Nike, originally known as Blue Ribbon Sports (BRS), was founded on January 25, 1964, by University of Oregon track and field athlete Phil Knight and his coach Bill Bowerman. The company initially operated in Eugene, Oregon, as a distributor for Japanese shoe manufacturer Onitsuka Tiger and made most of its sales at track and field meets out of Knight’s car.
Let us look into the Overview of Nike and then we can move on to the SWOT Analysis of Nike.
Overview of Nike
Nike, Inc. is an American multinational corporation engaged in the design, development, manufacture and worldwide marketing and sale of footwear, apparel, equipment, accessories and services. The company is headquartered near Beaverton, Oregon, in the Portland metropolitan area.
It is the world’s largest supplier of athletic footwear and apparel and a major manufacturer of athletic equipment, with sales of more than $37.4 billion in fiscal 2020 (ending May 31, 2020). In 2020, the company employed 76,700 people worldwide. In 2020, the Nike brand alone was valued at over $32 billion, making it the most valuable brand among sports companies. Previously, in 2017, the Nike brand was valued at $29.6 billion. In the Fortune 500 list of the largest U.S. companies by total revenue, Nike ranked 89th in 2018.
The company was founded on January 25, 1964 as “Blue Ribbon Sports” by Bill Bowerman and Phil Knight and officially renamed Nike, Inc. on May 30, 1971. The company takes its name from Nike, the Greek goddess of victory.
Nike sells its products under its own brand as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Blazers, Air Force 1, Nike Dunk, Air Max, Foamposite, Nike Skateboarding, Nike CR7 and subsidiaries such as Jordan Brand and Converse.
From 1995 to 2008, Nike also owned Bauer Hockey, and before that owned Cole Haan, Umbro and Hurley International. In addition to manufacturing sports apparel and equipment, the company also operates retail stores under the Niketown name. Nike sponsors many high-profile athletes and sports teams around the world, with the well-known trademarks “Just Do It” and the Swoosh logo.
SWOT Analysis Of Nike
The SWOT Analysis of Nike includes its strengths, weaknesses, opportunities, and threats. And in this reading of the SWOT Analysis of Nike, we will examine this beauty and wellness company in terms of its internal and external factors.
S Stands For Strengths ( Internal Factor )
- Strong Brand Awareness and Brand Equity: Nike is one of the most recognised brands in the world because its name alone is memorable, easy to pronounce and very unique. Its Swoosh symbol is easily recognizable by everyone. According to Interbrand, Nike has a brand value of $42.5 billion.
- Huge Customer Base: Nike has millions of customers around the world who faithfully follow Nike trends, attend Nike events and even give customer feedback. Due to its huge popularity, Nike’s market capitalization has increased to $232 billion as of January 2022.
- Sustainability: Nike’s CEO, Mark Parker, has stated that the company will continue to address environmental issues in communities. The CEO assures that Nike will help find a solution to these environmental problems.
- Iconic Relationships: Nike’s long-standing partnership with Michael Jordan has proven beneficial to the company in terms of sales. Their collaboration resulted in the “Air Jordan 1 shoes.” Nike has also collaborated with the famous basketball player to design the “Air Jordan 1 Shoes”.
- Secondary Brands: Nike’s ability to maintain and improve its secondary brands such as Converse and Hurley has brought the company unparalleled success for decades.
- Low Manufacturing Costs: The majority of Nike’s footwear is manufactured overseas. In fiscal 2021, 51% of Nike shoes were made in Vietnam, 24% in China and 21% in Indonesia. Other plants are located in Argentina, Brazil, India, Italy and Mexico.
- In-House Professionals: Nike has a team of professionals who design its shoes and other sports accessories. Nike believes that their business thrives because of the thorough research that is done for each product.
- Superior Marketing Skills: Nike has excellent marketing campaigns. The brand relies heavily on demand creation spending that includes advertising, promotion, endorsement deals, media printing, and free products. In fiscal years 2019, 2020, and 2021, Nike spent $3.7 billion, $3.6 billion, and $3.1 billion, respectively. The brand has successfully leveraged social media and marketing campaigns to reach more customers.
- Supporting the Black Community: The brand has excellent marketing campaigns and recently released the “Do not Do It” ad campaign to support black communities against racism.
- High Market Share: Nike is a leader in the footwear industry. Nike has captured about 39% of the global athletic footwear market and 13% of the global athletic apparel market.
W Stands For Weaknesses ( Internal Factor )
- Poor Working Conditions Abroad: Over the past 20 years, Nike has been repeatedly criticised for its poor working conditions. These include forced labor, child labor, low wages, and appalling working conditions that have been deemed “unsafe.”
- Retailers Have a Stronger Influence: The retail sector weakens Nike because of its sensitivity to pricing. 65% of Nike products are sold directly to wholesalers or retailers. Since retailers are Nike’s main customers, Nike cannot defend itself against their pricing structures.
- Floating Debt: Although Nike’s income statements are prosperous, a quick look at its balance sheet might paint a different picture. Nike still faces financial threats. As of FY21, Nike’s total long-term debt stood at $9.4 billion
- Dependence on the U.S. Market: Even though Nike has established itself globally, the company still relies on the U.S. market for sales and revenue. In fiscal 2021, about 39% of Nike’s revenue came from North America, while the rest of 61% was global. Despite its fame, Nike is heavily dependent on the U.S. for sales and growth.
- Litigation: Recently, a former employee accused Nike of discrimination based on his Croatian heritage. Four former female Nike employees filed a class action lawsuit against the company in August 2018. According to these women, Nike has a toxic corporate culture for women. The women filed their lawsuit against the sportswear company, alleging that the company violated the Equal Pay Act. The women alleged that the company engaged in systematic gender-based wage discrimination, paying men more than women for the same work.
- Lack of Diversification: Nike’s over-reliance on sportswear, or lack of diversification, is a major weakness. The pandemic has meant that sporting events have had to be canceled or postponed, making physical interaction and coming together difficult. Several sports teams are on the verge of collapse. If the crisis keeps sporting events from happening even longer, Nike’s losses could be catastrophic.
- Conflicting Strategies: Nike has committed to converting all of its facilities to 100% renewable energy with net zero emissions as part of its “Move to Zero” program. While this strategy is great and welcomed, it is at odds with Nike’s strategy of prioritizing innovation over sustainability. This gives the impression that Nike is not committed to tackling climate change and that its pledge is just a marketing stunt.
- Sexual Harassment: Former female employees also indicated that sexual harassment and misconduct were widespread at the company. The New York Times conducted interviews with 50 former and current Nike employees to examine the company’s culture. The interviews revealed that Nike had a toxic work environment where sexual misconduct was commonplace. Several female employees reported that they had complained to HR, but no action was taken on their part. The women were devastated and felt unsafe while working at Nike. Some even left their jobs. The whole controversy has significantly affected the company’s image.
O Stands For Opportunities ( External Factor )
- Emerging Markets: Although Nike is already present in many foreign countries, there are still many opportunities for Nike. This is because emerging markets such as India, China and Brazil are gradually blossoming.
- Innovative Products: Although Nike has already produced many products, there is still much to innovate. Nike has expanded its reach in technology related to fitness and health. Products like wearable technology that monitors physical activity are the first step in developing innovative technology products. Combining technology with sportswear can prove beneficial, as it is an aspect of the fashion industry that has not been explored much.
- Efficient integration: The supply and production of Nike’s products depends on independent manufacturers. The brand can either adopt some of them or produce some itself to make the supply chain more efficient and streamlined.
- Cutting off Relationships with Major Retailers: Nike has decided to cut ties with some of its largest multi-brand retailers and wholesale partners. According to the report, Nike will no longer work with wholesale companies such as Zapoo’s, Dillard’s, Fred Meyer, Bob’s Stores, etc. This move is for better product positioning and customer experience.
- Acquiring an Artificial Intelligence Startups: With its vast financial resources, Nike can acquire small or medium-sized companies or startups. Recently, Nike acquired predictive analytics platform Celect to expand its online sales capabilities and predict the shopping behavior of its customers.
- Merging with the Metaverse: Recently, Nike acquired RTFKT, a digital footwear company. Yes, you heard right, the company designs shoes, but only for the virtual stratosphere. However, RTFKT also claims that it has partnered with FEWOCiOUS (a young artist) to sell real shoes in addition to digital versions. Nike is banking on the ability to market its digital shoes in the Metaverse, where players can use their Metamask wallets to buy various types of in-game merchandising.
- Exit Wholesale Distribution: Recently, Nike announced it would exit wholesale distribution in the United States. The company plans to sell its products only in Nike stores, via app and through websites. According to Nike, exiting wholesale will help the company double its profit margins. In addition, Nike will have the opportunity to improve the customer shopping experience and control prices.
- Consumer Direct Strategy: Nike has accelerated its consumer direct strategy, which means the company is shifting its focus to digital and closing physical stores as a result. In fiscal 2021, 38.7% of Nike brand revenue will come from online sales. It is clear that the pandemic is shaping the way Nike interacts with its customers.
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T Stands For Threats ( External Factor )
- Counterfeit Products: Counterfeit products can have a significant impact on Nike’s revenue and reputation. The company trades globally and the risk of counterfeit products has increased. A number of merchandisers and retailers offer counterfeit Nike products at lower prices. The cheap products are made of inferior materials but still carry the Nike label. This can damage the brand’s image, as customers may get the impression that Nike produces inferior products.
- Increased Competitive Pressure: Although Nike dominates the sports industry, competition and emerging brands are still a potential threat to the company. Due to higher competitive pressure, Nike has to spend more money on marketing and advertising. In fiscal 2020, Nike spent $3.5 billion specifically on marketing and demand generation. To beat the competition, Nike is most certain to develop innovative products that are tailored to the needs of athletes.
- Marketing Budget Pressure: Companies such as Under Armour, Adidas and Lululemon are spending more money on marketing and advertising campaigns, which increases the pressure on Nike.
- Exchange Rate Risks: Since the brand operates globally, it is affected by fluctuating exchange rates. Nike reports its financial results in U.S. dollars. This affects revenue as the US dollar is subject to fluctuations compared to other financial currencies.
- Patent Litigation: Regardless of whether a company is wrong or right, patent disputes are hotly and fiercely fought in the public eye and bring to light some dirty secrets about the disputants. Nike and Adidas have been engaged in a heated patent dispute over Primeknit and Flyknit shoes in U.S. and German courts.
- Economic Uncertainty: regardless of industry, all companies are vulnerable to the negative impact of a global recession. Nike has already seen a 38% decline in sales in the second quarter of 2020 and could see further declines in the future if the recession hits as hard as experts predict.
- Trade Tensions: Nike is dependent on various markets around the world, as evidenced by the recent rise in the company’s stock, which was fuelled by a surge in sales in China. Since China and the U.S. are the company’s largest markets, a large portion of Nike’s sales will be at risk if trade tensions between the two giants escalate.
- Patent dispute over Adidas Primeknit shoes: Nike filed a complaint with a U.S. agency that Adidas infringed on the company’s patent for its Flyknit shoe technology. The company also alleged that the German shoe maker used Nike’s Flyknit technology in 49 shoe designs (the Primeknit technology). However, according to an Adidas representative, the company will defend itself against these claims, stating that Adidas began using its Primeknit technology after numerous years of research and development.
- Threat to Kangaroo Population: Nike has been accused of threatening the Australian kangaroo population with extinction. The leading sports brand uses kangaroo skin to make leather football shoes. Animal rights activists and advocates have called on Nike to rethink its strategies and use plant-based alternatives. So far, Nike has not responded to these accusations.
SWOT Analysis Of Nike Key Takeaways
The SWOT Analysis of Nike highlights where the brand currently stands and its threats in this era. Following the detailed SWOT Analysis of Nike Here are a Few Important Key Points.
- Senior in the Industry
- Huge line of Products
- Strong Brand Image & Social Media Presence
Suggestion By Business Mavericks
- Need to focus on other markets too instead of highly deepening on US Market.
Nike STP & USP
- Segment: Sports enthusiasts.
- Target Group: Men, women and children from urban upper-middle and upper class.
- Positioning: Nike offers high quality sports products at a high price which gives satisfaction and comfort.
Nike USP: Nike shoes that are made for professional athletes across sports worldwide
- Adidas: Adidas is a German multinational company headquartered in Herzogenaurach, Bavaria that designs and manufactures footwear, apparel and accessories. It is the largest sporting goods manufacturer in Europe and the second largest in the world after Nike. It is the holding company for the Adidas Group, which owns 8.33% of the shares of the Bayern Munich football club, and for Runtastic, an Austrian fitness technology company. Adidas’ 2018 sales were reported at 21.915 billion euros.
- Puma: Puma SE, known by its brand name Puma, is a German multinational company that designs and manufactures sports and casual footwear, apparel and accessories and is headquartered in Herzogenaurach, Bavaria, Germany. Puma is the third largest sportswear manufacturer in the world.
The company was founded in 1948 by Rudolf Dassler. Rudolf and his brother Adolf “Adi” Dassler had founded Gebrueder Dassler Schuhfabrik together in 1924. The relationship between the two brothers deteriorated until 1948, when they decided to separate and create two separate companies: Adidas and Puma. Today, both companies are headquartered in Herzogenaurach, Germany.
- Reebok: Reebok International Limited is an American fitness footwear and apparel manufacturer that has been a subsidiary of the Authentic Brands Group brand company since March 2022. It was founded in the United Kingdom in 1958 as a subsidiary of J.W. Foster and Sons, a sporting goods manufacturer founded in 1895 in Bolton, Lancashire.
- Under Armour: Under Armour, Inc. is an American sporting goods company that manufactures footwear, athletic and casual apparel. Under Armour’s global headquarters are located in Baltimore, Maryland, with additional offices in Amsterdam (European headquarters), Austin, Guangzhou, Hong Kong, Houston, Jakarta, London, Mexico City, Munich, New York City, Panama City (international headquarters), Paris, Pittsburgh, Portland, San Francisco, São Paulo, Santiago, Seoul, Shanghai (Greater China headquarters) and Toronto.
- Asics: Asics is a Japanese multinational company that manufactures sports equipment for a variety of sports. The name is an acronym for the Latin phrase anima sana in corpore sano (translated by Asics as “a sound mind in a sound body”). In recent years, Asics running shoes have often been ranked among the best performance shoes on the market.
- Bata: Bata Corporation is a Czech multinational manufacturer and retailer of footwear and fashion accessories founded in Zlín, now in the Czech Republic. After World War II, factories in socialist states were nationalised, while branches in capitalist states remained family-owned. Today, the company’s headquarters are located in Lausanne, Switzerland.
- Skechers: Skechers USA, Inc. is an American footwear company. Headquartered in Manhattan Beach, California, the brand was founded in 1992 and is now the third largest athletic footwear brand in the United States.
- Fila: Fila Holdings Corp is an Italian-South Korean sportswear manufacturer that designs footwear and apparel and is owned by Ettor