Establishment or Expansion of Nike Inc in Spain

This report discusses the establishment or expansion of Nike Inc in Spain. It covers the benefits of expansion, background information on Nike, the business environment in Spain, analysis of the business scenario, and a PESTLE analysis. The report provides recommendations for successful expansion.

The establishment or
expansion of Nike Inc in
Spain

Table of Contents
INTRODUCTION...........................................................................................................................1
Background Information on NIKE .............................................................................................1
Background Information on the Business Environment in Spain ..............................................3
Analysis of the Business Scenario..............................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Business expansion has signifiant potential to expose organisation products and services
to large base of customers. By making increase in overall consumer base company have effective
opportunity increase their product offering range and further improve overall sales and
profitability of entity (Anderson and et. al., 2016). Present report has been conducted on Nike.
Organisation is looking forward to expand their business in Spain. Expansion benefit
organisation to have greater access to talent and further have exposure towards foreign
investment opportunities. In addition to this, FDI opportunity which is looking by Nike as to
expand their business in Spain in licensing. As this FDI opportunity allows company to have
quick and easy access into foreign markets with lower capital requirements while ensuring large
return on investment(ROI). Company operate their services in apparel, accessories and sports
equipment industry and was established in 1964. In this report formative discussion has been
made on FDI opportunity for which company is looking for, PESTLE analysis and Porter's five
forces. In addition to this report include recommendation in context with business scenario.
Background Information on NIKE
Nike was established in the year 1964 by Bill Bowerman as Blue Ribbon Sports. First
retail outlet of company was formed in the year 1966 and their launched their Nike brand shoe in
1972. Organisation renamed itself in 1978 as Nike, Inc. Entity engaged in the operations related
to development, design, manufacturing, design, equipment, services, sales of footwear,
accessories and apparel. It has been identified that range or size of company is increasing at fast
rate throughout the years. Nike is having estimated number of 73,100 employees till 2018 all
around the world. In addition to this, in the year 2019 company operate their business with
having 1.152 retail stores all around the world. Further this has been evaluated that Nike operate
their functioning as corporate ownership. It has determined that this form of ownership mainly
involve any number of owners but it turns the business into a corporation, which is a distinct
legal entity. In the segment of current international operations Nike conduct their functioning in
more than 45 countries. Further it has been identified that in order to formulate any international
expansion Nike effectively acknowledges formative collaborative and flexible innovation. In
addition to this, it has been identified that company undertake advantage of advocacy agenda as
to evolve large-scale investments as well as policies for sustainable innovation in order to make
sure that organisation gain more competitive advantage as per compared to their competitors.

Along with this, financial estimates shows that Nike significantly move towards high growth and
profitability in continuous manner. As “FY19 was turned out as crucial year for company. As
with the help of signifiant digital advantage and innovation company effectively accelerate
towards more profitability and growth opportunities. It has been significantly reflected from
FY19 performance of Nike that with the help of their strategic transformation company created
extraordinary value for their shareholders and customers that further ensure long term sustainable
and profitability of entity. It has been identified that Gross margin of company increase by 80
basis points to 45.5 percent because of higher average selling process. Nike Direct revenues were
$11.8 billion, up 16% on a currency-neutral basis, driven by a 35% increase in digital commerce
sales, 6% growth in comparable store sales as well as the addition of new stores. Sales to
wholesale customers increased 10%.

Background Information on the Business Environment in Spain
Nike operate their functioning in design, development, sale of footwear, accessories,
marketing and athletic services. In addition to this, it has been identified that operating segments
of company include Eastern Europe, Japan, North America, Greater China, Western Europe and
other emerging markets. It has been identified that Nike is looking forward for expansion in
Spain. With having high range of performance equipment as well as accessories company look
forward to serve individuals within Spain market in best effective manner. Mentioned below
PESTLE analysis has been conducted on business environment in Spain:
PESTLE ANALYSIS
PESTLE analysis is termed as a framework with the help of which organisation can
effectively able to identify factors that prevails in macro-environment and impact upon
functioning of entity. It further aid organisation to undertake use of numerous form of strategies
as to gain more competitive advancements. PESTLE analysis proves to be effective specially
when organisation is going to start new business or planning to enter into foreign market.
Mentioned below PESTLE analysis is being conducted with the help of which Nike can
effectively able to expand their business in Spain:

Political Factor:
As far as political factor is concerned it has been identified that Spain is a member of the
European Union and turbulence in EU politics significantly affect organisation functioning. In
addition to this, it has been determined that Spain had high fiscal deficit. This signifies that
Government of Spain spend more than it earns. It further lead country towards high debt. Along
with this, this has been evaluated that there is signifiant rise in corruption in country. It signifies
that Nike is required to take advantage of best effective form of strategies and measures as to
cope up with these challenges in order to ensure their expansion successful. As negligence of this
may further impact upon their functioning in number of ways.
Economical Factor:
By being part of European Union Spain has faced economic recession for past 10 years.
But in recent time country has begun showing some signifiant rise. As Spain is ranked among
most popular tourists destination that significantly lead country towards more economic
advancements. In addition to this, some certain cities of country like Barcelona and Costa del Sol
significantly attract attention of customers. Thus, Nike can take advantage of this factor in
number of ways and can further lead towards ensuring more successful growth. It further lead
company to lure customers from different destinations towards their products and offering and
can further satisfy their need in best effective manner while ensuring more successful growth
opportunities.

Social Factor:
This factor include values, beliefs, culture and perceptions of society. It has been
identified that Spain is having highly unique culture. In addition to this, it has been identified that
most of the inhabitants duly undertake use of workday schedule. Along with, demographics of
Spain depicts 50.50 split among biological females and males. Further it is being duly stated that
small ratio of country have immigrants that mainly belongs to Northern Areas of Africa. All
these factors is required to be duly consider by Nike in order to perform their operations related
to expansion. Along with this, Spain have Catholicism as prominent religion. Thus, with the
help of undertaking all these factors into due consideration Nike can effectively able to attract
attention of customers towards their products and services by ensuring more signifiant growth.
Technological Factor:
It include technological advancements and innovation that undertakes in marketplace
which is required to be adopt by organisations as to effectively serve their customers as per
according to their need and demand and in best effective manner as per compared to their
competitors. It has been identified that Spain in one of the most leading country in terms of
technology as per compared to other European nations. As advanced mobile phones as well as
computers widely been spread in all over country. In addition to this, it has been identified that
Spain is also having their own high-speed train system. All these factors significantly create
positive advantage for Nike. As it will allow to organisation to take advantage of technology in
Spain as to make their expansion in best effective manner.
Legal Factor:
It include different types of laws, regulation and rules that has been framed by
government as is required to be effectively undertake by all organisations as to effectively
operate their functioning in best effective manner. It has been identified that legal environment
of Spain have strict form of data protection and copyright laws. In addition to this, it has been
determined that country have high bureaucratic environment. Thus, it become essential for Nike
to have effective and proper understanding of all legal laws, rules and regulations for Spain and
further frame strategies as to overcome them in best effective manner. It will further allow them
to gain more advancements in well defined manner.
Environmental Factor:

This factor is mainly related to factors such as climate change, natural resources and
pollution. In Spain, government and individuals are more concerned towards environment
awareness and it has been further identified that environment is one of the serious topic in
country. It signified that organisations are subjected towards different types of regulations that
are mainly related to the amount of resources they undertake as to lower down the level of
population. Further it has been identified that in Spain more than 70% of resources directly
obtained form fossil fuel. In addition to this, country significantly increase the utilization of
renewable sources. Thus, it is essential for Nike to effectively consider all these factors that
comes under environmental factor as to effectively operate their activities and functions related
to expansion. With the help of this company can effectively able to increase their overall rate of
profitability and productivity in well defined manner.
Thus, it has been identified that with the help of PESTLE analysis Nike can effectively
able to identify macro environmental factors that has been prevailing in Spain. It will further aid
company to have clear set of view related to business environment of country and take advantage
of strategies and policies as to effectively overcome challenges in best effective manner and
ensure successful advantages from their expansion.
Analysis of the Business Scenario
Nike is going to expand their operations in Spain with the help of Foreign Direct
Investment method of Licensing. It has been identified that with the various form of attractions
in country company can significantly able to ensure successful growth rates with their expansion.
As it has been identified that Spain is having numerous forms of advantages in terms of
Technological and social elements. This will aid entity to undertake advantage from these and
increase their chances of make their plan of expansion successful. While if it is being considered
in terms of political and legal company may face certain form of challenges as political
environment of country is not that much stable and legal structure of nation is strong. Thus, it
makes essential for Spain to follow all the legal laws and legislations that has been framed by
government as to ensure more economic prosperity in country.

Threat of New Entrants (Moderate)
It has been identified that threat of new entrants for Nike in Spain is duly moderate as in
this country have not more barriers of entry in market for new entrants. In addition to this, it has
been signified that in order to enter into country marketplace entity is not required to make much
high investment. Further it has been determined that small scale organisations can duly enter into
Spain marketplace and can further offer competition to Nike as switching cost is not that much
signifiant. But it has been duly identified that many organisations can offer their products and
services to individuals in Spain but they somehow lacks in quality that has been served by Nike
to their customers.
Threat of Substitutes (High)
It has been identified that in Spain individuals are majorly tend towards soccer that make
large number of organisation to establish their business in the country. Thus, it has been
identified that Spain marketplace is having large number of substitutes those who already have
established image. Thus, it becomes essential for Nike to undertake use of much effective
strategies as to gain more signifiant growth advancements as per compared to their rivals.
Further it has been identified that company is required to take advantage of upgraded technology
and innovation as to significantly offer high quality, unique and attractive products and services
to the customers.

Bargaining Power of Buyers (High to Moderate )
As Spain is well known for their sports addiction thus, it has been identified that country
is having high number of buyers (Sekaran and Bougie, 2016). In addition to this, it has been
determined that country is having large number of organisations. Thus, it becomes essential for
Nike to offer best effective products and services to their customers in unique and innovative
manner. As customers in country hold power to switch towards any other alternative brand.
Bargaining Power of Suppliers (Low to Moderate)
It has been identified that Spain is not having enough raw material sources that aid
organisation to take advantage of. In this, company can take advantage of strong networking as
to acquire raw material. In addition to this, it has been identified that with the help of their FDI
investment method which is licensing company can effectively able to ensure high growth
advancements from their expansion.
Competitive rivalry (High)
It is being identified that Due to increase in customers tend towards sporting events there
is high number of rivals that operate their functions in same segment. Thus, it become essential
for Nike to take advantage of strategies and operations as to compete with existing rivals. In this
company can take advantage of strong networking as to ensure more effective growth.
CONCLUSION
As per the above mentioned report, it has been concluded that business expansion
effectively benefit an organisation to increase their overall rate of profitability and productivity.
In this it is essential for Nike to have effective understanding to business environment of Spain
as to acquire necessary data and information. In addition to this, company is recommended to
take advantage of number of strategies related to licensing as it is one of the most important FDI
method for business expansion. With the help of this company can effectively able to increase
their overall rate of profitability and productivity.

REFERENCES
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