Supply and Demand of Nike Products: An ECON 203 Project Analysis

This report provides a detailed analysis of the supply and demand dynamics of Nike products. It begins with an abstract summarizing the key concepts and objectives, followed by an introduction that sets the stage for the analysis. The literature review examines various articles and studies related to Nike's market performance, consumer behavior, and competitive landscape, comparing and contrasting different perspectives and supporting conclusions with relevant data and statistics. The discussion section delves into the core economic concepts, such as demand determinants (consumer tastes, prices of related goods, and income) and supply determinants (cost of production and technology), applying them to the context of Nike's operations. The report highlights how shifts in these factors influence market equilibrium, impacting both price and quantity. It also explores Nike's strategies for retaining customers and adapting to market changes, referencing the company's global presence, technological advancements, and supply chain management. The conclusion summarizes the key findings, emphasizing Nike's position as a leading sportswear brand and the factors contributing to its success.

Running head: SUPPLY AND DEMAND OF NIKE PRODUCTS 1
Supply and Demand of Nike Products
Student’ name
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SUPPLY AND DEMAND OF NIKE PRODUCTS 2
Abstract
This paper seeks to explore the demand and supply of Nike’s products. Nike is the
leading valuable sportswear brand worldwide. This company encounters stiff competition from
competitors such as Adidas. Usually, in a competitive market, the market equilibrium relies on
the forces of supply and demand. That is, the changes in equilibrium price and quantity are
influenced by shifts in demand and supply. It is vital for a business to understand the factors that
can cause changes in demand and supply of its products as these shifts result in fluctuation in
revenues. This study reveals that Nike has put measures in place to ensure that it retains its
customers and also draw new clients. The company’s leading market is North America.
Moreover, the demand for Nike’s products is swayed by determinants like price of related
products, income as well as tastes and preferences. On the contrary, the supply is impacted by
determinants like expectations and cost of production.

SUPPLY AND DEMAND OF NIKE PRODUCTS 3
Introduction
Nike is the globe’s largest designer, seller, and distributor of reliable apparel, footwear,
accessories, equipment, and services (NIKE, Inc., 2019). This company was incorporated 0n 8th
September 1969. Nike has branches across the world, and some of its operating segments include
Western Europe, North America, Japan, and China.
This firm sells a variety of performance accessories and equipment using its Nike brand
name. Some of these products include socks, golf clubs, bags, gloves, and bats, and eyewear.
(Yahoo Finance, 2019). Furthermore, Nike comprehends the desires of clients and makes use of
technology to enhance the experience of the customers. This firm boosts the demand for its
products through a well-organized supply chain as well as research and development.
Literature Review
Nike is expanding rapidly, and this is portrayed by the increase in demand for its products
as well as revenues. This company is currently dominating the international market for
sportswear. The rise in demand for the products of this company depicts that the management is
performing an essential role in drawing new customers as well as retaining the current clients.
"Potential new customer interest is high and increasing" (Sonenshine, 2018). The high and
growing attraction of new clients to the products of Nike is good news to the long-term growth
and sustainability of this firm. Furthermore, the study conducted by the Markets Insider reveals
that approximately 70 percent of Nike clients have the intention of procuring Nike goods. The
authors also highlight that the demand for products of Nike is high in the United States compared
to other regions in the world.

SUPPLY AND DEMAND OF NIKE PRODUCTS 4
Q May-
18 Q Aug-
18 Q Nov-
18 Q Feb-19 Q May-
19
8,800.00
9,000.00
9,200.00
9,400.00
9,600.00
9,800.00
10,000.00
10,200.00
NIKE SALES (in millions)
SALES (in millions)
U.S Dollars
Source: Reuters, 2019.
Compared to other competitors in the sportswear market, Nike is positioning itself as a
company that is responding to the needs of its customers. According to a Cheng, Nike is making
use of innovation to grants its clients the capacity to customize its products like shoes. Also, the
store of this firm has several features that mirror the vital trends in the sector. This company is
responding to the wishes of customers to shop and use their phones to make payments (Cheng,
2018).
From the three articles, the authors points out the role of technology in the growth and
expansion of Nike. This company has appreciated the fact that the customers are being driven by
industry trends and the best approach to fulfill such needs is to test, acquire, and deliver new
features. For example, when a shopper picks a shoe in the Nike store, there is a digital display of
information concerning the shoe that is crucial to the needs of clients (Cheng, 2018). Such
technologies are essential to the success of Nike in the industry that is facing stiff competition

SUPPLY AND DEMAND OF NIKE PRODUCTS 5
from other firms. Typically, in any sector, every firm puts measures in place to draw new clients
and retain the existing ones with the view of increasing its market share.
Apart from stiff competition from rival businesses such as Adidas, Nike has in the past encountered
challenges arising from the global politics between countries. As pointed out by Cheng, the United
States-China tariff standoff caused worries among the management of Nike that such disagreement
would result in a drop in the sales in China. Despite the concern, the sales of Nike in China have
continued to expand and contributed to the growth of revenue. “Nike continues to win with
consumers in China” (Cheng, 2018).
On the supply side, this company has also devised measures to ensure a steady supply of
its products in the market. In recent years, Nike has been investing in receptive manufacturing as
well as linked its inventory to reduce product creating cycle by almost half. According to the
leadership of Nike, the supply chain should be able to respond to the changes in consumer
demand rapidly for the company to benefit. “Speed remains an incredible opportunity” (Hart,
2019).
Discussion
The Demand for Nike Products
The demand for goods and services can rise or decline in response to changes in its
determinants. When the shift in demand factors is favorable, the demand will increase. On the
contrary, if the shift in demand factors is unfavorable, then a firm will experience a drop in
demand for its products (Mankiw, Taylor, & Ncwadi, 2018, p. 21). Usually, an increase in
demand will lead to a rise in equilibrium price and quantity, and decline in demand will cause a
reduction in equilibrium price and quantity, ceteris paribus.

SUPPLY AND DEMAND OF NIKE PRODUCTS 6
Several factors impact the demand for the products of Nike. Some of these factors
include consumer tastes and preferences, the price of related goods, and the income of shoppers.
When consumer tastes and preferences shift in favor of a given product, then the demand for
good in question will increase (Mankiw & Cosgrove, 2014, p. 15). From the previous article, we
saw the demand for products of Nike is on the increase. This company is not only retaining most
of its clients but also attracting new customers. This is an indication that the consumer tastes and
preferences have changed in favor of products of this business.
The prices of related goods also occupy a significant position in influencing the demand
for products of Nike. The competitors of Nike offer substitute products from which consumers
can select. For substitutes, the cross-price elasticity is positive (Slavin, 2014, p. 10). This
scenario depicts a positive correlation between the quantity demanded of one product and the
price of another product. Adidas is a major competitor of Nike. Therefore, when the price of
Adidas footwear surges, some consumers will switch to Nike footwear and thus cause an
increase in demand for products of Nike. Similarly, if the price of Nike footwear increases, the
demand for Adidas footwear will increase.
Change in the income of consumers also impacts the demand for products of Nike.
Usually, an increase in income causes a surge in demand for a normal product. Similarly, a
decrease in income will lead to reduction in demand for a normal good (Sloman, Wride, &
Garratt, 2015, p. 24). In the United States, a country with one of the highest Gross Domestic
Product, the demand for Nikes products has been increasing. Also, in emerging economies such
as China, the demand for Nikes products is rising.

SUPPLY AND DEMAND OF NIKE PRODUCTS 7
The rise in demand for sportswear of Nike is illustrated in the graph below by the change
in the demand curve to the right from D to D1. As a consequence, the equilibrium quantity
surges from Q to Q1 as well as the price from P to P1. This shift in demand shows that there is
an increase in the welfare of the Nike Company.
Supply
Price
P1
P
D1
D
Q Q1 Nike Sportswear
The Supply of Nike products
Like demand, the supply of products of Nike is influenced by several factors. Foremost,
when the cost of production like wages and cost of raw material increase, the supply will decline
(Tucker, 2016, p. 21). Conversely, when the cost of production declines, the supply will surge.
Technology also is a crucial determinant in the supply of products of this firm. In recent years,
Nike has been investing in technology to improve the supply of its products as well as gain a
competitive advantage in the industry. The other influences impacting the supply of this

SUPPLY AND DEMAND OF NIKE PRODUCTS 8
company’s products include a change in government policy and changes in expectations
regarding future prices.
Conclusion
Nike is the globe’s largest designer and seller of reliable apparel, footwear, accessories,
equipment, and services. The largest market for Nike’s products is North America. In recent
years, Nike has encountered a surge in sales. Some of the factors that impact the revenues of this
company include the income of consumers, changes in tastes and preferences as well as the price
of related products. The ability of this firm to respond to the changing needs of shoppers has
given it a competitive advantage over the rival firms in this industry. Nike has exploited this
opportunity through the deployment of technologies that enhance the experience of customers
while shopping. Furthermore, Nike is deploying technology to reduce product creating cycle to
ensure steady supply and reduction in production costs.

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Bibliography
Cheng, A. (2018, December 20). Nike, Already World's Largest Sneaker Maker, Proves It's Still
A Growth Company. Retrieved July 10, 2019, from
https://www.forbes.com/sites/andriacheng/2018/12/20/nike-just-proves-its-still-a-growth-
company/#2e8e1bad41f7
Frank, R. H. (2015). Microeconomics and behavior. New York, NY : McGraw-Hill Education.
Hart, C. (2019, July 4). Nike invests in tech to halve product creation cycle. Retrieved July 10,
2019, from https://www.cips.org/en/supply-management/news/2019/july/nike-invests-in-
tech-to-halve-product-creation-cycle/
Mankiw, N. G., & Cosgrove, S. (2014). Principles of microeconomics. Stamford, CT: Cengage
Learning.
Mankiw, N. G., Taylor, M. P., & Ncwadi, R. (2018). Microeconomics (Second ed.). Andover,
Hampshire: Centage Learning EMEA.
NIKE, Inc. (2019). ABOUT NIKE. Retrieved July 11, 2019, from https://about.nike.com/
Reuters. (2019). Nike Inc (NKE.N). Retrieved July 11, 2019, from
https://www.reuters.com/finance/stocks/financial-highlights/NKE.N
Slavin, S. L. (2014). Economics (Eleventh ed.). New York, NY: McGraw-Hill Education.
Sloman, J., Wride, A., & Garratt, D. (2015). Economics (9th ed.). Harlow : Pearson.

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Sonenshine, J. (2018, June 1). Nike is winning over new customers and it could 'dramatically
increase prices' (NKE). Retrieved July 10, 2019, from Markets.businessinsider:
https://markets.businessinsider.com/news/stocks/nike-stock-price-winning-customers-
could-dramatically-increase-prices-2018-6-1027308709
Tucker, I. (2016). Microeconomics For Today. Australia : South-Western: Cengage Learning.
Yahoo Finance. (2019). NIKE, Inc. (NKE). Retrieved July 11, 2019, from
https://finance.yahoo.com/quote/NKE/profile?ltr=1