BIZ202 – The Business Environment

Assessment 1 – Macro Environment Report

Torrens University Australia

Sanam Taimoor

1500 words

Geovanni Tanzil – A00067088

Nike. (n.d.-a)
Executive Summary

This report will analyse the macroenvironmental factors affecting Nike. It will do this by

discussing the sanctions imposed by President Joe Biden on Russia, impacting Nike’s

international business in Russia. Followed by its technological development by entering the

Non-Fungible Token (NFT) market. It will then discuss the potential opportunities of

entering the Web 3.0 ecosystem and potential threat of volatility of the new technology. It

will also recommend Nike to be cautious about its technology advancement, increase its

number of supplier domestically and from other countries to fix its supply-chain disruption.
Table of Contents

INTRODUCTION...........................................................................................................................4

POLITICAL AND LEGAL ENVIRONMENT..............................................................................4

TECHNOLOGY.............................................................................................................................5

OPPORTUNITIES AND THREATS........................................................................................................7

RECOMMENDATION.........................................................................................................................7

CONCLUSION...............................................................................................................................8

REFERENCES...................................................................................................................................10
Introduction

Nike, Inc. is an American renowned sportswear brand that has been in operation since 1964,
supplying an assortment of athletic products and services to middle-aged consumers of 11 to
55 years old through multiple segments of retail stores, e-commerce, and wholesale
distribution (Carmely, 2022). Nike operates through broad geographic segments of North
America; Europe, the Middle East & Africa; Greater China; the Asia Pacific & Latin
America; it aspires to be a beneficial influence and a source of progress for everyone (Axe et
al., 2022; Nike, n.d.-b). As the world economy began to recover from the financial constraints
imposed by the pandemic, it was rocked once more by the global instability, clogged supply
chains, and closed markets precipitated by the outbreak of the Russian-Ukraine war as
reported by CNBC (Thomas, 2022). Nike unfortunately was not unscathed by this conflict
and had to endure the financial and supply chain ramifications because of the closure of all of
its stores in the Russian territory. However, the global technological environment has proved
to be ideal for alternative approaches to financial transactions and digital fashion. With the
rise of cryptocurrency, metaverse and the ever-growing popularity of NFTs, Nike has started
to make moves in this new digital age most prominently through their acquisition of the
digital sneaker company RTFKT (Segal,2021). The prominent macroenvironmental factors to
be examined in this paper are the political and legal as well as the technological environment
and its impacts Nike’s performance. It will do this by analysing the sanctions imposed
because of the war outbreak and Nike’s digital development in its Non-Fungible Token
(NFT).

Political and Legal environment

The macro-environmental aspect of political and legal factors includes government activity,

rules, regulations, changes in legislation, and court interpretations (Wetherley and Otter,

2011). The most recent political conflict which inflicted adverse effects to Nike’s operations

is Russian-Ukraine War that began on the 24th of February 2022. These external events have
resulted in supply-chain interruptions and consumer spending suppression caused by the

imposition of sanctions on US brands in Russia as well as sanctions on the imports of Russian

raw materials (Thomas, 2022). As a result, Nike must revaluate its business strategies

considering the recent world political landscape developments to optimise its brand’s identity

and financial performance.

Ukraine-Russia War
On the 28th of April 2022, The United States President Joe Biden imposed several sanctions

on Russia in hopes to immobilise the war in its early stages. The introduction of the sectoral

sanction E.O 13662 (Psaropoulos, 2022) restricts U.S entities from operating in sectors of the

Russian Economy. This eventually led to the closure of Nike’s 116 stores within Russia’s

territory which amounts to roughly 2% of the company’s total revenue (Thomas, 2022; U.S.

Department Of the Treasury., 2022). Aside from the financial ramifications, the war has also

brought a severe disruption in Nike’s supply chain. As countless cargo carrying both products

ready for sale and crucial raw materials must be diverted to avoid Ukraine-Russian land,

marine, and air spaces. Not to mention the scramble to source key production materials from

other countries such as metalores, ferroalloys, minerals, and oil which had been previously

sufficed by Russian exports (Segal, 2022).

Technology
The advancement in technology has brought forth a new digital age that is formed around the

basis of a virtual world with full transparency and without bureaucracy. Although the concept

of Blockchain, Cryptocurrencies, Metaverse and other many others have actually been around

for a significant amount of time, it is only lately that we truly see its features and the potential

it has to change our society and our world as we know it.

The United Nations 2021 technology and innovation report elaborated on the worlds

readiness to use, adopt, and adapt frontier technologies such as Artificial Intelligence,

Internet of Things, Big Data, Blockchain and many others (UNCTAD., 2021).

It has placed highly developed countries such as the United States, United Kingdom,

Germany, South Korea, and Singapore amongst many others at the top of the list. With the

bottom ranks mostly occupied in the African Hemisphere (UNCTAD., 2021, p.25) It is for

certain that they key driver for the adoption of these technologies is none other than the

Internet. Mainly in its availability to access, and the society’s ability to navigate and embrace

them. The readiness of the world to adopt these seemingly novel digital technologies are

further expedited by the pandemic. In a world where all physical interactions must be moved

digitally, it gave even the most digitally reluctant members of society a reason to embrace the

technology made available to them.

NFT, Digital Fashion, and the Metaverse

In terms of Nike’s role in this technological environment, like many of its other U.S born

company comrades, Nike is one of the first retailers to make moves in the budding

technology. Through the creation of Nikeland within the Metaverse, and its acquisition of the

virtual sneaker company RTFKT (Segal,2021), the retail giant is making its products even

more accessible to the public. Creating an entirely new revenue stream coming from the sale

of digital assets in the form of a NFT.

However, it must be important to note that like any new advancements in the world, it is still

met with scepticism and uncertainty with 48% of U.S teens still unsure or uninterested in the

Metaverse (Thomas,2022b).
Opportunities and Threats
The macro-environment of technology is prime for Nike to thrive in the new Web3.0

ecosystem. In addition to the creation of a new revenue stream from NFTs as previously

mentioned. The transition into digital fashion would also be able to offset the adverse impacts

of the supply chain blockage due to political grievances. In a landscape where not only,

products are digitally purchased but also only made within and for a digital landscape, supply

chain delays or shortages in physical raw materials becomes a moot point and would no

longer be a concern.

However, as great as the new technological advancements are, if a large population of the

buying target market is still reluctant to make the switch from physical to digital, it will also

pose a great threat to Nike and the future of its brand. Not only are the ever so prevalent

supply chain issues still a large cause of concern, but it would then also potentially have

wasted millions of dollars that was invested in this new digital movement. Not to mention that

should the digital market continue to boom; it is likely that it would be met with eventual

government and political interference to regulate a market that is now at its infancy very

volatile. Which puts an expiration date on the myriad of benefits and freedom that Nike

currently has to capitalize on this budding infrastructure.

Recommendation
Nike has made admirable steps in contribution to the advances in Web3.0 and it should

continue to do so. By being an innovator in the field, Nike stands to be the first to capitalize

on a revolutionary industry. But such investments must be made with caution, because

although accessible digital fashion might beat physical products in terms of variability and
increase one consumer’s potential to purchase multiple items, it would never truly be a

replacement in terms of the functionality of clothes, accessories, and shoes.

There would always be a need for a physical product hence it must also not ignore the threats

that are very much present to their physical real-world operations. A potential course of

action to resolve its supply chain problems would be to resort to more renewable materials

that can be sourced domestically around its production factories to limit the adverse impacts

on import/export sanctions. Additionally, it should also look to source its materials from

multiple regions to avoid being reliant on a singular country’s commodity. By reason of the

ever shifting and volatile political landscape, it must learn from the present to minimize the

repercussions from subsequent unfortunate political clashes.

Conclusion
The recent war between Ukraine and Russia was identified as a political and legal factor in

Nike. President Joe Biden immediately imposed the E.O 1366 sectoral sanction to halt the

war, resulting in the closure of its 116 physical stores on Russian territory (Thomas, 2022).

Having an impact on Nike's financial situation, supply-chain disruption, and consumer

spending. Nike identified the technological environment as a result of its recent investment in

the Web 3.0 ecosystem. From a digital standpoint, it had a positive impact on Nike's sales

stream. Overall, Nike must exercise caution in the face of the emergence of digital

technology such as NFT and Metaverse, as well as the volatility of the global economy, by

taking precautions on its supply chain by diversifying its supply from multiple countries and

domestically.
References

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https://www.forbes.com/companies/nike/?sh=1a1b5f996eb5

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from http://search.ebscohost.com.ezproxy.laureate.net.au/login.aspx?

direct=true&db=nlebk&AN=678234&site=ehost-live

Appendices