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Swot Analysis of Nike

Autor:   •  September 7, 2017  •  2,231 Words (9 Pages)  •  718 Views

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- Limited Control over Contract Manufacturers

NIKE depends on independent contract manufacturers outside the US to provide fabrics and to produce its products, and therefore, has little control over the quality of products. During FY2013, the contract factories in Vietnam, China and Indonesia manufactured nearly 42%, 30%, and 26% of total NIKE footwear, respectively (Company Profile: Nike, Inc., 2014). Therefore, any failure on the part of manufacturers to achieve and maintain high manufacturing standards could result in manufacturing errors which could seriously harm the company's business.

Besides, Nike was criticized for the use of child labour in Cambodia and Pakistan in factories it contracted to manufacture soccer balls. Many colleges and universities, especially anti-globalization groups, took campaigns to against Nike and boycott all Nike’s products. (Adam, 2009).

Nike reliance on independent contract manufacturers makes it difficult to ensure the quality of manufacturing process as well as the violation of the labour laws. Therefore, it could have an adverse effect on customer retention, brand loyalty and brand reputation.

Opportunities

- Expand of Women’s Fitness Market

The Women’s Fitness Market is growing geometrically. In term of consumer base, 53% of the 36.3 million members at United States gyms are women. The women membership has been doubled in 15 years. Besides, the women participation in every “fitness” sport activities has been grown between 2001 and 2002. In term of location, the number of U.S. gyms grew 20% from 2002 to 2003 and the majority of the new facilities in the gyms are targeted at women. Besides, there is a new gym franchise called Curve which provide gym services to the women only. Until today, Curve is the fastest growing gym franchise in the world. In term of the demand of women toward fitness activity, there is a significant increase in the Women’s Active Sport Market.

Furthermore, no single company had a dominant “mindshare” in the women’s fitness market. If Nike can take these opportunities by established women’s fitness division, it will attract more and more women purchased their sportswear products due to the Nike is well-known global brand. It will result Nike’s profit margin in women’s fitness division increase significantly.

- Opportunity to develop New Product

Nike has the opportunity to develop products such as sportswear, sunglasses and jewellery. This is due to the strong research and development which can manufacture innovative, high value and quality, as well as at the lowest possible production cost (Adam, 2009). With Nike’s strong global brand recognition, it can initiate in many markets that have the disposal income to spend on high value items. These high value items do tend to have associated with high profit margin to the company.

- Growing online retail channel

The growing preference of customers to shop online has boosted the online retail trade in the US, Europe and Asia. According to the US Department of Commerce, online retail sales (adjusted for seasonal variation) in the US increased from $165.8 billion in 2010 to $262.5 billion in 2013, representing a CAGR of 16.6% (Company Profile: Nike, Inc., 2014). A similar trend is noticed in the European market. According to industry estimates, the online retail sales in Europe will increase to $255 billion by 2017, a 70% increase over 2012 (Company Profile: Nike, Inc., 2014). The Asian market is also expected to witness strong growth in online retail sales in the next few years, driven by strong growth rates in China and India. The Chinese online market is expected to grow at a CAGR of more than 30% during 2012–15 according to industry sources (Company Profile: Nike, Inc., 2014).

Nike offers its products through retail stores and its internet website, www.nike.com. According to industry estimates, the company plans to increase its online sales from over $500 million in FY2013 to nearly $2 billion in FY2017, representing a CAGR of nearly 41% (Company Profile: Nike, Inc., 2014). Online purchase became favourable channel by most of the customers due to several key characteristics such as convenience and lower costs. Online presence will enable the company to tap into the growing online retail sales globally which would, in turn, lead to increased sales.

Threats

- Intense Competition

The athletic footwear, apparel, and equipment industry is highly competitive in the US and on a worldwide basis. Internationally, Nike competes with a number of athletic and leisure footwear companies, athletic and leisure apparel companies, sports equipment companies, and large companies that have diversified product line of athletic and leisure footwear, apparel, and equipment (SWOT of Nike, 2015). For example, in the global branded footwear market, Nike’s market share at approximately 38% while Adidas/Reebok following at 34%. Other footwear competitors, including Puma, Asics, Mizuno, and Umbro, trailed significantly in their market share. Although Nike led in women’s running from a market share and revenue prospective, but Reebok also dominated the market in women’s aerobics.

Now, Nike competes with a number of new and smaller competitors such as Lulu Lemon, Uniqlo, Under Armour and Danskin. Lulu Lemon compete with Nike global women’s fitness business because of its designs, manufactures and distributes technical athletic apparel for healthy lifestyle activities such as yoga, running, general fitness and dancing. Nike also faces competition from cheaper imported footwear from Asian countries such as China (Company Profile: Nike, Inc., 2014).

Thus, intense competition and availability of cheaper products could put pressure on the price of products and therefore affect the company's margins.

- Currency Risk

The majority of Nike’s products are manufactured and sold outside of the United States (Nike, Inc. Annual Report on Form 10-K, 2014). As a result, Nike conduct purchase and sale transactions in various currencies, which increases the exposure to fluctuations in foreign currency exchange rates globally.

Currency exchange rate fluctuations could also disrupt the business of the independent manufacturers that produce the products by making their purchases of raw materials more expensive and more difficult to finance. Foreign currency fluctuations have adversely affected, and could

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