Nike: Examining Generic Strategies for Competitive Advantage

This report provides a comprehensive analysis of Nike's generic strategies, exploring how the company leverages cost leadership, differentiation, and focus to gain a competitive edge in the global market. It delves into the structure of the sports industry, utilizing Porter's Five Forces model to assess the bargaining power of buyers and suppliers, the threat of new entrants and substitutes, and the intensity of competitive rivalry. The report further examines the influence of various stakeholders, including customers, communities, employees, and government, on Nike's strategic decisions. It also identifies Nike's direct competitors, such as Adidas, Reebok, and Puma, and indirect competitors. The analysis employs the VRIO model to evaluate Nike's key resources and capabilities, highlighting how these elements contribute to the company's sustained competitive advantage. The report's findings underscore the importance of strategic planning and stakeholder management for Nike's continued success in a dynamic and competitive environment.

Generic Strategy of Nike

EXECUTIVE SUMMARY
The report described that Generic strategies can help company to gain competitive
advantage and company also uses this to achieve the target. There are three generic strategies in
order to achieve the average performance and this are cost leadership, differentiation and focus.
Report is based upon the Nike which is an international company and sale footwear, apparel,
accessories and different services. Report presents the generic strategy which a quoted company
uses and also uses appropriate strategic model through which an external analysis of Nike is
identified and report further described the internal analysis of Nike and also identify how it
neutralizes the threats and capitalize on opportunity.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
Presenting the generic strategy of Nike..................................................................................1
Presenting the industry structure............................................................................................2
Presenting different stakeholder and how they influence strategy.........................................3
Presenting different direct and indirect competitor................................................................4
Key resource of Nike..............................................................................................................5
Presenting the board of directors to managing the work........................................................7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10
APPENDIX....................................................................................................................................12

INTRODUCTION
Business strategies plays an important role in accomplishment of organisational goals or
objectives. The present report will describe generic strategies used by Nike in order to sustain its
competitive position in the market. The study will also discuss organisational structure of the
chosen industry, i.e. Nike.
Presenting the generic strategy of Nike
There are various drivers that affect the business strategy of an organisation such as
technology, resources, policies etc. There are various types of generic strategies which can be
used by an organisation such as -
Cost Leadership: As the company is considered top footwear brand which work with
different suppliers. In this strategy the company actually produces the lower cost and also
distributes to suppliers. Using this strategy, Nike is controlling the marginal costing, accounting
and also reduces the cost and control of labour cost (Agle, Mitchell and Sonnenfeld, 2018). But
on the other side, it is critically evaluated that cost leadership strategy also lowers down loyalty
of customers and as a result, company lead towards producing low quality of products and also
rebrand own with leadership.
Differentiation: Under this strategy, company actually try differentiate their products
and its features from other competitors. For example: Nike provides warranties for sear tools and
have the brand image for coach handbags and some special sports shoes. Company also uses
technology such as Hewlett laser printers and provide the best quality of products such that the
network of the company is also wide which differentiate the products from other.
Focus: In this strategy, the company actually focus on particular things such as
customers, channel of distribution and some niche market area and geographical region. If the
company is actually uses focus on the focus strategy and on the other side, if the customers have
different preference or due to some specialized needs they effectively use this strategy. Such that
Nike also uses Focus strategy because it designs new products only to meet the demand of their
customers (Autry and et.al., 2014). But it is critically evaluated that this strategy is actually
creates some problem for market size and even the rivals also find some target market.
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Presenting the industry structure
By using porter five force model, company easily determine the industry structure and it
is mentioned below:
Bargaining power of buyers: The company have low to moderate power of buyers and
their competitors are not so small. Even there are so many competitors who faces some problem
and beside this, there are other local and international brands that also compete with brands.
Hence, it has been analysed that customers have low switching cost and as Nike focus on the
quality of products and its design and that is the only reason the company build the brand image
and good customer loyalty too.
Bargaining power of suppliers: It has low bargaining power and the company operates
its unit in more than 42 countries and thus it reduces the chances of competition from suppliers.
As there are many numbers of suppliers and they are scattered all around and that is the only
reason, why suppliers cannot exert the pressure on Nike. Hence, the quoted company can switch
to other and as a result, the suppliers are also losing the major source of revenue. Nike hold the
brand image and strong control over their suppliers and this the bargaining power of suppliers
are low for the company.
Threat of new Entrants: It is also considered low to moderate and when a new company
is entered into a market then they require high investment and even they are not easily fulfil. If
the company is actually establishing an unit in its new market and thus it cannot raise its brand
image in market and hence the company is actually had to invest a lot of amounts in marketing
and distribution (Agle, Mitchell and Sonnenfeld, 2018). Even for a new brand, though it is not
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Illustration 1: Porter five force model
(Source: Porter five force model, 2018)

possible for the company to create good kind of image just like Nike. Hence, based upon other
factors, the threat of new entrants are low.
Threat of Substitution: Nike faces moderate threat of substitution due to having many
competitive brand. In market, there are so many brands which also produces the same kind of
product even with lower price as compared to Nuke, hence, it shows that the threat of Nike is
moderate for the quality as well as design of Nike products.
Competitive Rivalry: in sports industry, all the company faces strong competition and
even for Nike, there are so many rivals for the industry and hence the industry has also grown
saturated and the company which are already engaged have to make deeper market penetration.
Even the brand also invest lot for shape up the industry and Nike faces low competition from
their direct rivals and hence it makes the competition even more intense (Generic stratgies.
2017).
From the above, it has been analysed that the opportunity for Nike is also quite wide such
that if the company have low threat of new entrant then there are a chances to grow the business
at further level of success. Hence, on the other side, the threat which the company is actually
faces is from their direct and indirect rival company. Such that as the company offer top quality
of products to their customers then it will be more beneficial for the company.
Presenting different stakeholder and how they influence strategy
By using stakeholder mapping, Nike can determine how they all influence the
performance of the company. It is as mentioned below:
Customers: It has been analysed that Nike's CSR strategy also develop a top priority to
their customers which are considered the important part of stakeholder mapping. Customers
plays a significant role and they directly affect the revenue system of the company (Autry,
Daugherty and Richey, 2018). This stakeholders interest also includes a high quality of products
with a reasonable rates and that is why the company also invest its amount in research and
development department. Such that Nike continuously provide the top quality of products by
using advance technology into working area. Thus, its high CSR effectively satisfy the needs of
the customers and also influence the system into positive way.
Communities: another stakeholder group is communities and they also influence the
Nike overall performance. If the customers purchase products then it creates positive impact
upon community and it also supports the development of communities too. For example, in
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2005, the quoted company organize a campaign which actually support the community
development whose main aim is empowerment of the girls and as a result, the company have
positive response towards a community. This campaign also promote some physical activity and
hence, it considers one of the most advance campaign in world who actually support the
community for their own development.
Employees: They also play an important role for the welfare of the company and if the
performance of the employees are so strong then it will directly affect the company's overall
performance (Autry and et.al., 2014). But on the other side, the interest of these employees
includes fair compensation, new career development opportunity etc. Hence as the company
realizes the needs of their employees then it also focuses on internal leadership development
programs and through proper coaching, monitoring and team building the company's employees
actually raise their performance.
Government: Nike also identifies government as a stakeholder group. This is also
important because it actually determines how listed company operates in the terms of permits
and some legal actions. As government is only responsible for the legal and regulatory
compliance and whether the business is actually support to the growth of economy through tax.
Government also manages number of policies and standard which needs to be compliance for
every business area. Hence, it shows that the company's CSR policy is actually satisfied the
needs of their customers.
Interest Groups: they are also considered another stakeholder for the company because
they also effect on Nike for some government intervention and the perception of the customers.
These interest groups are also varied and thus includes some fair labour practise, steps taken for
environmental conservation (Adams and et.al., 2014). Due to some CSR policies it also improves
the labour management and also creates the environmental impact. Hence, this shows that the
company have a strong member who actually influence the company's overall performance in
positive way.
Presenting different direct and indirect competitor
There are various competitors of Nike which are as mentioned below:
Adidas: It is one of the topmost competitor for Nike. Such that it is also dealt with sports
industry and it is also operates in Adidas brand and also has a strong subsidiary and thus the
combination of both strong value makes the company to support or raise the customer base.
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Reebok: It is another rival of Nike which operates its firm in independent way. As the
company is actually known for their best design for sports footwear and also sponsor kits of
various football and cricket events. Hence, the company is known as a 2nd biggest competitor for
Nike (Barney, 2014).
Puma: this is third largest rival of Nike which is running for its best cloth and sports
wear shoes. Due to having a strong rival company in the world, the company is actually have
lack of equal sports sponsorship. As per the revenue generated by the company it shows that the
company is loved by many.
These all as direct competitors of Nike and on the other side, there are so many indirect
rivals too such as small shops who provide same brand product to their customer with cheap and
affordable rates. But the quality is quite differed from Nike such that it affect the profitability of
the company in adverse way. Moreover, the company is also affecting its overall structure and
hence, to gain high competition in market, there is a need to adopt some generic strategy which
help a firm to grow their current business at further level of success (Barney, 2015). Beside this,
Nike also faces indirect competition from sandal brands such as Gibi, Zanea and Figlia etc. this
shows that having a top brand in market, the company also faces strong competition in market
and as a result, to sustain in this competitive world, there is a need to adopt new strategy.
Key resource of Nike
Using VRIO model, Nike can easily analyse the resources and capabilities of the
company and it is mentioned below:
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 Nike is operating its unit at global level and it is sustaining its brand in 45 countries and
there are more than 700 stores in the company. Nike has the brand image in market and
also in sports industry too. Beside this, the company also consider the leading brand in a
industry which is further followed by Adidas (Corsten and Felde, 2015). Due to wide
range of stores and good brand image Nike successfully manage to sustain its sales and
position in the market. However, it has been critically evaluated that this is also linked
with external analysis.
 Further the company also enjoy the strong base of customers loyalty and have the trust
because of offering the best and top quality of products. Nike also focus to remained on
product innovation and also dominate the top selling shoe model in US as well as other
international companies. However, it has been critically evaluated that this is also linked
with external analysis that the company also have unique product innovation strategy that
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also makes quite different from other company. Improved and innovative products helps
to attract more and more customer as well as to increase sales. It helps to reduce threats
from competitors.
 Company also adopt unique marketing capabilities and it is also known best for its
excellent marketing from other company. Beside this, the company also adopt new and
advance technology into their working area so that it further help a company to sustain its
brand image in market (Adams and et.al., 2014). Effective marketing methods or
strategies such as social media marketing, digital marketing helps to get attention of
maximum customers in global market. It can help to maintain the sales and profit of level
of the company.
 However, it has been critically evaluated that VRIO model is also linked with external
analysis. It also has strong market share and because of operating in shoe market, the
company have strong market presence and customer base among all its rivals. Moreover,
as per the strong brand image in market, the company also have advance and diversified
supply chain that is actually helped a company to reach large mass of the audience to
provide the best quality of products. The culture of Nike also support business strategy
and it helps to raise the customer base.
Presenting the board of directors to managing the work
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The company is actually operates its unit in more than many countries and also have the
different organizational structure which is actually uses by the company in order to sustain their
brand image. Further, the board of Directors also plays a significant role and hence because of
better decision planning the company is also sustained its long term planning. It has been
analysed that corporate governance of the company is also advance and as a result, it also
conducts many meetings in order to raise the performance and support towards the sustainability
of the environment too (Andriof and Waddock, 2018). Moreover, the board of director also
manages or control the things in better way so that they further help a company to lead towards a
success.
CONCLUSION
By summing up above report it has been concluded that having generic strategy will be
more beneficial for the company to sustain its brand image in market. As the report also
concluded that by using cost differentiation strategy, Nike can easily develop new strategy that
will further help to maximize the company's overall profit. Further report also concluded that by
using VRIO model, Nike also sustain its brand image and determine the exact needs of their
customer too. Moreover, present study concluded that to sustain in this competitive market, Nike
should also use some advance technique that help to beat their rivals. Hence, it has been
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Illustration 2: Organizational Chart for Nike