January 10th, 2018
Strategic Analysis of Nike
Nike’s strategy is affected by its growth rate in the industry and the market share it controls. The entity has been on a steady growth rate as evident from its five-year revenue trend in the recent past (Edgar Online 22). The industry however does not support rapid growth with identical competitors operating in most of the markets in which Nike operates (Datamonitor 5). Additionally, the market for sporting footwear, apparel and equipment is largely constant with institutional customers remaining the same over the years. Nike’s however controls the largest market share in various markets especially the athletic footwear and apparels market in North America (Datamonitor 5).
The athletic footwear products that Nike provides may be placed in different categories in the BCG matrix in accordance to variations in the customer preferences in the markets that the entity operates. In North America, for instance, footwear forms the “cash cows” category with a relatively moderate growth rate and a high market share. The entity enjoys the largest market share with respect to footwear in this market (Datamonitor 5). In terms of revenue, the footwear also provides the entity with the largest source of revenue in all its markets (Edgar Online 31-37). However, the products with the highest growth rate in North America in the during the last fiscal year were the apparel with a 21% growth compared to 11% for footwear (Edgar Online 31). The apparel however contributed lower revenues than footwear to the total revenues in the North American market. However, Nike enjoys a leading market share in the sporting apparel market (Datamonitor 5), hence such products are the stars for the entity according to the BCG matrix. The equipment products are also cash cows in this market with a growth rate of 5 per cent in the 2010-2011 period, but they contribute the least amounts to the entity’s revenue (Edgar Online 31). Accordingly, Nike should focus on retaining its market share in the footwear and equipment industry in North America but the moderate growth rate does not necessitate high investments in these products, which would drain the net cash flows from such products. In this respect, the marketing activities should be aimed at market penetration for instanceby competitive pricing and aggressive promotion activities. With respect to apparel, Nike should invest in approaches such as market communications to increase its revenues since such products have shown the potential for growth in the North American market.
In Western Europe, Nike’s footwear perform better than the other products with 0.3 Per cent change in during the 2010-2011 period (Edgar Online 32). The apparel and equipment products perform poorly in these markets with the high reduced performance in equipment (-12%) in 2011 (Edgar Online 32), suggesting that the equipment products could turn out to be dogs in the market. Such poor negative performance of equipment products is also notable in central and Eastern European market (-7 %) and Japan (-26%) (Edgar Online 32-34). The only market where equipment performs favourably is in the emerging markets (11% increase) whereas in the Greater China region, the equipment products achieved a marginal increment (2 %) (Edgar online 35; 37). Even in these markets where the equipment products performed favourably, the footwear and apparel recorded greater gains (Edgar online 32-37). Such a favourable performance could be a result of a market development approach where the entity sells its products in new markets e.g. in geographic locations where sporting activities are gaining increasing recognition as sources of income. Accordingly, Nike should evaluate the feasibility of stopping the sales of equipment products in the regions where they have negative growth rates unless when sales of the more profitable products are tied to the sales of such equipment – e.g. sports association making a single order that encompass footwear, apparel and accessories.
Go to part four here.