Strategic Analysis

Introduction

Nike, Inc. is a renowned world leading sportswear manufacturer and seller. The organization is globally renowned for sports apparel, accessories, sports equipment and the famous footwear. The products are designed for varying athletic activities such as athletics, basketball and soccer. With its headquarters in Beaverton, Oregon, the organization operates at a global level in over one hundred and sixty (160) countries. Similarly, Nike has an employee base of 34,400 individuals, based in manufacturing, marketing and distribution. The organization’s mission has been stated as to bringing inspiration and innovation to all athletes in the world. Through continuous processes, Nike, Inc. has aspired to use never-ending innovative techniques in order to widen its production to range of products that subsequently assist athletes to reach their upmost potential. In addition, the company’s quest in creating a brand name in sports footwear and apparel cannot be remotely compared to those of other brands. Clearly, the collective responsibility and constant innovation surpasses those of other competitors, placing Nike, Inc. at the edge in defining and viewing the continual possibilities for human potential in sports.

The success of Nike and many other organizations lies in core competencies that assist the firm in gaining a competitive edge in the market trends. Nike, Inc. utilizes its innovative technology, networked systems and extensive consumer base that increase the effectiveness and efficiency of product delivery. Furthermore, the company also maximizes the use of suppliers and individual consumers who boost the market sales. Recently, the success of Nike, as a firm, can be viewed from the incorporation of SACs, whilst putting into consideration, the roles of diverse stakeholders in the running of the firm. Traditionally, many firms perceived organization’s stakeholders as customers, shareholders and employees (Elliot 2001).

The organization’s successful strategic capability is as a result of intense market analysis and constant product improvement. At Nike, the mission of the company is to be a company that surpasses the rest in the highly competitive athletic industry. This mission has over the years been put into perspective through the maintenance of quality in all Nike products. This includes the production of quality footwear, apparel, equipment and sports accessories. These products are further supplied to individual consumers or other organizations. Similarly, Nike’s target market comprises of consumers of variant ages, economic status and lifestyle (Freeman 1984). Through the use of retail outlets, Nike pledges to avail all its products to all consumers globally. Marketing has also been eased by the use of the company website and mail orders. With continuous innovation and keeping  the mission in focus, Nike should only be expected to rise to greater heights.

The vision of the company is to remain the leader in the athletic industry. The company’s vision promises to uphold the production of quality products that have been a distinct characteristic of the organization since its inception in 1964. Ultimately, Nike has a vision to sufficiently meet the dynamic needs of all consumers, irrespective of age or lifestyle through innovation of their products (Moore 1992).

For the achievement of the organization’s mission and vision, Nike has well placed long-term and short-term corporate objectives. The long-term objectives are based on a five-year strategic plan. In the course of a five-year period, Nike seeks to maintain the improvement in stockholders' return on equity. The company, in addition, aims to achieve a 20.0% return by the year 2004 in comparison with the mere 6.5% from 1999. The boost is over the course of the period as indicated. In the long-term, the company also seeks to increase its earnings per unit share to an estimated value of up to $2.70 per share. If successful, then, this will mark a high record that surpasses the increase in earnings per unit share as recorded over a decade ago in 1997.

In the fiscal year 2000, Nike,Inc.’s short term corporate objectives were focused on the need to improve the company’s returns for the stated period. The objectives included the increase in the company’s net income to an estimated value of $550 million as a foundation of reaching all the organization’s long-term goals by improving returns on equity and higher EPS. In the period between 1999 and 2000, the company experienced a 22% increase in a combined first and second quarter income. Also, the company in the short-term seeks to recover the market prices of its stock to a high of $50 per share from the recorded low of $26.50 per unit share in the year 2000 (Quinn 1992).

Nike, Inc. strategic planning process utilizes a comprehensive structured approach that aides in the achievement of both the long-term and short-term goals. Nike’s focus on product development through innovation accounts for the position the organization upholds in the markets (Moore 1992). Continuous improvements in their products allow Nike to secure a position that indicates power and corporate advantage in the marketing of athletic footwear, accessories and clothing. Another strategy, employed by Nike, Inc. is the strategy of concentration. This is due to the extensive markets that Nike enjoys all over the world, accompanied by the extensive marketing in key global regions. This, as a result, acts as a boost in the sales and the realization of both the short-term and the long-term goals. Nike’s ability to expand geographically places it at a market edge in product offerings. Expansion in geographical markets translates into increased sales and rise in the cost of the firm’s shares.

The comprehensive structured approach, as utilized by Nike, is continuously evaluated in order to determine the overriding strategic position. The criteria, employed in the evaluation process, include demographics, competence, culture and timing. With comprehensive analysis of the markets, Nike places the strategies of product development, concentration and market development in descending order.

For effective strategic planning, Nike has a well-placed board of directors that is comprised of both management and independent directors. The two categories of directors bring efficiency in service delivery due to the direct and indirect natures of leadership. Management directors are directly involved in the company’s affairs, whereas the independent directors bring with them outside experience that is beneficial to the company. Also, the independent directors assist in providing independent frames of reference with clear attitudes of ‘thinking outside the box’. The board is of instrumental value in regards to decision making, management and strategy formulation processes (Moore 1992). The board is otherwise described as an oversight board. However, there has been sharp criticism over the constitution of the Nike, board of directors is over the age of these members. The board consists of older members with the youngest being 50 years old and an average of 62 years. For many, this seems as a constraint in the essence that the board may lack young insight into modern perspectives of the company, geared towards the realization of Nike’s short-term and long-term goals (Fisher et al. 1999).

With increased competition and market saturation, Nike, Inc. has been faced by threats in the market. The market is significantly infiltrated with diverse companies and brand names, leaving little or no room for expansion. In the same context, there is limitation in brand innovation and increase in the value for Nike’s market shares. Competition has been tight, especially in clothing and footwear. There is a risk of Nike, losing its market share and its leadership in the sector, if other competing firms gain a small percentage of the market. Lose in market share will, in turn, significantly affect the realization of Nike, Inc. goals and objectives both in the short and long-term.

The success of the company can be attributed to the Strong brand equity that Nike, Inc. is proud of. Nike’s sports apparel, equipment and footwear have very strong brand equity, which is a result of thorough and consistent marketing and innovation. As of 2009, Nike was placed as the 25th best overall brand, with a value estimated at $13,706 million. In addition, reports indicated an enhancement in the position within the market with a brand equity allowing Nike to secure a large share in the global footwear market roughly approximated at about 16%. On a global level, the achievement is barely ignorable.

As one of the world’s leading designer and manufacturer of footwear in the United States, Nike is continuously seeking to gain the edge in all the global sales. Subsequently, sales by the Nike, Inc. are operated through systematic distribution of varying products. In the United States alone, distribution is done through the approximately 350 retail outlets. This includes about 145 Nike factory stores in four cities. These stores are located in Wilsonville, Oregon and Memphis, Tennessee. Nike, Inc. also has a wide distribution system that allows retailers and distributors alike to maintain supply of products, whilst ensuring that all prices are kept competitive for all customers. For success, Nike also ensures that there is on-time delivery of all products, ranging from sportswear and plastic accessories.

Nike is arguably a trendsetter in technical innovation all over the world. These constant improvements are the results of consultations and consideration of opinions from trainers, coaches, orthopedists, podiatrists and athletes. All the considerations are done in the initial developmental stages of all products. This, as a result, has enabled the company to provide all its customers with products, considered as the best in all markets. Over decades, there has been consistent improvements and modification in footwear, equipment, accessories and apparel. The improvements are particularly notable in Nike’s footwear, making it the principal in the athletic footwear market (Mintzberg & Quinn 1992). Every year, Nike prides itself in innovation and releasing more advanced products every year. This is as a result of innovation in the sports industry, particularly the footwear and athletic industry (Elliot 2001). The most recent milestones in footwear, for instance, encompass lightweight shoes for all individuals who due to variant reasons prefer to train or compete barefoot.

To maintain competitive costs in all markets, Nike utilizes numerous manufacturing plants in low cost countries such as Thailand, Indonesia, Vietnam and the populous China. It, therefore, comes as no surprise that the bulk of Nike’s product manufacturing occurs outside the United States of America, which is largely considered as a focal point in manufacture and supply. The company has strategically placed suppliers in the low cost countries that ensure the supplies are not only effective but also efficient. The mega-sales recorded are due to individual suppliers who work with bulk and individual retailers at a small scale level. With proper mechanisms in these countries, Nike, Inc. has succeeded in maintaining competitive prices, while ensuring steady delivery of Nike products.

With increasing opportunities in the current markets, Nike is well placed in further development of the sportswear industry. For instance, Nike’s association with NFL will propel the company to higher levels in market leadership. In 2010, Nike, Inc. was declared as the official licensed-partner for on-field apparel, involving all sports clothing, uniforms, fan gear and related memento (Mintzberg & Quinn 1992). Consequently, this has brought a major boost in the company’s earnings per unit share in the subsequent years. It is estimated that the costs by unit share is expected to Rise by about three percent. The contract between Nike and NFL has been slated for the period, ranging from 2012 to 2016. This partnership has been projected to provide superb marketing opportunities not only for Nike but also for NFL as an entity and for the millions of NFL fans.

Nike, Inc. succeeds in the prospects of a strong market growth and the looming potential in footwear market and sports gear generally. Even though the footwear market’s growth has been observed to have declined over the recent years, market projections estimate that there may be a sharp rise by the year 2014. Further breakdown indicates that the increase will augment to $69.48 billion in 2014 from the recorded figures of $62.11 billion in 2009 (Himmelstein 1997).

Through strategies such as product differentiation, Nike has, over a period of years since the 1990s, managed to maintain a successful competitive strategy. The strategies, applied by Nike, concentrate more on the products of Nike, rather than competition. Again, the product variation is dictated by the changing market and consumer needs. The current generation of consumers looks for class and individuality in all products. In this regard, Nike has, therefore, catered for the needs of such customers. The emergence of custom-made products for many customers is also a strategy put in place to cater for these needs of consumers. At Nike, Inc., the topmost priority is the enhancement of performance through the constant development of new products. Similarly, the company’s website is a mark of excellence and individuality. For instance, Nike customers can easily select the color and designs of their products online. Athletic shoes have been known to be sold this way with an option of selecting monogrammed heel-insignia. This competitive strategy has honed Nike, as a market leader and as the focus of the athletic world in product offering.

The management of Nike has played an instrumental role in propelling the company to the edge of the markets. The management critically analyzes the internal and external environments and forces to determine the nature of markets and competition. All decision making processes are based on the extensive analysis results. Nike’s marketing research on product trends and costing have continually focused on low-priced markets. This stratagem is in effort to widen the range of Nike’s products in the global market. The high-end market has also been focused on these efforts, as it accounts for the bulk of Nike sales globally. The product spectrum at Nike has significantly broadened due to the inclusive nature of the target market to encompass the low, middle and high end markets.

Nike, Inc. has, over the years, lacked a clear set of corporate objectives that govern the company. This has subsequently deterred all stakeholders from being well informed on the nature, developments and the general direction of the organization. The absence of clear corporate objectives is a weakness that should be eradicated for the company to put into sharp focus, its nature and direction in the market. There have been no released or published corporate objectives in Nike, Inc. as an overall company since its inception.

However, it should be noted that Nike has established distinct corporate objectives, related to their corporate responsibility. This improvement seeks to create programs that reflect the caring nature of Nike as an entity. The objective is to be a market leader in corporate citizenship through a variety of programs that directly reflect the nature of Nike as a family (staff, consumers, teammates and partners). There has, however, been sharp criticism on the nature of the above objective, which is arguably marked with shortcomings, including the premise that the target is neither measurable nor time bound as clear objectives should be. The lack of time specifications for the implementation of the company’s strategies will most probably work as a negative force behind the success of the company. The company may generally face more constraints, when meeting the objective without clear-cut time specifications. Consequently, the suggestions for improvements in this spectrum involve the establishment of a clear time frame and better specifications of the corporate objectives (Himmelstein 1997).

In the quest to minimize costs and losses, Nike cut on the number of employees. This, as a result, was a de-motivation factor among many employees who over the years were loyal and committed employees. The emphasis on motivation cannot be ignored, considering the asset value that employees offer a company. Staff motivation was also significantly affected due to negative media coverage over claims of substandard working conditions for Nike, Inc. Asian factory workers (Melcher & Kerzner 1988). This was a great focal point of controversy that affected the organization negatively. However, the company established mechanisms to uplift employee morale, though it still remains a great challenge to the organization’s development.

Conclusion

It is clearly evident that the success of Nike is embedded on successful competition. The dominance of Nike in the market places it at the edge over its aggressive competitors. Through continuous product quality and innovation, Nike, as a firm, has been able to achieve greater goals. Athletic products, ranging from apparel, footwear, sports equipment and accessories, have, over the years, been transformed to powerful global trends.

The organization’s strategic planning process is a result of intense market analysis and constant product improvement. At Nike, the mission of the company is to be the company that surpasses the rest in the highly competitive athletic industry (Mintzberg & Quinn 1992). This mission has, over the years, been put into perspective through the maintenance of quality in all Nike products. This includes the production of quality footwear, apparel, equipment and sports accessories. These products are further supplied to individual consumers or other organizations. Similarly, Nike’s target market comprises of consumers of various ages, economic status and lifestyle. Through the use of retail outlets, Nike pledges to avail all its products to all consumers globally. Marketing has also been eased by the use of the company website and mail orders. With continuous innovation and keeping of the mission in focus, Nike should only be expected to rise to greater heights (Himmelstein 1997).