Strategic Business Analysis of Nike - Term Paper Example

? Strategic Business Analysis of Nike Table of Contents Table of Contents 2 Executive summary 3 Strategic Analysis of a company and its importance 4 Mission and Objectives of the company 5 Focus on strategic growth of the company 5 Evaluation of Strategic risks 6 Intense competition for Nike’s products 7 Failure to maintain brand reputation as well as brand image 7 Failure to anticipate consumer preferences 8 Failure to obtain high quality brand endorsers 8 Risk from currency and exchange rate fluctuations 9 Risks from foreign sourcing, manufacturing as well as financing 10 SWOT analysis 11 Strengths 11 Weakness 12 Opportunities 12 Threats 13 SPACE Matrix 13 Strategic Recommendations 15 References 17 Executive summary The world of the 21st century is progressing at a rapid pace, on the line of fast change and tremendous development. It is important to highlight that the fast change of the current centuryare being powered on the lines of highly connected telecommunications technology that has advanced in a tremendous way in the recent past. It needs to be mentioned that throughout the previous decade. There was a tremendous surge in the penetration of internet - based connectivity in various parts of the world. As a result of a fact acceptance of the single mode of connectivity which has developed on the lines of internet powered virtual platform in various corners of the world, it needs to be mentioned that the world has transformed into a single connected global entity. This has increasingly paved the way for easy synchronization of various trends related to globalization that are emerging from the different corners of the world. (International, 2011, p. 32) It needs to be mentioned that because of the trends of globalization, there is a tremendous amount of demand for new kinds of product and services that are emerging from various new as well as well established countries and economies around the world. As a result of this surge in demand, there is a tremendous amount of business opportunity that is emerging in the global marketplace. Many new as well as established companies that are located in various geographical locations are increasingly focusing on the process of market expansion as well as the process of entering in the new markets to capitalize on the new business opportunities (Tsai, 2003, p. 158). With the growing entrance of new companies in the markets of the emerging as well as the developed economies, there is a rise in the number of substitute products as well as the number of alternatives that exist in the market. The rising number of substitute products and services is automatically providing more power to the consumers (Hirschey, 2009, p. 504). This is naturally leading a strong hand in regards to increasing the level of competition in various markets around the world. Talking in this regards, it needs to be highlighted that in order to create a factor of distinction as well as develop an arena of unique strengths in the face of extreme competition in the marketplace, it is very important for an organization to engage in the process of conducting a strategic analysis on a periodic as well as regular manner. Talking in regards to the project, it can be said that this particular research based assignment focuses on the process of providing an in-depth analysis of Nike Inc, which is considered one of the most popular multinational brands of the division related to athletic footwear and apparel in the recent times. Strategic Analysis of a company and its importance Strategic analysis of a company forms a very important part of the strategic management of a company. From the academic point of view, strategic management is the process of identifying, evaluating as well as implementation of strategies so as to meet organizational objectives. From the importance point of view, it can be said that the strategic management is highly critical as it provides a well planned process related to analyzing as well as usage of tools and frameworks for studying the internal and external environment of a business, and thereby paves the route to logical decision making for the organization (Jeffs, 2008, p. 13). The analysis of the company from the strategic point of view often paves the route to a successful futuristic strategic planning of the company. While undertaking a strategic analysis, the focus revolves around a variety of key issues which comprises of mission of the company, strategic focus of the company, assessment of risk factors, relevant strengths and weakness, assessment of capabilities as well as development of competitive advantage (Sadler, 2003, p. 9). Conducting a strategic analysis of an organization is very important. Apart from the fact that it helps in assessing the abilities of the company as well as its long term and short term objectives it helps in a great way in the process of strategy formulation as well as implementation in the upcoming future (Henry, 2008, p. 9 -11). Mission and Objectives of the company While focusing on conducting a strategic analysis of a company, it is of significant importance to focus on the long term and short term goals and objectives that are targeted by the company. The long term and short term goals of a company are often covered under the vision and mission factors that are outlined by the top management of an organization. Talking in very specific terms, it needs to be highlighted that the vision of a company talks about the long term focus and objectives of the company, while on the other hand, the mission of the company talks about the ways of accomplishing and achieving the long term goals of the company. In highlighting the vision statement of Nike, it can be said that the company focuses on the process of implementing innovation for the purpose of serving the athlete community as well as attaining growth and providing inspiration to the world (Nike Inc, 2012). Now in highlighting the mission statement of Nike, it can be said that the statement talks about the focus of the company to provide innovation as well as inspiration to each and every athlete in the world. Focus on strategic growth of the company It needs to be mentioned that for the purpose of attaining significant growth in the market, it is very important to have a well crafted strategy. Nike in an attempt to attain significant growth in the market, has designed a very effective growth strategy. It can be said that because of theincrease in performance of the company on a year on year basis, the sports accessories manufacturer has raised the financial target to around 28 – 30 billion USD for the financial year of 2015 (Nikeinc.com, 2011) Also, it needs to be mentioned that the company has developed a strategic vision which will help in the process of attaining growth in the longer term. As per the new probable growth propelling strategy, the company will be focusing on possible decoupling of profitable growth from various constrained resources. Also, for the purpose of consolidating the factors of sustainability in organizing the strategic growth, the company Nike, will be focusing on the process of inserting the sustainability in the processes of innovation, organizational governance as well as portfolios. To further fuel the process of strategic growth, the internationally reputed Nike has developed a new factory rating system. It is very important to mention that this new rating system helps the company in a great way to look for better ways of attaining sustainability the production line. Talking more about this, it can be said that it helps in increasing the labor as well as environmental performance, apart from the traditional factors of cost, quality as well as on time delivery. It is highly interesting to state that in order to attain the factor of growth on the lines of performance, various sustainability related targets have been identified by the company. The factors comprises of product design, climate, labor, waste management as well as management and efficient control of various byproducts of product manufacturing (Nike, 2013). Evaluation of Strategic risks It has to be acknowledged that the company Nike is an internationally reputed organization, with presence in various geographical regions of both developing and developed economies. However, in spite of its strong presence, the company in the process of conduction of business operations in various markets around the world is largely vulnerable to various risk factors. Some of the risk factors which are of considerable strategic importance are being discussed below: Intense competition for Nike’s products It is important to state that Nike is a consumer product manufacturing company, whose product portfolio comprises mostly sports related apparel and accessories as well as equipments. The company has presence in various markets around the world. However, it is very important to consider that the market for sports related apparel, accessories and equipments is largely competitive in nature. These specific sectors always witness a lot of competition in the United States as well as in various markets around the world. Talking in a more specific manner, it is important to mention that the globally reputed organization is competing with various athletic and leisure manufacturers for shoes and apparels in various markets around the world. Also, in the sports equipments sector, Nike is competing with various globally popular manufacturers that have presence in some of the key markets that are currently targeted and serviced by the company. Hence, an intense competition is often faced by the company’s products from various local and international brands that manufactures and distributes products of homogeneous nature in the local as well as the international markets. This factor of high competition can be increasingly considered as a strong risk from the strategic point of view. Failure to maintain brand reputation as well as brand image Nike is a dedicated manufacturer of sports related shoes, apparel as well as equipments, which has a large number of high quality products in its portfolio. Almost all of these products have a iconic brand value and are popular in various markets all over the world. It is important to mention that the process of developing the brand reputation as well as the image of the products in the local and international markets is very much dependent on the organization’s ability to market and design the products. In order to gain an edge in the areas related to product marketing and designing, the organization tries to magnify its focus on the lines of advertising, consumer campaigns as well as product-based innovations. Failure to focus in any of the areas related to advertising, consumer campaigns and product innovation will result in the loss of brand image and reputation. Since, advertising, product based innovation and consumer campaigns help the globally popular organization to distinguish itself in the market in regards to its competitors, the failure on these factors can be counted as a very important risk from the strategic point of view (Nike Inc -1, 2012, p. 12) Failure to anticipate consumer preferences A considerable amount of success for the products of Nike is dependent on the company’s ability to identify, distinguish and define trends related to products of the future and simultaneously responding to these changes at the same time. Hence, it can be said that the company provides a strong amount of focus in regards to changing and evolving consumer trends and patterns. The factor of risk emerges from the point in case the company fails to anticipate the consumer preferences. The failure of anticipation of consumer preferences by the company will lead to lower sales of the company’s products which will thereby create a significant impact in regards to the profit generating ability of the company. Failure to obtain high quality brand endorsers It needs to be highlighted that the organization which manufactures mainly sports related products provides a high amount of focus on the lines of developing relationships with highly popular brand endorsers. By getting the branded products endorsed by the well known figures and personalities from the sports and athletes domain, the company is able to connect itself with the desired target audience. This automatically results in the process of high demand and high sales for the company’s branded products. Hence, as a natural product marketing strategy, it can be said that the company Nike enters into endorsement based agreements with various sports personalities. However, in case of some problems with the company, the engaged endorsers prefers to stop using the company sponsored products, it will automatically result in the process of emergence of a risk for the company’s brand image. Also, poor performance of the athletes and the sports personalities in their respective domains may also the brand image and associated brand value for the celebrity endorsed products. Hence, it can be said that the company faces a two way risk when it comes to assessing the strategic disadvantage and risks emerging from the highly popular brand endorsers (Nike Inc -1, 2012, p. 12) Risk from currency and exchange rate fluctuations It needs to be mentioned that the company Nike conducts its business operations in various locations around the world. So naturally, the company has to engage in the process of conducting financial transaction in various regional as well as global currencies that dominate the global as well as regional financial markets. While talking about conducting business operations in foreign locations and markets, it needs to be considered that a lot of revenue is also generated for the company from most of these overseas operations. Now with the possibility of continuous fluctuations of exchange rates of other currencies with the US Dollar, the amount of revenue generation abilities of the company as well as the profits of the company gets tremendously impacted. Hence, it can be taken into consideration that the currency and exchange rate fluctuation of the various regional as well as global currencies can significantly emerge as a strong risk factor for the operations of the company. Also, while talking about the risk that emerges for the company in regards to the currency fluctuations, it needs to be considered that the currency risks also impacts the various manufacturers and retailers that are associated with the company. In discussing it in a specific manner, it can be said that the manufacturers and retailers of the company will face significant amount of challenges in regards to financing their operations as well as raw material purchases when they gets impacted by currency fluctuations. Thus, it can be acknowledged that by getting impacted in regards to the profit making abilities, the vulnerability of the multiple manufacturers and retailers that are spread in various markets around the world presents a factor of associated risk for the company (Nike Inc -1, 2012, p. 12). Risks from foreign sourcing, manufacturing as well as financing It has to be taken into consideration that Nike produces high quality products in order to meet the superior quality related expectations of its global customers. For the purpose of manufacturing of the high quality products, which consists of sports related shoes, apparels as well as equipments, the company uses various kinds of resources like natural and synthetic threads and fabric, plastic, metal wire etc. However, in order to gain cost related advantage as well as other strategic related benefits, it can be said that the company focuses on the process of outsourcing most of the manufacturing process. In order to develop high quality products that match the company’s set quality standards, the outsourced product manufacturers try their best to maintain stability in product manufacturing and as a result concentrates on bulk acquisition of the raw materials. In the event of a disruption in the supply and procurement of the critical raw materials by the company’s manufacturers, the company does not have any strong alternative which will act as a potential backup in the times of crisis. This presents a risk to the company’s operations that are spread all over the globe. Also, it has to be taken into account, that since the products of the company are in most cases developed by a third party manufacturers who are located in foreign locations, the company is also strongly vulnerable to the factor of delay in product shipments due to known or unforeseen circumstances. Hence, while analyzing the risk of the company in regards to outsourced manufacturing process of its products, the focus has to be on the lines of risk related to procurement difficulties faced by the third party manufacturers as well as delay in shipments from the manufacturers end. This can significantly lead to the process of bringing a negative impact in the financial performance of the company (Nike Inc -1, 2012, p. 12). SWOT analysis The SWOT analysis of a company talks about an organization’s analysis while judging the relevant strengths, weakness, opportunities and threats. While talking in a split up manner about the SWOT analysis, it can be said that the strengths and weakness are the internal factors and are dependent mostly on the company’s abilities, advantages and disadvantages. On the other hand, the factors of opportunities and threats are external factors on which the company has little or no control in most of the times. Strengths While judging the list of strengths for the company, it has to be increasingly considered that the brand of Nike is a highly popular global brand. As a result, this provides the company with a strong portfolio of various branded products that has a lot of demand in both the emerging as well as the developed markets. Having a strong brand under the company’s product portfolio also extends credibility for the company’s products. It provides the company with a significant amount of edge in regards to the process of value communication for its product offerings. Talking in a little detailed manner, it can be said that in the case of a new product introduction, the brand of Nike will provide significant amount of mileage to the new products. Another significant strong point for the company is that the company Nike provides a strong amount of focus on innovation and creativity. In order to distinguish its products in regards to the marketplace, the company tries to inculcate a high degree of innovation (Carr, 2013). Weakness The company though has significant strong points along with a series of weaknesses. The most important that needs to be highlighted in this case is the fact that since the company focuses a lot of attention on developing innovative as well as creative products, failure to defend the intellectual property rights of the company can present a loss of competitive advantage for the company. Also, the company’s depreciating sales figure in the Chinese market, which is supposed to have a strong potential as of the current times can also be counted as a serious weakness (The Associated Press, 2013) Opportunities The company has some strong opportunities that have evolved in the course of conducting business opportunities. Talking in definite terms, the most important opportunity that has to be identified is the strong focus of the company for the process of development of sustainable yet creative and innovative products which will help in the process of gaining an edge in the global markets (nikeresponsibility.com, 2012).Another opportunity of the company is in regards to growing markets of the developing economies, especially in the BRIC regions, where the consumers are increasingly showing a fascination to acquire branded products of superior quality. Threats Now talking in regards to the threats, since the company is present in multiple locations around the world, hence, it is vulnerable to various macro based risks. More specifically, the company is highly vulnerable to the threat factors related to instability of the global economy as well as fluctuations in currency exchange rates. Also, since the company outsources its product manufacturing process for the purpose of generation of strategic benefits, Nike also faces threats in case of failure of timely production and supply of its products (Nikeinc.com, 2011, p. 11). SPACE Matrix The Strategic Position and Action Evaluation (SPACE) matrix is a very important strategic tool which helps in the process of identifying the right strategy that will help in attaining organizational growth Source: Rao & et.al, 2008,, p. 254 The SPACE matrix analyzes the internal and external strategic positions of the organization. The internal strategic position is comprised of factors related to financial strength, competitive advantage, while the external strategic position comprises of environmental stability and industry strength (Rao & et.al, 2008, p. 254). In regards to the Oregon based sports gear manufacturing company, it can be said that the company has a high market share as well as a highly innovative product life cycle. Also the company because of its increasing focus on innovation has resulted in the process of developing high growth potential. The company also is tremendously high in regards to the cash flow and return on investments because of the significant growth attained by the company in the recent times. Hence, it can be said that the company falls on the lines of Aggressive variant of the SPACE matrix Strategic Recommendations For the purpose of making strategic recommendations, the focus has to be given on the lines of developing the opportunities that have emerged for the company, while carefully maneuvering the pitfalls that might emerge in the form of threats that can hamper the overall performance of the company. The most important strategic recommendation that can be made for Nike is that it should focus on the process of developing innovative and creative products for the markets of the developing regions, especially the ones that are located in the BRIC countries. The reason behind making this strategic recommendation is the fact that the company already has a strong brand image for its products which are high on quality, style as well as innovation. Since the markets of the emerging locations provide a strong opportunity in regards to future growth, the innovative products of the company will help the organization to develop a competitive edge. This will help to attain an increase in sales and thereby develop a strong foothold as well as high market share in the emerging markets of the future. Another important strategic recommendation that can be made for the company is that the company should focus on developing a team of product manufacturers at a more central location. Talking in details, this particular strategy will help in the process of addressing the threat factors associated with the outsourced manufacturing process of Nike. Since, Nike’s outsourcing based manufacturing strategy poses risks to the organization in regards to failure of timely supply of product by the manufacturers of foreign locations, hence having a team of local manufacturers will help the company to develop a backup in case of probable failure by the foreign manufacturers. Now judging this particular move from the financial point of view, it can be said that though this might seem a little costly in nature, yet in the event of a potential supply related failure, these local manufacturers will be extremely helpful in regards to the process of delivering the desired supply. This will automatically help the company to stay in the competition rather than losing out storage space as well market share to rival competitors of local as well as international nature. References Rao, C.A., & et.al. (2008). Strategic Management and Business Policy. New Delhi: Excel Books. nikeresponsibility.com. (2012) Letter from the CEO. Retrieved from: http://www.nikeresponsibility.com/report/content/chapter/letter-from-the-ceo Nikeinc.com (2011). FY15 REVENUE TARGET RAISED TO $28-30 BILLION. Retrieved from: http://nikeinc.com/earnings/news/fy15-revenue-target-raised-to-28-30-billion Nikeinc.com. (2011) Form 10 K. Retrieved from: http://investors.nikeinc.com/files/doc_financials/AnnualReports/2011/docs/Nike_2011_10-K.pdf Nike Inc. (2012) Business Overview. Retrieved from: http://www.nikeresponsibility.com/report/content/chapter/business-overview Nike Inc -1. (2012) Form 10K. Retrieved from: http://investors.nikeinc.com/files/doc_financials/AnnualReports/2012/docs/nike-2012-form-10K.pdf Carr, A. (2013). NIKE: THE NO. 1 MOST INNOVATIVE COMPANY OF 2013. Retrieved from: http://www.fastcompany.com/most-innovative-companies/2013/nike The Associated Press (2013) Nike Profit Rises, Despite Weak China Sales. Retrieved from: http://www.nytimes.com/2013/03/22/business/nike-profit-rises-despite-weak-china-sales.html?_r=1& Nike. (2012) FY10-11 SUSTAINABLE BUSINESS PERFORMANCE SUMMARY. Retrieved from: http://nikeinc.com/news/nike-inc-introduces-new-targets-elevating-sustainable-innovation-within-business-strategy Jeffs, C. (2008) Strategic Management. London: Sage Publications. Sadler, P. (2003) Strategic Management. USA: Kogan Page. Henry, A. (2008). Understanding Strategic Management. US: Oxford University Press. Aacsb International. (2011). Globalization of Management Education: Changing International Structures, Adaptive Strategies, and the Impact on Institutions : Report of the AACSB International Globalization of Management Education Task Force. UK: Emerald Publishing Group. Hirschey, M. (2009) Managerial Economics. 12th ed. USA: Cengage Learning. Read More