Strategic Management for Nike Company - Case Study Example

STRАTЕGIС МАNАGЕMЕNT FОR NIKE COMPANY Name: 28th November 2016 Introduction The report concentrates in showing the Nike company strategic plan concerning what the company is offering for future growth. Notably, the report contains strategic analysis that aids us in discussing the company’s strategies and henceforth lay down a recommendation on the same. The comprehensive discussion of the analysis tools such as the SWOT analysis, the porter’s five analysis, among others will enable us to understand in depth the position of the company and the possessed establishment of the company competitive strategy. We understand that Nike can offer as well as increase its product and services range through offering related products such as aerobic products and services to its esteemed customers and set a value-based pricing strategy accordingly. Moreover, for new offerings, the company can develop its other platforms other than commercials that are available; it can lay more focus on social media to promote its new products, and like that, it may expand its business operation in developed states such as middle east, China among others. Company’s history The inception of the Nike Company came about when the company entirely focuses on importing Japanese shoes. Since then the company has grown to be the largest marketer of athletic footwear in the entire world (NIKE Inc., 2015). The market niche occupied by the company includes the United States of America and the rest of the Americas, Europe, the Middle East, Asia Pacific, as well as Africa. The precursor of Nike Company originated in the year 1962, a product that was coined by Philip (Berger, 2011). He entered into a contract with one of the firm in Japan that concentrated in making athletic attires (Borowski, 2013). Philips firm, Onitsuka Tiger company Knight developed blue ribbon sports in the event of the agreement and the partnership eventually grew up to become Nike incorporations (NIKE Inc., 2015). In the early 1970s, the Blue Ribbon Sports had managed to manufacture its line of products as well as services overseas and later introduced its Swoosh trademark and the brand name, Nike. In the year 1974, Blue Ribbon Sports launched its first plant in the United States of America and further work strategically to expand the variety of its products as well as services. The name was changed for Blue Ribbon Sports to Nike incorporation in the year 1978, and by the 1980s, Nike had already expanded its market to the European states. In reaching 1982, the company’s product had already risen to more than 100 different kinds of shoes that comprised of air force 1, basketball shoes, the air ace, as well as its companion shoes for racquet sports (NIKE Inc., 2015). Through Nike’s product diversification, it has turned out to be a global leader in sportswear (Berger, 2011). In the year 2014, the Nike incorporation was declared the largest apparel as well as footwear company in the entire globe. The Company Market Share value in the world market is at 2 percent (NIKE Inc., 2015). The company’s market leadership is associated with its brand image and loyalty. Regardless of having a positive reputation for matters entailing innovation, Nike has also established celebrity endorsement to enhance its loyalty in a brand (Borowski, 2013). Moreover, Nike has already taken advantage of the technological advancement and introduced social media such as the websites and interactive app to keep their customers with up to date information of their products in line with brand development (NIKE Inc., 2015). The porter’s five ANALYSIS Industry Environment Bargaining Power of Suppliers The bargaining power of the Nike Company and the suppliers is moderate. Notably, it is attributed to the inputs such as cotton, plastics, and polyester for accessories, shoes, and other technological items. The suppliers to the Nike company have bargaining power since the company is highly dependent on the inputs for the final products. Alternatively, the product line of Nike incorporation is considered highly diversified since their products are developed from outsourced labor (Berger, 2011). Hence, this reduces the company’s dependence on specific suppliers, and as such, the two opposing forces outweigh each other making the bargaining power moderate. Bargaining Power of Buyers The bargaining power of the buyer is considered low. This is because the company is dependent on a single national market or a specific product line to make a profit. For instance, it achieved high sales in the Republic of China. Notably, according to analysts, China will assist the company’s brand to meet annual revenue of fifty billion dollars by the year 2020. The success of Nike company in entering other big markets that are emerging reveals that it relies less on the buyers situated in the United States of America or other established or developed markets (Borowski, 2013). Hence, all these elements contribute to a low bargaining power for the buyers (Berger, 2011). Threat of Substitution With regard to the threat of substitution, the intensity is considered low to medium; that is according to various analysts. The demand for athletic footwear, equipment, and apparel globally is expected to rise by a great margin, as the customers are not able to substitute for these products and services. Notably, it is impossible to counterfeit Nike’s product due to the continuous innovation as well as the introduction of new products. Threat of New Entrants Other companies may decide to diversify their products into developing new athletics attires, and other companies can choose to outsource their athletic products from cheap sellers in the market. The capability of new businesses to enter the market is increased due to the availability of few barriers. Nevertheless, Nike Company is deemed to have diversified its business engagements, and as that, it has created or developed new products incorporated into the new technology. For instance, the Nike plus lines incorporate the 3D printing to develop customized designs of shoes (Berger, 2011). The company has also revolutionized its product supply systems so that the new business entering the market will pose a minimum threat. Its new technological innovation on products minimizes the threat of new players to moderate (NIKE Inc., 2015). Industry Rivalry There exists very high rivalry in this industry among the major businesses in Nike’s core market of athletic apparel and footwear. Puma, New Balance, and Adidas are very strong and large sportswear manufacturers that compete directly with the Nike Company (Borowski, 2013). The management team in Nike Company has to consider the emerging competitors regardless of the major players in the athletic attire industry. Emerging players such as Lululemon and Under Armour among others, which focus on the industry segment such as yoga focused apparel and performance apparel notably pose a business threat to the share market of the Nike incorporation. SWOT Analysis The largest strength possessed by the Nike incorporations is the ability of its brand to meet a self-expressive level of customer engagement through giving the end user the feeling that the company’s brand empowers those who wear their Nike shoes. Moreover, the Nike brand exists loyalty since they have developed an image of dependability as well as trust among the end users. Notably, it has an imperative interactive movement; however, they reveal a huge weakness through not incorporating the social media platform or phenomenon of pin boards in their strategy. Moreover, Nike has alienated itself from then casual running society through concentrating too much on the competitive aspect or athletics (Borowski, 2013). The opportunities for the company lie in advertising strategies. The company has spent so much on online platforms to increase its brand awareness through casual running experiences (Borowski, 2013). This is evident in that only four percent of the current media of the company is concentrated in an online platform as opposed to the posted higher percentages by their business rivalries (Berger, 2011). Notably, the company also sponsors events to acquire non-competitive consumer who engages in fitness as well as running as their hobby. The new brand messages by Reebok as well as Adidas, which their image denote fitness and running as innovative and fun rather than solely competitive, is viewed to pose a threat to the company since the rivals can snatch away their urban athletes who are in dire need of more laid experiences (NIKE Inc., 2015). PESTLE Analysis of Nike Company The PESTLE analysis focuses on the macro environmental factors that affect the Nike Company positively or negatively as it is an international incorporation, hence entails the political, society, technology, as well as economics (Nash & Nash, 2000). Political Analysis From a general perspective, the government of any state is responsible for creating economic policies, which later have a great effect on the success of any business located in the respective country (Borowski, 2013). In this case, the United States of America policies seem to favor the Nike Company, and as such, it has enabled the management team to modernize their products as well as services. The support such as the reduced interest rates, the international competitiveness of the tax systems as well as a stable currency status has boosted the company through the formation of the foundation, which might be a critical aspect of the Nike’s management team. Economic Analysis The most feared economic aspect by most companies or organization is the economic recession since it always presents adverse effects on the growth as well as the advancements of the Nike incorporation (Bohlander & Snell, 2010). As it was then before when the economy of the United States of America was being faced with a huge downturn, the consumers or the wearers of sports attires decreased tremendously. Besides, the US economy, the economy of Asia pose a threat in the company’s product as many of its product are manufactured and distributed from Asia. Moreover, the voices of labor works and martial will also increase rapidly (Borowski, 2013). Society Analysis The society analysis in this juncture is aligned with health consciousness of individual to keep fit each day. Hence, they tend to join fitness clubs, and as such, they will be forced to buy attires that are normally used on such occasions. With respect to this, the demand for the products such as shoes manufactured by Nike will tremendously increase (Borowski, 2013). For many years, Nike’s products have always been the immediate and first choice of the people when it is time to buy sport or fitness related attires in all over the world. Alternatively, Nike Company has missed addressing the issues pertaining to the conditions of labor as well as a factory in various locations of their production in Asia. Technology Analysis Efficiently, Nike incorporates all the technology and marketing ideas in their business activities. Notably, it only incorporates information on marketing systems to the economics of differentiation, innovation, as well as segmentation among others (Borowski, 2013). Hence, Nike Company has managed to maintain its name in the market. Nike has been able to maintain its name in the market and had positioned its works effectively on the marketing and production to improve its sales (Mard, 2004). Legal Analysis Nike incorporation being an international entity, it has always observed business ethics present in its working environment. Notably, it has always met its obligation through paying all due in conjunction to remain an environment-friendly business. The management team has ensured that all branch companies all over the world have observed all legal issues as per the state requirement (Campbell, Houston & Stonehouse, 2000). A comprehensive analysis and evaluation of the suitable Business Level Strategy Cost Leadership The management team in the Nike Company has outsourced all their sports attire manufacturing outside the States of America and currently it is cooperating with over seven hundred and eight five factories all over the globe (Mard, 2004). Such countries include Indonesia and Vietnam. Out of the advantage of the low salaries paid out as expenses, the company makes over 80 percent of revenue. Hence, the management team can re-invest the extra revenues into postproduction business activities such as sales, distribution, as well as marketing. In turn, these activities will eventually increase the company’s potential to grow (NIKE Inc., 2015). Notably, outsourcing will assist the company to minimize the cost of operation effectively and in turn, boost its competitiveness in the industrial market, and as such, the company will be able to price its brand at a rate that is competitive than other competitors operating in the same industry. Product differentiation Just like any other company with an intention to grow and win the entire market, Nike incorporation has a distinct differentiation strategy. The strategy is to develop the company as the only company with the standards in athletic attires. The company’s product differentiation is constructed on the power attained by their brand, its high quality of products, and the interrelationship with prominent athletes. Such athletes may have performed in the world Olympic marathon (Borowski, 2013). The brand, NIKE, is the most powerful asset the company has in their portfolio, which accounts for about 85 percent of the total annual revenue to the company. Notably, the company has position itself as an influential fashion brand, not only as a leading athletic brand. Nevertheless, the customers are compelled to completely utilize the products from the Nike Company for competitions as well as recreation through continuous advertisement with well know athletes in the world. In addition, through their professional brand management, Nike Company provides an increased awareness of the uniqueness of their products, even with a few modifications compared to other products; Nike incorporation can still win loyal customers (Borowski, 2013). Corporate- Level Strategy Innovation Innovation is the heart of any other business that wants to remain competitive in the market. As that, Nike is not exempted. Innovation is a major element in the growth of its business (Hunger & Wheelen, 2014). Nike company is one of the many businesses that continuously focus on delivering new innovative products to its customers in a way that is suitable (Johnson, Scholes & Whittington, 2008). They emphasize on unique and quality products to their customers, who at most cases are athletes (Hunger & Wheelen, 2014). For instance, in the Nike sports research lab is the place where the scientists, designers, athletes, as well as engineers converge to develop and establish the vital performance insight that in turn drives the company’s innovation goal (Johnson, Scholes & Whittington, 2008). Notably, in the NSRL venue, they majorly focus on the perception, biomechanics, physiology, and the athletic performance. Producing athletic equipment that will eventually eliminate injuries and maximize the level of comfort with their science insights remains one of the major goal and objectives of the company. Nevertheless, Nike Company has come up with Nike +, a platform to track fitness from various users as they undergo their exercises through apps as well as sports watches. Moreover, Nike allows their customers to present their customize design shoes of their own for the purpose of producing them. Recommendation for future strategic direction While embarking on the company’s strategic plan, it is critical to state that the company is operating in an industry that is very competitive, and as such, the management team ought to be on their toes to observe any shortcoming that may lead to their downfall. Innovation stands a great opportunity for the company to continue dominating in the market (Johnson, Scholes & Whittington, 2008). Today, people are continuously in search of new products that meet new technological advancement regardless of their costs, and if any company may be able to meet this condition, then it will be top high in the market (Hunger & Wheelen, 2014). In this case, the recommended future strategic direction will fall on the notion that the company can be able to co-exist and fit in the new world that is technologically changing daily. The company needs to engage in a technology assessment for their products. They need to research daily in the market and acquire what their customers and commenting on their products (Johnson, Scholes & Whittington, 2008). This will be aided by establishing online networks or social media such as Facebook, Twitter among other and continue interacting with their customers on a daily basis. Second, product differentiation is a major concern. The customers should be able to differentiate Nike’s product from those of the competitors. As noted earlier, small business and the large one are diversifying their product and have begun to produce athletic attires. Most probably, most of them will begin by imitating those products that already exists in the market as an entry strategy (Hill & Jones, 2010). If the customers will be able to differentiate Nike’s products from those produced by other companies, it is likely that the new entry will shut up their plants since there will be no more capital to sustain them in the market. In conclusion, the strategy remains the path for any business success (Bohlander & Snell, 2010). The plan is crucial and must be strictly followed to ensure there is no downfall. Notably, the management team should continuously engage in restructuring their strategy daily, as they study the industry in regards to their production. Moreover, they should ensure that they observe the rules and regulation pertaining to being socially responsible to their employees as well as the larger society, who are considered as their customers. This will greatly boost and help them be at the top in their business. Reference list Berger, A. (2011). Global corporate strategy - honda case study. Place of publication not identified: Grin Verlag Ohg. Bohlander, G. W., & Snell, S. 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