January 10th, 2018
Assessment of Nike’s Strategic Fit
The strategic fit of Nike’s strategy can be evaluated through the strengths, weaknesses, opportunities and threats (SWOT) framework. The entity’s strengths include its leadership of the sports’ footwear and apparels market which allows it to compete effectively even without investing much in communications aimed at increase the market share. Secondly, the entity’s technical innovation capacity presents it with a strength through which it can shape industry trends. Thirdly, the low cost-manufacturing base and a strong distribution channel enables the entity to better incomes even in periods of economic adversity.
Nike’s weakness lie in in its large pension plan liability. For instance, by May 31, 2011 unfunded pension liabilities amounted to $113 million (Edgar Online 78). Such pension liabilities reduce the entity’s reserves that can be used for expansion processes when required in future (Datamonitor 7). Another weakness with respect to Nike is a battered corporate image with respect to its labour sourcing practices. Such battered image limits the extent to which the entity can penetrate the market, for instance in the North American market where customers are highly sensitive.
Opportunities for Nike include partnerships with sporting organizations in its markets to increase its market leadership. Such partnerships would allow it to offer suppliers to such organizations while increasing the market awareness of its products. Another opportunity is increasing its market in the emerging countries. Emerging countries for instance recorded favourable performance in all the three product segment for the entity in its 2011 results. Thirdly, the entity can increase its engagement in the social media to boost its market reach within its existing markets.
Threats in the market include intense competition. Major competitors for Nike are Adidas and Puma, which belong to the same strategic group as Nike. In the North American market, the entity faces additional competition from Dicks’s Sporting Goods and Finish Line (Datamonitor 8). With products being identical among the competitors, Nike could lose its market to competitors due to low switching costs. Additionally, cheaper imports from Asia could present a challenge for Nike with respect to price-sensitive segment (Datamonitor 8). Another threat from the environment arises from its sourcing major supplies from Independent suppliers. Such approach limits the extent to which the entity can control its supply-chain network thus being vulnerable to exchange fluctuations.
Strategic planning helps the entity to position itself to compete effectively in a dynamic environment. This paper evaluated Nike’s business strategy and its fit to the market. Nike strategy embodies aspects of a cost-efficiency focus and differentiation strategy. The cost-efficiency focus is achieved by sourcing suppliers from contractors in low-wage countries. Such a strategy has enabled the entity to achieve favourable performance even with adverse economic environment. The wide range of products that the entity controls facilitates the achievement of a differentiation strategy. Such differentiation strategy is achieved through the technological competencies that enable Nike to remain innovative.
Nike’s strategic fit is evident with the large market share that the entity enjoys. Nike is a leading player in the sports’ footwear and apparel industry. Nike’s continued leadership is however affected by intense competition in the market and a threat posed by its independent contractors. Such contractors could affect the entity’s cost-leadership strategy with fluctuations in market conditions.
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