Business Analysis project

This report evaluates Nike's business performance through soft and hard analysis, benchmarking with Adidas and Puma, and suggests strategic models to improve performance.

Running Head: Business Analysis project
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Project Report: Business Analysis project

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Contents
Introduction.......................................................................................................................3
Company overview...........................................................................................................3
Benchmark companies overview......................................................................................3
Soft analysis......................................................................................................................4
Qualitative analysis.......................................................................................................4
PESTLE analysis......................................................................................................4
Porter’s five forces model.........................................................................................5
Hard analysis....................................................................................................................7
Quantitative analysis.....................................................................................................7
Key financial indicators............................................................................................7
Ratio analysis............................................................................................................8
Trend analysis.........................................................................................................11
Identification of issues and opportunities.......................................................................12
Strategy options..............................................................................................................12
Best strategic models......................................................................................................13
Conclusion......................................................................................................................14
References.......................................................................................................................15

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Introduction:
Business analysis is the procedure of enable the changes and the strategies in the
context of a business. This process takes place through defining the recommendation and
needs of the business which delivers the values to the business and stakeholders. These are
various tools and techniques through which a business could be analyzed by the business as
well as business analysis evaluates the financial and non financial information in context to
measure the overall performance and position of the business (Williams et al, 2005). This
process helps the business to make the related changes in the overall performance of the
business.
In this report, Nike’s business performance has been evaluated. The business analysis
process has been done on the company after evaluating the soft and hard analysis of the
company as well as the data of the business has been compared with other benchmark
companies to identify the overall performance and the strategic issues of the business. The
best strategic models have also been suggested in the report to improve the performance of
the business.
Company overview:
Nike Inc is an American international company which is involved in development,
manufacturing, design and worldwide sales and marketing of sports equipment, apparels,
footwear and other services. Headquarter of the company is in Oregon. The company has
been founded in 1964 and currently, it is one of largest companies in the industry. The
company is operating its business in sports services, accessories, sports equipment etc.
(Home, 2018) the income generated by the company in the year of 2017 was $ 34.35 billion
and the net profit was $ 4.24 billion whereas the available resources of the business is $ 23.26
billion. The main competitors of the business are Adidas and Puma.
Benchmark companies overview:
For evaluating the business performance and the industry position of Nike, the
performance and position has been compared with the Adidas and Puma. Adidas and puma
are a German multinational company which manufactures and designs the casual footwear,
accessories and apparels. Adidas is the second largest and Puma is the third largest
sportswear manufacturing company in worldwide. Both of these companies are the main

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competitors company. The net income of Adidas and puma in the year of 2017 was Pound 1
billion and pound 135.8 million. The stock position of both the companies also explain about
better market position of the company.
Soft analysis:
Soft analysis is mostly concerned with the qualitative analysis of a business. In this
analysis, the non financial performance of the business is evaluated on the basis of the
internal position, industry position, competitor’s position and the market position of the
company (Nobes and Parker, 2008).
Qualitative analysis:
For evaluating the qualitative analysis on the business, PESTLE analysis and porter’s
5 forces analysis study has been done. PESTLE analysis is a concept which evaluates the
industrial position of the company. It measures the political, economical, social,
technological, legal and environmental aspects of the business (Weygandt et al, 2008).
Further, the porter’s 5 forces analysis model is a competition position which evaluates and
assesses the position and the competitive strength of a business organization. The qualitative
analysis of the companies is as follows:
PESTLE analysis:
Nike Inc is a growing company which depends on the various external conditions.
The PESTLE analysis model identifies the various external aspects of the business. The
PESTLE analysis of Nike is as follows:
Political factors:
The US is the home country of Nike and the political growth and opportunity of the
company is quite fantastic which helps the business to improve the overall performance of the
business. As the company produces the physical goods so that company is subject to change
in the manufacturing laws and low interest rates. As well, the various political conflicts could
always make the process and customers relation of the company difficult and prevents the
export and import of the company (Hitt, Ireland and Hoskisson, 2012).
Economical factors:

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The company sells its product on medium range product which is less vulnerable to
the economical factors. A market collapse could lead to the Nike at lower position. The
revenue of the Nike depends on the low cost of labour and the economical factors direct
affect it. Further, the business has to focus on the small emerging market to sell their
products.
Social factors:
Social factors are always on a crucial level in order to evaluate the performance of the
business. Worldwide increment in “health consciousness” factors lead to the youth to take
care of their body and themselves. These people undoubtedly purchases plenty of sports
products and it would enhance the profitability of Nike. Simultaneously, huge criticism has
been faced by Nike due to its dubious production procedure (Madhura, 2011).
Technological factors:
Technology is one of the crucial factors which allow the companies to innovate the
products and services in various new ways. Social media has allowed the Nike to blow up the
production and sales in faster way than ever. Nike is performing well in terms of social
media. This has also been used by the company to gather the information and attract more
people.
Legal factors:
Legal factors are somehow grouped with the political factors of a business. Nike has
faced substantial amount of taxation claims. Currently, not much crackdowns have been
shown in Nike. Also, Nike has met occasionally with the legal repercussions because of its
shady market (Hill et al, 2014).
Environmental factors:
Environment issues are important for the business. The mass production of Nike has
harmed the environment and due to it plenty of pollution has spread and the scrap is
occasionally go so far in the rivers. However, Nike has also promised a change in their
practices along with resolution for the eco system.
Porter’s five forces model:

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Nike Inc is a growing company which depends on the various internal conditions. The
Porter’s five forces analysis model identifies the various internal aspects of the business. The
Porter’s five forces model analysis of Nike is as follows:
Competition rivalry:
Competition level determines that the Nike Inc has maintained the market share of
sports footwear in the market. The evaluation explains that the competition has influenced the
industry environment and the individual firm’s performance. The low market growth rate of
the business is quite strong. The firms are highly aggressive in the industry in terms of
competition (Damodaran, 2011). Based on the evaluation, the company is required to focus
on those external factors which lead to strong competition in the market.
Buyer’s bargaining power:
The customers of the company directly affect the performance of Nike Inc. Five
forces elements of the business explains that the customer has determines that how the
bargaining level of the buyers affect the position of the company. The evaluation explains
that the buyers have influenced the industry environment and the individual firm’s
performance at huge level (David, 2011). The low switching cost of the business is quite
strong. The moderate availability of substitute enables the customers to bargain with the
company. Based on the evaluation, the company is required to focus on those external factors
which lead to strong power of bargainers.
Supplier’s bargaining power:
The suppliers of the company directly affect the performance of Nike Inc. Five forces
elements of the business explains that the customer has determines that how the bargaining
level of the suppliers affect the position of the company. The evaluation explains that the
suppliers have influenced the industry environment and the individual firm’s performance at
huge level. The overall supply of raw material is lower in the industry. The population of the
suppliers are also lower in the company. Based on the evaluation, the company is required to
make new strategies to reduce the influence of suppliers.
Substitution threat:
Substitute products and services explain that the threat of Nike is quite higher as
various other companies are also offering the same product in the market. The competitors of

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the company directly affect the performance of Nike Inc. Five forces elements of the business
explains that the substitutes has determines that how the other substitute product and service
level of the suppliers affect the position of the company. The evaluation explains that the
substitute products are highly available (Hill, Jones and Schilling, 2014). And the switching
cost of the industry is also lower which have influenced the industry environment and the
individual firm’s performance at huge level. Based on the evaluation, the company is
required to make new strategies to reduce the influence of substitute products.
New entrant’s threat:
Lastly, the new entrant’s threat has been evaluated on the basis of the five forces
elements of the business which explains that the threat from new entrant is quite lower. As
the company is already on the leading position and thus new entry cannot affect much on
overall position of the company (Enz, 2010). The evaluation explains that the brand
development cost is higher in the industry as well as economics of scale is also lower. Based
on the evaluation, the company is not required to make many efforts in this scenario.
Hard analysis:
Hard analysis is mostly concerned with the quantitative analysis of a business. In this
analysis, the financial performance of the business is evaluated on the basis of the stock price,
market position, financial statement and other financial transactions of the business.
Quantitative analysis:
For evaluating the quantitative analysis on the business, key financial indicators, ratio
analysis and trend analysis study has been done on Nike Inc and its competitors. Key
financial indicators explain about the main financial figures of the company which explains
about overall position. In addition, the ratio analysis is a process which measures the different
position of an organization. Further, the trend analysis measures the overall changes in the
company at a particular period in context with previous year or competitors. The quantitative
analysis of the companies is as follows:
Key financial indicators:
Key financial indicators of the business have been evaluated on the basis of the
financial figures of the company. The key financial transactions and the amount have been

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evaluated of the company in the current year and it has been compared with the financial
figures of Puma and Adidas to measure the overall position.
The overall study explains that the financial performance of the company is quite
higher than the competitors of the company. The company has managed to earn the highest
profit from the market. The operating profit level of the company was huge but due to various
operational expenses, the net profit of the business has been lowered and it has affected the
overall position of the company. The resources of the company are also higher than the Puma
and Adidas due to which the company has able to perform better in the market. It has also
been measured that the funds of the company are also higher which explains that the
company has used the maximum resources to manage the overall level of the business. The
below table explains about key financial indicators of Nike and Puma and Adidas.
Key performance indicators
Description Nike Puma Adidas
Revenue 36397 4136 21218
Cost of goods sold 20441 2182 10514
Gross profit 15956 1954 10704
Operating profit 4445 245 2063
Net profit 1933 136 1097
Current assets 16061 1765 8645
Current liabilities 5474 1056 6291
Equity 12407 1626 6450
Total liabilities 10852 1228 8072
Total assets 23259 2854 14522
(Morningstar, 2018)
It explains that the performance of Nike is quite better in the industry and the
company is largest company in terms of revenue at worldwide.
Ratio analysis:
Further, the ratio analysis study has been performed on Puma, Adidas and Nike. The
ratio figures and the analysis on those figures are as follows:
Net profit analysis: Net profitability level of the business explains about the profitability
position of the business. The ratio explains that the profit margin of the company is higher
and few changes would help the business to improve the performance.

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Description Formula Nike Puma Adidas
2018 2017 2017
Net profit 1933 136 1097
Equity 12407 1626 6450
Return on shareholder
funds
NPAT/ Total
equity 15.58% 8.36% 17.01%
Operating profit level: Operating profitability level of the business explains about the
profitability position of the business. The ratio explains that the operating profit % of the
company is higher in the industry.
Description Formula Nike Puma Adidas
2018 2017 2017
Operating profit
margin 4445 245 2063
Sales 36397 4136 21218
Operating profit
margin
Operating net profit
/ Sales 12.21% 5.92% 9.72%
(Morningstar, 2018)
Gross profit margin: Gross profitability level of the business explains about the profitability
position of the business. The ratio explains that the business is required to evaluate the
suppliers again to improve the position in the industry.
Description Formula Nike Puma Adidas
2018 2017 2017
Gross profit 15956 1954 10704
Sales 36397 4136 21218
Gross Profit
Margin
Gross Profit /
Sales 43.84% 47.24% 50.45%
Current ratio: Current ratio explains that the liquidity risk of the business is quite lower in
the industry. However, the company could reduce the level to manage the cost and extra
expenses of the business.
Description Formula Nike Puma Adidas
2018 2017 2017
Current Assets 16061 1765 8645
Current
Liabilities 5474 1056 6291
Current ratio Current assets/current 2.93 1.67 1.37

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liabilities
(Morningstar, 2018)
Quick ratio:
Quick ratio explains that the liquidity risk of the business is quite lower in the
industry. However, the company could reduce the level to manage the cost and extra
expenses of the business.
Description Formula Nike Puma Adidas
2018 2017 2017
Current Assets 16061 1765 8645
inventory 5261 778 3692
Current
liabilities 5474 1056 6291
Acid test ratios
Current assets-Inventory/current
liabilities 1.97 0.93 0.79
Efficiency ratios:
The efficiency ratios of the business has been calculated further and it has been found
that the required working capital of the business is higher in the market (Debrecht, 2014).
The business is required to make few changes to improve the performance of the business.
Description Formula Nike Puma Adidas
2018 2017 2017
Receivable 3498 504 2315
Total Sales 36397 4136 21218
Receivables collection
period
Receivables/ Total
sales*365 35.079 44.478 39.823
Description Formula Nike Puma Adidas
2018 2017 2017
Payables 2279 646 1975
COGS 20441 2182 10514
Payables collection period
Payables/ Cost of
sales*365 40.69 108.06 68.56
Description Formula Nike Puma Adidas
2018 2017 2017
Inventory 5261 778 3692
COGS 20441 2182 10514
Inventory days Inventory/ cost of 93.94 130.14 128.17

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goods sold *365
Gearing ratios:
The gearing ratio and market ratio of the business has been calculated further to
identify the investment level of the business. It has been measured that the company is able to
manage the gearing position in better way. However, the EPS level of the company is lower
in the market.
Description Formula Nike Puma Adidas
2018 2017 2017
Noncurrent
interesting debt 6684 172 1781
Equity 12407 1626 6450
Gearing
Noncurrent interest
bearing debt /
noncurrent interest
bearing debt + equity 53.87% 10.58% 27.61%
Description Formula Nike Puma Adidas
2018 2017 2017
NPAT 1933 136 1097
Num of ordinary
shares 1624 15 408
Earnings per
share
NPAT/ Number of
ordinary shares 1.19 9.07 2.69
(David, 2011)
Trend analysis:
Trend analysis of the business has been evaluated on the basis of the financial figures
of the company. The financial figures and the amount have been evaluated of the company in
the current and previous year and it has been compared with the financial figures of Puma
and Adidas to measure the overall position.
The overall study explains that the financial performance of the company has been
improved from last year. However, some of the figures explain about decrement but the
overall position of the company has been better. The company has managed to improve the
revenue and gross profit level. However, it has been found that the growth rate of the
company is lower than the competitors of the company which explains that the company is

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required to focus on those factors again (Dalken, 2014). The operating profit level of the
company explains about decrement due to increment in few expenditures of the company.
The resources of the company have also been lower than the Puma and Adidas due to which
the company the other factors of the company has been affected. It has also been measured
that the funds of the company have also been lower by the business. The below table explains
about changes in the financial performance of the company from last year:
Trend analysis
Description Nike Puma Adidas
Revenue 5.96% 14.03% 9.99%
Cost of goods sold 7.37% 10.76% 6.07%
Gross profit 4.21% 18.00% 14.13%
Operating profit -6.40% 91.41% 42.97%
Net profit -54.41% 119.35% 7.87%
Current assets -5.77% 6.80% -2.71%
Current liabilities 10.34% 17.99% -7.01%
Equity -20.92% -4.75% -0.34%
Total liabilities 17.25% 16.07% -7.26%
Total assets -3.11% 3.22% -4.31%
(Arnold, 2013)
Identification of issues and opportunities:
On the basis of the hard and soft analysis on Nike, it has been found that the various
issues are currently faced by the company. These changes are related to the financial and non
financial factors both. In terms of soft analysis, it has been found that the substitution risk of
the business is higher as well the economical factors of the industry are also a threat to the
business. In addition, it has been found that the bargaining power of the suppliers is also
higher in the market.
Further, the evaluation on the hard analysis express that the overall position of the
business is quite better in terms of the competitors, the growth rate of the business is higher.
It has also been found that the working capital management of the business is not good and
the overall position of the business has also been lowered from last year (Ackert and Deaves,
2009).

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The main issue of the business is from the competitor’s ad they are giving tough
competition to the company in terms of market share, profitability level, revenue etc.
Company is required to manage these factors effectively.
Strategy options:
The issues of the business could be resolved through applying new strategies in the
market. It has been found that the acquisition strategy could be used by the business to
resolve the issues of the business (Chernev, 2018). SAF analysis has been done on the
company to evaluate the strategy
Suitability It is the important factor. The acquisition
strategy’s suitability has been measured and
found that it is one of the better options to
improve the performance of the business.
Acceptability The strategy could be easily accepted by the
internal and external stakeholders of the
company (Brewer, Garrison and Noreen,
2005).
Feasibility The feasibility of this strategy is higher as the
company is in a better position to acquire
other small companies.
:
Best strategic models:
In case the acquisition strategy would be applied in the business than the following
changes would take place in the business:
Key performance indicators
Financial
perspecti
ve
Best case Moderate case Worst Case
Reduce
cost
The overall cost of
the business would
The cost % of
the company
Due to the changes in
the production and

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be lower as the
technology of the
business would be
improved.
would be
similar.
other activities, cost of
the business would be
higher.
Increase
d
revenue
s
The overall revenue
of the business due to
more market share.
The revenue of
the company
would be
similar.
Due to the changes in
the activities of the
business, revenue of
the business is
affected.
Internal
process
perspecti
ve
Product
ivity
The overall
productivity of the
business would be
higher as the
technology of the
business would be
improved (Brigham,
and Ehrhardt, 2013).
The
productivity
level of the
company
would be
similar.
Due to the changes in
the production and
other activities,
productivity level of
the business would be
lower.
Employ
ee
qualific
ations
The better
qualifications of the
business would help
the business to
improve the level.
The changes
and the
qualification of
the employees
would not
affect much.
The company would
not be able to utilize
the resources at their
maximum.
Custome
r/ market
perspecti
ve
Custom
er
Services
Customer service of
the business would
be improved
(Bromwich and
Bhimani, 2005).
Customer
service level of
the company
would be
similar.
Customer service level
of the business would
be lower.
Retain
high
value
custome
rs Better Normal Worst
Conclusion:
To conclude, few changes in the business would help the overall performance of the
company. The hard and soft analysis explains that the business performance of the company
is at best level in the industry.

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References:
Ackert, L. and Deaves, R. 2009. Behavioral Finance: Psychology, Decision-Making, and
Markets. Cengage Learning.
Arnold, G., 2013. Corporate financial management. Pearson Higher Ed.
Brewer, P.C., Garrison, R.H. and Noreen, E.W., 2005. Introduction to managerial accounting.
McGraw-Hill Irwin.
Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice.
Cengage Learning.
Bromwich, M. and Bhimani, A., 2005. Management accounting: Pathways to progress. Cima
publishing.
Chernev, A. 2018. Strategic marketing management. Cerebellum Press.
Dalken, F. 2014. Are Porter's Five Competitive Forces Still Applicable. 2-9.
Damodaran, A, 2011, Applied corporate finance,3rd edition, John Wiley & sons, USA
David, F. R. 2011. Strategic management: Concepts and cases. Peaeson/Prentice Hall.
Debrecht, D. 2014. Using the Boston Consulting Group Portfolio Matrix to Analyze
Management. Journal of Higher Education Theory and Practice, 65-69.
Enz, C. A. 2010. Hospitality strategic management: Concepts and Cases, 2nd Ed.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an
integrated approach. Cengage Learning.
Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2012. Strategic management cases:
competitiveness and globalization. Cengage Learning.
Home. 2018. Nike. (online). Available from: https://www.nike.com/in/en_gb/?ref=https
%253A%252F%252Fwww.google.co.in%252F (Accessed 9/8/2018).
Madura, J., 2011. International financial management. Cengage Learning.

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Morningstar. 2018. Adidas. (online). Available from:
http://financials.morningstar.com/income-statement/is.html?t=ADDYY (Accessed 9/8/2018).
Morningstar. 2018. Nike. (online). Available from:
https://www.morningstar.com/stocks/xnys/nke/quote.html (Accessed 9/8/2018).
Morningstar. 2018. Puma. (online). Available from:
http://financials.morningstar.com/income-statement/is.html?
t=XBER:PUM&region=deu&culture=en-US (Accessed 9/8/2018).
Nobes, C. and Parker, R.H., 2008. Comparative international accounting. Pearson Education.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2009. Managerial accounting: tools for
business decision making. John Wiley & Sons.
Williams, J.R., Haka, S.F., Bettner, M.S. and Carcello, J.V., 2005. Financial and managerial
accounting. China Machine Press.