Running Head: Problems and Solutions for Nike Inc.
Problems and Solutions for Nike
Submitted to
NIKEYTA MULLEN
Submitted by
Narendra Babu Muidili
5162091
California University of Management and Sciences
Date: December 07, 2017
1
Problem and Solutions for Nike Inc.
2
Table of Contents
I.
Abstract ................................................................................................................................ 5
II. Overview .............................................................................................................................. 6
A.
Background ................................................................................................................... 6
B.
Mission and Vision ....................................................................................................... 7
C.
Problem Statements ...................................................................................................... 8
III. Analysis................................................................................................................................ 9
A.
Market Analysis ............................................................................................................ 9
B.
Nike Inc. Analysis ...................................................................................................... 10
C.
Why SWOT and Porter’s Five Forces are being used? .............................................. 10
D.
Why SWOT and Porter’s Five Force model analysis is the right analyses for the
problem? ............................................................................................................................... 11
E.
SWOT Analysis .......................................................................................................... 12
a. Nike Inc. SWOT Analysis.............................................................................................. 12
i.
Strengths ......................................................................................................................... 12
1.
Established Label picture............................................................................................ 12
2.
Fast renovation procedure .......................................................................................... 13
3.
Global manufacture and supply network .................................................................... 13
4.
Management team....................................................................................................... 13
ii.
Weaknesses ................................................................................................................. 14
1.
Work controversies ..................................................................................................... 14
2.
Limitations of the product mix ................................................................................... 14
3.
Less existence in developing markets ........................................................................ 14
4.
Nike’s Board of directors ........................................................................................... 15
iii.
Opportunities .............................................................................................................. 15
1.
Improve labor techniques ........................................................................................... 15
2.
Improve the merchandise blend .................................................................................. 15
3.
Development of demand presence in developing countries ....................................... 15
4.
Technological utilization ............................................................................................ 16
iv.
Threats ........................................................................................................................ 16
1.
High competitiveness ................................................................................................. 16
2.
Fast technological renovation ..................................................................................... 16
3.
Emulation.................................................................................................................... 16
Problem and Solutions for Nike Inc.
3
4.
Maturity levels ............................................................................................................ 17
F.
Porter’s Five Force Model .......................................................................................... 17
1.
Competitive rivalry ..................................................................................................... 17
2.
Negotiating influence of suppliers .............................................................................. 18
3.
Negotiating influence of consumers ........................................................................... 18
4.
Risk of fresh arrivals................................................................................................... 18
5.
Risk of alternative merchandise and services ............................................................. 18
b.
Nike Inc. Porter’s Five Forces Model Analysis ......................................................... 18
i.
Competitive Rivalry ....................................................................................................... 18
ii.
Negotiating influence of suppliers .............................................................................. 19
iii.
Negotiating influence of consumers ........................................................................... 19
iv.
Risk of fresh arrivals................................................................................................... 19
v.
Risk of alternative merchandise and services ............................................................. 19
IV. Recommendations and Implementations ........................................................................... 20
A.
Problem Statement Summary ..................................................................................... 20
B.
Recommendations and Implementation Plans ............................................................ 21
1.
Problem Statement 1: High Levels of Expenditure within the Corporation............... 21
a. Recommendation 1: Inventory Management ................................................................. 21
i.
Implementation 1: Standard Management .................................................................... 21
ii.
Implementation 2: Optimization of Inventory ............................................................ 22
iii.
Implementation 3: Make Cycles Count ...................................................................... 22
2.
Problem Statement 2: High levels of Competition within in the market.................... 23
b.
Recommendation 2: Identification of New Niche markets. ....................................... 23
i.
Implementation 1: Reaching out to customer needs and wants ..................................... 23
ii.
Implementation 2: Establish Communication ‘with’ and ‘to’ Your Customers. ....... 24
iii.
Implementation 3: Defining Your Brand.................................................................... 24
3.
Problem Statement 3: Decline in Nike’s brand power ............................................... 25
c. Recommendation 3: Perform a Market Research .......................................................... 25
i.
Implementation 1: Market Testing ................................................................................. 26
vi.
Implementation 2: Innovate Existing Product Offerings in the Market ..................... 26
vii.
Implementation 3: Brand Positioning ......................................................................... 27
C.
Suggestions for Future Growth of Nike Inc. .............................................................. 27
V. Conclusion ......................................................................................................................... 28
Problem and Solutions for Nike Inc.
4
References ................................................................................................................................. 29
Problem and Solutions for Nike Inc.
5
I. Abstract
Nike, Inc. is a multi-national organization located in the United States of America (USA) that is
involved in the design, advancement, making, and global marketing and sales of footwear,
apparel, equipment, accessories, and services. The company has for a long time been the key top
in the footwear industry. However, the company has been faced with the issue of increased levels
of financial loss. This issue has been disintegrated into three issues namely high levels of
expenditure within the corporation, high levels of competition within in the market and decline
in Nike’s brand power. SWOT and Porter’s Five Force analyses are used to analyze the market
conditions of Nike. In solving these issues this research paper has provided recommendations for
each problem with three systematic implementations.
Problem and Solutions for Nike Inc.
6
II. Overview
A. Background
NIKE, Inc. is an apparel company founded in 1964 and its headquarters are in Beaverton,
OR. It is involved in the design, advancement, marketing, and sale of athletic footwear,
apparel, accessories, equipment, and services. Its sales regions include North America,
Western Europe, Central & Eastern Europe, Greater China, Japan, Emerging Markets, Global
Brand Divisions, Converse, and Corporate. The worldwide label Divisions category depicts
the Nike brand licensing the brand. The Converse category brand, sales, license, and sell
casual sneakers, apparel, and accessories. The Corporate category has a foreign existing
hedge profits and losses related to revenues brought by bodies over the Nike label and
Converse but administrated by the central foreign exchange risk administration program of
the organization. Its founders include William Jay Bowerman and Phillip H. Knight. The
company was founded by William Jay Bowerman and Philip H. Knight in 1964 and is
headquartered in Beaverton, OR.
The company was established at nineteen sixty-two by Bill Bowerman and Phil Knight as a
partnership, in those times the company was known as Blue Ribbon Sports. Nike’s simple
objective at that time was to issue cheap, great standard Japanese sportswear to US customers to
finish German's supremacy of the indigenous industry. Today, the company. Not only produces
and dispenses sportswear at each demandable cost point to a worldwide demand, however, more
than forty percent of the company market is from sportswear, and subordinate enterprises. The
company keeps customary and modern dispensation ways in over hundred nations aim its key
demand areas such as the USA, European countries, Asian countries. The company has more
Problem and Solutions for Nike Inc.
7
twenty thousand marketers, the company production resellers, and other stores including the ones
based online for selling Nike’s merchandise. Nike has established its dominance transactions in
the sportswear with a thirty-three percent worldwide demand share. The company has had the
ability to achieve this leading position over "standard production, renovate products, and
assertive retailing. As a result, for the fiscal year in 1999, Nike’s twenty thousand and seven
hundred employees generated nearly eight billion dollars (Duncan, 2017).
The company’s premiership in the worldwide athletic wear, resources, and apparel demand
shows the significance of its capabilities of operating over different giants like Under Armor
among other companies in the apparel industry. Conducting SWOT evaluation of the company
depicts such capabilities included with the company’s incapacities, chances & uncertainties.
Nike is recently some of the world’s key participants at the sportswear sale. An understanding of
the organization’s capabilities & incapacities (inside planned elements), and incapacities and
uncertainties (outside planned elements) produces intuition on the way a production and sales
organization would gain worldwide prosperity even when facing an extreme competition.
B. Mission and Vision
Mission
The company’s official mission declaration is to bring inspiring and innovating spirit to each
sportsperson around the globe. Nike Inc. states that everyone is a sportsperson, according to a
statement by the company’s initiator Bill Bowerman. “If one has a physique, he/she is a
sportsperson.”
Vision
Aid NIKE, Inc. and the company’s costumers prosper in a workable financial state whereby
individuals, profitable and the world are in equilibrium.
Problem and Solutions for Nike Inc.
8
C. Problem Statements
The focal point of this research paper is to point out the problems those are connected to the
Nike Inc. Also, assess the problems to determine the impact on the company’s performance
towards its future growth and opportunities in the market. In this research paper, some
potential problems are identified and listed in the following:
i.
High Levels of Expenditure within the Corporation
One of the primary factors that have contributed to the high levels of financial loss at
Nike Corporation is the high levels of expenditure. Expenditures are costs that the business
incurs and tend to eat into a business’ profit margins. As a result, higher margins of expenditure
reduce the profit margin and in some instances, result in a loss on the part of the company. At the
Nike, the company is faced with very high operational costs that have resulted in increased losses
within the organization. The high levels of costs at Nike is a result of costs from different
departments such as finance, procurement. Production and marketing among others pooled
together. Most organizations in the present generation are falling into the losses due to
mismanagement of the company’s expenditures. To effectively manage these costs, Nike should
involve effective cost management strategies in its business operations (Kelly, 2015).
ii.
High levels of Competition within the market
The other issue faced by Nike Corporation in its market is a higher level of competition
by various other players in the market. When competition is high in the market, businesses are
forced to undertake strategies that will attract customers into the business. One of the basic
strategies undertaken by businesses in the face of intensive competition is a price reduction.
However, price reduction also affects the profitability margins resulting in low profitability
margins. To solve the issue of competition in the market, Nike should seek strategies that will
Problem and Solutions for Nike Inc.
9
make the corporation attain competitive advantages. Nike should identify its strengths in the
market and base on them in attaining competitive advantages (Lee, 2016).
iii.
Decline in Nike’s brand power
The Decline in Nike’s brand power has also played a significant role in a financial loss at
Nike. This is because the brand is no longer able to command the market the way it used to be.
As a result, Nike was forced to sell its products at a lower level to maintain competitiveness. In
some instances, the corporation is forced to sell its products at a price lower than the costs of
production which results in financial losses on the part of the business. Loss of brand power also
results in a decline in the market share as the customers no longer find the products appealing to
their respective needs and wants. Since brand power plays a significant role in the attainment of
competitive advantages in the business, the business should adopt strategies that will see it win
back its brand power and subsequent market share. The use of intensive marketing activities and
product differentiation among others would be effective in enabling the business to attain
competitive advantages in the business (Schlossberg, 2016).
III. Analysis
A. Market Analysis
The key merchandise line for the company has been mostly in sportswear and accessory
producing demands. Over 20 different organizations are manufacturing similar product segment
and branding techniques. From research, the whole apparel industry existing clients are mostly
athletes with over one million dollars in transactions from the producers of sportswear &
accessories (Wagner, 2017).
Problem and Solutions for Nike Inc.
10
A lot of huge, perfect-labeled retail marketers contribute to the demand in this industry, however
a lot of small firms, like a small shop selling fashionable clothes or accessories and minor retail
stores of the industry, play a significant role also. The retailing giants are attracting the consumer
by bulk purchase from the distributors of the company that curses the small stores business. As a
result, the profitability is higher and there is a chance to give good market costs to the clients.
B. Nike Inc. Analysis
The growth in individuals interested in shopping apparel products at their homes over the
internet than the customary trend of walking into stores has been a key issue impacting this type
of industry especially in the retailing. New revolutionary technologies like mobile apps are
revolutionizing the techniques and methods retail marketers carry out their transactions. For
example, online retailers said that clients with modern mobile gadgets use them to purchase and
occupy approximately 8x more than the individuals that just transact in a physical shop. Another
example of trends is such as building computer POS apps to make it simpler to purchase and
give services like software fitting chambers. Others include the adoption of client information to
determine the needs and requirements of the company’s clients. This is a common technique for
minor retail marketers and their way to employ social media such as Facebook, Instagram, and
Twitter among others.
C. Why SWOT and Porter’s Five Forces are being used?
Reasons for the adoption of SWOT and Porter’s Five Forces: SWOT evaluation is done as a unit
of the whole company strategizing procedure whereby financial and functional objectives are
outlined for the following year plus the creation of strategies for the achievement of such goals.
It is essential in that it assists in managing resources, improving company functioning,
identifying chances, tackling with the uncertainties amongst them.
Problem and Solutions for Nike Inc.
11
SWOT is certainly influential in which, it aids in recognizing chances those are perfectlypositioned to utilize. By pinpointing the incapacities in the company, it is easily manageable and
it’s simple to get rid of any uncertainties that would happen without the knowledge.
Through evaluating the business and the competitor’s business using SWOT analysis, it can
begin with crafting a technique which assists in differentiating the business from others, to
compete effectively in the involved industry.
The 5 forces of Porter give an insight into an organization’s competitive surrounding, that
impacts profits. The negotiating influence of purchasers and distributors impact a minor
organization’s capability to enhance incomes and control value, individually.
D. Why SWOT and Porter’s Five Force model analysis is the right analyses for the
problem?
Reasons for SWOT and Porter’s 5 Force model analysis as the right analyses for the challenge
Carrying out a SWOT evaluation assists in carefully understanding the line of operation through
the presentation of a focus of the company’s operations from an alternate view. In cases of new
opportunities, this evaluation is crucial for the organization’s strategizing plan. The beauty part
of it is that it can be carried at any given period. A company’s unique “SWOTs,” helps in making
a new line of opportunities function properly.
Walsh noted that the general knowledge eliminates blind spots which, if not recognized, can lead
to losses and damages to the organizations own or the connection with the customers, (Walsh,
2017).
The Porter’s five forces evaluation ensures more to the organization’s straight competitors, it
views at various features of its competitive design and the surroundings of the economy, and this
Problem and Solutions for Nike Inc.
12
involves things like the negotiating influence of purchasers, the negotiating influence of
distributors, the risk of new arrivals, and the risk of subordinate merchandise.
E. SWOT Analysis
SWOT is an acronym for strengths, weaknesses opportunities and threats. Due to the nature of
this research question, the researcher will be required to analyze both internal and external
business environments to establish factors that result in the high expenditure level and strategies
to counter them. SWOT analysis will come in handy in ensuring that both the internal and
external factors have been effectively analyzed.
a. Nike Inc. SWOT Analysis
i.
Strengths
Strengths refer to the positive internal factors within the organization that enable the company to
perform better than the others in the market. Strengths at Nike have been listed below:
1. Established Label picture
The company’s powerful label picture operates on merchandise standard. The organization’s
successful marketing campaigns also accord to this strength. The company’s label pictures,
involving the name of the brand and the logo Swoosh, are deemed as representative of one of the
greatly identifiable label globally. This label influence interprets into bottom-line expenditures.
The company name and incorporated logo have been appearing in a lot of places including
players' gears, shorts, caps, arena posters, and even walls. Utmost marketing campaigns,
celebrity recommendations, and standard merchandise contribute to the growth of the label. Nike
showed an illustration of Nike’s brand presence at the nineteen ninety-two NCAA Basketball
tournament after forty-two of the sixty-four participants engaged had their shoes on. The
company’s latest label-developing challenges have their focus on growing strength in
Problem and Solutions for Nike Inc.
13
collaboration with female’s games. Few of the examples include Nike’s promotion of the
nineteen ninety-two Female’s World Cup football competition and their promotion at the United
States tournament of skating group in the following years’ Olympics (Mullin, Hardy, Sutton &
Stern, 2014).
2. Fast renovation procedure
Nike’s fast innovation processes have been an essential factor in the organization’s strength to
create innovative designs for their industry. Nike’s position is comprehensive, often measuring to
a secure position, and often a reach-out stance. It prides itself as a premier in distribution good
quality sportswear and accessories. This innovative nature has been the key thing in assisting the
organization in getting its premiership in this industry (Jason, D., 2015).
3. Global manufacture and supply network
The company’s huge global manufacturer and management technique is a strength which permits
the organization help global demand dominance. Some of Nike’s facilities have locations in
Asian and South American countries. The resources are situated in a geographic manner and
dispersed to ensure smooth operation globally. The production facilities are located near with
raw materials and cheap labor which is readily available. The facilities are in a strategic way just
for this accountability (Jason, D., 2015).
4. Management team
Nike’s member’s executive members include both administrative members and individualistic
members. The mixture of such 2 kinds benefits the organization because it ensures existing
interaction with the company and too different ones who are exclusive forthwith that give the
outside experience, deliver another set of information and can assist the entire board in acting
and operating differently (Sutherland, 2012). Nike’s administrative members can be divided as a
Problem and Solutions for Nike Inc.
14
prospective group, working as an involvement in contemplation to management’s decisions on
the part of strategy building.
ii.
Weaknesses
Weaknesses are a shortcoming in the internal business environment that put the business at a
disadvantage over other competitors in the market. Examples of weaknesses at Nike have been
listed below:
1. Work controversies
This is yet playing a huge role in impacting Nike’s business, additionally based on production
facilities in developing countries. It has affected the organization’s brand image in negative
ways. Each successful company can be and succeed in the utilization of its labor cost. While the
Nike has had various concepts in place, weaknesses remain in basis to labor plans in different
locations. The company faced too much bad publicity and faced a decline of businesses because
of poor labor plans and absence of plans established in the international market (Jason, D.,
2015).
2. Limitations of the product mix
Despite the extension of the company’s product mix within a period recently, the resulting
product lines are still limited in growing part of the sportswear, equipment, and accessories. Nike
has had much success because of partnerships with other companies involved in athletic
businesses. The company has started a more extreme strategy to analyze product collaborations,
not over the key functions of Nike’s merchandise (Sutherland, 2012).
3. Less existence in developing markets
The company has faced challenges due to finite participation in growing demand, often because
of issues like cost, imitation and license security. This has led to restrictions for the organization
Problem and Solutions for Nike Inc.
15
in terms of its advancement of its market globally. Nike has had a lot of success because of
partnerships and agreements with other companies (Roy, 2011). However, often the company
expanded into demands which were not strategically fitting. This can be given as an example in
the case of the decline in brand made available due to declining demand for in-line skating and
roller hockey products at Bauer Nike Hockey.
4. Nike’s Board of directors
Most of Nike’s board associate age is 62, the youngest associate is 49 years of age and the eldest
being 79 years old. This brings a possible weakness since the young members of the board are
not involved, who could serve to bring at the table new perspective ideas in the company and
assist it to achieve its goals.
iii.
Opportunities
Opportunities are external factors faced by a business that provides the business with the
potential to grow and develop in the market. Opportunities at Nike are listed below:
1. Improve labor techniques
Nike can enhance their labor standard to deal with discords in this part of the company. Proactive
methods for this concern can lead to an improved and superior brand image.
2. Improve the merchandise blend
The company has many opportunities which can utilize to develop and improve the merchandise
blend to attract a larger crowd of consumers, and mostly the individuals who not athletes or
involved or not interested in sports.
3. Development of demand presence in developing countries
The company possesses opportunities too to develop its presence in growing areas to increase
profitability from these countries’ great development estimation. This depicts that the company
Problem and Solutions for Nike Inc.
16
should modify some of its principles and methods to ensure continual premiership in the global
athlete wear accessories, apparel, and related marketing.
4. Technological utilization
E-tailing, or customer-designed online merchandise, is threatening the traditional distribution
techniques, this has resulted in the elimination of middle-man suppliers. This is serving as a
benefit to the company in that profitability has increased and the cost for the middleman is saved
or eliminated.
iv.
Threats
Threats are factors in the external business environment that have the potentiality to impair a
business’ growth and development. Threats at Nike corporation are as listed below:
1. High competitiveness
The company isn’t the only one involved in the apparel and footwear industry, hence this has led
to Nike facing heightened competitive challenges, this can put into consideration of emergence
other significant players involved in the same apparel industry, they include companies such as
Adidas.
2. Fast technological renovation
Quick technological innovation is bound to more heighten the level competition if the company
won’t bring in new ideas and concepts to adapt to the ever-changing trends and attract new
customers.
3. Emulation
Furthermore, emulation stays a threat to the company, this is mostly in growing nations with bad
lawful safety copyright. This depicts that, for the company to retain its leadership in the
Problem and Solutions for Nike Inc.
17
worldwide sports shoe market, merchandise renovation and license safety should be involved in
its key plans.
4. Maturity levels
The apparel industry is at its maturing height. While style and technology in athletic apparel and
footwear have reached a leveling-off peak, the crucial thing then is for companies to bring
differences in their brands.
F. Porter’s Five Force Model
Porter’s five forces analysis is made up of five types of forces that analyze the external
environment with the objective of determining how the five forces interact and how they can be
used in strategic positioning. The five forces analyze the power held by an immediate
stakeholder in the business such as customers, competitors, suppliers, substitutes and new
entrants. In this research paper, Porter’s five forces will be used in strategic position based on an
understanding of the powers held by the various stakeholders in the business (Wilkinson, J.,
2017).
1. Competitive rivalry
It analyzes how strong the competitiveness presently is in the market that depends on the count
of current opponents and what every one of them can do. The competitiveness is more in the case
of less company’s similarly marketing merchandise or services when an industry is developing
and in the example of where customers can just change to a rival’s selling for less price (Marci,
M., 2017).
Problem and Solutions for Nike Inc.
18
2. Negotiating influence of suppliers
It examines the height of influence a company’s supplier possesses and the height of control it
maintains over the possibility to increase its costs that, in turn, would reduce company’s
productivity.
3. Negotiating influence of consumers
This one analyses the influence of a customer to affect cost and value. Costumers possess a
power in the case of where there are few, and many sellers, also when it’s simple to shift from a
company’s merchandise or service to a different one.
4. Risk of fresh arrivals
It determines how simple or challenging it is for rivals to enter the market in the industry on
analyzing.
5. Risk of alternative merchandise and services
It analyses how simple it is for costumers to shift from company’s merchandise or service to a
competitor’s merchandise. It studies the number of rivals which exist, how their costs and value
are in comparison to the company under examination and the level of profitability those
competitors are getting, that would decide whether to reduce their costs extra.
b. Nike Inc. Porter’s Five Forces Model Analysis
i.
Competitive Rivalry
Nike faces extreme competition from companies such as Under Amor, Adidas, and fresher
participants. These high enterprises profiled that explicitly exceedingly huge facilities at their
conveyance, are playing a huge role in performing in the apparel industry to acquire demand
share in merchandise and brand part. The existence of these rival companies has also posed a
challenge for the Nike Inc. brand (Christine, R., 2017).
Problem and Solutions for Nike Inc.
ii.
19
Negotiating influence of suppliers
A broad distributor foundation limits negotiating control. Nike’s merchandise is produced by a
lot of manufacturers who are suited diversely in different nations. The suppliers of Nike products
do not have high negotiating power because there are numerous suppliers for the company.
iii.
Negotiating influence of consumers
Nike Inc.’s clients and consumers involve both wholesale clients and end clients. Wholesale
clients, such as Dick's Sporting Goods and the Sports Authority, have a height of negotiating
influence, as they have a capability of substituting Nike’s merchandise for other companies with
the same products to get the huge surplus. Negotiating control of end clients is down as Nike
prides in a powerful label identification.
iv.
Risk of fresh arrivals
Enormous financial costs are essential for labeling, marketing and building a merchandise
market, and so this restricts the entry of fresher participants in is industry demand. Due to this
reason, a lot of new arrivals haven’t been profoundly witnessed in the apparel industry although
there are minor organizations with the possibility of climbing high to pose a challenge to Nike
Inc. But, agencies current in this type of industry can join the production apparel demand in the
Risk of alternative merchandise and services.
v.
Risk of alternative merchandise and services
The market for products in apparel, sportswear, and supplements is anticipated to go on, and
there exist several other companies which are involved in the same apparel industry as Nike.
This has posed an intense challenge for the Nike Company as the consumer can opt to go for the
alternative companies which offer the same. This force can indicate as is in the case of NBA
players, whereby, different players play with different shoes for promoting different brands. For
Problem and Solutions for Nike Inc.
20
example, in the year 2016, Nike failed to convince one of the famous NBA players (Steph Curry)
in developing the name. This led to the player adopting the Under-Armor brand, which is a rival
brand for Nike.
IV. Recommendations and Implementations
A. Problem Statement Summary
The primary issue faced by Nike Inc. is increased financial losses over the last few years. The
increase is attributed to various factors such as poor financial management. Competition has
also played a very significant role in in the increased level of financial loss at Nike. Due to
the high competitive levels, the business undertakes intensive marketing among other
activities with the aim of winning back its market share. These marketing activities translate
to high expenditures that eat into the business’ profit margins resulting in losses in the
company. In addition, high levels of competition also result in price wars in the market that
affect the business’ profitability. Brand power has also played a significant role in financial
losses in the company due to declined sales as the business is no longer profitable. The issue
of the increased level of financial loss manifests itself through three problems namely high
levels of expenditure within the corporation, high levels of competition within the market and
decline in Nike’s brand power. The three problems re:
1. High expenditure levels within the corporation.
2. High Levels of Competition
3. Decline in the corporation’s brand power
Problem and Solutions for Nike Inc.
21
B. Recommendations and Implementation Plans
1. Problem Statement 1: High Levels of Expenditure within the Corporation
a. Recommendation 1: Inventory Management
The corporation incurs a significant amount of expenses in the process of acquisition and storage
and storage of inventory. This is because Nike is a manufacturing brand hence uses a significant
amount of inventory in the daily manufacturing process. The process of inventory management
will ensure that costs related to the process of inventory management are significantly managed
with irrelevant costs being eliminated. The process of inventory management will involve
changes in the processes related to inventory management. The company should fine-tune their
inventory so that they stock goods for a short time before being used in the manufacturing
process or sold. As a business, it is crucial to know the goods need to be stocked depending on
volume, available cash, sales forecasts, and the capabilities of the supplier (Vinson, 2016).
Furthermore, businesses that re-sell goods can also use purchase order financing when financing
huge sales that surpass the capabilities of their cash flow.
i.
Implementation 1: Standard Management
Several unnecessary expenses in the business are attributed to poor management. As a result,
decisions related to the management of the organization are not given due attention. The
implementation of effective management will go along in ensuring effective management will go
along in facilitating the implementation of cost effective decisions that will go along in managing
expenses in an effective and efficient manner.
Establishing quality management processes can be unchallenging as outlining a list which
gives every process workers are required to use during evaluating the goods they get.
Problem and Solutions for Nike Inc.
22
Once every employee is aiming at the similar objectives, quality will grow. If commodities can’t
achieve organization objectives, they know to return them to suppliers. This inventory control
excellent method ensures no unnecessary growth in stock levels, and workers won’t give
consumers unsuitable merchandise (Vinson, 2016).
ii.
Implementation 2: Optimization of Inventory
Good inventory control is the understanding of merchandise and controlling it excellently. When
excellent inventory methods are implemented, the organization can now do the optimization of
merchandise quantity to not only enhance efficiency but also achieve ever-changing consumer
requirements. In the recent marketplace, consumers will not delay to socially share their awful
incidences when their requirements aren’t met or just looking for a different organization.
Optimization methods are crucial to an organization’s economic growth. Negligence to adopt
inventory excellent methods can lead to losing the company’s clients, cuts in inventory, and in
the end worker reductions. Various problems can be avoided when inventory control best
methods are initiated at early stages. Taking Inventory management as a precedence can avoid
glaring inefficiencies on the performance and assist precise strategy for tomorrow (Jim,2017).
iii.
Implementation 3: Make Cycles Count
Cycle counting method is most effective for managing in a competitive environment. To
implement a successful cycle counting Schedule company need to develop an elegant strategy.
The main goal of performing cycle counting in inventory to identify the faulty product that
enables the error-free inventory. There are several approaches to cycle counting, but the most
popular is ABC classification. This type of counting approach has four driven forces:
Problem and Solutions for Nike Inc.

23
Product classification: whole inventory can be categorized into a related and meaningful
batch that permit the more organized inventory.

Inventory precision mark: inventory precision standard that sets the goal to reach the
maximum level of error-free classification.

Counting intervals can determine the number and date of a completed product batch.

Chance of variance that can elaborate the variance in counting a product while cycle
counting (David, R., 2016).
2. Problem Statement 2: High levels of Competition within in the market
b. Recommendation 2: Identification of New Niche markets.
Since the current markets occupied by Nike are saturated resulting in excessive competition
levels that are almost eliminating Nike from the market, Nike should identify and reach out to
new target markets in a bid to get away from saturated markets. Reaching out to new market
segments will enable the business to expand its market share hence attain competitive advantages
in the market.
Trading to reach out to a large market share can grow the customer base and spread the risk.
Put into consideration if the company can manage to sell through the internet or internationally,
e.g., There are some groups explored before and they might can interested in companies offer ?
However, it is advisable not to waste time marketing to individuals that aren’t in interest (Frisch,
2011).
i.
Implementation 1: Reaching out to customer needs and wants
Individuals are reluctant to deal with companies which don’t come up with innovative ideas and
brands. Innovation causes excitement to the marketplace and customers like excitement. A
Problem and Solutions for Nike Inc.
24
company should invest their time to study the kind of reaction a brand, service will get from the
public at its new launching.
Innovation gives the marketplace something exciting to talk about. Advertisements through the
word of mouth promotes the company, services, and brands faster. The consumer always get
excited when they found something new and interesting update in the product, so it necessary to
implement the high quality and new features makes them to bind with product. If company can
manage to became a pacesster of the industry, the rest of companies will take it as a searchlight
and following are some practical implementation (Shaw, 2011).
ii.
Implementation 2: Establish Communication ‘with’ and ‘to’ Your Customers.
Communication between the business and the customers will play a significant role in deterring
the customer needs and wants. Communication in the corporation can take various forms such as
comments, compliments, and complaints against. Through this communication, the researcher
will be able to identify customer needs and wants and respond to them in an effective and
efficient way. Failure to establish a communication with and to your clients will result in an
inability to meet customer needs and wants. Communication ‘to’ the clients can also be pursued
through advertising by Nike Inc. whereas communication ‘with’ the company’s clients are
referred to as market research (Lu, 2017).
iii.
Implementation 3: Defining Your Brand
Brands and organizations are normally different, as well as customers, therefore there is the
requirement for branding. What does the company stand for? What’s different about the
company in contrast to other companies in the same industry? What does the company want to
be known for in the marketplace? What is the specialty of the company?
Problem and Solutions for Nike Inc.
25
With introduction and emergence of fresh competition, it is advisable to be prepared to prevent
loss of some market share. Therefore, the excellent solution is to outline the brand and frequently
define its Unique Selling Proposition (USP). The surfacing of competition openly differentiates
the strong and the weak. It is the companies which do not plainly stand for something which
usually are challenged during periods of stiff competition. If company does not stand for
something, it will fall for anything.
To stay competitive, organization must remain distinctive. There must be an exciting thing in
company which makes the clients develop a second thought of adapting to the brand
competitions (Scott, 2008).
3. Problem Statement 3: Decline in Nike’s brand power
c. Recommendation 3: Perform a Market Research
A product in limbo is likely facing this problem: The product features and attributes are not
appealing to the consumer. If a product’s unique value proposition and core benefits are not
distinct enough to set it apart from competitors, then it has failed to convince its target market of
its benefits (Lee, 2016).
The solution to this problem is to perform upstream market research and identify the hierarchy of
attributes in terms of both performance expectations and the best associated messaging and
positioning using discrete choice analysis with qualitative feedback. The ultimate goal of market
research is to understand customer priorities and to produce products which solve the most
urgent customer problems. This helps to avoid the dreaded product limbo. Conjoint analysis is
one way to do that (Shaw, 2011).
Problem and Solutions for Nike Inc.
i.
26
Implementation 1: Market Testing
Any procedure or methods that a researcher evaluates the production, well-being, standard, and
compliance of a brand with fixed qualities. After doing the research about the product about to
be launched, it is wise to test it to prospect its success. Implementing this will ensure that the
product is sure its differences which will sway the users/customers.
Companies are always dedicated to testing the product vigorously for the improvement of
product quality to dominate the competitive products from other contenders in the market. Also
helps to develop the superior grade product may create the premium price over the others. This
process makes the product endure in marketing over the consumer taste evolves. Product testing
assessments help to develop the future products and predict how marketing is going to be. In the
testing process of a product, it is very crucial to prepare the test strategies those are acts as
frameworks to choose and implement right testing techniques. Following are the well-renowned
product testing techniques (Jerry, 2017):
ii.
Nomadic Testing
iii.
Sequential nomadic testing
iv.
Paired comparison design
v.
The protonomadic design
vi.
Implementation 2: Innovate Existing Product Offerings in the Market
The other significant methods that can be used by Nike to reach out to the market is by
improving their existing products in the market. Improvement of existing products in the market
can only be facilitated through innovation. At Nike, innovation may entail the introduction of
new products into the market or improv the existing products. Innovation will result in the
development of competitive advantages in the market as the company’s products will reach out
Problem and Solutions for Nike Inc.
27
to the customer needs and wants in a more effective manner than the other players in the market.
Innovation will also be responsible for the development of new designs that will give Nike a
competitive edge over other players in the market (Lee, 2016).
vii.
Implementation 3: Brand Positioning
To benefit from the market in an effective and efficient way, the business should be able to
capitalize on existing opportunities. In strategic management, the process of anticipating and
capitalizing on opportunities is referred to as strategic positioning. Nike should also position
itself in a strategic position to enable it to capitalize on existing position in the market. Strategic
positioning at Nike could be in the form of acquiring a talented labor force and producing goods
that are aligned with the various customer needs and wants. Capitalization of opportunities will
go along in improving profitability and reducing competition as the business will be venturing
into markets that aren’t saturated. (James Corrigan, 2017).
C. Suggestions for Future Growth of Nike Inc.
From Nike Inc. problem analysis above, it’s right to say that the company, it’s facing various
challenges that it can solve for its continued growth and survival. The notable struggles that Nike
faces today are market competition, high levels of expenditure that affect profitability margins
and degradation of the Nike Brand. Today Nike is experiencing diminishing brand image and
quality, and thus more money can be pumped into brand and class improvement and
advertisement. The product design should be enhanced as well as materials and production
process. Also, their products should be expanded and diversified from their main footwear to
casual footwear and others for increased sales and profits.
Problem and Solutions for Nike Inc.
28
V. Conclusion
In summary, cost point is the key point which affects consumers in this company. At a
monopolistic market, it’s difficult to determine if it’s inflexible or flexible need a few of the
customer could more concerned about the cost of footwear while others would not.
Apart from the cost of shoes, there exist other factors which will as well have an effect on the
need for footwear, e.g.: preferences, standard, trend and if there are alternative merchandise.
Additionally, hobby or view of other people can be a less individual cause of affecting the
buying resolution. For instance, the man of the house feels highly pessimistic about footwear
which the wife desired to buy. The implementation of the above stated recommendations and
respective implementations should take a maximum of 3 years before being realized holistically.
The implementation of these recommendations should improve the sales margins by 25% while
reducing expenditure by 12%. An improvement of the sales and reduction of the expenditure
should improve the profit margin by 20% if all the recommendations are implemented in an
effective manner.
Problem and Solutions for Nike Inc.
29
References
Berry, T. (2017). What Is a SWOT Analysis? - Bplans Blog. Bplans Blog. Retrieved 3 November 2017,
from https://articles.bplans.com/how-to-perform-swot-analysis/
Christine, R. (2017). Nike Inc. Five Forces Analysis (Porter’s Model) Retrieved November 3rd, 2017,
from http://panmore.com/nike-inc-five-forces-analysis-porters-model
Duncan, E. (2017). Topic: U.S. Apparel/Fashion Industry. Www.statista.com. Retrieved 3 November
2017, from https://www.statista.com/topics/965/apparel-market-in-the-us/
Fallon, N. (2017). SWOT Analysis: What It Is and When to Use It. Business News Daily. Retrieved 3
November 2017, from http://www.businessnewsdaily.com/4245-swot-analysis.html
Hill, B. (2017). Why Perform a SWOT Analysis? Smallbusiness.chron.com. Retrieved 3 November
2017, from http://smallbusiness.chron.com/perform-swot-analysis-5050.html
Jerry, w., Thomas. (2017). Product testing. Retrieved November 22nd, 2017, from
https://www.decisionanalyst.com/whitepapers/producttesting/
Kelly, N. (2015). The Most Common Mistakes Companies Make with Global Marketing. Harvard
Business Review. Retrieved 20 October 2017, from https://hbr.org/2015/09/the-most-commonmistakes-companies-make-with-global-marketing
Lu, S. (2017). Market Size of the Global Textile and Apparel Industry: 2015 to 2020. FASH455 Global
Apparel & Textile Trade and Sourcing. Retrieved 3 November 2017, from
https://shenglufashion.wordpress.com/2017/06/06/market-size-of-the-global-textile-and-apparelindustry-2015-to-2020/
Marci, M. (2017).Porter’s Five Forces: Analysing the competition. Retrieved November 22nd, 2017,
from https://www.businessnewsdaily.com/5446-porters-five-forces.html
Michaux, S., Cadiat, A., & Probert, C. (2015). Porter's Five Forces. Namur: 50Minutes.com.
Problem and Solutions for Nike Inc.
30
Mitrę ga, M. (2006). Market analysis. Katowice: Publisher of the Karol Adamiecki University of
Economics.
Mullin, B., Hardy, S., Sutton, W., & Stern, D. (2014). Sports marketing. Champaign (Ill.): Human
Kinetics.
Munch, C. (2013). Relationship marketing of Nike. [Place of publication not identified]: Grin
Verlag.
Roy, D. (2011). Strategic Foresight and Porter's Five Forces. München: GRIN Verlag GmbH.
Sarsby, A. (2016). SWOT analysis (5th Ed.).
Sutherland, A. (2012). Nike. London: Wayland.
Wagner, N. (2017). Analysis of the Retail Apparel Industry. Smallbusiness.chron.com. Retrieved 3
November 2017, from http://smallbusiness.chron.com/analysis-retail-apparel-industry70514.html
Wilkinson, J. (2016). Porter's Five Forces of Competition • the Strategic CFO. The Strategic CFO.
Retrieved 3 November 2017, from https://strategiccfo.com/porters-five-forces-of-competition/
Frisch, A. (2011). The story of Nike. Mankato, MN: Creative Paperbacks.
Green, S. Nike.
Icon Group. (2006). Economic competitiveness of Papua New Guinea, the: financial returns, labor
productivity, and international gaps. ICON Group.
Jackson, S., & Andrews, D. (2007). Sport, culture, and advertising. London: Routledge.
James Corrigan. (2017). Nike decides to stop manufacturing golf clubs and balls. The Telegraph.
Retrieved 20 October 2017, from http://www.telegraph.co.uk/golf/2016/08/04/rory-mcilroy-leftin-limbo-after-nike-decides-to-stop-manufactur/
Problem and Solutions for Nike Inc.
31
Kelly, N. (2015). The Most Common Mistakes Companies Make with Global Marketing. Harvard
Business Review. Retrieved 20 October 2017, from https://hbr.org/2015/09/the-most-commonmistakes-companies-make-with-global-marketing
Lee, E. (2016). Product Limbo Can Ultimately Lead to Product Failure. Actionable.com. Retrieved
20 October 2017, from http://www.actionable.com/blog/product-limbo-can-ultimately-lead-toproduct-failure
Schlossberg, M. (2016). Nike is facing unprecedented headwinds. Business Insider. Retrieved 20
October 2017, from http://www.businessinsider.com/nike-is-facing-problems-2016-6?IR=T
Scott, S. (2008). The winged and garlanded Nike. Berkeley, Calif.: Regent Press.
Shaw, R. (2011). "Reclaiming America: Nike, clean air, and the new national activism".
Smith, L. (2009). Nike is a goddess. New York: Atlantic Monthly Press.
Ten ways to keep ahead of the competition. (2017). Marketingdonut.co.uk. Retrieved 20 October
2017, from https://www.marketingdonut.co.uk/marketing-strategy/ten-ways-to-keep-ahead-ofthe-competition
Vinson, B. (2016). 6 Inventory Management Best Practices. Wasp Buzz. Retrieved 20 October 2017,
from http://www.waspbarcode.com/buzz/6-inventory-management-best-practices/