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Strategic Analysis of NIKE

Strategic Analysis of NIKE

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  • 1.
    • Amy Neelima
    Group 12:
    • Chih-Ling Lee
    • Ai May Soh
    • Abhishek Varier
    • Md. Towhidur Rahman
    • Ahmed Mostafa Avishek
  • 2. Phil Knight and Bill Bowman founded Nike Inc. as Blue Ribbon sports in 1962, the first Blue Ribbon sports shoe was introduced as a soccer shoe which bore the Nike brand name referring the Greek Goddess of Victory and Swoosh trademark. In today’s sports world, Nike is well known as the leading seller and distributor of genuine sports footwear, clothing, kits and accessories for a wide variety of sports and fitness activities along with the fashionable commodities as well.
  • 3.  
  • 4. PESTEL Analysis
    • olitical Factors:
      • Potential risk of terrorism in the home nation.
      • Favourable foreign nations’ relationship.
      • Risk of diverse tariffs and non-tariffs, law and regulations between countries.
      • Adverse Trade Protection in global businesses affects sales and service.
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES P
      • Positive US government polic ies that foster business growth.
      • Political unrest in outsourced manufacturers, nations such as Vietnam, Indonesia, and Thailand.
  • 5. PESTEL Analysis
    • conomic Factors:
      • Global Economic downturn affects consumer purchases.
      • Reduced Consumer confidence.
      • Risk of currency exchange rates, and interest rates.
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES E
      • Economic benefits from low cost outsourced manufactures.
      • Increasing material prices and labour costs in the production countries because of gradual increase of living standards.
  • 6. PESTEL Analysis
    • ocio-Cultural Factors:
      • Consumers are becoming brand conscious.
      • Change in buying habits in youth .
      • Increasing market share of female customers.
      • Diversity of consumer preferences and demands.
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES S
      • Change in lifestyle - health awareness, sports participation on the rise.
      • Consumer conscious in Corporate Social Responsibility (CSR)
  • 7. PESTEL Analysis
    • echnological Factors:
      • Lean manufacturing because of technological advances.
      • Up-to-date technology adoption.
      • Speed of technology transfer, and speed of change of product.
      • High rate of technological obsolescence.
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES T
      • Internet and information technology systems development.
      • Innovative and technically superior products.
  • 8. PESTEL Analysis
    • nvironmental Factors:
      • Waste disposal, recycle and reuse policies adoption.
      • Sustainability philosophy by using natural materials.
      • Reduce energy consumption.
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES E
      • Growing popularity of “green” products.
      • Challenges of tackling climate change.
  • 9. PESTEL Analysis
    • egal Factors:
      • Corporate social responsibility beyond legal obligation.
      • Trade agreements to safeguard for business operation.
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES L
      • Risk of legal violation in terms of human rights, environmental issues, etc.
      • Risk of contract manufacturers copying of product (intellectual property rights).
  • 10. Porter’s 5 Forces Model STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES High Moderate Low Bargaining power of buyers Threat of Substitutes Intensity of Rivalry Between Firms Threat of New Entry Bargaining power of suppliers
  • 11. Porter’s 5 Forces Model STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES
    • Economies of scale
    • Strong & well established brand name
    • High capital requirements
    • Selling footwear online is highly competitive; barriers to enter into this e-commerce industry are quite low
    • Cheap copies from the Far East
    LOW
    • Competitive products all compete on differentiation
    • Many online buyers are price sensitive & switching cost is low for the buyer
    • Buyers of sports footwear have changed in the past decade
    • An increase in women buying the shoes
    • Generation Y has a different taste & purchasing methods
    HIGH
    • Buyer’s propensity to substitute is low
    • Consumer substitutes for athletic footwear products are low
    LOW
    • Sub contracts to more than 500 small scale factories
    • Low bargaining power due to Nike’s big volume
    LOW HIGH
    • Reebok, offering more choice of shoe, introducing endorsement by sports personalities, sponsoring sporting leagues etc
    • Adidas have recovered from the problems that plagued them, and have a good product mix, covering a wide range of sports.
  • 12. Industry Life Cycle STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES Growth Shake-out Maturity Decline Market Size Nike is in the stage at which the efficiency of dominant business model provides the company competitive advantage over the competition. Factors: Strong Product Awareness Barrier of New Entry Share Market Quality of Product Development
  • 13. Strategic Group Analysis STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES PRODUCT LINE CASUAL ATHLETIC BRAND IDENTIFICATION LOW MEDIUM HIGH 11.2% 2% 2.5% 1.4% 1.8% 0.5% 2.7% 2.7% 5% 2.3%
  • 14. Opportunities
    • Innovative product development can be promoted as a fashionable merchandise
    • Extension of eco-friendly projects like ‘Reuse-A-Shoe Program’ aimed at further recycling
    • Building upon strong global brand recognition internationally where the markets have high disposable income to spend on high value sports goods.
    • Expanding their e-commerce to global markets
    • Growing reputation in non-basketball sports will boost e-business
    • E-commerce will reduce cost of goods sold thus improving the “bottom line”
    • Possibility of outsourcing the web development and e-commerce to a third party developer
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES
    • Emphasis on corporate marketing strategy through the promotion of corporate brand and sponsorship agreements
    • Increasing demand in the industry for products available online
  • 15. Threats STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES
    • Negative image due to “sweatshops”
    • Financial crisis may lead to job shortages in a number of Nike’s worldwide subsidiaries
    • Exposure to the international nature of trade and fluctuations in currencies poses a threat to its profit margins
    • Continuing challenges in import export duties
    • Increase in price of raw materials
    • Product innovations at Nike’s R & D is no longer a basis for sustainable competitive advantage as competitors are developing alternative brands
    • The consolidation & strategy alliance amongst competitors that can result in a reduction of bargaining power harmful competitive behaviour
    • Increase in the price of providing technological solutions (e-commerce)
    • Experienced negative publicity feedback due to its extensive advertising in mass media (Kasky v Nike; Minor Threat at; Beatles song; Chinese-themed at, Horror ad etc)
  • 16.  
  • 17. Resource Audit STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES
    • Formidably talent management staff
    • Incredibly strong brand
    • Distinctively high quality products
    • Fabulously strong financial resources
    UNIQUE RESOURCES HUMAN RESOURCES PHYSICAL RESOURCES FINANCIAL RESOURCES INTANGIBLE RESOURCES
    • Strong workforce of 34,300
    • Cost effectiveness of a streamlined management structure
    • Powerful research team
    • Good inventory management allowing selling at low prices
    • Aggressive marketing to influence consumer demands
    • Premier seller & developer of athletic goods with a wide product portfolios
    • Rapid introduction of new products with latest technology & innovative design
    • Cost effective distribution channels
    • Unequivocal commitment to CSR
    • Low cost outsourced manufacturers
    • Consistent growth of sales in emerging markets as growth driver
    • A comparatively strong financial position vs Adidas (NTA: $8.7b v $5.0b; ROE: 18% v 18.9% & T/O: $19.2b v $15.8b GP%: 44.5 v 48.7)
    • A relatively low goodwill and intangible assets vs Adidas ($0.8 b v $4.9b)
    • A dynamically technological innovation in design
    • Continued efforts of upgrading in IT
    • Readily identifiable distinctive trademarks
    • Exclusive worldwide patents registered for reliable innovation
  • 18. Michael Porter’s Value Chain
    • Operations
    • Outsourcing manufacturing and assembly
    • Design (R&D)
    • Technological Innovation
    • Effective supply chain management
    • Quality control
    • Inbound Logistics
    • Locally purchase most raw materials in bulk
    • Specialised materials importation
    • Local logistics providers
    • Inventory control
    • Outbound Logistics
    • Strong control over global distribution channel
    • Just in time delivery
    • Marketing and Sales
    • High brand recognition and reputation
    • Scale advantage
    • Price leadership and value based pricing strategy
    • First mover advantage in e-commerce in the industry
    • Aggressive Marketing
    • Service
    • Customer care
    • Pre-sales & after
    • Sales services
    • Added value service
    COST ADVANTAGE Support Activities Primary Activities MARGIN MARGIN STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES CORE COMPETENCIES FIRM INFRASTRUCTURE IT system across supply chain; E-commerce infrastructure; Strong financial position & CSR HUMAN RESOURCE MANAGEMENT Strong management team; Global learning & staff training; Excellent employee relationship TECHNOLOGY DEVELOPMENT Research and product development; Leading edge in technology development; Product improvement; Ability to change PROCUREMENT Long-term and trusting relationship with suppliers; Localised and bulk procurement
  • 19. Strengths
    • Contracts with about 700 shops worldwide, runs offices in 45 countries, and manages factories in China (36%), Vietnam (36%), Indonesia (22%) and Thailand (6%).
    • Belongs to more than fortune 500 countries where 2008 revenue is 19.2 b. USD
    • Brand reputation and recognition with trademark “Just Do It”
    • Employs 34,300 people worldwide
    • Owns strong marketing strategy under Nike brand that assumes the involvement of world top-class athletes and sportsmen in Nike’s ‘Just do it’ advertising campaigns
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES
    • Strong customer base and control over its own distribution channel
    • Operates a chain of Nike town retail stores
    • Strong financial position with minimal long term debts
    • Leads its international business operations through acquisitions and re-branding: Converse Inc,2003; Starter athletic clothing, 2004; Umbro, 2008
    • Nike’s premium brand is used to manufacture and promote a wide variety of products for all types of sport-oriented and leisure activities
    • Strong management team and good corporate strategy in both North America and overseas market
    • First movers advantage in e-commerce
  • 20. Weaknesses
    • Heavily dependent upon its share of the footwear market though it has diversified range of sports products
    • Contracts overseas companies that apply non-transparent and inadequate labour regulations, involving child labour
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES
    • Negative image portrayed by poor working conditions in its overseas factories
    • The retail sector is price sensitive
    • Positioned as a permanent subject of criticism by anti-globalisation groups
    • E-commerce is limited to USA
  • 21. Competitive Advantage STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES
  • 22.  
  • 23. Mission Statement STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES “ To bring inspiration and innovation to every athlete* in the world. “ * If you have a body, you are an athlete . Markets Customers Technology Self-concept Products/ services Philosophy
  • 24. Mission Statement - Breakdown STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES 1. Customers Each person 2. Products or services Revolutionary sports correlated commodities 3. Markets Global 4. Technology Up to date through innovation 5. Concern for survival, growth and profitability. No 6. Philosophy Considering every entity as a possible valued buyer 7.Self-concept Carry along motivation and innovation which differentiates the company from their rivals. 8. Concern for public image No 9. Concern for employees No
  • 25. Bowman’s Strategy Clock
    • Broad Differentiation Strategies : Nike has always been valued higher than its competitors in terms of innovative design and excellent quality of the goods.
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES Differentiation 4 Hybrid 3 Low Price 2 8 Price 1 Low price, low added value 7 Strategies destined for ultimate failure 6 5 Focused differentiation Low High Low High Perceived Added Value
      • Nike has successfully identified and understood the strategic customers.
      • The strategy/route that Nike should consider is the route 3 i.e. Hybrid strategy
      • Better understanding of their competitors.
      • This strategy is again about having differentiation of product when compared to competitors with low price.
  • 26. Ansoff Matrix STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES Existing PRODUCTS New INCREASING RISK INCREASING RISK Existing MARKETS New MARKET PENETRATION In fiscal 2009, U.S. sales of accounted for 42% and non-U.S. sales of accounted for 58% of the total revenues with the target revenue growth to $23 billion by fiscal 2011 MARKET DEVEOPMENT Nike, used this approach to sell their existing range of sports clothes and sport shoes in the fashion market (fashionable leisurewear) and recently the company challenged Adidas by extending their market by sponsoring the Germany national football team starting in 2011. PRODUCT DEVELOPMENT By redesigning their products, Nike can give reposition existing products in new ways to their customers. In addition, it saves Nike the costs of developing an all together new product, and allows them to earn more of a return Eg Nike Air Force 1, Nike ‘Dunk’ DIVERSIFICATION Since now Nike has not focused on diversifying their products.
  • 27.  
  • 28. Conclusion
    • To summarize the presentation, we conclude that Nike has done pretty good in this financial crisis.
    • Providing excellent service in the foot wear industry.
    • Still to date they are the market leader within the industry.
    • Entry barrier for other competitors in the industry is still very high to compete with Nike.
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES
  • 29. Recommendation
    • Nike should effectively prevent “Sweatshops” protest which results in negative impact on their brand image
    • More emphasis on Women Athletics
    • Design shoes for elderly people & pregnant women
    • To sponsor international universities, like – our very own Coventry University who specializes in sports management courses and promotes inter university sports events
    STRATEGIES CONCLUSION & RECOMMENDATIONS EXTERNAL INTERNAL ORGANIZATIONAL ANALYSIS ANALYSIS PURPOSES
  • 30. References
    • Anon. 'Nike, Inc. Official Site, the World's Largest, Leading Athletic Brand.' [online]. Available from http:// www.nikebiz.com/?sitesrc =GBLP
    • Anon. ‘Nike Challenges Adidas in home market – World business – msnbc.com’ [online] Available from http://www.msnbc.msn.com/id/17282642/
    • Anon. (2007) 'Nike Reports Sales Growth.' Mintel - Wall Street Journal Europe
    • Anon. ‘Oxford Learning lab’ [online] Available from http://www.youtube.com/watch?v=AORoMxgp428
    • B. B. Jay, ‘Looking inside for competitive advantage’ from Academy of Management Executive, 1995 Vol. 9 No. 4
    • Cashian, P. (2007) Economics, Strategic and the Firm . Palgrave Macmillan
    • Crain, D. W., and Abraham, S. (2008) ‘Using value-chain analysis to discover customers’ strategic needs.’ Strategy & Leadership [online] 36, (4) 29-39. Available from <http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/EmeraldFullTextArticle/Articles/2610360406.html>
    • Dr Gomes, E. Complied document 'Strategic Management - Module Handout.‘
    • GMID (2007) Footwear-US [online] London: Euromonitor International. Available from <http://www.portal.euromonitor.com/>
    • Goldman, R. (1998) Nike Culture : The Sign of the Swoosh Sage .
    • Jobber, D. (2007) Principles and Practice of Marketing . McGraw-Hill Education
  • 31. References
    • Johnson, G., Scholes, K. and Whittington, R. (2008) 8th edn. Exploring Corporate Strategy . Prentice Hall - Financial Times
    • Locke, R. and Siteman, A. (2002) 'The Promise and Perils of Globalization : The Case of Nike.' EBSCO
    • Lynch, R. (1997) Corporate Strategy . Pitman Publishing
    • McGlone, C. and Martin, N. (2006) Nike's Corporate Interest Lives Strong : A Case of Cause - Related Marketing and Leveraging .
    • Mintzberg, H. and Quinn, J. B. (1992) The Strategy Process - Concepts and Contexts . Prentice Hall INternational, Inc.
    • Nike Inc. (2009) 2009 Annual Report [online] Washington: Securities and Exchange Commission. Available From <https://materials.proxyvote.com/Approved/654106/20090724/10K_44242/HTML2/default.htm>
    •   Porter, J., Harris, M. and Yeung, G. (2002) International Business Management - Nike . Emerald Group Publishing Limited
    •   Ramaswamy, V. (2008) Co-Creating Value through Customers’ Experiences : The Nike Case . Emerald Group Publishing Limited
    • Scott, H. (2000) The Story of Nike . Smart Apple Media
    • Walters, D. and Lancaster, G. (2000) 'Implementing Value Strategy through the Value Chain.' Emerald - Management Decision
    •   Willigan, G. (1992) High - Performance Marketing : An Interview with Nike's Phil Knight . Harvard Business Review
  • 32. THANK YOU