Date: 19/04/2020

To: John Donahoe

CEO of Nike, Inc.
From: Business Strategy Group
Re: Interim Strategic Analysis

INTRODUCTION
Nike is an international brand of athletic wear, including shoes and apparel as well as equipment.
The brand is known mainly for its stylish and great quality products. The company is equally
strong in terms of marketing. It has maintained a strong and unique brand image. As a brand,
Nike is deeply connected with sports and strives to encourage sports fans throughout the world.
The swoosh logo of Nike is easily recognizable among the crowd of brands worldwide. The
company was incorporated in 1967 and is the largest seller of athletic footwear and apparel in the
entire world. It offers products in six main categories – Running, NIKE Basketball, the Jordan
Brand, Football (Soccer), Training and Sportswear. Apart from Jordan, other subsidiary brands
of Nike include Converse and Hurley. United States is the largest market of Nike accounting for
more than 40% of its total sales in 2018. Nike has total 392 retail stores in United States.
Outside the U.S., Nike has 790 stores located in international markets. The brand has managed
heavy focus on research and development to bring innovative products as well as footwear and
apparel made from sustainable material to the market. It has outsourced most of its production.
Around 124 footwear factories and 328 apparel factories manufacture Nike products (2018).
Competition in the athletic wear industry has increased a lot. However, Nike has got an edge
over its competitors owing to several factors. Unique designs, great product quality, product and
process innovation and marketing have helped it achieve strong competitive edge. Its financial
performance has kept growing over years which is evident in how Nike’s revenue has grown
over the past five years.
COMPETITIVE POSITION
1. Brand Equity:
Brand equity is a major strength for any brand. Customer trust, customer experience as well as
customer engagement are among the several factors that together affect band equity. Brands that
have built high level of trust in the market and among their customers are ahead of their
competitors. Nike is a leading brand of athletic wear because it has built high level brand equity.
It is a customer oriented brand that knows its customers inside out. Moreover, it has focused on
their taste and changing preferences. It spends a lot on research and innovation as well as
marketing which enables it to bring the best designs to the market before its competitors do. This
is also why the customers love Nike. It sells products that are excellent in terms of design and
quality. Nike has formed a strong brand image. Whether it is about product quality, sustainability
or supply chain, Nike has maintained strong focus on ethics, accountability and social
responsibility. High brand equity has translated into stronger financial growth for the brand.
2. Innovation :-
Innovation can be a source of competitive advantage. Whether it is a technology brand, fashion
or a sport brands, innovation offers new ways to tackle leading challenges. Moreover, product
innovation has become important due to fast changing preferences of the customers. Nike’s
strong focus on innovation is tied to its business strategy. It invests in research and development,
to learn about customers’ taste and the fashion trends. Athleisure products have grown
increasingly popular in the recent years. People are looking for stylish and durable products. It is
why innovation is a core focus for Nike and its rivals like Adidas and Under Armour. However,
compared to Under Armour, both Nike and Adidas are more aggressive for growth and
expansion. The size of their investment in R&D is much larger. Investing in R&D has helped
gain a large market share and the popularity of Nike products has also grown. However, its
financial performance is also a testimony to the fact that investment in R&D will help you
strengthen your brand.
3. Global presence :-
Nike is a global brand. It has more than 1,180 stores around the globe. While U.S., is its core
market, its supply chain and distribution network is spread globally. It has 392 stores in US and
790 in the international market. Apart from that, the brand has outsourced most of its production
to external suppliers. Around the world 124 footwear factories and 328 apparel factories supplied
Nike in 2018. The main business of Nike is design, development and global marketing and sales
of athletic footwear, apparel, equipment, accessories and services. NIKE is globally the largest
brand of athletic footwear and apparel. It sells its products through NIKE-owned retail stores and
through digital platforms (called “NIKE Direct” operations), to retail accounts and a mix of
independent distributors, licensees and sales representatives in almost all countries of the world.
Independent contractors manufacture virtually all of its products. Independent contractors from
outside US produce nearly all footwear and apparel products for Nike. Its equipment products
are produced in the United States as well as abroad.
4. Marketing :-
Marketing is also a major strength of Nike and offers it a unique advantage in the global athletic
wear market. Nike is known globally for its unique marketing strategy and techniques. Apart
from its Swoosh logo which can be identified easily from among the crowd of brands, there are
several things outstanding about its marketing. It uses a mix of traditional and modern methods
and tools for marketing. Its retail and distribution network as well as its commerce channel also
acts as a marketing channel. The brand engages its customer through inshore and online
promotional. However, when it comes to marketing very few are as excellent as Nike.
Especially, in terms of video marketing Nike likes to connect with its customers’ emotions. Its
promotional videos are less about product promotions and meant more to strike an emotional
connection. Nike believes in the spirit of sports and how it connects people worldwide. It
engages and encourages sport lovers through promotional videos. However, apart from that it
also spends on online and offline advertising. Other forms of promotions include media releases,
events and sponsorships. In the world of fashion and athletic wear celebrity promotions including
both sports and cinema celebrities has remained common. Nike also uses celebrity endorsements
and sponsorships to connect with its audience. In fiscal 2018, it spent around 3.6 billion dollars
on advertising and promotions. Nike is an excellent marketer. However, marketing is not solely
for promotions or to retain customers. In case of Nike it is an important part of tis core business
strategy which is to create a unique place in its customers’ hearts.
5. Customer base:-
Nike has the largest customer base of all the sports shoe and apparel brands. It is a global brand
with a large supply chain, retail and distribution network. It is globally famous as a brand of
stylish sports shoes and apparel. Marketing has played a major role in making Nike globally
famous. However, it is also the style, quality and focus on product innovation that has helped
Nike grow its global network. Nike’s popularity has resulted in a large and loyal customer base.
However, competition is tough and Nike is employing new strategies to bring better products and
retain its existing customers while also attracting new ones. Its industry leading position and
large customer base is still a significant strength that sets it apart from the crowd as an
outstanding brand.
6. Customer loyalty :-
Customer loyalty is difficult to gain in the 21st century because of several factors including
competition and changing consumer preferences. However, customer oriented brands have still
but string customer loyalty. Nike is a customer oriented brand and customer loyalty is a strong
source of competitive advantage for it. The company has employed several methods to increase
customer loyalty. Apart from investing in design and quality, the brand has also employed a
great business strategy and focused on customer service. In the 21st century, customer
preferences change fast. There is string competition. Nike focuses on research and innovation to
bring new designs and styles that increase the popularity of its products. Simultaneously, it is
also focusing on its pricing, retail and marketing strategy to bring the best products for its
customers. Nike is an outstanding brand and enjoys highest popularity and customer loyalty in
the athletic wear industry. This is a distinct competitive advantage which has kept Nike ahead of
its rivals.
7. Product range :-
Nike has brought a large product range to the market. It offers products mainly in six categories
which include Running, NIKE Basketball, the Jordan Brand, Football (Soccer), Training and
Sportswear. A large product range helps it target a larger customer base. Its diverse product
portfolio caters to diverse customer segments. Apart from Nike, the other subsidiary brands
including Jordan, Converse and Hurley also target distinct customer segments and sports fans. A
large and diverse range of popular products has created a unique advantage for Nike.
8. Supply chain & Manufacturing :-
Nike has managed a strong supply chain and manufacturing network which helps it to cater to
popular brand with agility. Nike has outsourced nearly all of its production. However, proper
management of the supply chain and manufacturing has enabled the brand to produce superior
quality products while also keeping costs under control. 124 shoe factories and 328 apparel
factories supplied Nike in 2018. In the United States, NIKE has seven significant distribution
centers, five in Memphis, Tennessee, and two other distribution centers, one in Indianapolis,
Indiana, and one in Dayton, Tennessee. A well synchronized manufacturing, distribution and
retail network helps Nike to cater to demand better. Its well integrated network allows it to focus
on innovation and bring high quality products to the market.

NIKE’S FIVE FORCES ANALYSIS

There are a wide variety of external factors that determine the strengths or intensities of forces
impacting Nike Inc. However, based on this Five Forces Analysis, the following are the
intensities of these forces currently influencing Nike’s performance and industry environment in
the athletic footwear, equipment and apparel market:
 Competitive rivalry or competition (Strong Force)
 Bargaining power of buyers or customers (Moderate Force)
 Bargaining power of suppliers (Weak Force)
 Threat of substitutes or substitution (Moderate Force)
 Threat of new entrants or new entry (Weak Force)
Recommendations. Nike Inc. must prioritize strategies that address competition, which is
highlighted as the strongest force in this Five Forces Analysis. Nonetheless, the bargaining
power of customers and the threat of substitutes are also significant. A recommendation is for
Nike Inc. to prioritize investment in product development to ensure competitive advantage.
Based on this Five Forces Analysis, it is also recommended that Nike Inc. must implement
strategies to attract and retain more customers, so as to minimize the effects of substitution in the
sports footwear industry environment.
Competitive Rivalry or Competition with Nike Inc. (Strong Force)
Competition determines how Nike Inc. maintains its share of the sports footwear market. This
element of the Five Forces Analysis shows how competition influences the industry environment
and the performance of individual firms. The following external factors create the strong force of
competitive rivalry in Nike’s case:
 Low market growth rate (strong force)
 High aggressiveness of firms (strong force)
 Moderate number of firms (moderate force)
The low market growth rate is partly due to firms’ high market penetration and market
saturation. This condition creates a strong force, as Nike and other companies compete for a
market that grows slowly. In relation, firms are highly aggressive in competing for bigger market
shares. Also, there are only a moderate number of firms that significantly impact Nike. Based on
this element of the Five Forces Analysis, the external factors that lead to strong competition
requires Nike Inc. to focus on market development and product development to ensure
competitive advantage and a growing share in the global athletic shoes, apparel and equipment
market.
Bargaining Power of Nike’s Customers/Buyers (Moderate Force)
Nike’s customers directly affect business performance. This element of the Five Forces Analysis
shows how consumers determine business competitiveness and the industry environment. In
Nike’s case, the following external factors contribute to the moderate bargaining power of
customers:
 Low switching costs (strong force)
 Moderate substitute availability (moderate force)
 Small size of individual buyers (weak force)
The low switching costs make it easy for customers to buy sports shoes other than those from
Nike. The moderate availability of substitutes also enables customers to buy other products
instead of always buying from Nike. However, the small size of individual customers minimizes
their individual forces on the company. These external factors lead to the moderate bargaining
power of customers. This element of the Five Forces Analysis shows that the force of customers
is a major consideration in Nike’s strategies for the athletic footwear, apparel and equipment
market.
Bargaining Power of Nike’s Suppliers (Weak Force)
Suppliers affect Nike’s business through the availability of raw materials. This element of the
Five Forces Analysis tackles suppliers’ influence on firms and the industry environment. In
Nike’s case, the following external factors create the weak bargaining power of suppliers:
 High overall supply (weak force)
 Large population of suppliers (weak force)
 Moderate size of individual suppliers (moderate force)
The high supply minimizes the effects of individual suppliers’ actions on Nike’s business.
Similarly, the large population of suppliers reduces the impact of individual suppliers’ demands
on large companies like Nike Inc. The moderate size of individual suppliers supports a moderate
degree of suppliers’ influence. Nonetheless, this element of the Five Forces Analysis shows that
Nike experiences only a weak force representing the bargaining power of suppliers. As such,
suppliers are among the least significant concerns determining Nike’s strategies in the sports
shoes, equipment and apparel industry environment.
Threat of Substitutes or Substitution (Moderate Force)
Substitutes pose significant threat against Nike’s performance as a leading player in the global
athletic shoes market. This element of the Five Forces Analysis identifies the force of
substitution on the business and the industry environment. The following are the external factors
that maintain the moderate threat of substitution against Nike Inc.:
 Moderate availability of substitutes (moderate force)
 Moderate performance per price of substitutes (moderate force)
 Low switching costs (strong force)
The moderate availability of substitutes imposes a moderate force against Nike, as customers
have considerable alternatives to Nike’s products. In relation, customers have a moderate
likelihood of considering substitutes because of the moderate performance of substitutes
compared to Nike’s sports shoes, apparel and equipment. The low switching costs further add to
that likelihood. Nonetheless, this element of the Five Forces Analysis shows that substitutes
exert only a moderate force against Nike Inc.
Threat of New Entrants or New Entry (Weak Force)
New entrants or new firms can disrupt Nike’s industry environment. This element of the Five
Forces Analysis identifies the extent of new entrants’ influence on firms in the sports shoes,
apparel and equipment market. The following external factors contribute to the weak threat of
new entrants against Nike Inc.:
 High cost of brand development (weak force)
 High economies of scale (weak force)
 Moderate cost of doing business (moderate force)
The high cost of brand development makes it difficult for new entrants to succeed in competing
against large firms like Nike Inc. Also, the high economies of scale provide Nike with a
competitive edge against new entrants, considering the company’s global production and
distribution network for its athletic shoes, apparel and equipment. The moderate cost of doing
business further limits new entrants’ ability to disrupt the industry environment. Based on this
element of the Five Forces Analysis, the threat of new entry is a minor concern for Nike Inc.
NIKE REVENUE 2017-2020

NIKE SWOT ANALYSIS

REFERENCES

1. https://bstrategyhub.com/swot-analysis-of-nike-nike-swot-analysis/
2. http://panmore.com/nike-inc-five-forces-analysis-porters-model