Strengths

Strong Core Brand

The Nike brand itself is one of the strongest — if not the strongest —
names in the entire sportswear industry. Across much of the world,
Nike is one of the first companies that come to the public’s mind when
they think hip, sporty footwear. Overall, this extremely powerful core
brand is one of Nike’s biggest strengths, and you can bet that helps
them rake in billions in additional revenue every year.
Diverse Brand Portfolio
Although the Nike brand itself is incredibly strong, the company has a
diverse brand portfolio beyond that. Most notably, this brand portfolio
includes Converse as well as dozens of other Nike-centric sub-brands
such as Nike Shox, Nike Blazers, and Nike Tiempo. This suggests that
Nike has its foundations well spread across the footwear industry,
allowing it to painlessly weather changes in preference.

Low Product Cost

As many of Nike’s products are manufactured in developing South
East Asian countries such as Indonesia and Thailand, Nike has
extremely low labor costs. What’s more, Nike also uses relatively
inexpensive materials for many of its shoes. Together, these two
factors — labor cost and material cost — allow Nike to manufacture its
footwear for extremely low prices.

Weaknesses
Dependence on US Market
In 2018, over 40% of Nike’s revenue came from the US market. As you
can imagine, this demonstrates a huge dependence on the US market
as part of Nike’s business model. If American tax or legal policies were
to change, in any way affecting Nike’s ability to sell on the US market,
that would significantly hurt the sportswear giant’s profits.
Outsourced Manufacturing
Despite the low cost associated with manufacturing products abroad,
there are indeed downsides to doing so. For one, manufacturing
abroad requires you either to set up dedicated manufacturing
operating in your chosen country or to outsource your work to existing
manufacturers. Nike has chosen to do the latter, which means that
their products aren’t always top quality.

Footwear Focus
Although Nike is relatively diversified within the footwear industry
itself, Nike has not diversified itself much across other industries.
Although the footwear industry is probably here to stay, Nike may
consider broadening their horizons.

Opportunities
Growing Market
There are only more and more people in this world, and many of them
(especially in developed countries) are becoming gradually more active.
Together, these two factors compound to create a constantly growing
footwear market. If played correctly, Nike should be able to capture
much of the business of this growing market, allowing the company to
further grow its profits.

Emerging Markets
As countries across the world become wealthier and wealthier, citizens
in developing countries have more disposable income. In areas such
as South East Asia, growing disposable incomes present an
opportunity for new markets in which to sell products. If Nike is able
to market themselves in these emerging markets, they could grow
their reach and reduce dependence on the US market.

Responsible Manufacturer
In many Western countries, there is a growing trend of knowing where
products have come from and how the environment and workers have
been treated. This presents another opportunity for Nike. If they are
able to brand themselves as a responsible manufacturer of sportswear
goods, they may be able to increase their market penetration among
more ethically and environmentally conscious consumers.

Threats
Tax Clampdowns
Like many other big companies, Nike has its tax strategies optimized
down to the dollar. This has for many years allowed Nike to avoid
paying large amounts of tax, even on its billion dollar profits. However,
there is growing controversy about the amount of leeway large
organizations are afforded when it comes to tax matters, and their
freedom to pay low amounts of tax may one day come to a close. This
would afford Nike significantly smaller net profits.

Competition
Nike is competing in the fiercely competitive sports apparel market,
with other big names such as Adidas, PUMA, and Reebok ready to
pounce on any new opportunities. As such, Nike needs to tread
extremely carefully to ensure it isn’t replaced by one of these, or —
somewhat less dramatically — doesn’t lose out on potential revenue.
Counterfeiting
Like many valuable branded goods, Nike apparel is subject to large
amounts of counterfeiting. Counterfeit Nike goods are available
everywhere — even on the internet. Nike needs to develop a strategy to
ensure that the counterfeiting of their goods doesn’t affect their core
business model, perhaps by taking legal action against counterfeiters
or with a clever marketing campaign that encourages consumers to
buy the real thing.
PESTLE Analysis For Nike, Inc.
Political Factors
• Favorable US Government Policies
The government policies always have a profound impact on the businesses
especially which are engaged globally. The US government has always initiated
growth-oriented policies which have helped the company to grow and expand
internationally. The trade regulations, stable government and international
competitive tax arrangements by the Federal Reserve fosters its growth
(Whitehead, 2012). As Nike, Inc. is known for its environmental-friendly
business strategies, it receives considerable tax benefits in this regard.
• Political Unrest in Some Asian countries
Most of the factories of Nike, Inc. are located in the emerging Asian countries
like Thailand, Vietnam and Indonesia. The political unrest in Thailand in the
last few years was a major concern for the management of Nike, Inc. where
more than 35 factories are located. The situation was equally gloomy in
Vietnam, Indonesia and parts of China in stages as any form of protest, political
instability or social unrest can disturb the supply chain of Nike, Inc.
• Changes in International Law
The international law in the last one decade has become more stringent with the
rising threat of terrorism. Various countries have imposed new rules and
regulations to counter the growing threat of illegal activities within their
territory. The increase in tariffs in some countries while the strict rules of
immigration and visa are one of the important concerns for every global firm
and Nike, Inc. is not an exception. United States, where the headquarters of
Nike, Inc. is located is always under constant threat of terrorist attacks which
pose a potential threat for the normal functioning of Nike, Inc.
Some of the countries also impose various tariffs to protect their indigenous
brands for which Nike, Inc. is a serious threat. This trade protection hinders the
growth of Nike, Inc. in those respective nations.

Economic Factors
• Rise in Production Cost and Labor Issues
One of the main reasons for Nike, Inc. to set up their base in Asian countries is
the low labor cost. But with the economic boom and rise in living standards, the
production cost in these countries has raised manifolds (Scmp.com, 2014). The
labor issues are quite 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 production citing low wages. It had a significant effect on the
production as well as the revenue of the company.

Nike saw a comeback of a similar protest in July 2017 where a number of

claims were made. Among all the claims, the most prominent ones are that
workers at a Nike contract factory in Hansae, Vietnam, suffered wage theft and
verbal abuse, and labored for hours in temperatures well over the legal limit of
90 degrees, to the point that they would collapse at their sewing machines. Nike
is also accused of cutting jobs at the Hansae factory and pulling production
from a factory in Honduras with a strong union presence, resulting in hundreds
of workers losing vital jobs. Such claims and protests are quite detrimental for
the company’s growth. (Source: /qz.com/)

• The Threat of Recession and Competition

Nike, Inc. needs to devise a plan how it can tackle another global economic
recession. Being a market leader, Nike, Inc. can be affected significantly as it
experienced in the last decade (2008-09). Last time, it was noticed that during
the recession that consumers replace Nike with some other brand which offers
the same products at a lower price. So, the threat of recession always has a
paired effect on Nike, Inc.

• Fluctuating Profit Margin

Nike performs all its business on the global spectrum. Hence, the stability of
currency exchange and international interest rates in crucial to consistent growth
of its profit margins (Nytimes.com, 2009). However, the higher inflation rate at
the domestic level (USA) with the fluctuating currency rates with respect to the
Dollar always has detrimental effects on the annual profit margin. According to
Forbes, gross profit margin for Nike’s apparel division declined by 2.4% in
2011 and the primary reason being the volatile economic condition around the
world (though the input costs also rose during this period).
• Acquisitions and Subsidiaries
Nike, Inc. has acquired various companies which function within its domain of
footwear and apparel industry. It started in the year 1988 when it acquired Cole
Haan (New York times). Since then, it has purchased many companies to
strengthen their base in the world. Nike owns Brand Jordan, Converse, Hurley,
and SPARQ. However, some of these acquisitions put a major pressure on their
finances without any significant accomplishments.

Social Factors
• Consumers Becoming More Brand Conscious
Globally most of the consumers have became brand conscious. They associate
Nike, Inc. with quality and stature. This increase in brand awareness has helped
the business of Nike, Inc. to grow. They were the first company that introduced
innovation in the footwear and apparel industry. The amalgamation of style with
technology led the foundation of success for Nike, Inc. which continues till
today (Scribd.com, 2016). Apart from the products, the Swoosh logo and their
slogan ‘Just do it!’ is highly popular and recognized around the world.

• Consumers Becoming Health and Fashion Conscious

Every year the number of people visiting the nearest gym to maintain their
health, body and physique is increasing exponentially. Indirectly, this rise
helped Nike, Inc. to boost up the sales as they turn to buy footwear and apparel
for themselves to look athletic. Some of the consumers also associate Nike, Inc.
with fashion and leisure (About.nike.com, 2016). They too are getting interested
to buy Nike, Inc. products. This awareness among the people would help Nike,
Inc. in the long run.

• Increase in Female Consumers

Nike, Inc. has devised the key strategy to grow their business in the next few
years by targeting the increasing number of female customers. Nike has
announced a new approach in designing and selling shoes to the growing
number of female sneaker fans out there. It includes expanded, unisex sizing on
some of its classic Jordan styles and hyped designer collaborations, a push for
more partnerships with female creatives, and Nike Unlaced—a retail concept
aimed squarely at women.
• Working Conditions at Factories
Nike, Inc. is often accused of its hazardous working conditions in its factories
especially in the Asian countries. It has been alleged that it is using sweatshops
to produce footwear and apparel since the 1970s. Initial denials from the
authorities and Nike, Inc. itself made the situation even more complicated
which affected its image globally. During the 1990s, Nike, Inc. installed the
code of conduct for their factories with defined regulations for safety, security,
optimum wages and overtime limits (Businessinsider.com, 2015). Since then,
the working environment improved in the factories. Consumers always want
their company to be socially responsible.

Technological Factors
• Innovation
Nike, Inc. is often referred as the Apple Inc. of apparel and footwear. It is
regarded as the pioneer to introduce various products which enthralled the
whole world. It has always adapted the latest technology to ameliorate their
products. This technological innovation not only helped them to set ahead from
their competitors but also refined and augmented the production process
(About.nike.com, 2016). It is also one of the global brands which took a
revolutionary step to curb the usage of chemicals and other raw materials which
are detrimental for the environment. The latest popular product introduced by
Nike, Inc. Is Tech Pack Fall 2018 apparel, which received acknowledgment
globally

• Marketing Techniques
With the global rise in sales and impact, Nike, Inc. has also altered their
marketing strategies to reach their customers and prospective consumers. The
increase in advertising concentrating on the digital medium more than the
traditional channels is one such step. Nike, Inc. uses online media and apps to
reach the customers and popularize their different products. In the last few
years, the market of online shopping has expanded which has given Nike, Inc.
the opportunity to increase their base worldwide. Now, Nike, Inc. does not have
to depend on their stores and franchises outlets to sell their popular footwear
and apparel. For the year 2015, Nike, Inc. reported a 55% increase in sales
through web. The figures touched $1.19 billion crossing the billion mark for the
first time through the internet sales. According to the reports, Nike’s revenue in
2017 in Greater China (Nike's third-largest market after North America and
Europe, the Middle East and Africa) continued to be a bright spot on the
company’s earnings report, growing 16% in the quarter and totaling $1.2
billion. Nike's divisional revenues in Europe, the Middle East & Africa grew by
19% to $2.1 billion.

Legal Factors
• Legal Battles with Adidas and Other Companies
The feud between Nike, Inc. and Adidas is not new. In the year 2014, Nike, Inc.
filed a $10 million lawsuit on Adidas accusing the later for taking proprietary
secrets, marketing plans and product designs when they recruited few former
employees of Nike, Inc (Qz.com, 2015). Though Nike, Inc. enjoys undisputed
dominance in North America, still these legal cases against the rival companies
are an important factor which determines the future strategies. It is also engaged
in various other legal battles which include the rights over the iconic ‘Jump
man’ logo and footwear designs.
However, Nike recently defeated Jacobus Rentmeester’s appeal in 2018.
Rentmeester, had accused the sportswear company of ripping off his iconic
photo of basketball superstar Michael Jordan, and using it to create its
silhouetted "Jumpman" logo.

• Child Labor and Minimum Wage Allegations

Nike, Inc. had been accused of using child labor in its various factories located
in Cambodia and Pakistan. They were used to prepare soccer balls. Although
Nike, Inc. took extensive measures to stop this practice, it was rebuked globally
and it also faced legal cases worldwide. Accordingly, in Indonesia, the laborers
claimed to receive lower wages than the standards. Nike was sued in California
for this illegal practice. However, the matter ended amicably, it was a
considerable bolt to its reputation (Jennings, 2012). Though Nike, Inc. now
follows a definite regulation still violations are not rare.

• Counterfeit Products
Nike, Inc. is one of the most counterfeited brands globally. It affects its annual
revenue drastically. It is also regarded as the violation of intellectual rights and
patented products when they are sold by fake brands claiming to be Nike, Inc.
There are also some contract manufacturers which produce these products and
sell them into the markets which directly affects the sales in that country
(Philnike.blogspot.in, 2013). In a step to tackle the menace of counterfeit
products, Nike, Inc. can monitor and ensure that their products are not sold
widespread as these fake products can ruin the reputation of the company.

• Paradise Papers
On 5 November 2017, the Paradise Papers, a set of confidential electronic
documents relating to offshore investment, revealed that Nike is among the
corporations that used offshore companies to avoid taxes.
Appleby documents detail how Nike boosted its after-tax profits by, among
other maneuvers, transferring ownership of its Swoosh trademark to a
Bermudan subsidiary, Nike International Ltd. This transfer allowed the
subsidiary to charge royalties to its European headquarters in Hilversum,
Netherlands, effectively converting taxable company profits to an account
payable in tax-free Bermuda.[98] Although the subsidiary was effectively run
by executives at Nike's main offices in Beaverton, Oregon—to the point where
a duplicate of the Bermudan company's seal was needed—for tax purposes the
subsidiary was treated as Bermuda. Its profits were not declared in Europe and
came to light only because of a mostly unrelated case in US Tax Court, where
papers filed by Nike briefly mention royalties in 2010, 2011 and 2012 totaling
$3.86 billion.[98] Under an arrangement with Dutch authorities, the tax break
was to expire in 2014, so another reorganization transferred the intellectual
property from the Bermudan company to a Dutch commanditaire vennootschap
or limited partnership, Nike Innovate CV. Dutch law treats income earned by a
CV as if it had been earned by the principals, who owe no tax in the
Netherlands if they do not reside there.

Environmental Factors
• Global Warming and Environmental Concern
With the rising concern about global warming, it has become extremely
important for the global companies to reduce waste which are harmful for the
environment. In various countries the new environmental laws also restrict their
production if they do not follow the specific laws. Through the usage of
innovative manufacturing methods like Nike Flyknit technology, it strives to
reduce the manufacturing waste in the supply chain and also reduce carbon
emission and elimination of waste (About.nike.com, 2016). Nike, Inc. plays its
role; however, still a lot needs to be done.

Nike Sportswear’s latest Tech Pack collection spins body-informed and

environmental data into focused and functional forms. The collection uses knit
and woven materials as well as base, mid- and outer layers engineered to
provide athletes with full range of motion.

• Pollution Concern in China

Most of the factories of Nike, Inc. are located in the China. In the last few years,
the Chinese government took extensive steps to check the pollution level in the
country which has increased the production cost for the company drastically.
The limited usage of fossil fuel and its regulations adds to their concern.

• Decrease Greenhouse Emission

Nike, Inc. is working to reduce their contribution towards greenhouse gas
emissions throughout the value chain. It has formulated definite strategies to
introduce new technology which will not only release less carbon dioxide and
carbon monoxide but it will also decrease the need of basic raw materials
(Reuters.com, 2016).