Internal Analysis

• Slide 01

The value, rare, inimitability, and organization (VRIO) framework used to conduct an internal analysis of Nike reveals some important resources and capabilities that give Nike a competitive edge. The major resources that can be leveraged will include a strong network of supply chain, association with celebrities, unique products, and corporate social responsibility. The various supply chain networks demonstrate Nike in having its value in the footwear industry (Li, 2023). Intellectual property, together with a large network of suppliers, would give Nike a competitive edge in the market as compared to its competitors. In its business strategy, Nike has employed celebrities and athletes as its business partners, which exemplifies the rare aspect of the VIRO framework. As an example, a Michael Jordan collaboration with Nike will earn the company in the tune of 1.3 billion (Badenhausen, 2020). Nike is expanding on its working relationships with fashion designers, which has enabled the company to reach out to a variety of audiences through innovative product solutions (Spartaco, 2024).

The organizational factor cannot be left out as a competitive advantage of Nike in accordance with the VRIO analysis. Nike has a variety of pricing plans to cater to particular target markets to fulfil the needs of consumers as well as achieve its organizational goals. The value-based approach assisted consumers in purchasing the products, which resulted in profitability (Yan et al., 2022). Therefore, good pricing strategies can also be used to formulate a competitive edge. Nike can be considered to be very unique in the growing market based on ecological awareness under the “move to zero” initiative, when combined with the environmental initiatives of sustainable practices (Kim and Oh, 2020). The constant striving of the company to utilize renewable energy helps consumers to consume sustainable commodities, which enhances sales and profitability.

Results from External Analysis

• Slide 02

An external analysis involving political, economic, social, technological, legal, and environmental (PESTLE) and Porter’s Five Forces has shown that there are a number of issues that can influence the strategies that Nike employs.

PESTLE Analysis

The political reasons that influence the productivity and level of profitability of Nike in the market include the varying international trade policies and tariffs. As an example, in case of political instabilities, the customer-clearing process could be stopped at some point, confusing the importation of products, which has a negative effect on the performance of the company (Li, 2023). On an economic basis, inflation has impacted the levels of purchasing power of customers, as this has decreased the sales of Nike products. Nevertheless, with cost reduction policies, Nike will be able to boost its sales, which will in turn result in profitability. Socially, the fact that the rate of athletes’ participation in a certain sport is increasing is boosting Nike products’ demand, predominantly in sports gear (Li, 2023). Nike is also not an exception, and in order to create a positive social image in the market, Nike has also focused on attracting female customers. On the technological aspect, Nike has been able to use the technology to enhance the customer experience, resulting in increased sales. As an illustration, digitized tools could present a hassle-free shopping experience to the customer, culminating in profitability (Patov, 2024). Lawfully, Nike complied with the trade policies to escape any lawsuits and conflicts that would lead to improved customer loyalty. On the environmental front, Nike is resolute in coming up with environmentally friendly materials in order to reduce air pollution (Nada, 2023). An example is that Nike, too, utilizes renewable energy in order to reduce the waste products that negatively affect the environment.

• Slide 03

Porter’s Five Forces

The use of the Five Forces model, developed by Porter, is useful in identifying the current market competition trends for Nike. First, its competitions of the shoe industry is stiff since Nike has to compete with other shoe companies, such as Adidas. The market share is taken as the gauge in gauging the competition, as Nike has a 21.1% market share in the footwear market, which is complemented by Adidas, which has contributed 15.1% market share in the same footwear market (Li, 2023). Second, the threat of the new entrants in the footwear market is very low since the expenses incurred to venture into the market are high. In addition, the brand image of Nike came to a stop as well, to detract entry of new businesses in the market. Thirdly, cautiousness in relation to the presence of alternative products is moderate since footwear brands are endowed with alternative products. It highlights how Nike has come up with innovative products with varying ranges to eliminate the threat of substitutes (Lin, 2024). Fourthly, the supplier can negotiate power is low since Nike conducts its business all over the world and on a contractual basis, thus minimizing the chances of supplier bargaining power. Fifthly, the bargaining power of the buyer is moderate, with customers being conscious of the brand image of Nike and the outlets where the products could be purchased.

Nike’s SWOT Matrix

• Slide 04

Strengths

The greatest strength that Nike enjoys is the fact that the firm has a number of outlets in the world, which has contributed to the firm enjoying a strong brand image in the footwear industry. More so, Nike is also involved in corporate social responsibility (CSR) and is significantly committed to doing more than just providing environmentally-friendly footwear; it is imperative that they offer a viable solution to an environmental issue in the form of a sustainable footwear solution, which does not have any harmful effects on the environment (Huang et al., 2022). The other strength is that the digital tools were used in a bid to make shopping easier for consumers. Adjustment of the e-commerce model, such as the DTC approach, is necessary in augmenting sales (Li, 2023). As an illustration, the Nike App can be utilized to have the consumer order wear and apparel products online, increasing the company’s sales and profitability.

Weakness

One of the weaknesses that Nike has is that it majorly depends on the US market. In 2022, Nike made its sales in the US market, accounting for some 41% of total sales (Lin, 2024). Any alterations in the US tax policies will have a negative effect on the profits of Nike. The other weakness is that they rely on footwear since their competitors offer a variety of options to consumers, which affects the profitability of Nike (Wu, 2022). Increased competition in terms of marketing and branding position in the US with other footwear brands like Puma and Adidas, Nike had to invest in the marketing and branding position in the US, resulting in strained resources and influencing profitability.

Opportunities

One of the opportunities is to enter into strategic alliances with fashion brands as well as famous celebrities, to build trust among people. The company will also have an opportunity to venture into new business fields as it will be able to set up its business presence across Asia, South America, and Africa (Lin 2024). The Nike strategy to target emerging markets in developing countries helps it reduce its dependence on the market in the United States (Li, 2023). The business can also be expanded with the markets of athletic wear to be targeted, as the product is primarily consumed by women. By developing a range of athletic products tailored to the female market and increasing its revenues, Nike will be free to capitalize on the rapidly increasing female market segment and grow its revenues.

Threats

One critical threat, which arises, is the economic recessions and fluctuations of the exchange rate between the different currencies that impact the sales and profitability of Nike. However, as an illustration of how economic instability affects a company, it will reduce the profits of a company due to decreased consumer spending on well-known brands like Nike (Wu, 2022). Additionally, tax controversies also have an influence on the international business of Nike in the case of foreign currency exchange values (Lin, 2024). The threat posed by market competition also puts the company under strain with regard to resource investment (cost of marketing strategies). Moreover, the fact that Nike was not quick enough to adjust to the evolving trends among consumers is a threat.

Recommendations

• Slide 05

The existing strategies have to be transformed to push the organization towards a new direction. Nike should make several strategic changes to help it develop its markets in the future, as well as protect its position as a leader in the footwear market. Nike will target emerging markets in developing countries to decrease its dependence on the US market as its first priority (Lin, 2023). Expansion to new regions of production will reduce geopolitical risks and also increase the supply chain resilience of Nike (Lin, 2024). This strategic choice would enable the production facilities to work their various shifts without interruption, irrespective of globally unforeseen events, through this strategic decision.

Secondly, the increase in the number of services offered by Nike to satisfy the increasing female athletic demands is an approach towards achieving better business performance. The increase in the reach of consumers, combined with the growth of markets, makes it certain that Nike will earn profits in new markets (Wu, 2022). Thirdly, the approach of CSR can assist the company in applying its model of governance, which is based on sustainable growth along with operational excellence (Huang et al., 2022). The strategy should be able to bring on board an investment approach to sustainability. To enhance brand loyalty, Nike needs to set more ambitious carbon neutrality goals, improve ethical sourcing policies, and use more recycled materials to sustain sustainable production (Almiya et al., 2020). It will spearhead market success for the company due to its sustainable business practices.

The recommendations align with organizational structure and governance that focus on expanding the business and developing a strong image in the footwear industry. Also, recommendations reflect ethical responsibility by adhering to business principles. Diversifying the supply chain in developing countries reduces geopolitical risks and ensures alignment with ethical principles (Nike, 2024). Likewise, investing in renewable energy and recycled materials for product manufacturing also shows Nike’s adherence to CSR and ethical governance principles.

Conclusion

• Slide 06

To implement the strategy, a framework of AFI will be employed to help organizations enhance their overall performance. Some of the analysis tools that will be used to determine the internal and environmental factors that influence the performance of Nike include VRIO, PESTLE, and the five forces as proposed by Porter. Also, the SWOT assists in the development of the most valuable opportunities that can enhance the profitability of Nike. Additionally, the recommendations will focus on the emerging markets, expand its reach to the customers, and follow the principles of CSR to build its competitive advantage in the footwear industry.