Nike Company: Porter’s Five Forces Model and PESTEL

Introduction

Nike is an American footwear and apparel firms that has a global coverage. The firm operates in a very competitive industry. However, the firm has managed to overcome the market competition and is considered one of the most successful firms in the world today. Understanding the key success factors of this firm will help demonstrate its ability to manage the forces in the market (Chaston, 2009). Brand implementation is one of the main key success factors. The firm has been able to make its brand known in the world market. The firm also has effective distribution strategy that has enabled it to distribute its products to the world market. The communication structure of this firm is also another key success factors that has enabled the management to coordinate the employees irrespective of their location.

Analysis of the Firm by Porters Five Forces

According to Bissoondoyal (2006), the market for footwear and apparel has been on a constant rise in the last two decades. Emerging technologies are changing the social structure of societies around the world. People, especially the youths, have come to appreciate the importance of designer shoes and other apparels. Nike has been keen with its marketing strategy. According to Ferrell (2011), one of the most powerful tools that a firm has in the market is the ability to reach out for the customers with the desired message in the best way possible. The management of Nike has come to realize that this is one of the strongest tools that competitors like Addidas Puma and Reebok are using today as a way of developing competitive advantage in the market. Nike comes out as one of the leading manufacturers and distributer of footwear and apparels not only in the American markets but also in the world. With a market share of about 19%, this firm is the largest manufacturer and distributer of sportswear in the current world market. However, the recent incidents are poised to change these figures. The emerging trends are favoring some firms while hurting others. Nike is one of the biggest beneficiaries of the emerging technologies in this industry (Evans, 2012). It has become very popular, especially among the college students.

Porters Five Forces

New Competitors is one of the threats it has to take care of. New firms will be entering this industry very frequently, especially due to the attractiveness of the industry Addidas, Puma, and Reebok are some of the main competitors of this firm. To tackle the threat of new competition, this firm has been keen on producing new products to rival those of new competitors. It has been keen to introduce new products in the market to counter any possible threat. Threat of Substitutes also threatens operations of this firm. To manage the threat of substitute products; this firm has developed different lines of products to satisfy different markets so that they may not be adversely affected if substitute products invade one line.

To increase their bargaining power with the buyers, this firm has continued to produce high-end products with qualities that make it easy for the customers to appreciate their high prices. In so doing, this firm has been keen to ensure that the lower end of the market is not assumed.

To increase its bargaining power with the suppliers, it has created a scenario where is single buyer with various sellers. The merger was one of the ways of achieving this. This makes it able to dictate the terms of buying the products. To counter the intensity of competition, it has been able to acquire a special niche in this market, rendering their competitors irrelevant as their products are turned into mere substitutes of such company’s products.

Analysis of the External Business Environment (PESTEL)

Environmental scanning can be done using PESTEL Analysis. This involves the analysis of political, economic, social, technological, environmental, and legal environments. Politically, various firms in the United States have experienced a relatively stable government. The country has experienced a long period of political stability that has made it conducive for business. It has a very stable government that is supportive of business operations. The government of this country has ensured that the political environment of the country is peaceful enough to encourage business operations. Lack of political stability would mean that various businesses are not in a position to conduct business normally. Some may even be forced out of the market with huge losses in case the instability is accompanied by looting and arson.

Economically, various firms in this country, including Nike, have had difficulties. The firms have been faced with economic recession that hit various countries in the world, especially the US economy that had direct effect on various economies in various other nations. This had serious negative effects on the firms’ revenues as many of the customers considered the products as non-basic. When the economy of a country is on a decline, the purchasing power is reduced, and this reduces the viability of various businesses. They will be forced to cut down their operation levels, as the market will have a reduced capacity to sustain them. During such times, weak firms are always faced out of the market.

The socio-cultural environment of this country is diversified. This is because this country has people from all over the world. There are those countries that cherish equality, and women have equal economic strength just as men. In such countries, the firm does not segment the market based on sex, but age. The United States is one such country. However, in other countries where this firm operates, like the Kingdom of Saudi Arabia, women are subordinates to men. It forces this firm to target the male members of the society because they have bigger purchasing power.

The technological environment that firms in this country have to operate in is very dynamic. Technology inventions and innovations, especially in the field of communication have been the main challenge and strength of this firm at the same time (Evans, 2012). While this firm is left with nightmares of trying to guess what their competitors in the market are going to come up with overnight, it has used this technology to emerge as the leader in the market. Technological changes are so unpredictable and firms are struggling to come terms with these changes. The dynamism of technology in this sector has forced some firms out of the market.

Legally, this firm has not faced major challenges. The laws that govern trade in the United States and many other countries in the world have been very favorable to this firm. However, some firms have faced serious litigation cases for failure to follow some of the industry rules and regulations. It is important to note that although the largest market for this firm is made up of Christians, portions of the market are Muslims. Failure to follow the industry and national laws and regulation may not only lead to serious fines imposed by the government on the firm, but even a total closure of the firm.

There are some environmental concerns that would be considered a challenge for the firm. The United States is one of the developed nations in the world. However, other markets have poor infrastructure and this causes serious problems to Nike, especially in distributing its products. Although these governments have made efforts to improve their road networks, others still need serious improvement in order to be considered as of the right standards. The facilities at various institutions of higher learning also need improvement for them to be in a position to churn out fully capable employees.

The main threat that firms in this country have had to deal with is competition. The market has gotten increasingly competitive. According to Montiel (2011), many firms have come up with products, which are close substitutes of those that are offered by other firms in the same market. This scholar notes that there is lack of creativity in various countries. Various firms that come into the market are not creative, but just copy cuts. They come to the market with similar products as those of existing companies, and this brings about serious competition in the market. Nike must come up with a strategy that can help it overcome this challenge.

References

Bissoondoyal, U. (2006). Total quality management: a practical approach. London: New Age International.

Chaston, I. (2009). New Marketing Strategies: Evolving Flexible Processes to Fit Market Circumstance. London: Sage Publications.

Evans, D. (2012). Social media marketing an hour a day. Indianapolis: Wiley.

Ferrell, C. (2011). Marketing Strategy. New York: Cengage Learning.

Montiel, P. (2011). Macroeconomics in emerging markets. Cambridge: Cambridge University Press.