Diploma in Commerce Business Administration (PTDipBA5A) Marketing Principals

Peter Robinson Goh Lincoln Vivian Tan Jia Yu Eddie Submission Date:20th May 2013 Lecturer: Ms. Catherine Chai

TABLE OF CONTENTS

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Description Introduction Macro & Micro & SWOT Analysis

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Conclusion References

INTRODUCTION

MACRO ENVIRONMENTAL FACTORS The macro environmental factors of Nike in an international organization consist of political, economic, social, technological and legal. POLITICAL The government has the responsibility to create economic policies which will have great effect on the growth of business. Nike has been helped by the US government which enables them to modernize their products. (Cooter, 1998) The support by US Government, particularly in general macroeconomic stability, also low interest rates, stable currency conditions and the international competitiveness of the tax system which helps the formation of the foundation critical to Nikes growth. ECONOMIC In the economy, the biggest threat economically would be economic recession. During recession, Nikes growth will be adversely affected. The US economy is facing a huge downturn and consumer purchases are slowing down. The Asian economic crisis has also affects Nike, as its goods are manufactured in Asia and the labor costs and material prices are increasing rapidly. SOCIAL Nowadays, people are more health conscious. Diet and health are getting more prominence which resulted more and more people are joining fitness clubs so there is more demand for fitness products example like exercise apparel, equipment and shoes. Nike always been the first choice of people when it comes into looking for sport shoes, equipment and apparel. Nike failed to foresee problems like the conditions of labor and factory conditions at production locations in Asia. (Clancy, 2000) This causes bad publicity and declining sales as society and consumers demand more socially responsible companies. TECHNOLOGICAL Nike uses IT in all the marketing information systems very effectively. It mainly applies marketing information systems to the economics of segmentation, innovation and differentiation for its business. Nikes leadership status also has been able to owes in large part to use of extremely valuable Information Technology, and applying it to every aspect of the product from development to distribution. Nike being the world leader in the athletic footwear industry, is able to maintain its name in the market and works effectively in its environment in order to boost its marketing efforts which resulted boosting up its sale.

ENVIRONMENTAL Nike have to consider a number of factors to do with the environment when making their products. Nike is also ISO certified from global environment, carbon foot prints tracing point of view and pollution. Nike is a strong believer of green environment and as per requirement they brought changes in the way things work and the processes to ensure that the environmental factor has been taken care of. Nike always are fulfilling consumers expectations, contributing in creating an environmental friendly atmosphere, motivational boost in employees and being top of legislation. A positive attitude has been indicated in a study towards social and environmental responsibility on part of companies around the world. LEGAL Nike always maintained the business ethics. For all companies legal issues are of key importance to the company as these laws can determine how an organisation conducts its business. It is essential that a business complies with these rules or else they will have to pay a high price or even fold. The acts that have to be obeyed are the consumer protection legislation, the trade descriptions act. The sales and supply act, the weights and measures act, the equal opportunities act which is making sure that nobody gets an unfair chance.

MICRO ENVIRONMENTAL FACTORS Michael Porter was advanced in 1980s by this is a strategic business planning model. It has become a very useful business tool for managers who either want to rise to the top or those who want to revive businesses that have fallen. Porter's model is pegged in five cornerstones; these are buyers, substitutes, suppliers, competitors and new entrants (Porter, 2008).

Diagram 1 Michael Porter 5 Force Model

BARGAINING POWER OF BUYERS With nike buyers have a chance to select the color of the shoes they want and the option of personalizing the footwear with their names (Porter, 1980).

BARGAINING POWER OF CUSTOMERS The continued supply of the products to the market improved customers confidence in RBS Company (Porter, 1980). Many suppliers were contacted and Nike stores were plant of products for every customer need. There are many suppliers in his industry, the fact that the suppliers have little differentiation, makes their bargaining power no-existent. Only, letter, rubber, and cotton are the commodity items available in the market. Nike a conglomerate has an advantage and power over its suppliers. Thus the suppliers tend to depend on it for survival. In addition Nike and Adidas have standardized their input procedures, concerning the material used; labor force, supplies, services, and logistics this has made it easy for firs to switch between supplies quickly and cheaply.

THREAT OF NEW ENTRANTS The introduction of new services such as promotions and incentives to lure and attract athletes than half of what other players in the industry are providing shows that Nike is prepared to fight off new entrants to the market who may want to lure customers with new products (Porter, 2008). THREAT OF SUBSTITUE PRODUCTS Athlethic footwear products have very low consumer substitutes and there are little alternatives to switch. Some substitutes could be sandals, boots, dress shoe or bear feet. Due to performance specifications of the product consumers are not likely to substitute. For example a basketball player will not wear boots to play basketball hence, athletic footwear has no real substitute (Porter, 1980). RIVARLY AMONG EXISTING COMPETITORS Competition is fierce particularly in footwear industry and the competitors who dominate the market do so with strategic marketing, strong brand identity, aggressive sales, and very high capital expenditure (Porter, 1980).

SWOT ANALYSIS SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

STRENGTHS Nike is a very competitive organization. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.' Nike has a healthy dislike of is competitors. At the Atlanta Olympics, Reebok went to the expense of sponsoring the games. Nike did not. However Nike sponsored the top athletes and gained valuable coverage.

Nike has no factories. It does not tie up cash in buildings and manufacturing workers. This makes a very lean organization. Nike is strong at research and development, as is evidenced by its evolving and innovative product range. They then manufacture wherever they can produce high quality product at the lowest possible price. If prices rise, and products can be made more cheaply elsewhere (to the same or better specification), Nike will move production.

Nike is a global brand. It is the number one sports brand in the World.

WEAKNESSES The organization does have a diversified range of sports products. However, the income of the business is still heavily dependent upon its share of the footwear market. This may leave it vulnerable if for any reason its market share erodes.

The retail sector is very price sensitive. Nike does have its own retailer in Nike Town. However, most of its income is derived from selling into retailers. Retailers tend to offer a very similar experience to the consumer. Can you tell one sports retailer from another? So margins tend to get squeezed as retailers try to pass some of the low price competition pressure onto Nike.

OPPORTUNITIES Product development offers Nike many opportunities. The brand is fiercely defended by its owners whom truly believe that Nike is not a fashion brand. However, like it or not, consumers that wear Nike product do not always buy it to participate in sport. Some would argue that in youth culture especially, Nike is a fashion brand. This creates its own opportunities, since product could become unfashionable before it wears out i.e. consumers need to replace shoes.

There is also the opportunity to develop products such as sport wear, sunglasses and jewellery. Such high value items do tend to have associated with them, high profits.

The business could also be developed internationally, building upon its strong global brand recognition. There are many markets that have the disposable income to spend on high value sports goods. For example, emerging markets such as China and India have a new richer generation of consumers. There are also global marketing events that can be utilised to support the brand such as the World Cup (soccer) and The Olympics.

THREATS Nike is exposed to the international nature of trade. It buys and sells in different currencies and so costs and margins are not stable over long periods of time. Such an exposure could mean that Nike may be manufacturing and/or selling at a loss. This is an issue that faces all global brands. The market for sports shoes and garments is very competitive. The model developed by Phil Knight in his Stamford Business School days (high value branded product manufactured at a low cost) is now commonly used and to an extent is no longer a basis for sustainable competitive advantage. Competitors are developing alternative brands to take away Nike's market share. As discussed above in weaknesses, the retail sector is becoming price competitive. This ultimately means that consumers are shopping around for a better deal. So if one store charges a price for a pair of sports shoes, the consumer could go to the store along the street to compare prices for the exactly the same item, and buy the cheaper of the two. Such consumer price sensitivity is a potential external threat to Nike.

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Diagram 2 SWOT Analysis

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CONCLUSION

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REFERENCES Robert Cooter, 1988 Tom Clancy, 2000 Michael Porter, 2008 Porter, M.E (1980) Competitive strategy:Techniques for Analyzing Industries and Competitors, New York: Free Press.

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