Nike Business Essay

Analyse their strategic choices with their options- why they made the choices that they did and recommendations. Has their strategic focus changed? Look for critical success factors, matches and mismatches. Identify each key areas that get down affected Nike. Look at tools of analysis e. g. swot analysis, pestle, value chain, porters 5 forces, shareholder matrix, resource view, 4 ps, BCG matrix. etc and others to come to your answer. Introduction Nike operates within the variances footwear and apparel market.Origin solelyy designing and producing running shoes, their portfolio has broadened to include a wide range of sports and leisure wear. This is all endorsed by top sporting personalities. This environment is fairly stable although terrorism and Sars has affected consumer confidence and supply networks. Mission Statement In its mission mastery Nike expresses that it requires doing business in a responsible way, leading to sustainable financial growth. With the advances in tec hnology, HR practices, the well informed and trained work force, there is precise little left to differentiate musical arrangements.Being seen to go further than the minimum require on social issues faeces attract and retain customers. This green neaten attracts attention to the organisation they are viewed as caring and social responsible (Mullins, L. cc5). A report, on the business practices of Nike through its supply chain accused the organisation of being involved in poor working conditions, violations of outwear rights, low wages and harassment of its workforce. Nike takes these reports seriously. On the basis of the research findings the company has intensified the monitor of its suppliers (Hummels, H and Timmer, D. 004) olden options To build its business with all of its partners based on trust, squadwork, honesty and mutual respect this is expected to be returned, expecting business partners to operate on the same principles. rule Nike does not want to only do what is required by law, but also do what is expected of a leader upcoming Options Review and monitor closer the actions of business partners precept To prevent bad publicity, which toilet damage the organisation everyplacecritical Success component To demonstrate to consumers the elevated value within the organisation to CSR. heighten of Focus TheoristHummels, H and Timmer, D. 2004 agreed that these reports were needed, Although Mullin, L. 2005 stated that it could be just green washing Nikes Function preceding(a) options the company focus on design and development Rationale This reduces long term debt has the benefit of not tying capital up in graft and equipment Future Options Rationale deprecative Success Factor Reduced size of premises therefore reduced costs. Vital to drop innovative employees. Products are viewed as innovative Change of Focus Theorist Johnson, G & Scholes J 2004 agreed that this was a cost effective method of businessProduction Within some(prenominal) of these countries there have been problems with production, distribution and political problems. With the change in relationship in the midst of the USA and Vietnam and China, these are new production venues that Nike could explore. Past options Produce goods in the far-off east Rationale Keeps costs down Future Options Vietnam and China Rationale New trade agreements, present sites are switching manufacturing to electrical goods Critical Success Factor Maintaining current standards, closer working relationships, retaining customer loyalty by guaranteed standard of product Change of FocusA shift to a more managed production Theorist All organisation need to watch changes in political and economical factors in their outsourcing. Johnson, G & Scholes J 2004, Shareholder ground substance Surrounding all organisations are stakeholders, all with varied levels of authority, power and interest towards the organisation Mendelow (1991) considered a matrix that classifies the level of po wer and interest a stakeholder has in an organisation. Although once each group of stakeholders is recognised, it cannot be assumed that their level of interest ordain remain the same (Mendelow (1991) cited in Scholes, K. Johnson, J 1997198). Jones (1995) argue that the stakeholder framework is functional for considering business and society issues, because it identifies the sources of a corporations social obligations and its set of stakeholders (Jones (1995) cited in Rowley, T. 199828). Therefore by Nike concentrating on their stakeholders it has placed incorporate Social duty graduate(prenominal) on their agenda. The organisation has to demonstrate transparency in all actions and insurance coverage. This can cause conflict with the shareholders.Common in stakeholder theory is compromises on some(prenominal) sides that can obviously haze over differences this primary characteristic is accepted as contra-distinctiveness from the shareholder value. This was discussed by Friedm an, (1993) that the ultimate purpose of a company should be serving the interests of its shareholders (Friedman, (1993) Value Chain Nikes supply chain provides a clear view of the extent of the global nature of the company. Nikes headquarters are in America however, virtually all of its production takes place outside of the United States.Nikes supply chain upstream begins with the materials used in the production of its products. Many of these materials used in production are available in the locations which the manufacturing takes place, but some specialised materials have to be imported to the manufacturing company. Past options Outsourcing of all production Rationale Reduced costs Future Options Outsource with stronger take Rationale Speed up reporting of any problems in production, the supply chain, the great the distance the slower the reporting of problems Critical Success Factor Reduce problems associated with distance, i. e. uality, consistency and value Change of Focus Al though still outsourcing, they would gain more control over production. Theorist Johnson, G & Scholes J 2004, agreed that Nike can be too far from the site of production Past options Target USA Rationale Demand and growth for footwear in the US was rapid. Future Options Future option is to enter EU markets Rationale To expand into growing markets as US is near saturation. Critical Success Factor organic growth as well as by acquisition, also speck name, goodwill- therefore there is a match is CSF to succeed Change of Focus Maybe have to target marketing in a different wayTheorist When markets are grasp saturation, new markets need to be identified to prevent decline in gross sales. Johnson, G & Scholes J 2004, Distribution And Retailers Nike has a strong network of retailers in 200 coutries manhood wide through distributors, licensees and sudsiduaries. Within the USA there are 18000 stores that retail nike products. These are well established channels. Nike made itself heavily qualified on one retailer Footlocker, representing 10% of their revenue. When Footlocker reduced their purchasing form Nike, it created a reduction in turnover in the short term.Organisations that are over dependant on one retailer are open to cash flow problems, if the retailer switches suppliers, reduces purchasing or ceases trading (Johnson, G & Scholes J 2004). Past options Although they have numerous retailers, they were heavily dependant on one out let chain Rationale To sell top of the range products Future Options To pull off partnerships deals that allow for the choice of product for the retailer Rationale To prevent sudden withdrawal of products Critical Success Factor Customer being able to rely on source of product. If withdrawn they may find an alternative product Change of FocusCloser working partnerships Theorist Organisations that are over dependant on one retailer are open to cash flow problems, if the retailer switches suppliers, reduces purchasing or ceases trad ing. Johnson, G & Scholes J 2004 Nike has a futures, but can also ship overnight when needed. Although the futures method is currently working for Nike, Past options Futures ordering system Rationale a 6 month lead cadence for product orders, always knowing what is needed in production Future Options Rationale Critical Success Factor This is responsive to the market trends, but can also help retailers plan stock. Change of FocusTheorist Any change or threats within the markets could leave them overstocked (Groucutt, J. et al 2004) Sales In addition, consumer sales outside of the United States exceeded sales in the United States in 2003 with only 43% of the companys sales coming from the US In atomic number 63 there are difficulties in entering the market, the single currency and the trade rules make entry difficult for large organisations. Past options Target the US Rationale Growing market, but is now reaching saturation Future Options Target new markets, including e-commerce Rati onale To avoid a reduction in sales Critical Success FactorEntry to the markets, by advertising and targeting the audience. Ensuring accurate and quick picking of the customers order Change of Focus Shift to global marketing, selling world wide from the web targeting Generation Y. Theorist By tailoring marketing to the customer needs Nike has been successful in the past and continues to be today (Johnson, G & Scholes J 2004) Nike Branding Past options global provoker Rationale Consumers are willing to pay a premium price for as they imply credibility, high quality and up-to-date global trend. Future Options When companies are bought trade under their name RationaleMoving into a new market with a brand that is already global you can reduce cost of introductory and follow-up marketing programs. Critical Success Factor Ensures customer loyalty and to widen portfolio Change of Focus Concentrating on core products as Nike, allowing growth in new diverse markets Theorist significant scal es of economy are achieved Aaker 2000, this is in terms of brand development, packaging and manufacturing Marketing Sports personalities have endorsed the Nike product, although with numerous different sports and countries targeted this has been costly. The amount each personality has received is considered high.This forces the competitors to market their products in the same way. Trends within the industry have increased the number of female consumers. With advertising Nike has targeted segments of the market, this costly. Nike should review their advertising policies (Groucutt, J. et al 2004). Past options Sports personalities have endorsed the Nike product, although with numerous different sports and countries targeted Rationale To target all types of sport by choosing personalities which are at the top of their sports. Future Options To chose personalities that appeal to a wider audience Rationale To reduce advertising costsCritical Success Factor Change of Focus Theorist Groucu tt, J. et al 2004 4ps The athletic shoe industry is highly competitive as well as a demanding market where enraged competition, price conscience consumers, and constant changing market trends and fads have all been attributing factors in how a manufacturer responds. Highly focused brand includes Nike, Adidas, and Reebok, they target a precise market. However, there is evidence that a brand will widen its target market as it reaches a greater level of maturity. In the study of Nike, for example, there was a move into new sports areas away from the running heritage.Nikes target audience has moved from more masculine towards female and Generation Y. cost is related to Product, through the characteristics of the brand, its packaging and overall image. People are buying into an ideal, not just the item. Consumers believe that there is a link amongst quality of a product and the price. Consumers question what they are getting for their money. Brand Management, customer awareness and l oyalty, is directly linked to the price, therefore maintenance of the relationship between brand images quality and price have to be consistent (Johnson, G & Scholes J 2004). Models Used In AnalysisSwot Analysis This analysis will summarise key issues from the business environment and the strategic capacity of Nike. This can be used to judge future strategic options. Strengths Product Range competency for innovation Distribution expertise Single Brand Stars endorsement Contract manufacturing Large portfolio of products Weaknesses Single Brand Too many stars endorsement Contract manufacturing break up portfolio of products Reliant on retailers Reduction of target market Opportunities New Markets E commerce Research and development Increase product line Product diversification Change target market New manufacturing countriesThreats Competition Fashion Trends Contract manufacturing and copying of product (intellectual property) Consumer lifestyle changes Competition Bad press associ ated with Nike Outlets cancelling orders Sars bray This will consider environmental influences on the organisation, both in the past and with future strategic plans. Political Striking dock workers Political unrest in the production countries Terrorism in the home country Economic Slow down in the economy Reduction in consumer confidence Barriers of entry to the EU Contract manufacturing Socio-cultural Brand conscious consumers Change in buying habits in younger peopleGeneration Y prefers other types of footwear Increase in the female share of the market Corporate social responsibility Technological Speed of change of product Design Ability Speed of News reporting Environmental Re use a shoe Sustainability philosophy Climate impact Legal Threaten action by underage workforce low-down employment record Corporate social responsibility Contract manufacturing and copying of product (intellectual property) Trade agreements Supply Chain Like every large IT undertaking, the team responsi ble for the implementation of Nike Supply Chain (NSC) began with a set of specific, stated goalsEnhancing Nikes ability to respond to changing conditions Reducing inventory and capital investment risk Improving service to meet customer/consumer needs Improving process, information and product quality and Providing an efficient global supply chain with local implementation Porters 5 Forces This model is used to identify the sources of competition, and how to gain advantage over them. Potential Entrants Other sportswear manufacturers expanding their portfolio Cheap copies from the Far East Buyers The buyers of sports footwear have changed in the past decade.There has been and increase in women purchasing the shoes, Generation Y has a different tastes and purchasing methods. Substitutes When required for professional use there is no substitute goods, but as a fashion item there are many other goods that could be purchased. Suppliers Using production facilities in the Far East has giv e Nike economies of scale. Although there are now problems arising from these factories, they are switching to making there own goods, labour and political unrest causes delays in manufacturing and shipping of the goods, Competitive RivalryReebok, offering more choice of shoe, introducing endorsement by sports personalities, sponsoring sporting leagues Adidas have recovered from the problems that plagued them, and have a good product mix, covering a wide range of sports. BCG Matrix Nike is established within its markets, benefiting from economies of scale. This places them in the Cash Cows category on the Matrix. Cash cows market growth has slowed, and the products hold a fairly stable market share. Bibliography Books Aaker, D. (2000) Brand leadership Free Press, New York Doyle, P. (1998) Innovation in marketingButterworth-Heinemann, Oxford Drawbaugh, K. (2001) Brands in the balance meeting the challenges to commercial identity Pearson Education, London Groucutt, J. et al (2004) Mar keting Essential Principals and New realities Kogan & Page, Great Britain Johnson J & Scholes K (1997)(4th Edition)Exploring Corporate Strategy Prentice Hall, Hemmel Hempstead. Johnson, G & Scholes J (2004) (6th Edition) Exploring Corporate Strategy Prentice Hall, Hemmel Hempstead. Mullins, L. (2005) (7th Edition) Management and Organisational Behaviour Prentice Hall, Pearson, Harlow. journalsHummels,H and Timmer, D. (2004) Investors in Need of Social, Ethical, and Environmental Information Journal of art Ethics Jun 2004Vol. 52, Iss. 1 Kaler, J. (2003) Differentiating Stakeholder Theories Journal of Business Ethics Aug 2003. Vol. 46 Rowley, T (1998) A normative justification for stakeholder theory Business and Society. Mar 1998 Welch, J. (1997) Business ethics in theory and practice Diagnostic notes. A prescription for value Journal of Business Ethics, Feb 1997. Vol. 16, Related Nike Resources On Business Teacher Nike campaign Study Nike SWOT Analysis