BUS1001: BUSINESS ENVIRONMENT SUBMITTED BY: NAVPREET SINGH STUDENT ID : G1749271W DATE: 12-JANUARY-2018 WORD COUNT: 2433 Contents BUS1001: BUSINESS ENVIRONMENT. 1 Introduction. 3 1. PEST Analysis.
3 1.1 Political Factor. 4 1.2 Economic Factors. 4 The Danger of Retreat and Rivalry. 4 1.3 Social Factors.
5 1.4 Technological Factors. 6 SW0T Analysis. 7 OPPORTUNITIES & THREATS.
7 2.1 OPPORTUNITIES. 7 Taking full advantage of the emerging markets. 7 Product Expansion. 7 2.
2 THREATS. 9 Intense Competition. 9 Fluctuating International Markets.
10 Recession. 10 3. Conclusion. 11 4.
References. 12 Introduction One of the most leading sports goodsretailers, Nike Inc. is an Americanmultinational corporation, it designs, creates and sells apparel, footwear, equipment and accessories and other services,the world over. It majorly aims to manufacture sportswear and athleticsproducts. And it also holds prominencein the recreational and casual clothes market.It was initially named as Blue Ribbon sportsin the year 1964, later developed into Nike, Meaning the Greek goddess ofvictory Inc on 30th May 1970. In2014, Nike was known worldwide as the most valuable brand among all sportsbusiness.
Also, was recognized with its logo ‘Just do it’. Industry Apparels, Footwear, Accessories Headquarters Washington County, Oregon, USA Area Served Worldwide Annual Revenue The US $32.4 billion (2017) Founder Phil Knight, Bill Bower man President and CEO Mark Parker, Products Athletic footwear, apparel, sports equipment and other recreational products with separate lining for men, women, and kids Number of Employees 74,000 (2017) Source: 2017 AnnualResults Nike Inc 1. PEST AnalysisPEST analysis refersto all the macro-environmental factors that are necessary for strategic management. It is an acronym which whenexpanded includes six factors when the company is contemplating to launch orupgrade a service or a product. The factors are: Political Economic Social TechnologicalThe significance of all these factors can be different fordifferent companies or industries but overall they play a crucial role indeciding the future action of every organization. 1.
1 PoliticalFactors •Favorable Government PoliciesThe governmentpolicies always have a huge impact on the companies specifically those thatoperate globally. The US government has always certainly initiatedgrowth-oriented policies which have supported this company to grow and expandinternationally •Political Unrest in Some Asian countriesMost of the factoriesof Nike, Inc. are situated in the developing Asian countries such as China,Vietnam and Indonesia. But the political situation in Thailand in the last fewyears was a big concern for the management of Nike, Inc. where it’s had its 35factories located. The situation is somewhat same in Vietnam, Indonesia andparts of China as well, as any form of protest, political instability or socialunrest can disturb the supply chain of Nike, Inc. Country Number of Factories (2014) China 195 Indonesia 40 Vietnam 65 Thailand 35 •Changes in International LawIn last one decade, the international law has become even more stringent with the increasing threat of terrorism.
To counter these illegal activities within their territory many countries havechange their rules and regulations,. 1.2 Economic Factors The Danger of Retreat and Rivalry Nike, Inc.requirements to devise an arrangement how it can handle another worldwidefinancial subsidence. Being a market pioneer, Nike, Inc. can be influencedaltogether as it encountered in the most recent decade (2008-09).
Last time, itwas seen that amid the subsidence that purchasers supplant Nike with some otherbrand which offers similar items at a lower cost. In this way, the danger ofretreat dependably paired affects Nike, Inc•Rise in Production Cost and Labor IssuesThe labor issues arevery common in the factories of Nike, Inc. recently. In April 2014, Nike, Inc.experienced the biggest strike as most of the factories in China stopped itsmanufacturing because of low wages. It had a significant effect on theproductivity as well as the revenue of the company. •Fluctuating Profit MarginsNike performs all itsbusiness at a global level. Hence, the stability of currency exchange andinternational interest rates is crucial for the continuous growth of its profitmargins.
However, the higher inflation rate at the domestic level (USA) withthe fluctuating currency rates with respect to the Dollar always has adverseeffects on the yearly profit margins •Acquisitions and SubsidiariesNike, Inc. hasacquired many companies which function within its domain of footwear andapparel industry, it started in the year 1988 when it took over Cole Han (NewYork Times). And Since then, it has purchased many companies to strengthen itsgrounding internationally. 1.3 Social Factors•Consumers Becoming More Brand ConsciousIn this modern era,most of the customers have became brand conscious.
They associate Nike, Inc.with quality and status. This increase in brand awareness has been beneficialfor the business of Nike, Inc. to grow better. It was the first company thatintroduced innovation in the footwear and apparel industry. •Consumers Becoming Health and Fashion ConsciousEvery year the numberof people visiting the nearest gym to maintain their health, body and physiqueis increasing tremendously. This rise has certainly helped Nike, Inc.
in someway in order to boost up its sales as they turn to buy footwear and apparel forthem to look athletic. Some of the consumers also associate Nike, Inc. withfashion and leisure (About.nike.com, 2016). They are interested buying Nike,Inc. products.
This awareness among the people would apparently help Nike, Inc.in the long run. •Increase in Female ConsumersNike, Inc. has devisedthe key strategy to grow their business in the next few years by targeting theincreasing number of female customers.
As a part of the strategy, it has appointedAmy Montage as the head of its business in the year 2013 (Forbes, 2014). Thebusiness in the women line grew by nearly 12% to $5 billion in the year 2013.The company envisages that the revenue from this segment will reach $7 billionby the year 2017. The enormous potentiality of this segment has encouraged thecompany to introduce various products exclusivelyfor women. Nike, Inc.
projects that soon 25% of its total revenue would begenerated by the female consumers itself. •Working Conditions at FactoriesNike, Inc. is oftenaccused of its dangerous working environment in its factories in manycountries. It has been alleged that it’s using sweatshops to produce footwearand apparel since the 1970s. Initial denials from the authorities itself made thesituation even more complicated which affected its image globally (Businessinsider.com,2015).
1.4Technological Factors•InnovationNike, Inc. is oftenregarded as the Apple Inc. of apparel and footwear.
It is regarded as thepioneer to introduce various products which amazed the whole world. It hasalways adopted the latest technology for theirproducts; this innovation not only helped them to set ahead from theircompetitors but also refined and improved the production process(About.nike.com, 2016). It is also one of the global brands which took arevolutionary step to reduce the usage of chemicals and other raw materialswhich are detrimental for the environment. The latest popular productintroduced by Nike, Inc. is Fly knit Racer which received acknowledgment globally.
•Marketing TechniquesWith the worldwide ascent in deals and effect, Nike, Inc.has additionally adjusted their advertising techniques to achieve their clientsand forthcoming customers. The expansion in promoting focusing on thecomputerized medium more than the customary channels is one such advance. Nike,Inc. utilizes online media and applications to achieve the clients and promotetheir diverse items. Over the most recent couple of years, the market forweb-based shopping has extended which has given Nike, Inc. the chance to expandtheir base around the world.
Presently, Nike, Inc. does not need to rely ontheir stores and establishments outlets to offer their prominent footwear andattire. For the year 2015, Nike, Inc. detailed a 55% expansion indeals through web contrasted with a year ago. The figures touched $1.19 billionintersections the billion check out of the blue through the web deals. It was$767 million in the financial year 2014 (Internetretailer.
com, 2015). SW0T Analysis This analysis is conducted in order to access the various factorsaffecting Nike Inc; it studies its performance and strategies in terms of allthe external and internal factors that affect the working of Nike. Generallyknown as the SWOT analysis, it consists of strengths, Weaknesses, Opportunitiesand threats, the basis of its short-term and long-term strategic direction.Below is a briefanalysis done on the external factors influencing Nike, Inc.OPPORTUNITIES & THREATS 2.1 OPPORTUNITIESTaking full advantage of the emergingmarketsIn the 21st century,countries like China, India, South Africa and Brazil showed high economicgrowth when European and American economies plunged. Customers in these nationshad huge interest in western brands and had high disposal incomes Source: 2016Annual Results Nike Inc.
Though Nike, Inc. hasalready ventured into these nations, still the potentialities have not beenfully exploited. The primary strategy that Nike, Inc. adopted to become asports leading brand was to capture the most famous sports of those nations andadvertisement by the prominent sports professionals which actually proved to bebeneficial.Product ExpansionNike, Inc. isone of only a handful couple of brands which burn through a great many dollarsin innovative work. As they reign in footwear, clothing and games and wellbeinghardware, it gives them extensive chance to expand their scope of items. Itneeds to enhance the item extend with unique accentuation on frill andfurthermore associations with other marked organizations to fortify itsposition (Nikevision.
com, 2013). As the inclinations of the clients tend tochange each year, item development would keep up their hang on a piece of theoverall industry. Initiatives towards Better EnvironmentNike is ranked among the top two companies for being climate-friendly, just after Canon (Reuters.com, 2016).
Nike, Inc. usesparticular strategies to initiate recycling, phasing out usage of chemicalcomponents, proper precautions to safeguard health of laborers working infactories earned them reputation and praised globally.Potential inE-Commerce TradeBefore the major advancements that took place in the IT and communicationindustry, Nike only explored the option of brick and mortar selling, i.
e.either through their own retail store or franchises but with thetransformations in IT sector, it can now boast sales and enhance its customerbase by offering such a wide range of its products over the Internet (Internetretailer.com, 2015). . 2.2 THREATSIntense CompetitionNike, Inc.
operates insuch an industry that is highly competitive, still has a better position interms of market share as opposed to its rival companies, but it faces toughcompetition from Adidas, Puma and other reputed brands. The competition getstougher as these brands also produce a similar range of products (statista.com,2016). Revenue in Billion USD$ The above chartdepicts the stiff competition between the major brands of the industry.
In thefootwear section, Nike is the leader of the industry but it receives continuouschallenges from Adidas and Puma. Fluctuating International MarketsMajority of theproducts manufactured by Nike, Inc. are made in the factories situated outsidethe USA, meaning, they conduct transactions in various financial currencies. Itincreases their vulnerability to any fluctuations in foreign currency exchangerates, also increases the cost, affects the operations and adversely affectsbusiness with independent manufacturers of Nike, Inc Perilous Supply Chain ManagementFor an internationalcompany like Nike, Inc.
, it is very challenging to reach its consumers and makethe delivery of the products properly and timely. Despite the fact that Nike,Inc. acquires no factories for the production of its footwear and apparels, itstill makes up to 90% of its revenues. The manufacturing of these products isentirely outsourced to third parties, which requires raw materials fromindependent contractors. Though it helps in improving profit margins andreduces inventories but it is also a major risk factor in the whole supplychain management system.
For example: This complex supply chain failed inFebruary 2001 and Nike, Inc. suffered a loss of over 100 million US dollars. RecessionNike, Inc. is knownfor its massive advertising spending, endorsements and sponsorships. But in thelast decade (2007-08), when the world was in recession, Nike had to cut itscosts by reducing the advertising budget and also by decreasing the totalworkforce by 4% (NYTimes.com, 2009).
The recession not only affected thecompany internally but the economic conditions of the customers also worsenedas they went to buy footwear and apparel from the brands with lower prices NIKE, INC. NET INCOME, IN MILLIONS OF DOLLARS In can be clearly seen as to how the annualrevenue of Nike, Inc. suffered in two years successively (2009 and 2010) whichwere also the recession years. The growth rate was negative as it earned less,especially witnessing a tremendous fall in the sales in North America andEuropean markets. Hence, every global recession pose a serious threat for thiscompany Nike, Inc. 3.
Conclusion Nike is a global brandaiming at providing sports products to its customers by offering a range ofproducts in a highly competitive and fragmented market. Nike, Inc. It hashundreds of stores worldwide. In order to excel in the market it must assessits external and competitive environment. This will reveal the keyopportunities and will be able to take full advantage of its potentialities andthe threats it must take care of. The above analysis done brings order andstructure to otherwise random information.
The information derived from theanalysis gives more direction to the various strategies that should be adoptedby NIKE, Inc. It was able to identify what opportunities it needed to work on.The case study showed the Political, social, economicand technological factors that are associated with the company. Its passion combines design, premium qualityproducts, economical use of its resources, responsibility for the people andthe environment. Nike became an apparent example of a leading example indeveloping a sustainable business.
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