Focusing on middle manager Harry Leidboldt, this case presents a clear-cut strategic issue--should Nike move into the leisure shoe business? The teaching objective is to first view the decision as a business problem--can Nike succeed in this business? and secondly, to review the effectiveness of the process by which a middle manager helps senior management deal with strategic issues.
Swot Analysis of "Nike (D): Leisure Shoes" written by C. Roland Christensen, David C. Rikert includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Nike Leisure facing as an external strategic factors. Some of the topics covered in Nike (D): Leisure Shoes case study are - Strategic Management Strategies, Entrepreneurship, Managing people and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Nike (D): Leisure Shoes casestudy better are - – there is increasing trade war between United States & China, increasing commodity prices, increasing transportation and logistics costs, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%,
technology disruption, geopolitical disruptions, etc
Introduction to SWOT Analysis of Nike (D): Leisure Shoes
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nike (D): Leisure Shoes case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nike Leisure, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nike Leisure operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Nike (D): Leisure Shoes can be done for the following purposes –
1. Strategic planning using facts provided in Nike (D): Leisure Shoes case study
2. Improving business portfolio management of Nike Leisure
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nike Leisure
Strengths Nike (D): Leisure Shoes | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nike Leisure in Nike (D): Leisure Shoes Harvard Business Review case study are -
Analytics focus
– Nike Leisure is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by C. Roland Christensen, David C. Rikert can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Sustainable margins compare to other players in Leadership & Managing People industry
– Nike (D): Leisure Shoes firm has clearly differentiated products in the market place. This has enabled Nike Leisure to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Nike Leisure to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Nike Leisure in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Nike Leisure in the sector have low bargaining power. Nike (D): Leisure Shoes has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nike Leisure to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Nike Leisure has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nike Leisure to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Nike Leisure is one of the most innovative firm in sector. Manager in Nike (D): Leisure Shoes Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Nike Leisure
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Nike Leisure does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Nike Leisure is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Nike Leisure digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nike Leisure has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Operational resilience
– The operational resilience strategy in the Nike (D): Leisure Shoes Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to recruit top talent
– Nike Leisure is one of the leading recruiters in the industry. Managers in the Nike (D): Leisure Shoes are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Nike Leisure has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Nike (D): Leisure Shoes - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Nike (D): Leisure Shoes | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nike (D): Leisure Shoes are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Nike (D): Leisure Shoes, it seems that the employees of Nike Leisure don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow decision making process
– As mentioned earlier in the report, Nike Leisure has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Nike Leisure even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Workers concerns about automation
– As automation is fast increasing in the segment, Nike Leisure needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Aligning sales with marketing
– It come across in the case study Nike (D): Leisure Shoes that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Nike (D): Leisure Shoes can leverage the sales team experience to cultivate customer relationships as Nike Leisure is planning to shift buying processes online.
Interest costs
– Compare to the competition, Nike Leisure has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Nike (D): Leisure Shoes, in the dynamic environment Nike Leisure has struggled to respond to the nimble upstart competition. Nike Leisure has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Nike Leisure has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High cash cycle compare to competitors
Nike Leisure has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of Nike Leisure, firm in the HBR case study Nike (D): Leisure Shoes needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Nike (D): Leisure Shoes has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nike Leisure 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Nike Leisure has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Opportunities Nike (D): Leisure Shoes | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Nike (D): Leisure Shoes are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Nike Leisure can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Creating value in data economy
– The success of analytics program of Nike Leisure has opened avenues for new revenue streams for the organization in the industry. This can help Nike Leisure to build a more holistic ecosystem as suggested in the Nike (D): Leisure Shoes case study. Nike Leisure can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Nike Leisure has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Better consumer reach
– The expansion of the 5G network will help Nike Leisure to increase its market reach. Nike Leisure will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Manufacturing automation
– Nike Leisure can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nike Leisure in the consumer business. Now Nike Leisure can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Nike Leisure has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Nike (D): Leisure Shoes - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nike Leisure to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Nike Leisure can develop new processes and procedures in Leadership & Managing People industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Nike Leisure to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Leveraging digital technologies
– Nike Leisure can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Nike Leisure can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nike Leisure can use these opportunities to build new business models that can help the communities that Nike Leisure operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nike Leisure can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Nike Leisure can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Nike (D): Leisure Shoes External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Nike (D): Leisure Shoes are -
Environmental challenges
– Nike Leisure needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Nike Leisure can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Regulatory challenges
– Nike Leisure needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Leadership & Managing People industry regulations.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Nike Leisure in the Leadership & Managing People sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Nike Leisure has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Nike Leisure needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nike Leisure can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Nike Leisure business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nike Leisure in the Leadership & Managing People industry. The Leadership & Managing People industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing wage structure of Nike Leisure
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Nike Leisure.
Stagnating economy with rate increase
– Nike Leisure can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Nike Leisure will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Nike Leisure with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Nike (D): Leisure Shoes, Nike Leisure may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nike Leisure can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Nike (D): Leisure Shoes .
Weighted SWOT Analysis of Nike (D): Leisure Shoes Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Nike (D): Leisure Shoes needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Nike (D): Leisure Shoes is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Nike (D): Leisure Shoes is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Nike (D): Leisure Shoes is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Nike Leisure needs to make to build a sustainable competitive advantage.
