Nike Analysis - Essay Example

Primary Activities

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Under the inbound control, the corporation buys raw materials locally in bulk, uses specialized imported materials for its manufacturing functions and performs inventory control. Under the operations, the corporation outsources its manufacturing and assembling functions and uses R&D technological innovations. Under the outbound logistics, the corporation has a strong control over its global channels of distribution. It also delivers products on time since it has an expansive network of transporters. Under marketing sales, the corporation uses strong and expansive marketing strategies, has a high brand identity and commands a price leadership as well as value based pricing. Under the services activities, the corporation has an extensive team of customer care services.

Secondary Activities

There are four subcategories of chains of value in Nike Corporation. These include the firm infrastructure, human resource management, technological development as well as procurement. Under the firm infrastructure, Nike Corporation is strong in E-commerce, uses advanced IT-systems to connect the supply chain and gives an emphasis on CSR as well as business sustainability. Under the technology development, the corporation has a constant product development as well as the customer-focused development of products. Lastly, under procurement, the corporation has localized as well as bulk procurement activities. It also fosters a progressive and sustainable association with all its suppliers.

Porters 5 Forces

There is an analysis framework that can be employed by an organization to determine the extent of competition it faces within a specified industry. It also informs the establishment on the best business strategies it should use for its development. The concept has derived the economics of industrial organization and its focuses on the five forces that evaluate the competitive intensity of an entity as well as the attractiveness of the identified industry. The five primary factors considered in this classification include the rivalry of the industry, bargaining potential of business suppliers, as well as the bargaining power of the product consumers (CGMA, 2016). The others include the threats of new entrants and threats of substitute goods in the market.

Bargaining Power of Consumers

Under this classification, Nike Corporation produces high competitive products that compete with other substitutes in differentiation. In addition, numerous online consumers are price sensitive, and as such, the switching costs for the consumers is low. The number of buyers for the sport’s footwear from the company has also changed. Ultimately, the company has recorded a significant increase in the number of women buying the sporting shoes.

Bargaining Power of Suppliers

The Corporation has seen an increase in the number of suppliers over the past few decades. For instance, the corporation offers subcontracts to over five hundred small scale factories situated in different parts of the world (Varier, 2011). Nevertheless, the corporation experiences a low bargaining force from the suppliers due the big volume of the operation be the corporation.

Nike financial analysis

Threat of New Substitutes

Due to the high quality and brand domination of Nike’s products, the consumers’ propensity to acquire substitute products is remarkably low. As such, the sale of other substitute products in the market does not affect the sale of Nike’s products. In addition, the consumer substitutes products in the footwear category are low, and as such, it does create any significant competition for Nike’s footwear products in the market.

Threat of New Entrants

Since its inception, Nike Corporation has grown significantly and established brand recognition in the market. As such, the company is able to attain the benefits of economies of scale, which makes them produce products at lower costs than other competitor corporations. In addition, the company has been able to venture into the online market to sell its products. In the online market, barriers to market entry are very low, and this has aided the corporation in staying ahead of numerous other rival corporations in terms of the sale of its products.

Competitive Rivalry in the Industry

Despite its continued performance. Nike is also facing a competition in the market. This is through its sale of products to the targeted consumers. Two of the companies offering Nike competition include Reebok and Adidas. Reebok offers a wide range of sporting shoe selections, and this has made it attract a lot of sports personalities for endorsement. It has also participated aggressively in the sponsoring of numerous sporting events in the world, and this has improved its brand recognition. Adidas has developed a remarkable product mix, which has been greatly supported by its wide range of products in the market.

Foreign Direct Investment (FDI)

The phrase is used to describe the controlling ownership of a business that is situated in other nation. The only difference between FDI and foreign investment portfolio is the aspect of direct control of a business that is situated in another nation. Today, due to the growing need for expansion and diversification, numerous corporations situated in different parts of the globe has seen the need to venture into the foreign markets. Normally, such a move is incentivized by the low costs of factors of production in the foreign markets. Nike has also ventured into numerous international markets since its inception. This has made it achieve a tremendous growth in terms of FDIs in numerous parts of the globe. There are various advantages and disadvantages that the corporation has faced in using FDI as a method to venture into new markets overseas.

Advantages of FDI to Nike’s Operations in Overseas Markets

Reduced Costs of Production

By venturing into overseas markets, Nike has attained the advantage of low production costs. This is because the costs of the factors of production in the other nations are lower than in the United Staes. As such, the corporation has been able to produce high quality products at reduced prices. Such prices have been able to compete favorably with the prices of substitute products in the overseas markets. This pricing advantage has also been employed as a competitive market entry strategy aimed at creating a niche for the company’s products abroad.

Access to Resources

Using FDI has also offered Nike Corporation a chance to attain massive raw materials to manufacture its products. This is because, in some nations, some of the raw materials used in Nike’s manufacturing activities are in abundance and also availed at a very low cost. The corporation has also benefitted from the move by accessing other resources such as low transportation costs due to lower costs of fuel. All these factors have greatly supported Nike’s ability to produce high quality goods at reduced prices in the international markets. Consequently, this translates into added revenue for the corporation in terms of gross sales.

Tax Incentives

Taxation is a high incentive that attracts numerous businesses to venture their trade in the foreign markets. For instance, in the past, Nike Corporation has been encouraged to venture into some overseas markets by being offered tax incentives. This enables the corporation to produce its products at reduced prices, which consequently enhances the company’s annual profit margin. In return, the concerned government benefits from Nike venturing into its economy through the creation of employment for the persons in the nation.