Nike

SWOT and PEST Analysis

2019
 INDEX
Page #
1. Introduction of Nike 03
2. SWOT ANALYSIS OF NIKE 03
3. STRENGTHS 03
a. Product Inventions 03
b. Strongest World Brand 03
c. Low Cost Manufacturing with High Cash Flow 03
d. World Presence and Influence 04
e. Leadership 04
4. WEAKNESSES 04
a. Immoderate Dependence on Footwear 04
b. High Prices 05
c. High Advertising 05
5. OPPORTUNITIES 06
a. Explore Emerging Markets 06
b. The Rise of Trade 06
c. Product Expansion 06
6. THREATS 06
a. Extreme Competition 06
b. Fluctuation in International Markets 07
c. Dangerous Supply Chain Management 07
d. Recession 07
7. PEST ANALYSIS FOR NIKE 08
8. Political Factors 08
9. Economic Factors 09
10. Social Factor 09
11. Technological Factors 09
12. Conclusion 10
13. References 10

Introduction of Nike.

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Nike is the one of most famous brand which designs different product like footwear etc that company is
based on America. Nicks main focus on manufacturing athletics and sportswear products
(About.nike.com, 2016).It was officially named as Nike on 30th May, 1970.
Nike head office is in America Washington and 63666 number of employees work in that company.
[Source: 2015 Annual Results Nike]

SWOT ANALYSIS OF NIKE

This study is assessing of Nike, reviewing the four major aspects of concern. Nike is listed on NYSE with
offices located all over the world. It reviews its performance against all the external and internal factors
and its strategy. They know as the SWOT analysis that includes Strengths, Weaknesses, Opportunities
and Threats. They are known as the basis of its short-term and long-term strategic direction.

STRENGTHS
• Product Inventions
In world, new invention is more important for nick has always been successful and is regarded to
introduce new and different products range it has maintain its position as one of the leading and famous
brands in the footwear and apparel industry.
Since the 1990s, a lot of difficulties in supply chain, Nike Start focusing on making these kinds of
products which would be better for the sportsman (News.nike.com, 2016).
• Strongest world Brand
Nike is the one of the strongest and world famous brands which has its own presence all over the world.
Nick promotes his brand by famous celebrities and different sports players that makes brand more popular
and famous (Businesstoday.in, 2016). Nick has brand ambassador of different sporting events and teams
at domestic and national level. Some of the most famous sportsperson or team who promotes or still
promotes Nike like these famous players Michael Jordon, Cristiano Ronaldo, Rory Mcllory and Rafael
Nadal.
• Less Expensive Production with High Cash Flow
An effective marketing strategy has followed by Nike, which helps it to reduce the cost of production.
Many of the nick units are located in Asian countries that makes low production cost. Their different
plants are located in South Korea, China, and Bangkok. Apart from these units, nicks main plant in South
American countries and in USA (Seattlepi.com, 2016).
Nike shareholders always get a more profit which keeps their reputation high. Nike also maintains a
continuous cash flow which is used for marketing strategy and spends some amount for Research and
Development work. Nike capital expenditures increased sharply in the last five years, from $430 million
in the year 2010 to $984 million in the year 2014 (Marketwatch.com, 2016).

• Number of Outlets
Nike has more than 936 retail stores all over the world through which it reaches its consumers need all
over the world.

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 NO. of Stores

1000

800

600
NO. of Stores
400

200

0
2012 2013 2014 2015

• Higher Management
Higher Management plays an important role in the success and failure of any company who handles the
company in up and down situation very carefully. As multinational company Nike has one of the capable
team of higher management who not only making marketing strategies but they also motivate others to do
the good work (About.nike.com, 2016). More than 63,600 workers they work for this brand plays the
important role behind the success of Nike.
At last not least mention one comment by Philip Knight, the founder of Nike, ‘Business is war without
bullets!’ Nike follows that principle.

WEAKNESSES
• Immoderate Dependence on Footwear
Nike has a different range of products which includes footwear and apparels etc. But the marketing point
of view Nike is dependent on the sales of its footwear. If in any case, the footwear segment experience
gradually destructs then the whole organization would be affect wisely. In North America itself, more
than half of the revenue gets generated from the footwear every year.

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 Revenue in Million USD $

14000
12000
10000
Equipment
8000
Apparel
6000
Foot Wear
4000
2000
0
2012 2013 2014 2015

The above figure explains shows different products of nick and how more important to other fields apart
from its footwear.
• Costly Product
Nike enjoys very high reputation all over the world all the products are premium ranged. Though it
supports their strategy of high profit and high margin but that thing reduces the number of customers
especially in the Asia and South America. The high prices of nick products also give chance to
competitors to keep their price low and giving them an opportunity to increase their market share in result
loss of share in Brazil and Japan. But it still reign all over the world.
• High Advertising
Nike spends a lot of money for advertising and marketing. After successful marketing strategy, the annual
cost goes high and they affect the profit rates. According to the Nike Annual Report (2012), the total
advertising and promotion spending cost for about 12% of the total sales or around $2.72billion.

Period Promotion in billion USD

2009 0.57
2010 0.88
2011 1.1
2012 1.14
2013 1.33

The above chart explains how in USA itself the advertising spending has increased in the last few years
for Nike.

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OPPORTUNITIES
• Apparent Markets
In the 21st century, different countries like India, China, South Africa and Brazil have very high
economic growth when European and American economies slowed down. User in these countries had
high obtainable income with increasing interest in western brands (Forbes.com, 2016). These countries
can turn into important markets for Nike. These markets can boost up the sales of Nike and increase the
profit rate. Nike has already moved into these countries. Main strategy of nick is how to popular their
products in these countries through most popular sports.
• Increase of Trade
Till the last session, Nike had to cover a lot of customers through their own stores and different
franchises. But the high increase in web sector they allow to every to book their favorite product from
using computer and smart phone and get delivered anytime at their own address. The marketing strategists
projects that by 2020, web sales had big hand for increasing the overall growth.(Internetretailer.com,
2016). They also project that the total sales in the 2020 will reach $7 billion.

Sales

800
700
600
500
400 Sales
300
200
100
0
2012 2013 2014 2015

Apart from the rising sales, people who are not engaged with any sports associate the brand of Nike with
fashion and style. People are regularly use popular websites and make brands more popular by using
websites.
• Product Expansion
Nike is one of the few famous brands which spend millions of dollars in research and development. As
they reign in apparel, sports and footwear etc it gives them opportunity to increase their wide range of
products. It needs to make different product range with different style and also focus to partnership with
different branded companies to make more strength (Nikevision.com, 2016). As customers point of view
nick change all style every year, changing the product style give help to maintain their share holder in
market.

THREATS
• External Competitors
Nike has a lot of competitor in market. Nike has strong position in market that things the nick share is
better than other competitors. But after this nick faces though completion from Puma,NB and other
famous brands. All of the famous brands produces same kind of staff like footwear, apparel etc which
makes the competition much higher (Statista.com, 2016). While the industry is highly competitive, the
customers always have the option to choose the same product from different company if customer is not
satisfied from product quality.

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 Revenue In Billion USD (Foot Wear Section)

30
25
20
15
10
5
0
2010 2011 2012 2013 2014

Nike Adidas Puma

The above chart shows different between the three brands of the industry. In the footwear section, Nike is
the leader of the industry but it faces challenges from Adidas and Puma. Recently, Nike has experienced a
fall in footwear sales in the USA which is a serious threat to the company.
• Fluctuation in International Markets
From last 10 year, the fluctuation in international market creating a major affect on currency rates. That
why nick manufacture their most of the product in different countries like china, India, Brazil etc.
Accordingly, that they make transactions in different currencies. That is very dangerous toward
fluctuations in foreign currency exchange rates. That thing increase the product cost and affect the
business with independent manufacturers of Nike (Nike, Annual Report, 2009). The entire world famous
brand faces same issues. Fluctuation in currencies they affect product cost and labor cost and also affect
Nike and its productivity.

• Dangerous Supply Chain Management

For a worldwide company like Nike it is very difficult to reach the customers and make the delivery of
the product to the point of view of customers. Nike have no owns plants for manufacturing it makes more
than 90% from outsourced third parties. That thing makes more profit but adds some risk into the supply
management. This supply chain failed in February 2001 and Nike had a loss of over 100 million US
dollars. The company stock share fell by 20% at that time (Scdigest.com, 2016). After that happens they
tried to improve their supply chain network, communities, suppliers, buyers and obviously consumers by
identifying the key issues which lead to the failure. After that take combine decision and action which
requires better management. (Nikebiz.com, 2016).
• Recession
Nike is known for its advance and massive advertising spending and sponsorships. But in the last 10 year
(2007-08) the recession threatening all over the world goes up, at that time Nike was decreases his
advertising cost and labor cost by 5% (NYTimes.com, 2009). At that period everything would be affected
like all branded company affected internally and externally but economically all the customers want to
buy branded product in low cost. Like premium Product Company Nike was affected in that period of
time. The world economic conditions and stability of the consumer’s financial condition are most
important for extension of this company.

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 Nike World Wide Revenue USD $

25000

20000

15000
Revenue
10000

5000

0
2008 2009 2010 2011 2012

In the above figure show annual revenue of nick and how nick suffered in two reception years (2008 and
2010). The growth rate was goes down and rapidly falls in sale in world market. Every worldwide
recession create a major threat for Nick.

PEST Analysis
PEST analysis refers to all the macro-environmental factors that are important for strategic management.
The importance of all these factors is different for different companies or industries but they play very
important role to take future action of every organization.

PEST Analysis for Nike.

Political Factors
Rules & regulations of government always put big effect on stability and instability of any worldwide
business. The US government department has always makes helpful policies that help out any
multinational company to achieve their targets internationally.
Many of Nike units are established in Asian countries like China, Indonesia, and Bangkok etc. The
political un stain ability in Bangkok past few years was a major concern for the management of Nike
where more than 45 Nike units are located. The same situation was equally gloomy in Indonesia and some
parts of China in different situation like form of protest or social unrest can disturb the supply chain of
Nike.
Most important factor for growth of Nike is the international law, in the last ten years threat of terrorism
in many countries like Asian countries have imposed new laws to counter the growing threat of illegal
activities within their country. Huge tariffs cost in some countries while the strict rules of immigration
and visa are one of the important concerns for every international firm and Nike is not an exception.
United States of America, is always under constant threat of terrorist attacks where Nike headquarter is
located, Many of the countries also impose various tariffs to protect their indigenous brands for which
Nike, Inc. is a serious threat. This trade protection hinders the growth of Nike, Inc. in those respective
nations.

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Economic Factors
In United States of America the labor and manufacturing cost is very high that’s why Nike to set up their
units in Asian countries where both manufacturing and labor cost is very cheap. But due to the increase in
purchasing power and rise in living standards, the manufacturing cost in asian countries has raised
manifolds (Scmp.com, 2014 ). Main issues are labor unions in many Nike units which effect the
production in many units. In April 2014, Nike has faced the biggest labor union strike as most of the units
in China stopped production because of low labor wages. It had a main effect on the production as well as
the revenue of the company.
Economic recession is another factor for Nike globaly and needs to devise a strong plan how it can
tackled. Being international market leader, Nike, Inc. can be affected significantly as it faced last ten
years (2008-09). During the last recession the consumers replace Nike with some other brand which
offers the same products at a lower price. So, the threat of recession always has a paired effect on Nike,
Inc.
The higher inflation rate at the domestic level (USA) with the fluctuating currency rates with respect to
the Dollar always has detrimental effects on the annual profit margin. According to Forbes, gross profit
margin for Nike’s apparel division declined by 2.6% in 2012 and the primary reason being the volatile
economic condition around the world.

Social Factors
All over the world many of the costumers are brand conscious. Nike is associated with its quality and
uniqueness. This increase in brand awareness has helped the business of Nike to grow. They were the first
company that introduced innovation in the footwear and apparel industry. The amalgamation of style with
technology led the foundation of success for Nike which continues till today (Scribd.com, 2016). The
Nike Swoosh logo and their slogan ‘Just do it!’ is highly popular and recognized around the world.
Awareness of fitness and health is increasing day by day all over the world. Due to which the Nike
footwear and apparel are used number of people who are visiting the nearest gym to maintain their health,
body and physique. Indirectly, this helped Nike to increase the sales. Some of the consumers also
associate Nike with fashion and leisure (About.nike.com, 2016).
Nike has devised the key strategy to grow their business in the next few years by targeting the increasing
number of female customers. The business in the women line grew by nearly 14% to $5.5 billion in the
year 2014. The company estimated that the sale from women will reach $8 billion by the year 2018.
In the Asian countries the working condition in Nike units are not satisfied. During the 1990s, Nike
introduced the code of conduct for their units with defined law and regulations for safety, security,
optimum labor wages and overtime limits (Businessinsider.com, 2015). Since then, the working
environment improved in the factories. Consumers always want their company to be socially responsible.

Technological Factors
Now the days technology is growing faster and faster. As a pioneer Nike is regarded to introduce various
products which become the famous in the whole world. It has always adapted the latest technology in the
manufacturing their products. This new technological innovation not only helped them to set ahead from
their competitors but also refined and augmented the production process (About.nike.com, 2016).

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Marketing is very important factor for growth of any multinational brand. With the help of global
marketing rise in sales and impact is seen clearly, Nike has also altered their marketing strategies to reach
their customers and prospective consumers. The increase in marketing activities on the internet, face
book, twitter etc is different from the traditional way of marketing on TV channels, Hoarding etc. Nike
uses online media and apps to reach the customers and popularize their different products. In the past few
years, the market of online shopping has expanded which has given Nike, Inc. the opportunity to increase
their base worldwide. Due to this the company is less dependent on their retail stores.
For the year 2015, Nike reported a 60% increase in sales through web compared to last year. The figures
touched $2.1 billion crossing the billion marks for the first time through the internet sales.

Conclusion
After assessing all these concerned factors, both internal and external, it will be safe to say that Nike will
continue to enjoy their dominant position in the industry. But the organization needs to work on their
weaknesses and threats to strengthen their position. The footwear and apparel industry is very
competitive, but Nike has successfully dealt with every challenge through the years. Their impressive
ability to alter their strategy and introducing new products from time to time has helped its revenue to
grow every year. Lastly, Nike will continue to rule the apparel and footwear industry in the years to come.

References
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