Analysis Of Nike Inc: Market Potential And Entry Strategy Essay.

Macro business factor

• An analysis of the macro and micro factors impacting on the sports retail market and the market recommendations

• An analysis of Nike Inc. internal business factors

• An evaluation of market potential, to include an identified shortlist of markets with potential.

• Then using a clear and identified screening criteria, select two recommended markets with clear justification as to why these markets have been selected.

• Recommended and justified market entry strategy to take Nike Inc. into each of these markets

• Recommended adaptations to Nike’s marketing mix for the proposed markets, ensuring differences in culture and consumer behaviour are recognised in their marketing mix activity.

Nike started their journey as an American multinational corporation and set an objective to establish their business across the entire world. Their prime target was to provide footgear products to their end-users; however, they also focused on other marketing sales products like attire equipment and services(nike.com 2016). Their annual revenue is exponentially growing since every year. In the year 2014, their annual income is $27,799 billionand raises ten percentages to 30.6 billion US Dollars for 2015 (NIKE, Inc. 2016). The previous year was the outstanding year for them as their Gross margin as expanded 60 basis points to 46.2 percentages (nike.com 2016).

Nike receives its highest annual revenue from the North America and it costs$1,740 million for the concerned organization, which is followed by the Western Europe form where Nike has earned $5,709 million and from the emerging markets they receives$3,898 million in for the previous year that is 2015(NIKE, Inc. 2016). Nike has also gained their popularity more than for the online business than the stores present in the markets. They also want to take initiatives for establishing new stores in all possible location so that they can grow their markets worldwide (nike.com 2016). It is also predicted by the experts that the annual revenue of Nike Inc. will cross 36 billion US Dollars for the fiscal year 2017.

Figure 1: Annual Revenue and Annual Income estimation

(Source: NIKE, Inc. 2016)

This assignment comprises of the market study for the two countries where Nike is not existed at present and trying to attract those communal. In this study, the researcher focused on the two new markets – Nigeria and Bangladesh. The analysis of micro and the macro factor is also enlightened by the analyst that could influence their market strategies which are further followed by the evaluation of the potentiality of their markets. The researcher also analyzed the screening criteria for the selection and justified their entry strategy and the study ultimately wraps up with the marketing mix proposal for achieving their success in those selected markets.

Micro Business factor

Macro business factor

Figure 2: PESTLE Analysis

(Source: Yuan 2015)

Political condition: In Nigeria and Bangladesh is a high-risk and high-rewarding market; however, they are stable at present and Nike can take initiatives to open their markets in these areas, as no other competitors will show their interest to compete in those areas (Sandberg 2013).

Economic condition: Nigeria and Bangladesh being the least developed country, their governing bodies will eagerly take appropriate footsteps for recovering their Economic condition and provide Nike the best possible opportunity to set up their business in their respective countries (Yap and Yazdanifard2014).

Social factors: They are also responsible for the market planning as they are taking participation in sports. Bangladesh youth is performing well in crickets and Nigeria participates in basketball, football and other games.

Technological factor: West et al. (2015) depicts that Nike can also collaborate with the online media like Amazon and eBay to attract customers with the modern technologies as today’s youth spends more time over the internet. They prefer those opportunities where they do not have to make much effort for achieving the desirables.

Environmental factors: Nike targets for CO₂ reduction up to 20 percentages in 2015 out of which they attained 13 percentage of the less reduction of these gasses (Houlihan2013). They also emphasis on the less water usage in the countries like Nigeria, Bangladesh and other countries where there is scarcity of safe water, Nike attained 15 percentage of less usage of water since 2011. Vadicherla and Saravanan (2015) also demonstrate that the effort for using the sustainable material for innovation like ColorDry products use for shoe Dyes and the use of Flyknit Technology maintains the sustainability for their less consumption of water.

Legal factors: Nike faced legal factors like sweated labour like the one they faced in Pakistan, Thailand and China. Conditional unemployment is another legal factor that is face by Nike in previous era. Nike also paid minimum wages to the employee in the countries like Indonesia. Thus, Nike takes initiatives to resolve their controversy in the undertaken places that is Nigeria and Bangladesh.

Porter’s five forces Analysis

Figure 3: Porter’s five forces of Nike

(Source: Yap and Yazdanifard 2014)

Rivalry among competitors: According to Mahdi et al. 2015, this Competitive rivalry of Nike is extremely high and can be a reason that threatens Nike’s market share growth. The athletics products are prone to continuous changes due to change in customer’s preferences and technology. Moreover, Under Armour and Lululemon Athletica focus more on the niche market such as yoga apparels and others that could threat their market share. Moreover, local companies also improve their products that also raise their threats regarding the competition.

Analysis of Nike Inc

Bargaining Power of Suppliers: This has a low impact as no supplier holds significant bargaining power. The third party distributor in selected countries like Vietnam, Indonesia and others, handles their footwear and apparel products. Moreover, no other factories exceed the 6% of the production made by Nike and hence the bargaining power of supplier gets limited (West et al. 2015).

Bargaining power of Buyers: Customers can bargain high extent in order to get a top class product in a reasonable price range. Zink and Fischer (2013) also depicts that direct-to-direct sales has risen by 23% compares to 6% growth in their wholesale business, as a result, Nike takes initiatives to strengthen their direct channel. There is a high chance for huge wholesale consumers to develop a partnership.

Threats of New Entrants: Nike enjoyed the circumstance where they have assurance that any new entry organization in the same field cannot match the reputation of Nike within a short interval of time. Nike believes that online retailer have the potential to gain more popularity than market retailers as consumer prefer things that can be easily available.

Threats of Substitute Products: It is evident that the requirement for the athletic apparel is improving their quality and customers cannot substitute these products. As the quality is improving day-by-day, it can be a great thereat for Nike in the existing markets as well as to those places where they intends to open their business.

Ansoff Matrix

Image 4: Ansoff matrix

(Source: Zink and Fischer 2013)

Market Penetration: Out of their total sales almost 42% of their total sales are obtained from United States. Their existing product obtained total revenue of $23 million dollars in the previous year and stated to increase the income in future.

Product Development: The risk in this is very high as Nike intends to formulate new products for bringing development in the existing items. In this context, Nike takes the initiatives for redesigning their new products to reduce the cost for manufacturing new products. Thus, proceeding in this way, Nike can target new places also where there is no existence of their factories and retail shops.

Market Development: This mainly emphasizes on their existing products in the markets. Their major risk relies on the fact that their competitors like Adidas extend their business by sponsoring their products in sports events to staring teams like Germany national football team (West et al. 2015). In the new market places also, Nike must have to take initiative to support local and national sports events for attaining more interest.

Diversification: Until the year 2015, Nike has not taken any steps for diversifying their products. The major risk rely in this scenario is whether the new products will be liked by the consumers or not. However, they have to take measurable steps for formulating new products that are of low cost while not compromising in the quality. In this way, Nike can attain more popularity among the low-income public in the developing countries.

Image 5: SWOT Analysis

(Source: Zink and Fischer 2013)

Strength: Rainer et al. (2013) depicts that apart from the manufacturing of the shoes, Nike also manufactures variety of sports accessories like baseballs, footballs, volleyball and tennis in enough quantity. Their strength also relies on the fact that they have their factories in all their markets so that they can sell their factory outlets in a very reasonable price to their new customers especially of the low-income group people like in Nigeria md Bangladesh.

Weakness: One of the major reasons regarding their weakness is that their income from the business is heavily relying on the footwear markets. Rainer et al. (2013) depicts that; the circumstances will affect their trading procedure largely if the market shares erode. It is not always possible for Nike to inaugurate their genuine shop; as a result, they collaborate with retailer, who stocks similar products of their brands in a much reasonable price. People, who always cannot afford Nike, will always go for the other brand. This situation may arise in the low profitability of the Nike.

Opportunity:  Zink and Fischer (2013) analyzed that 42 percent of the Nigerian people took agriculture thus, Nike have an opportunity to provide them a job to the educated people for the betterment of their factory and as well as the Nigerian and Bangladesh community (Stinson and Pritchard2013). Nike’s innovative products and their product’s physical appearance provide the concerned company an opportunity to develop a fashion sense in the youth. They also have an opportunity to invest in the research and development section to innovate products other than the footgear that is sunglasses and jewelry (Zink and Fischer 2013).

Threat: All the global brands suffer from threats in their trading business. (Mahdi et al. 2015) mention that being a global company, Nike has to deal their business by selling their product in international markets with different currencies values. As a consequence, it is very difficult for the Nike to evaluate their overall profit shares as these differences in the currencies values lead to their instability of their trade. Izogo and Ozo (2015) also enlighten that, there are numerous sports brand like Adidas Inc., PUMA and others in the market and they are intended to compete with Nike for attaining a better market position compared to Nike.

Image 6: Market Entry Strategy

(Source: Gross2013)

Some essential feature those are required for the market entry strategies for the Nike are as follows:

Country Identification: Apart from the developed country to start their business, Nike has selected two countries – Nigeria and Bangladesh, where there is not much development until now. Nike can take initiatives to identify the requirement of furtherance in these countries, along with also targeted them for their trading system.

Preliminary Screening: In the second stage, Nike must have to be focus regarding the macro and micro environmental factors. Gross (2013) depicts that, Nike can take advantage of these two countries as their other competitors like Reebok, Adidas Inc. will not easily target these countries. Apart from that, the screening of the competent collaborators is also very crucial for the market entry. They can pick other online shopping hubs like Ikea.com, Groupon.com, and Shop.com etc.

In-Depth Screening: This is the third step concerning the market entry strategy and enlightens the marketing mix policies. Concerning the countries Nike have selected, they can take inventiveness for formulating low range products for the low-income group like farmers and service people. Schlegelmilch (2016) suggested that they can also plan an effective strategy for the distribution procedures for serving their products to their end-users.

Final Selection: In this step, Nike can select their final location considering the location of their retail showrooms. They have to consider the other retail store of the same products to decide their position on the existing shops.

Direct Experience: The higher authority of the Nike has to visit the places of the Ibadan in Nigeria and Bogra in Bangladesh to gather personal experience about their culture and the business practices (Davidson et al. 2015). This direct experience of these authorities makes then enables to understand the community or the society better and helps them to incur their business in those targeted places. Exampling the scenario of Nigeria, the authorities can take opinion from the local how much they value sports and support the sports accessories. This step is beneficiary for them to take the idea of formulating products according to their requirements. While in the case of Bangladesh, the authorities can consult with the local sports academic institutes or school to gather the information regarding the sport’s needs.

The prime reason for the selection of these markets is the development of the livelihood in a place where people do not think about the additional requirement of the luxurious materials. Awoniyi (2016) mention that people in Nigeria are mostly related to the farming and Bangladesh with the local service sectors. Nike mainly focuses on targeting these places for making their livelihood comfortable and takes the challenges to establishing their trading. Nigeria is a country where the experts predict that the demands of trading commerce will increase up to 2020 and hence the Nike wants to take the advantage of that prediction.

The prime reason for the selection of the Bangladesh is to rectify their fault that Nike has faced for the uncertain situation of Sweatshop in Bangladesh. They want to take an initiative for resolving the situation and provide the community with better job offer following the ethical approach of trading (Mahdi et al. 2015). Proceeding in this way, they can make the life of the locals better than their present condition by providing them the opportunity to associate with a global brand image and also an occupation matching with their educational knowledge.

Price: The price factor is the central issue regarding the effective marketing mix. The Nike can manufacture a very small range of product considering the economic condition of the Nigeria. People here are mostly agriculture-centric and having a very less income. Thus, Nike must consider this factor and design their products in the low range. For Bangladesh, it is a developing country and also values sports. The pricing can be moderate in these communities so that every person from every section can use their products and helps in their productivity.

Product: Nike in the community contributes some of their wide range of footwear not only for the sports purpose; however, for daily wear and clothing accessories. According to Shank and Lyberger (2014), people in Bangladesh are participating in sports nowadays and Nike can take the initiative to manufacture other equipment like sports ball or eye gear so that the customers can get all the required sports accessories under the same roof. Their product ranges are also for all kind of consumers from old to young and women.

Promotion: Accomplishing the educational approach, Nike can also select the most famous sports icon to promote their products and their purpose. Collaborating with the digital media technology, Nike can also deliver their offerings to household people via TV Commercials or Air-advertisements through Radio etc. (Chaston2015). Online advertisements and personal e-mail can also promote the modern technologies in these areas as well as their online trading approach to the youths.

Place: Ibadan in Nigeria and Bogra in Bangladesh are one of the densest cities in their country respectively. These areas are suitable for the establishments of new stores, and there is enough space for formulating their manufacturing factories as well (Lyberger 2014). They can also consult with the local or the country experts and the governing authorities to spaced-out their factories to match with the economy.

Suggesting a way to improve the marketing strategy for Nike is the part of the judgment. Nike must have to be conscious of the environment. They should take care of the raw products they use for their shoe materials. They also emphasize on the eco-friendly leather materials and focus on the reusability and recycling. Being a leading company, Nike also has to take measures for promoting the Corporate Social Responsibility (CSR) activities in the places targeted by them that are Nigeria and Bangladesh. Proceeding in this way, Nike can able to attain reputation in the society, which is important in concerned location. Participating in the voluntary activities helps them to gather status in the community that helps them to survive in the long run. Collaborating with the local academic center, Nike can take initiatives for promoting sports activities to the students for promoting their brand products and their usage to them. This way they can also target other under-developed countries where other retailers do not take initiatives to start their business.

Another consequence is that Nike must have to follow the ethical consideration for their trading system to avoid and an adverse situation like their experience of Bangladesh’s sweatshops. They must have to utilize the educational knowledge of the common people and provide them training so that they can serve the company their best possible services for the betterment of the organization. Moreover, they can also take measures for formulating new ranges of products like sports bikes, headgears etc. to attract the customers with their wide varieties of products and make it easy for them to access every kind of goods under the same roof. Another step that can be taken by the Nike Inc. is to expand their business in multiple locations of the same place so that the end-users can access their shops from anywhere irrespective of their physical presence.

Conclusion

Nike Inc. has already attained their brand image all over the world. They are progressing well with their performance and productivity compared to each year and looking for their further expansion. The increase in the worldwide commercial competition forces Fast Moving Consumer Goods (FMCG) in search of new efficient markets for starting up a business from the scratch. Nike has taken the initiative to launch their business to two of the underdeveloped countries Nigeria and Bangladesh, where the livelihood of the communal are not goods as well as stable; however, they started measures for the betterment of the society.

Nike has to consider the micro and macro environmental factors like the competitors and their physical and virtual collaborators. Irrespective of the past adverse experience with Nike, the governing authorities supports the company for implementing the growth initiatives in their origin so that the economic growth can be enhanced and they can match the current trends of the world.

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