|Industry||Apparel Accessories & Sports Equipment Industry|
|Headquarters||Beaverton, Oregon, US|
|Profit||US$ 5.7 billion, 2021|
|Competitors||Addidas,New Balance, Puma|
Nike Company Overview
Headquartered in Beaverton, Oregon, USA Nike is world’s best athletic footwear, apparel, equipment and accessories most significant designer, marketer and distributor for sports Industry. Nike is operating in North America, Europe, Middle East & Africa; Greater China; Asia Pacific and Latin America.It was founded by William Bowerman and Philip Knight in 1964 and it is valued at $ 166.68 billion in 2022.Its reported revenues are $ 44.53billion, reaching the 83rd place in Fortune 500 by Forbes. Its brand value is estimated at $ 33 billion in 2022.
Porter’s Five Forces Analysis
The Porter’s Five Forces Analysis is developed by Micheal E. Porter in 1979, Professor at Harvard Business School for organizations to better strategies their business as per their Industry structure for better profits and less competitive environment.
It is one of the most famous and referred model by business managers for analyzing their business’scompetitive environment as per their industry’s structure.
Nike Rivalry among Existing Competitors:
- Basic Idea& Background: This first force“Rivalry among Existing Competitors” is to analyze the competitor’s presence and rivalry with in the industry in relation to the competitive positioning of the company and it’s action plan to earn high sales, increased profit margins and covering it’s fixed cost.
- Nike is operating in three main business segments athletic shoes, apparel and equipmentunder it’s own brand including Nike Pro, Nike+, Nike Blazers, Air Max, Air Jordan etc. The main competitors in the Industry are Adidas, Puma and Under Armour.
- Nike USA Operations The Company is generating 40% of its global revenue from USA only.Nike has major operations in North America with a record sales of more than 18 billion USD, in Year 2022 from this continent only.
- Adidas AG is the largest sportswear manufacturer in Europe and second largest globally having headquarters in Germany, Europe .Adidas generated a record sales of 21 billion euros in 2021 which is almost 50% of Nike’s total global revenues including all segments. Adidas is generating 50% of its total retail sales from North America and Greater China. Adidas also outranked Nike by 1 point in American customer’s satisfaction index score, by achieving 79/100.
Adidas also faced a low sales prior to 2021 due to coronavirus (COVID-19) pandemic.
- Puma is also one of the fastest growing German-owned multinational company in Global Sports Apparel Industry with a record sales of 6.81 billion euros in 2021.Puma faced tremendous growth in recent years and it’s consolidated sales increased by 3 billion euros since 2014 which is recorded increase of 50% percent.
- Suggested Strategy: Nike is facing intense rivalry in a slow growth market with aggressive competition from same level international firms .As number of firms are moderate in the sector so competitor’s moves are quite observable. Nike should do extensive product development to have future competitive advantage and target to achieve high market growth rate with the low churn rate.
Nike Threat of New Entrants:
- Basic Idea& Background: This the second force of Porter’s Five Forces Analysis is to evaluate the possibilities of new entrants in the market as they disrupt the Industry environment. The existing Global Sports Apparel market is generating revenues of 191 billion UDS in 2022 with a forecast to reach almost 249 billion USD in 2026.As with the changing consumer’s trend towards health and wellbeing it is one of the attractive Industry.
- Low Capital Investment: Opening a high scale organization like Nike is difficult but opening a similar operation is not very challenging so this a considerable factor.
- Competition from Local Market: Competition from Local Market is quite considerable fact.
Nike is experiencing tough competition in China region. The company experienced a 9% decrease in sales in Year 2021 only in Apparel segment in Chinese market which is around 476 million USD. Nike blamed COVID 19 for the slow growth but it is also factual that operation of international brands are getting difficult in China.
- High Cost of Production and LessLocalized-Adaptive Approach: Nike also faced different controversies in recent years in China and facing tough competition from Anta Sports and Li-Ling who improves their local cost of products with more localized approach. Even Nike was early overseas entrant in China in 1980s and currently owned 7000 stores in retail presence.
- Suggested Strategy: Nike should adapt more local approach with cost cutting measures and identification of new markets or unique technology based product development to retain it’s market leadership.
Nike Bargaining Power of Suppliers:
- Basic Idea& Background: This force analysis the supplier’s power to influence the availability of final product and it’s pricing. In Nike’s case the number of raw material or supplies are various with a large population of suppliers availability with a moderate supplier’s size. Nike also expanded it’s offerings with diversified products and service offerings including digital content.
- Nike’s Digital Sales: Nike created its own sales channels and drew attention of it’s main customers and its own website. Nike’s reported a record salesof 9.1 billion USD in Year 2021,from it’s websites and total apps which is 21% of the company’s total sales and half of its digital sales.Nike experienced 60% increase in sales in this segment from prior year which is 5.5 billion USD. This eliminated a lot of intermediaries and Nike got high margins on it’s products.
- Suggested Strategy: Nike as being a powerful brand supplier’s try to attach with such big companiesand try to attract Nike as a client. Despite of this Nike should continue it’s diversifying product service offering utilizing digital channels to keep pace with the competitive and growing global sports market.
Nike Bargaining Power of Buyers:
- Basic Idea& Background: This force analyzes the bargain and influencing power of buyers which is a conclusive of different sub factors including present number of buyers in the market and considerable purchase by one buyer.
- Nike’s Flagship Program & Churn Rate: For maintaining high customer satisfaction and low churn rate Nike devisedNike Flagship program which offers Nike Run Club and Nike Training Club which offers social events, community platform, personal training and expert guide in the category of health and fitness guidance with the help of third party apps including Spotify,Apple Health, iTunes and Headspace.
- Nike Nutrition Category& Customer’s Needs: Nike also entered in nutrition category with recipe offerings. In future the company will enter into further fitness related categories.
- SuggestedStrategy: Nike is diversifying not only in it’s main offerings also in its operational ways and keeping pace with the digitalization. Nike is using it’s expertise well and capitalizing its resources in a best way which are not only delighting it’s customers also keep retaining their interests and attention.
Nike Threat of Substitute Products or Services:
- Basic Idea& Background: This is the last factor which is a threat from substitute products which can affect or influence the Company’s operational strategies. Changing consumption patterns of consumers due to life style changes can divert the consumers towards substitute products or services.
- Substitute Products from Competitors: Nike is facing a direct competition from it’s competitor’s for substituting it’s products and services including spots wear and equipment from Adidas ,Puma, Reebok ,New Balance ,Under Armour etc
- Digital Sports & Virtual Sports Activities: As with the increasing trend in Digital and Virtual Sport’s Activities it may also substitute the current consumption patterns. Even Nike is evolving with connected digital products and services and having a key digital team but any new development from the established Tech Giants may be a game changer.
- Threat from Other Leisure Activities: Nike is well versed in understanding and adapting the changing requirements of it’s main customers but even though Nike should continue as a keen observer for the upcoming impacts of digital revolution and post COVID-19 way of living
- Threat from Global Economic Situation: As with the changing times including Ukraine–Russia war and expectation of high spikes of recession the probability of sports and spending on leisure activities will be affected.
- SuggestedStrategy:Considering all and taken these factors into consideration Nike should well strategies it’s business activities
Fortune 500 Companies
Forbes Profile Nike NYSE:NKE
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