PESTLE Analysis of Nike

PESTLE for Nike in UK Case Study

Company Overview

Nike Inc. is a multinational corporation based out of Beaverton, Oregon, U.S. It deals in the development, design, manufacturing, and marketing & sales of sports footwear, apparel, related accessories, and varied services worldwide. Nike was founded in 1964 by Phil Knight and Bill Bowerman. It has primary businesses in the footwear, apparel, sports equipment sans accessories industry. Nike had a valuation of more than 23 billion dollars in 2020 and is one of the most valuable brands in its business niche.

The key competitors that Nike has worldwide are Adidas, Puma, Fila, Reebok, New Balance, Under armor, Converse, and K-Swiss. Nike is one of the top 3 among these sports footwear brands all over the world along with Adidas and Reebok.

Nike is in the sports goods business and targets both women and men athletes equally. The age group that Nike targets are between 15 – 40 years of age. The campaign of Nike is based around the young and upcoming generation that looks up to their sports idols and strives to be similar to what their idols are. One of the subtle factors that pull customers towards Nike is that it does not have any differentiation in customer groups on the basis of ethnicity, social class, religion, or race. The largest markets for Nike are North America subsequently followed by Western Europe and emerging markets in China. Nike is now focused on the South Asian markets to diversify its business operations. The analysis of Nike's business factors is for the UK market. The primary focus is on the footwear business line of Nike and how it operated in the UK market.

Get free written samples by our Top-Notch subject experts and Assignment Helper team.

Macro Analysis (PESTLE)

Political

The UK market includes England, Scotland, Wales, and Northern Ireland. It is deemed to be one of the powerhouses of the world and is a modern democracy along with being a constitutional monarchy. The prime minister in the UK is appointed for a term of five years. The country has traditionally been a proponent of heavy commercial activities and has good political stability illumination ease of business. The recent Brexit however has shaken the political stability of the country. It has permanent membership of the UN and has soothing relations with the US. The criticism is however on its relations with a couple of authoritarian regimes (Nye, 2019).

Economic

The UK economy is the 6^th largest in the world currently and a lucrative market for any capable corporation. Dues to the pandemic the Bank of England had to infuse 100 billion pounds into the UK economy in 2021. The national living wage(23+) stands to be at 8.91 pounds currently. The corporation tax that the government levies is 19% on the company profits. There has been an influx of FDI in sports, technology, real estate sectors in the UK economy (Nye, 2018).

Social factors

The current population stands to be at 68 million. The average age of the population is getting pushing away in the UK. The quality of life in the UK is on the higher side and people like to have the top-notch quality of products and services. The UK is in the top 10 list of countries worldwide having the most educated population. The cost of living in the UK is on a gradual rise (Zink and Geyer, 2017).

Technological factors

The technological sector stands to be in excess of 184 billion pounds in the UK. Digital tech employment in the UK is also on the rise. Online sales and business activities are of prominence in the economy. The problem however is that technology as a whole is expanding and growing 2.6 times faster than what it is in the UK (Tranos, et al., 2020).

Legal

The general product safety directive presents the safety guidelines that every footwear manufacturer in the UK has to comply with. If dyed leather is used in manufacturing then it has to be made sure that none of it includes the 22 prohibited aromatic mines. Metal accessories and parts of footwear shall not release nickel more than 0.5 microgram centimeter square (McInroy, 2018).

Environmental

The prominent environmental factor that affects businesses the most is the weather in the UK. The weather conditions in the country can sometimes be very extreme and harsh. However, the environmental factors in the country are better than its contemporaries and there are appropriate steps taken by the government to keep waste management and other related activities in check (Oakley and Ward, 2018).

Micro Environment Analysis for Nike in the UK

Porter’s 6 forces model

• Power of buyers: The footwear market of the UK is worth approximately 5 billion pounds. The growth rate is expected to be a slow one till 2024 to be around 1.2% yearly. These numbers are huge and there are a lot of sellers in the UK and the purchasing power of the customers is also on the higher side. This paves in the way for the power of buyers in the UK footwear market. (Chen and Cheng, 2019).
• Power of Suppliers: Nike has third-party contract manufacturers and the production is majorly done in China, Indonesia, and Vietnam. No contract supplier of Nike has more than 6% of the brand’s production. Nike continues its operation in the UK with little change suppliers and is not dominated by its suppliers. Also, the suppliers of Nike do have inflationary pressure from the brand (Nguyen, 2017).
• Risk of substitutes: The consumers that want high-performing sports goods can switch to brands like Adidas and converse and the casual consumer who buy these products just for leisure do have the option to switch to copycat products offering mediocre quality to that of Nike's. (Lapidus, 2018).
• Competitive rivalry: Nike dominates the UK market currently with 29% of the market share with Adidas right behind it with 24%. Next is Converse having 8% of the market share and then comes Reebok. This is an oligopoly market condition and there is high competitive rivalry for Nike in the UK market. (Lord, et al., 2020).
• Risk of new entrants: The quality of products that Nike provides is tough to match for a new entrant in the market. Also, significant capital investment has to be there for entering such a market. Furthermore, the economies of scale that Nike enjoys make it difficult for new entrants to jump into the footwear industry of the UK.
• Complementary products: Nike has a very unique complementary branding strategy with Apple. The brand has introduced Nike+ that has a tracking chip manufactured by Apple in Nike’s shoes. The performance of one brand is definitely going to have some effect on another’s. The UK being one of the most prosperous nations might be able to elevate such products of Nike (Anastasiu, et al., 2020).

Porter’s generic strategy

Nike’s Generic strategy –

To gain a competitive advantage Nike follows a cost leadership strategy wherein the brand aims to minimize its cost of production and increase profitability or reduce its selling prices in order to boost up the revenue (Rashidirad, 2019). This strategy is adopted in order to specifically compete with the brands like Adidas. The price segment and the target market Nike works with the brand surely has the cost leadership and caters to the upper-middle-class segment of the UK perfectly.

Nike also follows a differentiation strategy wherein it aims to provide unique and innovative products. For instance, the brand moves away from traditional shoe designs and integrates its shoes with cutting-edge and innovative designs like the recent Nike+ that integrates an Apple Inc. manufactured tracking chip in its shoes. (Osorio-London?o Andrés, et al., 2020).

Nike’s Intensive strategies –

Product development is one of the main focus points of Nike. Introducing new and innovative products keeps them ahead in the market. The inclusion of cutting-edge technologies is deliberately done to increase the market presence of brands in the name of differentiated products (Rashidirad, et al., 2017).

Market penetration through smart pricing policies and increasing the number of outlets to bolster sales is also one of the main objectives of Nike's growth model. Nike does this effectively in its target market segment with the adequate implementation of a cost leadership strategy (Park, et al., 2021).

Market development is one of the major supporting intensive growth strategies Nike employs. Spreading the scope of operations and gaining market leadership in the UK market showcases the market development strategy of Nike perfectly. Similarly, it recently moved to African and middle-eastern countries as well to employ its focus strategy (Cox, et al., 2018).

Internal Environment Analysis

McKinsey’s 7’s framework

• Strategy: Nike sets up SMART goals that are viable and achievable. Looking at the economic state of the UK and Nike’s market leadership there, it aims to introduce new and innovative products frequently. There is an increasing trend of online shopping in the UK market and Nike's strategy now mainly relies on online presence rather than just multiple offline outlets. The flexible organization is the key element of Nike's strategy as it focuses on the daily use of sports shoes and apparel in the UK because of the social structure (Adamakis, 2018).
• Structure: Nike follows an organizational hierarchy that is flat in nature and the chain of command gives easy and frequent access to employees to interact with the senior management (Distelhorst, et al., 2017). A decentralized organizational structure is followed at Nike primarily because e of the varied branches at different demographic locations (Waymer and Logan, 2021).
• Systems: The systems and procedures that Nike follows are by nature highly departmental. The different departments at Nike have specialized evaluation systems to analyze and evaluate the performance of its members with high specialization (Kim, 2020). A high level of specialization with specific targets in consideration for all departments is followed at Nike (Lin, et al., 2020).
• Shared values: The core values of Nike are creativity, transparency, honesty, accountability, heritage, quality, and trust. Nike aims to have a diversified corporate culture wherein people from all ethnicities can come together and work for organizational objectives (Intravia, et al., 2020).
• Style: With the help of its flat structure Nike has a high engagement of its employees in the decision-making processes and managerial interactions and thus a participative leadership style is followed. Nike has departmentalization but the focus is on integrating all the specialized departments and their systems in such a way that a cohesive team is formed rather than some nominal groups (Brooke, et al., 2017).
• Staff: Nike focuses on acquiring skilled staff for specific operations and provides in-house as well as external training for the development of the employees working in the organization. Training sessions for the current workforce are done quite frequently at Nike because of its focus on differentiation and innovation.
• Skills: Nike is a highly specialized organization that focuses on hiring and training the skilled workforce for unique job roles. The skills of the employees are properly aligned with the organizational objectives.

TOWS Matrix

Strategic challenges

The strategic challenges that are in front of Nike, UK are quite taunting but fairly generic to combat. Firstly, though Nike has market leadership in the UK it still is over-dependent on the US market. The revenue stream and the market share need to expand keeping the complacency aside. Marketing strategies are to be restructured in order to gain elite supremacy in the UK market. Secondly, Nike has been criticized for focusing on gender-specific products. It is not starkly prevalent but there have been discussions on how it caters to men more. Strategies have to be formed to break the shackles of gender biases.

References

• Adamakis, M. (2018) “Nike Training Club, an Ultimate Personal Trainer: Mobile App User Guide,” British Journal of Sports Medicine, 52(13), p. 2. doi: 10.1136/bjsports-2017-098414.
• Anastasiu, L., Gavri? Ovidiu and Maier, D. (2020) “Is Human Capital Ready for Change? A Strategic Approach Adapting Porter’s Five Forces to Human Resources,” Sustainability, 12(6), pp. 2300–2300. doi: 10.3390/su12062300.
• Baklizky, M. et al.(2017) “Business Process Point Analysis: Survey Experiments,” Business Process Management Journal, 23(2), pp. 399–424. doi: 10.1108/BPMJ-03-2016-0061.
• Brooke, S. M. et al.(2017) “Concurrent Validity of Wearable Activity Trackers Under Free-Living Conditions,” Journal of Strength and Conditioning Research, 31(4), pp. 1097–1097. doi: 10.1519/JSC.0000000000001571.
• Chen, Y.-G. and Cheng, J.-N. (2019) “A Study Investigating Teachers' Competitiveness-Michael Porter's Five Forces Model As Theoretical Basis.(report),” Academy of Educational Leadership Journal, 23(2), p. 1.
• Cluley, R. (2020) “Book Review: Advertising Revolution: The Story of a Song, from Beatles Hit to Nike Slogan,” Journal of Macromarketing, 40(2), pp. 266–269. doi: 10.1177/0276146719878250.
• Cox, A. M., Pinfield, S. and Rutter, S. (2018) “Extending Mckinsey's 7s Model to Understand Strategic Alignment in Academic Libraries,” Library management, 40(5), pp. 313–326.
• Distelhorst G, Hainmueller J and Locke R.M (2017) “Does Lean Improve Labor Standards? Management and Social Performance in the Nike Supply Chain,” Management Science, 63(3), pp. 707–728. doi: 10.1287/mnsc.2015.2369.
• Huang W.-L et al.(2020) “The Business Analysis on the Home-Bias of E-Commerce Consumer Behavior,” Electronic Commerce Research, (2020). doi: 10.1007/s10660-020-09431-2.
• Intravia, J., Piquero, A. R. and Byers, B. (2020) “‘just Do It? An Examination of Race on Attitudes Associated with Nike’s Advertisement Featuring Colin Kaepernick,’” Deviant Behavior, 41(10), pp. 1221–1231. doi: 10.1080/01639625.2019.1604299.
• Kim, M. (2020) “How Phil Knight Made Nike a Leader in the Sport Industry: Examining the Success Factors,” Sport in Society, 23(9), pp. 1512–1523. doi: 10.1080/17430437.2020.1734329.
• Lapidus, B. (2018) “Finance Strategy: Re-Thinking Porter’s Five Forces,” AFP Exchange, 38(4), pp. 27–27.
• Li, J.-Y., Kim, J. K. and Alharbi, K. (2021) “Exploring the Role of Issue Involvement and Brand Attachment in Shaping Consumer Response Toward Corporate Social Advocacy (csa) Initiatives: The Case of Nike’s Colin Kaepernick Campaign,” International Journal of Advertising, 1-25, pp. 1–25. doi: 10.1080/02650487.2020.1857111.
• Lin, C.-W. et al.(2020) “Exploring the Adoption of Nike Run Club App: An Application of the Theory of Reasoned Action,” Mathematical Problems in Engineering, 2020, pp. 1–7. doi: 10.1155/2020/8568629.
• Lord, J. et al.(2020) “Examination of Nursing Home Financial Distress Via Porter’s Five Competitive Forces Framework,” Health Care Management Review, Ahead Of Print. doi: 10.1097/HMR.0000000000000297.
• McInroy, N. (2018) “The Everyday Economy: Framing a New Political Economy for the Uk?,” The Political Quarterly, 89(4), pp. 614–617. doi: 10.1111/1467-923X.12607.
• Nguyen, T. T. T. (2017) “Management Education As an Industry and Mba As a Product: Revisiting Joint Mba Programs Using Porters Five Forces Model.(master of Business Administration)(report)(author Abstract),” Global Business & Economics Review, 19(3), pp. 356–356.
• Nye, J. (2018) “Uk Economy Pushing Ahead Despite Brexit Worries,” Econoscope, 42(10), pp. 11–11.
• Nye, J. (2019) “Uk Economy Stumbling Toward March 29,” Econoscope, 43(2), pp. 11–11.
• Oakley, K. and Ward, J. (2018) “Creative Economy, Critical Perspectives,” Cultural Trends, 27(5), pp. 311–312. doi: 10.1080/09548963.2018.1534573.
• Osorio-London?o Andre?s A, Naranjo-Valencia, J. C. and Caldero?n-Herna?ndez Gregorio (2020) “Training and Its Influence on Competitive Strategy Implementation,” Human Resource Development Quarterly, 31(2), pp. 149–172. doi: 10.1002/hrdq.21381.
• Park, H., Yoo, Y. and Lee, H. (2021) “7s Model for Technology Protection of Organizations,” Sustainability, 13(13), pp. 7020–7020. doi: 10.3390/su13137020.
• Provis, C. (2017) “Intuition, Analysis and Reflection in Business Ethics,” Journal of Business Ethics, 140(1), pp. 5–15. doi: 10.1007/s10551-015-2688-z.
• Rashidirad, M. (2019) “The Applicability of Porter's Generic Strategies in Pure Online Firms: A Case Study Approach,” Strategic Change, 28(3), pp. 167–176. doi: 10.1002/jsc.2258.
• Rashidirad, M. et al.(2017) “Competitive Strategy, Dynamic Capability, and Value Creation: Some Empirical Evidence from Uk Telecommunications Firms,” Strategic Change, 26(4), pp. 333–342. doi: 10.1002/jsc.2135.
• Sanne, R. (2019) “Swot Analysis Helps Put a Company on Strong Footing,” Industrial Management, 61(2), pp. 28–28.
• Taymouri, F. et al.(2021) “Business Process Variant Analysis: Survey and Classification,” Knowledge-based systems, 211.
• Tranos, E., Kitsos, T. and Ortega-Argile?s Raquel (2020) “Digital Economy in the Uk: Regional Productivity Effects of Early Adoption,” Regional Studies, 1-15, pp. 1–15. doi: 10.1080/00343404.2020.1826420.
• Waymer, D. and Logan, N. (2021) “Corporate Social Advocacy As Engagement: Nike's Social Justice Communication,” Public Relations Review, 47(1), pp. 102005–102005. doi: 10.1016/j.pubrev.2020.102005.
• Zink, T. and Geyer, R. (2017) “Circular Economy Rebound,” Journal of Industrial Ecology, 21(3), pp. 593–602. doi: 10.1111/jiec.12545.