Organizational analysis of the Nike Company - Research Paper Example

Nike’s Organizational Analysis with Respect to Modern Day Challenges SWOT Analysis Following is the most valuable and important part of this report which is none other the SWOT analysis of Nike: - Strengths Strong Brand Name: The company is having prestigious image in sports garments and sneaker industry. Nike is having a well vested and protected brand power that it can use in order to win the hearts and minds of the clientele in developing parts of the world as well Loyal Clientele in Professional Sports Circles: The athletes and other sportsmen and women have been known to favor Nike whenever they can. However, the company needs to enhance breadth of its product lines in order to attract general public in the near future Sensible use of Outsourcing: The company used trend of outsourcing to its advantage in the past few years and now it is an ideal time for offering Nike’s world-class products to the population of developing and emergent markets Weaknesses Poor Linkages with External Environment: The company is not changing in accordance with modifications in the external environment and therefore, its organizational culture and structure remained rigid in recent times when flattening of the layers was warranted Customer Relations Failing: The company has no formidable system emplaced in order to record changes in consumer tastes and preferences and because of this reason, its offerings are getting obsolete and outdated rapidly. The company needs a proficient CRM department and it is the most significant weakness of all Weak Research and Development: The inability to develop new products is a big question mark on a big company like Nike. The Research and Development department must be empowered so that it can become capable of doing out of the box thinking whereas, Marketing and Sales department must also work closely with the abovementioned one in order to develop marketable products Dropping Sales in General Public: Any company in luxuries’ business makes and generates profit by selling its products to general public but it is not the case with Nike. People of all nations are starting to think about fulfillment of basic and fundamental needs of life and therefore, they are not wasting their money on luxuries. Given the current consumer behavior, the company has to develop multipurpose footwear as soon as possible Opportunities Emerging Markets: The company have to decide to enter emergent markets because opportunities for luxuries are literally dancing around in the featured parts of the world. The levels of disposable income is rising and market for luxuries will expand in a few years from now Price War: The company ought to have its products offered at reasonable prices in developing markets so that initial customer base can be developed. Developing nation’s people do not have sufficient buying power and therefore, price reasonability is a necessity for the company Threats Recessed Global Economy: The drop in disposable income resulted in lessening demand for luxuries worldwide and surely sports goods are not necessities to say the least. The developed nations are experiencing recession and in this way, people are not spending money on luxuries Changing Consumer Preferences: The customers all around the world look to buy footwear that is multipurpose in nature so that they can be used in multiple scenarios of life such as professional and personal versions of one’s existence. However, Nike’s products are good for usage in playing field only Competition: Other companies such as Reebok are establishing their brands as the ones which can be used in one’s daily life and they are quite fairly applicable in the playing field as well. The Nike is in for a rough ride and it may lose all of its share in the market in a few years if it cannot bring viable strategic change in the near future. TOWS Matrix for Nike Following is the TOWS Matrix of the Nike: - SO Strategies The company needs to develop its market share in developing and emergent economies by using its brand image WO Strategies Nike requires proficient CRM department in order to keep a close eye on changing preferences of the clientele ST Strategies The company is required to develop new multipurpose footwear in order accommodate changing consumer preferences in the developed countries WT Strategies Nike needs to drive down costs of production in order fight off economic recession in key markets Strengths Weaknesses Key Strategic Issues for Nike Nike is no doubt a leading manufacturer and provider of sports goods and equipment throughout the world filled with hundreds of nations. The production facilities of the company are operating in distant parts of Bangladesh and India where employees are paid on an hourly basis[Lea04]. The Nike as a company is the most suitable instance of an organization which has worked tremendously over the past few years to incorporate outsourcing within the very fabric of itself but recent problems with the company are originating within its strategic alignment with the outside world and external environment in a general way. The company is operating in order to provide state of the art gear for sportsmen and women all around the world. Nike is clearly feeling reluctant in terms of adopting change and therefore, lagging behind in the industry of footwear that is rapidly evolving in order to incorporate growing demands of the modern consumer. The company needs to design and market multipurpose shoes so that public can use them in wide range of scenarios of life. Nike as an organization is serving a very specific and unique clientele in all regions of the world. Major KSIs are described as follows: - Changing World and Static Nike: Not an Ideal Marriage The international economic and fiscal pressures have caused people to drop their expenses on purchasing luxuries and as Nike’s products qualify as luxuries and therefore, they also took a notable hit as their global demand decreased[Fla09]. The reduction in demand for luxuries had been motivated as people’s level of disposable income dropped and they started to spend their money on fulfilling their needs while ignoring the temptation to buy luxuries. The whole idea behind modern consumer behavior is simple because it is all about saving money in order to get through futuristic rough times. The company is required to modify its product offerings in the light of changing consumer behaviors. They need multipurpose footwear which they can use in multiple scenarios of life. Marketing department has to work with Research and Development Unit in order to pull this off. International Economic Conditions, Disposable Incomes and Market of Luxuries The rough times are expected due to recessing global economy. The company is facing problems in creating new, loyal and repeat customers and therefore, its revenues are diminishing with the passage of time. Nevertheless, the production costs for the company are rising manifold because contractors are gaining more and more bargaining power in recent years and which they are using to get increased cut of the profit every year[Chi11]. The local governments on the other side are increasing taxes in order to retain drainage of money to foreign countries and in this way, living is getting tough for the world leading sports goods and equipment provider. The company has to expand its operations in emerging markets and in this regard top management will be majorly responsible to forge strategic alliances and acquisitions with local organizations. Nike’s unproductive Narrow Focus on Professional Sportsmen and women Nike is surely one of the leading brands and it is quite significantly liked in professional circles of athletics and other famous sports but the company is needed to sell its products to general public in order to remain afloat in the globalized world of economics. The company is required to modify its product offerings and make them more appealing to general public[Urd13]. The Research and Development has to work hard in order shave off extra cost of production so that the products can be offered at reasonable prices in both developed and developing markets. Augmenting Product Offerings to Attract Population of Emergent Nations The economic pressures have motivated people to get professionally engaged and because of this reason, they are always looking and searching for the footwear which can be used in the office setting and in their personal lives as well. The modern customer needs shoes which should be applicable to multiple scenarios of life. In simple terms, when one thinks about buying a multipurpose footwear then Nike does not appear as a likely choice and there lies a problem[Fan11]. The company has to reengineer and remarket its offerings with notable level of augmentation because serving the needs and wants of professional sportsmen and women is not a viable strategic option for the company anymore. Nike as a Sitting Duck The delay in strategic decision making and lethargy in changing the outlook of Nike as a company mean that the firm is not closely linked with its outward environment. Additionally, the Research and Development Unit of the company is either nonexistent or it is doing its job very poorly at the present time[Kel121]. The company is more like a sitting duck whereas, world around it is changing so rapidly that in a few years from now, Nike will implode on itself because of its incapability to generate substantial sales revenue which will render it unable to cover operational expenses and making a profit will appear like a dream at that point in time. The strategic management of the company has clearly fallen into the trap of a fallacy that states that everything will be fine in the future but it cannot be guaranteed without incorporating strategic change. The company is commencing to experience vicious cycle that involves lessening organizational ability to acquire needed resources from the external environment. The abovementioned reality is evidently happening because the company is not being able to generate sales and therefore, the piles of company’s obsolete inventories are starting to gather even in the most favorable economic and national systems of the world. The top management has to initiate the process of strategic change and it should include offering of existing and new products at reasonable prices in both developed and developing nations. Incapability of America and England to Support Nike Nike traditionally and historically served population of developed nations such as America and England but both of the nations are in turmoil and that is why, local populations are already engaged in attempts of fighting off dropping disposable incomes. The former economy is hit hard by the ramifications of semi-permanent recession whereas; the latter one is literally left alone in the community of nations after deciding not to join European Union[Luo11]. In the light of above arguments and discussion, it can be assumed that both of the featured economies are not in positions to support and sustain Nike which is providing luxuries when necessities are indeed needed. Need to Shift Focus Nike is also required to offer its product lines in developing and emerging markets of the world[Luo10]. Nike should see the working and strategic planning of Disney Land that has established its facilities in India by now and looking to expand from there to other similar parts of the world. Nike must understand the fact that the future of luxurious products and services lies in emergent markets where income levels are sharply growing for the period of past decade. Nike’s Brand Quality might do the Trick in Emergent Markets Nike may be able to reap success and establish loyal clientele in the developing geographical areas with the help of strong brand name and the cause of market dominance will be assisted by pricing the products as cheaply as possible[Chi11]. Secondly, the expense burden will also dissipate as local production will be sold to indigenous population whereas; the company will gain the power to negotiate with local governments to get lower tax rates. The rates will be reduced as an acknowledgment and appreciation for company’s willingness to finally work to serve the local population by offering high quality products for reasonable prices. Top management needs to take the charge of the situation and work in order to make the company’s products attractive to masses by driving down their prices in the international markets. Recommendations and Suggestions The company is going into turmoil and therefore, it needs a complete turnaround in order to remain alive in the globalized world where England and America are no longer center of economic activities. The Nike as a company is required to realize the fact that both nations that were central to its product and marketing strategy, had not been able to sustain it anymore. The luxuries are ideally marketed in economies where disposable incomes are either rising or have risen to accommodate people’s impulsive buying. Nike must understand the fact that humans can very well survive without its state of the art sports goods and therefore, it should try to make them more applicable in the daily life of the customers. The emergent markets of India and Brazil are becoming centric to world of economics. Additionally, Disney Land and world leading hotel chains are shifting their operations to less developed nations because in due time, people of these geographical parts will initiate to throw their money into luxuries and companies are getting ready to catch the money once it is thrown. Nike should do the same in order to survive in the changing world of business and commerce. Action Plan for 2014 and 2015 Period Strategic Activity March-May 2014 Conduct survey about changing consumer preferences worldwide and compel recommendations for new and improved products for R&D June-November 2014 New products will be designed, prototyped and launched in specific geographical areas for quantification of public response December 2014-Feburary 2015 Acquisitions of production capacity will be done in order to house manufacturing in the developing nations while, multipurpose footwear are to be offered in developed one as well March 2015- December 2015 Sales will continue along celebrity endorsement in developing nations while in developed ones online media should be used to tell people that Nike’s products can be used in various scenarios of life Conclusion This section of the report has reviewed the current strategic position of Nike and found that the company is attempting to focus on nations that are in the process of fiscal turmoil at the present time and therefore, the company is strongly recommended to shift its focus towards emerging markets in order to return to profitability. The asset of brand power will most probably do the trick for troubled Nike. Additionally, the company requires focusing of middle working order of the society in developing nations of South Asia. The key recommendation of serving developing nations is tied with significant growth of disposable incomes in emergent economic parts of the world and therefore, their ability to sustain luxuries has grown considerably in the recent past. Nike is also supposed to offer its products against reasonable prices in order to stimulate local demand in the featured geographical and economic parts of the world. References Lea04: , (Leavy, 2004), Fla09: , (Flatters & Willmott, 2009), Chi11: , (Chiu, Choi, & Tang, 2011), Urd13: , (Urde, Baumgarthb, & Merrilees, 2013), Fan11: , (Fang & Qi, 2011), Kel121: , (Keller, 2012), Luo11: , (Luo, Sun, & Wang, 2011), Luo10: , (Luoa, Xue, & Han, 2010), Read More