Marketings Principal

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Diploma in Commerce Business Administration(PTDipBA5A)

Marketing Principals

Peter Robinson

Goh

Lincoln

Vivian Tan Jia Yu

Eddie

Submission Date:20th May 2013

Lecturer: Ms. Catherine Chai


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TABLE OF CONTENTS

Description Page No.

1 Introduction

23 Macro & Micro & SWOT Analysis

4

5

6 Conclusion

7 References


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INTRODUCTION


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MACRO ENVIRONMENTAL FACTORS

The macro environmental factors of Nike in an international organization consist of political, economic,

social, technological and legal.

POLITICAL

The government has the responsibility to create economic policies which will have great effect on the

growth of business. Nike has been helped by the US government which enables them to modernize

their products. (Cooter, 1998) The support by US Government, particularly in general macroeconomic

stability, also low interest rates, stable currency conditions and the international competitiveness of the

tax system which helps the formation of the foundation critical to Nikes growth.

ECONOMIC

In the economy, the biggest threat economically would be economic recession. During recession,

Nikes growth will be adversely affected. The US economy is facing a huge downturn and consumer

purchases are slowing down. The Asian economic crisis has also affects Nike, as its goods are

manufactured in Asia and the labor costs and material prices are increasing rapidly.

SOCIAL

Nowadays, people are more health conscious. Diet and health are getting more prominence which

resulted more and more people are joining fitness clubs so there is more demand for fitness products

example like exercise apparel, equipment and shoes. Nike always been the first choice of people when

it comes into looking for sport shoes, equipment and apparel. Nike failed to foresee problems like the

conditions of labor and factory conditions at production locations in Asia. (Clancy, 2000) This causes

bad publicity and declining sales as society and consumers demand more socially responsible

companies.

TECHNOLOGICAL

Nike uses IT in all the marketing information systems very effectively. It mainly applies marketing

information systems to the economics of segmentation, innovation and differentiation for its business.

Nikes leadership status also has been able to owes in large part to use of extremely valuable

Information Technology, and applying it to every aspect of the product from development to distribution.

Nike being the world leader in the athletic footwear industry, is able to maintain its name in the market

and works effectively in its environment in order to boost its marketing efforts which resulted boosting

up its sale.


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ENVIRONMENTAL

Nike have to consider a number of factors to do with the environment when making their products. Nike

is also ISO certified from global environment, carbon foot prints tracing point of view and pollution. Nike

is a strong believer of green environment and as per requirement they brought changes in the way

things work and the processes to ensure that the environmental factor has been taken care of. Nike

always are fulfilling consumers expectations, contributing in creating an environmental friendly

atmosphere, motivational boost in employees and being top of legislation. A positive attitude has been

indicated in a study towards social and environmental responsibility on part of companies around the

world.

LEGAL

Nike always maintained the business ethics. For all companies legal issues are of key importance to

the company as these laws can determine how an organisation conducts its business. It is essential

that a business complies with these rules or else they will have to pay a high price or even fold. The

acts that have to be obeyed are the consumer protection legislation, the trade descriptions act. The

sales and supply act, the weights and measures act, the equal opportunities act which is making sure

that nobody gets an unfair chance.


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MICRO ENVIRONMENTAL FACTORS

Michael Porter was advanced in 1980s by this is a strategic business planning model. It has become a

very useful business tool for managers who either want to rise to the top or those who want to revive

businesses that have fallen. Porter's model is pegged in five cornerstones; these are buyers,

substitutes, suppliers, competitors and new entrants (Porter, 2008).

BARGAINING POWER OF BUYERS

With nike buyers have a chance to select the color of the shoes they want and the option of

personalizing the footwear with their names (Porter, 1980).

Diagram 1 Michael Porter 5 Force Model


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BARGAINING POWER OF CUSTOMERS

The continued supply of the products to the market improved customers confidence in RBS Company

(Porter, 1980). Many suppliers were contacted and Nike stores were plant of products for every

customer need. There are many suppliers in his industry, the fact that the suppliers have little

differentiation, makes their bargaining power no-existent. Only, letter, rubber, and cotton are the

commodity items available in the market. Nike a conglomerate has an advantage and power over its

suppliers. Thus the suppliers tend to depend on it for survival. In addition Nike and Adidas have

standardized their input procedures, concerning the material used; labor force, supplies, services, and

logistics this has made it easy for firs to switch between supplies quickly and cheaply.

THREAT OF NEW ENTRANTS

The introduction of new services such as promotions and incentives to lure and attract athletes than

half of what other players in the industry are providing shows that Nike is prepared to fight off new

entrants to the market who may want to lure customers with new products (Porter, 2008).

THREAT OF SUBSTITUE PRODUCTS

Athlethic footwear products have very low consumer substitutes and there are little alternatives to

switch. Some substitutes could be sandals, boots, dress shoe or bear feet. Due to performance

specifications of the product consumers are not likely to substitute. For example a basketball player will

not wear boots to play basketball hence, athletic footwear has no real substitute (Porter, 1980).

RIVARLY AMONG EXISTING COMPETITORS

Competition is fierce particularly in footwear industry and the competitors who dominate the market do

so with strategic marketing, strong brand identity, aggressive sales, and very high capital expenditure

(Porter, 1980).


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SWOT ANALYSIS

SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities,

and Threats. It involves specifying the objective of the business venture or project and identifying the

internal and external factors that are favorable and unfavorable to achieving that objective.

STRENGTHS

Nike is a very competitive organization. Phil Knight (Founder and CEO) is often quoted as

saying that 'Business is war without bullets.' Nike has a healthy dislike of is competitors. At the

Atlanta Olympics, Reebok went to the expense of sponsoring the games. Nike did not. However

Nike sponsored the top athletes and gained valuable coverage.

Nike has no factories. It does not tie up cash in buildings and manufacturing workers. This

makes a very lean organization. Nike is strong at research and development, as is evidenced by

its evolving and innovative product range. They then manufacture wherever they can produce

high quality product at the lowest possible price. If prices rise, and products can be made more

cheaply elsewhere (to the same or better specification), Nike will move production.

Nike is a global brand. It is the number one sports brand in the World.

WEAKNESSES

The organization does have a diversified range of sports products. However, the income of the

business is still heavily dependent upon its share of the footwear market. This may leave it

vulnerable if for any reason its market share erodes.

The retail sector is very price sensitive. Nike does have its own retailer in Nike Town. However,

most of its income is derived from selling into retailers. Retailers tend to offer a very similar

experience to the consumer. Can you tell one sports retailer from another? So margins tend to

get squeezed as retailers try to pass some of the low price competition pressure onto Nike.


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OPPORTUNITIES

Product development offers Nike many opportunities. The brand is fiercely defended by its

owners whom truly believe that Nike is not a fashion brand. However, like it or not, consumers

that wear Nike product do not always buy it to participate in sport. Some would argue that in

youth culture especially, Nike is a fashion brand. This creates its own opportunities, since

product could become unfashionable before it wears out i.e. consumers need to replace shoes.

There is also the opportunity to develop products such as sport wear, sunglasses and jewellery.

Such high value items do tend to have associated with them, high profits.

The business could also be developed internationally, building upon its strong global brand

recognition. There are many markets that have the disposable income to spend on high value

sports goods. For example, emerging markets such as China and India have a new richer

generation of consumers. There are also global marketing events that can be utilised to support

the brand such as the World Cup (soccer) and The Olympics.

THREATS

Nike is exposed to the international nature of trade. It buys and sells in different currencies and

so costs and margins are not stable over long periods of time. Such an exposure could mean

that Nike may be manufacturing and/or selling at a loss. This is an issue that faces all global

brands.

The market for sports shoes and garments is very competitive. The model developed by Phil

Knight in his Stamford Business School days (high value branded product manufactured at a

low cost) is now commonly used and to an extent is no longer a basis for sustainable

competitive advantage. Competitors are developing alternative brands to take away Nike's

market share.

As discussed above in weaknesses, the retail sector is becoming price competitive. This

ultimately means that consumers are shopping around for a better deal. So if one store charges

a price for a pair of sports shoes, the consumer could go to the store along the street to

compare prices for the exactly the same item, and buy the cheaper of the two. Such consumer

price sensitivity is a potential external threat to Nike.


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Diagram 2 SWOT Analysis


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CONCLUSION


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REFERENCES

Robert Cooter, 1988

Tom Clancy, 2000

Michael Porter, 2008

Porter, M.E (1980) Competitive strategy:Techniques for Analyzing Industries and Competitors,New York: Free Press.

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