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Posted on April 25th, 2014, by

Nike Inc. is one of the leading manufacturers of sports goods. Since it is already at the stage of its formation, which was more than 40 years ago, faced with competition in this segment of the market and managed to become one of the leaders in it, it only confirms its art of competition. Still, identifying long term trends in the stock market and in the economy as a whole and consequent formation of long term financial goals are the constant priorities of the companies in the conditions of rapidly changing market.

In forecasting future directions in the economy, Nike Inc. may apply the analysis of the matrix of opportunities and the matrix of threats to the organization, as well as the analysis of the external environment.

Market opportunities are favorable circumstances that the company can use to get the advantage. An example of market opportunities is deterioration of the positions of competitors, the sharp rise in demand, new technologies of production, increase in population’s income levels, etc. It should be noted that the opportunities from the perspective of the SWOT-analysis are not all the opportunities that exist in the market, but only those that can be used. In their turn, market threats include events, the occurrence of which may have an adverse impact on the enterprise: the emergence of new competitors, increase of taxes, increase of inflation, changing tastes of buyers, lower birth rates, etc.

As a basis we can take the following list of parameters (Eplresidential.com, 2010; Mahaffy, 2002; The McGraw-Hill Companies, Inc., 2007):

        Demand factors (it is advisable to take into account market capacity, its growth or reduction rate, structure of demand for the company’s products, etc.);

        Competition factors (it is necessary to consider the number of major competitors, presence of substitute products in the market, height of barriers to enter and exit the market, the distribution of market shares among major market participants, etc.);

        Sales factors (it is important to pay attention to the number of intermediaries, the available distribution networks, the conditions of supply of materials and components, etc.)

        Economic factors (taking into account exchange rate, the rate of inflation, changes in the level of income of population, state tax policy, etc.)

        Political and legal factors (estimate the level of political stability in the country, the level of legal literacy among the population, the level of compliance with the law, the level of corruption of power, etc.)

        Scientific and technical factors (usually take into account the level of scientific development, degree of innovation (new products, technologies) in industrial production, the level of state support for science, etc.)

        Socio-demographic factors (note the number and gender-age structure of population of the region in which the business operates, fertility and mortality rates, the level of employment, etc.)

        Socio-cultural factors (usually take into account the traditions and values of society, the current culture of consumption of goods and services, existing patterns of human behavior, etc.)

        Natural and ecological factors (take into account the climatic zone in which the business operates, the environment, public attitudes towards environmental protection, etc.)

        International factors (they take into account the level of stability in the world, the existence of local conflicts, etc.)

The method of positioning of each specific feature in the matrix of opportunities is used to evaluate the opportunities of the company.

Matrix of opportunities for Nike Inc.

 

Probability of applying opportunities

Effect of opportunities on the organization

Strong

Moderate

Weak

High

Development of retail network

Expanding the range of goods

Average

Conquering new market segments

Reduction of production costs

Low

 

Based on the analysis of opportunities, the company should necessarily use the possibility of developing a network of retailers, expanding the range of products, and gaining new segments. This will help it strengthen its position in the market and make the product more affordable for consumers (Carbasho, 2010; Nike Inc., 2012).

 

Matrix of threats for Nike Inc.

Probability of realization of threats

Effect of threats on the organization

Destruction

Critical state

Severe conditions

Slight concussion

High

Rising demands from government agencies

Average

High degree of competition

Low

Emergence of counterfeit goods on the market

 

At present a significant threat is the high degree of competition. Nike needs to monitor the market, the requirements of consumers and their preferences in order to overcome this threat (Carbasho, 2010; Nike Inc., 2012).

The external environment is characterized by factors such as factors of demographic, economic, technical and political nature, which together represent STEEP analysis (The McGraw-Hill Companies, Inc., 2007).

S (social or demographic factors) – these are the factors that relate to the culture and society. At present demographic situation is as follows: young people outnumber the elderly population. This relation of age categories makes it possible for Nike to expand the market of sports shoes.

T (technological factors) – scientific advances have a major impact on the production part, which allows the company to produce more convenient products. Also, the advent of new technologies reduces production costs.

E (economic factors) – this is the effect of the country on the company’s economic activities. The economic factors include: GDP and its growth rate, the country’s industrial structure, availability of information and the associated degree of openness of the economy, relation of the economy to the resources of the country. In the context of the global crisis, running the foreign business was not promising. Now, when the situation in the U.S. stabilizes, there emerge new opportunities, at the same time a new round of crisis in Europe can postpone the plans to conquer the European market.

E (environmental factors) – normative legal acts aimed at protecting the environment have an impact on the company, because it has to look for new technologies of production. Nike Inc. manufactures products from environmentally friendly materials and does not bring harm to the environment during its disposal.

P (political factors) – the company is a very strongly influenced by the events in the political environment (legislation to regulate business activity, increased import quotas, rising demands from the government agencies that monitor compliance with laws, the growing number of groups to protect the interests of consumers). These factors are composed of the legal norms which affect the organization and restrict its freedom of action within the community.

In this way, the Strategic Plan of Nike Inc. must be supported by extensive research and actual data, therefore it is necessary to continuously collect and analyze vast amounts of information about the sectors of the economy, market, competition, etc. Strategic plans must be designed so that they not only remain integral for a long time, but also retain flexibility. The general strategic plan should be viewed as a program guiding the activities of the company over a long period of time, taking into account regular adjustments in connection with the constantly changing variables in the business and social life.

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