Role of Strategic Management and Strategic Competitiveness In a Globalized Economy
Despite Nike’s extensive international presence, the company’s growth prospects remain robust. The reason for this is the promising potential of emerging markets such as India, China, and Brazil. With an ever-growing middle class and increasing purchasing power, these markets offer lucrative business opportunities for multinational companies like Nike. Although Nike already operates in many foreign countries, these emerging markets have the potential to become significant revenue generators for the company.
Nike has long been a leader in athletic apparel and footwear, producing innovative products that combine style and performance. However, the company recognizes that there is still much to be done regarding innovation. To that end, Nike has been extending its reach into the realm of technology, particularly in association with fitness and health.
Nike is a global brand that relies on a vast network of independent manufacturers to produce its products. While this approach has allowed Nike to expand its product offerings and reach a larger customer base, it can also lead to supply chain inefficiencies.
Cutting ties with big retailers
In a bold move, Nike has cut ties with some of its largest multi-brand retailers and wholesale partners. This decision has caused a stir in the retail industry, as Nike products have traditionally been available through a wide range of retailers. According to reports, Nike will no longer work with wholesale retailers such as Zapoo’s, Dillard’s, Fred Meyer, and Bob’s Stores. Instead, the company focuses on direct-to-consumer sales through its retail stores and e-commerce platform.
Acquired Artificial Intelligence Start-up
Nike’s acquisition of Celect, a predictive analytics platform, is a strategic move that demonstrates the company’s commitment to using technology to enhance its online sales capabilities. Celect’s technology uses artificial intelligence to analyze customer data and predict shopping behavior. This information can be used to optimize inventory management, improve the customer shopping experience, and increase sales. By acquiring Select, Nike can integrate this technology into its operations, providing the company with valuable insights into customer behavior and preferences. This, in turn, will enable Nike to anticipate better and respond to changing market conditions and customer needs.
Merges with the Metaverse
Nike’s recent acquisition of RTFKT, a digital shoe-making company, has raised eyebrows and sparked conversations about the future of fashion and retail in the Metaverse. RTFKT designs virtual shoes that players in online games and other virtual environments can wear. While this may seem like a niche market, the rise of the Metaverse and the increasing popularity of virtual worlds and gaming have made digital fashion a potentially lucrative industry. By acquiring RTFKT, Nike is positioning itself at the forefront of this emerging market. The company is looking to leverage its brand and design expertise to create digital shoes that are both visually stunning and highly sought after by gamers and other users of virtual platforms.
Exiting From Wholesale Distribution
Nike’s decision to exit the wholesale distribution market in the United States marks a significant shift in the company’s retail strategy. Rather than relying on third-party distributors to sell their products, Nike focuses on direct-to-consumer channels, including stores, apps, and websites. This move is driven by several factors, including the desire to increase profit margins and to take more control over the customer shopping experience. By selling directly to consumers, Nike can eliminate the intermediary and capture a greater share of the profits from each sale. Additionally, the company can ensure that their products are presented in a way that aligns with their brand values and message.
Nike to End Use Of Kangaroo Leather For Its Shoes
Nike has made a noteworthy decision that will bring joy to animal rights activists and customers. The well-known sportswear company has chosen to end using kangaroo skins in their shoes, which has been a controversial practice. Following in the footsteps of Puma, Nike has decided to abandon the use of kangaroo leather in its products. Nike plans to utilize synthetic materials instead of kangaroo leather in its new line of Tiempo football boots, named the Tiempo Legend Elite, released in the summer. The company’s dedication to more sustainable and ethical practices is reflected in its decision to terminate its partnership with its sole supplier of kangaroo leather in 2021.
Consumer Direct Strategy
Nike has expedited its consumer-direct strategy, prioritizing its digital business and closing down physical stores. As of the fiscal year 2022, 42% of Nike’s revenue is from online sales. The pandemic has influenced how Nike engages with its consumers.
Counterfeit products pose a significant threat to Nike’s revenue and reputation. As a global brand, Nike is more likely to encounter counterfeit products. Numerous retailers and merchandisers offer fake Nike products at lower prices, which can negatively impact the company’s image. These counterfeit products are typically made from low-quality materials, yet they still bear the Nike label. This not only results in a company revenue loss but can also damage its reputation if customers believe that Nike is producing subpar products.
Increased competitive pressure
Nike faces increased competitive pressure from emerging brands, which requires the company to spend more on marketing and advertising. Despite dominating the athletic industry, innovative products tailored to the needs of athletes remain Nike’s best bet to stay ahead of the competition. In fiscal year 2022, Nike spent $3.8 billion on marketing and demand generation.
Marketing Budget Pressure
Companies like Under Armour, Adidas, and Puma are spending more on marketing and advertising campaigns, increasing the pressure on Nike.
Currency Foreign Exchange Risks
As a global brand, Nike is susceptible to currency foreign exchange risks due to fluctuating foreign exchange rates. The volatility of the U.S…. dollar against other currencies can affect Nike’s revenue since the company reports its financial earnings in U.S.. dollars.
In U.S. and German courts, Nike has been involved in a patent dispute with Adidas over Primeknit and Flyknit shoes. These disputes can reveal sensitive information about the companies involved and negatively affect their reputation.
Like all companies, Nike is susceptible to the negative effects of a global recession. The company reported a decline in sales during the lockdown, and sales could drop further if the recession hits as hard as predicted by experts.
Nike depends on different global markets, and an increase in sales in China boosted the recent increase in its stocks between China and the U.S. could threaten a large chunk of Nike’s sales.
Patent Conflict towards Adidas Primeknit Shoes:
Nike filed a complaint accusing Adidas of infringing on their Flyknit shoe technology patent and using it in 49 shoe designs that use Primeknit technology. Adidas denied these claims and stated that they have been using their Primeknit technology after years of research and development.
Risk to Kangaroo Population:
Nike has faced criticism from animal rights activists and advocates for using kangaroo skin in manufacturing leather football shoes, which could potentially put the Australian kangaroo population at risk of extinction. The activists urged the company to consider using plant-based alternatives, but Nike has yet to respond to the allegations.
Nike Faces A Wave Of Retail And Warehouse Thefts: Nike has been facing increased theft crimes across its supply chain, including warehouse and retail theft. The company has been forced to close an outlet store, and thieves steal from shelves and vehicles. The estimated cost of retail theft in the United States is $95 billion, and Nike finds it difficult to prevent theft along its entire supply chain despite having 344 stores in the country.
The sports apparel and footwear industry is highly competitive, with established players and new entrants vying for market share. Using Porter’s Five Forces Model, we can analyze the level of competition in the industry:
- Competition in the industry: Intense competition from established players such as Adidas, Under Armour, and Puma, as well as new entrants such as Allbirds and Hoka One One, disrupting the market with innovative products and marketing campaigns.
- Potential of new entrants into the industry: The sports apparel and footwear industry has high barriers to entry due to strong brand loyalty and high capital requirements for research and development, manufacturing, and distribution networks. However, new entrants can disrupt the market with innovative products and marketing campaigns.
- Power of suppliers: The sports apparel and footwear industry has a moderate to high power of suppliers due to the concentration of suppliers and raw material prices. Nike must maintain good relationships with its suppliers and negotiate favorable prices to maintain profitability.
- The power of customers in the sports apparel and footwear industry is moderate due to the availability of substitutes and low switching costs. Nike must stay competitive in product quality, innovation, and pricing to maintain customer loyalty.
- Threat of substitute products: The threat of substitutes in the sports apparel and footwear industry is high due to the availability of alternative products, such as casual wear and fashion items. Nike must stay ahead of the curve in fashion and trends to maintain its relevance and appeal to consumers.
Overall, the sports apparel and footwear industry is highly competitive, and Nike must continue to innovate and differentiate itself from its competitors to maintain its market position.
Nike’s major sports apparel and footwear competitors are Adidas, Under Armour, and Puma. Here is a brief analysis of each competitor’s strengths and weaknesses:
- Brand Value
- An Iconic Brand with a Prestigious Legacy
- New Products Innovation
- Young Customers prefer Adidas
- Effective Supply Chain Management
- Sponsorship of high-profile athletes
- Celebrity Endorsements
- Supply Chain Shortage
- Expensive Products
- Limited Product Line
- Links to Forced Labor
- Allegation of Racism
- Distribution Networks
- Adoption of Digital Apps
- Brand Recognition
- Adoption of E-Commerce
- Limited Operating Presence
- High Investment Expenditure
- Slow E-Commerce Adoption
- Poor Expansion Strategies
- Strong brand recognition
- Diverse product portfolio
- Innovation and design
- Strategic partnerships and collaborations
- Global distribution network
- Sustainability and corporate social responsibility
- Strong financial performance
- Limited market share
- Dependence on third-party manufacturers
- Slow response to market trends
- Limited presence in emerging markets
- Inconsistent marketing strategy
1. Leverage Emerging Markets: Nike should continue to expand its operations in emerging markets such as India, China, and Brazil. With an ever-growing middle class and increasing purchasing power, these markets offer lucrative business opportunities for multinational companies like Nike. The company should focus on developing products that cater to customers’ specific needs and preferences in these markets. This will enable Nike to establish a stronger foothold in these regions and generate significant revenue.
2. Continue to Innovate: Nike should invest in research and development to create innovative products that combine style and performance. The company should also explore opportunities to integrate technology into its products, particularly in association with fitness and health. This will enable Nike to stay ahead of the competition and appeal to customers who value style and functionality.
3. Streamline Supply Chain: Nike should streamline its supply chain to eliminate inefficiencies and reduce costs. The company should build stronger relationships with its independent manufacturers and suppliers to ensure that products are produced and delivered on time and to the desired quality standards. This will enable Nike to respond more quickly to changing market conditions and customer needs.
4. Optimize Direct-to-Consumer Sales: Nike should continue to optimize its direct-to-consumer sales channels, including its own retail stores and e-commerce platform. The company should focus on providing customers with a seamless shopping experience across all channels, emphasizing mobile and online sales. By capturing a greater share of the profits from each sale and controlling the customer shopping experience, Nike can increase its revenue and build stronger customer loyalty.
5. Combat Counterfeit Products: Nike should take proactive measures to combat counterfeit products. The company should work closely with law enforcement agencies to identify and shut down counterfeit operations. Nike should also invest in anti-counterfeiting technologies, such as RFID and holographic labels, to make it more difficult for counterfeiters to replicate its products.
6. Maintain Brand Image: Nike should continue to invest in marketing and advertising to maintain its brand image and stay ahead of the competition. The company should focus on promoting its products’ quality, performance, and style to differentiate itself from other brands in the market. Nike should also focus on building stronger customer relationships through social media and other digital platforms.
7. Focus on Sustainability: Nike should continue to focus on sustainability by using eco-friendly materials and processes in its products’ production. The company should also explore opportunities to reduce its carbon footprint and other environmental impacts. By demonstrating a commitment to sustainability, Nike can appeal to environmentally conscious customers and differentiate itself from other brands in the market.
Overall, Nike should focus on leveraging its strengths, such as its strong brand image, innovative products, and direct-to-consumer sales channels, to take advantage of the opportunities presented by emerging markets, technology, and sustainability. Additionally, the company should work to mitigate the threats posed by counterfeit products and increased competition by investing in marketing and advertising, streamlining its supply chain, and continuing to innovate.
Gupta, S. (2018, December 18). Nike SWOT 2023 | SWOT Analysis of Nike. Business Strategy Hub. https://bstrategyhub.com/swot-analysis-of-nike-nike-swot-analysis/
A. (2023, March 22). Puma SWOT Analysis – The Strategy Story. The Strategy Story. https://thestrategystory.com/blog/puma-swot-analysis/
Parker, B. (2019, January 6). Under Armour SWOT Analysis 2023 | SWOT Analysis of Under Armour. Business Strategy Hub. https://bstrategyhub.com/swot-analysis-of-under-armour-2019-under-armour-swot-analysis/
Gupta, S. (2019, December 1). Adidas SWOT Analysis (2023). Business Strategy Hub. https://bstrategyhub.com/adidas-swot-analysis/
Porter’s 5 Forces Explained and How to Use the Model. (2023, March 31). Investopedia. https://www.investopedia.com/terms/p/porter.asp
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In this assignment, (you) will be able to develop an understanding of the role of strategic management and strategic competitiveness in a globalized economy. You will have a chance to analyze a company’s external environment, identify opportunities and threats, assess industry competition, and conduct a competitor analysis to identify the company’s strengths and weaknesses. Then, you communicate your findings in an infographic.
To get started:
- Select a company that operates in a globalized economy. You may choose a company from any industry.
- Conduct an external analysis of the company using the following framework:
- Opportunities: Identify and describe the opportunities available to the company in its external environment.
- Threats: Identify and describe the threats facing the company in its external environment.
- Industry competition: Assess the level of competition in the company’s industry using Porter’s Five Forces Model.
- Competitor analysis: Conduct a detailed analysis of the company’s major competitors, including their strengths and weaknesses.
Based on your analysis, provide a strategic recommendation for the company. Your recommendation should be supported by the analysis you have conducted and should consider the company’s strengths and weaknesses, opportunities and threats, and the competitive landscape of its industry. Communicate your findings in an infographic.
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