Marketing Report Writing Analysis On Nike Growth with SWOT & Pestle Analysis
Question ??
Choose any company (MNC or SME) of your choice –My choices are Coca Cola, Samsung, Apple, Singapore Airlines, BMW, Chanel, Canon, Google and Nike??
Solution the Report frame is::
INTRODUCTION
Philip Bill and Knight Bowerman in 1972 incorporated Nike. In the year 1975 it became international when it opened its office in Taiwan and now it operates in six continents. It is headquarterednear Beaverton in Portland area (Kathleen 1999). It’s a major supplier of clothing, footwear, sportswear and equipment’s .It sells products to retail stores through their own direct mechanism and also employ independent distributors. Nike’s operations are spread over 170 countries across the globe. All products are manufactured by independent contractors and products like footwear and apparel are produced outside United States, whileEquipmentismanufactured both in US and abroad. It operates through its three wholly owned companies: Cola Haan which designs and distributes foot wears (athletic and casual); Hurley international LLC deals in lifestyle apparels and accessories and Umbro Lts which designs and distributes footwears, apparel and equipment majorly for soccer. The third quarter 2012 financial records show Nike’s sustainable growth in the market. Its revenue has increased 16 percent in every market except Japan. Expenses relating to selling and administrative grew at a lesser rate than revenue that is 10 percent.
SWOT ANALYSIS
STRENGTH
- Nike has spread its operations across the globe in almost 170 countries and thus enjoys the global competitive advantage.
- It does not have its own production houses thus it has the advantage of concentrating on research and development, marketing, choosing cheapest source or supplier for production of their products.
- Its joint venture with Apple helped it to take a step forward in the field of innovation.
- It came out with innovative designs in footwear attracting the youth market .It provides its customers an ability to design their own show through their website.
- It has taken steps to change the unethical views regarding poor working conditions in its various outsourced factories like paying the workers according to the wage minimum standard, ensuring no forced overtime, providing social security, child care and other employee benefits etc.
WEAKNESS
- Nike major source of revenue that is nearly 65 per cent comes from foot wears. Thus it is heavily dependent on only one service lineusing it as a cash cow thus making it vulnerable to market changes.
- Its product demand is mostly dependent upon sports fashion thus it experience fluctuating demands in the market. Thus it can be said that its products have a shorter life cycle as they may fade out as fashion changes.
- It still holds negative image in overseas market regarding poor working conditions of employees.
OPPORTUNITIES
- Nike has their own stores thus can capitalize on providing customers unique experience
- It can come up with other products like sports wear and accessories like bracelets etc.
- Nike can advertise and participate in endorsements especially in Olympics, IPL etc.
- It can tap more in emerging markets like India and China, where disposable income of people is increasing.
As it does not own factories, Nike do not have cash tied up in inventories .Thus can utilize the same in R&D (Reimer & Nayar 2008).
THREATS
- Nike has heavy reliance on its outsourced suppliers posing a greater threat of increase in raw material cost etc.
- The footwear market is highly competitive with Adidas and Puma giving a serious threat by attracting its target segment.
- It faces a serious threat of change in economies of its target market like increase of excise duties, inflation, interest rates etc.
- Economic downturn in Asian countries and earthquake in Japan.
- Threat from human right campaign groups over its ethical business practices.
- The local footwear manufacturers also compete with Nike giving tough competition by providing products at cheaper rates.
PESTEL ANALYSIS
POLITICAL
Nike trade majorly in America, United Kingdom and other European countries. Thesecountries have stable political environment and boost import export and other policies like government subsidies for setting up operations in underdeveloped areas. Thus Nike has an advantage as it is not affected by exchange rates (Business Week. 2006). On the other hand Nike needs to keep an eye on groups that can force ban on methods Nike adopts.
ECONOMIC ANALYSIS
From over last 20 years there has been increase in demand for products in the sports clothing market which suggest that Nike will have a profitable investment if it continues business in the same industry. People are spending more on such products .
SOCIO CULTURAL
As Nike has global presence in market it needs to focus consumer buying habits, their changing taste and preferences. For example the following social factors are contributing to Nike’s growth:
- There is increase in health consciousness among people
- People are focusing on exercising and dieting in their daily routine
- They are becoming brand conscious and thus are attracted to be associated with popular sports players.
- There is increasing demand for green products.
- Also, the number of internet users has increased benefiting Nike with their online presence.
TECHNOLOGICAL
The technologies in the market are changing at a rapid speed and are helping Nike to make a robust mechanism to deliver quality products to customers
- The adoption of RFID by Nike have helped it to strengthen its supply chain process
- Adoption of e- business as a source of delivering goods to customers: for example Nike uses its online site to sells its products where customers can design their own footwear.
- The technological advancement has helped Nike to customize their products according to customer taste and preferences
ENVIRONMENTAL
The environmental factors are becoming an area of concern for Nike in the market.
- Nike uses animal skins for leather and thus has to consider their extension or forced ban on using such resources.
- It needs to consider the focus groups that may boycott its raw material use and put pressure on delivering green products. Thus it needs to maintain good public relation in market.
LEGAL
For all companies legal issues are of key importance to the company as these laws can determine how an organization conducts its business. It is essential that a business complies with these rules or else they will have to pay a higher price.
The acts that have to be obeyed are the consumer protection legislation, the trade descriptions act. The sales and supply act, the weights and measures act, the equal opportunities act.
PORTERS FIVE FORCES MODEL
THREATS OF NEW ENTRANTS
The threats of new entrants are low in apparel and footwear market. As top players like Nike, Addidas, Under armour are having a larger market share and have money to maintain high performance level. However a new entrant like Calvin Klien which is already doing well in other market segment, its entrance into this industry might pose a threat to existing competitors.
THREATS OF SUBSITUTES
Nike deals in products like apparels and footwear that do not have substitutes available in market. But the threat is that people tend to search for alternatives in terms of lower price and quality. For example the customers may not be brand conscious and thus would like to go according to latest fashion like wearing collared t shirts or youth market attracted towards converse shoes providing trendy designs.
BARGAINING POWER OF BUYERS
Bargain power of buyers is often dependent upon two factors: branded and non-branded products. The consumers demanding non branded products are often price conscious and the market thus is buyers determined. However in footwear and apparel industry fashion can be termed as lifestyle and thus customers are willing to pay an extra penny to buy branded products. Therefore the brand dictates the market scenario.
BARGAINING POWER OF SUPPLIERS
The bargaining power of suppliers is rated as moderate in the market of apparel and footwear because they have the power to increase prices. For instance, if a cotton company asked for more money to sell their goods to an apparel manufacturer, and the threat was if they didn’t get the increase they would go to the competition, then they have the power to influence the manufactures. As Nike do not operate through its own stores, the suppliers and manufacturers increasing their raw material prices can make Nike products expensive in the market and lowering their profit margin.
EXISTING RIVALRY
The apparel and the footwear industry have become saturated because of the highly competitive nature of business. Nike has two main competitors in the US market: Adidas and underarmor. Billabong, Puma and Asics are also grabbing a greater share inmarket especially in specific product assortment like Asics in running shoes. (Robins et al. 2009). Moreover the emerging local market with cheaper prices and trendy products are also taking away Nike share in the market.
FOUR FUNCTIONS OF MANAGEMENT
PLANNING
Nike mission statement reflects its personality and differentiates itself from competitors in the market. It is directed towards a larger market segment it says “if you have a body, you are an athlete. Thusits target audience spread to all the ages: be a physical therapist, basketball player or a high school student.(Prahalad & Ramaswamy 2009).
ORGANIZING
To achieve its goals Nike employs a robust supply chain mechanism. It relies on its supply chain mechanism for economies of scale. It does not own factories and have several channels including Nike futuresprogram etc.Where retailers place orders which helps in better for casting and stocking of inventories. In addition to this Nike also have retail branches instead of wholesaling. ( Mintzberg 1993). Nike spends huge investments in research and development. New products are developed at a fast pace and are tested by both internal and external bodies which includes professional athletes.
CONTROLLLING
Nike keeps an eye on its growth rate and market presence by measuring its performance in the industry. For example in third quarter of fiscal year 2012 the revenue growth of Nike was 16 per cent. Also the capital expenditures in the form of long term debt are limited. Inventory turnover is an important measurement factor for Nike. Returns for Nike have increased to a significant level because of its organic growth and various repurchase programs. (Nikebiz 2011)
LEADING
As Nike deals in the premium market segment it continues to enjoy higher profit margins in the industry. Its major contributing factors are its supply chain and strong manufacturing base .These factors will help the company to keep stable margins. Moreover its huge cash flows as well repurchase. Allows Nike to capitalize opportunities of growth
CONCLUSION AND RECOMMNEDATIONS
Nike is a market leader and provides value products to consumers. However as it competes in the premium market segment it will continue to operate in a highly competitive market
The next five year plan can involve a shift in Nike focus from traditional division in categories like footwear, equipment etc to individual sports, selling of other assortments like sunglasses, hats and other accessories. On the other hand Nike strong financial performance will help it to cash on new innovation with its robust R&D . Apart from main focus on athletic apparel and footwear Nike can make further development in casual wear items. Further, Nike can inbuilt RFID technology into its supply chain system which will help it in operating more efficiently in the market and also gain six sigma quality standards. There is also an opportunity to tap other market segments like Asian countries where disposable income of people is increasing and they are becoming more brand conscious.
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