Question

(What are YOUR thoughts and own words)

1. Situation Analysis for Nike
   1. Provide answers to the question “Where are we now as a company?”
      1. SWOT Analysis
      2. Industry Analysis
      3. Competitor Analysis
      4. Company Analysis
      5. Customer Analysis/Customer Characteristics

It's for a 5 year period. As a reminder, a marketing plan is a road map for the marketing activities of the company for a specified future time period.

Answer 1

answer-

Situation Analysis for Nike-

For years, NIKE, Inc. has been the worldwide leader of athletic shoe sales. The company’s successful brand image united competition and empowerment for the competitive, athletic user. However, NIKE is losing their grasp of the urban, casual runner. These runners exercise and run for fitness or enjoyment, avoiding the competitive atmosphere many of NIKE’s current brand statements are aligned with. Nike needs to reposition their brand towards a focus on fun and functionality. By compiling and examining a variety of information we will be able to interpret where NIKE currently stands in the athletic shoe industry and how they will be able to adapt their brand position to be more successful in the future. These adaptations will allow NIKE to reach a more casual group of urban runners and consequently increase sales forecasts, while maintaining a dominating portion of the market for athletic shoes.

SWOT Analysis-

Nike is known as the biggest and best sports shoe and apparel brand in the world. It designs and sells products in nine key categories. While its products are mainly designed for athletic use, they have also grown popular world wide as leisure wear. The brand focuses on two important things – product innovation and product quality.

Strengths:

• Brand Image – A strong brand image is a key strength for any brand. Over time, Nike has built a strong image as an ethical and customer oriented business. It is an innovative brand that is also known for its excellent marketing and for good quality products. Most of Nike’s fame depends on its stylish products and a well crafted marketing strategy. Its swoosh logo sets it apart from the crowd of businesses. Nike’s focus on innovation and ethics has resulted in stronger reputation and faster growth.
• Excellent Marketing capabilities – Marketing can be a source of competitive advantage in this era. A very large part of the entire battle is being fought in marketing and marketing capability of a brand determines its sales and revenue. Not just Nike, its competitors are also focusing heavily on marketing. Apart from innovative marketing and advertising, the brand spends a heavy sum on marketing. In 2016 and 2017, it spent $3.2 and $3.3 Billions on marketing. Nike is now relying increasingly on digital and social media advertising.
• Financial strength – Financial clout also becomes a key strength for any brand in the 21^st Nike’s position is much stronger than its competitors financially. In the fiscal year 2017, the brand achieved record growth in revenues and earnings per share despite continuing foreign currency headwinds. Its revenues grew by 6% over 2016 to $34.4 billion in 2017. Its net income increased by 13% and Diluted Earnings per share by 16% to $2.51.
• International presence – Nike’s International presence has grown fast. Its number of non US retail stores has climbed to 758. Total number of Nike brand factory stores is now 642 and that of brand in line stores is 71. The number of Converse stores internationally has also grown to 45. The total number of Non US stores is now double that of the US stores.
• Large and well managed supply chain and distribution network – A large and well managed supply chain and distribution network is also among the key strengths of Nike. For a well known sports shoe and apparel brand, Nike has a quite big and well managed supply chain and distribution network. It relies almost totally on independent manufacturers for the production and supply of its products. The brand works with more than 500 suppliers across 42 nations and has strategic partnership with 363 apparel factories in 37 countries and 127 footwear factories in 15 countries. Asia has the highest number of Nike suppliers and especially in China, Indonesia and Vietnam. The brand has 1142 stores internationally of which around a third are in US and two third outside US. The brand has Nike and Converse websites in 45 countries and is working on new innovative models to extend its reach closer to the customers.

Weaknesses:

• Overdependence on the US market – The brand still depends heavily on the US market for sales and revenue. In 2017, close to 46% of its revenue came from inside US and around 54% from outside US. While the brand has expanded fast overseas, the US market is its biggest source of income.
• Increasing marketing and overhead operating expenses: Rising competition in the spots shoe and apparel market has caused an increase in the marketing related expenses of Nike. In 2016 and 2017, it spent more than 3 Billions on marketing. There was a rise of more than 60 million in marketing expenses of Nike from 2016 to 2017. Operating overhead expenses for 2016 and 2017 were higher than 7 Billion for Nike.

Opportunities:

• Digitization and product innovation – For further growth, the brand must continue to retain its focus on digitization and product innovation. Digital marketing and ecommerce both will affect its growth and profits. Its competitors are also investing in these areas and they will continue to affect the consumer experience of Nike as well as its sales and profits.
• Acquisitions – Acquisitions can also be a good method to find growth faster. The brand can grow faster by acquiring related businesses.
• International expansion – International expansion can also be great for faster growth. Nike is currently operating its ecommerce websites in only 45 countries. It can exploit both ecommerce and physical retail channels for international expansion. Asia is particularly a fast growing market full of space and opportunities for market growth.
• Backward integration- Nike currently relies totally on independent manufacturers for the production and supply of its products. It can either acquire a few of them or build some of its own which will help it have a more agile and stronger supply chain and find faster growth.

Threats:

• Stronger US dollar hurting earnings – A stronger US dollar has an adverse effect on the earnings of Nike. A stronger US dollar increase inventory cost and reduces the consolidated earnings of Nike. In both 2016 and 2017, the detrimental effect of fluctuation in foreign currency was felt by Nike. It felt a detrimental impact of $542 million and $1,985 million on its consolidated revenues for 2017 and 2016 respectively. A similar detrimental impact was felt on Income before income taxes because of fluctuation in foreign exchange rates which was close to around $115 million and $449 million for 2017 and 2016 respectively.
• Increased competitive pressure – The competitive pressure over Nike has also kept increasing requiring higher investments in marketing as well as operations. Adidas and Under Armour are also investing heavily in innovation and marketing creating competitive pressure on Nike. To manage the competitive pressure Nike will have to retain its focus on product quality, innovation and supply chain management.
• Growing HR and marketing expenses – With growing business, the HR and marketing expenses of Nike have also grown. It spent more than 3 billion on marketing in 2017. The company is also experiencing higher wage related and compensation expenses.
• Higher legal pressures – The legal pressures over businesses have grown globally leading to higher pressure related to ethics and compliance. This has also led to an increase in compliance related costs for Nike. Failure to comply with regulatory standards can lead to financial and reputational risks.

Conclusion:

Nike is the biggest sports shoe and apparel brand of the world which has focused on product innovation and marketing for growth. Its excellent marketing capabilities have held it apart from the crowd of brands. Its e-commerce websites are now active in 45 countries. However, despite its international growth the brand still relies heavily on US market for revenue and income. A stronger US dollar and continued tightening of the regulatory net are some of the most important threats before the brand. Competitive pressures against the brand have also kept rising. To retain its growth rate, the brand must retain focused on product innovation and marketing. It can also try backward integration since it depends heavily on independent manufacturers in its supply chain.

Industry Analysis-

INDUSTRY ANALYSIS

Opportunities

• The athletic footwear and apparel industries will benefit from the currently strong economic backdrop in the United States. Spending is high and is expected to result in sales growth industry-wide.
• Athletic shoes and apparel have become a staple in wardrobes worldwide. This is due to both the increasing numbers of people exercising and the trend towards casual apparel.
• Competition is fierce at all levels in within the industry, especially among the leaders. This creates a sense of security for the companies that have been able to create a niche.

• Cost cutting due to restructuring of operations will give many companies the chance to price products more competitively.
• One area in the industry that is ever changing is research and development. The strong departments will surely capitalize on the trends of tomorrow if their efforts are successful.
• Increasing financial recovery in overseas markets proves to be an area of expansion for the athletic footwear and apparel industry.

• E-tailing, or customer-designed internet merchandise, is threatening the traditional distribution channels, thus eliminating the "middle-man" distributors and allowing for increasing profitability.

Threats

• The industry has reached a level of maturity. While style and technology in athletic apparel and footwear has reached a leveling-off point, the important aspect now is for companies to differentiate their lines.
• Inflation is looming over the U.S. economy, which may spark a cutback in consumer spending.
• Consumers are becoming savvier and may lean towards discounted items.

• In terms of market saturation, many of the key manufacturers in this industry have been around for many years. Consumers may be scanning the market for new and different footwear and apparel products.

COMPETITOR ANALYSIS-

• Distinctive Competency - Marketing (Consumer Loyalty)

  Despite the tough times Reebok has recently come upon, reasons for optimism remain. Reebok has managed to hold the loyalty of a large portion of the industry’s female consumers market. While Reebok’s spending on advertising has fluctuated, individual product designs have come and gone, female consumers have, as a group, remained loyal to Reebok and their products.

  Can Reebok use this distinctive competency to inflict damage on Nike?

  Yes, Reebok can use their distinctive competency to wound our company. If Reebok can expand their appeal to incorporate female consumers who are not currently Reebok customers, Reebok could expand their market share and take customers away from Nike products.

  Can Nike protect itself against this threat?

  Yes, we can protect our market share among female consumers within the industry by targeting some of our promotions to female consumers. Nike’s sponsorship of the 1999 Women’s World Cup Soccer Tournament was a great example of how Nike is appealing to female athletes.

  Competitor’s Key Weakness – Marketing – (Advertising/Promotion)

  The leading cause of Reebok’s recent tumbles stemmed from problems relating to poor marketing. Reebok’s shortcoming in the area of marketing is their key weakness. While other athletic shoe companies bombard the airwaves with commercials pushing their product lines, Reebok remains out of sight and out of mind. While Reebok’s competitors are known by familiar slogans like Nike's "Just Do It," Reebok’s, "Are You Feeling It," does not equate to their brand name in the eyes of most consumers.

  Can Reebok’s key weakness damage their competitive position?

  Yes, Reebok’s chances of growing their market share are slim as long as their advertising endeavors remain to be so unsuccessful. For Reebok to rebound from their current economic woes, they will have to improve the quality of their overall marketing operations.

  Can Nike take advantage of our competitor’s key weakness?

  Yes, Nike can take advantage of Reebok’s marketing woes by doing one of the things we do best: marketing. Continuing our successful marketing programs should allow Nike to court the customers Reebok fails to draw in with their weak marketing initiatives.

Company Analysis-

Strengths and Weaknesses of the Corporate/Business Level

Strategic Managers

Board of Directors - Strength

Nike’s board of directors consists of both management directors and independent directors. The combination of these two types of directors benefits Nike in that there is a presence of those directly involved with Nike as well as others indirectly involved who bring outside experience, provide another frame of reference and can assist the overall board in thinking "outside the box." Nike’s board would be classified as an oversight board, playing an active role with regards to management’s decisions in the area of strategy formulation.

Top Management - Strength

Co-founder, Philip H. Knight, has been with Nike since its inception. As a result, he has much knowledge and experience about the company and the industries in which it competes. Knight’s strategic planning managerial style serves as a strength in that his actions are planned and calculated, allowing for both risky and conservative decisions based on careful thought and analysis. His participative decision-making style can also be viewed as a strength such that Knight is willing to listen to others to generate ideas. He does not limit the company’s options to one-sided ideas and decisions.

Customer Analysis-

NIKE, for years, has put forth a tremendous amount of effort in order to preserve a large following of consumers who remain loyal to the brand and what it stands for. The current users of NIKE branded shoes come from a wide variety of demographic backgrounds. Among the many consumers who use NIKE’s athletic shoes, a clear split among male and female consumers exists, with males making up 50.7% sales to the 49.3% of sales from females (Mediamark,2010). Most of the consumers of NIKE products went off to college, with 58.6% of the consumers having either attended college or gone on past a four-year college to graduate school (Mediamark, 2010). Some age segments purchase more shoes then others. The largest purchasers to increase the sales of the brand’s products; consumers age 18-24 make up the market sector that could be receptive to new ads focusing on a casual running experience that would encourage
urban runners to buy NIKE shoes. Consumers within the ages of 18 to 24 years old are more likely to try out new athletic shoe brands on a more consistent basis then any other age group (Mintel, 2008). This age group also uses athletic shoes in a fairly consistent manner, exercising more then any other age group. Around 54% of this age group runs or jogs regularly as opposed to much lower numbers in older generations (Mintel, 2008). Additionally, New Balance and Reebok have created more brand loyalty among older consumers (Mintel, 2008). It would be difficult to change the perception of NIKE products to older generations who have already formulated their beliefs about running shoe brands. In marketing a casual, non-competitiveatmosphere associated with NIKE shoes to urban runners between the ages of 18-24, the products can become top-of-mind to this age group. The age group stands as a mix of emergent consumers. In creating positive associations related to a casual experience with the products, NIKE can make the 18-24 year old consumers brand loyal going into the future and increase the company’s total sales now and in the future.

*hope above answer would help you.good luck.

Note- add this under company analysis heading Board of Directors - Weakness

The average age of Nike’s board is 62, the youngest member being 49 and oldest being 79. This constitutes a possible weakness in that there is a lack of younger members of the board who could serve to bring a new perspective to the company and assist in achieving Nike’s goals.