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Nike Company’s Analysis Using Management Tools Essay

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Updated: Jul 21st, 2021

Abstract

Nike is a global conglomerate that deals mainly in sportswear. The company’s mission statement is, “To bring inspiration and innovation to every athlete. If you have a body, you are an athlete” (Nike, 2014, p. 1). The company’s corporate and retail store operations are carried out in consideration of this mission statement. Nike is a company that is known by its logo; this shows the popularity of the company. This paper will evaluate the company using three of the management tools. The management of Nike should now lay stress on the company’s strategy. It has to be in line with its mission statement that suggests extending the boundaries of technology and innovation.

SWOT analysis

Strengths

Nike is at 24th place in the list of world’s most valuable brands and at 343rd place in Global 2000 (Forbes, 2014a). The following graph of the company’s performance (of shares) clearly depicts a steady growth. During the past 5 years, there has been an increase of 250.21% in the capitalization of Nike (Yahoo Finance, 2014).

Nike

The company has also launched ‘lower-priced’ products under the brand ‘Converse’ in order to cater to a larger customer base (Burkitt, 2010). The company has an exemplary presence throughout the global markets and is the global leader (with 20% market share) in sports apparel (Forbes, 2014b).

Weaknesses

Nike’s revenues rely mainly on its footwear market. If for any reason, the company’s market share declines, the company revenues will suffer a significant downfall. Moreover, the footwear products are sold in retail, and the retail market is very price sensitive. Due to the presence of various competitors, the company has to keep very low-profit margins. Most of the company’s products are highly-priced.

Opportunities

The prevailing trend for fashion among the customers is an encouraging sign for the company’s future prospects. The company’s plan to venture into jewelleries and sunglasses is an opportunity that is expected to reap great profits (Hanrahan, 2012). Nike’s market share is greater than the combined shares of Reebok and Adidas.

Threats

There are various competitors, such as Reebok, Adidas, and Puma, that have the capability of usurping Nike’s market share. Due to the increased popularity of the Nike brand, many counterfeit brands have entered the global markets; this can have a negative impact on the company’s sales. Currency fluctuation across the globe is another threat to the company; this may have an impact on the profit margins. Moreover, the footwear industry has reached a saturation point as far as the design of products is concerned. Nike might have to resort to some new techniques for future sustainability.

Stages in the Industry Life Cycle

There are four stages (development, growth, maturity, and decline) in the ‘Industry Life Cycle’ of any company. After successfully passing through the development and growth stages, Nike has now entered into the maturity stage. Having established its brand name throughout the globe (during its 50 years of existence), the company is now concentrating on sustaining its market share (Deng, 2009).

The company has also developed a suitable infrastructure and is now engaged in augmenting its stock value. Nike is now in a stable position and has carved a niche for itself in the global market. Now, the prime motive of the company is to augment its supremacy in the related industry; the company has plans of diversification into ancillary products as well. One such example is the collaboration of Nike with Cole Haan. The new range, named Cole Haan FLX gives the user better sole comfort (Pieri, 2010).

If the company fails to follow its mission statement, it faces a risk of entering the decline stage. Considering the prevailing scenario, the chances of having decreased competition for Nike are very less. However, the growing competition within the industry ought to make Nike feel some pressure, but by maintaining control over the market, the company seeks to abstain from entering the decline stage of the Industry Life Cycle.

Porter’s 5 Forces discovery

Competitive rivalry within the industry

Nike faces the risk of losing its market share due to the severe competition from existing and forthcoming rivals; companies such as Adidas, Puma, and Reebok pose a great risk. The customer preferences also change incessantly, and as such, it becomes crucial for Nike to adapt to the changes without any delay or else it might have to experience heavy losses. Adoption of latest technology by local players in global markets makes their products compatible with those of Nike but at lower prices.

Bargaining power of suppliers

Nike outsources its production work to various suppliers, and as such, no supplier has any major bargaining power. According to details of Form 10-K submitted by Nike, its largest supplier (of footwear) accounted for 6% of the overall manufactured footwear (Form 10-K, 2011). Nonetheless, Nike shares an increase in inflation cost with its suppliers.

Bargaining power of customers

Even though retail customers don’t have any significant bargaining power, wholesale customers do have such powers to a certain extent. But customers do have a choice over Nike as far as the price is concerned.

The threat of new entrants

Manufacturing quality footwear needs a lot of investment, and this could act as a barrier for new entrants. Building a global infrastructure also needs ample time and resources, which again is a barrier for new entrants.

The threat of substitute products

Imitation products are probably the biggest threat to any footwear industry. As the global demand for footwear is increasing, counterfeit products are swarming the market. Customers prefer them because they get a compatible quality at a lesser price.

References

Burkitt, L. (2010). . Web.

Deng, T. (2009). Just done it – Nike’s new advertising plan facing global economic crisis. International Journal of Business and Management, 4(3), 102-105.

Forbes. (2014a). Nike. Web.

Forbes. (2014b). . Web.

Form 10-K. (2011). Web.

Hanrahan, W. (2012). . Web.

Nike. (2014). About Nike, Inc. Web.

Pieri, K. (2010). . Web.

Yahoo Finance. (2014). . Web.

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IvyPanda. 2021. "Nike Company's Analysis Using Management Tools." July 21, 2021. https://ivypanda.com/essays/nike-companys-analysis-using-management-tools/.

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