BUS1001: goods retailers, Nike Inc. is an American multinational

BUS1001: BUSINESS ENVIRONMENT

 

 

 

 

 

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                          STUDENT ID :         G1749271W

               DATE
:         12-JANUARY-2018

                     WORD COUNT:         2433

 

 
Contents
BUS1001: BUSINESS ENVIRONMENT. 1
Introduction. 3
1. PEST Analysis. 3
1.1 Political Factor. 4
1.2 Economic Factors. 4
The Danger of Retreat and
Rivalry. 4
1.3 Social Factors. 5
1.4 Technological Factors. 6
SW0T Analysis. 7
OPPORTUNITIES &
THREATS. 7
2.1 OPPORTUNITIES. 7
Taking full advantage of
the emerging markets. 7
Product Expansion. 7
2.2 THREATS. 9
Intense Competition. 9
Fluctuating International
Markets. 10
Recession. 10
3. Conclusion. 11
4. References. 12
 

 

 

 

 

 

Introduction

 

One of the most leading sports goods
retailers, Nike Inc. is an American
multinational corporation, it designs, creates and sells apparel, footwear, equipment and accessories and other services,
the world over. It majorly aims to manufacture sportswear and athletics
products.  And it also holds prominence
in the recreational and casual clothes market.

It was initially named as Blue Ribbon sports
in the year 1964, later developed into Nike, Meaning the Greek goddess of
victory Inc on 30th May 1970.  In
2014, Nike was known worldwide as the most valuable brand among all sports
business. Also, was recognized with its logo ‘Just do it’.

 

Industry

Apparels,
Footwear, Accessories

Headquarters

Washington
County, Oregon, USA

Area
Served

Worldwide

Annual
Revenue

The US $32.4 billion (2017)

Founder

Phil Knight, Bill Bower man

President and CEO

Mark Parker,

Products

Athletic
footwear, apparel, sports equipment and
other recreational products with separate lining for men, women, and kids

Number
of Employees

74,000
(2017)

Source: 2017 Annual
Results Nike Inc

 

1. PEST Analysis

PEST analysis refers
to all the macro-environmental factors that are necessary for strategic management. It is an acronym which when
expanded includes six factors when the company is contemplating to launch or
upgrade a service or a product.

 

The factors are:

Political
Economic
Social
Technological

The significance of all these factors can be different for
different companies or industries but overall they play a crucial role in
deciding the future action of every organization.

 

 

 

 

 

1.1 Political
Factors

 

•Favorable Government Policies

The government
policies always have a huge impact on the companies specifically those that
operate globally. The US government has always certainly initiated
growth-oriented policies which have supported this company to grow and expand
internationally

 

•Political Unrest in Some Asian countries

Most of the factories
of Nike, Inc. are situated in the developing Asian countries such as China,
Vietnam and Indonesia. But the political situation in Thailand in the last few
years was a big concern for the management of Nike, Inc. where it’s had its 35
factories located. The situation is somewhat same in Vietnam, Indonesia and
parts of China as well, as any form of protest, political instability or social
unrest can disturb the supply chain of Nike, Inc.

Country

Number of Factories  (2014)

China

195

Indonesia

40

Vietnam

65

Thailand

35

 

 

•Changes in International Law

In last one decade, the international law has become even more stringent with the increasing threat of terrorism.
To counter these illegal activities within their territory many countries have
change their rules and regulations,.

 

1.2 Economic Factors

 

The Danger of Retreat and Rivalry

Nike, Inc.
requirements to devise an arrangement how it can handle another worldwide
financial subsidence. Being a market pioneer, Nike, Inc. can be influenced
altogether as it encountered in the most recent decade (2008-09). Last time, it
was seen that amid the subsidence that purchasers supplant Nike with some other
brand which offers similar items at a lower cost. In this way, the danger of
retreat dependably paired affects Nike, Inc

•Rise in Production Cost and Labor Issues

The labor issues are
very common in the factories of Nike, Inc. recently. In April 2014, Nike, Inc.
experienced the biggest strike as most of the factories in China stopped its
manufacturing because of low wages. It had a significant effect on the
productivity as well as the revenue of the company.

 

•Fluctuating Profit Margins

Nike performs all its
business at a global level. Hence, the stability of currency exchange and
international interest rates is crucial for the continuous growth of its profit
margins. However, the higher inflation rate at the domestic level (USA) with
the fluctuating currency rates with respect to the Dollar always has adverse
effects on the yearly profit margins

 

•Acquisitions and Subsidiaries

Nike, Inc. has
acquired many companies which function within its domain of footwear and
apparel industry, it started in the year 1988 when it took over Cole Han (New
York Times). And Since then, it has purchased many companies to strengthen its
grounding internationally.

 

1.3 Social Factors

•Consumers Becoming More Brand Conscious

In this modern era,
most of the customers have became brand conscious. They associate Nike, Inc.
with quality and status. This increase in brand awareness has been beneficial
for the business of Nike, Inc. to grow better. It was the first company that
introduced innovation in the footwear and apparel industry.

 

•Consumers Becoming Health and Fashion Conscious

Every year the number
of people visiting the nearest gym to maintain their health, body and physique
is increasing tremendously. This rise has certainly helped Nike, Inc. in some
way in order to boost up its sales as they turn to buy footwear and apparel for
them to look athletic. Some of the consumers also associate Nike, Inc. with
fashion and leisure (About.nike.com, 2016). They are interested buying Nike,
Inc. products. This awareness among the people would apparently help Nike, Inc.
in the long run.

 

•Increase in Female Consumers

Nike, Inc. has devised
the key strategy to grow their business in the next few years by targeting the
increasing number of female customers. As a part of the strategy, it has appointed
Amy Montage as the head of its business in the year 2013 (Forbes, 2014). The
business in the women line grew by nearly 12% to $5 billion in the year 2013.
The company envisages that the revenue from this segment will reach $7 billion
by the year 2017. The enormous potentiality of this segment has encouraged the
company to introduce various products exclusively
for women. Nike, Inc. projects that soon 25% of its total revenue would be
generated by the female consumers itself.

 

•Working Conditions at Factories

Nike, Inc. is often
accused of its dangerous working environment in its factories in many
countries. It has been alleged that it’s using sweatshops to produce footwear
and apparel since the 1970s. Initial denials from the authorities itself made the
situation even more complicated which affected its image globally (Businessinsider.com,
2015).

 

 

 

1.4
Technological Factors

•Innovation

Nike, Inc. is often
regarded as the Apple Inc. of apparel and footwear. It is regarded as the
pioneer to introduce various products which amazed the whole world. It has
always adopted the latest technology for their
products; this innovation not only helped them to set ahead from their
competitors but also refined and improved the production process
(About.nike.com, 2016). It is also one of the global brands which took a
revolutionary step to reduce the usage of chemicals and other raw materials
which are detrimental for the environment. The latest popular product
introduced by Nike, Inc. is Fly knit Racer which received acknowledgment globally.

 

 

•Marketing Techniques

With the worldwide ascent in deals and effect, Nike, Inc.
has additionally adjusted their advertising techniques to achieve their clients
and forthcoming customers. The expansion in promoting focusing on the
computerized medium more than the customary channels is one such advance. Nike,
Inc. utilizes online media and applications to achieve the clients and promote
their diverse items. Over the most recent couple of years, the market for
web-based shopping has extended which has given Nike, Inc. the chance to expand
their base around the world. Presently, Nike, Inc. does not need to rely on
their stores and establishments outlets to offer their prominent footwear and
attire.

 

For the year 2015, Nike, Inc. detailed a 55% expansion in
deals through web contrasted with a year ago. The figures touched $1.19 billion
intersections the billion check out of the blue through the web deals. It was
$767 million in the financial year 2014 (Internetretailer.com, 2015).

 

SW0T Analysis

 

This analysis is conducted in order to access the various factors
affecting Nike Inc; it studies its performance and strategies in terms of all
the external and internal factors that affect the working of Nike. Generally
known as the SWOT analysis, it consists of strengths, Weaknesses, Opportunities
and threats, the basis of its short-term and long-term strategic direction.

Below is a brief
analysis done on the external factors influencing Nike, Inc.

OPPORTUNITIES & THREATS

 

2.1 OPPORTUNITIES

Taking full advantage of the emerging
markets

In the 21st century,
countries like China, India, South Africa and Brazil showed high economic
growth when European and American economies plunged. Customers in these nations
had huge interest in western brands and had high disposal incomes Source: 2016
Annual Results Nike Inc.

Though Nike, Inc. has
already ventured into these nations, still the potentialities have not been
fully exploited. The primary strategy that Nike, Inc. adopted to become a
sports leading brand was to capture the most famous sports of those nations and
advertisement by the prominent sports professionals which actually proved to be
beneficial.

Product Expansion

Nike, Inc. is
one of only a handful couple of brands which burn through a great many dollars
in innovative work. As they reign in footwear, clothing and games and wellbeing
hardware, it gives them extensive chance to expand their scope of items. It
needs to enhance the item extend with unique accentuation on frill and
furthermore associations with other marked organizations to fortify its
position (Nikevision.com, 2013). As the inclinations of the clients tend to
change each year, item development would keep up their hang on a piece of the
overall industry.

 

Initiatives towards Better Environment

Nike is ranked among the top two companies for being climate-friendly, just after Canon (Reuters.com, 2016). Nike, Inc. uses
particular strategies to initiate recycling, phasing out usage of chemical
components, proper precautions to safeguard health of laborers working in
factories earned them reputation and praised globally.

Potential in
E-Commerce Trade

Before the major advancements that took place in the IT and communication
industry, Nike only explored the option of brick and mortar selling, i.e.
either through their own retail store or franchises but with the
transformations in IT sector, it can now boast sales and enhance its customer
base by offering such a wide range of its products over the Internet (Internetretailer.com, 2015).

.

 

 

 

 

 

 

 

 

 

 

 

2.2 THREATS

Intense Competition

Nike, Inc. operates in
such an industry that is highly competitive, still has a better position in
terms of market share as opposed to its rival companies, but it faces tough
competition from Adidas, Puma and other reputed brands. The competition gets
tougher as these brands also produce a similar range of products (statista.com,
2016).                                                 

Revenue in Billion USD$

 

The above chart
depicts the stiff competition between the major brands of the industry. In the
footwear section, Nike is the leader of the industry but it receives continuous
challenges from Adidas and Puma.

 

 

 

 

 

 

 

 

Fluctuating International Markets

Majority of the
products manufactured by Nike, Inc. are made in the factories situated outside
the USA, meaning, they conduct transactions in various financial currencies. It
increases their vulnerability to any fluctuations in foreign currency exchange
rates, also increases the cost, affects the operations and adversely affects
business with independent manufacturers of Nike, Inc

 

 

 

Perilous Supply Chain Management

For an international
company like Nike, Inc., it is very challenging to reach its consumers and make
the delivery of the products properly and timely. Despite the fact that Nike,
Inc. acquires no factories for the production of its footwear and apparels, it
still makes up to 90% of its revenues. The manufacturing of these products is
entirely outsourced to third parties, which requires raw materials from
independent contractors. Though it helps in improving profit margins and
reduces inventories but it is also a major risk factor in the whole supply
chain management system. For example: This complex supply chain failed in
February 2001 and Nike, Inc. suffered a loss of over 100 million US dollars.

 

 

 Recession

Nike, Inc. is known
for its massive advertising spending, endorsements and sponsorships. But in the
last decade (2007-08), when the world was in recession, Nike had to cut its
costs by reducing the advertising budget and also by decreasing the total
workforce by 4% (NYTimes.com, 2009). The recession not only affected the
company internally but the economic conditions of the customers also worsened
as they went to buy footwear and apparel from the brands with lower prices

 

 

 

 

 

 

 

 

 

 

 

 

 

NIKE, INC. NET INCOME, IN MILLIONS OF DOLLARS

 

 In can be clearly seen as to how the annual
revenue of Nike, Inc. suffered in two years successively (2009 and 2010) which
were also the recession years. The growth rate was negative as it earned less,
especially witnessing a tremendous fall in the sales in North America and
European markets. Hence, every global recession pose a serious threat for this
company Nike, Inc.

 

 

3. Conclusion

 

Nike is a global brand
aiming at providing sports products to its customers by offering a range of
products in a highly competitive and fragmented market. Nike, Inc. It has
hundreds of stores worldwide. In order to excel in the market it must assess
its external and competitive environment. This will reveal the key
opportunities and will be able to take full advantage of its potentialities and
the threats it must take care of. The above analysis done brings order and
structure to otherwise random information. The information derived from the
analysis gives more direction to the various strategies that should be adopted
by NIKE, Inc. It was able to identify what opportunities it needed to work on.
The case study showed the Political, social, economic
and technological factors that are associated with the company.  Its passion combines design, premium quality
products, economical use of its resources, responsibility for the people and
the environment. Nike became an apparent example of a leading example in
developing a sustainable business.

4.
References

-: Canon tops
list of climate-friendly companies. (2007). Reuters. Retrieved 10-January-2018,
from
http://www.reuters.com/article/environment-climate-companies-dc-idUSN1840883720070619?feedType=RSS

 

-: Forbes
Welcome.
. Forbes.com. Retrieved 10-January-2018,
from http://www.forbes.com/sites/greatspeculations/2014/08/26/how-nike-can-grow-its-womens-business/#637d58ca5068

 

-: How Nike
Solved Its Sweatshop Problem(2013). . Business Insider. Retrieved 08-January-2018, from http://www.businessinsider.in/How-Nike-Solved-Its-Sweatshop-Problem/articleshow/21122639.cms

 

-: How Nike will
grow e-commerce to $7 billion. (2015) Retrieved 10-January-2018,
from

How Nike will grow e-commerce to $7 billion from $1 billion in 5 years

 

-: In recession,
Nike is likely to cut marketing. (2009). Nytimes.com. Retrieved 10-January-2018, from

 

-: Nike annual
web sales top $1 billion for the first time (2015). Retrieved 10-January-2018,
from

Nike annual web sales top $1 billion for the first time

-: Revenue from
footwear segment of Nike, A. (2016). Footwear/shoe
revenue Nike, Adidas & Puma 2012-2016 | Statistic. Statista.
Retrieved 10-January-2018, from https://www.statista.com/statistics/278834/revenue-nike-adidas-puma-footwear-segment/

 

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