Taylor Smith
MGT 349
Professor Gates
Due Friday 13 Sept.
Short Paper #1
Competitive Analysis: Nike
Nike is the equivalent to Wal-Mart when it comes to producing and offering a
high variety of products to a very large target market. Nike produces just about
anything in the sports world that you could think of, and then some more on top of
that. Nike not only makes products that are relevant in sports, they also have
products that are more casual that fit the category of “lifestyle.” From the general
population, I feel that Nike is perceived as the top dog of sports apparel and gear.
Not only does Nike make clothing and sports gear, they have also made their way
into other markets and had success in them. For example, Nike now makes a
product called the Fuelband; it is an electronic wristband that calculates numerous
statistics as you wear it throughout the day, such as calories burned, distance
walked, etc. Things like this make Nike hard to compete with because they have sort
of monopolized the market for sports gear and apparel. Nike is hands-down the
leading brand in the sports world with sales and revenue, above and beyond any of
their potential competitors; but although they have a good hand in this particular
market, they do have some competitors that should be of their concern.
Nike has many competitors but two of their main competitors are Adidas and
Under Armour. Adidas is known as Nike’s main competitor and it as been that way
for quite some time. Adidas doesn’t quite reach out as far as Nike when it comes to
variety and product lines or product mixes, but where Adidas lacks in this field, they
make up in quality of the products they do make. Under Armour is an up and coming
competitor for Nike because they are still a fairly new brand in the sports world.
Under Armour isn’t necessarily Nike’s second biggest competitor, but Under Armour
is a brand they should be worried about because of how popular it is becoming in
today’s world in the market of sports and lifestyle.
The brand Adidas has many different strengths and a few weaknesses that
come along with them. One of Adidas’ main strengths is their status/reputation.
Adidas is well known for having a majority of costly, quality products that many
people are willing to pay the price for. Adidas’ marketing team has always been very
creative and have earned a great number of loyal customers who keep coming back
for more. Not only is Adidas an international company and is recognized all over the
world, but they also have sponsored many sporting events including the Olympics.
As I said, Adidas’ products are usually fairly pricey due to how much it costs to make
them because of the expensive technology or process used, and this can be seen as a
weakness. In this economy, customers can deal without name brand apparel or
sports gear and use cheaper products, so Adidas products can be considered elastic
for the most part. Since Adidas has a lot of competition, another weakness is that
customers may switch brands often. Another weakness of Adidas is they offer less
variety of products in their product line compared to other brands like Nike. Adidas’
main target markets include: young to middle age men and women who are sportsoriented, mainly targeting middle to upper class. Adidas’ main product line offer
casual shoes, sports shoes, sports apparel, casual apparel, sports equipment, and
accessories including watches, eyewear, backpacks, and more. Also, Adidas owns
Reebok and TaylorMade. Reebok was its own brand until Adidas bought it out in
2005. Reebok’s product line is similar to Adidas in the way it offers shoes, apparel
and limited sports equipment. TaylorMade is a golf brand that offers golf clubs, golf
balls, hats, and more. TaylorMade is arguably the best golf brand of this day and age.
TaylorMade-Adidas Golf is also the sponsor of many professional golfers on the PGA
Tour. Adidas-Group differs from Adidas because Adidas-Group is all of the
companies Adidas owns. Adidas-Group sales for 2012 were 14.883 billion euros,
which is equivalent to about $19.7 billion. Net income for 2012 was 791 million
euros, which is about $1.053 billion.
Under Armour is a company that has great potential for their future in the
market for sports apparel and sports gear. With that being said, they have quite a
few strengths, but also a fair number of weaknesses and threats they should focus
on. Firstly, one of Under Armour’s biggest strengths is their sponsorships with
college athletes. Since they are college sponsorships, they can’t actually pay the
college athletes to wear their gear, but rather these athletes choose to or want to
wear Under Armour’s gear. Other strengths include: customer loyalty, brand equity,
and a fairly wide range of sports wear and some casual apparel. Under Armour is
infamous for their high pricing of products, which to an extent they can get away
with because of their high brand equity, but this is ultimately considered a
weakness. Some other weaknesses include: narrow focus, advertising, and inability
to adjust prices with competitors. Narrow focus is directed at the fact that their
brand is primarily targeted towards men, with a much smaller product line for
women. They are also at a disadvantage when it comes to advertising. Under
Armour is behind the game when it comes to online marketing; they need to
increase their presence online and figure out an effective marketing plan.
Under Armour’s offers many different sports-related products with their
main ones being: sports apparel, sports footwear, sports equipment, and accessories
including watches, backpacks, mouth guards, basketballs, footballs, and more. Under
Armour’s revenue for 2012 was about $1.834 billion, this being about a 25 percent
increase from the previous year. Net income for 2012 was approximately $208.7
million for Under Armour, while they have recorded 11 consecutive quarters with at
least 20 percent growth. Neither Under Armour nor Adidas-Group come close
combined with revenues or income in comparison with Nike.
Although Nike, for the most part, dominates their competitors and have
many areas of strength, they also have some areas that could be considered weak.
First off, their top strengths include: globally leading sports brand for sports shoes
and apparel, and very high brand recognition around the whole world. Other
strengths include innovative advertising and work well by collaborating with other
companies to make great products. On top of all of these strengths, they also
sponsor many sporting events, teams, and players like Tiger Woods, LeBron James,
and other high profile athletes. Something Nike is very infamous for and is probably
their biggest weakness, is the way a lot of their products and clothes are made. Nike
has faced allegations of labor laws and wage laws with employees and has also had
allegations of child labor and poor working conditions. Dealing with all of these legal
issues has been a setback for Nike. Target markets and segments for Nike are quite a
bit broader than Adidas or Under Armour. The target segment for Nike is mainly for
sports fanatics or enthusiasts. The target market is aimed mainly towards children,
and young to middle-aged men and women from middle to upper class. Nike also
owns big brands like Hurley, Converse, Air Jordan, and has a major line of golf
equipment with the name Nike Golf. While Nike has their hand in the production of
just about everything sports-related, some of their main products include: sports
apparel, casual apparel, sports footwear, casual footwear, sports equipment in
tennis, basketball, golf, baseball, football, soccer and other sports. Their brand
Hurley is a very successful brand of casual apparel and in some instances may even
have a Nike swoosh symbol located on some of their apparel. Converse is a shoe
brand that was bought out by Nike in 2003 for $305 million. Jordan is a brand
owned by Nike that sells high quality, high priced shoes and some sports and casual
apparel. Jordan is a successful company that gets its name for the great basketball
player Michael Jordan. Nike Golf is a branch of Nike that sells golf equipment like
golf clubs, balls, shoes, hats, and golf apparel. Nike Golf is sponsored by some of the
greatest golfers including Tiger Woods and Rory McIlroy. Nike’s recorded income
statement was from May 31st, 2011 through May 31st, 2012, and their revenue
between that period was about $25.313 billion. Nike’s net income was about $2.485
billion between May 31st, 2011 and May 31st, 2012.
Since Nike is a highly recognized company, what moves they make can be
highly scrutinized by the environment, whether it is the general, or specific
environment. The general environment can also indirectly affect Nike as a company
as well. From the standpoint of the economical environment, Nike as well as just
about every other company, has had to adjust to the way our economy has been the
past five or six years. I personally have noticed Nike has had not only a selection of
products for only the middle to upper class, but have adjusted to the economy by
lowering some prices of apparel and other products to compensate for our
economic situation in the United States. Nike isn’t untouchable though, as their sales
and earnings have been affected from the struggling economy since around 2007,
but have only had a drop in annual revenue from May 28th, 2009, to May 28th, 2010.
As far as the technological environment goes, Nike has taken full advantage of it.
Nike has brought to the table some of the best advertising and has been very
innovative in the world of technology, with their online presence being outstanding.
There are not really any technological issues at hand for Nike. The sociocultural
environment is ever-changing and with Nike being an international company, they
need to keep up-to-date on the events, cultures, values, and be socially aware of
what is going on in different environments of different countries. Nike cannot
simply release the same apparel everywhere, they have to be careful of what
products they sell in each individual environment as well as advertise differently to
different cultures. Political trends, however has been an ongoing issue for Nike, as
they have had legal issues in labor laws for child labor, and poor working conditions
for employees. Rules and regulations have been a big controversy when it comes to
foreign employees of Nike. Advocacy groups have also been an issue for Nike. For
example, there was a student-lead anti-sweatshop campaign against Nike that made
Nike look bad and they potentially lost customers because of this. The specific
environment can potentially affect how Nike does business. Customers are Nike’s
biggest concern in many ways and fall under the category of specific environment.
In the sports world, companies like Nike are trying to build customer loyalty, which
can sometimes be hard because customers tend to switch sports brand often; this is
why Nike spends a lot of money on advertising and sponsorships, so they can try
and out-do their competitors. Competitors are a huge factor for Nike and Nike is
constantly trying to be one step ahead of their competitors. With Nike being a sports
brand, there are a countless amount of competitors and since Nike makes so many
products that other companies specialize in, Nike needs to focus on making the
better product. For example, Nike has a line of golf equipment, therefore they have
competitors like Titleist and Ping that specialize in golf equipment, and so they don’t
want to just have mediocre golf equipment because they would quickly be
dominated in the golf market. Suppliers for Nike are also a huge factor. With Nike
using many different materials for different apparel and equipment comes with a
very large amount of suppliers. Just for shoes alone, Nike has over 900 different
vendors for different materials. It is important for Nike to know what materials
should be supplied by other vendors to help with competitive advantage. Nike must
also abide by industry regulations; this can also include the department of labor,
which was discussed earlier. Nike has had issues with the department of labor
including: minimum wages, and safe working conditions. Nike is definitely overall
highly affected when looking at different aspects of the specific, and general
environment.
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