An Overview of Nike

Nike, Inc. is an American multinational corporation. Nike is headquartered in Beaverton,

Oregon, USA. It was found by Bill Bowerman and Phil Knight in the year 1964. The
company specializes in athletic wear, providing footwear, apparel, athletic equipment, and
accessories.

Nike’s primary goal is to supply athletes with exceptional products and wearable that aids
them in better sports performance. However, due to the success, Nike has gotten the
company now provides athleisure wear as well. Currently, Mark Parker is the CEO of Nike.

Key Facts about Nike

SWOT Analysis of Nike
Here’s a detailed breakdown of Nike SWOT analysis. 
Nike’s Strengths – Internal Strategic Factors
1. Strong Brand Awareness – Nike is one of the most recognizable brands in the
world as its name alone is memorable, easy to pronounce, and very unique. Its
swoosh symbol is easily recognized by everyone. Nike has captured
approx. 31% of the global athletic footwear market.
2. Huge Customer base – Nike has millions of customer from around the world who
loyally follow Nike’s trends, participate in Nike events, and even provide customer
feedback. Due to its huge customer base, Nike’s market cap has grown to $224
billion as of Feb 2021.
3. Aimed For Sustainability – Nike’s CEO Mark Parker has addressed that they will
continue to acknowledge the environmental issues in the communities. The CEO
ensures that Nike will help to contribute in finding a solution against these
environmental issues.
4. Iconic Relationships – Nike’s long-term partnership with Michael Jordan has
proved to be beneficial in terms of sales for the company. Their collaboration
resulted in “Air Jordan 1 Shoes”. Additionally, Nike teamed up with the famous
basketball player to help design the “Air Jordan 1 Shoes”.
5. Side Brands – Nike’s ability to maintain and enhance its side brands such as
converse and hurley have enabled it to enjoy unparalleled success for decades.
6. Low Manufacturing Cost – Most of Nike’s footwear is manufactured in foreign
countries. In the fiscal year 2020, Vietnam produced 50%, China produced 22%,
and Indonesia produced 24% of total Nike’s footwear. Other operations are in
Argentina, Brazil, India, Italy, and Mexico.
7. In-house Professionals – Nike has a team of professionals that design its shoes
and other athletic accessories. Nike believes that their business has flourished due
to the thorough research that is conducted for each product.
8. Superior Marketing Capabilities – Nike has excellent marketing campaigns. The
brand heavily relies on demand generation expense. In the fiscal year 2019 and
2020, Nike spent $3.7 billion and $3.5 billion respectively. The brand has
successfully utilized social media and marketing campaigns to target more
customers.
9. Black Community Support – The brand has excellent marketing campaigns
and recently released “Don’t Do It” ad campaign in support of Black communities
against racism.

Nike’s Weaknesses – Internal Strategic Factors

1. Poor Labor Conditions in Foreign Countries – In the last 20 years, Nike has been
consistently targeted regarding their poor labor conditions. These issues include
forced labor, child labor, low wages, and horrific working conditions that were
deemed “unsafe”.
2. Retailers Have a Stronger Hold – Nike’s retail sector makes Nike weak due to its
sensitivity against pricing. 65% of Nike products are sold directly to wholesalers or
retailers. With retailers serving as their core customers, Nike does not put up a fight
against their pricing structures whatsoever.
 3. Pending Debts – Although Nike’s income statements prove to be prosperous, a
quick glance at their balance sheet could paint a different picture. Nike is still facing
financial threats. As of Aug 2020,

Nike’s total long term debt was $9.54 billion

4. Dependency on US Market – Even after having established itself globally, Nike still
relies on the U.S Market in terms of sales and revenue. In the fiscal year 2020, about
41% of Nike’s sales came from the U.S, while the rest of 59% came globally. Despite
its fame, Nike depends on the U.S for substantial sales and growth.
5. Lawsuits: 
o Recently, a former employee accused Nike of discrimination based on his
Croatian origin.
o Four former female Nike employees filed a class-action lawsuit against the
company in August 2018. According to these women, Nike has a toxic
company culture for women. The women filed their case against
the sportswear company claiming that the company violated the Equal Pay
Act. The women said the company engaged in systematic gender pay bias
where men were paid more than women for the same amount of work.
6. Lack of Diversification: Nike’s over-dependence on sporting apparel or lack of
diversification is a major weakness. The pandemic has discouraged physical
interaction and gathering with sporting events canceled or postponed. Several
sporting teams are on the brink of collapse. If the crisis discourages sporting events
for longer, Nike’s losses can be catastrophic.

7. Contradicting Strategies: Nike pledged to shift all its facilities to 100% renewable
energy with net-zero carbon emissions under the “Move to Zero” scheme. While the
strategy is great and welcomed, it contradicts Nike’s strategy that favors innovation
over sustainability. This creates the perception that Nike is not committed to
addressing climate change and its pledge is just a marketing stunt.

8. Sexual Harassment: Former female employees also pointed out that sexual

harassment and misconduct was very common in the company. The New York
Times conducted interviews with 50 former and present Nike employees to
investigate the company culture. Through the interviews, it was established that Nike
did have a toxic working environment, where sexual misconduct was rampant.

Multiple female employees reported that they had complained to the HR but saw no action
being taken from their part. The women were left devastated and felt unsafe while working
at Nike. Some even left their jobs. The entire controversy has significantly affected the
company’s image.

Nike’s Opportunities – External Strategic Factors

1. Emerging Markets – Although Nike already has a presence in many foreign
countries, there is still plenty of opportunities for Nike. This is because emerging
markets like India, China, and Brazil are gradually flourishing.  
2. Innovative Products – Although Nike has produced many products, there is still a
lot to innovate. Nike has extended its reach in technology in association with fitness
and health. Products like wearable technology that monitors physical activities, is
the first step in building innovative technology products. Combining technology with
athletic wear can prove to be beneficial as it is an aspect of the fashion industry
that still hasn’t been explored much.
3. Efficient Integration – The supply and production of Nike’s products depend on
independent manufacturers. The brand can either acquire a few of these or make
some of its own for a more efficient and streamlined supply chain.
4. Cutting ties with big retailers: Nike has decided to cut ties with some of the biggest
multi-brand retailers and wholesale partners. According to the report, Nike will no
longer work with wholesale retailers such as Zapoo’s, Dillard’s, Fred Meyer, Bob’s
Stores, etc. The step is taken for better product positioning and greater customer
experience.
5. Acquired Artificial Intelligence Start-up – With its vast financial resources, Nike
can acquire small or medium companies or startups. It recently acquired predictive
analytics platform – Celect to expand its online sales capabilities and predict
customer’s shopping behavior.
6. Consumer Direct Strategy –  Nike has accelerated the consumer-direct strategy,
which means shifting its focus to digital business and subsequently closing physical
stores. In fiscal year 2020, 35% of its Nike brand revenue comes from online sales.
Clearly, the pandemic is shaping up how Nike interacts with its customers. 
Nike PESTEL Analysis

Contents [hide]
 Background
 Understanding the Nike PESTLE analysis
o Political
o Economic
o Social
o Technological
o Legal
o Environmental
 Key takeaways:
o Related Resources

Background
Nike is the world’s largest athletic shoe manufacturer. It’s also one of the most
successful, generating over $30 billion in revenue in each of the last four years.
As a global company, Nike’s growth depends on a suite of macro external
factors.

Following is a detailed look at each.

Understanding the Nike PESTLE analysis

Political
The United States is a core market for Nike, with the company having a large
consumer base in the country. Nike also has a large manufacturing base in
China and also has a presence in Vietnam, Indonesia, and Thailand.

Trade tensions between the United States and China threatened to increase
tariffs on footwear by as much as 25%. To mitigate this problem, the company
has sought to diversify its supply chain geographically.

Economic
Like most companies, Nike is vulnerable to a downturn in the economy. During
the GFC in 2008 and the COVID-19 pandemic, global revenue dropped
significantly as stores closed and discretionary income plummeted.

The pandemic in particular has highlighted Nike’s dependence on physical

stores to make money. In response, the company has sought to strengthen its
eCommerce arm. But the company may struggle because its staple products of
shoes and apparel are difficult to size online.

Social
The past few decades have seen the rise of the so-called sneakerhead culture,
created in part by basketball and the growth of hip hop music. Some estimate
that the sneaker resale market alone is valued in the billions of dollars.

Nike capitalized on this trend early, partnering with Michael Jordan to promote
a line of shoes that were not only functional but also collectible.
Technological
Technology is a major disrupter in most industries. Sports apparel is no
different.

Nike’s dedicated R&D facility, dubbed the Nike Sport Research Lab, has
produced a multitude of innovative and market-leading products.

One such example is Nike Fit, which uses machine learning, data science, and
artificial intelligence to scan consumer’s feet and find the best fitting shoes.

Legal
Nike is no stranger to legal battles. Invariably, these battles are fought with
major competitors over proprietary shoe or apparel technology.

Indeed, Nike has had a long and public battle with Adidas over patent
infringements. Sketchers is another competitor that has been sued by the
company for imitating patented designs.

Environmental
Once associated with sweatshops and negative environmental impact, Nike has
made great progress in rebranding itself as more environmentally responsible.

The company has pledged to use 100% renewable energy by 2025. It is also
planning to phase out single-use plastic bags and has designed a line of eco-
friendly shoes and apparel made from recycled plastic.

Key takeaways:
 Nike is the largest and perhaps most well-known athletic shoe company
in the world. However, a reliance on the U.S market makes it
vulnerable to tariff hikes and deteriorating US-China relations.
 Nike owes a large part of its success to the sneaker culture. Through
high-profile endorsements, Nike shoes are not only innovative and
functional but also collectible.
 Nike has been involved in several legal battles with competitors such as
Adidas and Sketcher over patented technology.
 Image
source: Statista

Nike’s Threats – External Strategic Factors

1. Counterfeit Products – Counterfeit products can significantly affect the revenue
and reputation of Nike. The company deals globally and the risk of counterfeit
products has become higher. A number of merchandisers and retailers offer
counterfeit Nike products at lower prices. The low-priced products are made from
low-quality materials but still have the Nike label. This can tarnish the image of the
brand as the customers might feel that Nike has started producing low quality
products.
2. Increased competitive pressure – Although, Nike is a dominating the athletic
industry, competition, and new emerging brands are still potential threats to the
company. With higher competition ratio, Nike has to spend more money on
marketing and advertising. Nike spent $3.5 Billion specifically on marketing and
 demand generation in fiscal year 2020. To overpower competition, Nike’s safest bet
is to design innovative products that are tailored according to the needs of athletes.
3. Marketing Budget Pressure – Companies like Under Armour and Adidas are
spending more on marketing and advertising campaigns, increasing the pressure on
Nike.
4. Currency Foreign Exchange Risks – Since the brand operates globally, it is
affected by fluctuating foreign exchange rates. Nike reports its financial earnings in
U.S dollars. This affects its revenue as the U.S dollar is exposed to volatility against
other financial currencies.
5. Patent Disputes – Regardless of whether a company is wrong or right, patent
disputes are hotly and fiercely contested in the public domain and expose some dirty
secrets about sides in the dispute. Nike and Adidas have been engaged in a fierce
patent disputes over Primeknit and Flyknit shoes in U.S. and German courts.
6. Economic Uncertainty – Regardless of the industry, all companies are susceptible
to the negative effects of a global recession. Already, Nike has registered a 38%
decline in sales in Q2 of 2020 and can drop further in the future if the recession
strikes as hard as predicted by experts.
7. Trade Tensions – Nike depends on different markets across the world evidenced by
the recent increase in its stocks rallied by an increase in sales in China. With China
and the US as its biggest markets, a large chunk of Nike’s sales will be threatened if
the trade tensions between the two giants escalate.

Nike SWOT Analysis

Final Thoughts
The fiscal 2020 proved to be successful for Nike. Although the brand is still in debt, the next
few years look promising. Nike has grown exponentially in the last decade.

From releasing new product lines to building new brands, to outsourcing, and establishing a
global presence alone is an extraordinary achievement.

Through this SWOT analysis of Nike, you will be able to understand the business model of
the brand.