Nike's International Business Strategy

This assignment analyzes Nike's international business strategy, examining its strengths such as global brand recognition and partnerships with Apple and athletes like Tiger Woods. It also identifies weaknesses like currency fluctuations and overpricing by retailers. Opportunities include expanding into new markets and investing in technology. Threats include environmental concerns and economic instability. Finally, the assignment proposes a competitive advantage strategy for Nike based on improving worker welfare and motivation.

Running head: ATHLETIC FOOTWEAR MARKET IN THE UK
Athletic footwear market in the UK
Name:
Date:
Institution:

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5 Forces analysis on the athletic footwear market in UK,
Nike Inc. has over the years been one of the largest sportswear production firms around
the world. As a result, it has gained worldwide recognition owing to the high-quality sportswear
kits they produce. The firm has also been able to conquer other bigwigs in the market and thus
secured its place in the global arena. Being a globally established sportswear corporation, Nike
has faced various challenged gaining entry into new markets and in most instances, the barriers
to entry have jeopardized the entire functioning of the organization along the way. Nike Inc. has
experienced various obstacles, but the market forces have not stopped the firm from achieving
the ultimate goal of providing sports shoes to most countries in the world. The market forces that
affect Nike Inc can easily be assessed by the use of Michael Porter’s five force analysis. The
model tends to look all the vital elements that influence the distribution and the sale of footwear
across the UK and other parts of the world. The forces can either affect the external or the
internal environment based on the area which they concentrate mostly. The forces can either be
strong moderate or weak basing on how they affect the market orientation of Nike Inc. The five
forces are described below.
Competition is one of the major market forces that affect the market share of Nike’s
goods and services. The competitive rivalry as it is considered in the wider scale involves some
of the major competitors of Nike in the sports shoes and others sportswear. The element of
competitive rivalry helps to maintain the company in the global arena and also facilitate its
penetration into unexplored regions. Additionally, the competitive rivalry serves to influence the
operations of Nike either externally or internally based on the level of control it applies towards
the activities of the firm. Crane points out that competition is an essential part of any business
entity and can be used as a mirror to gauge the level of development achieved by any business

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entity (Crane, 2010 p.46). For the case of Nike, the major external competitive rivalry they
experience low market growth rate which is a strong force that significantly affects the sales of
the corporation. The implication of this effect is that the substituent companies crave to enter a
market setting that grows at a slower rate. Additionally, high aggressiveness from other
enterprises seeking entry into the larger markets and occupy a larger market share has acted as
one of the forces affecting Nike's marketing strategy. Moderate amount of firms serves as a
reasonable force that affects the functioning of Nike Inc. In an aim to surpass all these forces,
Kuroiwa asserts that the company has to put more focus on the product development so as to
create a competitive advantage to surpass the competitors (Kuroiwa, 2012 p.65).
Another reasonable force affecting Nike Inc. is the bargaining power of their customers.
The bargaining power affects the overall performance of the firm. In this instance, the bargaining
power brings about low switching costs, which gives the clients an easy time purchasing the
sports shoes from other producing brands other than Nike. Amos and MacLaren also confirm
that the bargaining power creates a favorable environment that promotes substitutability of
Nike’s products with other manufacturing brands (Amos and McLaren, 2016 p.95). Thus to
surpass the bargaining power by the clients the firm has to ensure it invests more in
advertisement and production of high-quality merchandise.
Furthermore, the bargaining power of Nike’s suppliers works as a weak force towards
assessing the market force of the company. The suppliers affect the business through the
provision of raw materials which he may choose to overprice thus jeopardizing the output of the
firm which may influence the pricing of the final output. A Large population of supply affects

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the individual suppliers and their demands for huge companies Nike Being an example.
Additionally, a modest number of different suppliers is a moderate force that alters the setting of
the firm. Though the vendors act as one of the market forces, their interference is of less
significance to the overall orientation of the footwear market. In the sports shoes, apparel and the
equipment industry Nike has the mandate of formulating unique strategies that can adequately
address this issue.
Kuroiwa points out that the threat of substitution is a market force that significantly
affects the market for goods from Nike (Kuroiwa, 2012 p.99). It is evident that substitutes pose
great threats against Nike’s performance as one of the leading corporation supplying athletic
shoes. Some of the significant risks posed by this force are the average performance per price of
the substitutes. The customers at certain points have the likelihood to consider the alternatives
over Nike’s apparels and sports shoes. Furthermore, low switching costs immensely affect
Nike’s client base. When customers have easier and less costly substitutes, they can quickly
switch to suit their satisfaction consequently altering Nike’s customer base.
The threat of new entrants also works as a market force that alters the functioning of
Nike’s client base. Kahle and Riley distinctly put it that new entrants into the new pose threats
in the sportswear market as they bring about changes which may be negative or positive based on
the area they affect (Kahle and Riley, 2004 p.48). The high cost of brand development is a weak
market force posed by the new entrants into the market seeking to run against Nike Inc.
Additionally, high economies of scale is a moderate force that is experienced in the quest to try
new markets. With the large economies of scale, Nike has a greater competitive edge against the
new entrants and the other competitors in the global market. Giving consideration the global

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level of production and distribution of athletes shoes in almost each part of the world, hence the
economies of scale acts as a moderate force affecting their total market share. Furthermore, the
cost of doing business is part of the reasonable force which affects the business orientation by the
firm (Armstrong and MacLaren, 2016 p.74). Hence checking on all the forces affecting Nike’s
market share in the footwear industry, the threat of new entrants is a minor threat because Nike is
an already established industry with clients in almost each part of the world.
All these factors serve to affect the stability of Nike in the global market. It is, therefore,
the responsibility of the management to improvise ways and mechanisms to help secure its place
in the UK athletes’ footwear industry. Thus after ensuring these factors are addressed, the
managers guarantee that Nike maintains its brand name, the status and the orientation of the
business and ultimately lead to expansion into other unexplored markets around the world.
Analysis of the assets and competencies of Nike’s internal environment
Nike Inc as a company has an internal auditing team that is mandated by Nike
management that has the responsibility to analyze the company’s internal environment and as a
result, come up with decisions and recommendations that are implemented by the management
team. They have done proper market research, and as a result, the company has realized how
fashion plays a significant role in the dressing industry now. With this regard, the company is
now more aware of the fashion trends, and as a result, they are revamping their apparel division
to make it more fashionable and trendy too. The company’s research on this end has proved very
profitable as they can evolve their products with time and making sure that their products have
continued to be in demand even as the times and the trends are continuing to change. Nike Inc

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has also done proper research on market pricing and product as well. The management team was
given unyielding recommendations to continue their focus to the high-end market as well as
ensuring the company is increasing its share in the market for the products that range in the
middle and low price section.
The management does this with the aim of broadening Nike’s product market and
demand. The move, as researched, seeks to tap the market of middle to low priced section of
purchase of goods. In respect, the company is looking into developing new products that lie
within these sections to widen the scope of the market and at the end to increase its profitability.
They are also giving their initial consideration to high-end products as they proof very profitable
and they make the brand outstanding due to their quality. These two measures are proofing quite
essential as the profit margins have been noted to be very high as pointed out by the auditing
section of the company when the routine auditing practices are carried out. However, the
company’s inability to foresee problems and difficulties as far as bad publicity is concerned has
proved a massive problem which has led to the decline in profits. The society currently seems to
be interested in companies that are more socially responsible, and it is this section that Nike Inc
has been unable to fit in. The company’s image is bad as they are viewed as a non-social
company irresponsible of the social requirements.
The tainted picture has negatively publicized the company reducing the sales and as a
result dropping the profit margins in the long run. These failures in meeting social approval are
arising because of the company’s inability to improve the factory conditions of the various
facilities within the banner of Nike. In addition to this, there have been complaints about labor
conditions all over the different branches of the company which has also played a role in tainting
this company’s image (Potter, 2010, pg 3). This aside, the company remains a competent

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company and still is amongst the leading companies in the world in sports and fitness regardless
of the stiff competition. Their products are and continue to be valued all across the world
something which is seen due to the profit margins made by the company as much as their image
is not as good as it were before.
The competencies of Nike Inc exist in the marketing strategies that are also responsible
for innovation of the company’s products as far as design is concerned. The innovativeness of
their products will set the products from Nike apart from the rest meaning that they are safe from
imitation from the other competitors, especially in sportswear. The two elements mentioned
above are imperative as it is arguably stated that they are the ones that still make Nike the
company it is today, which is their innovative products and their marketing strategy. The
marketing strategy by Nike is the one that lures clients in the sense that the clients are attracted
by the brand which has the slogan “just do it” which makes it very distinctive and very attractive
as far as the purchase of the product is concerned (Potter, 2010, pg 5). The marketing strategies
involve the company making deals with famous athletes and sportsmen, professional teams as
well as athlete endorsements that are aimed at marketing the products through the fame of such
professionals raising the market and increasing the popularity of the commodity meaning more
sales and eventually large profit margins. However, it is the innovativeness of the products from
this company that makes them outstanding as far as sales of sportswear is concerned. The
company’s creative product design focuses its value on the use and the essence of the
technology. They have been able to pioneer cushioning of shoes that can prevent shock or rather
reduce it. In addition to this, this division on innovation and design has been able to come up
with cushioning designs for shoes that can distribute pressure throughout all the parts of the shoe
and also protect the leg from impact when it is intense as well as offer comfort.

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Some of these technological developments that are very outstanding include Nike Air
Max and Nike Shox among many others. These innovative goods are essential as they raise the
level of performance of the consumers of the products and bring much more comfort to them too
(Distelhorst, 2016, pg 2). The company has also been able to come up with a website that has
created an online customization for their products meaning they can reach an even wider market
regarding advertisements and sales as well. The site enables consumers to easily customize as
well as buy sportswear concerning shoes and athletic gear too. By ensuring they focus on their
competencies, Nike Inc will remain and has remained to be the leading distributor and supplier
of as well as a large manufacturer of sportswear and sports equipment as well recording very
high revenues and huge profit margins that set them up and above its competitors.
A SWOT analysis for Nike (UK) and competitive advantage strategy
The growth and success of any company solely rely on the structure and how it has
devoted and structured all the factors of production. All the parameters involved in production
should be in alignment with each other and coordinate successfully to ensure the estimated yield
is generated all year round. Nike Inc. is one of the most competitive sportswear, apparel and
equipment production firm in the world. An analysis of the various structures and departments
make it easy to administer as pointed out by Phil Knight, among the founders of the corporation.
Owing to its competitiveness, the firm uses various mechanisms to gauge their level of progress.
An important analysis tool is the SWOT analysis which checks at the Strengths of the company,
the weaknesses undermining its operations, the opportunities which they can utilize and finally
the Threats which they are exposed to in the ventures in the sportswear industry. Crane points

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out that Nike business is a competitive one and always seeks to outdo their competitors (Crane,
2010 p.84).
Strengths
Nike Inc., considered as one of the most competitive organizations in the world, has very
much strength in the sportswear industry. The ability to utilize their strengths has acted as a
valuable stepping stone towards the competitive advantage they have against other major firms.
One of the major exercises of the powers is during the Atlanta Olympics. Reebok was chosen to
be the primary sponsor of the game, but Nike went ahead to sponsor the top athletes in the games
thus they were accorded valuable reporting. Additionally, Nike is a universal brand, and it
exposes itself as the number one sportswear brand on the planet (Distelhorst, Hainmueller, and
Locke, 2016 p.125). This is also due to the research and development that are done on the
products. Furthermore, the firm happens to manufacture very high-quality brands and sells them
at the lowest possible price. Finally, the brand is also an innovative and high-quality footwear
company thus has outsmarted all the other competitors in the game.
Weaknesses
Nike Inc. is also associated with some significant gaps in the shoe business. Crane
observes that the firm is short of a range of diversified footwear (Crane, 2010 p.136). Basing on
statistics, the significant part of the revenue is dependent on the footwear market. Relying on one
primary source of income makes the firm vulnerable in instances where the market erodes.
Additionally, Nike’s retail sector is very pricey, and this causes the business to lose a larger
client base that ends up seeking alternatives. Several reports have also emerged stating that the
firm engages in unethical business practices. There have been claims that they make use of child
labor and also fail to recognize the employee codes of overtime and the minimum wages. All

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these elements tend to tarnish the reputation of the institution and consequently affect its market
share. Finally, the firm has also had management issues since the resignation of Phil Knight as
the CE0 in late 2005. The managerial sales have affected the global sales of Nike in the past few
years.
Opportunities
In the course of production, Nike has positioned itself to many opportunities which have
aligned themselves. Product development has been one of the major opportunities that the firm
can openly associate with quickly. It is through this that the company was able to identify itself
as a fashion brand in the UK. Due to its global brand recognition, the firm has been able to grow
internationally. Nike has used this channel to enter new markets thus increase their total yearly
revenue. Nike also can invest in its own Nike technology. This is a partnership that involves
Nike and Apple Company that checks on the heath speed and other factors about health and
fitness. Given the fact Nike has been able to enjoy global recognition they also act as endorsers
and sponsors of various sportspersons and events like Tiger Woods’ and major golf tournaments
respectively (OECD, 1997 p.34).
Threats
Nike has also had a share of threats in the international trade process. The significant risk
experienced being the global nature of commerce. Currencies from various parts of the world
fluctuate or appreciate over a given time, and such exposure jeopardizes the operations of the
industry if they do not become stable. The sales and the profits are hugely affected in such
instances (Kahle and Riley, 2004 p.167). Another threat exposed to the firm is the overpricing by
the retail shops which may drive away the client base thus destabilizing its position on the global
scale. Additionally, environmental challenges also pose a threat to the operations of the

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organization. Over the past years, the firm has been struggling to portray itself as an eco-friendly
institution. Therefore they have to compensate the negative externalities that it may cause to the
society.
Competitive advantage strategy
One primary strategy that the institution can adopt is checking the workers' welfare.
Correctly pricing the overtime hours worked and leveled the minimum wage. Additionally,
awarding tokens and bonuses to the most performing employees will serve to increase the
production (Kuroiwa. 2012 p.78). This will work as a competitive advantage over other
sportswear producing firms around the world. They will have a higher worker retention rate, and
they can easily outsource. Additionally, the employees will be motivated and increase their work
output.
Conclusion
Conclusively, a thorough analysis of the internal functioning of the institution provides a
competitive advantage against other game players in the footwear industry.

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References
Armstrong-Gibbs, F., & McLaren, T. (2016). Marketing fashion footwear: the business of shoes.
London; New York : Fairchild Books
Crane, F. G. (2010). Marketing for entrepreneurs: concepts and applications for new ventures.
Thousand Oaks, Calif, Sage Publications.
Distelhorst, G., Hainmueller, J., & Locke, R. M. (2016). Does Lean Improve Labor Standards?
Management and Social Performance in the Nike Supply Chain. Management Science.
New York: Columbia University Press.
Kahle, L. R., & Riley, C. (2004). Sports marketing and the psychology of marketing
communication. Mahwah, N.J., L. Erlbaum Associates.
Kuroiwa, I. (2012). Economic integration and the location of industries: the case of less
developed East Asian countries. New York, Palgrave Macmillan.
OECD. (1997). Globalization and small and medium enterprises (SMEs). Country studies 2 2.
Paris, Organization for Economic Co-operation and Development.
Potter, J., & Marchese, M. (2010). A Review of Local Economic and Employment Development
Policy Approaches in OECD Countries: Policy Audits.