Nike Corporation

Question

Nike Corporation

Abstract

Nike Corporation is an American-based multination company that focuses on designing, manufacturing, marketing, and selling apparel, accessories, footwear, and services. It was founded in 1964 by and Philip H. Knight and William Jay Bowerman. Nike’s headquarters is based in Beaverton. The company has particularly majored in the manufacturing of athletic footwear products for specific athletic use, but a larger proportion of its products target the general customers who wear them for either casual or leisure purposes.

On a global level, Nike operates several subsidiaries, with the NIKE brand name in Western Europe as well as Central and Eastern Europe, parts of Asia, and the emerging markets in Africa. Thus, the current paper seeks to determine the impact of the company’s mission, vision, and primary stakeholders on its overall success. Moreover, the paper evaluates Nike’s competition by using Porter’s Five Force analysis model as well as creating a SWOT analysis to determine its major strength, weaknesses, opportunities, and threats.

Additionally, the paper addresses various levels and types of strategies that Nike may employ to maximize its competitiveness alongside the underpinned communications plans applicable to the making of the strategies. The paper also explores two corporate governance mechanisms used by Nike to evaluate how effectively they control the managerial function. Lastly, the paper evaluates the effectiveness of leadership within Nike as well as assesses Nike’s social responsibility.

Company Mandate

Mission Statement

Nike’s mission is to provide both innovation and inspiration to every professional, amateur, and potential athlete around the world (Doole & Lowe, 2008). The mission statement articulates the fact that Nike’s primary purpose is to distribute accessories, equipment, apparel. and shoes to every individual who has the potential and inspiration to be an athlete. The mission statement has enabled the company to express its varying ideas, objectives, and strategies about the company’s success. Particularly, the mission has narrowed down the company’s area of interest as this allows a close focus on the quality of the merchandise to its customers (Nike, 2015). Thus, Nike’s success is attributed to its clear and concise mission statement that defines its goal.

Vision Statement

Nike’s vision statement is to remain the industry’s leading company by helping its consumers to be incorporated into a sustainable economy where people’s welfare and the company’s profit are in balance (Doole & Lowe, 2008). The statement has enabled the company to integrate information among all stakeholders, evaluating past inefficiencies as well as establishing the basis that would allow the company to continue implementing sustainable principles (Doole & Lowe, 2008). Additionally, the company has strived to attain the stipulated vision through the identification of constraints and brainstorming solutions, making decisions, and acting on them. The company's success is underpinned by the constant measure and evaluation between the actual vision and the expected results.

Stakeholders Analysis

As in many other companies, Nike’s stakeholders are the customers, employees, and owners. The company stakeholder’s management focuses on managing the pressure from consumers and employees group (Doole & Lowe, 2008). Nike has won customer loyalty over its competitors such as Adidas and Puma, and this has placed it in a better position in the industry. Additionally, increased customer loyalty tends to boost company sales, hence boosting its profitability over the years (Smith, 2012).

The employees play a vital role in the progress and financial sustainability of Nike. The company’s human resource instills motivation to its employees by offering them good remuneration packages as well as proper working conditions; in turn, the employees give their best to the company to meet the expected mission and vision. The shareholders are simply the owners of the company who make investments with the expectation of multiplied earnings. Nike treats its shareholders with utmost integrity, regarding any activity or decision it chooses to undertake.

Porter’s Five Force Analysis

Competition Rivalry

Nike’s internal rivalry is high from major companies such as Adidas, Converse, and Jordan. As of 2014, Nike’s market share in the industry was at 41%, Adidas had 30%, Jordan had 16%, and Converse had 13% (Nike, 2015). The intensity of the competition has affected Nike’s performance in terms of profit generation. The rivalry is high as the competitors are homogenous and similar in size, competing with each other for the customers’ attention. In a response to the competition, Nike has offered its products at lower prices as compared to those of competitors to regain its market share in the first phase of the strategy (Lussier & Kimball, 2013).

However, the competition between mega-companies such as Nike, Adidas, and Jordan is ferocious and it cannot be solely fought through price wars as all these companies have the advantage of the economies of scale (Lussier & Kimball, 2013). With this idea, Nike has turned to other business-level strategies such as differentiation that entails constant innovation and upgrading of their brand, which has consequently boosted its brand on the market.

Power of Customers

The customers' bargaining power is the ability to subject the company under pressure, which makes it sensitive to price changes. In the footwear and apparel industry, the buyer’s power is relatively high as consumers usually have the option of switching to other brands availed from other providers (Doole & Lowe, 2008). When the buyer’s bargaining power is high, any proportionate change in price and the reduction in quality of products will result in a massive reduction in sales, as customers will shift to the better products provided by the competitors.

For this reason, Nike has set up internal strategies that have guaranteed a constant quality production of products at affordable prices to retain customers as well as attract new ones (Smith, 2012). Similarly, Nike has managed to control the buyers’ bargaining power by resorting to intensive product promotions such as year-end stock, which has helped the company to retain old customers and attract new ones successfully (Smith, 2012). Thus, the company is in a position to control the customers but not at the expense of their exploitation.

Potential New Entrants

The possibility of new entrants into the market is always a threat to every industry. Having new players in the market means there will be an increase in competition. Like other industry, the footwear and apparel industry ought to attract new entrants, but in reality, entering this industry appear impossible as Nike has adopted characteristics that boost its profit generation as well as restrict potential new entrants from entering the market (Nike, 2015).

Moreover, the probability of new players entering the market is lower since Nike’s brands are of high quality and they have a high level of customer loyalty (Nike, 2015). Therefore, the industry favors Nike as the new entrants are barred from entering the market by the high production and marketing costs required in the market. With this advantage, Nike continues to raise the bar high to restrict the possibility of the appearance of new entrants on the market.

Power of Suppliers

The power for suppliers refers to the ability of the seller to control the prices of supplies. For the case of Nike, one should state that its suppliers do not have the power that can unfavorably affect Nike’s pricing strategy (Smith, 2012). However, some of Nike’s suppliers, such as the ones supplying rubber, still pose a danger of acquiring a strong bargaining power, as they are not numerous, which limits switching costs for Nike. Additionally, the suppliers of raw materials, such as rubber and cotton, are less likely to acquire a strong bargaining power as they are plentiful; thus, they cannot dictate their prices to Nike.

In this regard, Nike has established a system that seeks to ensure that all the contracted suppliers submit quality supplies, high-standard working conditions, and distribution procedures (Nike, 2015). Failure to adhere to the recommended standards will lead to the automatic termination of the contract. The measures are set in such a way that there is a fair relationship between the company and its suppliers.

Threats of Substitute Products

Almost every company faces a threat of either direct or indirect forms of substitutes from other competitors. In the case of Nike, the threat of alternate products is low. The reason for the low threat of substitutes lies in the fact that some sports products do not have direct substitutes (Smith, 2012). For example, a footballer cannot wear a pair of sandals for a football match although sandals are a substitute for football shoes. Shortly, the threats of substitute look imminent as the industry upgrades and innovate products in the pursuit of making more sales and building strong brands (Smith, 2012). Nike has reacted by differentiating its products to appear unique and upgraded to match the current demand as well as bar the threat of alternate merchandise.

SWOT Analysis

Strengths

One of Nike’s major strengths is its high-level brand recognized globally as the leading sports brand in the world. The company’s brand has boosted the strength in its distribution strategies that facilitate the wider supply of products across the world. Additionally, another Nike’s strength emanates from its engagement diverse production of a variety of products in many categories (Doole & Lowe, 2008). Furthermore, Nike’s strength lies in its consistency in producing high-quality products at prices more affordable than those of the competitors. Lastly, Nike has a robust product promotion strategy that involves sponsoring top athletes around the world with the popular swoosh logo and a slogan of “Just Do It.”

Weaknesses

Even though Nike manufactures a wide range of products, a great proportion of the total revenue collected solely relies on the sale of footwear products (Doole & Lowe, 2008). This is a huge weakness as it subjects Nike to a more vulnerable market position in case the footwear market drops. Another weakness is that Nike products are found to be expensive, which made it difficult for developing countries to afford Nike products (Smith, 2012). Lastly, Nike has acquired a bad reputation and critics from social groups in its steps to use child labor, paying meager earnings, and having people work in poor working conditions in emerging markets such as Bangladesh and Vietnam.

Opportunities

Considering the trending nature in the apparel and footwear industry, Nike has many opportunities that it can exploit. The youth culture and behavior that believes that fashions are bound to become outdated has granted Nike with an opportunity of providing an upgrade of its products to act as the latest brand of the existing ones (Smith, 2012). For this reason, consumers will always be in the urge of replacing the unfashionable brands with the latest ones (Smith, 2012). Another opportunity is the constant expansion of the emerging markets that are available in some parts of Asia and Africa. Nike can tap such an opportunity by employing a cost leadership strategy, where products are provided at the lower and fairer values to the consumers in the developing countries.

Threats

Nike’s major threat has been the constant economic downturn that is typical in the North American and Asian countries. Additionally, Nike continues to suffer from the threat of substitutes from the sprouting private labels and generic products (Nike, 2015). Relatedly, the sportswear industry is already competitive with the intense rivalry from mega-companies such as Adidas, Fila, and Jordan that also provide quality merchandise. Lastly, Nike suffers from the potential costumers’ bargaining power threat as consumers constantly look for better deals rendering them to be price sensitive.

From the SWOT analysis, one can conclude that Nike should adopt a focus differentiation strategy to improve its strength, capitalize on its opportunities, mitigate its weaknesses, and eliminate its threats. A focus differentiation strategy consists of differentiating products by the taste and preferences of the market segment of focus (Lussier & Kimball, 2013). With the strength of producing quality merchandise, Nike will manage to win more customers as they find the products to not only match their taste and preference but also meet their demand in terms of quality. Concerning weaknesses, the strategy will fight the competition in a narrow market as the differentiation of products is targeted at a specific market segment.

Moreover, a focused differentiation strategy will ignite Nike’s opportunity in the youth market (Smith, 2012). Young consumers are known to be fashion-sensitive, and Nike can exploit this opportunity by customizing youth merchandise to match their fashion tastes and preferences. Finally, Nike can eliminate the imminent threat of close substitutes from the competitors by making its products unique and exceptional from that of competitors while focusing on the need of specific market segments around the world (Smith, 2012).

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Levels and Type of Strategies

For Nike to improve its competitive edge and profitability, it has to adopt both the corporate-level strategies and business level-strategy. There are three types of corporate-level strategies that a firm can adopt, including multi-domestic strategy, global strategy, and transnational strategy (D'Amato, Henderson, & Florence, 2009). A multi-domestic strategy refers to an approach, where a company can choose to focus on the specific products per specific market segment in different parts of the world. On the other hand, global strategy entails an approach, whereby a company opts to promote one specific standardized product across the world.

Lastly, the transnational strategy refers to a combination of multi-domestic and global strategies. There are four business-level strategies that a company may adopt, namely cost leadership, differentiation, focused low cost, and focused differentiation as well as the integration of both cost and differentiation strategies. Cost leadership strategy grants a company a competitive edge over its competitors by capturing a wider proportion of customers based on price (D'Amato, Henderson, & Florence, 2009). Differentiation presupposes offering the customers the same product with unique characteristics instead of lowering the prices.

Lastly, focused cost leadership and focused differentiation involve practicing cost leadership differentiation strategies on a selected target market appropriately. In this respect, Nike ought to adopt a transnational strategy as a corporate level strategy to expand its market share (Lussier & Kimball, 2013). A large market share guarantees high sales, which in turn will increase Nike's profit. On the other hand, cost leadership strategy will improve Nike's competitive edge, as its products or services are standardized, generic, and acceptable to many customers; in this case, offering lower prices becomes feasible.

Communication Plan

Communication plans are essential in the process of identifying and implementing strategies in the business environment. They are selected by the purpose, urgency, and nature of the information as well as the nature of the targeted audience (Smith, 2012). A communication plan may include written, electronic, or verbal interaction. Concerning the nature of the purpose and nature of the adopted strategies, Nike should consider adopting the face-to-face type of communication with the intended target.

A face-to-face meeting will be conducted in the parent company and its subsidiaries. A meeting mode of communication is appropriate because the organization adopting a transnational strategy will prompt the decision of Nike’s board of directors. Similarly, a cost leadership strategy will need verbal communication in meeting to make its implementation official (D'Amato, Henderson, & Florence, 2009).

Corporate Governance Mechanism

Corporate governance refers to the outlined policies and procedures that corporations employ to control and protect the vested interest of all the concerned stakeholders. Corporate governance mechanism includes the balance of power, board of directors, and audits. As a large and complex organization, Nike can employ both the balance of power mechanism and audits to evaluate how effective they are at controlling managerial actions (D'Amato, Henderson, & Florence, 2009).

The balance of power mechanisms ensures that no segment of the department overextends its resources. Additionally, the mechanism operates by separating duties and responsibilities between the members of the board, directors, managers, and other relevant stakeholders. Importantly, the balance of power examines how corporate governance has segregated functions for every individual division within Nike (D'Amato, Henderson, & Florence, 2009).

The audit mechanisms are independent reviews that focus on establishing whether a company’s financial operation exhibits a true and fair representation. Audits will help Nike’s management to evaluate whether the company’s financial operation is by international accounting standards and other external guidelines (Lussier & Kimball, 2013). The audit also boosts the confidence of Nike’s management, shareholders, and investors as well as the public to rely on the financial information provided as a true assessment of the Nike Company (Lussier & Kimball, 2013).

Nike’s Leadership Style

Nike’s chief financial officer Mark Parker believes in an inquisitive and transformational style of leadership. Parker is known for using questions to his followers to allow them to think through and get the answers (D'Amato, Henderson, & Florence, 2009). Inquisitiveness is a vital part of a leadership strategy as it boosts employees’ development in a transformational leadership style. Through this style, Nike aims to instill creativity and innovative capacity in its employees by subjecting them to a constant reasoning situation. Nike’s step to adopt the winning management tactic is critical as leaders who ask questions and urge their followers to seek answers tend to be more effective than those who do not give their employees a chance to participate (D'Amato, Henderson, & Florence, 2009).

Additionally, all Nike’s leaders have chosen to act as multiplier leaders who constantly seek to maximize intelligence among their followers, as they believe that an employee’s ability is cultivatable rather than fixed. As much as Nike’s leadership style appears to be pivotal in its run to match the dynamism of the industry, it still has room for improvement. Many leaders have reported that there is a high level of employee disengagement (Nike, 2015). High staff turnover is a bad signal and Nike’s leaders have to expand on transformational leadership. In this case, leaders have to motivate their followers to buy into and deliver the vision of their company.

Nike’s Ethics and Corporate Responsibility

As a multinational corporation company, Nike must act ethically and responsibly towards the community. Nike has realized that corporate responsibility is inevitable for its success. The company has displayed efforts in CR by consolidating CR functions under the newly created position, which has harmonized the environmental and labor strategies (D'Amato, Henderson, & Florence, 2009).

The environmental approach involves taking cost responsibility of all its activities that degrade the environment. Additionally, Nike has taken a step to correct its labor allegations in developing nations such as Bangladesh and Vietnam (Nike, 2015). It has achieved this by scrapping child labor practices, improving working conditions, and raising the wages and salaries in their factories in such nations. These efforts have improved sustainability as well as boosted the company’s relationship with the global community.

Conclusion

Nike has remained the leading sportswear company globally over the years. It has attained this position by achieving its concise and precise mission and vision. Nike’s vision statement is a subset of its mission statement, which has facilitated the mode of selecting appropriate strategies. From the discussion, it is obvious that Nike can adopt the differentiation strategy to improve its strength, capitalize on its opportunities, mitigate its weaknesses, and eliminate its threats.

Additionally, it can improve its profits as well as a competitive advantage by adopting a cost leadership strategy and transactional strategy as a business-level strategy and corporate level strategy respectively. The most appropriate communication plan to communicate the decisive aspects such as the adoption strategies is face-to-face meetings as it allows consultation, authorization, and approval. Concerning corporate governance, Nike can employ the audits and balance of power mechanism to evaluate how the management operations are conducted. The company has also extensively participated in corporate social responsibility as a way of meeting its duties to the public.