International Business PESTEL Analysis for Nike Inc
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This report provides a PESTEL analysis of Nike Inc, an American international business. It covers political, economic, social, technological, environmental, and legal factors affecting the company's performance. The report also suggests strategic responses to the identified issues.
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INTERNATIONAL BUSINESS PESTEL ANALYSIS
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TABLE OF CONTENTS INTRODUCTION...........................................................................................................................3 PESTLE analysis.........................................................................................................................3 Strategic Response to PESTLE analysis.....................................................................................6 CONCLUSION...............................................................................................................................8 REFERENCES................................................................................................................................9
INTRODUCTION International business means movement of goods, services, technology and human capital across different countries or national border. The business which have its operations in more than on country is known as international business. This presentation is based on Nike Inc which is an American international business having headquarter in US. The company basically engaged in thedesigning,developmentandmanufacturingoffootwear,apparel,sportsequipment, accessories and other services. The purpose of Nike is to provide inspiration and innovation to athlete and move the world forward through the power of their sports equipments. Nike Inc is worlds the largest athlete apparel company having its operations worldwide along with the net income, total assets, total equity and number of employees of US$2.54 billion, US$31.34 billion, US$8.06 billion and 75,400 respectively in the year 2020 (PANDEY, 2017). The organizational structure follows by Nike is hierarchical which is further broken into three key segments such as global headquarters, regional headquarters and subsidiaries. The competitive strategy of Nike is cost leadership strategy with the help of which defend their market position and gains a competitive advantage. PESTLE analysis Political factor: The political factor of Pestle analysis helps the company to analyse and understand degree of government intervention and how it affects the present and future of the business. The government policy of US is fantastic which includes the low interest rate and well arranged international tax agreement. Basically, US market is a core market for Nike company because the company generates around 41% of the revenue because of low tax rate policy. But on the other side, because of the government decision regarding US-China trade it was estimated that the companies such as Nike need to pay high tariff on imported raw material. The impact of which the American customers bear an additional cost i.e., around $7 billion per year. It is because 10% of the Nike goods are produced in the China and are imported in the US from China (Riwayadi, Deliabilda and Panahatan, 2021). Another issue faces by Nike company because of this change is diversification in supply chain and further because of the trade restrictions the company unable
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to sale its goods to China customers. The overall impact of this over the company is that their sales and profitability get highly decreased. Economical factor: The economic factor involves the variables such as economic growth, interest rate, inflation rate and unemployment rate impact over the business performance. The unemployment rate of the US in the year 2021 is 6.3% which was drop by 0.4% from the previous year (Alina, 2020). The impact of this over Nike company is that the company basically get high skilled labour force at low cost. However, because of Covid-19 the government has imposed lock-down which leads to temporary closure of business. The impact of such change over the business is that their sales has decreased because the spending pattern of the consumer has decreased. The companies have cut their employees salary along with that various consumers has also lost their job which has largely affected their savings and buying pattern. Products of Nike company is high in price which is only targeted to high income people and after the decreased disposal income and spending pattern the sales of Nike is also decreased. It is identified in the research that availability of cheaper substitute products is a threat for the company like Nike because consumers prefer more decent and low cost products. Social factor: The social factors majorly affects the sales of the sports equipment industry that's why it is advisable to the companies that have to map the social condition of countries in which they operate. The various social factors includes are safety emphasis, lifestyle attitude, population growth rate etc. People of different countries are more focused towards their health and thus their lifestyle has changes which have impact on health. This factor is an opportunity for Nike because they provide products such as sports equipment which promotes the health approach among the people. The aim of the company is to promote the health and fitness among the people which further result into the increased brand value of the business (Abdulla and Borar, 2017). However, the social issues faces by Nike safety issues regarding the products. Nike needs to change their production process in order to produce safe sport products such as footwear etc. It is because the consumers trust over Nike and maintaining their trust is the first priority and responsibility of consumers.
Technological factor: Technological factor consist of innovation in the industry. It considered the research and development activity in this factor. It also involves the digital and mobile technology which is in trend as per market research. It delivered new methods of the dispersionor segregation, fabrication and logistical. Technological factor delivered capability to innovate or organize the services or commodity(Grose,2021). With the assistance of the technological support the organization can deliver the services in the effective and efficient manner. Technology supports the Nike in interacting with the customers as well as values to the organization. The organization innovates the commodity as per the availability of the technology. In context to increase the brand value the organization use online platform, like social media. The organization utilized Facebook, Instagram, Pinterest, google etc. to increase the brand value.Through the technology the organization is connected with the potential consumer but over utilization is harmful. The organization have opportunity to modify themanufacturing process and client service sector. The company is pressurized to increase the scale of production and development efforts.The organization have opportunity to reduce the risk of the company.Nike highly invest in the technology for research and development of the organizational product. Environmental factor: This factor is highly concern with ecological impacts on businesses. The organization willbeenvironmentalfriendlyunderthisfactor.Itconsistsofatmosphericcondition, temperature, climate alteration, impureness and natural disasters(Matovic,2020.). Many of the product produced by the organization is recyclable. the organizationutilized the raw material which is of plastic. The organization delivers eco-friendly as well as sustainable commodity to the consumers of the organization. Extension of environmental law create the opportunity for the organizationtoimprovetheplansofactionregardingtheenvironmentalprograms.The organization produces adequate amount of air pollution. Along with this the administration also realize chemicals in rivers which create water pollution too. The creation of the pollution decrease the brand value in the marketplace. Due to deforestation and banned on leathers commodity affect the organization. The organization promise to providethe bag which are environmental friendly. The organization have opportunity to attract more customer by reducing environmental waste. The organization faced regular pressure from NGOs and environmentalists.
The organization develop plan of action to deliver the services totally environmental friendly in forthcoming period which is challenge for the organization. The organization developed various strategy for waste management. Legal Factor This factor consists of legal forces of the market. It covers the relationship of the organization with the authority or the governing body of the nation. It consists of various rules and regulation of the marketplace impose by the governance of country.The business is operated with the permission of the authority only (Yusop, 2018). Industry regulation, licences and permit, labour or the employment law , intellectual property is the elements of law. The organization need to follow all the norms of international market as every country have different lawsuits. The company have opportunity to deliver high standard for labour and workers. The organization have opportunity to scale up customer satisfaction by expansion of the consumer law in the developing country. The organization can lead the opportunity by offering good health and safety regulation to the workers under employment law of country. The case of false discount offered by organization ruins the picture of brand in the market. The another threat the organization faced that is tax evasion which need to ratify on the urgent bases to improve the brand value in the marketplace. The organization follows all the norms of the market in order to acquire the attention of the consumer. Strategic Response to PESTLE analysis On the basis of the analysis of Pestle factors, the strategic response advisable to Nike Inc is application of appropriate pricing strategy. It is the duty of Nike company that they have to adopt the value-based pricing strategy rather than premium pricing in order to keep their customers with themselves even at the time of financial crises. For this, it is further advisable to the HR function of company that they have to hire employees which helps in reducing the unemployment rate. Further, in order to solve the economic issue of high tax rates the finance function of Nike need to analyse the various investment options for tax benefits. It means in order to reduce tax expenses the company need to reduce their profit and for reducing profit the finance team of the company need to raise their funds more from debts rather than equity. The consumer of Nike able to get the same products at cheaper cost from somewhere else which is a threat for the company (Husak and et.al., 2020).
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In order to resolve this issue and adopt value-based pricing strategy, the finance team of Nike need to work together. The production process need to be improved by company which is the duty of HR department (Abdulla and Borar, 2017). For this, the HR team of the company need to analyse their current workflow and further implement the training and development for the employees. With the help of training, the employees of Nike able to complete their targets on time without wasting too many resources. The reduction in wastage of resources will leads to reduction in the overall cost of production and improves production process. Human resource management The management of human resources department is managed by the mangers of the organization. The manger plan, coordinate, cooperate and direct the various plans of action in order to achieve the goals of the organization. The manger of the organization examine or analysisthe threats and opportunities of the company to lead the international market fully (Andre,2020). In order to solve the technological threats employees of the firm keep tracking the activity of the customer on the product. The analysation of the negative reviews given by the consumers on online platform is resolved by the employees on the regular bases. The leader of firm work on the demands of consumer and manufacture the goods as per the interaction with the customers. The employees regularly asked for feedback through the online platforms such as Facebook, Instagram, websites etc. and work on it. The manger took major steps to resolve the environmental threats and acquire the opportunity for further growth of the business. In order to protect the planet the organization focused on chemical element, waste, H2O and chemistry. The organization aim to deliver fully renewable electricity and fleet electrification. The company gathered all the waste from the consumer and recycle as well as donate them. Along with the organization work the manger engaged the workers in the environmental protection work. The manger of the organization start focusing on the decreasing the child labour with in the firm. The leader form rules and regulation for the employees in order to treat the customer in fair manner. The company determine the false discount issues and started delivering the right discount offer through the online platforms.The institution allows the female participate in the organization with almost 50% participation ratio( Grünig, and Kühn, 2015.). In order to build impression on the customer, the firm invest in pre-tax income. The organization maintain equality among the employees under the legal system of employment rules.
CONCLUSION From the above report it will be concluded that the organization identify all the aspect that impact the growth of the organization. Through the pastel analysis the organization identify the threats and opportunities of brand. The organization increased the brand value by working on threats and the opportunity. Furthermore, human resources management and finance department took major steps to resolve the issues analysed in the PESTAL analysis. Both the department play crucial role in addressing the issues in a adequate manner(Alsaffar, 2020).
REFERENCES Books and Journals PANDEY, B. C., 2017.Nike Inc-Complete Analysis: SWOT, PESTLE and Marketing strategy. BookRix. Riwayadi, E., Deliabilda, S. A. and Panahatan, M. B., 2021, August. PESTLE ANALYSIS OF FINANCIALTECHNOLOGYININDONESIA.InInternationalConferenceon Innovations in Social Sciences Education and Engineering (ICOISSEE)(Vol. 1, No. 1). Alina, F., 2020. THE IMPACT OF COVID-19 ON PROMOTION OF BRANDS. InThe science of the XXI century: challenges of the contemporaneity [Еlectronic edition]: proceedings of the all-Ukrainian scientific and practical student conference (Kyiv, May 14, 2020)–Kyiv: Kyiv National University of Trade and Economics, 2020.–477p.–English, German.(p. 38). Abdulla, G. M. and Borar, S., 2017. Size recommendation system for fashion e-commerce. InKDD Workshop on Machine Learning Meets Fashion. Husak, V. and et.al., 2020. Information System for Recommendation List Formation of Clothes StyleImageSelectionAccordingtoUser'sNeedsBasedonNLPandChatbots. InCOLINS(pp. 788-818). Grose, V., 2021.A Practical Guide to the Fashion Industry: Concept to Customer. Bloomsbury Publishing. Andre, R., 2020. Practice 4. Define the Business of Business. In Lead for the Planet (pp. 129- 164). University of Toronto Press. Yusop, Z.B.M., 2018. PESTEL analysis. COMRAP 2018, p.34. Alsaffar, H., 2020. Nike’s Marketing Mix and PESTEL analysis in China. Matovic, I.M., 2020. PESTEL Analysis of External Environment as a Success Factor of Startup Business. ConScienS, p.96.
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