SWOT analysis for Nike
Nike is considered a world-renowned icon. Nike is the Coke of the athletic footwear and apparel industry. Undoubtedly, it is the number one sports brand in the planet. It’s “Swoosh” logo is easily recognized and is always associated with success and victory. Nike is a fierce and competitive organization. CEO Phil Knight applies his dogma “Business is a war without bullets” through the intense advertising and distribution of Nike products. The company has a penchant for healthy yet blunt competition. During the 1996 Atlanta Olympics, Reebok was the sole sponsor of all the games.
However, Nike was clever enough to sponsor top caliber athletes instead, which they gained notable exposure from. Nike puts a premium on the aspect of product innovation. Nike’s research and development provides the company fresh and innovative ideas, which they apply in their products. Nike’s technology is spontaneously evolving to address the clamor of professional athletes and consumers for better performance footwear. Nike is a frugal organization. It has no factories, and prevents tie-ups from buildings and manufacturing workforce.
The company strives to create high quality products at the lowest possible retail prices. Whenever prices mount, Nike manufactures its products at a cheap budget elsewhere yet still maintaining the quality of its products.
The revenues of Nike depend solely on their footwear products. Even though the company has a wide-array of athletic and casual products, Nike spends most of its advertising fund in promoting its footwear. If ever Nike’s market share in athletic footwear wears out, revenues might experience a strong letdown.
Since Nike is easily recognizable, its products are easily imitated as well. Even if Nike makes up for such letdown with its technologies, some people will solely adhere to the brand rather than the technology of the footwear. The ever price sensitive retail sector hinders Nike of its revenues. Majority of Nike’s revenues are generated by retailers, even though Nike came up with Nike Stadiums and Nike Town retail stores. Retailers’ prices are no different from those of Nike stores. Retailers give Nike a marginal letdown whenever they go on sale in order to relinquish stocks.
Nike, being the global icon that it is, can single-handedly dominate the sports wear industry internationally with massive advertising and efficient endorsements. There are a plethora of markets in the world that has excess disposable income to spend on quality athletic footwear and accessories. Nike can conquer emerging markets in third world countries, which has younger generations willing to spend for its products. Sponsoring European sports teams can aid Nike in its quest for global supremacy. European athletes endorsing Nike will augment Nike’s marketing arsenal.
International sporting events like the Olympics could be a target for massive advertising and product promotion for Nike. Nike sponsors college athletic wear like jerseys in the NCAA to expose itself to young consumers. Nike’s research and development is one of its strengths besides its intense advertising. Nike’s R;D provides consumers a vast set of technologies where professional athletes and consumers alike can choose from in order enhance their performance. Although Nike is not a fashion wear per se, consumers buy and wear Nike products but does not necessarily engage in sports.
Arguably, Nike is a fashion brand among the youth due to the fact that young people look up to athletes, and athletes wear Nike. Opportunity emerges from this whenever a shoe gets outdated, and consumers tend buy a new pair of shoes. Aside from footwear, Nike is always developing products like sports apparel, sunglasses, bags, sports equipment, and even jewellery. It may not generate profits like the footwear line produces, but it allows Nike to promote its brand while generating profits as well. Threats
Competitors are always developing a wide-array of alternative brands, which engulfs Nike’s market share. The market for athletic footwear is very fierce and competitive. A sustainable competitive advantage is not secured from potential product threats from rival companies. Due to the inconsistencies of international trade like currency fluctuations and tax impositions, marginal cost for Nike is not firm and remains unstable in an annual basis. With this in mind, Nike might be manufacturing and trading whenever there is an imminent loss. Large global brands always face this matter.
The retail sector great deal of price competitiveness. Consumers are perpetually bent on buying any good for a better deal and low prices. Price comparison is always in tow for any consumer. Consumer price sensitivity is a perennial threat for any global brand like Nike. As mentioned in one of the weakness bullets, Nike is easily copied and imitated due to the fact that it is recognizable and distinct. Piracy is one of the threats that Nike faces. Black market boasts a plethora of raw material that makes an imitation look like the real thing.
It poisons the mentality of the market segment into thinking that Nike is all about appearance, and not the footwear technology and performance.
Financial Analysis Graph The Graph above indicates revenues of Nike from 1991 to 2002, with American and European revenues broken out. The early and mid ‘90’s showed a steady increase, then a letdown, then again an incline in 2000. U. S. revenue increased in 1998 yet has gradually declined due to the overall percentage of total revenue. Revenues from Europe have increased, yet overall percentage remained flat, then a slight upward trend lately (Porter et al, 2002).
The graph above shows holistic and overall operating revenue for Nike. It is divided to America and Europe. An increase in the operating income was apparent since 1995. The increase begets the over U. S. operating income, yet it remains within constant levels. On the other hand, European operating income remained flat and eventually decreased in percentage (Porter et al, 2002). Nike’s Research and Development Strategy Chart References Nike. (2008). History and Overview of Nike. Retrieved March 22, 2008, from http://www.nikebiz.com