nike environmental analysis

strategic management

NIKE just do it!

andi erdika

maydita diah s.

m. setiawan kusmulyono

rieni widyastuti

yusuf firdaus

Internal and External Assessment

S1 Business Prasetiya Mulya Business School

Undergraduate Degree

Indonesia

Company Profile

Visi …

To bring inspiration and innovation to every athlete

… MisiNike is the “largest seller of athletic footwear and athletic apparel

in the world. Performance and reliability of shoes, apparel, and

equipment, new product development, price, product identity

through marketing and promotion, and customer support and service

are important aspects of competition in the athletic footwear,

apparel, and equipment industry… We believe we are competitive in

all these areas.” The company aims to “lead in corporate

citizenship through proactive programs that reflect caring for

the world family of Nike, our teammates, our consumers, and

those who provide services to Nike.

The Internal Assessment

Marketing

Target Market Male and Female; 18 – 34 y.o.

Positioning High performance shoes designed with hi-tech features

Have many brands and products model for each type of

consumers.

Have high allocation of advertising budget for endorser contract,

TVC, print ads, and sponsorship activities.

Have top endorsers that are the champion in their sports areas.

Distribution

Nike has worldwide distribution line

Nike has good distribution line to retailer

Nike has new ordering system, named Futures Ordering

Program

Research & Development

Nike has NSRL (Nike Sport Research Laboratory) and APE

(Advanced Product Engineering) which cooperated in

developing and executing idea

Nike did direct research to the athlete by accompanying their

daily activities to find the best suitable product

Nike always developing superior technology to compete with

others

Management Style / Culture

Knight as CEO Nike, is an former athlete of long distance run

Nike working culture is established as camaraderie and

cooperative culture.

Factory design in Oregon is especially designed to create

natural circumstances and equipped with complete sport

facilities.

Social Responsibility

Nike placed VP for social responsibility in 1998

Nike joined Fair Labour Association (FLA) and Global Alliance

for Workforce and Communities (GAWC)

Nike funded many NGO such as WWF, etc.

Nike do public relation activities to keep the company’s image

Finance / Accounting

• Nike has healthy financial situation

Sumber: Nike 2003 Form 10-K, p.37 (data diolah)

• But, Profit margin is lower than

Gross Profit margin

The External Assessment

Economic forces

EU is changing into one currency.

USA economic growth is in slow growth because of WTC.

Contract manufacturing is chosen by many athletic shoes

company.

Social forces

Since 70-s, customer is more brand-minded.

Sport Consumer preferences is changing into more fashion-

oriented.

Young consumer is believed much in advertising promotion and use

internet as the primary sources of information.

Buying motives of young consumer is dominated for leisure activity

Since 90-s, woman’s consumer dominated the athletic shoe market

because of the changing lifestyle.

Political forces

World is entering global trade climate with NAFTA and GATT

There is anti-dumping regulation existed in EU

Technology forces

Nike has integrated technology system to develop their product

Nike always adopted latest technology for their product and

matched with their vision

Competitive forces

Competition is more tight with the coming of Reebok and

Adidas

Competition is happened around the world, globally, not locally

Athletic shoe trend is going to be fashion-oriented

Five forces (Porter)

Bargaining to :

– Supplier High

– Buyer High

– New Entrant Low

– Substitution Low

Conclusion:

– Internal Rivalry High (Oligopoly)

Conclusion

SWOT analysis

Strength(s) High brand awareness

Highest market share

Worldwide distribution line

Integrated and future R&D

Better working culture

Healthiness of financial condition

Weakness(es)• Bad social issues, such as children

labor, sexual harassment, etc

SWOT analysis (lanjutan)

Opportunity(ies) Total of athletic shoe sales in US is

increasing in 2002

Fashion trend

Domination of womans consumer

Global and Free Market

Threat(s)• US economic growth is decreasing

• More newcomers

• Close competitor, such as Rbk And

Adidas are more aggresive

• Anti-dumping regulation in EU

Generic Strategies Nike uses network structure

Nike implemented Differentiation Strategies

Detail Strategies• Finance Keep the financial ratio in standard

• Marketing use endorser in every sport

Higher allocation of marketing budget

• Operation Centralization of R&D in Oregon

application of NSRL

• HR Network Structure

Athlete management

Problem(s) :

1. Manufacturing ethics Social issues about labor exploitation

2. Law suits

3. High endorsement fees paid to athletes High SA Expenses (selling and administrative)

Based on the analysis of Nike I/S, the growth of SA expense in 2002 -2003 is

not comparable (11.2%) with the growth of the sales (8.1%).

Measure Performance

Nike has good position in market

Financial liquidity is good

Primary threats is coming from:

– Contracted manufacturing(labor)

– Long-term endorser usage

Conclusion

There is a changing behaviour of the consumer in athletic shoe.

They are moving from sportswear to fashion-sportswear.

Unfortunately, Nike is still using the endorser that is not

fashionable, even though they are the champion in their area. It

was proven by the highest growth of SA expense in 2002-2003.

Recommendation

Try to generate sales from SA expense, by:

– Flexible endorser contract (not in long term)

– Lifestyle consideration in choosing the endorser

Endby: Kelly Kusmulyono

setiawan_kusmulyono@yahoo.comPrasetiya Mulya Business School