PART A: RESEARCH OBJECTIVES AND OVERALL RESEARCH APPROACH

1. Topic chosen
The topic I selected for my BCs Research and Analysis Project is “Review
marketing strategy of organisation and its effectiveness”
Reasons for choosing the topic:
Marketing is not only essential to small business to promote but also necessary to
large organisation to survive in highly competitive environment.
“The marketing function is also tasked with branding of the organization,
participation in publicity activities, advertising and customer interaction through
feedback collection. Every product launch starts with marketing and an end with
marketing where by the department establishes the needs of the consumers and after
introducing the product, the department seeks to identify whether the customer needs
were met.” (Timothy Mahea, 2014)
https://www.linkedin.com/pulse/20140915080650-84228363-the-role-of-
marketing-in-organizations-by-timothy-mahea
During time as an ACCA student, I was equipped with knowledge and
professional competence which is very helpful for me in my Accounting career.
Choosing this topic gives me an opportunity to challenge myself in different field
rather than Finance and Accounting, the purpose is to assess whether I can apply my
knowledge and skills in different sectors. Beside that, this is the topic I am interested
the most because marketing is a new area of knowledge that I want to investigate .
As an professional accountant, I need to ultilize my understanding and ability to
appraise and assess whether marketing strategy is beneficial for business operation,
effective in increasing sale/revenue, profit and enhancing brand value.

Limitation of choosing this topic.

Marketing strategy is not a straight-forward topic that I can show my ability of
Accounting.
This decision of topic asks me to devote much more time to research, not only
financial but also marketing sector. Moreover, completely new knowledge brings
many difficulties and obstacles as it requires a lot of time to absorb and understand.
 2. Organisation chosen and its competitors
The organisation that I choose to do a research is NIKE INC.
Reasons:
“Footwear industries have rose with a pace and recorded a green growth in the past
few years across the globe. Introduction of different types of footwear for various
purposes in order to maintain the well-being and lifestyle is driving the footwear
industry globally” (Wiseguyreport, 2017)
https://www.wiseguyreports.com/reports/1023964-athletic-footwear-market-global-
demand-growth-analysis-opportunity-outlook-2023
Except fashionable demand, health awareness and fitness consciousness is
improved day – to – day, demand of quality athletic clothing is increasing to minimize
the risk of disease.
According to Felix Richter “With annual footwear sales of $21.1 billion, Nike is
still number 1 in the global sneaker market, even if Adidas has recently gained some
ground on the U.S. sportswear giant” (Felix Richter, 2018)
https://www.statista.com/chart/13470/athletic-footwear-sales/
In order to achieve such a successful result, there is a significant contribution of
Marketing strategy and that is the reason why Nike is listed as one of top 10 insanely
great marketer in 2012. Except doing RAP purpose, this research of NIKE marketing
will also assist me in further expanding my knowledge of marketing.

Brief introduction of NIKE INC

OVERVIEW

Nike was established in 1964, as Blue Ribbon Sport, by Bill Bowerman and Phil
Knight and officially became NIKE, INC in 1971 (Marina Nazario and Dylan Roach,
2015)
https://www.businessinsider.com/nike-history-timeline-2015-10
The logo “Swoosh”, was listed as the most iconic brand logo of all time according
to (MARIA COHN,MORGEN BROMELL, 2017) and now become the most iconic
image in the world, was orginally designed by Carolyn Davidson with only 35$ (about
200$ today).
 https://www.complex.com/life/2013/03/the-50-most-iconic-brand-logos-of-all-
time/
“Nike is the largest seller of athelic footwear and apparel in the world” ( Nike Inc,
2017)
Nike has such a surging revenue from $18.627 million 2008 to $36.397 million
2018, which increased 95.4% during 10 years and possess $28 billion of brand value
in 2018 (Samantha McDonald, 2018)
https://footwearnews.com/2018/business/retail/nike-adidas-brand-value-
1202541719/

MISSION AND VISION STATEMENT

Nike’s mission statement is “Bring inspiration and innovation to every athlete* in

the world” based on Nike co-founder, Bill Bowerman’s quote “If you have a body,
you are athlete”
In another word, Nike has an objective to encourage human confidence, motivate
and inspire people and mentally support them in the most difficult time. This is
clearly represented by slogan “just do it” in every advertising message, social media...
No matter who you are, what is your gender or age, you can do everything that you
believe and have passion.

RANGE OF PRODUCTS:

NIKE Brand product offers in nine key categories: Running, NIKE Basketball, the
Jordan Brand, Football (Soccer), Men’s Training, Women’s Training, Action Sports,
Sportswear and Golf.
Inside, Sportswear, Running and the Jordan Brand are currently top -selling
footwear categories and they are expected to continue to lead in footwear sales. (Nike
Inc, 2018)

NIKE’S COMPETITOR

In athletic footwear industry, Adidas was a second-largest seller of sports footwear

and apparel behind Nike (John Kell, 2016), which possesses brand value of $10.2
billion. In addition to deep history and appealing stories of Adidas, they have a great
marketing strategy to boost their sales, for example, collaboration with Kanye West –
probably one of the most influential artist on the planet - released Yeezy line.
That is the reason why I chose Adidas is the main competitor to compare with
Nike’s financial performance. Beside that, Under Armour financial performance is
also used as references.
http://fortune.com/2016/10/25/adidas-under-armour-nike/

3. Research objectives

The main objective of this research need to be close with the requirement, which is
review the effectiveness of marketing strategy of Nike.
However, there are some goals that I need to target in research project.
- Nike’s history and its growth trend.
- Key factors which make Nike become unique in industry.
- Study of Nike’s marketing strategy and find out how it make Nike different
from the other competitors.
- Assess short term and long term objectives of Nike and examine whether
marketing strategy can assist Nike to achieve its goal s.
- Analysis Nike internal and external environment .

4. Research questions

- What are brand attributes of Nike that make it different from others?
- Which brand is the main competitor of Nike?
- What are Nike competitive advantages to maintain its position in industry?
- What is role of marketing in organisational growth of Nike?
- How effectively marketing strategy is in achieving company’s goal?
- Is benefit of marketing outweighted its cost?

5. Research approach

Firstly, the research will start with understanding background of the business,
overview of sportwear industry. Qualitative and quantitative secondary data is the
main source of this stage, which can be gather through various kind of research
method, such as Internet and Social Media.
 Secondly, literature review is the next method to obtain fundamental knowledge of
business models, financial approach to determine and analyse marketing strategies.
Finally, after data collection process, reliable information will be analysed and
evaluated to answer research questions and draw conclusion to the research.

PART B: INFORMATION GATHERING & ACCOUNTING/BUSINESS

TECHNIQUES

6. Primary data and secondary data definition

- Primary data are collected specifically for research needs at hand. (Feinberg,
Kinnear, Taylor, 2012). There are different way to collect this type of data, such as
interview, questionnaire, focus group...
- Secondary data are already collected and often published, typically for some
other purpose. Secondary data can be futher classified as internal and external, the
former being generated and made available within the organisation; the latter
originating outside it.
(Feinberg, Kinnear, Taylor, 2012)
Problems arise as collecting data: difficult to obtain and gather primary
information because of many reasons: marketing related information is confidential,
unable to contact with staff members of company, or they are not willing to share
information. Interview or questionnaire maybe bias due to sample method, sample
size. Secondary data is sometimes unreliable, inaccurate.

7. Sources of information used

Secondary information is the main source to do research because it is easy to find,
available on the Internet, E-books, magazines and library, which is time and cost
saving.
There are many ways to collect information but method that I used the most is
literature review, focused on documents and records.
a. Internet
- Nike’s official website: documents collected such as annual reports , director’s
reports, news, stories, Nike history...
This is the main source of information regards to companies’s performance,
including annual revenue, types of expenses, geographical segments...
- E-magazine: forbes.com, footwearnews.com... which provide an overview of
industry, economic...
 b. BPP Text Books
All the knowledge of Finance and Accounting that I need for my research is
included on ACCA books, mainly F5 Perfomance Measurement and F9 Financial
Management. These understanding play an important role in analysing and evaluating
business performance by ratio analysis.
c. Library: printed books are probably the most reliable information, which I can
search necessary knowledge of fundamental marketing.

BENEFITS AND DISADVANTAGES OF SECONDARY INFORMATION

Benefits:
- Easy to find
- Always available
- Combined and intergrated as one helpful source
- Time and cost saving
Disadvantages:
- Information maybe inaccurate. While some website say A and some say B.
- It requires a lot of time and efforts to search and process to get relevant
information
- Some information is reserved and required permission to use.

8. Models application

In order to review marketing strategy and the effectiveness, understanding the

environment they operate in is nessessary. The main purpose is to determine what is
Nike’s competitive advantages, its position in industry and what are essential factors
which impact business.
Several techniques are used as below:
RESEARCH OF INDUSTRY’S MICRO-ENVIRONMENT
A. PORTER’S FIVE FORCES FRAMEWORK
Sportwear is a fast-growing and profitable industry, so the competition among
rivals is more intense. Eventhough Nike is the top player in this industry, they still
have to formulate specific strategy to keep their competitive advantages in which
Porter’s five forces framework will help.
 Porter’s five forces framework was originally developed by Harvard Business
School's Michael E. Porter in 1979 (Marci Martin,2018)
https://www.businessnewsdaily.com/5446-porters-five-forces.html
This is useful both in understanding the strength of an organisation’s current
competitive position, and the strength of a position that an organisation may look to
move into. (CGMA, 2013)
https://www.cgma.org/resources/tools/essential -tools/porters-five-forces.html
This model is a tool to analyse competition between companies in the same
industry, which covers micro-environmental factors that close to the business,
including:
- The bargaining power of customers
- The bargaining power of suppliers
- The threat of new entrants
- The threat of substitute products
- The intensity of competitive rivalry

RESEARCH OF INDUSTRY’S MACRO - ENVIRONMENT

B. PESTEL ANALYSIS

DEFINITION

The PEST analysis is a useful tool for understanding market growth or decline, and
as such the position, potential and direction for a business (Business Ball ltd, no date)
https://www.businessballs.com/strategy-innovation/pest-market-analysis-tool-20/

Pest analysis is an acronym for Political, Economic, Social, Technological factors. In

order to cover more external aspects, Pest is now extended to Pestle, which add
Environmental and Legal factors into consideration.

USAGE

Pestle analysis offers an overall macro-environmental factors scanning and it is

better used as combining with Swot analysis. This process will provide broader
understanding of business from different angles, such as current condition business
operates, facing difficulties. As obtainding overview of business, I can conclude
whether Nike marketing strategy effectively adopt to the changes and obstacles in
order to help business operates well in industry.
 For example: Social factor discloses that consumer spending trend of footwear and
apparel products is declining because of uncontrollable reasons, for instance, the
scandal of their brand ambassador. In this situation, what does organisation do to
solve problem, and whether it is successful?

BENEFITS AND DISADVANTAGES

Advantages:
- It’s a simple framework.
- It facilitates an understanding of the wider business environment.
- It encourages the development of external and strategic thinking.
- It can enable an organisation to anticipate future business threats and take
action to avoid or minimise their impact.
- It can enable an organisation to spot business opportunities and exploit them
fully.

Disadvantages:
- Some users (of a PESTLE analysis) oversimplify the amount of data used for
decisions – it’s easy to use a limited selection of data.
- The risk of capturing too much data may lead to ‘paralysis by analysis’.
- The process needs to be undertaken on a regular basis to be effective.
- The pace of change makes it increasingly difficult to anticipate developments
that may affect an organisation in the future.
- The data used may be based on assumptions that subsequently prove to be
unfounded.
(Chartered Institute of Personnel and Development, 2017)
https://www.cipd.co.uk/knowledge/strategy/organisational -development/pestle-
analysis-factsheet

As obtainding an overview of the environment, understanding the competitive

intensity and factors affect to business, Swot analysis is used next to aggregate
strengths and recognize weaknesses to form a suitable strategy for company.
C. SWOT ANALYSIS

DEFINITION:
 Swot analysis is an valuable and effective tool to identify and evaluate those
factors affect to business. The aim is to exploit their strengths and reduce weaknesses,
in order to take advantage of their opportunities in the market.

Swot is an acronym which stand for Strengths, Weaknesses, Opportunities and

Threats
- Strengths and Weaknesses: internal factors that company has power over
- Opportunities and Threats: external factors which can impact actively to
company without control
MAIN USAGE
Who can use Swot analysis?
This technique is suitable for everyone who underst and the organisation, mostly
ultilized by management teams to identify factors which might impact to business
performance or compare among competitors in order to form strategies, set action
plans.
Specificially, the main purpose of Swot Analysis in this project is:
- To understand the chosen organisation better
- To audit internal and external nature which gives an idea of the current and
future situation of the business (PESTLEanalysis Contributor, 2015)

BENEFITS AND DISADVANTAGES

- Easy and simple to perform - It is less probability to support
- It has little or no cost - anyone in making decisions of more complex
who understands your business can issues because it does not provide in-
perform a SWOT analysis. This means depth analysis.
that you can take steps towards - Identified factors under
improving your business without the specific category can be both
expense of an external consultant strengths and weaknesses of
or business adviser. (Queensland company.
Government, 2016) For ex: diversified geographic
https://www.business.qld.gov.au/sta segmentation is strength of Nike but
rting-business/planning/market- also weakness as the system is more
customer-research/swot- complex and difficult to control.
analysis/benefits-limitations - It provides too much ideas and
- Focus on significant factors and information without prioritising
important situations that can help to issues, which can not support
reduce time wasted. performer choose the best one.
(Queensland Government, 2016)

D. MARKETING MIX
 Marketing mix is widely used by small and large organisations to access customer
demand (for example: what do they want to buy? How much they are willing to pay?)
which aim to provide specific strategy and plan to meet customer expectations.

Marketing mix became very popular and crucial tool as its first established by E.
Jerome McCarthy in 1960, which help understand what the product or service can
offer and how to plan for a successful product offering. (Martin,2014). The four P's of
marketing – price, promotion, product and place (distribution) – which constitute the
most common variables used in constructing a marketing mix ( Yousef Baalbaki,
2015)
https://www.linkedin.com/pulse/history-marketing-mix-from-4ps-7ps-yousef-
baalbaki

However, the traditional mix with 4 elements was argued not suitable and adequate
to the complex marketing contexts. Therefore, 7P marketing mix, by Booms and
Bitner, was introduced in 1981 to replace the 4P. Further more, 7P marketing mix is
demonstrated the clear advantages that it has over 4P framework and can be applied to
consumer goods industry which Nike operates. (Mohammed Rafiq and Pervaiz K.
Ahmed, 1995) page 4
Seven attributes of marketing mix includes product, price, place, promotion,
people, process, and physical environment
https://www.researchgate.net/publication/247624673_Using_the_7Ps_as_a_generic
_marketing_mix_An_exploratory_survey_of_UK_and_European_marketing_academic
s

https://www.cleverism.com/understanding-marketing-mix-concept-4ps/

E. RATIO ANALYSIS
Ratio analysis is recognised as the most meaningfull and usefull tool to evaluate
financial performance of organisation. It includes liquidity, effieciency, profitability
ratio which can help to identify problems that business faces.
ROI – Return on investment, Profit margin is suitable to use in reviewing and
accessing the effectiveness of marketing strategy. Beside that, method of comparing
financial number between different periods or companies will be helpfull to draw
conclusion whether business operates effectively.
 The process of calculating financial ratio is more simple than other method.
Quantitative data is available in financial statement, annual report, in addition to that,
information as number is reliable. However, these ratios can be easily manipulated by
different accounting policies that organisation used. If desions are only made based on
ratios analysis, they can be failed because ratios may be short-sighted, negatively
affected by one off transaction. For example, the marketing cost is too high which
reduce net profit margin, decision to cut off marketing expense to maintain high profit
is only short term objective and against long-term target.
PART C. ANALYSIS, CONCLUSION
1. SWOT ANALYSIS
A. STRENGTHS
- Strong blobal brand recognition and awareness: apparently, Nike really spent a
huge amount of money to do marketing for the brand , more than 3 billions per year
(Nike Inc, 2017). It is evidient that the appearance of “Swoosh” logo on the streets or
slogan “Just do it” on advertisement makes people thin k of Nike.

- Brand loyalty:
According to Elizabeth Goudreau (2017) “Brand Loyalty is arguably the most
important dimension of BE and is a function of both consumer behavior and attitudes,
that will result in repeat purchases and increase likelihood choice over competition”
https://medium.com/@emgoudre/how-brand-equity-has-kept-nike-on-top-
3f4ee0814d60
Revenue analysis
- Largest seller of athletic footwear and apparel in the world
- Huge distribution networks: as recored in 2017 annual report, Nike’s operation
in US and internation includes:
US retail stores: 392 stores
International retail stores: 790 stores
In addition, Nike and Converse owned digital commerce websites in over 45
countries.
(Nike Inc, 2018) annual report page 56
- Global production, outsourcing:
All of footwear and apparel is manufactured outside of the United State by
independent manufacturers.
For Fiscal 2017, contract factories in Vietnam, China, and Indonesia manufactured
approximately 46%, 27%, 21% of total Nike brand Footwear respectively. (Nike Inc,
2017) annual report page 57
 For Fiscal 2017, contract factories in China, Vietnam and Thailand produced
approximately 26%, 16%, 10% of total Nike brand Apparel respectively.
The outsourcing will help Nike to reduce as much cost as possible because
manufacturing expense in those developing countries is cheaper than US, such as
lower standard labour cost, lower material cost. Further more, independent contract
manufacturers are also responsible to buy materials in their own countries , which
minimizes shipping cost, reduces currency fluctuations.
- Strong Research and Development: As Nike believe this stage is the key factor
in their success, therefore, technical innovation in the design and manufacturing
process receive continued emphasis (Nike Inc, 2017)
Nike’s dedication in innovative process will help them to upgrade and create new
products which can enhance athletic performance, reduce waste to environment.

WEAKNESSES:
- Cost management need to be improved: profit margin of Nike reduced slightly
from 46.2% to 44.6% in 2017 and lower of approximate 10% compared to Adidas.
The reason of increasing in mix of higher cost products and labor input cost
inflation, unfavourable changes in foreign currency exchange rates is explained by
Nike (2017)
- Revenue of Nike mostly contributed from Footwear with more than 65% while
Apparel only accounted to 30% and 5% for Equipment (Nike Inc, 2017) page 75.
In addition to that, category of Action sport and Golf are unable to attract their
customers, with decreasing revenue by 9% and 18% in 2017. It is clearly that Nike has
a weaken diversified strategy in this competitive industry. If any rivals create the
same product line with new applied technology and cheaper price, Nike will lose their
market.
- Most revenue comes from wholesale customers: nearly 72% income of Nike
Brand was made of retailers.
This poses a higher threat to Nike as their business depend s on retailer’s
performance and service. If their retailers experience financial difficulties and have to
cease operation or any of them provide bad service to customers , Nike will suffer
from decreasing revenue and damaging image. Beside that, contracting with retailers
will reduce profit as price charged for retailers is lower than direct sale to customers.
OPPORTUNITIES
- Digital commerce platform: in technological world, social media such as
website, facebook is becoming essential for a business. Apparently, digital commerce
sales through NIKE-owned websites and mobile applications increased 30% from
2016 to 2017($2.2 billion for fiscal 2017 compared to $1.7 billion for fiscal 2016 ) and
represented approximately 24% of our total NIKE Brand DTC revenues for fiscal 2017
compared to 22% for fiscal 2016 (Nike Inc, 2017) page 76
Sale direct to customer increase significantly by 16% from 2016 to 2017.
- Expansion DTC business: As Nike has a plan to continue investing in DTC
business which is considered as the key area of future growth. The purpose is to give
customer great shopping experience, to maintain and gain customer loyalty which play
an important role in growing revenue.
- New technology and innovation: Nike focus es on research and development
stage to apply new technology into create quality products effectively, reduce waste
material in order to cut input cost. By pricing value-based method, Nike still earn high
profit margin due to premium price with lower cost of production.
- Pressence in developing countries: although America is the main market of
Nike that accounted to 47% share of revenue with stable growing trend every year,
sale from other developing countries surges significantly. Specifically, revenue for
Japan increased 7% (excluding currency rate changes) and EBIT increased
significantly 29%, whereas Greater China revenues for fiscal 2017 increased 17%.

THREATS
- Currency exchange rate fluctuation: Since Nike sale and purchase transactions
mostly occurred outside United State, their operations are suffering to fluctuation in
foreign currency exchange rates. Because of stronger U S Dollar, any revenue derived
from sale in foreign currencies and translated into US dollar for consolidated financial
reporting will be negatively impacted.
It is evident that % change in Nike’s revenue from 2016 to 2017 is 8% (excluding
currency changes), but only 6% change (including currency changes)
According to Nike (2017) forecast “Foreign currency fluctuations have adversely
affected and could continue to have an adverse effect on our results of operations and
financial condition.”
- Tough competition: The athletic footwear, apparel and equipment industry is
highly competitive on a worldwide basis (Nike Inc, 2017) page 58. The rapid changes
in new technology and consumer preferences also make the competition more intense.
International companies such as Adidas and Under Armour, are the main competitors
of Nike. Eventhought these rivals have to struggle in competing with Nike, they still
experience stable growth of revenue with 18% (Adidas) and 3% (Under Armour) from
2016 to 2017.
(Adidas, 2017) page 4 (Under Armour, 2017) page 35
- Fashion is a risky industry where specific products are easily obsolete:
Although Nike is the leader in footwear and apparel industry that generates more
than 30$ billions revenue every year. However, Nike business still depend on seasons,
fashionable trends, people demand toward their products which is constantly
fluctuated. That means if Nike fails in forecasting future customer preferences or
popularity of designs, it will impact negatively to revenue.
Possible strengths:
 Specialist marketing expertise
 An innovative product or service
 The location of your business is convenient for customers
 The reputation of your brand. For example, if it is trusted or recognised to offer
the highest quality, your brand reputation is a strength.
Possible weaknesses:
 Not having a clear product differentiation compared with competitor’s offerings
 Weak distribution compared with your competitors
 Not having enough online presence
Potential opportunities:
 Using advanced technology to develop new products
 Growing demand from international markets like China and India
 Using Facebook, Twitter and other social media sites to reach new customers
Possible threats:
 Competitors might introduce better products and services at lower prices
 Changes in the economic environment might reduce customer loyalty to
established brands
 Changes in customer tastes and fashions can also be a problem

B. PESTLE ANALYSIS
 Nike is doing their business on international scale, with more than 50% revenue
generated outside USA and nearly all products are imported from other countries due
to outsourcing. Therefore, Nike is affected not only by US government but also other
national regulations and policies, such as export and import duties, tax laws,
employment laws, environmental laws...
Therefore, a thorough analysis of the macro environment helps ensure that the
have fully addressed the current and future operating environment f or the firm. Such
analysis is reffered to as PESTEL analysis. (Stewart R Clegg, Jochen
Schweitzer, Andrea Whittle, Christos Pitelis, 2016) – Strategy theory and practice
Within Nike’s organisation, macro-environmental factors include:

POLITICAL
Key political factors which impact to Nike is:
- Free trade agreement (FTA)
This is an opportunity to Nike to increase international trade in which FTA
regulates the tariffs, taxes, and duties that countries impose on their imports and
exports ( Kimberly Amadeo, 2018).
https://www.thebalance.com/free-trade-agreement-pros-and-cons-3305845
The policy enhances economic growth, supports company to increase competitive
advantages, widen global market and reach more audiences .
- Unstable political condition
This poses a dramatic threat to Nike operation.
+ First attribute is that current U.S. policy proposals, including potential tariffs or
penalties on imported goods, if enacted, may negatively affect U.S. corporations with
production activities outside the U.S (Nike Inc, 2017). Intention to w ithdraw from
NAFTA (the largest multilaterial free trade agreement) is a specific example.
+ In additional, increased protectionist actions around the world also affect to the
whole footwear and apparel industry. According to Nike Inc (2017), protectionist
measures have resulted in increases in the cost of products, and additional measures,
if implemented, could adversely affect sales and/or profitability for NIKE as well as
the imported footwear and apparel industry as a whole.
+ Lastly, the most significant problem is trade restrictions targeting China which is
known as “Trade war”. As acknowledged, China is the main manufacturer (provide
27% footwear and 26% apparel products) and consumer market (accounted to 13% of
revenue) with enormous increasing rate. As new tariffs arise, imported products from
China will cost more than they should be, which lead to increasing price to consumers
and affect negatively to Nike.

ECONOMIC
National and Global economy affects directly to business’s operation. Growth or
recession in economy will also impact to purchasing power, for example, if personal
income decreases, consumer spending will be lower which lead to reduced demand for
unnessary products. As reported by Nike Inc (2017) , in recent years, uncertain global
and regional economy has affected international trade, which have material
disadvantages to their performance and financial condition. Key factors include:
- Fluctuated currency exchange rate: the stronger US dollar is becoming, the
more revenue’s exposure to fluctuation in foreign currency exchange rate which
impacts negatively to reported operating results.
- Higher interest rate: although Nike has not faced any difficulties in accessing
credit markets or incurring higher interest costs to date (Nike Inc, 2017) page 89, the
chance to maintain reasonable interest rate is still at risk .
- Uncontrollable factors in worldwide where Nike’s suppliers operate. The
performance of independent contracters will affect to Nike’s operation, such as
increased material cost, financial difficulties which force to stop business.

SOCIAL
Social factors are very important to consider, especially for consumer goods
industry Nike is operating in. An essential st ep to successfull in fashion business is
forecasting customer demand, their preferences in near future, worldwide popular
trend.
There is a favourable chance to Nike when consciousness of health and fitness is
increasing, it also means demand for sportwear accelerates. Beside that, there are
various factors which play an important role in deciding strategic plan for Nike:
- Rising trend of digital commerce (which is known as shopping online)
- Consumer trends toward “green products”
- Increasing individual wealth, average personal income
Since individual income rises which enable consumers to afford more expensive
products, their behaviours and attitudes positively change towards shopping
experience, quality and friendly to environment products. In another words,
consumers are willing to pay more to obtain happiness from shopping tasks, for
example, they will prefer a beautiful and unique design store, convinient location and
enormous size to normal outlet. For example, emerging markets are powering back
fueled by digital consumerism (JOHN ZEALLEY, 2018), having the same
characteristic of higher consumer spending and growth of economy, which are now
considered as the main target of Nike.
https://www.fdfworld.com/retail/top-10-consumer-goods-trends-will-shape-2018
Base on above aspects of social trend, Nike can draw a specific plan of
distribution, development or expansion capabilities in order to improve business
performance.

TECHNOLOGY
Rapid changes in technology are not only opportuniti es but threats to Nike in the
highly competitive athletic footwear, apparel and equipment industry. As technology
has critical effects on organisation, it changes the way business operates, responses to
customer demand. Those factors are listed below will explain further the benef its and
risks of technology to Nike’s operation.
- Innovative products, incorporating proprietary technology platforms such as
NIKE Air, Free, Zoom, Lunar, Flywire, Dri -Fit and Flyknit (Nike Inc, 2017) page 73
- Rising trend of digital commerce, including shifts in the ways in which
consumers are shopping, for instances, through websites or mobile applications.
- Information technology systems and networks dependence.
While technology is clearly advantageous to Nike performances, which support s
company in achieving revenue growth by creating the right products to market
demand, provide customers good experiences. Beside that, technology also contribute s
to more effective management, for example, in maintain inventories and ships to
customers. However, substantial investment on technology infrastructure or
significant disruption of information system will cause serious loss es and other risks.

ENVIRONMENT
According to Mark Parker, CEO of Nike (2016,2017), “ Our purpose is to use the
power of sport to move the world forward. We believe in a fair, sustainable future –
one where everyone thrives on a healthy planet and a level playing field. ” he said,
“We’re innovating a new business model for the 21st century, in which supply chains
are lean, green, equitable, and fair, and our materials and products are sustainable.”
Apparently, environmental impacts, communities or athletics health became the
main purpose and mission of Nike, they already set a moonshot – “to double our
business while having our environmental impact” (Nike Inc, 2016,2017)
 Nike puts many efforts to achieve its target, protect the environment, such as
ultilizing organic and recycled materials, cutting carbon emmisions, apply ing
premium technology to reduce waste... By commiting to goals which minimise
environmental impacts will contribute to stronger brand loyalty as consumer care
towards ethical and friendly-environmental products increases. Moreover, existing or
future shareholders are willing to invest more in an ethical business.
https://sustainability-nike.s3.amazonaws.com/wp-
content/uploads/2018/05/18175102/NIKE-FY1617-Sustainable-Business-
Report_FINAL.pdf

LEGAL
Legal, involves government regulations, is very important macro -environmental
factor which impacts directly in the process of growth.
Since Nike is operating on worldwide basis and legal differs from country to
country , corporating with many suppliers and distribution channels throughout the
world will occur various legal issues. They include employment law, competition law,
data privacy law and tax law... If there is any failure of compliance and result in
lawsuit, it will damage seriously to brand image and reputation.
A specific example is sweatshop problem in 1990s which badly hurt sales and
company’s image, Nike was endlessly managed to turn around its image . Although
they successfully overcame and were recognized as one of the greatest image
turnarounds in recent decades (Max Nilsen, 2013) , Nike’s sweatshop problem is
threatening a comeback (Marc Bain, 2017). In order to prevent disadvantages once
again involve in, Nike need to monitor working conditions strictly, such as
auditing factory in multi geography areas, obeying code of conduct...

https://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5
https://qz.com/1042298/nike-is-facing-a-new-wave-of-anti-sweatshop-protests/

C. PORTER’S FIVE FORCES

Nike’s operation, especially strategic planing is affected directly by those factors
below, which will be categorized as low, moderate, strong to determine level they
impact to business.
 1. The bargaining of customer: moderate
Those factors which impact negatively to business:
- Low switching cost because several brands in local or international markets
offer lower price compared to Nike
- Available substitutions in market: consumer preferences may shift from this to
another brand easily.

Reduced customer demand is always the most dangerous risk to any firms in
consumer goods industry. However, Nike is still able to control the threat of customer
bargaining to moderate base on below strengths:
- Consumer connection and affinity for brands and products (Nike Inc, 2018)
page 58
- Small size of individual customer, while no customer accounted for 10%
ormore of our worldwide net revenues during fiscal 2018 (Nike Inc, 2018) page 57

2. The bargaining of supplier: low to moderate

Cooperating with independent contracters throughout the world is an essential part
of business, and suppliers performance will directly affect on Nike operation such as
sales and reputation.
Large population of suppliers with approximately 124 footwear factories and 328
apparel factories (Nike Inc, 2018) is favourable to company as they can not put any
pressure on Nike to drive up prices.
On the other hand, there are five footwear contract manufacturers accounted for
approximately 69% of NIKE Brand footwear production (Nike Inc, 2018) page 57.
This over-dependence is quite risky because if Nike can not find another replacement
in timely manner to conditions that manufacturers offer, including altering contract
terms, adjusting price charge, or ceasing cooporation, it will impact s eriously to
operation.
3. Rivalry competition: moderate to strong
According to Nike Inc (2018): “The athletic footwear, apparel and equipment
industry is highly competitive on a worldwide basis. We compete internationally with
a significant number of large companies having diversified lines of athletic and
leisure footwear, apparel and equipment, including adidas, ASICS, Li Ning, lululemon
athletica, Puma, Under Armour and V.F. Corporation, among others”
Because of saturated industry where there is strong ba rriers for new entrants,
existing competitors are running on a intense race to snatch bigger market shares.
 Chalenges Nike is facing is:
- Probability of failure of exported Nike’s products to compete with local
products as increased product cost due to adverse politics.
Apparently, although Nike is dominating the sportwear industry, its revenue in
Adidas homecountry – Western Europe is still lower than competitor. While Adidas
generated more than 6.6$ billion, Nike accounted only 6.2$ billion.

- Substantial increase in marketing investments: the costs associated with

establishing and retaining such sponsorships and other relationships have increased
(Nike Inc, 2017) page 61.
Demand creation expense of Nike is more than 3$ billion every year.

4. Threat of substitutes products: moderate

In the most competitive industry as footwear, there are big competitors such as
Adidas, Reebook and Under Amour, which offer the same products and services. For
example, Flyknit of Nike and Primeknit of Adidas is similar technology with
lightweight material.
However, although Nike has largest median price (Price Economics, 2017), Nike
Inc still possesses a subsidiary – Converse, which is affordable and popular brand.
https://priceonomics.com/how-much-do-shoes-cost-for-men-vs-women/
Further more, apart from innovative design and quality, Nike is very successful in
gaining customer loyalty, which means their consumers are willing to pay higher price
for a healthy and meaningful lifestyle. That is the reason why Nike can maintain the
threat of substitutions to low or moderate.

5. Threat of new entrants: low

Footwear and apparel is a high profitable industry, which attract many entrants. If
there are successful rivalries with potential outstanding products, it will erode
profitability and market shares for existing organizations. However, the industry Nike
is leading, which is very competitive, listed factors below will clarify the situation:
- High cost of investment: substantial R&D, marketing expense is essential to
start a business in footwear and apparel industry.
- High economies of scale: footwear and apparel require large amount of
production to cut down cost. If new start-up invest too much on production, they may
not have enough expenditure to finance. Or if they choose to produce a reasonable
amount, they may lose in serving customers who have many choices in the industry.
Base on those limitations, threat of new entrants is not trivial.
 MARKETING MIX
PRODUCTS
Because NIKE is a consumer products company, the relative popularity of various
sports and fitness activities and changing design trends affect the demand for our
products.We must, therefore, respond to trends and shifts in consumer preferences by
adjusting the mix of existing product offerings, developing new products, styles and
categories and influencing sports and fitness preferences through extensivemarketing.
Failure to respond in a timely and adequate manner could have a material adverse
effect on our sales and profitability.
- Wide range of products: six key categories in footwear and apparel products
cover variety of sport, in which Sportwear and Running are currently top-selling
within Nike Brand. In addition to that, Nike also sales equipment and accessories such
as bags, socks, eyewear, and other equipments designed for sport activities.
- Nike markets their products for both men and women, as well as kids. Beside
that, Nike customized shoe is one of the most innovative projects, which offer
customer great experience to get personalized item in just one hour.
- Diversified portfolio brands include: NIKE Brand, Jordan Brand, Hurley and
Converse. Each brand will focus on specific sport or style, for example, while
Converse is specialize in casual style which is suitable for teenagers, Hurley brand is
focused on surf and action sports.
- Nike’s products are developed and produced mainly for athletic use, however,
mostly customers buy them for casual purposes.
- Adapted to growing technology trend, Nike was successfully incorporating
innovative technology into products and services, such as Flyknit, Nike Air, React and
NIKE+ technologies, which aims to provide customers the most valuable experience
as using Nike Products. The success is clearly defined by the cooperation with Apple
to launch Apple Watch Nike+ in 2016, which is defined as “the easiest way to run” by
Apple Inc (2016)
https://www.apple.com/newsroom/2016/09/apple-nike-launch-apple-watch-nike/

PRICE

Nike is the brand offers highest price compared to existing competitors , this is
because Nike applies value based pricing to their products, which are unique in
design, premium quality, and meaningfull stories behind that iconic slogan “Just do
it”. The pricing strategy is probably effective as Nike’s revenues increase stably every
year, this success is partly made of consumer’s loyal ty. Although expensive products
are very competitive in the industry, however, Nike’s strategy is premium customer
segment, who are able to afford high-prices products to maintain their values.

PROMOTION
- Investment on traditional advertising is effective but costly, especially massive
outdoor billboards, or media such as television, magazines.
- Major sponsorships and endorsements with celebrities, professional athletes,
football clubs and sport events
- Digital marketing on social media such as Facebook, Instagram, Twitter and
Youtube.
(chart of social engagement)
- Commercial campaign and products launching events

Brand’s awareness and loyalty play an essential part contributed to Nike’s success ,
therefore promotion and advertising are the most important and critical marketing
strategy to business.
Growing investment to improve brand’s perception is probably a good sign,
eventhough returns of such substantial expenses can not determined under specific
categories. However, Nike successfully takes advantages of famous celebrities such as
Cristiano Rolnado or Michael Jordan to speak up their mission, spirit and promote
healthy lifestyle. This kind of strategy create an emotional connection, which can
boost sales and brand’s loyalty. It is evidently that fans will support for their idols and
purchase line of products that their idols represent.
http://fortune.com/2018/09/07/nike-colin-kaepernick-sales/

PLACE
Strategy of diversified distribution channels over the world is essential to business,
which can reach more audiences and response to the increasing demand. Nike will sell
their products through
- Retail accounts
- Wholesale customers
- Independent distributors
- Licensees and sales representatives on worldwide basis
- Direct to customers through various digital platforms and Nike’s owned retail
stores including factory stores, in-line stores and employee stores.
 Commiting to long-term objective which is sustainable growing revenue, Nike
focuses on investment in growing Nike direct business . The announcement of
Consumer direct offense in June 2017, which allows Nike to better serve and build a
deep connection with end customers globally. Beside that, retail stores are also
accelerated with unique design to promote brand awareness, Flagship store or House
of Innovation Store are specific examples. Accoring to Heidi O’neil (2017), President
of Nike Direct, “new flagship store is about serving all of our customers, especi ally
our NikePlus members – with pinnacle innovative products, a unique design and the
very best of personalized service”
https://news.nike.com/news/new-york-city-flagship-store-5th-avenue

PEOPLE
Not only customers, but also employees and contract manufacturers are the most
important elements in Nike’s successful business strategy.
Nike targets consumers of premium segments, who are affordable and desirable to
purchase their quality or luxury products and brand value as well. (phân tích doanh
thu đến từ nam/nữ). Beside that, serving direct customers is also an important part in
achieving long-term revenue growth.
In order to do that, Nike need to provide customers valuable and ethical products, that
is the reason why employees and manufacturers are essential to operation.
In term of employees, they are unleased full potential. Nike provides their staff
members not only well working conditions, reasonable to high salaries, opportunities
of career development, but also other benefits to promote their standard of living.
According to Nike Inc (2016,2017) “As a growth company, we’re committed to
employing the best and brightest to serve consumers globally, Employees with the
necessary skillsets, expertise, and diversity are critical to drive our business forward ”
In term of manufacturers, Nike works with a hundreds of suppliers around the world,
in which their negative performance will affect directly to Nike’s reputation and brand
image. Therefore, Nike imposes specific regulations and requires contractors to
comply with, such as code of conduct, healthy and safety policies, environmental
regulations.