Nike is one of the leading multinational corporations that specialize in manufacturing sports apparel and footwear, different types of accessories, and specific sports equipment for athletes and general customers. Nike is a US-based company that was founded in 1964. Currently, the company is headquartered in Oregon, but its facilities are located in many countries.
The company employs more than 62,500 employees all over the globe, and its revenue in 2015 was more than $30.5 billion (Nike 2016). The purpose of this project is to analyze Nike’s strategy with the focus on the company’s competitive advantage and provide recommendations to overcome current and future challenges.
The industry analysis for Nike should be conducted concerning Porter’s Five Forces. While discussing the bargaining power of suppliers, it is possible to state that it is medium because the company has the developed supply chain and suppliers in more than 45 countries, but strikes at factories in China in 2015 influenced the company’s image among suppliers (Nike 2016).
The bargaining power of customers tends to increase because, despite the strong brand recognition, Nike’s sales in 2015 differed from the expected numbers, and this situation is associated with negative tendencies in the market (Nike 2016; Porteous & Rammohan 2013). The threat of substitutes is high in the industry because the target audience can choose products from other markets. The threat of entrants is also high because many companies specializing in manufacturing targeted products for women or children enter the industry annually. The rivalry between market actors is active because Adidas, Puma, and Under Armour propose similar products.
Nike is not limited in resources, much attention is paid to operations and resource management, and the company has the developed supply chain that covers more than 45 countries. The company’s facilities are located in China, Turkey, Thailand, Malaysia, Indonesia, Vietnam, India, Argentina, and Brazil. Suppliers of materials are also located in these countries, and they work as partners of Nike according to the principles of sustainability (Doorey 2011). Nike launched the developed supply chain monitoring system to guarantee cooperation between facilities and partners.
Nike’s mission is to use innovation to support athletes and people interested in sports activities. As a result, much attention is paid to investing in research and technologies in the company. The focus on the financial analysis allows for identifying other specific features of the company’s balances and prospects for the future. The financial analysis demonstrates that the company’s revenues increase annually and proportionally to inflation rates, but these changes in profits can be discussed as low in comparison to the expected gains (Nike 2016). For the next fiscal year, it is possible to predict the stable growth in profits.
The market of sports apparel and equipment is not stable today, and Nike faces such problems as the necessity to design new strategies to attract customers because of stable decreases in market sales. The profitability of the sports apparel market decreased by 5% during recent years, and only the slow rise is predicted for the future (Porteous & Rammohan 2013). Besides, many companies enter the industry and propose niche goods, and they can become more attractive to customers. Furthermore, the company needs to focus more on differentiation to propose products reflecting the latest tendencies.
Nike operates and has facilities in many countries, including such regions as Latin America and Asia. The economic environment in the majority of developing countries is non-stable. Nike is rather vulnerable to economic changes in these countries because it relies on trade agreements and labor in these countries (Doorey 2011). The market collapse in Asia or Latin America can force Nike to relocate its facilities and recruit new employees at higher costs.
Nike’s strategy is based on the principles of differentiation. The company produces well-recognized lines of sports apparel, footwear, and accessories that are characterized by the high quality and use of innovation (Bohm & Batta 2010). The company’s target customers are middle-income and high-income men and women aged 18-40 years and sportsmen. They are interested in an active and healthy lifestyle, as well as sports activities. Nike invests in research and development, as well as in addressing customers’ demands all over the globe (Porteous & Rammohan 2013). Much attention is paid to advertising.
Competitive Advantage and Analysis
Nike’s competitive advantage is based on proposing high-quality products manufactured while using the latest technologies and addressing recent fashion trends in the area of sports apparel and footwear. Nike demonstrates flexibility and adaptability to customers’ demands and differences in markets (Nike 2016). The good reputation and the association with the high-quality differentiated products are key elements of the company’s competitive advantage. The current strategy followed by Nike can be discussed as sustainable to respond to the identified challenges and contribute to the company’s future economic growth.
Conclusion and Recommendations
To contribute to Nike’s expansion in foreign markets, it is necessary to propose improvements for the current strategy to address such challenges as the market instability and potential decreases in sales. First, Nike needs to revise its strategy of managing facilities in Latin American and Asian countries to increase the employees’ and customers’ loyalty. Second, it is necessary to balance the application of cost-efficient processes with the investment into research and development in the company to design new attractive products. Furthermore, it is also possible to launch cost-effective products and initiate expansion in new markets.
Bohm, S & Batta, A 2010, ‘Just doing it: enjoying commodity fetishism with Lacan’, Organization, vol. 17, no. 3, pp. 345-361.
Doorey, D 2011, ‘The transparent supply chain: from resistance to implementation at Nike and Levi-Strauss’, Journal of Business Ethics, vol. 103, no. 4, pp. 587-603.
Nike 2016, Sustainable innovation.
Porteous, A & Rammohan, S 2013, Integration, incentives and innovation Nike’s strategy to improve social and environmental conditions in its global supply chain.