Nike's Apparel Situation Analysis (Essay Sample)

Nike’s Apparel Situation Analysis
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Nike’s Apparel Situation Analysis
Nike Inc. started in 1962 as Blue Ribbon Sports, with the goal of distributing Japanese athletic shoes that were low-cost and high-quality. It was a partnership of Bill Bowerman and Phil Knight who wanted to break the domination of the Germans on the American sports shoe industry. The company now operates in 160 countries all over the globe with more than 40,000 employees. It achieved sales revenue of $20.9 billion in the 2011 fiscal year (Nike, 2014). The company deals with a varied product range. It deals with athletic shoes, athletic apparel, sports equipment, and other subsidiary ventures.
Strategic Business Units (SBUs)
The company has three product branches namely: footwear, apparel, and accessories. The footwear division has a 45% market share and contributes 60% of Nike’s profit. It has a 7.5% growth rate and a 1.5 relative market share. The apparel division has a market share of 35% and contributes 30% of the company’s profit. It has a 6% growth rate and a 0.9 relative market share. Finally, the accessories division has a 30% market share and contributes 15% of the company’s profit. It has a 3% growth rate and a 0.8 relative market share.
Situation analysis
Internal Environment
Being one of the pioneers in modern marketing, Nike has a strong marketing mix. It adopts a pull strategy that helps it ward off competition from other brands such as Reebok and Adidas.
Product
Nike’s product lifecycle starts with Research and Development to establish the requirements and impacts of the product. The next step is the design of the product in terms of appearance and materials used to make it. The third step is the manufacture of the product and involves all the processes that lead up to a finished product leaving the factory. The fourth step is the distribution of the product to the various distribution centers. The fifth step is the selling of the product to the consumers. The sixth step is the use of the product by the customers. The sixth and final step is the final disposition of the product which can include reuse and disposal.
Price
The company uses a price leadership strategy combined with a value based pricing. Since Nike is the market leader in most of the products it deals with, it acts as a price leader by setting prices that are followed by others in the industry. The high regard consumers have for the Nike brand also means the company can manage to set prices for its products based on the value its customers attach on the product (Fried., Shapiro, and DeSchriver, 2008).
Place
The company distributes its products through various multi-brand stores and its own Nike branded stores across the world (Lipsey, 2006). The company’s main channels of distribution are the retail stores. Nike uses both pull and push strategies for its distribution. A pull strategy is where the company communicates with its end customers in order to attract them to the retailers so that they can buy the products. A push strategy is where the company promotes the product to the retailers so that they can in turn promote it to the consumers.
Promotion
Nike uses an approach of getting endorsements for its products by various famous athletes that has made it easily recognizable. As a result of the company’s promotion efforts, the trademark “swoosh” and “Nike” name are easily recognizable. It leverages the promotion efforts with a quality product offering to make it one of the most successful apparel companies.
External Environment
Competitive environment
The company receives competition from other large apparel firms such as Adidas, Reebok, Puma, and Under Armor. The company leverages its brand power and marketing to remain ahead of its competitors.
Demographic environment
The apparel company has been in existence for a long period. As a result, most of the once loyal customers are now aging and no longer as athletic. The company now has an opportunity to create products that will influence the next generation of customers.
Social and cultural environment
The company supports various initiatives aimed at giving back to the community. It partners with the Global Fund and the football community in order to fight against HIV/AIDS through its RED initiative (Deng, 2009).
Political and legal environment
Nike contributes to federal, state, and local level political activities in the United States. It has political action committees made up of its employees to support politics. The support is given to political parties that have strategies most favorable to Nike’s business interests.
Technological environment
The company adopts technology as it seeks to be a market leader in creating innovative products. It also uses technology to improve its efficiency. In 2011, the company won the Gigaton Award for energy saving programs.
SWOT Analysis
StrengthWeaknessOpportunityThreatPriceNike manufactures its products wherever they can produce high quality products at the lowest prices possible.The market is very price sensitiveFinancial recovery in overseas markets provides it with an opportunity to increase prices.Consumers moving towards discounted products.PromotionThe company’s products receive endorsements from some of the world’s most successful soccer players.Aggressive marketing makes the company vulnerable to being viewed as exploitative and greedy.Exploitation of global marketing events such as the World Cup and the Olympics.Association with disgraced athletes such as Lance Armstrong and Tiger Woods.ProductNike utilizes its research and development department to continuously inform the manufacture of innovative products.The company can stick its logo on a plain white t-shirt and pass it off as very high quality with a high mark up. There are opportunities to develop sport wear, glasses and even jewelry.There’s market...