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Auditing Research - Essay Example

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A competition is increasing in occurrence for Nike since competitors are creating alternative brands which are aimed at taking away the market share of Nike Inc. Nike Inc. faces certain…
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Module There exists a great deal of competition in the market for sports garments and shoes. A competition is increasing in occurrence for Nike since competitors are creating alternative brands which are aimed at taking away the market share of Nike Inc. Nike Inc. faces certain internal and external threats. Mainly, it faces threat from competition. The competitive industry of Nike is challenged by a certain number of companies. For example, Under Armour, which is smaller than Nike and by end of 2014, had achieved $3billion. This was an increase of 29% from the result of 2013. This shows that once the company initiates its international expansion, it will become an even greater threat. In cases when Under Armour, albeit a smaller company, becomes more prominent among the customer population, Nike will no longer remain the most desired company for sports garments and this hinders the main objective of Nike that is to improve as well as protect the position of Nike as the number one brand in US.
Furthermore, Nike not only faces huge threat and competition from major sports brands but also faces threats from fake Nike goods. According to an article by BBC, almost 135,000 fake Nike running shoes have been seized by the U.S, making it clear that this is a huge problem. Nike has been selling goods in countries other than the US. Certain labor related accidents, in countries like Bangladesh where the Nike goods are sold, have led to protests regarding the safety rights and health of the employees. If Nike is forced to invest in the uplifting of health for these employees, it would act as a risk since it would enhance the costs of the company and a contraction in margins. This risk will continue to increase with time as Nike is raising their prices of sports goods.
Another risk factor for Nike is the fact that since it generates sales outside US, it is inevitable for the company to face currency fluctuations. Since the dollar has been strengthening and will continue to strengthen, it will pose as a risk for Nike. The company is exposed to the international nature of trade. Since it sells and buys in different currencies, it faces instability in terms of margins and costs over time duration. This means that Nike Inc. might be selling at a loss. With these fluctuations, the income of the company will become varied and the cost for its manufactured goods in other countries will also be altered. This tends to obstruct the objective of Nike to manage and direct the international business of the company as it is developing. Also, if such incidents continue to occur along with protests against the company, it could threaten the brand image of Nike.
Adding further, there is a greater occurrence of price competition in the retail sector. This means that the customers aim at buying those products that are concerned for looking for a better deal. As a result, if one store is charging more, the customers will move towards buying that item from the store along the street after comparing the prices from other sports good stores. And ultimately will buy the cheaper product. Thus, such an extreme sensitivity to price tends to be a potential threat for the company Nike
Work Cited
Dmitry, Stock. Nike Inc.: The Opportunities And Risks. Seekingalpha.com. N.p., 2015. Web. 5 May 2015.
Hanrahan.W, (2013), Business Environmental Audit Critically assess the strategic Direction of the Nike brand, ACE1004 Introduction to Management
Kytle.B, (2005), corporate social responsibility as risk management; a model for multinationals, Working paper No. 10 Read More
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