Nike (NKE) SWOT Analysis / TOWS Matrix / MBA Resources
Footwear
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nike (Germany)
Based on various researches at Oak Spring University , Nike is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, wage bills are increasing, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models,
supply chains are disrupted by pandemic , increasing transportation and logistics costs, 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 Germany
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 -
Analytics focus
– Nike 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 Footwear industry. The technology infrastructure of Germany is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
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.
Effective Research and Development (R&D)
– Nike has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nike staying ahead in the Footwear industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Footwear industry
– Nike is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Nike is one of the most innovative firm in Footwear sector.
Sustainable margins compare to other players in Footwear industry
– Nike has clearly differentiated products in the market place. This has enabled Nike to fetch slight price premium compare to the competitors in the Footwear industry. The sustainable margins have also helped Nike to invest into research and development (R&D) and innovation.
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.
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.
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.
Ability to lead change in Footwear
– Nike is one of the leading players in the Footwear industry in Germany. Over the years it has not only transformed the business landscape in the Footwear industry in Germany 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.
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.
Weaknesses of Nike | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nike are -
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 dependence on Nike ‘s star products
– The top 2 products and services of Nike still accounts for major business revenue. This dependence on star products in Footwear industry has resulted into insufficient focus on developing new products, even though Nike has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative at Nike, in the dynamic environment of Footwear industry it has struggled to respond to the nimble upstart competition. Nike 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 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 Footwear industry using digital technology.
Slow decision making process
– As mentioned earlier in the report, Nike has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Footwear industry over the last five years. Nike 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.
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.
Interest costs
– Compare to the competition, Nike 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.
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.
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.
Nike Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nike are -
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.
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 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.
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.
Better consumer reach
– The expansion of the 5G network will help Nike to increase its market reach. Nike 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.
Building a culture of innovation
– managers at Nike can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Footwear industry.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nike can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nike is facing challenges because of the dominance of functional experts in the organization. Nike can utilize new technology in the field of Footwear industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nike in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Footwear industry, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nike to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Nike to hire the very best people irrespective of their geographical location.
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.
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.
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.
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
Technology acceleration in Forth Industrial Revolution
– Nike has witnessed rapid integration of technology during Covid-19 in the Footwear industry. As one of the leading players in the industry, Nike needs to keep up with the evolution of technology in the Footwear 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.
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.
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.
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.
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.
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.
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.
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.
Easy access to finance
– Easy access to finance in Footwear industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nike can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.