Nike is a global leader in the athletic footwear and apparel industry, with a reputation for innovation, quality, and style. But what are the strengths, weaknesses, opportunities, and threats facing Nike today, and how can the company leverage this information to stay ahead of the competition?
In this blog post, we will conduct a comprehensive SWOT analysis of Nike. We will explore the company’s strengths, such as its strong brand image and extensive distribution network, as well as its weaknesses, such as its high operational costs. We will also examine the opportunities and threats facing the company, including changing consumer preferences and increasing competition from both domestic and international players.
By the end of this post, you will have a better understanding of the factors that are shaping Nike’s success, as well as the challenges the company faces in the years ahead. Whether you’re a potential investor, a student of business, or simply interested in the strategies of successful companies, this SWOT analysis is sure to provide valuable insights into one of the most innovative and respected athletic companies in the world. So let’s dive in and explore the SWOT analysis of Nike.
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An Overview of Nike’s SWOT | Nike SWOT
Nike, Inc. is an American multinational corporation. Nike is headquartered in Beaverton, Oregon, USA. It was founded by Bill Bowerman and Phil Knight in 1964. The company specializes in athletic wear, providing footwear, apparel, athletic equipment, and accessories.
Nike’s primary goal is to supply athletes with exceptional products and wearables that aid them in better sports performance. However, due to Nike’s success, the company now provides athletic wear as well. Currently, John Donahoe is the CEO of Nike.
SWOT analysis of Nike
Here’s a detailed breakdown of Nike’s SWOT analysis:
Nike Strengths: Internal Strategic Factors
- strong brand awareness and brand value
Nike is one of the most recognizable brands in the world, as its name alone is memorable, easy to pronounce, and unique. Everyone easily recognizes its swoosh symbol. According to the Interbrand global brand ranking report, Nike is ranked in the #10 position with a brand value of $50.2 billion.
- A huge customer base
Nike has millions of customers worldwide who loyally follow Nike’s trends, participate in Nike events, and even provide customer feedback. Due to its vast popularity, Nike’s market cap has grown to $193 billion as of April 2023.
- aimed at sustainability
Nike’s CEO, Mark Parker, has stated that they will continue to acknowledge the environmental issues in the communities. The CEO ensures that Nike will contribute to solving these ecological issues.
- Iconic Relationships
Nike’s long-term partnership with Michael Jordan has proved beneficial in terms of sales for the company. Their collaboration resulted in “Air Jordan 1 Shoes“. Additionally, Nike teamed up with the famous basketball player to help design the “Air Jordan 1 Shoes”.
- Side Brands
Nike’s ability to maintain and enhance its side brands, such as Converse and Hurley, has enabled it to enjoy unparalleled success for decades.
- low manufacturing cost
Most of Nike’s footwear is manufactured in foreign countries. In the fiscal year 2022, Vietnam produced 44%, Indonesia had 30%, and China had 20% of Nike’s total footwear. Other operations are in Argentina, Brazil, India, Italy, and Mexico.
- In-house Professionals
Nike has a team of professionals that designs its shoes and other athletic accessories. Nike believes their business has flourished due to the thorough research conducted for each product.
- Superior marketing capabilities
Nike has excellent marketing campaigns. The brand heavily relies on demand creation expenses, which include advertising, promotion, endorsement contracts, media print, and complimentary products. In the fiscal years 2019, 2020, 2021, and 2022, Nike spent $3.7 billion, $3.6 billion, $3.1 billion, and $3.8 billion, respectively. The brand has successfully utilized social media and marketing campaigns to target more customers.
- Black Community Support
The brand has excellent marketing campaigns and recently released the “Don’t Do It” ad campaign supporting black communities against racism.
- high market share
Nike’s Weaknesses: Internal Strategic Factors
- Poor labor conditions in foreign countries
In the last 20 years, Nike has been consistently targeted regarding its poor labor conditions. These issues include forced labor, child labor, low wages, and horrific working conditions deemed “unsafe.”
- Retailers have a stronger hold.
Nike’s retail sector makes Nike weak due to its sensitivity to pricing. 65% of Nike products are sold directly to wholesalers or retailers. With retailers serving as their core customers, Nike does not put up any fight against their pricing structures whatsoever.
- Pending Debts
Although Nike’s income statements prove prosperous, glancing at its balance sheet could paint a different picture. Nike is still facing financial threats. As of FY22, Nike’s total long-term debt was $8.9 billion.
- Recently, a former employee accused Nike of discrimination based on his Croatian origin.
- Four former female Nike employees filed a class-action lawsuit against the company in August 2018. According to these women, Nike has a toxic company culture for women. The women rubbed their case against the sportswear company, claiming it violated the Equal Pay Act. The women said the company engaged in systematic gender pay bias, where men were paid more than women for the same work.
- Lack of diversification
A significant weakness is Nike’s overdependence on sporting apparel or lack of diversification. The pandemic has discouraged physical interaction and gathering, with sporting events canceled or postponed. Several sports teams are on the brink of collapse. Nike’s losses can be catastrophic if the crisis prevents sporting events for longer.
- Contradicting Strategies
Nike pledged to shift all its facilities to 100% renewable energy with net-zero carbon emissions under the “Move to Zero” scheme. While the strategy is excellent and welcomed, it contradicts Nike’s system, which favors innovation over sustainability. This creates the perception that Nike is not committed to addressing climate change and that its pledge is just a marketing stunt.
- Dependency on North America, especially the US market
Even after establishing itself globally, Nike still relies on the U.S. market regarding sales and revenue. In fiscal year 2022, about 41% of Nike’s sales came from North America, while the rest (59%) came globally. Despite its fame, Nike depends on the U.S. for substantial sales and growth.
- Sexual Harassment
Former female employees also pointed out that sexual harassment and misconduct were common. The New York Times interviewed 50 former and present Nike employees to investigate the company’s culture. Through the interviews, it was established that Nike did have a toxic working environment where sexual misconduct was rampant.
Multiple female employees reported that they had complained to HR but saw no action taken on their part. The women were left devastated and felt unsafe while working at Nike. Some even quit their jobs. The entire controversy has significantly affected the company’s image.
Nike Opportunities: External Strategic Factors
- Emerging Markets
Although Nike already has a presence in many foreign countries, there are still plenty of opportunities. Emerging markets like India, China, and Brazil are gradually flourishing.
- Innovative Products
Although Nike has produced many products, there is still much to innovate. Nike has extended its reach in technology in association with fitness and health. Products like wearable technology that monitors physical activities are the first step in building innovative technology products. Combining technology with athletic wear can prove beneficial, as it is an aspect of the fashion industry that hasn’t been explored much.
- Efficient Integration
The supply and production of Nike’s products depend on independent manufacturers. The brand can acquire a few or make some of its own for a more efficient and streamlined supply chain.
- cutting ties with big retailers
Nike has cut ties with some of the biggest multi-brand retailers and wholesale partners. According to the report, Nike will no longer work with wholesale retailers such as Zappos, Dillard’s, Fred Meyer, Bob’s Stores, etc. The step is taken for better product positioning and a more significant customer experience.
- acquired artificial intelligence startup
Nike can acquire small or medium-sized companies or startups with its vast financial resources. It recently received a predictive analytics platform, Celect, to expand its online sales capabilities and predict customer shopping behavior.
- merges with the Metaverse
Recently, Nike acquired RTFKT, a digital shoe-making company. Yes, you heard that right; the company designs shoes only for the virtual stratosphere. However, RTFKT also claimed that it partnered with FEWOCiOUS (a young artist) to sell authentic shoes along with their digital versions. Nike is banking on the opportunity to market their digital shoes on the Metaverse, where players can use their Metamask wallets to purchase different types of in-game merchandise.
- Exiting from Wholesale Distribution
Recently, Nike announced it would exit the wholesale distribution market in the U.S. The company plans to only market its products at Nike stores, apps, and websites. According to Nike, moving away from distributors will help them double their profit margins. Moreover, Nike will also be able to spearhead the customer shopping experience and control prices.
- Nike to End Use of Kangaroo Leather for Its Shoes
Nike has announced a significant move that will please both animal rights activists and consumers. The athletic apparel giant will no longer use kangaroo skins in their shoes, ending a controversial practice. The decision comes after Puma made a similar move a few weeks ago.
Instead of kangaroo leather, Nike will use synthetic material in its new line of Tiempo football boots, the Tiempo Legend Elite, set to launch this summer. The company also ended its partnership with its sole kangaroo leather supplier in 2021, reflecting its commitment to more sustainable and ethical practices.
- Consumer Direct Strategy
Nike has accelerated its consumer-direct strategy, shifting its focus to digital business and closing physical stores. In fiscal year 2022, 42% of Nike’s revenue came from online sales. The pandemic is shaping how Nike interacts with its customers.
Nike Threats: External Strategic Factors
- Counterfeit Products
Counterfeit products can significantly affect Nike’s revenue and reputation. The company deals globally, and the risk of counterfeit products has increased. Several merchandisers and retailers offer counterfeit Nike products at lower prices.
The low-priced products are made from low-quality materials but still have the Nike label. This can tarnish the brand’s image, as customers might feel Nike has started producing low-quality products.
- increased competitive pressure
Although Nike dominates the athletic industry, competition and new emerging brands are potential threats to the company. With a higher competitive ratio, Nike must spend more on marketing and advertising.
Nike spent $3.8 billion on marketing and demand generation in fiscal year 2022. To overpower competition, Nike’s safest bet is to design innovative products tailored according to athletes’ needs.
- Marketing budget pressure
Companies like Under Armour, Adidas, and Lululemon are spending more on marketing and advertising campaigns, increasing the pressure on Nike.
- Currency and Foreign Exchange Risks
Since the brand operates globally, it is affected by fluctuating foreign exchange rates. Nike reports its financial earnings in U.S. dollars. This affects its revenue as the U.S. dollar is exposed to volatility against other monetary currencies.
- Patent Disputes
Regardless of whether a company is wrong or right, patent disputes are hotly and fiercely contested in the public domain and expose some dirty secrets about the sides of the conflict. In U.S. and German courts, Nike and Adidas have been engaged in fierce patent disputes over Primeknit and Flyknit shoes.
- Economic Uncertainty
Regardless of the industry, all companies are susceptible to the adverse effects of a global recession. During lockdown, Nike reported a decline in sales, and sales can drop further if the recession strikes as hard as predicted by experts.
- Trade Tensions
Nike depends on different markets worldwide, as evidenced by the recent stock increase fueled by increased sales in China. With China and the US as its biggest markets, a large chunk of Nike’s sales will be threatened if the trade tensions between the two giants escalate.
- Patent Conflict Against Adidas Primeknit Shoes
In an appeal to a U.S. agency, Nike filed a complaint that Adidas has been infringing on the company’s Flyknit shoe technology patent. The company also stated that the German shoe manufacturer had used Nike’s Flyknit technology in 49 shoe designs (which use Primeknit technology).
However, according to an Adidas representative, the company will fight these claims and stated that Adidas has started using its Primeknit technology after numerous years of research and development.
- Risk to the Kangaroo Population
Nike has been accused of putting the Australian kangaroo population at risk of extinction. The leading athletic brand uses kangaroo skin to manufacture leather football shoes. Animal rights activists and advocates have urged Nike to rethink its strategies and use plant-based alternatives. So far, Nike hasn’t responded to these allegations.
- Nike Faces a Wave of Retail and Warehouse Thefts
Nike experienced a surge in theft crimes throughout its supply chain, including warehouse and train thefts. According to the National Retail Foundation, retail robbery has become a massive problem in the United States, with an estimated cost of $95 billion.
The company has reported that thieves are stealing from shelves and vehicles. This forced Nike to close a popular outlet store in its hometown of Portland. In addition, two suspects were arrested in Memphis for stealing Nike merchandise worth about $60,000 from five rail cars. Despite having 344 stores across the United States, including outlets and Converse stores, Nike needs help to prevent theft along its entire supply chain.
- Nike Sues Lululemon Over Patent Infringement
Nike has filed a complaint in Manhattan federal court against Canadian athletic apparel company Lululemon, alleging patent infringement of at least four footwear products.
Nike claims that Lululemon’s Blissfeel, Chargefeel Mid, Chargefeel Low, and Strongfeel footwear have caused economic harm and irreparable injury to the company.
Although this isn’t the first time Nike has sued Lululemon for patent infringement, the recent complaint alleges that three patents have been infringed, including one addressing the performance of footwear when force is applied. While the company seeks unspecified damages, Lululemon has yet to comment.
The fiscal year 2022 has proved to be successful for Nike. Although the brand is still in debt, the next few years look promising. Nike has grown exponentially in the last decade.
This is an extraordinary achievement, from releasing new product lines to building new brands to outsourcing and establishing a global presence.
Through this SWOT analysis of Nike, you will be able to understand the brand’s business model.
References and more information
- Xu, V. (2020, March 17). Your favorite Nikes might be made with forced labor. Here’s why. The Washington Post
- Cara Salpini( 2021, November 4). Nike is on track to make $50 billion this year. How much is that, really? Retail Dive
- Interbrand: Best Global Brands 2021