PESTLE Analysis of Nike Inc
· Favourable Policies of US government
The policies generated by the government have huge impact on the business proceedings especially that are engaged with the global market. The government of US show their initiative to develop growth oriented policies that helped the company to expand and grow their business in international market. The international competitive tax arrangements, stable government and trade regulations by Federal Reserve enhance its growth. As Nike Inc is popular for its eco-friendly business initiatives, it receives tax benefits from the government.
· Political issues in some countries of Asia
Most of the manufacturing units of Nike are situated in emerging Asian countries such as Vietnam, Indonesia and Thailand. The political instability in Thailand in last few years was the biggest concern for Nike’s management where about 35 manufacturing units are situated. The situation was same in Indonesia, Vietnam and in some parts of China in stages as any form of political instability; political and social unrest can affect the supply chain of Nike Inc.
· Changes in global law
The global law is the last few years have become stricter due to the rise of terrorism threats. Different countries have applied new regulations and rules in order to stay safe from potential threats of illegal terrorism activities. The increases in tariffs in some nations while the strict rule of visa and immigrations are one of the most impact issues for every international organization like Nike Inc. In the United States, where headquarter of Nike is presented is always under major threats of terrorist attacks that create potential threats for Nike in order to maintain their normal organizational functioning. Some of the countries are following strict rules and regulation to restrict terrorist attacks and they are acting as serious threats for Nike in order to expand their business in global market.
· Rise of labor issues and production cost
One of the major reasons of Nike Inc is to develop a strong base in Asian countries due to low labor cost. However, as the economic condition of these countries is developing, the production cost of the company is also increasing. In 2014, April, the company have faced a biggest problem as most of the factories presented in China stopped their production due to low wage and called for strike. It produces major impact on the production and the revenue of the company.
· The threat of Competition and recession
Nike Inc needs to develop an effective plan in order to tackle the threat of global recession. Being a leader in the market, Nike can face huge problem in order to maintain their business proceedings in the recession period. Last time, it was found that, most of the customers replace Nike products with other companies’ product that are lower in price.
· Profit margin is fluctuating
Nike maintains its business proceedings on the international arena. Therefore, it can be said that, international interest rates and currency exchange is important to maintain constant growth of its profit margin. However, at the domestic level of US, the inflation rate is high with fluctuating currency rates with respect to dollars always has huge negative effects in the annual margin of profit. According to Forbes, the gross profit margin of apparel of Nike falls by 2.4$ in 2011 and the main reason was unstable economic condition in global market.
· Customers have become highly brand conscious
In the international market, most of the customers are found to become highly brand conscious. The customers are selecting those products that are of high quality. The increase of brand awareness helped Nike Inc to expand their business in international market. Nike Inc was the first company that used innovative ideas in order to develop apparel and footwear. The combination of style along with the technology helped the company to become highly successful in global market. Apart from their products, the Swoosh logo and their slogan ‘Just Do It’ is hugely famous and recognised in global market.
· Customers becoming Fashion and health conscious
In recent times, people are showing their willingness to visit a gym to maintain their body, physique and health. Indirectly, it is helping Nike to enhance their sales margin as people are buying sports shoe and equipment to look them as athletics. Some of the customers love to use products of Nike to maintain current fashion trend. This awareness within people will help Nike to gain competitive advantage from the market.
· Working environment of factories
Nike Inc often faced problems due to improper working conditions of their factories in most Asian countries. One of the major allegations for Nike they are using sweatshops in order to manufacture apparel and footwear from the 1970s. Initially, the authority handles the situation but they have faced complicated issues in the global market in terms of maintaining its image. In the year 1990, the company implemented code of conducts in the manufacturing units in order to maintain security, safety, overtime limits and optimum wages. From then, the company succeeded to improve their working environment. Customers are willing to use products of those companies who are maintaining social responsibilities.
Nike Inc is stated as the Apple Inc of footwear and apparel. They are reckoned as the pioneers in order to offer different products, which helped them to gain huge success in global arena. They apply latest technologies to produce new and attractive products. These helped the company to take huge lead from their major competitors. The combination of technology and creativity helped the company to produce unique that are highly popular in the global market. The supportability travel proceeds for Nike, and its prosperity is firmly subject to the development factor that the organization feels emphatically about, making it its way of life and primary driver of its business, by separating Nike from its rivals. Nike trusts that advancement comes in various hues and shapes. Similarly critical they fill in as a reaction and fundamental apparatus to many difficulties, by expanding the likelihood of the unthinkable getting to be noticeably conceivable through leap forward thoughts.
· Marketing Techniques
Nike Inc has changed their marketing strategies in order to reach prospective customers in the market to increase their sales. The company is focusing on digital marketing instead of traditional marketing in to promote their product and services in the market. Nike is using online apps and media to reach their targeted customer and inform them about their new and existing products. It can help the company to earn opportunities to enhance their market sales in global market. Now they do not have to rely on their franchise outlet and retail stores to sell their footwear and apparel.
· Legal issues with Adidas and other companies
Nike reacted to Adidas weaved footwear make a big appearance by documenting a patent encroachment claim. Nike recorded suit in a District Court in Nuremberg, Germany, looking to preclude Adidas from making and offering the Primeknit in Germany, where Adidas is headquartered, for the span of the prosecution and relying upon the result of the case, for all time from that point. The battle between Nike and Adidas is not new. It was found that, in 2014, Nike Inc filed $10 million lawsuits against Adidas accusing that they are taking proprietary secrets, product designs and marketing plans after recruiting few employees of Nike who have left the company. However, Nike Inc is the leader in footwear and apparel industry in the global market and they enjoy undisrupted dominance in North America, still these types of legal issues against their major competitors are considered as important factors that can help the company to develop future strategies. It also makes the company stay engaged with different legal battles that includes the legal rights of using a famous logo of ‘Jump man’ and footwear design. These legal factors can help the companies to develop effective strategic plans so that they can be able to enhance their development process and maintain sustainable growth in global market.
· Allegations related to child labor and minimum wage
It was found that, Nike has suffered from huge problems related to minimum wage and child labor. The company has faced allegation that they have used child labor in different manufacturing units especially to those units that are presented in Pakistan and Cambodia. The role of these child labors was to manufacture footballs. However, it has been observed that, Nike took intense steps in order to stop such unlawful practices, which can affect their existing brand image in the market. The management of the company took effective steps to mitigate these types of issues to stay away from legal issues as it can affect them to expand their business in global arena. Moreover, one of the major issues faced by Nike Inc has they faced the allegations of paying low wage to their labors. As a result, in Indonesia, the labors showed strong protest against the company as they are deprived of getting standard wages. However, the management of the company took strong initiatives in order to mitigate such issues as it can hamper to their brand image and their competitors will gain advantage from them. However, Nike Inc always tries to follow the rules and regulation of those respective countries in order to maintain customer satisfaction.
· Counterfeit Products
Nike Inc can be reckoned as one of the most counterfeited brands in the international market. It can be said, due to this reason, the company is facing huge loss and failed to generate sufficient revenue amount in some of the major countries in the world. Moreover, there are cases of violation related to intellectual rights and patented products when renowned company false products are sold claiming them as 100 % original. It was found that, there are lots of contract manufacturers who deal with these fake products and sell these products in the market. For this reason, the company is suffering from huge loss as it is directly affecting the sales of the company. In order to tackle the issues related to counterfeit products, Nike Inc needs to monitor the market so that they can be able to take effective steps in order to stop the selling of fake products in the global market. They can take legal support and help to take effective measures to mitigate counterfeit products issue as it can help them to maintain their brand image and reputation for which they are known for in the international market.
· Environmental Concern and global warming
With the rising concern related to the issues of global warming, it is hugely important for the multinational companies to stop using excessive harmful chemicals. They also need to reduce waste that can affect the local environment. It has been observed that, in different countries, the government impose new environmental laws that will force the companies to restrict their production amount if they failed to maintain specific laws. The company is trying to use innovative marketing procedures like Nike Flyknit technology in order to reduce production waste in their supply chain. It also helped to reduce excessive emission of CO2 gas and eliminate the garbage products. Nike took strong initiatives to reduce waste products to help the environment to stay protected.
· Pollution issues in China
As most of the manufacturing units of Nike are situated in China and it was found that the government of China took strong initiatives in order to check their pollution level in order to protect the environment from being polluted. In order to prevent the environment for getting polluted, the government of China tried to increase the production cost so that they can limit the production amount. The government took initiatives to make the limitation on the fuel consumption and impose law to protect the environment.
· Reduction of Greenhouse emission
Nike Inc is taking strong initiatives in order to mitigate their contribution towards the emission of greenhouse throughout value chain. The company developed effective strategies in order to implant new technologies which will help them to release less amount of carbon monoxide and carbon dioxide gas but it will also lead the company to face production related issues as the they have to decrease the requirement of basic raw materials.
After analyzing all the major factors, both external and internal, it can be said that, Nike Inc has huge opportunities in order to continue their dominance in the global market. However, it is important for the company to take effective steps to mitigate their weaknesses and threats in order to strengthen their current position in the market. As the apparel and footwear industry is highly challenging, it can make Nike to face immense challenges from the market and they need to develop effective strategies to overcome these challenges in order to stay in the market successfully over the next few years. They impressive capability to alter their strategies and new products in the market helped the company to generate huge amount of revenue to grow their business. Finally, Nike Inc will continue to dominate the footwear and apparel industry in the upcoming years.