Strategic Alternatives Analysis – Nike

Strategic Alternatives Analysis – Nike

Nike is An American multinational company based in Oregon, USA. The company specializes in designing, developing, and manufacturing footwear, apparel, accessories, and services. Nike is the largest producer of athletic shoes and apparel globally. The company is also a global leader in the production of sports equipment. Nike employs about 44,000 employees in the US and currently ranks as the largest business dedicated to sports, with a market value of $30.44 billion as of 2021. Other than its brand, Nike also markets under Nike Blazers, Nike Pro, and Nike Golf. It also engages other subsidiaries such as Jordan, Converse, and Hurley International.

SWOT Analysis

Strengths

Ahmed et al. (2016) notes that at the core of Nike’s success is its strong brand image, which gives them an upper hand in the market. Also, Nike’s effective marketing strategies are critical to its success. The company uses popular athletes as brand ambassadors, thus reaching the target audience who relate with their fellow athletes. Additionally, rapid innovation efforts give the company a competitive edge in the industry. The company has attained global dominance in sports footwear, equipment, and apparel with global production plants.

Weaknesses

Among the weaknesses facing Nike are labor controversies in developing countries. Labor issues like child labor have plagued the company in developing markets, thus hurting its brand image (Ahmed et al., 2016). Besides, the company has expanded its product portfolio over the years, but new product lines have failed to take off. Apart from the sports equipment, footwear, and apparel segment, where the company is a global leader, other product lines have struggled to penetrate the market (Ahmed et al., 2016). Besides, Nike’s presence in developing markets is limited due to issues related to pricing and imitation. The prices of Nike’s products are perceived to be very high in these areas. As a result, the company’s global presence is limited. Based on these weaknesses, the company ought to review its labor policies, improve other product lines, and penetrate markets in developing economies.

Opportunities

Among the potential opportunities for Nike are the expanding emerging markets. Although Nike still has no presence in many foreign markets, emerging markets like Brazil, China, and India are flourishing, and they hold significant market potential for the company (Ahmed et al., 2016). Besides, in a bid to improve its customer experience, Nike is also severing ties with wholesale retailers it has previously engaged. Examples include Fred Meyer Zapoo’s and Bob Stores. Once the partnerships are terminated, the company will have a wider market reach. Also, there is immense opportunity for Nike’s products in the digital market. For instance, in 2020, 35% of the company’s entire revenue was attributable to digital sales. In addition, Nike is also delving into innovative products that have not been manufactured before. For instance, the manufacture of wearable devices to measure athletes’ physical performance promises to open new market opportunities altogether.

Threats

Counterfeit products are among the prominent threats that face the company as retailers and merchandisers sell counterfeit products with a Nike label at lower prices. The practice threatens Nike’s brand image since the products wear out fast as they are made of low-quality material (Ahmed et al., 2016). Consequently, customers will shun Nike, thinking that the company now makes poor-quality products. Besides, Nike is facing increasing competition from emerging brands. That has forced it to spend heavily on marketing and demand creation. For instance, in 2020, the company spent a staggering $3.5 billion on marketing alone in a bid to expand its market share.

Nike’s Strategic Alternatives

Nike must follow well-thought-out strategies to be a leader in the sports footwear, apparel, and equipment industry. One key strategy focuses on innovation through research and development (Mahdi et al., 2015). That is intended to manufacture equipment and wearable devices that reduce or eliminate sports injuries, improve performance, and enhance comfort. However, no matter how the company innovates, there will always be copycats. Another strategy is premium pricing. The strategy targets customers who have developed a special intimacy with Nike products such that they can buy them at any price (Mahdi et al., 2015). Premium pricing, however, scares away customers from lower social classes.

Also, product differentiation has helped the company manufacture products that target a market niche. Nike leverages psychographic and behavioral segmentation to expand its market share (Mahdi et al., 2015). The strategy digs into consumers’ purchasing habits and their needs. Based on the strategy, Nike has defined its products as; fitness/recreational and sports-oriented. Moreover, Nike has positioned its products as leading sports goods in the minds of its customers (Mahdi et al., 2015). Also, its slogan ‘just do it’ inspires athletes to give their best. The strategy has given Nike a competitive edge in the sports industry.

Using Decision Matrix in Strategy Analysis

A decision matrix is a tool used by managers to make strategic decisions. The tool is especially helpful when managers have diverse strategic alternatives to choose from (Chang, 2014). To choose the best alternative, managers can list all available strategic alternatives in a table and list all factors against which to score them. Managers can choose strategies with the highest scores based on a zero (lowest) score to five (highest).

Limitations of the Decision Matrix

The decision matrix does not always result in the best decision. Sometimes, a highly ranked strategic alternative might be expensive to implement or replicate what managers wanted to avoid in the first place (Chang, 2014). The limitation results from assigning wrong score factors, such that a slight change will bring different results. Managers need effective human judgment to ensure rating factors are assigned objectively to ensure that a decision matrix brings the best result.

Elements of Organizational Growth

Apart from expansion, a firm can grow by forming joint ventures/alliances. The strategy is especially useful for small firms with limited resources. Joint ventures help firms grapple with shifting demand, competition, and supply chain changes, among other factors. For instance, subcontracting can help a small firm focus on a project so they can deliver the best and pass the rest to other partners (Durmaz & İlhan, 2015). Subcontracting will help the firm expand its client base and revenue.

Another growth strategy is licensing. Firms pursuing growth can consider licensing some of their technological discoveries to other firms since the latter will eventually discover them anyway (Durmaz & İlhan, 2015). Licensing will create a long-term cash flow, which will grow a company’s revenue.

Also, tapping into new markets can help organizations grow. Before venturing into these markets, the company must first ensure that there is limited competition. Tapping into new markets will enhance demand even though it will eventually face out.

 References

Ahmed, R. R., Brohi, B., Bhutto, A. H., Prithiani, J., Khubchandani, R., Kumar, S., & Abbas, Z. (2016). „Strategic Marketing Plan of Nike “. ResearchGate, Indus Institute of Higher Education.

Chang, K. H. (2014). Design theory and methods using CAD/CAE: The computer-aided engineering design series. Academic Press.

Durmaz, Y., & İlhan, A. (2015). Growth strategies in businesses and a theoretical approach. International Journal of Business and Management, 10(4), 210.

Mahdi, H. A. A., Abbas, M., Mazar, T. I., & George, S. (2015). A Comparative Analysis of          Strategies and Business Models of Nike, Inc. and Adidas Group with special reference to      Competitive Advantage in the Context of a Dynamic and Competitive    Environment. International Journal of Business Management and Economic Research, 6(3), 167-177.

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Strategic Alternatives Analysis – Nike

Conduct a SWOT analysis for your selected company and discuss your findings. What advantages does your company have over its competition? What opportunities exist in the industry from which your company can benefit? Who is your company’s competition, and what types of risks might they pose? What weak areas could your company improve to compete with its strongest competitors?
Identify strategic alternatives that create value for the company. Which ones are focused on internal growth, and what do they offer the company? What are the drawbacks of these strategies? Which ones are focused on external growth, and what do they offer the company? What are the drawbacks of these strategies?
How would you use a decision matrix to identify the leading alternative? Explain how you determined the values used to distinguish between each option. What about the matrix, if anything, may be limited in its use value to an analyst or decision maker?
What factors might inhibit the success of the identified optimal strategic alternative? How can the issues you identified be addressed and corrected?
Growing an organization is not always about increasing the size of the firm. If expansion is not the main focus, what other elements lend themselves to the growth of the firm? How might each be achieved?
You will be required to incorporate instructor feedback from this paper into the Assessing and Managing Risk assignment in Topic 7.

Prepare this assignment according to the guidelines found in the APA Style Guide located in the Student Success Center. An abstract is not required.