Nike Case Study: Swot & Pestle Analysis of Nike

Nike case study

Introduction

Nike Inc. was established in the year 1964 by John Donahoe. Nike has seen a significant drop in sales and revenue in the last few years. In this report an internal and external analysis of the company has been conducted. Finally, recommendations have been made with which Nike can improve their sales and revenue.

Background

Nike Inc, is an MNC based in America who design, develop, manufacture and market footwear, apparel, sports accessories and services. The headquarter of the company is located in Oregon. They cover the largest market share in athletic shoes supply worldwide and are considered major supplier in sport equipment. They secured a revenue of 3.4 billion dollar in the year 2020. The company employs more than 76 thousand people all over the world. They rank within the Fortune 500 list in the United States. They have stores and operation in almost all the metro cities in the world thus, attracting millions of customers.

External environment

For external environment analysis, the PESTLE framework is being used.

Political

The political factors of a company are extremely important to a company. Political factors can determine the survivability of a company, their profit, their production, their marketing assignment help and many other areas. The whole backend work, work that is not apparently seen by people is affected by the political environment and changes in a country. Some factors that affect Nike are:

USA is the home country of Nike and they have a stable political system with the end of Trump rule. The country also has policies that allow companies to grow. Their interest rate is low and internal tax agreements are well arranged.
They produce and sell tangible goods which indicates that they always fall under changeable tax and manufacturing laws.
Changes in government, political conflicts, interest groups and such can affect the company.
Changes in government and political unrest can make customs difficult or may prevent exports and imports.

Economic

Nike offers their product in medium to high range which makes them less vulnerable to economic factors. Some economic factors that affect them are:

A collapse in the market could be bad news for Nike as well as their competitor. Collapse in market as well as inflation could lead customers to switch to cheaper products affecting the sales and profit figure of Nike.
Nike secures large portion of their profit margin due to the low-cost labor in the factories of south east. However, the labor prices of these factories and their working environment is changing which might lead to high prices.
Nike has resources to expand to small emerging markets and create market monopoly.

Social

The social situation, institutions, beliefs and change in public behavior affects the corporations. The following changes in the social situations affects Nike:

There has been a worldwide shift in health consciousness. People are becoming more dedicated towards health and fitness. People are trying to follow better lifestyle and purchase sport apparel for status.
The increasing exposure to social media also increases purchase due to social competition and FOMO factors.
The use of sweatshops by Nike leads to much criticism and various pressure groups has already asked for such products to be banned. This can hurt Nike’s sales.

Technological

Technology is essential for companies to bring in new innovations and design new products. Companies can now interact with customers and develop products that are in most demand among their customers. The technological factors affecting Nike are:

Social media affects the popularity of a product immensely. Nike uses social media to build their brand, but it can also cause irreparable damage to the brand if not used correctly.
Technology allows them to use metrics to optimize production, targeting and revenue.

Legal

The legal factors that are likely to affect Nike are:

Nike, like many other large corporations evade substantial tax amounts.
There are issues like sweatshop labor and poor working and living conditions of labors as well as shady marketing practices that might affect Nike.

Environmental

The environmental factors affecting Nike are:

Nike uses mass production which affects the planet. They not only pollute air but also soil and water.
Recently Nike has shown initiative for change in their environmental responsibility by moving towards more eco-friendly and green production methods.

Internal environment

For the internal analysis, the SWOT (Strengths, Weaknesses, Opportunities and Threats) framework is being used for Nike.

Strengths	Weaknesses
· Nike has a String brand awareness. It is one of the most popular brands in the world. Their logo and name are easy to remember and easily recognized by people who do are not even their target market. · They capture 31% of the footwear market globally. · Nike has a huge customer base especially loyal niche customers who follow their every trend, promote the brand, give feedback and participate in their events. · They have started t contribute towards environmental sustainability · Nike use celebrity and influencer marketing substantially, thus, attracting more customers and fan base under their niche. They have long-term iconic relationships with famous sports persons such as Michael Jordan. · They have also developed many side brands such as Converse and Hurley for diverse target customers. · Nike uses low-cost labor for their manufacture of products. Factories are based in Vietnam, China and Indonesia, as well as Brazil, Mexico, Italy, India and Argentina. · Nike has in house professionals for designing and product development who conduct thorough research. It is one of the reasons for immense success of Nike. · Nike conducts excellent marketing campaigns using demand generation expense. They use social media and other digital platforms to attract maximum customers and start conversation about the brand. · Their marketing campaigns also brings black community support showing their social responsibility.	· The sweatshops of Nike have poor labor conditions, child labor, low wages and poor working condition issues that can affect their brand image. · Nike’s retail sector is price sensitive. As Nike sells majority of their products to wholesalers and retailers, they have to match their price structures. · Nike is still facing a long-term financial debt due to previous losses. · Nike is still heavily dependent upon their US market for their major sales goals. US alone contributes to 41% of the sales. · Nike faces several lawsuits based on discrimination, gender issues, pay issues and many more. This could affect the company negatively. · Nike is dependent on sports products and accessories which indicates to a lack of diversification. They mainly cater to the sporting teams and due to the pandemic situation might prove problematic for the company. · Nike contradicts their own strategy through their “Move to Zero” pledge. Their corporate strategy claims innovation over sustainability while the pledge was to convert to 100% renewable energy and zero carbon emission. This shows a lack of commitment towards sustainability and is probably just a marketing trick. · Nike has also been accused of sexual harassment by previous female employees. In an article published in The New York Times, Nike has a toxic work culture and several occasions of sexual misconducted covered up by the company. This is likely to affect the company’s image.
Opportunities	Threats
· The markets in the south-east Asian countries, like, India, China and Brazil, are emerging markets and with their high population, they can provide immense opportunities for Nike. · Nike rules the market through their product innovations. They have started new product lines with wearable technologies which is the new cutting-edge technology in the sports section. · Nike has independent manufacturers for supply and production of their product. They can easily acquire new suppliers and manufacturers according to their need. It makes integration easier. · Nike has cut ties with many big retailers like Dillard’s, Fred Meyer or Zapoo’s for better customer experience and positioning. · Nike has the opportunity to acquire small or medium startups working with Artificial Intelligence to expand their market and incorporate new technologies in their company. · Nike has directed their target to customer direct strategy, by focusing more on digital selling rather than physical stores. This has generated more sales and profit for them.	· Counterfeit products affects the revenue of the brand significantly, by revenue and reputation. · The competitors in the market such as Adidas, Puma, Reebok and many other emerging brands are threats for the company. · There is an increasing pressure to spend more on marketing and promotion budget due to increasing competition and competitor behavior. · Due to their global operations, fluctuating currency rates affect their turnover. · Nike and Adidas have been on a patent dispute case study help in international courts. · Nike is affected by global recession as well as a drop in sales due to Covid pandemic. · Trade tensions between US and China can pose a serious threat to Nike as China has the largest number of potential consumers as well as many manufacturing units.

Recommendations

Based on the previous internal and external analysis, the following recommendations can be made for Nike:

Nike can make use of the opportunities shown in the SWOT analysis.
It is recommended that they pursue a more aggressive approach for expansion especially where free trade policies exist.
Nike should focus more on high-growth development countries to counter balance the performance drop in China.
Investing more in research and development could help them in product diversification and finding new niche markets.
Improving their sustainability strategy to remain transparent so that consumers feel proud to be associated with the brand.
Improve their employment and inclusiveness within the company.
More competitive marketing campaigns to gain more customer interest than their competitors.

Conclusion

From the above discussion, it can be said that despite being popular and leader in the market, Nike still has many areas which need to be addressed. Nike can improve significantly by following the given recommendations and gain significant competitive advantage over their competitors.