Strategic Analysis of Nike's Athletic Footwear in the UK Market

This report provides a detailed analysis of Nike's athletic footwear market in the UK. It begins with an introduction to the footwear industry, highlighting the significance of branding and market dynamics. The core of the report applies Porter's Five Forces analysis to assess the competitive landscape, examining the bargaining power of buyers and suppliers, the threat of substitutes and new entrants, and the intensity of competitor rivalry. Subsequently, the report utilizes the VRIO framework to evaluate Nike's internal environment, assessing its financial resources, human resources, supply chain, and innovation and marketing capabilities. The analysis identifies Nike's strengths and weaknesses based on its internal resources and capabilities. Finally, the report concludes with a SWOT analysis, summarizing Nike's strengths, weaknesses, opportunities, and threats in the UK market, and suggesting potential future strategies for gaining a competitive advantage. The report emphasizes the importance of strategic approaches for success in the UK footwear market.

THE ATHLETIC
FOOTWEAR IN
UK -NIKE

TABLE OF CONTENTS
Introduction......................................................................................................................................3
1 5 force analysis For Footwear market of UK............................................................................3
Reflective ....................................................................................................................................6
2 Analysis and discussion of assets and competencies of Nike's internal environment .............6
Reflective ....................................................................................................................................8
3 SWOT analysis for Nike (UK) and future strategy that can be used by the company for
gaining competitive advantage ...................................................................................................8
Reflective ..................................................................................................................................11
Conclusion.....................................................................................................................................11
REFERENCES .............................................................................................................................12
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INTRODUCTION
Footwear industry has emerged greatly with recognition due to branding of athletic or
sportswear (Bickhoff, Hollensen and Opresnik, 2014). In this report, the different analytical
approaches for assessing the current industrial situation of the footwear market of UK will be
presented. The five force analysis, VRIO framework and SWOT analysis will be applied for
evaluating the performance of Nike. All these frameworks help in creating a perception about the
current working structure of the organisation.
TASK 5
1 5 force analysis For Footwear market of UK
Footwear industry of UK offers huge success and growth opportunities for organizations
that are working in this sector. Many multinational organizations are working in this sector and it
comprise of Nike, Reebok, Puma and other medium and small sized firms are also working in
this sector. Intense competition is faced by the companies that are working in this industry and it
makes it essential that strategic approaches should be taken by companies so that competitive
advantage can be gained for the business (Craig and Campbell, 2012). Quality and price of the
goods are two major factors that gives impact on the overall performance of the business.
Likewise, needs and preferences of buyers changes continuously and due to that impact is
being observed on the overall performance of the organization. Along with this fashion and
lifestyle of people also play a pivot role in determining sales and profitability of the business.
Competition that prevail in this sector is price sensitive and it provides added advantage for the
business firms that are working in this sector (Huang and Sarigöllü, 2012).
Economic growth of nation is also supporting for making increment in purchasing power
of people and it is also supporting for enhancing the purchasing power of people. Herein it can
be stated that footwear industry of UK is growing at a faster rate and it offers huge success and
growth opportunity for people that are working in this sector. Nike, Adidas and Reebok are
major players that are leading the footwear market and large market share is gained by these
firms (Luan and Sudhir, 2010). Other than this strategic approaches are used by business for
gaining big market share in this sector. Porter's five force analysis supports for identifying
diverse factors that gives impact on the performance and productivity of business.
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Bargaining power of buyers :-
Footwear industry of UK is enjoying successful period from last past decades and it is
offering huge success and growth opportunities for organizations that are working in this sector.
However challenges and difficulties for the existing firms also have been increases and it has
made it critical that innovative practices should be adopted so that growth and success of this
sector can be ensured (O'shaughnessy, 2014). Different companies that works in this sector sale
footwear through Brick and mortar stores and use of online platform is also taken.
It aids for selling large number of products to the consumers and due to that impact is
being observed on the overall sales performance of the company. Footwear market is divided
into three segments and athletic footwear are offered in four different segments and it comprise
of Insert shoes, sport shoes, backpacking shoes and hiking shoes. Bargaining power of buyers are
high as there are large number of options are available in market. Factors that contributes
towards bargaining power of buyers includes small size of individual buyers. Low switching cost
and moderate substitute availability (Pitta, 2012). Availability of substitutes is moderate and it
expedites customers for buying shoe products. These are some external forces that gives impact
on the overall performance of the business.
Bargaining power of suppliers :-
Bargaining power of buyers is weak and major factors behind it are high overall supply
and large population of suppliers. One more factor that gives influence is moderate size of
individual suppliers. Other than this high supply gives impact on the performance of individual
suppliers and it gives impact on the demand of the firm. In addition to that it has been observed
that bargaining power of buyers is a weak force for footwear industry of UK (Sadjadi, Yazdian,
and Shahanaghi, 2012). Along with this strategies and action plans that are formed by the
company gives influence on the overall performance of organizations that are working in this
sector.
Similarly large population of suppliers indicate that there are large number of suppliers
that are available in market. It provides opportunity for the organization to purchase their
required products in lower price ranges. Other than this moderate size of individual suppliers
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also affect sales of goods and impact of this force is moderate. Bargaining power of suppliers is
weaker force and its impact is weak on the footwear industry of UK.
Availability of substitutes :-
Athletic footwear industry of UK is growing at a faster pace and with this challenges are
also increasing. Threat of substitute products in market is moderate. There are four categories of
shoes that are sold in market and it includes Insert shoes, sport shoes, backpacking shoes and
hiking shoes (Wrenn and Mansfield, 2014). There are some factors that gives impact on the
threat of substitutes. Naming some factors includes Moderate availability of substitutes and low
switching cost.
Along with this moderate performance for per price of substitutes is one common factor
that creates threat for the substitutes products. Alternative options are available for consumers in
market and due to that threat of substitute products is moderate. Factors such as low switching
cost play a important role and if consumers wish to buy products at lower price than products are
available market in that price range (Chaffey, Smith and Smith, 2012). Footwear industry of UK
also have moderate performance per price of the substitutes and availability of the substitute
products is also moderate.
Threat of new entrant :-
Footwear industry of UK is growing at a faster pace and it is offering huge success and
growth opportunities for organizations that are working in this industry. New entrant firms need
to have capital and funds so that their operations can be started with out facing much difficulty.
Along with this there are many challenges that are faced by new entrant firms while executing
functions in footwear industry (Hollensen, 2015).
Some factors that affect the performance of new entrant firm includes high cost of brand
development and high economies of scale. Both the elements affect the performance of the
organization and with this moderate size of doing business also gives impact on overall
functioning of the company (Park, 2014). It becomes challenging for new entrant firms to
develop their products as it requires investments for conducting research for designing new
products. With this cost of doing business in footwear industry of UK is moderate. It creates
limitations for new entrant firms for doing business in this sector.
5

Competitor rivalry :-
Footwear sector of UK facing intense competition and many leading players such as
Nike, Reebok, Adidas and many renowned names are struggling for gaining market share.
Competitor rivalry is high and it is a complex task for organizations to start operations in this
sector. Major factors that lead towards creating rivalry in this sector includes low market growth
rate and moderate number of firms (Sadjadi, Yazdian and Shahanaghi, 2012). Along with this
high aggressiveness and effective strategies used by companies also work towards creating the
competitive rivalry higher. Other than this market growth rate in the footwear sector is slow due
to which it gives impact on the overall performance of the business firms in this sector. It
becomes vital that strategic approaches should be used by organizations so that competitive
advantage can be gained for the business. Existing firms that are working in the footwear
industry also faces challenges and difficulties and it is a complex task for them to gain
competitive advantage for the business.
Reflective
I have conducted five force analysis for footwear industry of UK and it has enhanced mu
understanding about the factors that affects the performance of this sector (Wrenn and Mansfield,
2014). I have analyzed impact of porter's five forces and five major elements in this are
bargaining power of buyers, bargaining power of suppliers, threat of substitutes, competitive
rivalry and threat of new entrant. Analysis of five forces have supported me in identifying the
impact of different factors that affects the performance of this sector.
2 Analysis and discussion of assets and competencies of Nike's internal environment
Nike is a leading footwear multinational firm that offers superior quality products for its
consumers. VRIO framework is a tool that is used for analyzing the internal environment of
business and it aid for identifying weak performing areas of the business. Internal environment
of business can be analyzed by making use of this tool.
VRIO FRAMEWORK
Element Financial
resources
Human
resource
Supply chain
network
Innovation and
marketing
Valuable Yes Yes Yes No
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Rare Yes No Yes Yes
Costly to
imitate
Yes No Yes Yes
Organized to
capture value
Yes Yes Yes No
It can be observed from the above table that company has sufficient amount of financial
resources that are required by them for executing the required operations. Financial resources are
required for giving salary to employees, purchasing required material and inventory so that all
the required operational practices can be performed successfully (Nwokah and Ahiauzu, 2009).
With this cash flow and reasonable debt are available with the firm and it aid for attracting
investors to invest money in the project. Other than this tangible and intangible resources are also
available with the firm that could be used for enhancing the existing performance of the
organization. Supply chain network of the company is vary strong and it offers products through
online platform and through Brick and Mortar stores. State of art technology is mandatory if an
organization aspires for gaining competitive advantage for the business. Financial resources of
the firm comprise cash flow, debt and capability of taking capital from different investor.
Company has currently announced stock repurchasing program.
From the above table we can see that Nike's 100% of its production is outsourced to Asia, has a
strong competitive advantage because of it efficient and well developed supply chain (Yan,
2009). As they believe that its outsourced production well developed supply chain is valuable to
the company. For outsourcing, it requires huge resources, initial investments as companies have
to build their own production facilities and also adjust to local,legal cultural differences. For any
company to imitate Nike's financial resources for a new upcoming company as not only it
requires large initial investments and also extensive knowledge. Hence its not a day thing it takes
years and years of experience to do so (Lee and Carter, 2011).
When it comes to innovation and marketing Nike is one of the recognized and also the famous
brands in the world. Coming on to the Nike's marketing strategies it is highly innovative product
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development team which give it a huge edge from other competitors. Nike also sponsors various
sports teams as well as individual athletes in a wide variety of sports and also supports various
charity events such as “Live Strong”, an organization that is financially supported by Nike to
cure cancer.
Reflective
From the VRIO framework I have found that VRIO is used to analyze firm's internal
resources and capabilities to find out whether they can be a source of sustained competitive
advantage. I see that firm have sufficient financial resources for executing the required
operations (Li and et.al., 2011). Next I see that the human resources of the firm they are valuable
but when it comes to rarity and imitation, it can be imitated. The supply chain network or the
firm is excellent as the production is outsourced. The innovation and marketing of Nike is up to
the mark as Nike has highly innovative product development team.
3 SWOT analysis for Nike (UK) and future strategy that can be used by the company for gaining
competitive advantage
NIKE- SWOT Analysis
Nike Inc. Is an American multinational corporation that is engaged in design, development,
manufacturing, and worldwide marketing and sales of footwear, apparel, accessories and
services. The company is headquartered near Beaver ton, Oregon, in the Portland metropolitan
area. The SWOT analysis of Nike discusses the strengths, weakness, opportunities and threats of
the leading footwear brand- Nike
STRENGTHS-
 Nike is the world's no. 1 shoemaker. It designs and sells shoes for a variety of sports
including golf, baseball, volleyball, cheer leading, tennis and football.
 Nike has no factories (Nike. 2017). It does not employ its cash in buildings and
manufacturing workers. This makes Nike a very lean organization (Wymer, 2011).
 They manufacture high quality at the lowest potential price, if in any case
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 prices rise due to price hike then the production process is made cheaper by changing the
production site. Nike employs about more than 30.000 people worldwide.
 Nike has a huge name for high quality and innovative footwear. It is also known for its
innovative marketing .Nike ads are the part of the pop culture an impressive achievement.
WEAKNESS-
 The company does not have the business through retailers who stock other brand as well
 Nike is perceived by some consumers as being too premium and a luxury brand. But
looking at the current market scenario is such that consumers are migrating to middle tier
of the luxury scale as consumers are being price conscious and quality focused (Morgan,
Katsikeas and Vorhies, 2012).
 Some things which tarnishes Nike's image for poor working conditions and have
described as sweatshops, low wages and child workers in its manufacturing facilities.
OPPORTUNITIES-
 Nike should focus on emerging markets which include increasing sponsorship of local
stars and celebrities.
 There is an opportunity to create custom footwear for the luxury segment so that they
could own their own shoe design, which could enhance its brand image.
 Nike has begun to diversify into accessories and other premium products apart from its
signature footwear segment (Azad and Darabi, 2013).
 Because of the emphasis on design of higher end footwear is really paying off for Nike
that is increasingly being seen as a must product for everyone who runs or walks as it was
founded on the principle that its would serve anyone on legs.
THREATS-
 The market for sports shoes and garments are very competitive. Competitors are
developing alternative brands to take away Nike's market share.
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 Consumers are constantly shopping around for a better deal that conveys a good quality
well as price. So whenever they find that a store charges higher price the consumer would
then try to search for better deal (Yan, 2009).
 As Nike is exposed to international trade, it buys and sells in different currencies hence
are exposed to currency fluctuations.
 Nike must improve on its image where its being seen as resorting to exploitative
businesses practices in its overseas outlets.
 New entrant firms are also creating challenges for the company and due to that impact is
being observed on overall growth of the firm.
Marketing Strategy used- Nike uses the low cost leadership strategy which means low overall
costs. This aims at achieving low costs as compared to competitors. This strategy appeals to a
broad segments of price-sensitive buyers. The cost can be controlled in two ways:first by
controlling cost drivers by reducing the cost as compared to competitors. And second by
revamping the value chain by-passing some cost producing activities. Marketing strategies that
are used by business aids for making significant improvements in the performance of the
business.
It is critical that strategic approaches should be used by business so that positive
improvements in weak performing areas of the business. It is critical that effective marketing
plan should be formed so that required objectives of the firm could be accomplished. Along with
this positive support of all the stakeholders of the business is also required that required goals
and objectives of the company could be achieved (Lee and Carter, 2011).
Moreover differentiation strategy can also be adopted by company so that different
products and services that are offered by the company can be made different from other footwear
products that are available in market. Research and development department of the firm can take
significant initiatives for launching new products and it will support for developing and
designing new innovative products for the company. With this it will also aid for gaining
competitive advantage for the business and it will prove beneficial in offering long term growth
and survival approaches for company (Nwokah and Ahiauzu, 2009). It can be evaluated that cost
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leadership leadership and differentiation strategy. Other than this these approaches will also aid
for making positive growth of the company and gaining long term growth for business. SMART
objectives for the company can be formed so that on the basis of that overall targets for the firm
can be accomplished. It will support for adopting step by step process for completing all the
required targets for the firm.
Reflective
From the above SWOT Analysis I found that Nike focuses on athletes. Sportsman are the
majority consumers of Nike's products. A lot of Nike's success has to do with the unique
usefulness that goes along with the items. I found that Nike targets mostly teenagers of all
socioeconomic classes, and also for those who want to look more athletic and fashionable. Nike
still is the market leader within the industry in spite of having many competitors within the
industry. Also Nike has to keep up the innovation very unique only then it will continue to stand
out.
CONCLUSION
Through this report, one can understand about the footwear industry of UK and the major
challenges which are faced by enterprises in this field. From the 5 force analysis, it has been
evaluated that there is a requirement of innovation so that customer share can be enhanced. The
product quality and service improvements should be prime focus of companies in this sector.
Nike doesn't have much catch over innovation and marketing which hinders overall progress.
Henceforth, it is inferred that there is a requirement of strategic decision making and processing
so that company can excel more in the footwear industry.
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