Nike is one of the most popular global brands with a distinguished dominance in the international sporting goods, footwear and apparel market. Nike has its operations spread across 170 nations and is clearly one of the most successful American brands. With a market capitalization of more than USD 218 billion, Nike takes the 49th spot on the list of the most valuable brands in the world. As per Statista, Nike currently has an impressive market share of 27.4 percent in the global market for athletic apparel and footwear.
This article presents a delineated SWOT analysis of Nike delving deeper into the identification of the company’s strengths and weaknesses. Besides, the analysis also highlights the threats and opportunities for Nike in the external business environment. In fact, if you want to know about SWOT analysis in detail, you can go through our all-inclusive SWOT analysis guide.
For now, let us get started with our well-crafted SWOT analysis of Nike.
Table of Contents
An astute SWOT Analysis of Nike
- Global presence- Nike has a strong presence in more than 170 countries and it has a network of 600+ factories that manufacture products on its behalf (Nike, 2022).
- High brand value and market share- Nike is valued highly among its competitors and it has been awarded the world’s most valuable apparel brand for the 7th consecutive year in 2021 and the total value of the brand is more than $30 billion.
- Marketing- Nike has a high budget of $3.11 billion for marketing. The company uses unique marketing techniques to increase its sales. It has partnered with several high-profile athletes from different fields that including Serena Williams, and Michael Jordan. It also has partnered with musicians and sponsors various sports tournaments like the women’s football world cup. It also has a tie-up with various influencers for marketing its products on different social media platforms (Golubeva, 2019).
- Strong financials- Nike earned $44.5 billion in 2021 in revenues. Its sales in Q4 2021 increased by 73% while earnings per share increased from $1.60 to $3.56 (Nike, 2021). Such high financials reveal that Nike is more competitive in the market.
- Customer engagement- The number of engagements in Q42020 crossed 400 million while over 7 million brand impressions were generated on social media, thus highlighting the strong influence that Nike has created in the minds of the people (Ryan, 2020).
- Sustainable practices- As per the data available in the company’s sustainability report, Nike is highly focused on social as well as environmental sustainability. The company has achieved its target of having 50% women representatives in the global workforce and 45% in leadership positions. Further, in 2021, the company came very close to its target of having 35% corporate employees from racial and ethnic minority groups in the US. The company has maintained its image of 100% pay equity across all employee levels in 2021. Besides, Nike reduced the carbon emissions from its operations by 43% in 2021 compared to 2020 and the company has also undertaken various initiatives with regard to recycling waste and reduction in the use of water.
- Strategic acquisitions- Nike has also acquired some subsidiary brands like Converse which it acquired in 2003 and as a result, the company was able to venture into different categories of shoes and other products.
- High-profit margins- Nike is able to get its quality products manufactured at relatively low cost as a result of most manufacturing operations in low-income countries and because of this, the company is able to enhance its profit margin.
- Patents- The concept of Metaverse wherein all the daily routine things are done digitally is gaining trend and the company has filed for a patent to sell the products in Metaverse (Golden, 2021). Alongside, it has been able to acquire patents for the Air Jordan 1. Further, the company has a large number of patents under its belt that are near 20,000.
- Issues in the supply chain- Nike outsources its production to third parties and as a result has less control over the production. This poses a serious challenge for the company as the employees working in its supplier’s factories have been found to be harassed and forced to work under extreme detonating conditions. Its largest supplier in the world located in South Korea which produces around 8 million units a year has been accused of hiring forced labor from the camps of Xinjiang in China (Pang, 2022).
- High debts and increase in operating expenses- Nike’s operating expenses as per the report presented by the company have increased over the last couple of years, in 2019, the expenses amounted to $8.94 billion and that increased to $9.91 billion in 2021. If the operating expenses keep on increasing in the future, then that could have a toll on overall profits.
- Massive dependence on the US market- 40% of the sales are generated just in the US and the company needs to aggressively increase its share in the other markets as well (Tighe, 2021). This can be a major threat as if the US faces any economic difficulties, then the company’s operations would get impacted on a larger scale.
- Lawsuits and controversies- Nike has faced many ethical issues related to the exploitation of labor wherein four women filed lawsuits against the company for differentiating in the pay system (Helmore, 2018). Further, the company has also been accused of discriminating against the employees based on their nationality and recently a former employee accused the company of impromptu behavior from the seniors because of his Croatian origin. The company needs to ensure business in its stores is conducted in an ethical way to enhance the trust among the customers. Further, the company is engaged in lawsuit tussles with its competitors Adidas and Under Armour wherein, it has accused Adidas of infringing its patents and copying the technology.
- Venturing into sports infrastructure- Nike is the world’s renowned brand in the sportswear segment. It can explore the opportunity of enhancing its business by establishing sports universities to train athletes.
- In-house manufacturing- Most of the product manufacturing is outsourced to the third parties in Asian countries that are at high risk of various violations related to labor and the environment (Pino, 2020). Nike can overcome this by establishing its own manufacturing plants which would provide it with more control over the quality of the products. For that, the company will have to rely on a strategic change management approach.
- Optimized digital channels- In the era of the ongoing digital revolution and consumers shifting to e-commerce channels, it has become essential for the company to constantly optimize the performance of its digital channels and drive greater innovation. The company can also invest in the latest digital marketing trends for greater brand authority.
- Counterfeit products- Nike is among the top 10 brands in the world that are counterfeited the most. Its variety of sneakers is copied the most followed by clothes. The sale of counterfeit goods leads to a loss of revenue for the company.
- Trade tensions- As a result of the ever-increasing US trade deficit with China the US government is discouraging the companies from sourcing products from China and to achieve its mission, the Trump administration increased the import tariffs on many goods from 10% to 25% that including apparel and footwear. The increase in the import cost would lead to an increase in the prices of final output which can impact its sales. Moreover, the company might look to shift its manufacturing out of China to other nations like Vietnam in order to avoid the rising cost and as a result, would face disruptions in operations.
- Supply chain issues- In the wake of the global supply chain disruptions Nike is facing a shortage of containers for shopping the materials and also the company is having difficulty in finding workers due to COVID. This would impact the level of production (Toh, 2021).
To recapitulate, Nike has been able to gain a huge share in the sportswear market because of its innovative marketing practices, possessing strong financial power, and having the advantage of parents registering for many products and technologies. However, the poor treatment of the company towards its employees can be a challenge for the company in the long run as it's a very well-known fact that satisfied employees always contribute more towards the success of the organization. Nike also needs to find a way out of defying the challenges related to the problems in the supply chain in order to have undisruptive operations.
Moreover, to better understand the impact of external business factors on the company and hence delve deeper into the opportunities and threats for the company, you can read our delineated PESTLE Analysis of Nike. The PESTLE analysis of the company offers a complete overview of how various external determinants can play a role in future implications for the company.
GOLUBEVA, H. Just Do It: What We Can Learn from Nike’s $39B Marketing Strategy. www.singlegrain.com/. Retrieved 22 April 2022, from https://www.singlegrain.com/marketing-strategy/nikes-39-billion-marketing-strategy-just-do-it-like-nike-does/.
Helmore, E. (2018). This article is more than 3 years old Nike hit with lawsuit from four women who allege gender discrimination. www.theguardian.com. Retrieved 22 April 2022, from https://www.theguardian.com/business/2018/aug/10/nike-lawsuit-women-gender-discrimination
JONES, R. (2021). The Air Jordan 1 Is Now a Federally Protected Trademark. www.complex.com. Retrieved 22 April 2022, from https://www.complex.com/sneakers/nike-air-jordan-1-trademark-approved-patent-office.
Pang, A. (2022). The China Challenge: The Stain of Forced Labor on Nike Shoes. www.discoursemagazine.com. Retrieved 22 April 2022, from https://www.discoursemagazine.com/economics/2022/01/05/the-china-challenge-the-stain-of-forced-labor-on-nike-shoes/
Pino, G. (2020). Nike Products Are Manufactured in Over 41 Countries. sourci.com.au. Retrieved 22 April 2022, from https://sourci.com.au/blog/nike-products-are-manufactured-in-over-41-countries.
Soapboxie. (2020). The Rise of Counterfeiting and Its Effects on Nike. soapboxie.com. Retrieved 22 April 2022, from https://soapboxie.com/economy/The-Rise-of-Counterfeiting-and-Its-Effects-on-Nike
The Economic Times. (2021). Adidas sees $1.2 billion sales hit as supply snags drag on. retail.economictimes.indiatimes.com. Retrieved 22 April 2022, from https://retail.economictimes.indiatimes.com/news/apparel-fashion/sportswear/adidas-trims-2021-forecast-on-sourcing-disruptions/87627090.
Tighe, D. (2021). Nike - Statistics & Facts. www.statista.com. Retrieved 22 April 2022, from https://www.statista.com/topics/1243/nike/#topicHeader__wrapper