The Nike Incorporated Strategies - Term Paper Example

EXECUTIVE SUMMARY In this project a thorough analysis of the Nike, Inc. has been conducted in order to examine the effectiveness of their existing business strategies and policies that they have employed since its inception. Nike is one of the world’s most popular and successful multinational companies and the reason behind their success is a strong business strategy. The report draws attention to the fact that how Nike has changed its strategies over time since its inception in 1968. The main business of the Nike is the design, development and worldwide marketing and selling of athletic footwear, apparel, equipment, accessories and services. Nike is the largest seller of athletic footwear and athletic apparel in the world. The company has its own retail stores in different parts of the world as well as have a mix of independent distributors and licensees across the globe. Since its inception, the company has employed some very smart strategies and policies and has increased their revenues over time. By the end of fiscal year 2013, Nike Inc., had $24.1 billion net Income. The company’s strong marketing strategy has helped in increasing its revenues and sales, and compared to the previous year its sales has grown by 12.36%. The report also reveals that the increase in sale and revenues is the evidence of effective strategies, however, the rapidly changing trends in sportswear as well as people’s interest in new designs and quality of fabrics need to have some amendments in their strategic planning and its implementation. Nike, Inc extends its operation in the global environment (market) and therefore creates products for global consumers. As per 2013 report, the company is based in relatively 160 countries across the world. In this perspective, it has extensive access to consumers. According to its financial ratios, its return on equity is 24.5%, return on assets is 14.89% while return on capital is 21.77. For the effectiveness of this report, industry research has been conducted using Porter’s Five Forces Analysis which identified a number of threats and opportunities as well as numerous strengths and weaknesses of the Nike’s current strategies. Nike has followed all the latest trends and techniques to effectively operate in the industry and the report suggests that Nike is an ideal candidate to survive successfully in the rapidly changing trends of the industry with the help of its well executed strategies. However, currently, some of the strategies employed by Nike are not as effective as they should which are posing potential threat to the overall success of the company. On the basis of analysis, it is concluded that new entrants could create potential threats for Nike such as the emergence of Reebok Company has posed a big threat to its success. Nike should revise its human resource strategies as well as its pricing strategies to stay in the competition. It is recommended for the management of the Nike Inc., that prior to making any type of strategy they must divide it in three phases: business analysis, integration, and business implementation phase. In the first phase, they should critically analyze and evaluate potential opportunities and threats in regard with their strengths and weaknesses. In the second phase the managers must communicate organization’s goals and objectives at all levels. And in the final phase they have to implement these strategies in the organization effectively. TOWS Matrix Internal Strengths Celebrity Endorsement Ability to venture into Global market Brand Logo Product Innovation & Creativity A very professional competitive company Nike has very strong marketing campaigns that increases its brand familiarity Weaknesses Lack of supply control Pressures from various groups on working condition, among other factors High advertising cost Nike’s higher profit is largely dependent on footwear market. Constant focal point for negative criticism by anti-globalization organizations Opportunities Growing market, Will create a broader market for Nike Products Ability of the Nike company to embrace E-commerce Large Distribution Networks Diversification of its portfolio by investing in overseas makes Nike to produce at a cheaper cost. Economies of Scale SO-Strategies Nike should exploit worldwide gaming opportunities by increasing their presence in countries like China, Qatar, etc. (S2, O1). They should build their distribution networks in those countries where they are leading the market. (S5, O3). Nike should try to gain economies of scales by expanding their product portfolio as well as by expanding their market access to countries where they can get raw material at much cheaper price. (S4, O5) WO-Strategies Should reduce spending on advertising and marketing (W3, O5). Should diversify its product portfolio to strengthen its position in the industry. (W4, O4). Should expand its presence to global markets specially to emerging markets. (W5, O1) Threats Counterfeit Products/availability of substitute products Threats of New Entrants into sports and footwear industry Poor human resource Policies in Nike company Lack of corporate objectives Poor pricing strategies ST-Strategies Nike should get copy rights for some of its design to avoide imitation by others. S4, T1). Increase focus on sportswear other than footwear. (S3, T3) WT-Strategies Should improve relation whith suppliers by offering certain incentives. (W1, T1). Should improve their pricing strategies by controlling advertising costs. (W3, T5). The TOWS matrix of the Nike Inc., represent a whole insight of the strengths, weaknesses, opportunities and threats. Nike has some strengths with which they can effectively exploit some potential opportunities that are present in the industry. For example, currently, Nike has ability to endorse in global market but still there are some parts of the world that can pose a potential opportunity for nike to imrove their global presence. Similarly, Nike can easily exploit different opportunities to overcome its weaknesses. For example, Nike has massive spending on advertising and marketing campaigns. Though, these marketing campaigns has improved the company’s brand recognition and has made it a household name when it comes to sportswear but at the same time, massive spending on marketing campaigns restricted the company from gaining economies of scales. Nike is a professionally competitive company and thus, it has ability to change its threats and weaknesses to opportunities and strengths. For example, one of the threats of the company is counterfeit products from other companies which is a serious issue for Nike amd can potentially affect its success. To change this threat to potential opportunity, Nike can design some unique and innovative products and can get copy rights of those products. This will further increase the popularity of the brand and will restrict its competitors from imitation. The TOWS matrix shows a strong relation between the internal factors and external factors. The matrix clearly shows that the management of Nike should consider both internal and external factors while making strategies and policies. Additional to understanding the importance of internal and external factors, the management should also consider the nature of available opportunities and threats. Some opportunities are volatile in nature therefore, it is important to deal with them on priority basis. For Nike, opportunities that are volatile in nature include diversification of product portfolio, the ability to embrace E-commerce and market expansion. Nike’s management should first deal with these three opportunities as soon as possible. These are the opportunities for which other companies are also improving their strategies. In case of delay, these opportunities would turn to potential threats and it will become difficult for the management of Nike to overcome the situation. TOWS matrix of the Nike Inc., is showing a complete framework for the management of the company and they can effectively build strong strategies and policies. Read More