CRAFTING AND IMPLEMENTING COMPETITIVE BUSINESS STRATEGY The case
CRAFTING AND IMPLEMENTING COMPETITIVE BUSINESS STRATEGY: The case study of Nike company NAME: COURSE: TUTOR: DATE:
Introduction This paper presents an analysis of Nike Company that deals with the sale of Nike shoes for sports persons. Phil knight the CEO of Nike had taken sixteen years to build Nike into a competitive number one athletics-shoe company in US. During the development of Nike, Adidas a Germany company was dominant in the market and it owned about 80% of the market share. Knight marketing techniques and approach revolutionized the industry through provision of groundbreaking technologies that made Nike brand the most recognizable in the world. By 1980, Nike Company had dethroned Adidas in the market share. This paper will analyze the firm’s external competitive environment, the firm’s internal environment and the overall competitive analysis of the firm in the market. The paper will address the above issues by using renowned business strategy tools like PEST-NED, porters 5 forces and SWOT analysis. Finally, the paper will propose some recommendation on what the company should do to remain or improve its competitive advantage in the market
Analysis of External environment of Nike Tools like PESTEL and porters 5 forces will be used extensively to analyze company’s competitive environment PESTEL acronym PESTEL stands for: Political, Economic, Social, Technological, Environmental and Legal forces. Political This has to do with politics of the day prevailing in country. Nike is number one sportswear in the USA and enjoys political stabilty. Hence its profits, turnovers, marketing sponsor ships and advertising surmount all other sports wear companies. Nike is positioned as a market leader as well leaders in the industry labor practices initiatives. Nike had suffered bad publicity over the last decade because of lack of ethics. it is best placed in the political climate as an ethical company. Nike enjoys good public reputation, which keeps on strengthening the brand name. neutrality of USA political temperatures as well as Nike company external environment had a lot of political pressure; the company suffered entry mode regulations, intellectual property rights were infringed on when tiger took it to court. No political issues with taxation laws in California trouble d the company. Publicizing of the company helped it to grow and compete more favorable with Adidas and tiger brands. Politics played a big role in tainting the image of Nike company over employee wages and benefits. (Kotler, 1998).
Nike Economic analysis Economic The increased demand for the products in the sporting clothing market in USA over the last 20 years provided a great opportunity for Nike Shoe Company. Nike brand to ok root very quickly in US market due to its availability and affordability. Nike is usually making much profit due to its increased sales and lowered costs through economies of scale it is enjoying. Nike enjoyed an economy with high national income. This boosted the demand for its products. The affordability of interest rates made the CEO of Nike to borrow funds, which he used to expand the business. The strong US currency made importation of the shoes from Japan easy improving competitive advantage USA experienced very good economic stability, inflation was held in control and thus wage demands for employees remained normal. Nike was able to maximize the profits by exploiting cheap labor especially at the industry in Japan. Although the company enjoyed the benefits of good economic climate, it also Nike suffered some finical challenges, which made knight the CEO to publicize it Hayes facilitated an agree meant with the Californian banks which show the credit line of BRS expanded. inclusion in the group of investors led to generation of more funds for the company growth (Booch, 1996).
Nike Social analysis They are cultural aspects that are perceived to affect the business either in a positive or negative manner. They include such factors as age structure, demographics, rural-urban migration, literacy levels, leisure activities, changing lifestyle and gender role. Those factors are linked directly to the market potential and the customer needs. For example in USA, The company targeted athletes and their need for quality affordable shoes. Change in the customers need and preferences for high quality affordable sport gear affected Nike changing lifestyles increased the pace of product change to fit the customers’ needs. Majority of Nikes manufacturing takes place in developing countries where more than 500000 workers are employed. Not easy to attain transparency due to its vastness. the launch of transparence 101 program will helped Nike in ensuring that the public is made aware of everything the company is doing. The practices in each factory were in line with the company code of conduct.
Technological analysis These trends in new technology keep on advancing on daily basis. Technology can create new products and services as well as phase out existing ones. Technological advancement and diffusion of technology in the manufacture of Nike shoes led to quality improvement and competitive advantage. Technology enhances consumer and the organization returns on investment. Nike employs specialists in the areas of exercise psychology, engineering design, and related fields to run the business. Nike utilize research committees and advisory boards made up of athletes, coaches, trainers, and other experts to consult and review designs, concepts and materials for the improvement of the products. Employee athletes and other athletes’ wear-test sport wear and evaluate the design of the products and development. Technical innovations in the design of footwear, apparel and athletic equipment is stressed.
Environmental analysis These include such factors as climate and weather changes in a period. Changes in environment are hard to determine or control and they have greater impact on businesses either directly or indirectly. Nike Company has put many efforts towards creating a better world. sustainable product innovation cycle has helped the company to advance in creating products, which are sustainable The cycle guides their operations and that of their suppliers since environmental impact occurs at every step in Nike product process. The use of organic cotton plays a major role in preserving and protecting the environment and health of people living near cotton growing areas. The environmental plan exhibited by Nike has helped in building very strong public relations and has enticed many customers and investors. American investors are environmental conscious, thus they feel strongly involved in environmental protection by investing in organizations, which they feel are ethical environmentally. Nike shoes are greener and more ethical as compared with other products in the USA market. Nike shoes are easier to recycle, and the solvent use of reduced by over 85% when compared with other brands like tiger and Adidas.
Legal analysis Legal factors have to do with government regulations that come into play from time to time. They relate to legal environment of an organization and the impacts hey impose on the performance of an organization in the market place. They include health and safety laws, consumer law, competition law , employment law, and discrimination law. Nike has face many legal issues in its process of growth and development, for instance, Stakeholders vs. Nike Katimi vs knight
Michael porter’s 5 force model is a strategic business-planning model that was advanced by Michael porter in the 1980 s. Since then it has become a very useful business tool for managers who either want to rise to the top or those who want to revive businesses that have fallen. Porter’s model is pegged in five cornerstones; these are buyers, substitutes, suppliers, competitors and new entrants (Porter, 2008). Figure 2 Michael porters 5 force model
Internal environment of an organization denotes the forces that affect the performance of the organization in the market from within. Nike has many forces, which affects its competitive advantage in the market. The company mission vision, values and goals all form the internet environment, which determine its performance.
Routes to competitive advantage Innovation Nike should keep on with the pace of techno innovation. This will improve its products differentiation and increase the customer base. Marketing will help the company to increase sales and reduce costs. Utilization of internet for marketing will provide Nike with an intangible asset such as market research and consumer buying trends. Price Nike has no problem with the price, this is because it acts as prices setter alongside Adidas and Reebok. More so, Nike does not gain competitive advantage through the prices they charge customers.
Competitiveness using ansoff matrix The matrix consists of four strategies to enable Nike gain competitiveness in the market. Market penetration: market penetration will not occur with the case of Nike which is already established in the market. However, Nike will attract new customers and non-uses of their products. Product development This affects Nike greatly because it continues to produce products for the same market. Development of new products could result in creating new customers for them. Therefore, if Nike wants to remain competitive, development of new products is the best way to go about it. Market development This one will not affect Nike because it focuses its products in particular known markets. If Nike changes its market, it has the potential of using or developing a new strategy to conger it. Diversification: Nike needs to diversify its product range by introducing new products into the market. Currently it only deals with the limited products although it has the potential of diversifying its products.
SWOT analysis This is the analysis of the organizations internal features, which matter a lot in placing the organization in he market (Bigelow, 1980). The acronym SWOT means S-strengths, W-weaknesses, O- Opportunities, T –treats Strengths Nike is a global brand is number one sports brand in the world. it is famous an recognizable easily with its trademark “just do it” Unethical views which tainted the image of Nike have been gradually ironed out by the efforts of management Has strong control over its distribution channel. Nikes financial position is very strong with little long-term debts. The company has experts who carry out innovative designs in footwear. They even allow consumers to design their own shoes Nike company is very competitive with a very strong management team and excellent cooperate strategy in all its markets. Nike is very efficient in service delivery.
SWOT analysis Weaknesses dependence on its share of the footwear in the market for business income. Saturation of the market The poor working conditions of Nike workers in overseas factories portrays a negative image of the company Opportunities Nike has benefited from product development. Nike brand is strong and if firmly defended by its owners who believe that it is not a fashion brand. Increased female participation in athletics is an opportunity female wear product from Nike Expiration of new technology and innovation makes Nike to remain top in the market. Threats Exposure of Nike to international nature of trade is dangerous incase of trade barriers. “Sweatshops” portray negative image Economic constraints in North American countries and Asian countries are a big treat. Challenges of import and export duties threatens its growth Strong competition from major competitor such as Reebok and Adidas in all its aspects of business.
Reference Bigelow, J. (1980) Strategies of Evolutionary and Revolutionary Organizational Change, Academy of Management Proceedings, 4 p, 1 diagram. Booch, G. (1996) Object Solutions: Managing the Object Oriented Project, Addison-Wesley, London UK.
Recommendations The current policy of widening the range of sport activities can be continued and expanded. Nike can venture into new markets such as fishing, walking, and hiking which has little entrance barriers. Nike can also expand its market to UK to serve the demands of customers as Mintel investigation report showed. Nike can exploit the opportunities available other than sports and clothing industry. It nay likes to join other companies to expand its product portfolio. Nike should begin a campaign against counterfeit products in sportswear industry. This will increase Nike’s profits and improve PR by becoming more ethical Nike can benefit from economies of scale if they look for new product and upcoming brands to take over while still being an alternative brand for Nike.
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