April 7, 2020

SWOT Analysis of Nike (2020)

Company: Nike
CEO: John Donahoe
Year founded: 1964
Headquarter: Beaverton, Oregon, USA
Number of Employees (FY2019): 76,700
Type: Public
Ticker Symbol: NKE
Market Cap (Mar 2020): $ 139.19 Billion
Annual Revenue (FY2019): $ 39.12 Billion
Profit | Net income (FY2019): $ 4.03 Billion

Products & Services: Athlete wear | Apparel | Sports equipment | Leisure footwear | Accessories Competitors: Adidas | Puma | Anta | New Balance | Under Armor | Lululemon | ASICS | V. F. Corporation

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.

A 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 $115.19 billion as of 2018.
  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 has enabled it to enjoy unparalleled success for decades.
  6. Low Manufacturing Cost – Most of Nike’s footwear is manufactured in foreign countries. In the year 2018, Vietnam produced 47%, China produced 26%, and Indonesia produced 21% 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 digital marketing. In the year 2016 and 2017, Nike spent $3.2 and $3.3 billion respectively. The brand has successfully utilized social media and marketing campaigns to target more customers.

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 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. About 60-70 % of Nike’s stocks are sold directly to 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. Currently, they have a total debt of $3.49 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 year 2018, about 42% of Nike’s sales came from the U.S, while the rest of 58% came globally. Despite its fame, Nike depends on the U.S for substantial sales and growth.
  5. Lawsuits: 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. 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 external 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.

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 products that have low quality.
  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 almost 3.5 Billion dollars specifically on marketing in 2018. 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 Armor 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.

Final Thoughts

The year 2018 proved to be successful for Nike. Although the brand is still in debt, the next few years look promising. Looking at the growth charts and comparing to 2009, 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.