Nike (NKE) SWOT Analysis / TOWS Matrix / MBA Resources
Footwear
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nike (United States)
Based on various researches at Oak Spring University , Nike is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, technology disruption, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , wage bills are increasing,
competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nike can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nike, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nike 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 can be done for the following purposes –
1. Strategic planning of Nike
2. Improving business portfolio management of Nike
3. Assessing feasibility of the new initiative in United States
4. Making a Footwear sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nike
Strengths of Nike | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nike are -
Innovation driven organization
– Nike is one of the most innovative firm in Footwear sector.
Learning organization
- Nike is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Nike is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nike emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Nike has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Footwear industry. Secondly the value chain collaborators of Nike have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Nike
– The covid-19 pandemic has put organizational resilience at the centre of everthing Nike does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Footwear
– Nike is one of the leading players in the Footwear industry in United States. Over the years it has not only transformed the business landscape in the Footwear industry in United States but also across the existing markets. The ability to lead change has enabled Nike in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Nike is present in almost all the verticals within the Footwear industry. This has provided Nike a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Cross disciplinary teams
– Horizontal connected teams at the Nike are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Training and development
– Nike has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Operational resilience
– The operational resilience strategy of Nike comprises – understanding the underlying the factors in the Footwear 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.
Superior customer experience
– The customer experience strategy of Nike in Footwear industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Nike has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nike has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High switching costs
– The high switching costs that Nike has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses of Nike | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nike are -
Low market penetration in new markets
– Outside its home market of United States, Nike needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Nike supply chain. Even after few cautionary changes, Nike is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nike vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Nike has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Employees’ less understanding of Nike strategy
– From the outside it seems that the employees of Nike 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 to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nike is slow explore the new channels of communication. These new channels of communication can help Nike to provide better information regarding Footwear products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– From the 10K / annual statement of Nike, it seems that company is thinking out the frontier risks that can impact Footwear industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Aligning sales with marketing
– From the outside it seems that Nike needs to have more collaboration between its sales team and marketing team. Sales professionals in the Footwear industry have deep experience in developing customer relationships. Marketing department at Nike can leverage the sales team experience to cultivate customer relationships as Nike is planning to shift buying processes online.
High bargaining power of channel partners in Footwear industry
– because of the regulatory requirements in United States, Nike is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Footwear industry.
Lack of clear differentiation of Nike products
– To increase the profitability and margins on the products, Nike needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the Footwear industry, Nike 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.
High operating costs
– Compare to the competitors, Nike has high operating costs in the Footwear industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nike lucrative customers.
Nike Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nike are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nike can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Nike to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Nike can develop new processes and procedures in Footwear 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nike 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.
Learning at scale
– Online learning technologies has now opened space for Nike to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Using analytics as competitive advantage
– Nike has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Footwear sector. This continuous investment in analytics has enabled Nike to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nike to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Nike can use the latest technology developments to improve its manufacturing and designing process in Footwear sector. 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.
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 can use these opportunities to build new business models that can help the communities that Nike operates in. Secondly it can use opportunities from government spending in Footwear sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Footwear industry, but it has also influenced the consumer preferences. Nike can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Nike has opened avenues for new revenue streams for the organization in Footwear industry. This can help Nike to build a more holistic ecosystem for Nike products in the Footwear industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Nike can improve the customer journey of consumers in the Footwear industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Loyalty marketing
– Nike 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.
Use of Bitcoin and other crypto currencies for transactions in Footwear industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nike in the Footwear industry. Now Nike can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Nike External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nike are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Footwear industry are lowering. It can presents Nike with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Footwear sector.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Nike needs to understand the core reasons impacting the Footwear industry. This will help it in building a better workplace.
Regulatory challenges
– Nike 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 Footwear industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nike may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Footwear sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nike in Footwear industry. The Footwear 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.
Shortening product life cycle
– it is one of the major threat that Nike is facing in Footwear sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 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.
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 in the Footwear sector and impact the bottomline of the organization.
Environmental challenges
– Nike 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 can take advantage of this fund but it will also bring new competitors in the Footwear industry.
Increasing wage structure of Nike
– 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.
High dependence on third party suppliers
– Nike high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Nike demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Footwear industry and other sectors.
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 business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Nike Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nike 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 Nike 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 Nike 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 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 needs to make to build a sustainable competitive advantage.