Analyzing Nike: A Report on Sports Organization Theory and Strategies

This report delves into the sports industry with a focus on Nike, examining its internal policies, organizational behavior, and outsourcing strategies. It contrasts organizational theory with actual behavior within Nike, highlighting the company's resource utilization and business-level strategies. The report suggests strategic alliances, such as with PepsiCo, and business diversification through energy drink launches to enhance competitive advantage. Change management processes, internal management elements, and identified gaps are discussed, along with recommended steps and their critical analysis, concluding with an evaluation of the current approach's effectiveness in addressing global organizational challenges.

Running head: SPORTS ORGANIZATION THEORY
Sports organization theory
Name of the student
Name of the university
Author note

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Executive summary
The aim of this report is to discuss about the trend and current scenario of the sports industry.
Nike is chosen as the case organization. In the very first stage, this report discussed about the
internal policies and processes of Nike in operating in the sports industry. Moreover, the
differences between organizational theory and organizational behaviors evident in the
organization are also being discussed in this report. The strategy of outsourcing initiated by Nike
in order to have optimal utilization of resources is also being discussed in this report. This report
concluded that initiation of the outsourcing strategy helps Nike to regulate the cost of production.
The business and market level strategies practiced by Nike are also discussed in this report. This
report concludes that Nike should go for strategic alliances with PepsiCo in order to gain more
competitive advantages in the market. In addition, it is also being discussed that they should
diversify their business by launching energy drink in the market. On the other hand, the change
management process initiated by them is also discussed along with the implication. Different
elements of internal management are being discussed in this report in order to gain the insights
regarding the internal management of Nike. It is concluded that the current approach followed in
Nike is effective enough to deal with the global organizational challenges. In addition, there are
number of gaps being identified and in accordance to these gaps, a few recommended steps are
being discussed in this report. The recommendations are being critically analyzed along with
identifying their advantages and disadvantages.

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Table of Contents
Introduction......................................................................................................................................5
Definition of sports organization.....................................................................................................6
Distinctive identify of sports industry.............................................................................................7
Impact on the organization..........................................................................................................8
Differences between organizational theory and behavior...............................................................8
Critical thinking approaches............................................................................................................9
Goals and objectives of Nike.........................................................................................................10
Utilization of the resources............................................................................................................12
Effectiveness and efficiency......................................................................................................12
Determination of the quality of data..........................................................................................13
Organizational structure of Nike...................................................................................................13
Tradeoffs....................................................................................................................................14
Organizational design................................................................................................................15
Level of strategy of Nike...............................................................................................................15
Business diversification.................................................................................................................16
Determination of strategic alliances..............................................................................................16
Determining factors in strategic alliance with PepsiCo.............................................................17
Determining factors in strategic alliance with FIFA.................................................................17
Determining factors in strategic alliance with Walmart............................................................17

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Selection of strategic allies........................................................................................................18
Impact of Isomorphism..................................................................................................................18
Change and strategy...................................................................................................................19
Change management in Nike.........................................................................................................19
Paradox of change......................................................................................................................19
Strategic response......................................................................................................................20
Sources of power in the organization............................................................................................20
Sources of external power and politics..........................................................................................21
Political landscape of Nike............................................................................................................22
Emergence of conflict in Nike.......................................................................................................23
Decision making process...............................................................................................................23
Organizational culture...................................................................................................................24
Leadership roles.............................................................................................................................25
Recommended steps......................................................................................................................25
Change in the marketing strategy..............................................................................................26
Change in the leadership approach............................................................................................27
Product diversification...............................................................................................................29
Conclusion.....................................................................................................................................30
Reference.......................................................................................................................................32

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Introduction
In the recent years, sports businesses are coming up as one of the major mainstream
business sectors. This is mainly due to the reason that sports are becoming more commercialized
and with the entry of the corporate investments, the approach of the sports are not limited to the
entertainment, rather it is also becoming more economic for the investing organizations
(Doherty, 2013). Emergence of number of sports in the popular culture such as different
professional leagues is contributing more on the commercialization of the sports industry. Thus,
with the gaining of popularity of the sports industry and increase in the profit from this sector,
competition is also increasing. More corporate organizations are entering in the sports sector,
thus increasing the competition.
It is becoming important for the sports companies to come up with effective business
strategies as similar to other business sectors. This is due to the reason that effective business
strategies are important to compete in the increasingly competitive scenario in the current global
sports industry. Organizations such as Nike are one of the leading brands in the global sporting
environment. Nike is mainly sports apparel suppliers for different types of sports. They are
having their presence in huge number of sports and are one of most known brand in the sporting
history. Currently, they are operating in the highly competitive market of sports apparel industry.
Some of their major competitors are Adidas, Reebok and Puma. Therefore, they are having the
importance of having effective business strategies and organizational processes.
Internal management is one of the major aspects that should be considered by the
contemporary business organizations. This is due to the reason that the more effective will be the
internal management of the organizations, the more will be their efficiency in dealing with the

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external organizational challenges (Goetsch & Davis, 2014). In the internal management of the
organization, some of the key elements are power, politics stakeholder conflict, decision making
process, organizational culture and leadership skills. Effectiveness of these elements will help the
organizations to have efficient internal management.
This report will discuss about the organizational processes of Nike along with
determining their operating strategies. In addition, this report will also discuss about the
organizational structure of Nike. Strategic alliances for Nike will also be discussed along with
identifying the impact of the organizational change on the business operation of Nike. This
report will discuss about these elements from different perspectives of Nike. As discussed in the
earlier assignment, Nike is not a sports organization but they are in the sports apparel industry.
This report will help to determine the effectiveness of the internal management of Nike and
identifying the gap areas in their existing managerial roles.
Definition of sports organization
According to the definition of a sports organization, any governmental entity that
sponsors or conduct competitive sporting events for participation of the professional athletes can
be terms as sport organizations. However, in the case of Nike, they are not a governmental entity
nor they conduct any professional sporting events (Cunningham, 2013). Nike sponsors different
sporting events as the official apparel suppliers but they do not officially conduct any sporting
events. This is due to the reason that Nike is not an authorized entity to conduct professional
leagues or events. Thus, Nike cannot be considered as a sports organization. However, the
business of Nike is associated with sports industry and their core business is to manufacture and

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sale sports goods and apparels. Thus, they can be considered as a manufacturer of sports items
not a sports organization.
Distinctive identify of sports industry
As discussed in the earlier section, sports industry is gaining huge popularity in the
current time due to the adaption of sports as one of the major mainstream source of
entertainment. However, there are a few unique characteristics of sports industry that is
distinctive from other contemporary business sectors. The major differences between the sports
industry and other contemporary business sectors are clearly stated by Smith and Stewart (2010).
According to them, one of the major distinctive features of the sports industry is the objective of
increasing the participation of the customers rather than increasing the consumption. The key
objective of any business sector is to increase the customer consumption in order to increase the
revenue, but in the case of the sports industry, participation of the audience will determine the
trend of revenue generation.
It is also being discussed by the authors that in the case of conventional business sectors,
revenue is generated from the consumption of the customers. Thus, the value paid by the
consumers is the source revenue generation for the operating companies. On the other hand, it is
also stated by the authors that in the case of the sports industry, the revenue from the audience is
not the core source; rather sponsorships and increase in the corporate investments with the
increase in the participation of the audience is the major source of generating revenue. Another
unique feature of the sports industry is the peculiar nature in participation of the audience. This is
due to the reason that the offerings of the sports industry are not homogenous in nature. Thus, the
level of participation of the audience is also not homogenous. It is also being stated by the

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authors that it is difficult for the organizations in the sports industry to maintain the similar level
of offerings as sports industry is driven by the experiences earned by the audience. All these
distinctive characteristics differentiate the sports industry from other conventional industry.
Impact on the organization
Nike is also getting affected from this distinctiveness of the sports industry. This is due to
the reason that concept of heterogeneous structures and experiences being stated by the authors
are creating challenge for Nike to get changed with the market and industrial trend (Leeds & Von
Allmen, 2016). Moreover, it is also stated that emotional experiences are also relevant in doing
business in the sports industry. Being a sports apparel manufacturer, Nike is facing the challenge
to meet the emotional experience expectation of the customers with their products. Moreover,
due to the fact that Nike is not a sports organization and it deals with the physical products, it is
more difficult for them to meet the customer demand where emotional experience of the
customers is the key determining factor.
Differences between organizational theory and behavior
Organizational theory is the concept of organizing the people or the internal stakeholders
of the organization to achieve the optimal utilization of the available resources. Thus, it involves
the different managerial aspects of the organization. On the other hand, organizational behavior
is the real world situation of the organization. The processes and practices follow by the
organization in relation to the interaction of the internal stakeholders. Thus, the effectiveness of
the organizational behavior of the organization determines the efficiency of the organizational
theory. In the case of Nike, one of the major organizational theories practiced by them is rational
system perspective. According to this organizational theory, Nike should follow pay for

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performance concept, providing training to the employees and effective allocation of the work
between the superiors and the subordinates along with having positive relationship between
them.
On the other hand, in view to the above organizational theory, Nike follows the collegial
model of organizational behavior. According to this model, they maintain less hierarchy in the
organization without having the concept of superiors and subordinates. All the internal
stakeholders work as a team and coordination among them is given the major concentration. It
helps Nike to have positive working environment in place and having less probability of
emergence of issues with the employees.
Critical thinking approaches
Critical thinking is one of the most important tools to determine and understand a
particular issue. This is due to the reason that critical thinking helps in reviewing different
models and theories in relation to a particular problem. Thus, different approaches of the
problem can be identified. Some of the major aspects of the critical thinking are having a specific
purpose for the critical analysis, solving the issue and the analysis will be based on a few
assumptions and data (Halpern, 2013). These aspects are important due to the reason that critical
thinking should have a specific purpose. This is due to the reason that the critical analysis is done
based on the objective. In addition, critical analysis should be done in order to solve the
particular issue rather that discussing about it. The major objective of doing critical analysis is to
identify solution for the issue. The last aspect is the assumptions and use of data. This is also
important due to the reason that crucial analysis should be relevant and authentic enough to solve

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the issue. Using of data and authentic information will ensure that the critical analysis will be
reliable and relevant in relation to the identified issue.
Critical analysis will be more effective when number of sources of information will be
used. This is due to the reason that the more will be the number of the information, the more will
be the probability of gaining diverse knowledge about the particular issue. Using of
interdisciplinary approach in doing the critical analysis will help to gather more diverse
information along with having the understanding of different views in relation to the identified
issue. It is also to be noted that using of number of information will also help to come up with
more than one solution in the critical analysis.
Goals and objectives of Nike
The goal of Nike is to offer latest and innovative sports items to the athletes. They also
aim to offer products in order to enhance the athletic performance and also they aim to bring
sports to all by offering different products for different need. Thus, it can be concluded that the
goal of Nike is defining their basic business approach. However, apart from just stating the
vision of the organization, goal for Nike serves more than that. The major importance of goals
for Nike is determining their business approach in the market. This is due to the reason that
according to the identified goals, Nike designed their business strategies in operating in the
market (Porter, 1996). For instance, in relation to their goal of offering latest and innovative
products in the market, Nike invests more in their research and development. This helps them to
come up with newer products in the market in less time compared to their competitors. In
addition, it also helps them maintain their business motto of staying ahead in the competition in
terms of offering latest products in the market.

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Figure: 1
Market share of Nike compared to others
Source: (Ridgewoodavenuejournal.blogspot.in, 2018)
The above figure shows that Nike is way ahead in the competition compared to their
competitors. This can be concluded that designing and practicing the business policies in
accordance to the goal of offering newer and latest products in the market is helping them in
staying ahead in the competition along with having the majority share in the market.
Another goal of Nike is to provide products that will enhance the athletic performance of
the users. This defines that all the products of Nike will be performance and athletics oriented.
This also shows in their current product portfolio, where all their products are designed in such
way that the athletic performance of the users will get enhanced. Therefore, this goal of Nike
helps to maintain their product orientation in the market and also helps them to initiate
differentiated approach compared to their competitors. The last goal of Nike is to offer different
products for different set of requirements. In accordance to this goal, Nike is having their

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presence in footwear, Apparel and accessories sector. Thus, it helps them to cater to larger and
diverse market share. It also contributes in increasing the global market share of Nike.
Utilization of the resources
Given the scarce resources, Nike is having number of strategies in resolving the
competing goals. One of the major strategies initiated by them is outsourcing of their
manufacturing facilities. According to the reports, Nike is having their manufacturing facilities in
different countries mainly in the Asian countries such as China, India, Pakistan and Indonesia.
This helps them to reduce the cost of production due to the fact that the host countries selected
by Nike are having lower cost of human resources. This helps them to resolve the competing
goals by offering their products in competitive price along with increase in profitability.
Effectiveness and efficiency
Difference in effectiveness and efficiency is evident in the business operation of Nike.
The leadership and managerial role practiced in the organization is effective enough to increase
the efficiency of the internal management. Employees in the organization are lead and managed
by effective leadership roles. This helps Nike to have efficient employees in place and this is
evident in gaining their competitive advantages from the production efficiency and customer
service (Dale, 2015). Moreover, it is also being identified that in terms of the product portfolio,
Nike is effective enough in bringing the latest products in the market and meet the changing
trend in the market. On the other hand, the efficiency in the production process of Nike in
manufacturing the new products along with gathering the market information is helping them to
have positive marketing environment.

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Determination of the quality of data
The goals of Nike are collected from the official mission and vision statement of them.
Nike is not having any official goals stated and thus with analyzing the mission and vision
statement, the goals of Nikes are collected. In addition, the data collected is analyzed by
comparing with the business, marketing and product strategy of Nike. This is being done in this
way due to the fact that goals of Nike are compared with that of their strategies in order to
identify the alignment between the two. Thus, the data is analyzed by comparing the goals with
that of the organizational strategies of Nike. The quality of the data is checked through analyzing
the authenticity and reliability of the sources of collecting the information.
Information for effectiveness and efficiency of Nike is collected through different
articles. These articles helped to have the fair idea about the effectiveness and efficiency of Nike
along with analyzing different perspectives. The data is analyzed with different articles and the
key points are being identified. Lastly, the quality of the articles is checked with the help of
CRAP test.
Data in relation to the organizational structure of Nike is collected from the official
website of them along with some other websites. All the information are analyzed and compared
in order to identify the key points. These points are used to discuss about the organizational
structure of Nike. The collected data is checked by comparing the reliability of the website in
terms of their rating.
Organizational structure of Nike
It is identified that organizational structure of Nike is having number of issues or
complexity. One of the major complexities identified is lack of communication across the

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hierarchy level (Amis & Slack, 1996). Moreover, it is also identified that the lack of freedom in
decision making of the middle level managers is also creating issues. Thus, one of the methods to
be used is the initiation of horizontal organizational structure. Currently, Nike is having vertical
organizational structure, which is causing more hierarchy levels. On the other hand, removing
the intermediaries in having horizontal organizational structure will help to meet the
communication issues. Moreover, another method will be the providence of training for the
middle level managers in order to equip them in decision making process.
Tradeoffs
Cost of
investment
Benefits
Initiation of horizontal
organizational structure
US$200,00  The key benefit will be the less cost
incurred in having more hierarchy
level.
 Effective process of communication
will be in place with having flat
structure.
 Efficiency in the organizational
structure will get increased.
Training for middle level
managers
US$ 150,00  Middle level managers will be more
equipped to deal with organizational
challenges.
 Lower level stakeholders can have
their issue solved efficiently and

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swiftly.
 More effective decision making
process.
Organizational design
Nike is having learning type of organization. This is due to the fact that Nike concentrates
more on the learning process in the organization. Employees are being motivated to initiate
innovative ideas and out of the box thinking and share with their peers (Kikulis, Slack &
Hinings, 1992). Moreover, the organizational learning process in Nike helps them to be one of
the most innovative organizations in the world.
Level of strategy of Nike
Nike mainly follows the business and market level strategy. This is due to the fact that
with the help of the business level strategy, Nike is being able to maintain their product
leadership in the market by means of innovative and diversified products. Moreover, business
level strategy also helps Nike in having lower cost of production. This is important for them in
operating in the intensely competitive market scenario of the sports apparel industry. On the
other hand, market level strategy also being initiated by them (Alstyne, Parker & Choudary,
2016). This helps them to increase their market share and penetrating in the new market. In
addition, initiation of the market level strategy also helps them in offering different products in
different markets. The major objective of initiating these strategies for Nike is to effectively
compete in the highly competitive market and enhance their market share and revenue.
Business diversification

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Blue ocean strategy will help Nike to launch new product in any business sector where
the competition will be lower or nil. Thus, it will help Nike to diversify their business in new
sectors along with increasing the market share and revenue (Kim & Mauborgne, 2005). It is
recommended that Nike should come up with their branded energy sports drink. This market is
selected due to the reason that energy drink market is less competitive due to the presence of
limited number of players such Red bull, Gatorade and Monster. Moreover, all these players are
operating the higher price segment. This is providing the opportunity for Nike to enter in this
market with having lower price range. Energy drink market in the lower price segment is having
no such competition and it will help Nike to increase their market revenue. Moreover,
diversifying their presence in different market sector will ensure that Nike will have more brand
value and exposure and it will help them to gain competitive advantages in the long term.
Determination of strategic alliances
The there shortlisted potential allies for Nike will be PepsiCo, FIFA and Walmart.
PepsiCo is selected in order to initiate co branding and launch drinks in collaboration with them.
Expertise of PepsiCo in beverage sector will help Nike to make an entry in this sector
(Washington & Patterson, 2011). Strategic alliances with FIFA will help Nike to have their
branding in the leading football events. It will also help Nike to launch FIFA merchandise
products in the market. Strategic alliances with Walmart will help Nike to have more effective
distribution strategy in the global market.

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Determining factors in strategic alliance with PepsiCo
 It is to be seen that the strategic objective of PepsiCo should get matched with Nike.
They both should have the same objective of entering in the energy drink sector.
 It is to be seen that PepsiCo is interested in equal share of investments or not.
 It should be checked that core competencies of Nike are not compromised.
 Whether PepsiCo is willing to launch product under new brand name or not.
 Checking the expertise of PepsiCo in operating in the energy drink market.
Determining factors in strategic alliance with FIFA
 Whether FIFA is willing to share royalty with Nike or not.
 Which and to what extent branding can be done in FIFA event.
 FIFA is willing to more different brands or not.
 Potential coverage to be achieved from association with FIFA.
 Cost to be incurred in paying FIFA.
Determining factors in strategic alliance with Walmart
 Market penetration of Walmart in the target market.
 Target customer audience for Walmart.
 Potential revenue to be generated from association with Walmart.
 Number of substitute products already available in Walmart.
 Whether Walmart is interested in launching new products with Nike.

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Selection of strategic allies
PepsiCo is selected as the most potential strategic ally for Nike. This is due to the reason
that Nike is already having their distribution channel. They will only require an expert in the
beverage market to launch their energy drink in the market (Kennelly & Toohey, (n.d). Thus,
Walmart is not required for Nike to distribute their products, while promotional activities
through FIFA will not help Nike to develop the new product. Thus, they should go with strategic
alliance with PepsiCo in order to have co-branded product in the market.
Impact of Isomorphism
According to DiMaggio and Powell (1983), the organizational approach of the business
firms becomes same due to mainly three factors, namely Coercive, Normative and Mimetic
processes. In case of Nike, there are number of suppliers from where they source their materials.
However, their competitors are also sourcing their materials from the same suppliers. Thus, the
sourcing approach along with the quality of the materials is becoming similar for Nike with that
of their competitors. This is an example of coercive process. In addition, the local rules and
regulations to be followed by Nike in different countries are also similar for all the organizations
and thus it is also creating coercive effect on Nike.
In terms of the normative process, Nike employs local employees in a particular region of
their manufacturing facility. However, these employees may have already worked with their
competing firms or they are going to work after leaving Nike. Thus, the knowledge of the
employees is becoming similar for employee for all the players in the market in a particular
region. This is also creating similar business approaches for Nike.

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In terms of the mimetic process, Nike is having their own organizational process and
policy, but the success rate of their practices is attracting other players to follow their policies.
This is leading to the similar business approach for Nike with other firms in the industry.
Change and strategy
Change and strategy are inter-related for Nike due to the reason that initiation of the
change management is leading to the need of having strategies in place. On the other hand,
change in the existing strategies is leading to the initiation of the change management in the
organization. In the case of Nike, they initiate newer strategies in accordance to the change in the
business and market scenario and this is creating the need of change management in the
organization. However, it should also be noted that Nike also faced number of difficulties and
challenges in initiating the change management in place, which proves that not all their strategies
are successful or fruitful.
Change management in Nike
According to the report, Nike had one of their major change management in 2013 when
their top executives are replaced in relation to their change in strategic goal. The change was
initiated in order to adopt the long term organizational strategy along with driving the growth in
the market. Moreover, they targeted to have more customer centric or focused team in place. In
accordance to this, Nike changed their top organizational structure with new executives.
Paradox of change
Paradox of change is having majority of the negative implications on the business
operation of Nike. This refers to the contradictory proposition where the external overview of

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any situation seems good and positive but the consequences of it will be different and in major
cases, undesired. In the case of Nike, change in the top management of Nike was done in view to
their increase in customer orientation. However, in the real world situation, the impact was
negligible and not up to the desired level (Amis, Slack & Hinings, 2004). Moreover, change in
the top management caused reduction in the pace of the organizational growth along with
creation of the disturbances in the sequential pattern of the organizational policies.
Strategic response
Nike initiated the geocentric staffing approach in order to overcome the issues of
normative isomorphism. Initiation of the geocentric approach helped Nike have home country
employees in the top management (Shilbury & Moore, 2006). Thus, it will help to create
distinctive organizational policies along with managing the local employees according to the
distinctive organizational policies.
Sources of power in the organization
There are number of power sources being identified in the internal management of Nike.
Moreover, the power is highly legitimized due to the presence of hierarchical levels in the
organization. One major sources of power practiced by the upper level managers in the
organization is legitimate power that comes from the sense of authority and organizational
position (Raven, 2017). Due to the fact that Nike is having the global business operations with
having number of strategic business units in different countries, managers enjoy more legitimate
power in managing their subordinates. It also helps them in directing and leading the internal
stakeholders in achieving the organizational vision.

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Another source of power identified in Nike is expert power. This refers to the origination
of power from the expertise possessed by the stakeholders. However, in this case, the power is
not legitimized in Nike; rather they are distributed among all the internal stakeholders across all
levels. This helps the organization in motivating the employees in coming up with expert
knowledge by providing the option for possessing expert power in the organization. Reward
power is also being practiced in the organization in order to motivate and engage the employees
in their workplace (Pierro et al., 2013). However, this source of power is legitimized in the
organization due to the fact that reward can only be practiced by the upper level managers for
their subordinates. Upper level management is responsible to practice the reward power in order
to enhance the organizational productivity and performance.
Sources of external power and politics
External consultant is mainly having legitimate and expert power in the organization.
This is due to the reason that external consultant is appointed in the organization on the basis of
their expertise and knowledge (Howlett & Migone, 2013). Thus, they are having the options to
possess expert power. On the other hand, external consultant is also having the option for
legitimate power due to the reason that they are appointed in a certain position or designation in
the organization and thus they are having the option for practicing the power of their
organizational posts and authority.
If the external consultant is having this range of power and influence in the organization,
then they will also have higher level of influential power in the organization. For instance,
external consultant appointed for recommending the organization in their business approach can
have the power of influence to change the hierarchy level. If the external consultant recommends

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that the existing organizational structure should be changed, then it will have direct impacts
majorly on the middle level managers (Yeoh & Popovic, 2016). On the other hand,
recommendations of the external consultants regarding the change in the leadership styles and
managerial roles will also affect the current approach of the upper level management of Nike.
Political landscape of Nike
Nike is having their operation and facilities in number of countries around the world.
Thus, they face diverse and varied political factors in different regions and countries. One of the
major political factors being faced by them in the global operation is the higher taxation rate in
the some major countries with having lower cost of operation in the some developing countries
(Morschett, Schramm-Klein & Zentes, 2015). This political variance is enabling them to
outsource or off shore their manufacturing facilities in developing countries and regulate the cost
of operation. Another major political factor that can have adverse implications on the business
profile of Nike is political turmoil between the United States and developing countries such as
China. United States is taxing more imported goods in the country and it is also the largest
market for Nike. On the other hand, China is the major manufacturing region for Nike.
However, in the case of Nike, the leveraging on the political networks to produce
organizational outcome is less. This is due to the reason that according to various reports Nike
maintains distances from the mainstream politics in every region around the world. For instance,
in the last American presidential election, some of the major competitors for Nike took political
stand while Nike maintains the distance from the whole process with just promoting equality.
Though this strategy is not having direct positive impact on the organizational performance, it is
helping Nike in having clean and responsible image in the global market.

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Emergence of conflict in Nike
Nike being operating in the global market for several years have faced number of
conflicts in their business operation. One of the major conflicts in the recent time for them is
channel conflict with Amazon (Spaho, 2013). The issue emerged when it is seen that third party
vendors selling the products of Nike in the online marketplace of Amazon and eating away the
retail sales of them. This is due to the reason that up to a certain time, Nike was not having
online sales channel in Amazon. Thus, this caused emergence of third party vendors in Amazon
who were bought the products directly from Nike in lower price and sold in more competitive
price compared to the retail channel for Nike (Mugal & Khan, 2013). This caused loss of retail
volume and revenue for Nike. Moreover, the conflict emerged due to the reason that Nike is
losing the revenue to the third party vendors while these vendors are one of the major sources for
reselling their products.
In order to overcome the conflict, Nike came up with their separate online retail channel
in order to overcome the challenge posed by the third party vendors. Thus, initiation of the Omni
Channel distribution strategy helped Nike to cater to both online and offline market properly. It
also helped Nike to have the entire control on both the online and offline retail channels.
Decision making process
Decision making is the process of initiating resolution about the future business approach
and strategy for the organization. Decision making process also refers to the selection of the most
effective and suitable alternative from the available source of number of alternatives by judging
different criterions (Shepherd & Rudd, 2014). In the case of Nike, there are number of conditions
or factors determines the decision making process. Some of the factors are marketing factors,

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political factors, economical factors and social factors. Marketing factors refer to the marketing
forces including rate of competition that determines the future strategies for Nike. In addition,
political factors are the political landscape under which Nike operates in the global market.
Economical factors are the financial condition of the operating market including the purchasing
power of the customers and per capita income. Social factors refer to the taste and preference
pattern of the target customers.
Nike mainly initiates rational decision making process over the administrative model in
decision making. Rational decision making process refers to the effective evaluation of the
alternatives based on different criterions and selecting the most effective one (Hopfe, Augenbroe
& Hensen, 2013). On the other hand, administrative decision making model refers to the
choosing of available alternative rather than comparing them with others. Nike initiates rational
decision making process in order to have the most effective option in their business approach.
Organizational culture
Organizational culture refers to the values and approach being maintained in the internal
management and the approach in managing the employees. Nike is having free, flexible and
diverse organizational culture covering all the internal stakeholders across every level (Hogan &
Coote, 2014). For instance, the culture of innovation practiced in Nike helps them to encourage
their employees for out of the box thinking and initiate the innovative products in the market.
Statement of Peter Drucker of “culture eats strategy for breakfast” is partially applicable
due to the reason that there are some organizations who concentrates more on their
organizational culture over the other factors while some organizations can change their existing
organizational culture according to other business factors. Organizations such as Nike are having

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more organizational culture oriented approach that is justified with the statement of Peter
Drucker.
Currently Nike follows innovative culture in their organization and this is managed
holistically. All the internal stakeholders across all levels in the organization are involved in
managing the culture. This also helps in gaining the employee insights and amends the
organizational culture accordingly. Thus, currently Nike is not having the requirement for change
in their organizational culture.
Leadership roles
CEO of Nike, Mark Parker mainly follows transformational style of leadership.
According to the reports, visionary approach of Mark Parker is helping Nike in creating the
effective business strategies and approaches for future. This leadership attribute is actually
helping Nike is having effective internal management due to the reason that employees are more
motivated and engaged by having supportive and participative leadership roles. It also enhances
the inclusion of the employees due to the holistic coverage of all the internal stakeholders.
Recommended steps
There are number of factors being identified in the above analysis and it is having the
importance to recommend some effective steps that will help to overcome the existing challenges
and enhance the organizational performance of Nike in the next three years. The following
sections will discuss about a few recommended steps from different perspectives for Nike.

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Change in the marketing strategy
The first recommended step for Nike is to change their existing marketing approach and
strategy. This is due to the reason that the current marketing approach of Nike is effective
enough but the effectiveness is reducing with the emergence of more complex business factors. It
is recommended that Nike should come up with more mass market and market penetration
marketing strategy compared to their premium marketing strategy. In the current time, target
market for Nike is mainly the premium section of the market with offering premium priced
products (Gummesson, Kuusela & Narvanen, 2014). Thus, it is recommended that they should
introduce more affordable products in the market. The major rationale behind this recommended
step is that offering more affordable products will help in increasing the sales volume and
increase in the market share. Though the rate of profitability will be lower for Nike in offering
affordable products over the premium products but the increase in the sales volume will adjust
the lower rate of profitability.
The more will be the affordability of the products of Nike, the more will be the market
penetration for Nike. This will also help Nike in expanding their current market area and
potentiality. However, there will be number of pros and cons in initiating this strategy by Nike.
One of major advantages for Nike will be penetration in the newer customer segments. This is
due to the reason that the more will be the affordability of the products, the larger will be the
target customer segments for Nike (Spann, Fischer & Tellis, 2014). They will be able to enter in
the new markets, which are cannot be targeted by the current marketing strategies. Another
major advantage of this strategy will be effective use of the supply chain and value chain
process. This is due to the reason that the more will be the sales volume, the more effectively and
fully fledged will be the value chain process of Nike and thus this will be optimally utilized.

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Apart from the advantages, there are some demerits also to be faced by Nike in
implementing the recommended strategy. One of the major disadvantages will be the chance of
dilution of the brand value of Nike. Increase in the affordability of the products will reduce the
exclusive brand value of Nike, which may discourage the current set of customers for them.
Another major disadvantage of this strategy will be the increase in competition due to the fact
that competition is higher in the lower level of market. However, it is expected that the outcome
of implementing this strategy will be favorable due to the reason that increase in the sales
volume will further cement the brand value of Nike. On the other hand, this strategy will also
help Nike to cater to the customers across every income level.
Change in the leadership approach
As discussed in the earlier section, transformational style of leadership being followed in
the organization. Though the current leadership approach in Nike is having majority of positive
outcomes but it is also having some limited challenges (Choudhary, Akhtar & Zaheer, 2013).
One of the most probable challenges will be directing the employees through the rough phase of
the organization. This is due to the reason that initiation of the transformational style of
leadership may cause less control of the upper level management on the employees. Thus, in the
case of the emergence of organizational challenges, upper level management may face difficulty
in managing the employees. It is recommended that situational style of leadership will be more
effective and applicable for Nike. This is due to the reason that initiation of the situational style
of leadership will help the upper level managers to change their leadership approach in
accordance to the originated situation (McCleskey, 2014). In the current business scenario,
external environment get change more frequently and thus practicing same leadership approach
will cause challenge for the managers to deal with the external factors. Thus, initiation of the

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situational style of leadership will help Nike in having effective leadership roles according to the
emergence of the external factors.
One of the major advantages that will be gained by Nike from the change in the
leadership approach is more effectiveness in their business strategy. This is due to the reason that
initiation of the situational style of leadership will help the upper level management to manage
their employees in accordance to the external factors. In addition, it will also be an advantage for
Nike by making the employees accustomed with the different leadership approaches. However,
on the other hand, there will be number of demerits also to be faced by Nike from the initiation
of situational style of leadership (Thompson & Glaso, 2015). One of the major disadvantages to
be faced by them is the resistance from the side of the employees. This is due to the reason that
employees will face more difficulty in getting accustomed with the change in the leadership
approach. In addition, the rapid change in the leadership styles in the situational leadership
approach will further cause difficulty for the employees, which will further lead to the
emergence of resistance from them.
It is expected that initiation of the situational style of leadership will help Nike to have
effective business strategies and leadership roles according to the organizational situation. Thus,
the internal management will become more effective and it will enable Nike to enhance their
business in the next three years (Gonos & Gallo, 2013). This due to the reason that in the next
three years, there will be different external factors that can only be mitigated by having
flexibility in the internal management of the organization. This flexibility in the organization can
only be initiated by having situational style of leadership.

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Product diversification
According to the organizational vision of Nike, they targets to cover more sports products
under their brand and offering more holistic experiences to their customers. Thus, it is
recommended that Nike should initiate the strategy of product diversification (Mayer, Stadler &
Hautz, 2015). This will help them to introduce new product in the market and to cater new
customer segments. It is recommended that Nike should come up with sports drink under their
brand. This will be the most proper product due to the reason that sports drink will be related and
associated with current business line of Nike. Introduction of the sports drink in the market will
help Nike to increase the target customer segments along with reducing the dependency from the
single business line. In the next three years, the objective of Nike will be to increase their
business and revenue across the world. However, the business will be limited if the current
business line is being continued. Thus, with the help of product diversification, Nike will be able
to increase their business and expending in other sectors also.
However, in the case also, there will be certain advantages and disadvantages to be faced
by Nike. One of the major advantages to be gained by them is increase in the market presence
due to the fact that entering in the new business sector will help them to have more diverse
customer segments. Another major advantage that can also be gained by them from the initiation
of product diversification is providing more holistic set of customer experiences. Currently, Nike
is having number of sports products in the market and absence of any sports drink is one of their
major gap areas. This can be fulfilled by initiating the product diversification strategy (Lien &
Li, 2013). On the other hand, the major disadvantage that will be faced by them from the
initiation of the diversification strategy is dilution of their core offerings. More concentration on
the sports drink may cause dilution of their core offerings of sports apparels. Moreover, Nike

30SPORTS ORGANIZATION THEORY
will also face the challenge of investing huge capital in developing the new products, which may
cause added financial load for Nike.
It is expected that initiation of the product diversification strategy will have added
benefits for Nike. This is due to the reason that, in the next three years, they will be able to
leverage the business opportunity from their existing product portfolio along with having the
added benefits from the newly launched product. Moreover, it will also enable Nike to enhance
their organizational performance in the next three years along with meeting their organizational
vision of offering more sports items to more diversified set of customer segments.
Conclusion
Thus, it can be concluded that the current internal management of Nike is effective
enough to deal with different organizational challenges. However, there are numbers of gap areas
being identified and in accordance to that; a few recommended steps are being discussed in this
report. It is expected that effective implementation of the discussed steps in this report will help
Nike to overcome their current challenges and enhance their business performance in the next
three years. Thus, it can also be concluded that Nike is not a sports organization but operating in
the sports industry with their sports items. This report discussed about the internal organizational
policies and processes Nike and how effective they are in meeting the organizational goals. In
addition, this report also discussed about the organizational structure being followed in the
organization along with identifying the complexities in it. In accordance to the complexities, a
new organizational structure is being recommended for Nike, which will enhance their
effectiveness. On the other hand, the potential strategic allies are also being identified in this
report. Three major allies are being identified and different factors that should be considered in

31SPORTS ORGANIZATION THEORY
selecting the strategic ally are also discussed. It is concluded that PepsiCo will be the most viable
strategic ally for Nike. It is also recommended that Nike should launch energy drink in the
market in view to their diversification strategy. This will help them to increase their market share
and market revenue. Lastly, this report also discussed about the impact and initiation of the
change management in the organization for Nike.

32SPORTS ORGANIZATION THEORY
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