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Nike's board of directors is made up of both independent and management directors. The combination of these two styles of leadership benefits the business because there are those who are directly involved with the firm while separate ones bring external knowledge, provide an option for consultation, and can aid the entire board in taking a broad view of challenges (Tang, Mu, & MacLachlan, 2010). Nike's board of directors is viewed as an oversight board, with an active role in managerial decision making and strategy Tang, Mu, & MacLachlan, 2010). Philip Knight, the co-founder has been with the company since its birth. He always offered a wealth of experience on administrative matters for the firm and the industry at large (Liao, Chuang & To, 2011). His strategic managerial skills provided a strength because his moves were calculated, taking manageable risks and everyday decisions relying on careful consultation, analysis and thought process (Liao, Chuang & To, 2011). His inclusive decision-making process is a high point because he is always willing to consider the views of others to make final decisions. His approaches are neither unilateral decisions nor ideas (Liao, Chuang & To, 2011).
Top management: the top management style features a teamwork approach. The top management comprises of a dedicated team of executives bringing on board wealthy of knowledge and experience. The control works with a partnership approach, but everyone recognizes their duties and fulfils them. The teamwork approach in management builds trust, dependability, and respect (Liao, Chuang & To, 2011).
Communication: From 1999, the company has frequently upgraded its hard and software. The recent technology utilized by Nike comprised of IBM 4690 system point-of-sale cash monitors running through the OS/2 functional system (Martin et al., 2012). The company improved and adopted the PC-based system operating the most sophisticated Windows NT system. At the same time, the software employed for the early, name connect: Remote, manufactured by Sterling Inc. also upgraded to the improved operating versions (Martin et al., 2012). Nike has regularly witnessed massive technical improvements. The technology records inventory and sales data as every transaction take place. Besides, sales reconciliation, credit authorization, and electronic journaling processing increased the efficiency because of further internal databases. Routers and other digital technology transmitting data at a very high speed replaced ones whose transmission power was slow (Martin et al., 2012). All these improvements and adoption of better communication system have increased corporate management efficiency at all Nike branches (Martin et al., 2012).
Further, the massive presence of Nike on the internet is a plus to the communication plans of the enterprise. The firm uses several networks to take advantage of the web as a leader in the sportswear provisions (Martin et al., 2012). The company has a massive presence on Twitter, Facebook, and YouTube. The utilization of these social media sites helps to reach many people particularly its customers and potential clients (Martin et al., 2012). Besides, the firm’s website is a critical communication tool. The sites allow customers to make online purchases without any difficulty; the company site also provides numerous videos which help in promoting Nike products (Martin et al., 2012).
Motivational effectiveness: With the fact that Nike staffs are very loyal, the company placed a lot of emphasis on motivation, especially after the poor performance in the last quarter of 1998 when several employees were laid off, and the entity had to boost its efforts to stir the morale of the remaining staff (Menguc & Auh, 2010). Besides, confidence also went down because of the media coverage of poor working conditions for Asian based factory workers. Irrespective of the massive efforts put in place to ensure that employees are motivated, the morale is not okay (Menguc & Auh, 2010).
Empowerment strategies: Corporate social responsibility: the company has put a lot of efforts in this area especially after illegal labor practices. The company has numerous policies on better working conditions, particularly in international markets (Menguc & Auh, 2010). The mission of being a corporate leader in operations which depict care for families, customers, workers, and all stakeholders drive the company (Menguc & Auh, 2010). The policy includes a mandatory minimum working age at its factories at 18 years, environmental conservation, providing safe and healthy working conditions, and the establishment of comprehensive educational programs for its staff. The policy reveals the commitment the organization has to the well-being of its employees globally and issues affecting its clients (Menguc & Auh, 2010).
Institution of standards: Detailed formulation of profit standards has helped Nike in the assessment of individual standards as well as comparison with competitors. The standards employed in this context involve financial aspects like net earnings, asset, and sales growth, return on equity and return on investment, etc. (Tang, Mu, & MacLachlan, 2010). Nike has set standards in factories, the competitive status in the United States, the world market, and efficiency of its technology about rivals, public rating, and corporate social responsibility (Tang, Mu, & MacLachlan, 2010).
Performance evaluations: Nike does thorough appraisals of the above productivity measures about the practical results achieved after implementation of plans to realize or exceed performance measures. The standards are significant to Nike as they provide the status of current performance in comparison to the past, and in an attempt to predict future outcomes in several financial aspects (Tang, Mu, & MacLachlan, 2010).
Correction of deviations: it is one of the key strengths of the Nike organization. In addition to performance and profitability standards, correction of recorded deviations takes time as responsible departments take time to analyze the necessary actions before making resolutions carefully (Menguc & Auh, 2010).. However, quick response is needed when working on deviation correction because it is one of the paramount strategies of propelling the company forward (Menguc & Auh, 2010).
Focus on research and development; the company carries out several primary market types of research which aids numerous facets of the fitness and sports market. Besides, the company also employs applied research whose emphasis is short-term success and advancement of new products and product lines (Menguc & Auh, 2010). The strength in applied research is it cheap than basic research and carries minimal risks because of its short approaches. Fruitful investments result in immediate success and termination of failed ones take place before the firm incurs significant losses (Menguc & Auh, 2010).
The company posture: the company position focus on innovation, catch-up standpoint, and sometimes modifications to a protective stance. Nike boasts of the provision of high-quality products-shoes and apparel. Innovation is the primary driver in assisting Nike becomes a dominant leader. Because of Nike’s dominant nature, focus on long-term plans is essential, unlike many competitors who stress on improving current product offerings (Menguc & Auh, 2010). Nike is using a flexibility philosophy and occasionally adjusts its posture to individual goods and product lines. Besides, the firm works with defensive strategies to correct situations when they get out of hand like when sales decline. Furthermore, the company applies the catch-up models and utilizes policies which efficiently work with rivals in the industry (Menguc & Auh, 2010).
Nike employs geography based organization structure depending on the company needs in each regional market. The following features describe Nike’s organizational arrangement.
The global corporate management: management at this level comprises of corporate leaders with offices at company headquarters in Oregon, United States. They make decisions which affect the global reach of the firm. For instance, the Global promotion team designs the marketing strategies for athletic shoes applied all over the world (Tang, Mu, & MacLachlan, 2010). Because of this structure, decision implementation is smooth through all company ranks. The following constitutes Nike’s global leadership: the president’s and chief executive office, Finance, Nike Brand, operations, legal and administration, global sports promotion and global personnel management (Tang, Mu, & MacLachlan, 2010).
Semi-independent geographic classification: this category is a significant organizational feature characteristic of Nike. The firm’s processes are classified into sections depending on the regional market (Tang, Mu, & MacLachlan, 2010). Every region’s leadership maximize processes in local apparel, shoes, and equipment promotion. The regional divisions of Nike comprise of: Japan, North America, eastern and central Europe, greater China, and Western Europe (Tang, Mu, & MacLachlan, 2010).
Global categories for brand licensing and converse: the organizational structure of Nike comprises of two international classifications: brand licensing and Converse brand (Powers & Hahn, 2004). Converse brand’s responsibility is to handle the global processes of Converse, a subsidiary of Nike. The second category handles the licensing of Nike brand on the global scale. The features of the organizational arrangement provide administration for converse operations and brand licensing (Powers & Hahn, 2004).
Strengths of organizational structure
The organization breakdown of Nike offers reinforcement for stability and growth. Besides, the global business management provides leadership for all branches and regions for the entire company (Menguc & Auh, 2010). The strength of semi-autonomous is it that it meets region-specific needs for athletic shoes, apparel, and equipment consumers (Menguc & Auh, 2010).
Nike Inc. has built a corporate culture wealthy in team spirit and loyalty. The company’s headquarters is also known as the “campus” in place of office. Workers are “players,” and supervisors take the “coaches” tag. These naming make the daily work enjoyable for few lucky employees operating the head office Tang, Mu, & MacLachlan, 2010).
Since 1985, when Nike lost its top position to Reebok, it reinvented its business culture and developed a great motivation to make Nike a way of life. Through this resolve, the firm realigned its promotion strategies stressing more on public image rather than mere advertising, a policy which bore the “just do it” slogan.
Motivational effectiveness: With the fact that Nike staffs are very loyal, the company placed a lot of emphasis on motivation, especially after the poor performance in the last quarter of 1998 when several employees were laid off, and the entity had to boost its efforts to stir the morale of the remaining staff (Martin et al., 2012). Besides, confidence also went down because of the media coverage of poor working conditions for Asian based factory workers. Irrespective of the massive efforts put in place to ensure that employees are motivated, the morale is not okay (Martin et al., 2012).
Leadership: as of 1999, the average age of the board of directors was 62, where the oldest was 79 and the youngest 49. Such age scenario brings forth possible weaknesses because there is the absence of the young generation in the board who can represent new and emerging approaches to Nike and aid in realizing the company goals (Martin et al., 2012)..
Research and development focus: Putting a lot of emphasis on applied research and development has come with some weaknesses. Several inventions happen in many cases through coincidence due to unspecific basic research. Though research is expensive, the company should rely on pure research to unearth prospective opportunities which it can take advantage (Tang, Mu, & MacLachlan, 2010).
II. External opportunities and threats
a. Porter’s five forces analysis for Nike
Several external forces determine the strengths of factors which impact Nike Inc. The following reviews offer a clear picture of the implications of the five forces to the company.
Competitive Rivalry (strong): competition influences how Nike protects its market share of sports shoes, apparel, and equipment. This feature of the Five Forces evaluation reveals how competitors shape the market environment and the performance of every player (Burke, van Stel, & Thurik, 2010). These external elements offer a strong force of competitive rivalry with Nike:
• High aggressiveness of companies (strong)
• Moderate players in the market (moderate)
• Slow market growth (strong)
The low growth rate of the market is because of market saturation and high market penetration. This situation provides a strong force, as Nike plus other actors compete for the market with a sluggish growth rate (Burke, van Stel, & Thurik, 2010). On the contrary, firms compete fiercely for a significant market share. Besides, the number of players is moderate hence greatly impacting Nike. From the competitive rivalry element, the external issues which provide intense competition compel Nike to emphasize on market development, and product innovation to foster competitive edge and large market share for Nike’s apparel, shoes, and sports equipment (Burke, van Stel, & Thurik, 2010).
Bargaining power of customers (moderate force): The clients affect business performance directly. The bargaining power element reveals how consumers influence firm competitiveness and the business environment (Burke, van Stel, & Thurik, 2010). For the sake of Nike, the factors below lead to moderate customer bargaining power:
• The small number of individual buyers (weak)
• Average availability of substitutes (moderate)
• Little moving price (strong force)
Little moving costs make it easy for Nike customers to switch to other brands. The reasonable obtainability of substitutes also makes it easy for clients to move and buy from competitors. Nevertheless, the limited number of individual buyers reduces their influence on the company (Burke, van Stel, & Thurik, 2010). These factors offer a moderate customer bargaining power. Bargaining power depicts the impact of clients and hence a significant factor in Nike’s considerations (Burke, van Stel, & Thurik, 2010).
Bargaining power of suppliers (weak force): Nike has a huge number of vendors, and this makes their influence limited. Besides, the vast number of providers lessens the bargaining power of an individual supplier (Dobbs, 2014). The medium size of different vendors provides a moderate degree of the suppliers’ influence. However, bargaining power explains that Nike only encounters a weak force from vendors (Dobbs, 2014).
Substitutes threat (moderate force): The availability of alternatives offers an average force against Nike because the options available for customers to buy are moderate to Nike’s offerings (Grundy, 2006). In effect, customers, have a considerable chance of considering products from rivals because of the average performance of goods from these firms. Further, the minimal switching costs foster the moving possibilities. Nevertheless, substitute threat depicts that alternative brands apply an average force touching Nike (Grundy, 2006).
New entrants threat (weak force): the enormous resources for brand development make it hard for new players to make a breakthrough and compete against an established entity like Nike (Roy, 2011). Besides, the vast economies of scale offer Nike with an upper hand in the market against new players, taking into account Nike’s global presence both in production and marketing. Besides, the moderate fee of running business further hinders new players’ capacity to unsettle the market. Thus, the threat of new entrants is a small concern for Nike (Roy, 2011).
b. Macro-environment forces
This section identifies key macro-environment forces which Nike must incorporate into its policy formulation for effective competition in the market. To solidify its position in the athletic shoe market, Nike Inc. must address the threats and opportunities depending on the external factors which mold the market. They are as follows:
Political factors: political stability in the major markets offers opportunities for Nike to develop and expand its market. Further, enacting free trade agreements in the international market provides better chances for market penetration for Nike (Gillespie, 2007). Furthermore, government investment in primary infrastructure, particularly in developing countries, gives Nike better opportunities to expand its business in such markets. The aspect of political stability advances growth and expansion opportunities for Nike (Gillespie, 2007).
Economic factors: developed economies like the U.S and Western European countries are stable and promote opportunities for Nike Inc. to grow, though at a slow rate (Roper, 2012). Further, rapidly growing developing countries present excellent opportunities by intensifying business activities in these countries. Nevertheless, the fast-growing developing countries threat Nike’s survival in their soils due to high labor costs in production facilities and along the supply chain (Roper, 2012). The economic factors, in this case, reveal that Nike Inc. must emphasize on international expansion while creating new strategies to establish in developing economies (Roper, 2012).
Sociocultural factors: Nike has best chances of tapping to wealthy consumers in developing countries. Besides, the company has prospects of designing safer products and use promotional campaigns which focus on the safety of sporting footwear, apparel, and equipment (Housing Industry Association, 2011). Further, Nike can also invent new product design techniques to meet the needs for leisure activities. Looking at sociocultural elements, Nike has better chances for business growth through product development (Housing Industry Association, 2011).
Technological elements: the vast investment in research and development (R&D)by rival companies offer threats, to Nike because they aim at developing technologically sophisticated apparel, sports shoes, and equipment. Besides, fast technological obsolescence advances more risks to Nike by increasing pressure on the company to bolster its R&D energies (Gillespie, 2007). However, this external factor offers openings for Nike to employ sophisticated technology in production. Besides, the firm has prospects to mix mobile innovations to consider clients who regularly utilize mobile technologies, like online tools and mobile apps. The technological factor, in this case, depicts that Nike encounters substantial threats and opportunities because of fast-changing technologies (Gillespie, 2007).
Legal factors: better and revised laws in upcoming countries are a threat to Nike because it will result in higher labor costs in regions where several Nike factories are based. Nevertheless, this external element provides prospects for raise standards for employment and labor requirements (Gillespie, 2007). Also, Nike has a chance to elevate its brand image by emphasizing customer satisfaction in promoting its equipment, shoes, and apparel (Gillespie, 2007). Also, the firm has prospects of improving safety and health procedures to manage expanded safety and health requirements. From the legal perspective, Nike Inc. has a tremendous chance to better its corporate reputation and brand image (Gillespie, 2007).
III. Evaluation of the SWOT analysis
Strengths and weaknesses: SWOT analysis reveals that the company has the capacity necessary to aid its global dominance in apparel, sports shoes, and equipment. Nevertheless, the firm needs to address the issues emanating from patent protection, imitation, and labor practices. Therefore, Nike Inc. needs to reform its strategies touching on these areas.
External opportunities and threats: from the external factors analysis, Nike needs to address numerous factors. The company has to pursue a more aggressive strategy to capture overseas markets based on favorable business policies, with greater emphasis on rapidly growing developing countries. Next, the company needs to invest more in R&D to take advantage of the prospective demand for equipment, apparel, shoes, and equipment with advanced technological integration (Gillespie, 2007). Besides, the external factor evaluations pinpoint the significance of improving employment practices and Nike’s sustainability.
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