Nike Company (Research Paper Sample)

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Nike Company
Introduction
Macro environmental factors define uncontrollable external aspects that organizations cannot control. These factors often have significant impacts on how operations are carried out in areas such as marketing, finance, management, human resource, and production. It is thus critical for companies that want to begin operations in new markets to conduct an analysis of the macro environmental factors in these markets. This essay will provide a macro market environment analysis of China, which is a growing market, for Nike Company. Specifically, Nike designs, develops, manufactures, markets, and sells apparel, accessories, and footwear. The areas covered in this analysis will include the economic, cultural, technological, competitive, and political environments. In addition to this, the essay will identify business and investment opportunities and threats as well as provide recommendations for investors.
Macro environment analysis of China
Economic environment.
According to the World Factbook (n. pag), China has continued to change its economic policies from a closed system that is planned centrally to a market-oriented system. This change has allowed China’s economy to grow to become the world’s largest exporter. China achieved the status of being the world’s second biggest economy in terms of purchasing power parity in 2013, and the value of its industrial output exceeded even that of the United States (World Factbook n. pag). The recent global financial crisis had a massive impact on China because it is the world’s largest exporter. However, the slow recovery in regions such as Europe and the United States indicates that China’s industries might also recover and grow. The fact that the Chinese government’s 12th Five-Year Plan that was adopted in 2011is focused on carrying out further economic reforms and increasing local consumption to reduce dependence on exports also points to a promising future (World Factbook n. pag).
According to the World Factbook (n. pag), the real growth rate of China’s GDP is 7.6%. A significant proportion of spending in the economy goes towards household consumption (36.3%) due to an emerging middle class with improving income. The inflation rate estimates for 2013 was 2.6%. On the other hand, the estimate for interest rates in 2013 was 5.73%, which can be considered as a high interest level. However, China has indicated that it might ease controls on lending rates, which will spur consumer spending (Wei and Davis n. pag).
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Cultural environment.
According to the World Factbook (n. pag), one of the consequences of China’s population control policy is that it has one of the world’s fastest aging populations with a growth rate of 0.44%. On the whole, 50.6% of China’s population lives in urban areas. The Chinese government has a physical health program that is designed to ensure that its aging population remains healthy. According to China.org (n. pag), a study by the State Physical Administration showed that approximately 40% of the people between 7 and 70 years take part in physical exercise. The survey also showed that 60% of urban residents visit sports clubs for physical health activities. What is more, the health program encourages young people and children to take part in at least one sport activity every day, learn at least two ways of maintaining fitness, and have annual health examinations.
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Technological environment.
There has been rapid growth in the adoption of technology in China. Both domestic and international manufacturers in China have adopted emerging technologies to make production efficient. The implication of this adoption is that investors also have to allocate a lot of funds on technology and ensure that they use it in innovative ways in order to gain competitive advantage over rival companies. The other aspect of the technological environment is the way consumers use technology. There has been an increase in the use of online shopping with China Central Television reporting that 81.52% of Chinese families used online shopping in 2013 (China Tech News n. pag). The implication of this is that manufacturers of consumer goods have to develop online marketing and advertising capabilities.
Competitive environment.
The apparel, footwear, and accessories market is very competitive in China. Foreign sportswear brands are increasing production in order to increment inventory. Importantly, the increased inventory allows them to reduce prices so that their brands can compete with local ones. The focus of those in the apparel, footwear, and accessories industry has shifted towards lower tier cities that are experiencing growth. Another source of competition is this market comes from high fashion stores that are establishing stores in both the first-tier and the lower tier cities in China. Examples of these stores include H&M, Gap, Zara, and Uniqlo (Zhuoqiong and Zhihao n. pag).
Political environment.
When it comes to the political environment, there is increased scrutiny on western companies that have intensive factory production in China. International companies are falling under increased pressure to provide good working conditions and to ensure that their premises meet environmental and safety standards. Another problem in China’s political environment is corruption. According to the China-Britain Business Council (n. pag), companies operating in China are likely to encounter various forms of corruption, including making facilitation payments, bribery, and giving and receiving expensive gifts to cultivate relationships. However, the Chinese government has taken measures such as imposing severe penalties on firms and individuals who take part in corruption (China Britain Council n. pag). Another political issue in China is protectionism. As alleged by Roberts, many Western companies are being recurrently targeted in China and given negative publicity in addition to getting stiff fines. The cause of this protectionism is the tough economic conditions and competition which is forcing government officials to attack foreign rivals in industries where local companies lag behind (Roberts n. pag). A suitable conclusion from these issues is that China’s political environment provides many challenges that foreign businesses have to overcome.
Opportunities and threats
The above analysis of the macro market environment in China shows that there are many opportunities that Nike Company can exploit. One of the most critical opportunities that can be fully utilized by Nike is the Chinese culture that favors physical activity. One of the prominent areas of specialization for Nike is sportswear, including clothing designed for several sports that are popular in China such as badminton, baseball, basketball, football, and rugby. Nike’s experience with sports apparel, footwear, and accessories coupled with the China’s high interest in physical activity and large population means that Nike has a high chance of being successful in this market. Popular sportsmen and women provide another opportunity that Nike can exploit. These athletes can endorse products from Nike and thus influence large numbers of consumers to purchase Nike’s product. Major sporting activities such as the forthcoming Soccer World Cup also present an opportunity for Nike to target new customers.
The economic condition in China presents several opportunities for Nike. There is an emerging middle class that values and wants to purchase branded goods and services. The government is increasingly committed to reforming the economy to spur local consumption, which means that citizens will have increased spending power that they can spend on luxury goods...