Analysis of Nike Inc. for Business Expansion in Germany

This report analyzes Nike Inc.'s plan to expand its business activities in Germany. It includes a PESTLE analysis of the German market, insights into the business environment, and a Porter's Five Forces analysis. The report highlights the opportunities and challenges for Nike in Germany.

Create a report to provide analysis of
Nike Inc., looking to expand business
activities in Germany as allocated
country. The scenario to relate to a

INTRODUCTION
Business expansion is related to opening new stores in various physical locations while
still maintain current business locations. Expansion provides the opportunities to the business to
provide the diverse range of services and products in another country. Present report is based on
Nike organization as this is an American multinational corporation that mainly engaged in
development, manufacturing and designing apparel, footwear, equipments and some other
services. In this report, Nike is planning to expand its business activities in Germany as the
allocated country. Foreign Direct Investment is an investment in form of controlling ownership
in business in one country through entity based in the other country. In year 2018, Germany FDI
inflows at USD 25.7 billion. In first half of the 2019, FDI flows to Germany enhanced by more
than USD 20 billion (Chickering, 2019). From this analysis, Nike can able to expand its business
in Germany country as to target new customers and enhance its market share.
BACKGROUND INFORMATION
Nike is Multinational Corporation that is specialized in development, production and
designing the footwear, accessories and equipments. This company was founded in year 1964 by
Bill Bowerman and Phil Knight. It headquarter is in Beaverton, Oregon, United States. In this
organization, there are more than 731000 staff members working. It provides its services and
products in all over the world. Market share of Nike stands about 27.4% in year 2019. Fiscal year
2019 ended with $39.1 billion in revenue and it is 7% enhance from previous year, which saw
the revenue come at $36.4 billion. The business of Nike organization is performing in a better
manner. Net income of Nike organization enhanced to $4 as comparison to $1.93 billion
(Cuervo-Cazurra, 2016).
Nike organization has the geographic divisional organizational structure. It is based on
requirements of an organization in global company and also uniqueness of the situations in
regional markets. The General Public ownership of Nike holds 12.9% stake. Nike is publicly
traded under symbol of NKE. At present, stock is in $ 65.00 range. Currently, Nike conducts its
international business as it is well known brand and sell its shoes in all over world. This
company can keep the down labor cost through using the laborers in developing world. This

helps Nike to maintain more profit and keep the investors happy. At present, Apparel, athletic
shoes, accessories and equipments are mainly manufactured in more than 700 plants which
located in the 42 countries. At core of international marketing operations is creative that proved
to be strong edge for brand in order to maintain the superiority over competition (Euler and et.
al., 2016).
Figure 1: Revenue Performance of Nike
(Source: Revenue Performance of Nike, 2014- 2018)
BACKGROUND INFORMATION ON THE BUSINESS ENVIRONMENT
Business environment is sum of the internal and external factors like staff members,
supply and demand, suppliers, customers and activities through government, technological
innovation, market trends and many others. It is marketing term that is related to forces and
factors which impact ability of company to develop as well as maintain customer relationships in
successful manner. The business is mainly impacted through the various factors which
collectively form business environment (Fasone, Kofler and Scuderi, 2016).
PESTLE analysis is framework that is mainly uses to analyze factors impacting company
from outside such as political, economic, social, technological and environmental. These macro
environmental factors are used in environmental scanning elements of the strategic management.
In order to expanding business in Germany, Nike company is conducting the PESTLE analysis

for analyze the situation of Germany. From this, it can know about the opportunities that can be
gained from expanding business activities in Germany (Gerpott and May, 2016). The PESTLE
analysis given below:
Political factor- This factor stated about how and what degree government intervenes in
an economy. Germany is demographic and parliamentary republic. This country is considered as
the technological leader and having manufactured high qualities of services and products. Nike
company can able to expand its business in Germany as there is technological advancement and
company can get the better opportunities to make innovations in its products and services so that
or can able to satisfy the needs and demands of consumers in an effective manner. Other than
this, International uncertainty has ranked Germany recently. Inevitable changes in management
and the imminent threat of Brexit triggered a major disruption in the country's political
environment. However, since Germany has a past in which to select stable regimes, it can expect
to lead Europe again in new age. In context to this, Germany is well known for its better working
conditions for its expatriates and citizens. This is mentioning that staff members of Germany
enjoy the generous advantages like long holidays in European Union, job protection and some
highest salary in world (Gourevitch and et. al, 2016).
Economical factor- This examined determinants of certain economy performance. The
factors involve in economic factor ate economic growth, inflation rates, exchange rates, income
of consumers, unemployment rates and the interest rates. The stable German labor market is
quite strong, with a 3,2% unemployment rate becoming one of world's lowest. For its people and
expats, Germany is known for its excellent working conditions. In regards to this, Germany has
mixed economy with budgetary surplus (Hoffman, 2019).
Social factor-It is related to dimension of general environment stated demographic
characteristics, customs, values and norms of population within which company operates.
Germany is one of the best places to live on earth, because of its high economic standards as well
as educational and the technical advances. The nation has a low birth rate that contributes to a
declining population, mostly elderly. It has been examined that in Germany, people have the
high living standard. Germany is a social welfare society and people can shape their lives
freely. Mainly, Germany country is known for its punctuality, strong ethics and the hard work
(Khodayar, 2017).

Technological factors- This factor is concerned with the technology innovations which
may impact operations of industry and market unfavorably or favorably. Germany in several
ways promotes national science as well as technology. It consists of separate laboratories.
National labs and private research are also open. The sector supports a variety of important
research and development forms. The Department of Science and Technology is an institution
that coordinates the national research and technology programs in Germany and decides
priorities for them. Germany is mainly considered as 5th technological advanced nation with an
expertise across many sectors like infrastructure, engineering and medicine. Germany is also
leading nation in context to information technology and made significant advances n area of
machine learning and Artificial Intelligence (Gross, 2019).
Environmental factor- Germany has a very country-specific market climate. If new
business has to expand, it must connect with local distributors. This cannot establish its
distribution network unless an organization recognizes local requirements of supply chain. Many
government regulations must also be adhered to. Other than this, Germany faces threat of the
global warning and also climate change. The environmental pollution with rapid industrialization
and fossil fuel use has prompted nation in order to adopt heartening alternative energy sources
policy. The government of Germany has taken the effective initiatives to tackle all the
environment related issues in an effective manner. Though maintaining equitable growth, the
Government has agreed to use same money. A German panel appointed by the government also
recommended that country stop burning coal to power by 2038 (Magnier, 2017).
Legal factor- The German legal system stipulates stringent labor regulations and
stringent lay-offs guidelines. The legislation often compels the company to file annual reports
even though the firm is not reported publicly. Unlike other developed countries, pay rates permit
central negotiation of salaries. On the other hand, legal framework of Germany allows both
residents and international investors to build business enterprises. The country has become a
global attraction for investors attributable to an excellent investment climate, high-end
infrastructure and structural changes to corporate tax rates. German workers must be given a
formal employment contract detailing the main aspects of jobs. Minimum wage is €9, 19 per
hour in Germany in 2019, which will rise marginally from 1 January 2020. That's not rare to
have 25 and 30 days of holidays a year for workers in Germany (Stolper, 2017).

It has been examined from the above discussion that Nike Company can expand its
business in Germany as there is political stability and commands positioning advantage in
World. Economy of this country is strong with the low unemployment rate. In regards to this, it
prowess technology, strong economy and also excellent investment that prospect help Germany t
remain force to be reckon with.
Porter Five force model
There are number of opportunities within the footwear industry is trading. Company has
to identify this opportunity by the use of porter's five force model. Porter's five force model is
developed by Michael porter, the five force model is a powerful competitive analytical tool
which is used by the business firms to identify the five important factors. These will help
organization in driving competitive position within the industry of Germany. It includes the
competition new entrants, suppliers and substitute of the product. This model will help
organization in identifying, how each force affects the organization and identify the strength and
the direction for of each force. These will help Nike in identifying its strength and positions for
increasing the profit within the industry (Varelas and Georgopoulos, 2017).
Sources: Porter Five force model, 2020
Competitive rivalry and competition (strong force): competition and important foods
to identify by Nike meaning and market. It helps in identification of what is the influence of
competition on an organization to perform at its best level. The low market growth rate leads as a
strong force as because of polices related to market penetration and market saturation. This
condition created a strong for sound and lighting and the other companies to compete in the
market because of slow growth. Nike position compared to other brand than it have aggressive
competition as well as big brand image which make it impossible for other brand to compete
with the form and make a competitive rivalry within the market. This is the reason that this factor

actors and strength of the company and strong force of Nike. Real Nike can focus the market
development as well as product development to ensure the competitive advantage and growing
number of shares within Germany athletic shoes as well as equipment market.
Bargaining power of suppliers (moderate force): number of suppliers in footwear
industry with Nike trading is moderate force company as company can use the bargaining power
with its supplier because of high availability of suppliers. But sum of products which are
manufactured by company like sports shoes for designer shoes include the raw material which
company have to buy from specific sellers because of their technology and innovation. this is the
reason that they this force is moderate to the company because it cannot execute the bargaining
power on this type of suppliers. Nike can also demand credit period for raw material from its
suppliers who are in large number in Germany (Aithal, 2016).
Threats of substitute (moderate force): substitute positive significant front against the
performance of firms if it is talk about Nike then there are some major substitute of the product
which can be to affect the performance of Nike in global athletic shoes market. The factors
which are considered in this pointe are moderate availability of substitute, moderate performance
per price of substitute and low switching of cost. If it is talk about the loss of cost it is a strong
factor for Nike because other brands cannot copy this. But the availability of substitute and
performance price per substitute is low within the Nike. This is become the reason that there is
small thought of substitute to the company if it is compared on the price and availability basis.
Threats of new entrants (weak force): new entrants on new forms can not disturb the
industry. Where, Nike trading this is because there is high cost of brand development as well as
hike nominal scale which will act as a difficulty to new entrant within the market. The moderate
cost of doing business can act as and moderate force within this type of force but it is not a big
issue for company like Nike because industry is full of competitors. But they are feeling to
compete with Nike because of the brand image as well as you ignore me of scale. High level of
brand development makes it difficult to new entrant for succeeding in competition in the large
form like Nike (Lüttgens and Diener, 2016).
Bargaining power of customer (moderate force): customer care directly affected by the
business performance of the organization, the low switching cost make it easy for the customer
to buy the sports shoes of other than those from the Nike which act as a strong force for the
industry where Nike trading and it must be considered by the organization deeply. The moderate
availability of substitute also has the customer to buy other product instead of always wearing
the same shoes of Nike. What do small size of individual customer minimize their individual
forces on the company that why company can take this factor as a moderate force within the
industry footwear and sports shoes. Element of five force model analysis shows that the forces of
customer is a major consideration for the company like Nike because it can affect their strategies
of athletic footwear and equipment market of Germany (Björk, 2017).

CONCLUSION
It can be concluded from the above mentioned that there are some issues which
have to be considered by Nike while performing its business operations as well as identification
of business strategies for development of business in Germany. Clearly identify its weaknesses
as well as threats prior to launching the business ventures in Germany because its threat and
weakness can act as a drawback for the company. So it is recommended to the company that it
should clearly identify its weaknesses which will reduce the chances of failures of operations
Germany. some issues are also highlighted while performing the porter's five force model for
formation of a business strategies within the organization the main issue which arises in front of
company is that there are some competitive rivalry and competition within the market as well as
bargaining power of customers with treat of substitute and bargaining power of suppliers are
audit also moderate forces which have to be considered by the organization while forming a
business strategy for market of Germany. From the pestle analysis of organization it is also
identify that there are some political and social reasons which can impact in future of the
organisation.so, it is also recommended to the company that it have to clearly identify the
political policy as well as social trend in the market of Germany where from one to launch its
business or products.

REFERENCES
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Online sources

Porter Five force model. 2020. [Online]. Available throughout: <
https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html >