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Examination of NikeResearch Paper

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Assessment of Nike

Segment of the General Environment

Demographic Segment

Technological Segment

Porters Five Forces

Power of Suppliers

Intensity of Rivalry

Further Management of Suppliers and Rivalry

External Threats and Opportunities

Strengths and Weaknesses

Company Resources, Capabilities and Core Competences

Value Chain

There are many influences that impact on firms in the retail environment. Nike, a successful international firm which designs, markets, and sells a range of athletic footwear, apparel and associated goods. The aim of this paper is to look at some of the factors, looking first at segments in the general environment, and then at factors within Porters five forces model, and finally external forces.

Segment of the General Environment

Two segments that are particularly important to Nike are the demographic segment and the technological segment. Each will be examined separately.

Demographic Segment

Demographics are an extremely important to Nike, the goods they sell target the mass market and rely on a large volume of sales; it is estimated that they sell 120 million pairs of shoes a year, and have approximately 31% of the athletic footwear market (Statistic Brain, 2014). Nike (2014) note in their 10k that changes in demographics are a risk factor.

The profile for Nike's primary target market will include those who are interested in any type of activity related to physical fitness and sports (Dass et al., 2013). The main purpose of the goods sold, including shoes, apparel and accessories are to support physical fitness and exercise. In demographic terms this indicates that Nike will be selling to both men and women, with the majority of the customers being at an age where they are able to activity participate in physical fitness and sport; this is likely to include adult men and women up to the age of 45 years, with a skew towards those in their twenties, after which sporting activity tends to tail off (Shank and Lyberger, 2014). If the demographic profile in the main markets, for example the U.S., where 54% of revenues originated in 2014 (Nike, 2014), change, for example the population ages and birth rate decreases, in the long-term the firm will see its target market disappear. Likewise, if there is a reduction in the overly population size, which would also reduce the target market size, there would be a decline in sales. It should also be noted that the products are also bought as fashion rather than simply for functional use, but the main target market will have a similarly demographic profile.

As Nike is a premium and fashionable brand the socioeconomic/employment status of the consumers are also likely to be important. The products are bought by adults in work, and also by many collages students who have sufficient disposable income to purchase premium goods. Increases in unemployment, or decreases in disposable income may impact negatively in the demand for the premium goods (Nellis & Parker, 2006). Conversely, if there is a shift in distribution that results in a net increased in disposable income for more people, there may be an increase in demand.


Technological Segment

Nike differentiates itself on the quality of the products and the way in which they are designed to meet the needs of those who use them. This requires technological innovation, as Nike, and their competitors seek to develop new products that will support improvements in athletic performance. Examples of existing developments include NIKE AIR, Shox, Dri-Fit, Flyknit, (Nike, 2014). Therefore, the firm will be impacted by the level of research and development that is taking place in the external environment, and the level of innovations that are found by external firms who may develop competitive advantages, as Nike will be competing with these technologies. The level of investment they make and development undertaken will impact on their performance. The firm will also benefit from the support of technology by government, such as with tax breaks and support for research and development processes, as this will ease the investment of the firm in technology areas. In the context of technology, the underlying legislative protection that is granted by patents is also an extremely important influence, impacting on how innovation are protected and the potential for other firms to use similar technology.

The development of information and communications technology and their proliferation is also important, to support the research and development process to gather and analysis data and create knowledge for the firms use. Technology also impacts heavily on the marketing and sales of the firm. The ability to use technology to connect with potential in a meaningful manner has also been shown to have a direct impact ion the purchase intent (Chaffey, 2009). Increased or changed connectivity will influence the way the connections can occur (Chaffey, 2013). Therefore, it is essential the firm remains up-to-date in terms of technology use, for research and development, as well as management and marketing and sales.


Porters Five Forces

Porters fives forces is a framework used to examine industry conditions. However, it may be argued that not all forces have equal importance, for Nike the two most important forces are the power of the suppliers and the rivalry among competitors.


Power of Suppliers

The power of suppliers is important to Nike as they design, market and sell their products, the firm is completely reliant on external suppliers for the manufacture of the products. In 2014 the annual accounts stated that the firm had more than 150 outsource suppliers. Nike is influenced by their relationship with the suppliers, as they are reliant ion the suppliers for the delivery of goods that are the right quality, and the price paid to the suppliers will have a direct impact on the firms profitability.

Influences which impact on the power of suppliers are issues such as the switching cost to the firm, the number of potential suitable suppliers, and the balance of the bargaining power of the parties in the way contracts are negotiated and terms and conditions are imposed (Thompson, 2007). For Nike, there is an asymmetry of power in their favor; the firm has a large number of suppliers, with many suppliers that can supply each type of product. This means that switching costs are relativity low, and the firm is known (Christopher, 2012). The company once had a very poor reputation for keeping the supplier prices slow by playing the suppliers off against each other; a move that resulted in very low labor standards, which resulted in a high level of negative publicity for Nike (Seknazy, 2001). Today the firm has higher labor standards, which suppliers are forced to sign before they are granted a Nike contract, but the firm is still extremely aggressive regarding the prices and terms and condition. The firm is able to do this as the supplier of potential suppers is greater than their demand, and Nike have the highest level of power. Therefore, Nike has been very efficient at managing their supply chain, and minimizing the potential influence of suppliers, by keeping their power low. In recent years the increased interest in the issue of cooperate social responsibly has increased pressure on Nike to pay attention to issues such as working conditions. However at the same time, technology development have created supply chains where there is a higher level of technological integration, which gives Nike a higher level of control over the supply chain and their relationships with their suppliers (Vachon & Klassen, 2006).


Intensity of Rivalry

The intensity of rivalry refers at the way in which competition emerges and the degree to which it is competitive. In the sporting footwear and apparel industry it may be argued there is an effective oligopoly, with Nike and Adidas dominating the market; Nike Stronger in the U.S. while Adidas is stronger in other countries. To put this into context Nike had sales of $25 billion in 2013, compared to Adidas's $20 billion, the third place contender, Under Amour, had sales of only $2.3 billion (Powell, 2014). The two firms compete in an aggressive manner seeking to gain endorsements and sponsor similar events. This structure means that the actions of Adidas are likely to have a significant impact on Nike, and vice versa. Nike have been strong in the U.S., where they have nearly 59% of the sneaker market (Powell, 2014), The marketing for Nike has seen extensive use of endorsements and placement of products will well-known sports people such as Michael Jordan, Kobe Bryant, Roger Fedeerer, and LeBron James (Ashrad, 2014). This is seen as 'creation demand' by Nike, as then believes increased exposure and association with sports people will make them, more competitive (Ashrad, 2014). A similar strategy is seen with Adidas, who also seek high levels of endorsements, and undertake a high level of sponsorship of international events (Kemp, 2014). In the recent past Nike, with its market dominance has appeared effective at leveraging its' leadership position.

With two major firms, this also indicates competition for the shelf space in shops and retail positions with retailers. Nike… [END OF PREVIEW]

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