in this realm.

Psychographic Variable

Nike also uses psychographic segmentation to target individuals with specific lifestyles and personalities.
To use this variable effectively Nike must target individuals who enjoy sports. Whether it is playing,
watching or simply talking about sports, these activities shape personalities and lifestyles. Nike’s
marketing efforts are targeted at creating a “feeling” that transcends the product. Nike fosters an
attitude, it develops a lifestyle. Events such as Nike: Run with Me, Sports Improvement Clinics, Social
Media contests and athletic and non-athletic endorsements go a long way to create community and a
feeling of “belonging” to the Nike family.

Market Segmentation

Sportsmen are the majority consumers of Nike’s products. This is extremely because of the usefulness
that goes along with the items. An athlete or sportspersons is more possible to choose shoe designed
that is marketed by Company more than an individual who hate sports as well as exercises.

Nike focused on these consumers by means of agreements between the Company and sports team,
college athletic for product support and sponsorship as well as eventual endorsement to the team
members.

Through this, Nike is capable to reach an extensive number of consumers and clients who are likely to
purchase. Even if some are likely to purchase the products, Company pays particular emphatic
concentrating to the sportsmen more than some number individuals even if it also targets teenagers
who have hold the hip hop customs.

Targeting strategies
Nike Company’s lays a lot of strategies to aim their immediate users, athletes and all sportsmen. These
targeting techniques include product sponsorship by professional and well known athletic team, college
sports team as well as celebrity athletes.

This marketing strategy of Nike is particularly successful as of its capability to reach many athletes. Once
the sports team manager lay down a particular kind of track shoes manufactured by Nike, the learner
have no choice other than to purchase them as well as sports team can purchase the track shoes in a
large number and deliver them to the members of the team.

Another marketing strategy of Nike is the styling of product objective or purpose. Company does this
through associating triumph with the apparel. For instance, when a superstar athlete sponsors a
particular brand of sports shoes, the shoes will be related with victory. It has psychological effect to the
viewers and this is reinforced with promotional which affirm this point.

At last, Nike targets the users who are possible to build up product intimacy, consumers who are after
the quality and utility of the items than the cost. Through this, the costing is not pretentious too much in
propose to accommodate a lot of consumers.

Exclusive Report (50 pages) on Marketing Strategy of NIKE can be downloaded HERE.

Pricing Strategies

Since Nike focused on the users who embrace product understanding and closeness and thus heed less
regarding the product. This allows the Company to set quite higher cost that its rivalry. This is a
marketing strategy of Nike which calls for superior pricing points in order to push the supposed valu of
the product.

Another significant thing that business must consider if you want to follow the success of the company is
that, the truth that Company utilizes the vertical combination pricing technique in that they take
participants ownerships at channel levels which differ and the Nike company also engage in diverse
channel level functions in a propose to control prices as a result affect pricing function.

Place/Distribution Nike shoes are conceded by other multi brand stores and exclusive Nike stores
worldwide. Nike has about 20,000 retail accounts in the US and sells its products in about 200 countries
worldwide. In the international market, independent distributors, licenses and subsidies sell Nike
products. The company has manufacturing facilities worldwide and in Asia, customer service and other
operational units (Nike Marketing Mix). Nike long term plans to open more stores and franchise to reach
target customers and to expand the maximum buyers. In Nike Town store, shops sell sheep
showmanship interested enough to do whatever. Nike town stores can take the entire city blocks and
customers can feel like future oriented. These include basic shoe stores made during each boasting
chandeliers Nike product imaginable. Nike town product offers a complete experience. This store has all
the products, but will not stay there again create a memorable experience for the customer to bring
back again (Nike 4PS). In the international market, Nike has independent distributors, licenses and
subsidiaries which sell its products. To reduce the cost of Nike’s products, it has outsourcing strategy
with China, from developing countries in Asia, such as Vietnam. And to do more business online because
Nike tradition is as spending on online advertising as compared to advertising media, ecommerce and
online marketing contributions are planned to expanded appropriate channels (Nike Marketing Plan).

Nike has some specific distribution outlets and use them for distribution of its products, following are
the major ones: • Nike town shop: In big cities of countries, Nike’s outlets are there to serve customers
with products. • Flagship stores: Nike has contracted with retail stores that has label of flagship of Nike
which serve with high volume of Nike’s products to consumers • Nikeid: It is a Nike’s online store that is
website which serves the customers of all over the world with customization services. • Big retail
discount stores: The big stores of country also serve with some high demand Nike products for the
target customers. All these have availability of Nike’s products; consumers who want Nike’s products
can get required products from these distribution methods of Nike.

Communication and Promotional Marketing Strategy of Nike

Aside from trading quality products that have result to a high number of user loyalty, the promotional
and communication utilize by the company are simply outstanding. Nike has hired many professional
and well known celebrity sportsmen that have managed to make a considerable interest to their items.

Most of the athletes contracted by Nike include soccer superstar Roberto Carlos, Ronaldo and
Ronaldinho, basketball legends and superstars such as Lebron James, Jermaine O’ Neal and triathlete
superstar Lance Armstrong as well as Tiger Woods a big name in the world of golf.

This has developed a fairly high level of Nikes items awareness. Aside from dealing or contracting of
celebrity athletes to endorse their products, Nike also used a best deal of ad by means of mass media.
The company uses a selective demand ad targets on the higher costs shoes utilized for typical sports.

All the marketing strategy by Nike show a competitive marketing management which can hoist company
top turn out to be market leaders and making the market leaders company retain their competitive
frame market by means of adherence to marketing principles, marketing plans and carefully planned
marketing strategies.

The marketing strategy of Nike is one of the techniques that many business are followed to become
successful in the world of business like Nike did.