Swot analysis of Nike. Nike is a US footwear and sportswear multinational company. Phil Knight and Bill Bowerman laid the foundation of the company on January 25, 1964. The headquarter of the company is in Beaverton, Oregon. Sports accessories, athletic wear, leisure footwear, apparel, sports items, and other types of equipment are some of the main products and services of Nike.
According to an estimate, the total annual revenue of Nike in 2020 was 37.4 billion US dollars. Out of which the net income of the company after excluding all the expenses was 2.54 billion US dollars.
According to the statistical analysis by macrotrends.com, the annual revenue of Nike has declined by approximately 6.26% in 2020 compared to the previous years. The net profit of the company has decreased by approximately 37.5% in 2020.
There’re approximately 75400 people are working for the company by the end of 2020. Puma, V.F. Corporation, Adidas, ASICS, Lululemon, Anta, Under Armour, and New Balance are some of the major competitors of Nike.
Today, we’ll study the swot analysis of Nike that how internal factors are impacting the company. If you want to learn about the external factors of Nike; check out the pestle analysis of Nike. Here’s the swot analysis of Nike as follows;
Strengths of Nike
Nike is the main brand of the company and it has the proven experience of adding billions of dollars to the brand’s account. Converse and Hurley are the sub-brands of Nike that running alongside parallel to the parent company. They’re also adding profit to the company.
Relationships with Icon
Nike has a longstanding relationship with the famous basketball icon Michael Jordan. It turned out very beneficial to the company by increasing its sales. The brand has manufactured a product and gave a name after him, Air Jordan 1 Shoe. Such collaborative products with sports icons have great meaning to the fans. The brand has successfully capitalized on those opportunities.
Environmentally Sustainable Products
The current CEO of Nike, Mark Parker, is an environmentalist and wants to develop environmentally friendly products. He’s determined to address the environmental issues by manufacturing a product that would have a positive impact on the community.
Large Customer Database
According to an estimate, the market capitalization of Nike is approximately more than 198 billion US dollars by the end of 2020. Nike has got millions of fans worldwide and they use the company’s products. They also provide valuable feedback to the company on social media for the improvement of its products.
The name, symbol, and pronunciation of Nike are so simple and easy that customers can easily remember and memorize the brand. According to an estimate, the global market share of athletic footwear of Nike is approximately 31% by the end of 2020.
Supporting the Black Community
Nike has always raised its voice against the social injustices committed against the black community. The most marketing campaign for “Don’t Do It” is a very good example of the company’s stands against racism. Such values have attracted many people to the company.
Advanced Marketing Techniques
According to an estimate, the marketing campaign budget of Nike in 2019 and 2020 was approximately 3.7 billion and 3.5 billion US dollars respectively. The brand also uses social media marketing campaigns to target its customers. It’s because of the advanced marketing strategies; the demand for Nike’s products is always high.
The company also works in close collaboration with the designers and professionals in the production of its sports and athletic products. Nike firmly believes in the research and development of production processes. It’s one of the main reasons behind the flourishing of Nike.
Nike gets its products manufactured from less economically developed countries. It helps the company to keep the price of its products lower. For instance, the company manufactured 50%, 22%, and 24% of its products from Vietnam, China, and Indonesia respectively. Nike has also got manufacturing units in Mexico, Italy, India, Brazil, and Argentina.
Diverse Product Portfolio
The product portfolio of Nike isn’t focusing on one line and category of products. The company offers diverse products in different categories ranging from shoes, sports equipment, accessories, shirts, trousers, and many other items.
One of the main reasons behind the success of Nike is customer-focused strategies. “Just Do It” is a very good example of the company’s tagline of encouraging people to do shopping.
Weaknesses of Nike
Some former female employees of Nike filed a class-action lawsuit against the brand in 2019. They claimed that the company discriminated against them in terms of unequal pay. The company is involved in systematic gender-based pay gap activities. It pays more to male employees than female employees.
Relying on the US Market
According to an estimate, a major of Nike’s sales of approximately 41% is from the US market in 2020. The remaining 59% of the company’s sales are from the global market. These statistics prove the fact, even though Nike is a multinational brand. But the company still depends on the US market for the majority of its sales.
High Pending Debts
According to the balance sheet of Nike, the total debt of the brand is approximately 9.54 billion US dollars. Debt shows the financial troubles of the company. The income statement shows that the company is earning very well and profitable. But the balance tells a different story.
The retailers and wholesalers of Nike hold great power over the company. According to an estimate, Nike sells roundabout 65% of its products through retailers and wholesalers. They know their worth, that’s why they don’t let the company negotiate over price.
Poor Conditions of Foreign Workers
Many human rights activists and critics claim that the conditions of workers in the manufacturing countries of Nike’s products are very low. Child labor, horrifying working conditions, forced labor, and low wages are some of the main issues that the competitors accuse the company of.
Many former female employees of Nike have claimed that sexual harassment is a common thing at its workplace. According to an investigative interview conducted by New York Times, approximately 50 participated in it. They all claimed the same thing that sexual harassment and toxic work culture is a common thing in the company.
Many women have also claimed that they approached the HR department of Nike to report the issue. When they didn’t receive any answer, they had no choice but to leave the company. All of these misconduct reports have badly impacted the image of the company.
Dual Standards & Strategies
At one end, the top management of Nike claims that the brand has shifted into renewable clean energy. On the other hand, the company also favors innovation and technology relying on conventional energy. Such attitude of the management gives the impression that the management of the company isn’t serious about environmental issues.
Sports & Pandemic of Covid-19
As we know that Nike manufactures sports apparel and related accessories. But lockdown and shutdown caused by the pandemic of covid-19 have limited people to their houses. Even it also closed down all the international sports events. That’s why the profitability of Nike has decreased due to the pandemic.
Opportunities Available to Nike
Leaving Big Retailers
Some of the big retailers and wholesalers like Bobe’s Stores, Fred Meyer, Dillard’s, and Zapoo’s have got a competitive edge over Nike. They don’t let the brand to raise its price and profitability of the company. Nike should cut off its ties with the big retailers and establish its retail stores.
Efficient Supply Chain System
Nike works with third-party manufacturers for the productions of its products. Now the brand should have its independent manufacturing units. Once the company has its production autonomy, then the brand would be able to run an efficient supply chain system.
Research and Development
Nike has launched many products over the years. The company has connected its products with health and fitness. It means that the sports wearable would technology to check your health activities. It’s a great step for the company to combine technology with wearable.
As a multinational company, Nike is already doing its business globally. But the growth potential in some of the developing markets like Brazil, India, and China is very high. The company should shift its focus to those markets.
Direct Customer Strategy
According to an estimate, approximately 35% of the revenue of Nike in 2020 was from online sales. The pandemic of covid-19 has made people do online shopping. It’s a good thing and it would help the company to shift its focus on the customers and online store.
Acquired AI Startup Company
Nike has recently acquired a small startup predictive analytic company by the name of Celect. It’s a great step for the company and it would the brand to manage e-commerce business and customer behavior. Most importantly, the brand has the resources to launch such ventures.
Threats Nike has to face
Nike is a multinational brand and it makes its transactions in US dollars. The currency exchange market keeps fluctuating throughout the year. Whenever there are currency fluctuations, it impacts the revenue and profitability of the company.
Marketing Pressure of Competitors
Adidas and Under Armour are the main competitors of Nike. Their marketing and advertisement budget is much greater than the company. It puts great pressure on the company.
As we know that Nike is a market leader in the sports wearable industry. But many new startup companies have entered the same category of sports equipment. It means that the brand has to increase its marketing efforts to maintain its market position. According to an estimate, the company has spent approximately 3.5 billion dollars on marketing.
Nike is operating its business in different markets across the world. The threat of copy and the counterfeit product has increased for the past few years. Many manufacturers use the label of Nike and produce low-quality products and sell them in the market at a low price. The counterfeit products in the market are jeopardizing the credibility of the company.
The 2nd big retail market for Nike after the US is China. The company has even increased its stocks in China. The conflicted relationship between the Trump administration and the Chinese government put everything on hold.
Uncertain Economic Environment
The pandemic of covid-19 has created an atmosphere of uncertainty across the world. The global economy is in recession due to the lockdown and shutdown of businesses. The worst fear of post-pandemic is yet to come. According to an estimate, the uncertain economic environment has decreased the annual profitability of the company by approximately 37.5%.
Nike and Adidas have had the fierce experience of copyrights and a patent lawsuit over FlyKnit Shoes and Primeknit shoes in the German and the US courts. It doesn’t matter whether your company is right or wrong, patent and copyrights lawsuits are a very dirty business.
After an in-depth study about the swot analysis of the Nike brand, we have concluded that the company has a very strong market position. The pandemic has reduced the profitability of the company, so does other businesses as well. But the threat of patent issues, counterfeit, and increasing debt are serious issues to the company. Nike should address these issues.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.