Sample Business Studies Paper on The Business Strategy of Nike, Inc.

Introduction

Founded in 1964 by Phil Knight and Bill Bowerman, Nike, Inc. has grown to become the largest sports brand. Due to its high-quality products that have received an endorsement from renowned athletes. Today, Nike is the highest-ranked manufacturer and distributor of sports apparel and equipment brands. The ability to formulate strategies based on the company’s vision and customer expectations is part of Nike’s success story. Given that a strategy is a pathway through which an organization optimally achieves its goals, Nike plies a mix of strategies to achieve competitive advantage (Mahdi, et al. 2015). These strategies have, over time, helped the company to utilize the available resources to stay successfully in business and to continue improving its processes. Nike’s strategies, coupled with its SWOT analysis and recommendations for improvements on the current strategies, form the basis of this discussion.

Mission and Vision Statement

Nike’s vision is to inspire athletes across the world through innovation. Inspiration and innovation stand out as the key components of the company’s vision (Park & Kincade, 2010). True to its word, Nike embraces technology in manufacturing its products, which enhances its sales year-over-year. The company constantly substitutes the old and obsolete technology with new and emerging technologies in the development of its products. Inspiring avid lovers of athletics is at the heart of Nike’s business model. As a result, the company spends a significant portion of its earnings to stimulate demand for its products every year.

Nike’s mission statement, on the other hand, is to do everything within its means to unleash human potential (Park & Kincade, 2010). The company does this through the creation of revolutionary sport innovations. Further, the company makes products that are more sustainable and eco-friendly. Nikes believe in creating and building a more diverse global team, so it engages in initiatives that have a positive impact on society. Nike emphasizes on unleashing human potential and believes that athletes can get better by wearing its sports products.

Nike’s Current business Strategies

Nike applies several strategies in order to remain the world’s largest designer, manufacturer, and distributor of sports products. The most outstanding strategy is the focus on innovation, research, and development (Mahdi, et al. 2015). The management believes that through innovation, the company will produce the best footwear, apparel, and athletic equipment that reduce injury concerns among its customers. By bringing comfort and maximizing enjoyment, athletes’ performance will definitely improve. Nike uses innovation as a tool to create sustainability and to cope with competition in the market. Cost leadership is another significant business strategy that allows Nike to incur the lowest cost of operation. Given that the company enjoys massive customer loyalty, it combines low per-unit margins with huge sales to generate profits t (Mahdi, et al. 2015). Nike leverages on cost leadership strategy coupled with premium pricing since the company knows too well that customers will be willing to pay any price as long as it bears the original Nike logo.

Similarly, Nike pays special attention to the differentiation strategy to design unique products. Based on this strategy, the company produces a variety of products for different segments, including children, men, and women t (Mahdi, et al. 2015). Additionally, differentiation is achieved in terms of product apparel and accessories for shoes, bags, skates, and gloves. Other than designing and manufacturing athletic products, Nike has acquired exclusive rights to manufacture and distribute Nike-branded products, including electronic devices and other supplies. In the same breath, Nike applies the market segmentation strategy to better market its products. In line with this strategy, the company sponsors famous athletes and professional teams in the athletic industry. It also enters into contractual agreements with renowned footballers and basketballs to enhance the visibility of its products across the world. The closed-loop system is the latest strategy that Nike pursued in its efforts to minimize waste within its supply chain t (Mahdi, et al. 2015). The main focus of this strategy is to recycle and reuse materials reclaimed from the manufacturing process to design new products.

The financial viability of Nike’s strategies and the company’s performance over time

Owing to the vibrant growth strategies, Nike has dominated the sports apparel industry for many years. Some of the growth indicators include a steady stock performance over the last couple of years. During the period under review, the company had impressive growth in terms of net income, earnings per share, and strong management practices. As of 22nd November 2019, Nike’s stock price stood at 93.34 US dollars. The stock price has been on an upward trend over the last five years due to the increased revenues and earnings per share. According to Macrotrends report (2019), as of May 2019, the net revenues stood at 39,117 million US dollars compared to $36,397, $34,350, $32,376, and $30,601 million US dollars in 2018, 2017, 2016, and 2015, respectively. Over the same period, the earnings per share (EPS) were $1.85, $1.49, $1.35, $1.18, and $1.10, respectively. The year-over-year revenue and EPS growth show that financial performance has improved over time. Investors use these basic indicators to assess the performance of a public trading company. The sound financial statements are an indication of how effective Nike’s strategies. The combination of strategies plays a crucial role in creating a favorable environment for Nike to do business.

Recommended Strategies for Improvement and their Implementation

Although the current strategies rank Nike as the top designer, manufacturer, and distributor of athletic apparel and equipment, improvements are needed on the existing strategies. Reforms are needed to address concerns like competition, imitation, and labor practices, which will enhance the company’s sustainability. To address competition, the company should consider revising its product differentiation strategy and design more unique products to reach out to as many customers as possible (Kissinger, 2017). To address the patent issues, Nike can collaborate with the law-making authorities to strengthen the Patent Act (35 US code) and prevent imitators from using its brand.

Nike’s SWOT Analysis

The SWOT analysis focuses on Nike’s internal strategic factors (strengths and weaknesses) and the external factors (threats and opportunities). Its strengths primarily drive growth and global leadership in the sports apparel industry. Nike’s major strengths include a powerful brand image, revolutionary innovations, and extensive distribution network (Kissinger, 2017). On the other hand, Nike’s weaknesses revolve around labor controversies, limited expansion in emerging markets, and limited product mix options.

Nike has massive opportunities that can turn around its performance in the sports apparel and equipment industry. It can improve its labor practices and product mix options. Further, it can expand operations to developing countries to tap the emerging market in those areas (Kissinger, 2017). On the contrary, Nike faces threats, such as stiff competition, rapid technological change, and the increased cases of imitation.

Summary

Overall, Nike, Inc. should continue with the current mix of strategies, including the focus on innovation, cost leadership, product differentiation, and closed-loop system strategy. However, reforms are needed to strengthen existing strategies further. The proposed improvements in areas such as labor practices, imitation, and competition will create a more sustainable future for the footwear giant.

References

Kissinger, D. (2017). Nike, Inc. SWOT analysis & recommendations. Retrieved from http://panmore.com/nike-inc-swot-analysis-recommendations

Macrotrends. (2019). Nike Financial Statements 2005-2019/NKE. Retrieved from https://www.macrotrends.net/stocks/charts/NKE/nike/financial-statements

Mahdi, H. A. A., Abbas, M., Mazar, T. I., & George, S. (2015). A Comparative Analysis of Strategies and Business Models of Nike, Inc. and Adidas Group with special reference to Competitive Advantage in the context of a Dynamic and Competitive Environment. International Journal of Business Management and Economic Research, 6(3), 167-177.

Park, H., & Kincade, D. H. (2010). Historical analysis of apparel marketer’s strategies: Evidence from a Nike case. Journal of Global Fashion Marketing, 1(3), 182-193.

 

https://www.ijbmer.com/docs/volumes/vol6issue3/ijbmer2015060302.pdf

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