Last updated: Oct 6, 2020
CEO: John Donahoe
Year founded: 1964
Headquarter: Beaverton, Oregon, USA
Number of Employees (FY2019): 76,700
Ticker Symbol: NKE
Market Cap (Oct 2020): $198 Billion
Annual Revenue (FY2020): $37.4 Billion
Profit | Net income (FY2020): $2.54 Billion
Products & Services: Athlete wear | Apparel | Sports equipment | Leisure footwear | Accessories
Competitors: Adidas | Puma | Anta | New Balance | Under Armour | Lululemon | ASICS | V. F. Corporation
Did you know?
Nike swoosh logo is inspired by the Greek goddess of victory, Nike
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.
SWOT A nalysis of Nike
Here’s a detailed breakdown of Nike SWOT analysis.
Nike’s Strengths – Internal Strategic Factors
- 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.
- 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 $198 billion as of Oct 2020.
- 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.
- 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”.
- 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.
- 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.
- 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.
- 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.
- 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
- 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”.
- 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.
- 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
- 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.
- Recently, a former employee accused Nike of discrimination based on his Croatian origin.
- 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.
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.
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.
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
- 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.
- 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.
- 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.
- 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.
- 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.
- 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’s Threats – External Strategic Factors
- 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.
- 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.
- Marketing Budget Pressure – Companies like Under Armour and Adidas are spending more on marketing and advertising campaigns, increasing the pressure on Nike.
- 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.
- 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.
- 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.
- 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.
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.
References & more information
- Nike’s Annual Report
Xu, V. (2020, March 17). Your favorite Nikes might be made from forced labor. Here’s why. The Washington Post.
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