Nike is a sportswear US multinational brand. Bill Bowerman and Phill Knight were the founders of the company, and the established sportswear and footwear brand in 1964. Nike’s headquarter is situated in Beaverton, Oregon. Sportswear, footwear, sports accessories, athletic wear, sports equipment, and apparel are the special expertise of the company.
CEO of Nike is Mark Parker. The main objective of the company is to offer you such quality sportswear products that would amplify your performance. However, the brand has achieved significant growth and success. Now, the company also offers athleisure.
Nike’s annual revenue was $37.4 billion in 2020, out of which the company’s net profit was $2.54 billion. The pandemic has reduced the company’s annual revenue by roundabout 6.26%, and net profitability has declined by 37.5% in 2020.
Nike’s top competitors are Anta, Puma, New Balance, Lululemon, V.F. Corporation, Under Armour, ASICS, and Adidas. The brand has employed roundabout 75400 employees to manage its various operations worldwide.
Today, we’ll discuss the SWOT analysis of Nike by studying various internal (strengths &weaknesses) and external factors (opportunities & potential threats).
The swot analysis of Nike is as follows;
Nike’s Strengths – Internal Factors Affecting Nike
Some of the min internal strengths of Nike are as follows;
Raising Voice for Social Causes
Nike has always raised its voice against social injustices and racism. In fact, the brand has supported the BLM (black lives Matter) movement. The company launched the campaign with the slogan of “don’t do it” in order to support the fight against black communities against racism.
The marketing and promotional campaigns of Nike are excellent, and the company organically generates its demand through advertisement expenses. The brand invested approximately 3.5 billion and 3.7 billion dollars in 2019 and 2020 respectively. However, it finds and attracts its target customer market on various social media platforms and other channels.
Nike has an excellent group of professional creative designers that come up with innovative designs of sportswear accessories, athletics, and footwear. The company believes in conducting thorough research and development before developing the product. It’s one of the main reasons for a company’s growth and productivity.
Lower Production Cost
Nike has established various production units in different countries where it could take advantage of cheap labor. For instance, the company’s footwear comes 24% from Indonesia, 22% from China, 50% from Vietnam, because these countries have an abundant supply of experienced cheap labor. Nike’s other manufacturing facilities are in Mexico, Italy, India, Brazil, and Argentina.
Hurley and Converse are the side brands of Nike, and the company has managed to successfully launch side brands along with the parent brand. Now, the company is also enjoying the growth and productivity of its side brands.
Relationship with Icons
Nike has developed relationships with sports icons and celebrities, and it has amplified the company’s sales to a great extent. Like Michael Jordan (basketball player), and the collaboration with the sports figure resulted in the form of a new product “Air Jordan 1 Shoes.”
The CEO of Nike, Mark Parker has recognized and acknowledged the environmental issues as the serious problem of our times. The company has shown commitment towards finding the solution against the environmental issues in terms of sustainable raw material and recyclable products.
Nike has a very large database of loyal customers and users, and they excitedly participate in the company’s promotional campaigns and trends. If the brand requires feedback about the product design or further improvement, then they actively offer it. At the beginning of 2021, the market capitalization of the sportswear brand was roundabout 224 billion dollars.
Nike has been in the athletic wear and sports apparel industry for a very long time. People can recognize and brand name and logo whenever and wherever they see it.
Nike’s Weaknesses – Internal Factors Affecting Nike
Sexual Harassment Suit
Some former women employees have reported that the workplace environment of Nike isn’t good for the ladies. Misconduct and harassment are the common issues there. However, the reporter of the New York Times interviewed 50 women employees of the company. The collective analysis of the interview established the fact that the brand has a toxic workplace environment for women.
The women employees also mentioned in their interviews that they have reported the misconduct to the HR department of the company. The brand hasn’t taken any actions against the misconduct or harassment.
Nike plans to achieve zero percent carbon emission rates and use renewable energy on all of its productions facilities. When we study a company’s innovation and creative product designs, then they’re far from sustainable. However, it shows the company’s non-serious commitment to climate and environmental issues.
The top-selling products of Nike are sportswear and athletic wear, and the company is overly dependent on them as a source of profitability. When pandemic and lockdown stuck the world, then it badly impacted the company’s income. However, if such an incident happens again, it would lead the company to ruin.
Along with misconduct and harassment lawsuits, some women have also filed a class-action lawsuit against Nike for discrimination and unequal pay in 2018. They maintained their views that the company is systematically biased towards women, where men receive more salaries than women.
Reliance on the US Market
Even though Nike is a global multinational brand, but the major portion of the company’s sales and revenue comes from the US market. In 2020, 59% of the company’s sales came from the global/international market, 41% from the US market. It shows the company’s reliance on the US market for growth and productivity.
The income statement of the company shows that Nike is making profit and revenue. On the other hand, the balance sheet tells the different sides of the story in terms of heavy debt. For instance, the company’s long-term debt in 2020 was 9.54 billion dollars.
The retailers of Nike have got an upper hand on the company’s sales. For instance, the company sells 65% of its sportswear products through retailers and wholesalers. They’re highly sensitive about the company’s pricing strategy, and the company can’t push its prices on them.
Poor Labor Conditions
The working conditions of Nike’s production and manufacturing facilities in the other countries are very bad and unsafe. The company receives criticism in terms of low wages, child labor, and forced labor.
Nike’s Opportunities – External Factors Affecting Nike
Ecommerce and online shopping is becoming increasingly popular among customers. It would be a huge plus point for the company by shifting its focus from physical stores to online stores. In fact, the online sale and revenue of Nike have increased by 35%.
AI Startup Acquisition
Nike should consider expanding its business portfolio by acquiring new AI startups. As many of you are aware of the fact that we’re living in the technological world. Acquisition of the AI firm would give the company a huge competitive edge in terms of predicting new upcoming trends and managing the business effectively.
Cutting Exploiting Retailers
Nike has recently decided to stop doing business with big retailers and wholesalers that were exploiting the company. Some of them are Fred Meyer, Dillard’s, Bob Stores, and Zapoo’s. It would be good both for the customers and the company.
Nike works with independent manufacturers and production facilities. In fact, it relies on them. Acquiring and integrating production units and suppliers would make the company’s supply chain management system efficient.
Although Nike always launches unique products, there’s always room for innovation and creativity. The latest technology would allow the company to develop a better product in terms of health and fitness. Now, it requires two major steps from the company. First, developing the latest technology, and then attaching it with the sportswear.
Nike is already doing business in the Asian countries, but there are many emerging markets unexplored like Brazil, India, China, and others. They all have got a great potential for growth and productivity.
Nike’s Threats – External Factors Affecting Nike
China and the US are always on the opposite sides of the poles. Since Nike is a US brand, and China has got the world’s biggest consumer. However, the trade and political tension between the two countries makes it difficult for the brand to expand its market there.
The global economy is going through a recession period since the pandemic situation, and it has dropped the company’s sales significantly, roundabout 38% in 2020.
Nike and Adidas are fierce competitors, and they’ve got a major chunk of customer market share. It doesn’t matter who is right or wrong, it’s costing them billions of dollars. Currently, they’ve got a patent dispute over Flyknit and Primeknit shoes in the courts of Germany.
Nike is a global multinational brand and its earning is in US dollars. The difference in the currency exchange rate of different countries impacts a company’s profitability.
Adidas and Under Armor are the top competitors of Nike, and they push their products into the market with a lot of marketing and promotional campaigns. It puts great pressure on the company to allocate more marketing budget.
The fake and counterfeit products from the 3rd party sellers are commonly available in the emerging markets almost at the same price as the original products. Customers can’t differentiate between original and fake products. The cheap quality products jeopardize the reputation of the company.