SWOT Analysis Report on Nike Shoes for Men - Case Study Example

SWOT Analysis Report on Nike Shoes for Men Executive Summary This report comprises of a SWOT analysis of Nike shoes for men, specifically focused on the Air Jordan brand. The reports establishes that although Nike started as a small marketing venture of cheap Japanese shoes in 1962, Nike’s shoes for men have today dominate those of the main competitors, Addidas and Reebok. The report establishes that Nike’s Air Jordan men’s shoes brand has numerous strengths such as dominant brand recognition, brand loyalty, brand supplementation, strong international presence and growth, an aggressive marketing strategy and continued innovation and product research. The brand also features some weaknesses like lack of young talents among the current board of directors, a centralized advertisement and worsening labor problems. The existing opportunities that Nike could exploit include continued exposure Nike men’s shoes in global sports, contracting of cheaper factories in remote areas and focus of product differentiation. The threats in exploiting these opportunities include poor employee working conditions, declining stock market performance, wavering financial position, reduction of sales and increased production costs. The report thus recommends that Nike should maintain a frontline in their social responsibility, review employee working conditions, adopt increased internet sales initiatives and focus more on leisure and fashions markets. Introduction This brief report summarizes a situation analysis of Nike, with a specific focus on the Nike shoes for men business segment. The report comprises a comprehensive SWOT Analysis as a central part of the most appropriate strategic marketing plan for the company. Nike is the global leading designer and marketer of men’s athletic footwear, with specific brands catering for athletics, football, basketball and other sports. The paper cannot possibly cover the entire brand portfolio of men’s shoes owned by Nike. The thus paper identifies a singular men’s shoes brand namely the Air Jordan sneakers. In analyzing the situation of the Air Jordan men’s shoes, the report includes a description of the external market situation in which Nike is operating today. The report begins with a brief overview of the company and then an examination of the Air Jordan brand. This allows the report to contextualize a competitive situation analysis inclusive of the industry situation. This section of the report details an identification of Nike’s main competitors. Further, the paper details several industrial issues relevant to Nike and the Air Jordan brand in particular. In this section, Nikes company structure; corporate responsibility and innovation are reviewed. The next section of the analysis construes of a macro-environment situation examination to identify the trends of Nike’s Air Jordan brand in the market for the last 10 years. This analysis helps in arriving at a summary of opportunities, strengths, weaknesses and threats that face Nike’s Air Jordan brand of men’s shoes. The paper arrives at recommended strategic action priority as justified by the analysis of the opportunities, strengths, weaknesses and threats that face Nike’s Air Jordan brand of men’s shoes before terminating with a concluding paragraph of the entire analysis. Nike’s Company Overview Nike Inc. today ranks as the largest and market dominant company in athletic footwear and apparel design, marketing and distribution. Phil Knight and Bill Bowerman founded the US company in 1962 as a partnership venture, then named Blue Ribbon Sports (BRS). BRS started out with a modest goal of distributing low-cost but high-quality athletic shoes in America. These shoes were designed and manufactured in Japan and BRS was simply their sole distributor to the American consumers (Goldman and Papson 1998, pp. 96). With time, BRS gained a footing in the US market and begun including its own designs in the established retail channels. Today, 48 years on, Nike Inc. has become a manufacturer, marketer and distributor of the single most dominant brands of athletic shoes to the global market, specializing in both low end and high-end market prices. Over 40% of Nike’s sales accrue from the sale of athletic apparel and sports equipment, as well as other subsidiary ventures (Donaghu and Barff 1990, pp. 537-552). But over 47% of their sales come from athletic shoes, the most profitable one being Nike Air Jordan designs. For its global sales franchise, Nike maintains both the non-traditional and traditional channels of distribution in over 160 countries in six continents. The primary market regions of the company are the US domestic market, Europe, Middle East, Americas (Excluding US) and Asia Pacific (Donaghu and Barff 1990, pp. 537-552). By 2007, Nike had over 32,000 operational retail outlets, factory stores, Cole Haan stores, Nike Towns and Nike stores across the world. These were then complemented by over 4, 000 internet-based retail sites selling the Nike label sports and fashion products. Nike today dominates the sales of the entire athletic footwear industry in the US and globally, commanding a 35% global market share (Ind 1993, pp.171-186). To attain such a formidable market placing Nike has in most cases relied on functional designs and labels for specific market niches. The 2008 fiscal year ended with Nike Inc having an employee base of over 32,740 employees who helped generate over $18, 627 million in annual revenue. Nike’s operating profit was $2,400.7 million in 2008, a 14.2% increase over 2007. Air Jordan was established as Nike’s Basketball sneaker design and marketed with the profile of the legendary NBA’s player, Michael Jordan (Goldman and Papson 1998, pp. 96). As such, Air Jordan is predominantly a men’s shoes design targeting basketball players. But since then, the label has become a fashion statement in the sneaker world, with most of its sales recorded with non-sporting sneaker wearers since 1997. Popularly known as Nike Air or as Air Jordan, this singular design has become the most successful sports shoe label in history and the best performing yet (Sage 1999, pp. 206-235). Competitive Analysis In the US and global sneaker market, Nike has dominated men’s shoes for more than a decade now, especially with the Air Jordan design. The main competitors are Addidas and Reebok respectfully. In recent years, Addidas has specialized in the marketing of other sports apparel and equipments more than in men’s shoes (Sage 1999, pp. 206-235). But they retain a large market presence with 15.5% command of the entire men’s sport shoes market. Reebok on the other hand is increasingly reducing its role as a formidable competition for Nike shoes for men. Reebok’s market share of 11.2% has been on a downward trend due to a continued poor financial performance. For a number of years, Reebok has experienced a decline in their stock price, accumulating to drop of over 80 percent in five years leading to 2007 (Sage 1999, pp. 206-235). Reebok’s financial problems have triggered a decline in net sales with 9% sales and 17% net income average reduction since the 1999 fiscal year (Sage 1999, pp. 206-235). Addidas and Reebok have men’s shoes designs that are very close to those designed by Nike. The three companies are all involved in designing and marketing athletic and non-athletic apparel and footwear and apparel. A close inspection of the highly competitive market however indicates that Nike has retained and even increased its lead in the last decade, gaining in new markets, building in its repute and modeling a successful brand portfolio in men’s shoes (Goldman and Papson 1998, pp. 96). Industrial and Macro-Environment Situation Analysis Nike Inc. adopts a matrix structure combining the divisional and functional structure. It comprises of five departments namely Human Relations, Marketing and Sales, Accounting, Design and Development and finally Production. Nike stopped manufacturing their products in 1992 and signed contracts with independent factories across the world. A team of production professionals from Nike, comprising of a team leader, technical experts, quality coordinators quantity control staff and scheduling experts, moderates each of these factories. At the top management, Nike comprises of a integrated board of directors structure with both independent and management directors. The management directors are in charge of day to day running of the company while the independent directors act as the think tank working from the outside to help in strategic management (Ind 1993, pp.171-186). The most notable trend of Nike’s strategic performance has been a growth of its market presence in international front. The sportswear company has currently targeted revenues of over US$27 billion by the 2015 fiscal year most of it to come from exploits in emerging markets. Also notable is the continued commitment to innovation in their designs as part of their growth strategy. Nike has launched a series of new high-tech men’s shoes with overly reduced weight, high-contrast colors and high conformability. The Sporting Goods Manufacturers Association reported in 2007 that sporting consumers have begun spending less across the world for athletic footwear. The industry is thus continually being focused towards leisure and fashion markets where individuals are increasingly turning to athletic footwear for their comfortable but casual shoe designs. Many workplaces are increasingly adopting casual dressing codes and thus prompting individuals to wear sports shoes more often (Goldman and Papson 1998, pp. 96). Nike’s Air Jordan SWOT Analysis Strengths Nike enjoys a brand name recognition that is incomparable in the industry. Their greatest marketing strength is that the Nike brand is easily recognizable as well as respected in international and US market. Secondly, Nike Air Jordan enjoys a phenomenal brand loyalty for consistently produced high quality shoes that appeal to sports, fashion and leisure consumers. Again, Nike’s shoes for men are marketed alongside numerous other desirable and popular products ranging from apparel to equipment (Donaghu and Barff 1990, pp. 537-552). The fourth strength is that the Air Jordan brand has increasingly gained a strong international presence just as much as basketball (the US game in which Michael Jordan remains a respected legend) gains international acceptance and popularity. This international growth will cushion the company in the event that national markets decline in sales such as was experienced in the U.S. due to the economic slack of 2009 (Ind 1993, pp.171-186). Nike has gained its phenomenal market share mainly due to an aggressive marketing strategy. With their healthy financial background, the company can afford massive budgets for their marketing campaigns. Finally, the continued innovation and product research technologies have helped Nike maintain its market lead. Their laudable Advance Product Engineering Department introduced in 1980 as part of the pioneer Nike Sport Research Laboratory has had a large role in establishing their dominant market share (Donaghu and Barff 1990, pp. 537-552). Weaknesses The current board of directors at Nike has an average age bracket of 62, with the youngest being 49 years old and the oldest member being 79 years old. This is a weakness since there lacks a youth perspective in their strategic management and yet the largest age bracket of Nike shoes market is o young people below 50 years. Another weakness is Nike’s tendency to advertise their Air Jordan as well as other men’s shoes brands with a common message. All their adverts featured globally are crafted by three central offices in Europe and the US, and then distributed to the other countries. The ads lack the local touch and efficiency that could accrue if such ads were crafted locally with a bias to local interests, audiences and trends (Donaghu and Barff 1990, pp. 537-552). Nike has been accused of failing to foresee labor problems among their growing employee base, especially in the factory conditions at most of their production locations. Since 2007, phenomenally bad publicity has caused a decline in sales (Goldman and Papson 1998, pp. 96). Nike’s factories in Vietnam and other Asian nations have been accused of being suppressive, exploitative to the local labor market (Goldman and Papson 1998, pp. 96). Opportunities The continued exposure and dominance of Nike Men’s shoes in global sports stages such as the World Cup, Olympics and Athletic Championships has granted Nike a rare opportunity to further establish itself as the most preferable sportswear provider. Nike has also registered impressive success in internet sales recently. With is revenue base and brand portfolio, Nike has a great opportunity to sell their products online more than any of their competitor. Nike stands to benefit by contracting factories based in remote areas of the globe for their products manufacture, to reduce costs and decentralize supply lines. Many third world nations and emerging markets will be welcoming of such initiatives for a mutual benefit. The countries can gain in their industrialization goals as Nike reduces costs and increases the profit margin. Nike’s adopted competitive strategy since 1990 has concentrated on focus their products designs and marketing strategies towards product differentiation. This presents a great opportunity for Nike to capitalize on specific market niches and completely dominate them at the expense of the competition (Goldman and Papson 1998, pp. 96). Threats Nike’s poor working conditions in factories have caused a public relations’ disaster for the company. These incidences across the world are threatening to negative impact on the sales and repute of the company if not checked and remedied urgently (Goldman and Papson 1998, pp. 96). Of great concern is the impact of such reports on the motivation of employees. Nike’s stock market performance has been on the low since 2007 with a 7% decrease in stock prices since then. This has been attributed to a wavering financial position of the company, which contrary to expectations is not as healthy as would be deduced from their financial reports. This is then coupled by the environmental requirements of manufacturing that threatens to increase production costs for the company (Goldman and Papson 1998, pp. 96). Strategic Action Recommendations While constantly developing and introducing new products, Nike should also maintain a frontline awareness of their social responsibility. It is notable that Nike donated over $34 million (products and cash) in 2007 to assorted charitable organizations. But the company needs to contribute and participate in social causes such as development and promotion of sports talent in most countries it is targeting. Most of such initiatives have been in the US and Europe and not in the Developing markets (Donaghu and Barff 1990, pp. 537-552). Related to this is the need to review working conditions for their employees both as a way of improving morale as well as preventing the bad press incidences noted in Asia over the last few years (Goldman and Papson 1998, pp. 96). The internet is rapidly becoming the dominant sales platform form many sportswear manufactures. With their financial might and dominant brand, Nike can exploit the e-commerce opportunities with a capability that none of its competitors can match (Donaghu and Barff 1990, pp. 537-552). The men’s sports shoes market has been changing as noted earlier. The emphasis is moving from wearing sneakers for sports purposes only and edging towards wearing casual sports shoes for fashion and comfort ability. This should be the strategic market for Nike to focus on. Nike should devote resources, products and marketing efforts towards making more sales off the field that for sports purposes, since this is the most lucrative market today. Conclusion As the report details, Nike enjoys a number of strengths as regards the Air Jordan men’s shoes brand. This include a dominant brand recognition, brand loyalty, brand supplementation by apparel and equipment products, increasingly strong international presence and international market growth, a well funded aggressive marketing strategy, a healthy financial background, and finally, the continued innovation and product research technologies. However Nike Air’s shoes for men brand has some weaknesses such as lack of young talents among the current board of directors, a centralized advertisement arrangement that does not capture local interests, audiences and trends, as well as worsening labor problems that attract bad press and batter employee morale. The paper however details some opportunities that Nike could exploit in future such as continued exposure Nike men’s shoes in global sports stages like the World Cup and Olympics, greater online sales, contracting of cheaper factories based in remote areas of the globe and finally on continued focus of products designs and marketing strategies towards product differentiation. To exploit these opportunities, Nike has to deal with such threats as the poor working conditions in factories, a declining stock market performance, a wavering financial position, reduction of sales globally and increased environmental demands that could increase production costs. To terminate the report, it is recommended that Nike should maintain a frontline awareness of their social responsibility in the developing markets, review the working conditions for their employees, adopt increased internet sales initiatives and to devote more resources, products and marketing efforts towards making more sales off the field that for sports purposes. References Donaghu, M and Barff, R 1990, Nike just did it: International subcontracting and flexibility in athletic footwear production, Regional Studies, Vol. 24 (6), pp. 537-552. Goldman, R and Papson, S 1998, Nike culture, London, Sage, pp. 96. Ind, N 1993, “Nike: Communicating a corporate culture”, in Great advertising campaigns: Goals and accomplishments, Lincolnwood, NTC Business Books, pp.171-186. Katz, D 1995, Just Do It: The Nike Spirit in the Corporate World, New York, Adams Media Corporation, pp. 136- 159. Sage, G 1999, Justice do it! The Nike transnational advocacy network: Organization, collective actions, and outcomes, Sociology of Sport Journal, Vol. 16 (3), pp. 206-235. Read More