Nike Strategic Plan, Research Paper Example

Company Introduction

It was in the 1962 when Nike Inc. was founded by Bill Bowerman and Phil Knight. Since then, the company has grown into a strong and most competitive brand in the whole world. Statistics has it that Nike Inc. owns about 80% of the market targeting athletic apparel. In 2014, it is believed that the company’s estimated total revenue is $27.79B as opposed to the $25.33B it accumulated in the year prior. The growth in the revenue of the company can be rooted from the existing 47,000 branches it has established in over 100 countries. Contrary to the popular belief that Nike only owns “Nike” tagged products, the company also extends ownership to various brands such as Umbro, Cole Haan, Hurley and the infamous Converse. The brand Nike has dominated the athletic apparel and its goal is to continually dominate the aforementioned market for as long as it can. However, with the extension of ownerships such as the Cole Haan line of product, it cannot be denied that the company is exploring other markets such as luxurious bags, top of the line shoes, coats and even accessories. Clearly, one of the strategies that are being employed by the company to dominate the market is its differential lead. This type of strategy will enable the company to target all specific markets without sacrificing the main market (athletic apparel) that is has a strong and solid foothold.

Analysis of Nike Inc. Strategy

Nike Inc. has been one of the best distributors of sports clothing apparel due to its utilization of famous athletes in advertising their products. Nike’s slogan “just do it” has been uttered by famous athletes such as Michael Jordan, Serena Williams and Lebron James among the many other famous sports personalities. The advertising strategy of Nike can be rooted from the creation of products (clothes and shoes) that have the most appeal to its targeted audience. Such appeal combined with an endorsement by a famous athlete has yielded good revenue for the company (Joiner, 88). The advertisements of the company give an impression to the buyer that once the product is purchased, the buyer can actually play as good as the endorsers. Though this may not be true, it can be said that aside from the company’s endorsers, the brand itself is famous for its quality. If someone wants a really good pair of running shoes, Nike will be the first choice because of its proven quality. In addition, Nike Inc. has expanded its products from shoes to sports equipment.

Moreover, in order to attain maximum profitability, Nike Inc. is getting their products manufactured in China due to the fact that it is cost-effective as compared to the cost when the products are made in the United States of America. The cost of labor in China is extremely cheap compared to the United States of America. However, the quality of the product stays the same. Nike Inc. takes pride in the quality of its products and therefore, even though the production and manufacturing are being outsourced, the company still practice strict and direct control and monitoring to ensure that the quality is not being compromised. The company’s ability to expand and to meet the changing demands of the market has allowed it to become the big conglomerate that it is today.

Structure of the Company

It is a known fact that Nike Inc. has more than 47,000 branches scattered all over the world while it is in Beaverton, Oregon that the main facility is located. The advantage of having branches worldwide, Nike Inc. is able to deliver products to virtually anywhere in the world. Its online presence allows people to order products via the website. With the utilization of business process simulation, an order can easily be processed and delivered in a timely fashion. Although it is hard to manage branches located in all parts of the world, Nike Inc. is able to maintain and implement the appropriate management style to keep the company and its branches in sync with one vision and goal- market domination. Hierarchical management is what the company employs. Every branch of Nike Inc. has its own active manager and teams specializing in the finances, marketing and production. It would seem that the research and development team of all the branches of the company is the one responsible for its success. The company also merges and acquires various companies to increase its sales and expands its product lines.

Even though, Nike Inc. has acquired several companies and did a lot of mergers, the company has specific teams and department for every product line that they have. They do not mix department to ensure quality control and success in research and development. Regular meetings and planning are being held in order to trouble shoot, brainstorm, benchmark and analyze how the company is performing and where are they standing in terms of their market share. Overall, it can be said that Nike Inc. has a good structure, management and procedures that the members of the staff are following in order to build and maintain their strong brand.

Strength, Weakness, Opportunities and Threat (SWOT) Analysis

The major strength of the company lies on its advertising and marketing skills. This aspect of the company has an advantage over its competitors due to the fact that Nike Inc. always get the top and most famous athletes as endorsers while the competitors settle for the next best athlete. In addition, the company’s expansion of product line also allows for the increase market based in a global/international scale. As a matter of fact, Nike Inc. once reported its excess net revenue of $13 billion. The expansion of the product line is a direct result of the merging and acquisition of famous companies such as Cole Haan, Livestrong, Umbro and Converse. Even though the aforementioned companies are strong brands of their own, being merged with Nike Inc. allowed the latter to better promote its brand. With this strategic move, Nike Inc. is now able to reach out to various and differing audience/markets. It is no longer just geared towards production of running shoes. With Converse on its team, the company can now cater to the market of skater shoes. The Cole Haan product lines cater to a more sophisticated and high end shoes, clothes and accessories (Ulrich, 57).

Clearly, the company is now able to cater to a whole lot of different markets other than athletes or sports enthusiasts. It can attract audience from all walks of life and that only means expansion of profitability as well. It has to be remembered that the main goal of a business is to make money. Its success lies on its ability to maintain current buyers and markets and to attract new ones (Johnson, 95). The demands of buyers differ and Nike Inc. is able to supply such ever changing demand, whatever it may be.

On the other hand, while the company has a strong brand, it cannot be denied that its profit and market share is heavily reliant on the footwear market more than anything else. Although the company has a better and wider product selection, the truth remains that Nike Inc. is known for its footwear line such as running shoes, hiking shoes and the likes. The company will be badly affected if another competitor comes in with better selection for shoes or if the footwear market collapsed for some reason. This is one of the most vulnerable aspects of the business. In addition, the prices of the Nike Inc. shoes are not cheap. Nike shoes can go from $100 or more, depending on the style. The buying power of the customers affects how Nike will perform in the market. Moreover, there are other competitors who are offering cheaper pair of shoes for almost the same quality if not better. Another important weakness of the company is its strategic outsourcing of labor. A lot of people have been advocating against cheap labor in China and it does not help the reputation of Nike Inc. Some people are refusing to buy the product just because of the fact that manufacturers from China oftentimes pay wage that are way below the minimum standards. Not to mention the issues on child labor and unfair labor practices (Wood, 116).

Nike Inc. is a strong brand yet it is not considered to be a fashion brand. However, a lot of people from all over the world think that it is a fashion brand and it is an opportunity that the company can take advantage from. Another opportunity for the company is its client-base. The brand is famous among the youth market. Hence, the company will generate a lot of profit from this group of people. Also, the company can take advantage of its strong market presence not just locally but also internationally. Its global presence will allow the company to keep growing and expanding.

The biggest threat that the company has to face is the competition. The number of competitors is increasing rapidly. Before, there were only Adidas, Rebook and New Balance for competitors. But now, there are Fila, Puma, Sketchers, Under Armour and Asics and the list go on. The company has to be on top of its game if they want to keep their market share or to grow the same. In addition, the competitors can also mimic the products of Nike Inc. without even violating any trademark or patent. For example, Nike Inc. has been utilizing the barefoot technology in its products. Other companies such as Puma and Reebok are now using the same technology. The truth of the matter is that whatever Nike Inc. will do it is guaranteed that others will follow. The success of one company always attracts competition. Nike Inc. is burdened with the reality of updating constantly their technology and their products only to be mimicked by another company.

Also, it cannot be denied that Nike Inc.’s products are also susceptible for substitution. This is due to the price competition. The growing numbers of competitors indicate customers’ buying power. Nike Inc. will not be able to determine a fix price on their products nor the value of it. If the price is too high, the customers can easily go to Under Armor or Rebook and buy cheaper yet quality products from them. Consumers are always finding better deals and prices and this will greatly affect the profitability of the company. Negative feedbacks from people all around the world concerning their outsourced production and manufacturing affect the reputation of the company and could potentially affect profitability and stability.

Recommended Strategic Plan

In order to keep up with the demands of the market and to gain higher profitability despite the increasing numbers of competitors, the following recommendations must be included in the overall strategic plan of Nike Inc.:

• The company must continue to strive for product expansion. It will help the profitability of the company if it will not be stereotyped as a shoe store. The marketing and advertising of the company can also be used in promoting other products such as clothes, sports equipment and accessories. It can easily take advantage of the strong advertising strategy the company has to promote other product line rather than just relying on the merging and acquisition of other companies (Jacobson, 112).
• Outsourcing is a good strategic move for Nike Inc. However, the company must ensure that it remains ethical in doing so. It should once and for all put an end to the issues on child labor and unfair labor practices. If the production companies it hires are doing unfair labor practices, Nike Inc. should terminate such companies and find another one who will be in sync with the ethical standards of Nike Inc. In this way, the consumers will not get offended and will continue to support the company.
• The company must also utilized huge sports events such as Super Bowl, World Series and NBA finals by setting up shops where people can buy products right where the event is happening.
• Set up specialty shops where only Nike Inc. products are being sold. Most shoe retailers have stores that sell various brands of shoes and it does affect Nike’s profitability since cheaper products are accessible. If the company will set up more retail shops that only sells Nike products, it will help the profitability of the company as it lessens price competition and product substitution.

Work Cited

Jacobson, Ivar. The Object Advantage- Business Process Reengineering with Object Technology. Englewood Cliffs, NJ: Prentice-Hall, 1995.

Johnson, Gerry. Exploring Corporate Strategy. London: Prentice-Hall, 2001.

Joiner, Brian. Fourth Generation Management- The New Business Consciousness. New York: McGraw-Hill, 1994.

Ulrich, Dave. The HR Value Proposition. Boston: Harvard Business School Press, 2005.

Wood, Robert. Competency-based recruitment and selection. Chichester, UK: Wiley, 1998.