Strategic Management Analysis: Nike Inc. Competitive Advantage

This report provides a comprehensive strategic management analysis of Nike Inc. It begins with an introduction to the company, followed by an examination of its mission and vision statements. The report then delves into the sportswear industry, utilizing Porter's Five Forces to assess the competitive environment, including competitive rivalry, the bargaining power of buyers and suppliers, the threat of substitutes, and the threat of new entrants. The analysis extends to evaluating Nike's resources and capabilities through the value chain framework, examining primary activities like inbound and outbound logistics, production, and marketing, as well as supporting activities such as technological development and human resource management. The report concludes by summarizing Nike's strategic position and offering insights into its competitive advantages.

Strategic management analysis

Table of Contents
Introduction......................................................................................................................................1
Section 1..........................................................................................................................................1
Section 2..........................................................................................................................................4
Scenarios and Industry Analysis..................................................................................................4
Section 3..........................................................................................................................................8
Evaluation of Nike’s resources and capabilities by utilizing the value chain framework...........8
Section 4........................................................................................................................................10
Conclusion.....................................................................................................................................13
References......................................................................................................................................14
1

Introduction
Nike Inc. is considered as a famous American multinational organization which is engaged in the
development, production, design, and global marketing or sales of footwear, equipment, services,
apparel, and other accessories. In this paper, strategic management of Nike Inc. is analyzed under
the light of its different competitive and strategic capabilities. This gives us significant
information about the strategic management and capabilities of the organization to compete with
its present competitors. It was incorporated during 1967 under the laws of the State of Oregon.
Nike Inc. is considered the world largest seller of apparel and athletic footwear. The organization
not only sells its product by using retail accounts but also by e-commerce or internet websites. It
was founded as Blue Ribbon Sports Company by Phil Knight and Bill Bowerman. After some
time, the organization takes its name from Nike, the Greek goddess of victory. The organization
has an excellent brand image in the global markets. It is known for its high quality and effective
products. Apart from producing sportswear and equipment, the organization also manages
different retail stores under the name of Niketown. It operates under different brands such as
Nike Pro, Nike+, Air Force 1, Nike Skateboarding, and Air Max. These brands make it popular
all over the world.
Section 1
Nike Inc. mainly believes in providing differentiated product portfolio with a focus or more
affordability and accessibility. The innovation strategy of the organization is highly appreciable.
The below mentioned are the vision and mission statement of the organization:
Mission
2

The official mission statement of the Nike is "to bring innovation and inspiration to every athlete
in the world." The organization believes that everyone is an athlete. According to the view of
Bill Bowerman "everyone who has a body, is athlete". The mission statement of the organization
represents its strategic goal of reaching out to the global apparel, sports shoes, and equipment
market (Distelhorst, 2016). The below mentioned are some important concepts which are
focused on the Mission statement of the Nike:
 Innovation
 Every athlete in the world
 Inspiration
As a growing and famous producer of sports shoes, equipment, and apparel, Nike Inc. motivates
and inspires people to create a winner mindset. It is covered under the inspiration component of
its vision statement. The slogan of Nike Inc. "Just Do It" shows this inspirational motive. On the
other hand, the mission statement of the organization also considers innovation
(https://www.thebalance.com/nike-mission-statement-4068545). This mission component of the
organization is applied through the new strategy of continuous improvement of products by
using innovative technologies. Apart from this "every athlete in the world" component of its
mission statement pushes it to target every people around the world. So, the athletic shoes of the
organization are mainly designed to attract and satisfy a large number of people around the
whole world.
Vision
It can be said that till now the organization has not published its official vision statement.
However, the vision statement of the organization towards its corporate social responsibility is an
3

effective approximation of its own business. Moreover, corporate social responsibility vision of
the organization helps it, and its customers thrive in a sustainable economy where people, planet,
and profit are in the balance (Hill, 2014). In its vision statement of corporate social responsibility
the organization mainly includes following components:
 Sustainable Economy
 Planet, people, and profit are in balance
 Help Nike Inc. and its customers
CSR vision statement of Nike Inc. mainly contains the company and its consumer's as big
participants in its future motive of sustainability. On the other hand, it can be said that the
corresponding strategic motive of the organization implied in the “sustainability economy”
component of the vision statement.
However, it can be said that both mission and vision statement of the Nike Inc. support the
development of sustainable competitive advantage in a significant manner. The mission
statement of the organization mainly highlights the general strategic directions of the business
which enforces it to fulfill all its objectives on a timely basis. Due to its high focus on the
mission statement, the organization can easily face the current situations which make it capable
of gaining competitive advantage over its potential competitors. Inspiration and innovation
concept of its mission statement helps the organization in maintaining competitiveness and create
tough competition among market competitors.
On the other hand, it can be said that the organization does not have a suitable corporate vision
statement. In such situation, CSR vision statement of the organization becomes a good start for it
(https://www.mindcoral.com/questionlibrary/view/1526). The CSR vision statement of the
4

organization guides it at every step of its working. This will bring improvement in firm
operations, and the organization can significantly create competitive advantage in its potential
market. With the vision and mission statement, the organization can keep its operations in the
right direction which helpful in avoiding mistakes and possible risks. Thus, it can be said that
mission and vision statement of the organization has potential to create a sustainable competitive
advantage over its competitors.
Section 2
Scenarios and Industry Analysis
Porter Five Forces Analysis
It can be said that the business environment of the recent time is extremely competitive and
fragmented with a large number of business players. Sportswear industry has few entry barriers
due to which every single organization has significant opportunity to enter into the sportswear
market. In this products are differentiated on the basis of brand value and innovation. In the
sportswear industry, they strive to establish their competitive advantage to thrive in the scenario
of the competitive environment. The below mentioned are the five forces which influence the
sportswear industry:
 Competitive Rivalry or completion: This element of the five forces model represents the
level of competition affecting the industry environment and performance of the
organization (https://www.ukessays.com/essays/marketing/company-overview-and-
mission-statement-of-nike-marketing-essay.php). The following external factors develop
the strong force of competitive rivalry in the case of Nike organization:
5

 Moderate number of firms
 Low market Growth
 High aggressiveness of firms
Market growth in the sportswear industry is low in comparison to other industries. It is
low due to the high rate of market penetration and saturation. Due to it, this situation
develops a strong competitive force, as Nike and other organizations compete for a
market that grows slowly and steadily. On the other hand, organizations under the
sportswear industry are highly aggressive in nature. Due to it, they are competing within
bigger share of markets.
 Bargaining Power of Buyers: Customers of the sportswear industry directly influence the
organization's performance. This element of the porter five forces model represents how
customers determine industry environment and competitiveness of business. The below
mentioned are some external factors that contribute to the bargaining power of buyers:
 Small size of individual buyers
 Low switching cost
 Moderate substitute availability
Low cost of switching makes it easier for the individuals to purchase sports shoes other
than those from Nike. On the other hand, moderate availability of substitutes enables
customers to purchase products of other brands rather than Nike
(http://panmore.com/nike-inc-five-forces-analysis-porters-model). Moreover, customers
of small size reduce their individual forces on the organization.
 Bargaining Power of Suppliers: Suppliers influence the sportswear industry through the
availability of raw materials. It includes following external forces:
6

 Moderate size of Individual suppliers
 High overall supply
 Large Population of suppliers
It can be said that the high supply of sportswear industry generally influences the
individual actions of suppliers. In the same manner, the large population of suppliers
reducing the effect of individual supplier demand on big organizations such as Nike Inc.
Furthermore, the moderate size of individual suppliers has a moderate degree of supplier
affect.
 The threat of Substitute: Availability of substitute influences the organization
performance in global athlete shoe market in a greater manner. It includes following
forces:
 Low switching cost
 Moderate availability of substitutes
 Moderate performance per price of substitutes
Generally, it can be said that the moderate availability of substitutes imposes a moderate
force on the sportswear industry. It is because customers have a large number of
alternatives to make their decision regarding the purchase. On the other hand, individuals
have a moderate likelihood of considering substitutes because of the moderate substitute
performance compare to equipment, apparel, and sports shoes of Nike Inc. Furthermore,
low cost of switching further makes an addition to that likelihood.
 The threat of New Entrants: New organizations and new entrants can work as a barrier in
sportswear industry environment. It includes following external forces:
 Moderate cost of doing business
7

 High scale of economy
 High-cost involvement in brand development
Due to the high cost of brand development, it is very difficult for the new entrants to
enter the sportswear industry market
(https://www.ukessays.com/essays/marketing/competition-in-the-sportswear-industry-
marketing-essay.php). Apart of this, the high scale of economy offer an edge to the Nike
Inc. by creating its competitive image in its potential market. Moreover, the moderate
cost of doing business prevents capabilities of new entrants to disrupt the sportswear
industry environment.
After conducting the porter five forces analysis, it can be said that sportswear industry is less
attractive than the other industries. It is because the industry has intense competition, price-
conscious consumers, fashion trends, and competition that slowed growth in the sportswear
industry. Slow growth of industry makes it difficult for the business organizations to create their
brand image that appeals to the consumer in a significant manner. Competitive rivalry or
competition force of porter five forces model is liable for bringing change in the next 24 months.
It is because technology is changing continuously. Due to change in technology demand and
preferences of consumers also changed. Due to it, high completion is growing in the sportswear
industry which influences the organization performance and sale in a greater manner. In this
situation, the organization needs to manufacture such products which differ from its competitors.
By doing this, the organization can significantly create and maintain its edge in its potential
market.
Porter Forces Force Capability
Industry Attractiveness Low
8

Bargaining power of suppliers Weak Force
Bargaining power of customers Moderate Force
Threat of substitutes Moderate Force
Threat from new market entrants Weak Force
Competitive Rivalry Strong Force
Section 3
Evaluation of Nike’s resources and capabilities by utilizing the value chain
framework
Organizational Capabilities- All the core competencies of Nike are created by adding up all the
resources and a changing a web of all practices which can be add-on factors for creating the
competencies. For example, Nike creates a competitive edge over its competitors by advertising
its product in media.
Resource and values of Value Chain Analysis
There are two main broad categories of activities in value chain analysis framework- Primary
Activities (outbound and inbound logistics, production and marketing) and Supporting Activities
(technological development, HRM, Firm infrastructure) (Gereffi, et al., 2003).
Primary Activities-
Nike Inc. delivers its products to approx. 143 global destinations. Their delivery originates from
factory to the docks which receive the products of Nike. Nike's operations of logistics consist of
three lines of products: equipment, apparel, and footwear. There are four different regions who
9

manage the orders through the logistics of company's service provider. There is a well-managed
co-corporation in the company's supply chain hence there is no need to involve any middle man.
Because of the facility of online system of ordering, many shipments are directly supplied to
their customers instead of involving retailers.
Marketing- All the endorsing and branding activities can impact the reputation of a brand as
doing the market research beforehand can help to enhance the brand image and make the
footwear and apparel selling the company as a leader.
Production- Nike's mission can help to create cost effective, innovative manufacturing processes
and proprietary materials with high-quality components and materials.
Technological Development- Nike has established itself as leaders and innovators in the shoe
industry by differentiating their offerings accessing the use of technologies that are patented.
Human Resources management- Human Resources include skills, accumulated wisdom,
judgment, competencies, and experiences of Nike Inc. Regarding the Human Assets, Nike has
declared that it has various opportunities to gear up the growth in terms of profits and
competitive advantage and our leaders are working on a daily basis to ensure that the brand is
inspiring many of the employees to work even harder (Walters, et al., 2000).
Firm Infrastructure-Nike is developing the logistics, information systems and management of
supply chain and marketing the company’s product in new innovative ways. Moreover, Nike is
finding new ways to operate on the system that creates an effective balance between financial
and managerial disciplines which can drive growth effectively. With The increasing awareness
of corporate social responsibility, Nike is helping to keep the environment safe and produce
maximum quality products with the efficient use of resources and keeping the environment safe.
10

Value Creation by Nike
Intangible Resources- Nike wants to establish itself as leaders and innovators in the shoe
industry by differentiating their offerings accessing the use of technologies that are patented.
Human Resources- Human Resources include skills, accumulated wisdom, judgment,
competencies, and experiences of Nike Inc. Regarding the Human Assets, Nike has declared that
it has various opportunities to gear up the growth in terms of profits and competitive advantage
and our leaders are working on a daily basis to ensure that the brand is inspiring many of the
employees to work even harder.
Financial Resources- These monetary resources include credit lines, debt capacity, cash
reserves, available equity, and other equitable financial holdings. Nike’s largest category of
product is Footwear which is representing approx. 53.7% of the revenue of the company. These
resources of finance are used to buy the large space for advertising be it billboards, TVs or any
stadium for athletics.
Physical Resources- Resources which are in physical forms like retail stores, office supplies,
inventory, machines, plants, buildings are called as Physical resources. Shoe line is considered to
be the most important line amongst all other.
Section 4
Nike Inc. can get a significant competitive advantage in a competitive environment by improving
its product quality and marketing strategy. Sustainable competitive advantage enables the
organization to sustain for a long time and earn huge profit. On the other hand, by following
below mentioned models, the organization can achieve sustainable competitive advantage in a
competitive environment:
11

 The Market-Based View: According to this model, Nike Inc. needs to focus not only on
industry factors but also the external market orientation. It is because these are considered
the primary determinants of organization performance (Bharadwaj, 2015). Furthermore, it
also suggests that the strategic position of Nike Inc. largely depend on its activities. It is
necessary for the organization to differentiate its activities from its competitors. It is
because performance and profitability of organization largely depend on its competitive
dynamics and structure within which it operates. On the other hand, the organization
should consider Industrial Organization paradigm. It is because with the help of this
paradigm the organization can gain significant knowledge about how the structure of the
industry influences its behavior and performance. With the help of such knowledge, the
organization can develop an effective strategy to gain competitive advantage.
 The Resource-Based View: According to this model, the organization needs to focus
more on its internal environment because it is a significant factor which helps the
organization in determining an effective strategy for competing in existing market. The
internal environment is considered the driven factor of competitive advantage. So, the
most of the focus of organization should towards on building its internal environment.
Generally, it is concluded that the resources of an organization are primary sources of
gaining competitive advantage. So, Nike Inc. should focus more on its resources with
which it can produce high-quality products. On the basis of its product quality, it can
achieve competitive advantage in a significant manner.
 The Knowledge-Based View: According to this model, knowledge is an important force
which enables an organization to gain a competitive advantage over its competitors. It is
because knowledge has such potential that makes it most valuable and important resource
12

for the organization. So, it is the responsibility of the organization to focus more on
getting enough knowledge, competencies, and intellectual assets (Li, 2014). It is because
these are the main forces that bring improvement in performance of the organization in
the digital information age environment. Generally, it can be said that material resource
of the organization can decrease after use but knowledge resource never decrease and
copied by others. So, Nike Inc. should focus more on developing its knowledge to
compete in the international and regional market.
 The Capability-Based View: As per this model, capabilities are considered as the source
of competitive advantage and resources are considered as the source of capabilities.
Capabilities have such potential with which it can significantly help the organization in
gaining competitive advantage. Nike Inc. has many capabilities to face a large number of
competitors in a single time. So, it can be said that the organization should focus more on
developing its capability with which it can perform a critical task in a significant manner.
If the organization considers all the given suggestions, it can significantly gain a significant
position in its existing market as well as eyes of customers. Furthermore, the organization can
also improve its product quality which enables it to provide large satisfaction to its target
customers.
Conclusion
After studying all this, it can be concluded that that Nike Inc. has an efficient composite business
structure with decentralized branches and the abundant brands. If the organization wants to
position itself in its existing market, the above-mentioned recommendation strategies help the
13

organization in doing so. This will be done through removing its weaknesses and strengthening
the existing capabilities (Rothaermel, 2015). It could formulate market penetration strategies for
expanding the size of its potential market in different areas. It can be said that Nike Inc. has a
significant reputation in the market which can be fluently utilized in exploiting the existing
business opportunities. Furthermore, the company can also apply a market segmentation strategy
for niche markets in established economies. With the help of all these initiatives, it can
efficiently utilize its existing technologies and resources which further prove beneficial in
achieving predetermined goals of the organization.
14

References
Distelhorst, G., Hainmueller, J. and Locke, R.M., 2016. Does lean improve labor standards?
Management and social performance in the Nike supply chain. Management Science.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated
approach. Cengage Learning.
Mindcoral.com. Nike: An Analysis of the Mission, Vision, Values, and Goals. [online] Available
at: https://www.mindcoral.com/questionlibrary/view/1526.
Nike-Mission-Statement. The Balance. Retrieved from https://www.thebalance.com/nike-
mission-statement-4068545
UKEssays. Company overview and mission statement of Nike. [online] Available at:
https://www.ukessays.com/essays/marketing/company-overview-and-mission-statement-of-nike-
marketing-essay.php.
Rowland, C. Nike Inc. Five Forces Analysis (Porter’s Model) - Panmore Institute. Panmore
Institute. Retrieved from http://panmore.com/nike-inc-five-forces-analysis-porters-model
Competition in the sportswear industry. UKEssays. Retrieved from
https://www.ukessays.com/essays/marketing/competition-in-the-sportswear-industry-marketing-
essay.php
Bharadwaj, S.G., Varadarajan, P.R. and Fahy, J., 2015. Sustainable competitive advantage in
service industries: a conceptual model and research propositions. In Proceedings of the 1992
Academy of Marketing Science (AMS) annual conference, Springer International Publishing (pp.
441-443).
15

Gereffi, G. and Fernandez-Stark, K., 2016. Global value chain analysis: a primer.
Mudambi, R. and Puck, J., 2016. A global value chain analysis of the ‘regional
strategy’perspective. Journal of Management Studies.
Li, D.Y. and Liu, J., 2014. Dynamic capabilities, environmental dynamism, and competitive
advantage: Evidence from China. Journal of Business Research, 67(1), pp.2793-2799.
16