Nike – Case Study

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Table of Contents

Introduction
General Environment
Specific Environment
External Opportunities and Threats
Financial Analysis
Conclusion
Reference

Introduction

In order for an organization to progress in operations, it has to adapt and identify with changes. A strategic management process is an operation aimed at making organizations adapt to changes.

In the modern business environment, there are constant changes and successful organizations manage these changes effectively by continuously adapting to bureaucracies, systems, cultures and strategies so as to prosper and to survive the forces of competition.

Globalization has transformed the global operations of businesses and altered the flow of information, financial and industrial activities. Nike is the world’s number one business firm in designing, marketing and distributing of athletic foot wear.

The company also designs other sports related apparel and accessories. The company’s flagship brand is Nike and Nike golf. Nike is a multinational company with its headquarters in the United States of America with production and operation branches in many other countries.

General Environment

The present general environment has turned out to shape the way Americans live, consume and work. The current environmental trends have created a different consumer and hence creating the need to have different products and services as well as strategies. In the event where the environment is in a state of fluctuation, the resources and the capabilities of a firm may be unstable.

The economic, technological, environmental, social and demographic forces have a lot of impact on all the products, customers and markets. Various businesses and organizations are challenged by the factors that emanate from environmental, social, demographic and technological aspects. This is analyzed below:

Economic Forces: The key economic forces are increase in interest rate, funds required for capital expansion, and declining value of the dollar. The decline in the value of the dollar has enhanced Nike’s competitiveness in the world. In the recent past, the dollar has fallen against the Yen and the Euro and this has led to a decrease in the price of Nike goods by pushing up the import prices.

The low value of the dollar has raised the prices and the profitability of Nike products. Being a United States Company, Nike benefits a lot from the weak dollar because foreign rivals are forced to raise the prices of their commodities hence killing their discounts; in such economic phenomenon Nike benefits from this weak dollar due to the big sales overseas.

Technological Forces: The internet allows footwear companies to pursue direct sales. Sales by use of the internet have been growing in double digits and keep on increasing due to the increase in the use of technology.

Specific Environment

The company designs, markets and sells its products in the following categories: equipment, apparel and foot wear. The company’s products are primarily for athletes though a small percentage wears them for leisure. The main customers of the company products are the youth and the young adults. This is because the company competes in athletic foot wear, sporting equipment and apparel.

The company is heavily skewed towards the market consisting of people aged from 12 to 24 years. The main reason for this is that the young ages mentioned above are price sensitive and spend a lot of money on athletic or casual wear than the old consumers. Nike holds a market share of 50 percent in the world athletic footwear market.

The suppliers of the company’s products are based outside the USA where the company manufactures its products by entering into manufacturing pacts with autonomous factories. The goods are primarily sold within the countries they are manufactured. This helps in saving costs. Supply of the footwear and equipments are outsourced.

Labor and operational costs in the USA are high and the costs of training labor are also high. The reason why the company outsources some of its operations is the shortage of labor in the US where it is headquartered.

Competition in the athletic footwear and apparel industry is extremely fierce. Various brands compete for athletic endorsements, sales and customer loyalty but Nike is the leading company in the athletic footwear. The key competitors for Nike are Adidas which is number two in the market share; it is a German based company.

The Adidas brand is a leader in Europe and China. The three divisions of the Adidas Company are Reebok, Adidas and TaylorMade Golf. Puma is another competitor of Nike in the global market for athletic foot wear. It sells its products under Tretorn and Puma brands.

It specializes in Sport Lifestyle Company and this is what gives it an upper hand against its rivals in competitions as depicted by the gold Puma Theseus 11 spikes that was worn by Usain Bolt in the Beijing Olympics. Other competitors in the industry include K-Swiss in the USA and Li Ling in China.

Nike also competes for athletic footwear with other companies that manufacture footware for leisure and fashion. This companies include Crocs, Deckers Outdoor group, Timberland and Sketchers USA Inc.

External Opportunities and Threats

External and internal threats are the social, cultural, demographic, environmental, political, competitive and legal trends and events that can benefit or harm the organization in the future. Opportunities and threats are beyond the management of any organization.

The major threats and opportunities that face several firms are capital availability which can never be ignored, expectations of green operations and product marketing that has moved to the internet, consumers who require value for all that they consume and global markets which provide prospect for high returns. Other threats include a lot of debt which threaten to crush the best firms, and the depressed housing market.

The above external threats and opportunities create different types of consumers who demand various kinds of goods, products, strategies and services. Nike and other different companies face a lot of threats emanating from online sales which attracts the increasing market share in the industry.

Other opportunities and threats may encompass the passage of laws, natural catastrophes which may curtail operations, competitors’ strength, declining value of the dollar and introduction of new products into the market by competitors. Consequently the unrest in the Middle East, skyrocketing price of oil and the war against terrorism can also be considered as opportunities or threats.

As a pillar of strategic management, Nike should formulate strategies that are geared towards capitalizing on the existing business opportunities in order to reduce the impact of the external threats. The identification, evaluation and the monitoring of the external opportunities and threats are considered critical for success. Nike and other firms should conduct environmental scanning.

External opportunities and threats can be utilized using lobbying. Strong strategies are considered to be the strength of the firm to overcome the impact of external threats and hence a strong organization should be in position to meet the threats in the external environment head on.

Financial Analysis

Financial analysis typifies the complex relationships between various functional areas of business. Any decline in the return on investment or in the profit ratio margin is associated with poor marketing, poor research and development, and poor management policies.

Ineffectiveness of the formulation and implementation of strategies are considered to be major business functions which influences one another; business strategies only succeed if all the financial business areas are well coordinated.

The financial position of a firm depends on various factors which include management, marketing, competitors and supply actions, and the economic, cultural and environmental trends. All these factors make the consumers to be price sensitive by lowering their firms. In its income statements the company has witnessed increase in revenue to $19.1 billion with decrease in the net income to $1.48 billion.

The company has set some strategic goals of realizing $23 billion in revenues. This can only be achieved by pursuing the following strategies: increasing growth opportunities, levering the resources and the capabilities of the company and serving the customers with a premium experiences and products to retail their loyalty. The following is the income statement of Nike.

(David, 2011)

Conclusion

Firms need to mobilize their employees and managers to conform to the changing business environment trends. This will enable the managers to evaluate, forecast and monitor the external forces that will prevent them from anticipating the emerging opportunities and threats.

Firms for example who are not capitalizing on the internet for marketing are considered to be technologically behind. The increasing complexity and dynamism of the environment is highly dependent on the combination of various functional influences.

Reference

David, R. (2011). Strategic management: concepts and cases. New York, NY: Prentice Hall.

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