PESTEL Analysis of Nike Inc. (Case Study Sample)

PESTEL Analysis of Nike Inc. Name Institution Course Professor Due date Table of Contents TOC \o "1-3" \h \z \u Table of Contents PAGEREF _Toc172550664 \h 2List of Figures PAGEREF _Toc172550665 \h 3Introduction PAGEREF _Toc172550666 \h 4Analysis – Application of the PESTEL Model PAGEREF _Toc172550667 \h 5Political Factors PAGEREF _Toc172550668 \h 5Economic Factors PAGEREF _Toc172550669 \h 6Social Factors PAGEREF _Toc172550670 \h 7Technological Factors PAGEREF _Toc172550671 \h 8Legal Factors PAGEREF _Toc172550672 \h 11Environmental Factors PAGEREF _Toc172550673 \h 12Discussion PAGEREF _Toc172550674 \h 13Recommendation for Nike PAGEREF _Toc172550675 \h 13Future Outlook of Nike PAGEREF _Toc172550676 \h 14Conclusion PAGEREF _Toc172550677 \h 14References PAGEREF _Toc172550678 \h 16 List of Figures TOC \h \z \c "Figure" Figure 1: Nike's Air Max Dn Shoe PAGEREF _Toc172550330 \h 9 Introduction Nike Inc. was established in 1964 by Bill Bowerman and Phil Knight. The company originally started as Blue Ribbon Sports but in 1971, rebranded to Nike Inc. (Ellero, 2019). The company revolutionized the sportswear industry with its innovative products and marketing strategies. According to Chen (2023), the “Just Do It” campaign and the Swoosh symbol are some marketing strategies that have increased Nike’s brand visibility globally. Nike Inc. currently occupies a strategic place in the global sportswear industry competing against its direct competitors Adidas and Puma (Xu, 2023). According to Hou (2023), the company’s competitive advantage and success are founded on principles of innovation, brand power, and marketing strategies. According to Kim (2020), Nike’s broad range of products including accessories, shoes, and clothing has expanded its market base, especially in North America, and Europe. Evaluating Nike’s case further helps identify its business strategies in the past and currently. This identifies factors that have led to its success, and areas for improvement, especially how this company can sustain its competitive advantage and grow in this globally competitive environment. Therefore, this paper applies the PESTEL model to provide a holistic analysis of the company’s market dynamics, challenges, and opportunities through the political, economic, social, technological, environmental, and legal lenses. Based on this analysis, this paper will also present an informed argument for the company’s position in the sportswear industry, and future outlook, and recommend opportunities for further. By navigating these sections, this paper offers insights to commercial companies about the success factors and shortcomings in the market, and how well they can navigate to sustain competitive advantage. Analysis – Application of the PESTEL Model According to Çitilci and Akbalık (2020), PESTEL is an acronym for political, economic, social, technological, environmental, and Legal. It is one of the most powerful tools to assess the external environment. Therefore, through PESTLE analysis, it is possible to identify factors in the external environment influencing Nike Inc.’s strategies and operations. Political Factors Political factors include various elements for example regulations, economic policies, political stability, tariffs, international relations, and social, and environmental governance policies (Çitilci and Akbalık, 2020). Analyzing these elements helps identify how they influence Nike’s strategy. According to Jin (2022), political stability is one of the factors that provides a favorable environment for business operations. Nike is a United States-based company. The country is politically stable, providing a favorable environment for the company to produce and sell its products (Keohane, 2019). The study further argues that appropriate economic policies in the country foster business growth. For example, low-interest capital that supports innovation and expansion of businesses like Nike. Drawing insights from Itakura (2019), tariffs and import/export restrictions are other political factors that influence Nike’s production costs, product pricing, revenue, and profitability. For example, the trade war between the United States and China led to the enactment of tariffs which could influence Nike’s operation in China. According to Chong & Li (2019), trade wars affect international relations between the two countries and can affect company operations. Public health policies also influence business operations and Nike’s political environment. During COVID-19, travel restrictions, store closures, and lockdowns negatively affected Nike’s operations, reducing sales, and revenue. These policies also affected Nike’s production and distribution of products. While these policies have since been lifted, they offer lessons that can guide the strategic positioning of Nike (Meng et al., 2021). Another political factor is regulations; according to Ren (2020), tax regulations affect Nike’s strategies and profitability. When tax is high, the company is compelled to transfer the burden to the prices of products, reducing consumers' purchasing power and sales. However, favorable tax leads to businesses setting favorable prices and high sales. Nike is a multi-national company affected by tax changes from one region to another. This affects its operations and revenue (Mantovani, 2020). Lastly, there is a growing campaign for companies to implement sustainable practices. This involves complying with social and environmental policies. Nike has implemented various practices to ensure sustainability. For example, the company initiated the NikeGo initiative to promote an active lifestyle among young people (Nelson & Cook, 2022). Economic Factors Various economic factors influence Nike’s operations. First, global or regional economic situation influences consumers’ purchasing capability and, consequently, the demand for luxury items like athletic apparel (Nani et al., 2022). When the economic conditions are favorable, for example when there is no inflation, consumers’ purchasing power increases, and demand for Nike products is likely to increase. On the contrary, when inflation rates are high, people purchase basic commodities and reduce sales of luxurious Nike products (Widiatmoko et al., 2023). In addition, Anoosh (2020) argues that analyzing the market size based on these consumer trends can guide Nike in its expansion. It also influences the company's production quantities, and prices, and corresponds to prevailing economic conditions. The study further notes that inflation and high economic situations, for example, an increase in fuel prices can lead to high transportation costs, and high prices of products Apart from the economic situation, trade agreements and economic policies also influence Nike’s business strategy. For instance, the free trade policies in the EU market mean that Nike has easier access to the market. This can increase the sales and profitability of the company. However, changes in trade agreements can pose challenges in accessing markets with restricted access (Velluti, 2024). Nike need to monitor these changes and adapt appropriately. According to Wu (2024), Nike is not the only player in the industry, competitors like Adidas also strive for market share. Nike must respond to competitors by developing sustainable, innovative, and unique products. Amidst the competition, the rising cost of labor especially in developing countries is an external factor that can increase the manufacturing costs, and prices of Nike products (Brino, 2019). Studying these aspects helps Nike be ready to respond to the constant shifts in the economy and sustain its dominance in the sportswear industry. Social Factors The social environment fluctuates based on consumer trends and preferences, this offers threats and opportunities in Nike’s strategic management. According to Haincourt (2019), increasing focus on health and fitness across the global market constitutes a large opportunity for Nike’s commercial operations. The trend causes a high demand for athletic wear and athletic shoes. However, due to changing consumer preferences, Nike needs to gather useful data about the recent trends in fitness activities and the corresponding needs. This could include developing new products aligned with the trends in certain demographics, for example, targeting youth with fashion wear (Ennis, 2020). As these trends change, Nike should adapt to the changes to ensure they meet consumer preferences. In the digital era, the emergence of social media has also influenced consumer trends and preferences. Companies that leverage social media with appealing information sway customers to like their products and buy them. This shift affects the market base of companies; therefore, Nike must intensify its presence on social media to reach online users. Already, the company uses Instagram to market its products but such presence can be increased by meeting clients on many other platforms (Diantari & Jokhu, 2021). Sun (2024) argues that fashion trends influence consumer preferences. This also affects the purchasing decisions of the consumers of Nike products. It underscores the need to assess emerging trends through various platforms like social media and customize their products. Lastly, demographic changes are another social factor that affects Nike's operations. For instance, the population in developing countries is aging, which means their preference also changes. It also affects Nike’s market (Cristea et al., 2020). On the other hand, regions like Africa have a younger population. They can associate with fashion more than the older population (Yan et al., 2022). These demographic shifts may influence Nike’s operations to respond to the changes. Technological Factors According to Standaert (2021), technology fosters Nike's innovation to produce unique products and ...