Management Economics: Nike's Market Structure and Optimal Position

MANAGEMENT ECONOMICS 2

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1.About the company...................................................................................................................3
Products and services...................................................................................................................3
Company history..........................................................................................................................3
2.Analysing the market structure of Nike....................................................................................4
3. Different market structure........................................................................................................6
4. Optimal market structure.........................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
The management economics basically refers to the application of the economic theories
and models in the business practices which helps in effectively determining the impact of its over
the business performance. The business runs on the concepts of the economics like demand and
supply and the elasticity along the market structure in which it is operating. In this report, Nike is
taken as an organization which is into the sportswear industry and is focused on the athletic
running shoe products. This report provides an insight about the company and its products and
the market structure in which it is operating from its inception. It covers the change in the market
structure with time along with the nature of industry in which it is operating.
MAIN BODY
1.About the company
Nike is a greater and one of the biggest distributor of the athletic footwear and apparel in
the globe. The company is having a global presence and is expanded in nearly 108 countries. It is
considered as the world's foremost supplier of the athletic shoes and apparel along with the major
producer of the sports equipment. The logo of Nike is indicates that it yields the quality products
to its customers with an affordable price (ABOUT NIKE. 2020). This check mark is an assenting
symbol highlighting convenience which also indicates success. Nike Inc with its subsidiaries
works on designing, development, marketing and selling of its athletic footwear and apparels
globally.
Products and services.
The company offers Nike branded products into the 6 categories which involves the
running, Nike basketball, sportswear, training, the Jordan brand, football shoes. It also markets
the products which are specially designed for the kids along with the other athletic and the
recreational usage, for instance, American football, volleyball, skateboarding, cricket, walking,
wrestling, baseball and other outdoor activities. The company also sells the performance
equipment and accessories which involves the bags, sports ball, eye wear, digital services and
other accessories under the converse, one start, Chevron etc.
Company history
The company Nike was established in the year 1964 named as the Blue ribbon Sports by
the founder Bill Bowerman and Phil Knight. The company has become formal in 1971. It is an
American international company which is into design, develop and selling of the footwear

(History of Nike: Timeline and Facts. 2019). It is headquartered in Oregon, USA. The company
has employed over 76700 employees globally and in addition to the sportswear and the other
equipments, the company also operates its retail outlets and along with this, it sponsors may high
profile athletes.
2.Analysing the market structure of Nike
From the time of its inception the company has being operating in the oligopoly and is
considered as the classic case of oligopolistic market structure. In this, the number of suppliers in
the market were very less and this Nike dominates it. This results into accounting of the greater
percentage of the market share and increased level of market concentration. In the world market
of the sports apparel, the Adidas and Nike holds approximately 60% of the market share
(Lamantia and Radi, 2018). But later in the years, the athlete footwear and the other accessories'
industry become consolidated because of which the leading competitors of Nike Inc. which are
Adidas and Reebok merged in the year 2006. The product differentiation which is also the key
strength of the Nike in the marketplace. Which ash supported it in engaging in the sales of
footwear for various types of sports.
The graph given below represents the revenue of the organization during the initial years
of tits inception. It can be clearly seen that the revenue of the company had increased at the
greater pace every year from 1976 to 1981. In the year, 1976, the company had a revenue of just
$14.1 million which doubled in $28.7 and again doubling in the coming up years and achieved
the revenue of $457.7 million which is a huge jump in the 5 years (Nike Inc. 1981 Annual report.
1981). This represents that there must be less competition in the market at that time resulting into
taking advantage of the oligopoly market. Another important point is that the company was
engaged in the distribution and the selling of the sportswear along with the athletic bags and the
accessory items.