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The Company and Its History
Nike was founded in 1964 by a University of Oregon track and field athlete named Philip Knight and his coach, Bill Bowerman. Nike was actually born as blueribbon sport however it was renamed Nike after a Greek mythology, goddess of victory in 1970 (Nike, 2020). Nike Inc. is considered the worlds largest athletic apparel company and is most known for their apparel and footwear line. They are a multinational corporation that is engaged in the design, development, manufacturing, and worldwide marketing and sales of footwear, apparel, equipment, accessories, and services (Nike, 2020). They are headquartered near Beaverton, Oregon, in the Portland metropolitan area.
Product, Price, Place, and Promotion
The profitability and expansion of the sports footwear, clothing and equipment industries are governed by Nikes marketing mix (4Ps). Nikes marketing strategy in this business study includes both sporting goods and leisure items. For instance, the business specializes in making shoes for basketball players that play professionally. However, based on the characteristics of Nikes business goal and vision statements, these items are offered to all clients globally for sports and leisure activities. The 4Ps of the corporation change following the dynamics of the global athletic goods market (Alsaffar, 2020). This type of development is essential to the companys success because it enables it to adapt its marketing mix in response to market trends, such as shifts in the American footwear industry. Therefore, Nikes marketing approaches hone the 4Ps to adjust to national, regional, and global market developments.
Nikes most popular items are shoes, and the companys general marketing plan continually expands the product mix by adding other product lines. For instance, the business now provides tennis shoes, cricket shoes, and shoes for different sports. Additionally, Nike offers clothing items, including jerseys, shorts, and associated goods (Alsaffar, 2020). The marketing mix of Nike contains a product range for golf clubs, including other accessories and equipment. The corporation sells these items under several labels, including Air Jordan and Converse. Nike increases its product mix to meet the demands of its target markets and market segments based on this marketing mix component, better adjusting the 4Ps to market characteristics.
Nike employs prestige and value-based pricing models for all of its goods. Value-based prices apply to a companys assessment of current market prices when determining the cost of its goods. Before they use product price, they evaluate the general response of the clients to see if they are ready to pay for the things. Nike may increase its revenue over time by using this pricing approach.
The marketing mix component describes the locations where the products of the sports goods firm are accessible, purchased, or distributed. Nike sells its athletic footwear, clothing, and equipment at a variety of locations across the world, including big-box stores and niche shops (Alsaffar, 2020). Through its online site and Niketown retail locations, the corporation manages the distribution of its products. The business relies on excellent product promotion to maintain a positive brand image. Nike uses colleges, local sports teams, and other groups for advertising its products as direct marketing initiatives. The business runs sales campaigns to entice more clients, including discounts and special incentives.
Mission Statement
Nikes mission statement is to inspire and innovate for every athlete on the planet. According to the firm, everyone is a sportsman. The companys strategic aim of extending out to the worldwide recreational and sports footwear, clothing, and equipment industry is represented by this mission statement. In addition, the business mission statement of Nike stresses innovation, impacting the organizations activities. This element is implemented as part of Nikes general competitive strategy and intense growth plans, which comprise a system of continual product improvement using technological advances.
The Current Situation: The Industry, Market, and General Environment Analysis
Nike is among the most successful sports footwear manufacturers, along with such companies as Reebok and Adidas, as well as leisurely footwear producers. In current history, the firm has moved into the garment sector in order to reduce its reliance on the volatile sports footwear market. However, the corporation must now determine whether it wishes to remain a sole player in the footwear sector or expand its business into other areas. Although it has had significant success in the garment business, footwear makers as a whole still control just a small portion of this potentially profitable market.
Nike is in the sports equipment and accessories business. The sports sector is becoming the largest in the world as more individuals participate in sports and leisure activities in order to increase health consciousness and manage stress. Sports have grown in popularity as both a passive and proactive form of entertainment. Consumers are increasingly spending more on sportswear, with athleisure clothes and accessories accounting for a substantial portion of the cost (Allied Market Research, 2022). The worldwide sports equipment and accessories market is expanding rapidly and is distinguished by the rapid acceptance of newer technology and adaptability to shifting trends. The sector is growing tremendously on e-commerce because it is a primary retail channel nowadays that allows buyers to evaluate all available options.
As for Nikes current situation in the market, it is a global business based in the United States and is the worlds leading seller and producer of athletic shoes, clothing, and other sports gear. Nike was the worlds top clothing brand in 2022, with a brand equity of around 33.18 billion U.S. dollars (Statista, 2022, para. 3). Hence, the company made steady progress and numerous sales around the world.
Concerning the general environment analysis, several factors determine the firms development. As such, one of the essential political factors is the relationship between the U.S. and China, the first being Nikes most significant target market and the second supplier. Furthermore, the COVID-19 epidemic caused an economic downturn, making Nike lose sales due to extensive physical shop closures. Three regional economic tendencies have formed the global garment market: substantial development in developing nations, a shaky resurgence in the United States, and a lack of success in the European segment.
As for social factors, consumers expect more adaptable clothing with greater practicality, which means shops continue to develop new types of clothing for men and women. When opposed to other consumer commodities, apparel remains essentially a discretionary choice, making it more vulnerable to changes in the economy. However, Nike is conscious of societal shifts and how the ideals of its most significant clients have evolved through time. In the technological aspect, a patented blend of machine learning, information science, deep learning, artificial intelligence, and recommendation algorithms determines the success of modern large corporations. In terms of the environment, Nike was associated with sweatshops and a detrimental environmental effect, but recently, the company has made significant advances in becoming environmentally mindful and sustainable. Finally, the legal factors for the organization include working conditions requirements and patent infringement suitcases.
S.W.O.T. Analysis
The S.W.O.T. analysis is specifically essential for the strategic plan for Nike. The two specific areas that Nike needs to address and correct for a more positive change are the sexual harassment complaints and lawsuits regarding discrimination. In 2018, four former female Nike employees sued Nike over gender discrimination and sexual harassment. This case is still ongoing and has fourteen plaintiffs involved currently.
One of Nikes opportunities to enhance its position within its market is starting research and development projects to implement artificial intelligence. Nike will be looking to harness the firms expertise as it improves its data offerings. Its ability to produce applications that can analyze the body in 3D will be helpful to both physical stores and online shopping (Larkin, 2018). This project would complement Nikes services perfectly as the need for artificial intelligence is moving forward faster since Covid. Multiple managers realized that businesses could maintain better by having technology that allows their employees to work from home. Moreover, numerous companies quickly recognized how technology allowed them to continue to prosper.
The last area that deserves specific attention in strategic planning is the threat of counterfeit products. The problem could be dealt with by applying Nikes ability for additional innovative products. A significant improvement that Nike could make is to open their manufacturing plants, whether in the states or not. Open manufacturing enables open innovation, which provides the possibility for bottom-up ideas to penetrate industrial enterprises production processes and make a difference.
Environmental Scan Summary
Nikes headquarters are in the United States, which offers outstanding growth policies that are extremely helpful to this firm. However, Nike, a firm that manufactures and sells tangible items, is constantly subject to taxation and manufacturing legislation shifts. Various political problems can make customs-related procedures difficult, if not impossible, to complete. Furthermore, a market collapse might be terrible news for Nike because customers may choose cheaper items. Nike has the means to pursue tiny new areas where they can sell their items. Global advances in health consciousness indicate that an increasing number of people are adopting healthier lives and will buy sportswear. Nike, on the other extreme, is often chastised for its questionable manufacturing practices. Nike will additionally be able to employ critical information-based metrics as a result of technology advancements, allowing them to improve targeting and manufacturing while increasing income. In legal terms, Nike faces risks in labor operations and patent lawsuits. Finally, Nikes mass manufacturing plants are undeniably damaging the environment. On the other hand, Nike looks promising a shift in their existing methods, with a great determination to become greener.
The environmental scanning provides a particular picture regarding the competitive position in the companys marketplace. Namely, the influence of the external forces seems to threaten Nikes position. Moreover, the scan provides information about the challenges that the firm can experience with attracting customers during crises and building a solid brand. However, the scan does not demonstrate the competitive power of the company, although it indicates that Nike is flexible and can deal with multiple challenges.
Porters 5 Forces Summary
The barriers for new firms to penetrate the market and establish a business are relatively low, yet these new enterprises are unlikely to compete with Nike due to Nikes economies of scale. As a result, the threat of a new entry is an extremely weak factor in this setting. Since Nike is a well-established brand with great R&D skills, there are no prospects for a replacement to take its position; hence the threat of alternatives is a weak factor. The reduced customer switching cost is the critical driver that provides them an advantage. However, this is readily overcome by the reality that individual consumers contribute so little. Customers negotiating power is thus a modest factor. Latex, cotton, viscose, synthetic fibers, and other materials are supplied to sporting brands by many vendors worldwide. This reduces the total negotiating strength of the industrys suppliers. As a result, suppliers negotiating power may be fairly considered a weak factor. Finally, despite the fact that Nike has few direct competitors, the competition is fierce, and hence rivalry among competitors is an influential factor.
Porters Five Forces analysis clarifies the companys competitive position in its marketplace to a greater degree than the environmental scan. In fact, it demonstrates that Nike is the market leader with diversified and high-quality products, as well as its own technologies. The picture and identity of the brand are viewed by the customers mostly positively, which is supported by the sports trend. At the same time, Nike is almost invincible in the competition with top sellers and newcomers in the market, although there is an issue of counterfeit products.
The International Performance
The international performance of the company can be viewed in several aspects. As such, Nike has coined its Just Do It phrase to work in different cultures. Since every culture has a distinct set of interconnected notions about what a perfect person should be, Nike has chosen the most neutral representation of its brand image so that it can overcome cultural barriers. According to NIKEs latest twelve months foreign exchange rate adjustments is -$143 million (Finbox, 2022, para. 3). Compared with the previous year, the foreign exchange rate adjustments have decreased, which means that the value of a currency has depreciated. The change in exchange rates supposes that the cost of imported items has increased for Nike, negatively impacting investment success, interest rates, inflation, and the employment market. Furthermore, Nike may see demand begin to decline as the likelihood of a recession rises with each Federal Reserve rate hike. Moreover, the political instabilities have led to Chinas market cooling significantly, with yet another month of year-over-year sales decreases. Thus, although Nike has successfully overcome cultural barriers, it struggles due to changed exchange rates and political instability.
Strategic Goals
There are several core strategic goals that could be provided in accordance with issues and opportunities addressed in the S.W.O.T. analysis. The first goal that could be prioritized due to the ease of achievement and a short time to completion is working on the organizational culture. The change should eliminate the sexual harassment complaints and lawsuits regarding discrimination. The goal could be measured by the employees reports on the working conditions. Next, reorganizing the companys operational structure to open the manufacturing system could be achieved in one to two years. The goal is to be measured by the number of shared work processes among the different departments and hierarchies of the employees. Finally, research and development projects to implement artificial intelligence should be implemented in five years to enhance the logistics and working processes of the company. The open manufacturing system mentioned earlier should eliminate the contingency regarding the rising costs of technology.
Marketing Positions and Opportunities for Growth
As was mentioned earlier, Nike has multiple opportunities that it could implement for strategical growth. One of the marketing positions that could be proposed to the company is diversifying its staff for the goal of open manufacturing and eliminating discrimination. This decision can help in providing more perspectives on the development of new products for the extended target market of the firm. Moreover, Nike has the opportunity to test the researched artificial intelligence for marketing purposes, such as predicting consumers tastes and trends.
Corporate Social Responsibility
Nike may demonstrate its commitment to corporate social responsibility by treating its staff fairly and ethically. This principle is particularly important for facilities that operate abroad in countries with labor rules that contrast with those in the United States. The second recommendation is that the company should specify an obligation to obey all applicable rules, regulations, and compliance requirements. Nike must follow the norms established by the society in order to operate as a business. Finally, diversity and inclusion must initiate policies that promote greater representation of various groups of individuals. People from various cultural origins, faiths, ages, sexes, sexual orientations, abilities, and impairments may be included in these groupings. Diverse job experiences, thinking processes, and personality types are all examples of diversity.
Measuring Plan
The strategic plan can be measured by tracking several metrics. The diversity and non-discrimination policies could be measured by providing monthly reviews of working conditions and interviews with employees. Moreover, the company should set objectives for diversifying the staff and periodically check the appointed metrics. The results of training and re-training should deliver data on the success of the open manufacturing launch. Furthermore, the company might measure the productivity of its employees after the change. For the goal of research and development, productivity versus cost-effectiveness should be measured in terms of how many projects have been completed in a particular time and with financial resources.
The Financial Performance and Condition
The financial performance and condition of the operational budget could be assessed for further analysis. Concerning profitability ratios, Nikes gross margin is 44.98%, while its operating margin is 12%, and the net margin of the company is 11.76% (CSIMarket, 2022, para. 1). Nikes financial structure favors equity capital over debt, with a debt-to-equity ratio of 0.58, albeit this figure rose significantly in 2020 owing to store closures (MacroTrends, 2022, para. 1). Nikes protracted debt to total assets ratio fell from 0.33 in 2021 to 0.33 in 2022 (0.29) (Nike Inc, 2022, para. 2). It might imply that Nike is growing less reliant on debt to build its business. Thus, Nike demonstrates the capacity to produce income at a healthy pace while minimizing debt and enhancing shareholder equity.
The key performance indicators are also essential to assess for further investigation. Nike has announced sales of $46.7 billion for the fiscal year 2022, a 5% increase yearly (SportsMedia, 2022, para. 1). Nike Direct revenue increased 14% yearly to US$18.7 billion (SportsMedia, 2022, para. 1). Converse brand revenue increased by 6% to US$2.3 billion (SportsMedia, 2022, para. 1). The corporation announced that it returned nearly $5.8 billion to stockholders, including $1.8 billion in dividends, a 12% increase over the previous year (SportsMedia, 2022, para. 1). Earnings before interests, taxes, depreciation, and amortization remained flat at US$5.1 billion (SportsMedia, 2022, para. 1). The three-year trend analysis provides more information on the financial condition of the company. In 2020, Nikes operating income comprised $3,115; in 2021 $6,937; in 2022 $6,675 (MacroTrends, n.d., para. 3). Hence, the percent change from 2020 to 2021 is 122%, and from 2021 to 2022 -3%. Therefore, data signifies that Nikes operational revenue has shrunk recently. However, the financial indicators demonstrate a stable growth of the company.
The three-year strategic plan is affected by the operational budget of Nike in one aspect. As such, diversifying and eliminating discrimination is mainly uninfluenced by the budget, similar to the open manufacturing plan. However, the research and development for implementing artificial intelligence in the workflow is expensive, and Nikes operational budget might not be enough for the implementation. The strategy is still possible under the condition that overall, Nikes financial performance is improving and promises further growth. Thus, it is essential to account for the consumer demand to be able to finance the initiative.
Organizational Structure
Furthermore, organizational design, as the process of determining how organizations should be run and organized, could be recommended. The organizational structure covers various topics such as team formations, reporting lines, team structures, forms of communication, and decision-making methods (Abraham, 2012). The recommended structure for Nike is a matrix, in which the staff has two or more streams of the report. This sort of organization may mix functional and divisional areas of responsibility, enabling it to concentrate on divisional success while sharing specialized resources and expertise.
The strategic plan highly impacts the existing organizational structure of Nike. Namely, it proposes a different way of distributing data and ideas about projects. Moreover, it diversifies the responsibilities and opportunities of the employees. The proposed structure implies that Nike implements more than one line of reporting, which is necessary for promoting innovation. The open manufacture format supports the recommendation regarding the matrix structure mentioned earlier. Thus, Nike could achieve the strategic goal by changing its organizational design.
References
Abraham, S. C. (2012). Strategic management for organizations. Bridgepoint Education.
Allied Market Research. (2022). Sports equipment and accessories market industry overview.
Alsaffar, H. (2020). Nikes marketing mix and PESTEL analysis in China. University of Salford Manchester.
CSIMarket. (2022). Nike (NKE) profitability comparisons, net margin, gross margin, tax rate, cash flow margin comparisons.
Finbox. (2022). The complete toolbox for investors. Web.
Larkin, M. (2018). Nike just does it again: This is the 2nd deal in a month to boost AI. Investors Business Daily.
MacroTrends. (n.d.). NIKE income statement 20092022.
MacroTrends. (2022). NIKE debt to equity ratio 20102022.
Nike. (2020). NIKE, Inc. History, profile and history video. CompaniesHistory.Com The Largest Companies and Brands in the World.
Nike Inc. (2022). Nike LT-Debt-to-Total-Asset.
SportsMedia. (2022). Nike revenue up 5% to US$46.7bn for 2022.
Statista. (2022). Value of the leading global apparel brands 2022.
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