Marketing Management CIA 1

Nike SWOT and PESTLE Analysis

Company overview
Originally known as Blue Ribbon Sports (BRS), the company was founded by University of
Oregon track athlete Phil Knight and his coach, Bill Bowerman, on January 25, 1964. The
company initially operated in Eugene, Oregon as a distributor for Japanese shoe
maker Onitsuka Tiger, making most sales at track meets out of Knight's automobile. The
company rebranded itself as NIKE in 1971. The company takes its name from Nike, the Greek
goddess of victory. The NIKE "Swoosh" logo was designed by a graduate student named Carolyn
Davidson, who was paid $35. The same year NIKE broke with Onitsuka in a dispute over
distribution rights.
NIKE, Inc. is an American MNC that is engaged in the design, development, manufacturing, and
worldwide marketing and sales of footwear, apparel, equipment, accessories, and services It is
the world's largest supplier of athletic shoes and apparel and a major manufacturer of sports
equipment, with revenue in excess of US$37.4 billion in its fiscal year 2020 (ending May 31,
2020). As of 2020, it employed more than 75,400 people worldwide. In 2020 the brand alone
was valued in excess of $32 billion, making it the most valuable brand among sports
businesses. Nike ranked No. 89 in the 2018 Fortune 500 list of the largest United States
corporations by total revenue.
NIKE-branded products, which account for 95% of total revenue, are focused on six key
categories: Running, NIKE Basketball, the Jordan Brand, Football (Soccer), Training, and
Sportswear (sports-inspired lifestyle products).

NIKE footwear is the company's leading product offering, bringing in more than 60% of sales
and led by the iconic Jordan Brand and other collections. NIKE Apparel accounts for about 30%
of sales and NIKE Equipment (bags, socks, sport balls, eyewear, timepieces, digital devices, bats,
protective equipment and other equipment designed for sports activities) adds about 5%.

Converse and other brands contribute the remainder of revenue.

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NIKE's strategy is to achieve long-term revenue growth by creating innovative, "must-have"
products, building deep personal consumer connections with its brands and delivering
compelling consumer experiences through digital platforms and at retail.

SWOT analysis
SWOT analysis (or SWOT matrix) is a strategic planning technique used to help a person or
organization identify strengths, weaknesses, opportunities, and threats related to business
competition or project planning.

Strength
1. Powerful Brand Recognition – Nike is one of the most recognisable brands in the world, as
the name alone is unforgettable, easy to say, and exclusive. The swoosh symbol is quickly
understood by all. Nike has been captured roughly. 31 per cent of the worldwide demand for
athletic apparel.
2. Massive Customer base – Nike has millions of consumers from around the world who are
loyally following Nike 's trends, engaging in Nike activities, and even giving feedback to
consumers. Nike's market cap has risen due to its large customer base.
3. Low Manufacturing Cost - Nike , Inc. has always adopted an aggressive marketing plan that
helps minimise production costs. Most of their factories and production units are located in
developing economies in Asia and have low cost of production. The plants are found in China ,
Vietnam, South Korea and Thailand. Apart from these units, there are also manufacturing firms
based in the countries of South America and the USA.
4. In-house Experts – Nike has a team of professionals who design their shoes and other
sporting accessories. Nike claims that their company has succeeded due to the in-depth analysis
carried out on each model.
5. Superior Marketing Skills – Nike has an outstanding marketing strategy. The brand relies
heavily on digital marketing. In 2016 and 2017, Nike invested $3.2 billion and $3.3 billion
respectively. The brand has successfully used social media and marketing strategies. To target
more customers.
6. Professional leadership - The success of every organization depends on its leadership and
the management of the business in good and bad times. As Nike describes, it has one of the
most brilliant team of leaders who not only formulate meticulous marketing plans, but also
encourage others to do their best. Nike 's executive team consists of:

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 PHILIP H. KNIGHT: CHAIRMAN EMERITUS

MARK PARKER: EXECUTIVE CHAIRMAN

JOHN DONAHOE: PRESIDENT & CEO

ANDY CAMPION: CHIEF OPERATING OFFICER

THOMAS CLARKE: PRESIDENT, INNOVATION

MATTHEW FRIEND: EVP & CHIEF FINANCIAL OFFICER

MELANIE HARRIS: VP, STRATEGY & DEVELOPMENT

HILARY KRANE: EVP, CHIEF ADMINISTRATIVE OFFICER & GENERAL COUNSEL

MONIQUE MATHESON: EVP, CHIEF HUMAN RESOURCES OFFICER

HEIDI O'NEILL: PRESIDENT, CONSUMER AND MARKETPLACE

NIGEL POWELL: EVP & CHIEF COMMUNICATIONS OFFICER

JOHN SLUSHER: EVP, GLOBAL SPORTS MARKETING

MICHAEL SPILLANE: PRESIDENT, CONSUMER CREATION

7. Iconic Partnerships – Nike 's long-term alliance with Michael Jordan has proven fruitful in
terms of revenue to the brand. The partnership resulted in "Air Jordan 1 Shoes." In addition,
Nike partnered up with the famous basketball player to help design the Air Jordan 1 Shoes.

Weakness
1. Retailers Have a Stronger Grip – Nike's retail business is weak due to its price sensitivity.
Around 60-70 percent of Nike 's stock is sold directly to retailers. With retailers acting as their
main consumers, Nike does not battle their pricing structures at all.

2. Poor Labor Conditions in Foreign Countries – In the last 20 years, Nike has been consistently
targeted regarding their poor labor conditions. These issues include child labor, low wages, and
horrific working conditions that were deemed “unsafe”.

3. Pending Debts – While Nike's income statements prove to be prosperous, a fast look at their
balance sheet could paint a different picture. Nike also faces financial risks. They currently have
a net debt of $13.015 billion.

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4. Excessive Footwear Reliance - Nike , Inc. has a wide selection of items, including clothing,
equipment and footwear. However, marketing trends show that the survival of Nike , Inc.
depends on the selling of its footwear. If, in certain conditions, the shoe section suffered
corrosion, the entire company will be adversely affected. In North America alone, more than
half of the revenue comes from footwear every year.

5. Sexual harassment - Former female workers have also found out that sexual harassment
and misconduct is very common in the business. The New York Times interviewed 50 former
and current Nike workers to examine the culture of the organization. Interviews found that
Nike had a hostile workplace climate where sexual misconduct was rampant. The
entire controversy has significantly affected the company’s image.

6. High advertising Cost - Nike , Inc. invests a great deal on ads and brand endorsements.
While considered to be a good marketing technique, the annual cost increase multiplies and
has a direct effect on profit margins. As competition increases with each tax, the allocation of
advertisement costs often increases exponentially. The business itself argues its position by
arguing that it is a 'market growth' operation, but the increase in the percentage does not
reflect the increase in productivity.

7. Lawsuits: Four former Nike female employees filed a class action suit against the company in
August 2018. According to these women, Nike's company culture is toxic to women. Women
brought their case against the sportswear company, alleging that the company had breached
the Equal Pay Act. Women said that a company engaged in a systematic gender pay bias where
men were paid more than women for the same amount of work.

Opportunity
1. Emerging Markets – While Nike already has a presence in several international countries,
there are still plenty of opportunities for Nike. This is because external markets such as India ,
China and Brazil are increasingly flourishing.
2.Efficient integration – The supply and production of Nike products relies on independent
suppliers. The brand may either acquire a few of these or make some of its own for a more
effective and streamlined supply chain.
3. Innovative Products – While Nike has produced many products, there is still a lot to be done
to innovate. In conjunction with fitness and wellness, Nike has broadened its scope in
technology. Products such as wearable technology, which tracks physical activity, are the first
step in the development of advanced technology products. Combining technology with athletic
wear will prove to be useful, as it is an area of the apparel industry that has not yet been
explored.

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4. Nike has the unique benefit of providing value for money and this can be leveraged as the
company continues to reach into younger market markets that want quality at an affordable
price.

Threats
1. Marketing Budget Pressure – Companies like Under Armor and Adidas invest more on
marketing and promotional campaigns, growing pressure on Nike.
2. Currency foreign exchange risks – As the brand operates internationally, it is influenced by
fluctuations in foreign exchange rates. Nike 's financial earnings are published in US dollars. This
impacts the income as the U.S. dollar is subject to fluctuations in comparison to other financial
currencies.
3. Increased competitive pressure – While Nike is dominant in the athletic industry, rivalry and
new brands are still potential challenges to the business. With a higher competition ratio, Nike
has to spend more money on promotions and advertisement. Nike invested nearly $3.5 billion
on ads in 2018. To overpower competition, Nike's best bet is to develop creative goods
customized to the needs of athletes.
4. Counterfeit Products – Counterfeit products can have a huge effect on Nike 's sales and
credibility. The business operates internationally, and the risk of counterfeit goods has
increased. Many merchants and retailers sell counterfeit Nike items at lower prices. The low-
priced items are made of low-quality materials but still have the Nike logo. This can tarnish the
reputation of the brand as consumers could believe that Nike has begun to manufacture low-
quality items.
5. The fact that the organization has a global supply chain means that it is subject to the
vicissitudes of foreign trading practices, including labor protests at its overseas locations,
currency fluctuations that reduce its margins, as well as a lack of control over the geopolitical
events taking place around the world that have the potential to disrupt its global supply chain.

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PESTLE Analysis
A PESTLE analysis is a tool used to gain a macro picture of an industry
environment. PESTLE stands for Political, Economic, Social, Technological, Legal and
Environmental factors. It allows a company to form an impression of the factors that might
impact a new business or industry.

Political factors
The United States has favourable policies for many companies, including Nike, and these
include low interest capital and a successful global tax treaty. The US government is helping
Nike grow its goods and companies by giving them low interest capital and a successful global
tax treaty. The tax laws of the United States and other overseas authorities have an effect on
Nike. Contemporary political circumstances make tax policies vulnerable to substantial
adjustment in every jurisdiction, as well as in the United States. Several people in authority
have proposed changing overseas tax laws that could ultimately affect the manner in which US
multinational companies, like Nike, are taxed on the money they raise overseas. Different
political conflicts will make customs procedures tough and delay exports and imports.

Economic factors
Recession is the main economic concern in a variety of industries. Nike cut expenses and
around two thousand workers or five per cent of its workforce during the recession. Recession
forced Nike to reduce its marketing budget in order to pay less. Nike ended some of the
agreements with celebrities, many workers lost their employment, and the company invested
less on advertisement during the recession. Currency rates have a major effect on multinational
businesses.

Social Factor

Several people around the world especially in the U.S are gradually becoming health conscious.
They want to keep their body fit and safe, so most of them enter the gyms. People are changing
their habits and taking part in physical activity. According to figures, the total number of gym
memberships in the U.S. rose from 32.8 million to 60.87 million between 2000 and 2017. And
the number is still growing. This means that the demand for Nike products will increase because
the gym members will need sportswear to exercise and Nike is known to be the favourite sport
brand of most people.

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 Technological Factor
The U.S. has an successful process of intellectual property rights defence and compliance that
makes it easier for Nike to use technology. As a result, Nike is spending more in technology to
build its products. The 3-D printing technology has been implemented in the U.S. and Nike has
used it to create new value technologies for its products.

Legal Factor
Local laws and procedures affect the market strategy and activities of Nike in foreign countries.
Nike 's rule is to prevent problems when entering a foreign country and thus examine local laws
before entering another country. If the local laws of a particular country are contradictory to
what Nike can offer, the company would avoid entering that country. Nike has factories in
Pakistan where the government has not changed the child protection system, which has
required Nike to use child labour to produce its soccer balls in Pakistan in order to minimise
manufacturing costs.

Environmental Factor
Nike does not have a factory in the United States , the company produces most of its products
in China. However, due to the use of some toxic chemicals, Nike was polluting the air and some
rivers in China. There are a number of polluted cities in China. The health of Chinese citizens is
impaired by water and air pollution. The World Meteorological Organization ( WHO ) estimated
that air pollution caused around three hundred thousand deaths in China in 2001. Furthermore,
pollution in China affects the health of Nike consumers and employees. It makes them sick.

Conclusion
After evaluating all of these variables, both internal and external, it would be fair to conclude
that Nike , Inc. would continue to enjoy its dominant role in the industry. But the company needs
to focus on its vulnerabilities and risks to improve its role. The footwear and clothing industry is
very competitive, but Nike , Inc. has successfully overcome every challenge over the years. Their
remarkable willingness to adapt their approach and to launch new products from time to time
has allowed their revenue to grow every year. Finally, in the coming years, Nike , Inc. will
continue to dominate the clothing and footwear industry.

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