“See you tomorrow, Michael J. Fox” appeared on a Twitter profile of Nike Inc., and immediately caused a lot of speculation. Finally, 26 years after the official premiere of the cult “Back to the Future II” movie, Nike is here to announce the release of brand new self-lacing NikeMag shoes just like the ones in the movie.
It has been quite a journey since 1989 — both for the technology in general and the American sportswear company in particular. Just a year before, in 1988, Nike advertising executive Dan Wieden had coined its new marketing slogan: “Just Do It”. Today this slogan is one of the most recognized trademarks in the world, Nike is worth more than ever and holds more than 60% of the American footwear market.
Nike is obviously on a roll, but will it last forever? What kind of strategy should Nike employ in the immediate future? Let’s take a look at the SWOT analysis we have prepared.
The strengths of Nike are pretty straightforward. First and the most important one (see the picture below) is a significant amount of brand diversity. Nike, with its famous Swoosh slogan and the previously mentioned slogan “Just Do It!” is one of the most recognized brands in the world and occupies first place in the Top 50 ranking of brands appreciated by millennials, ahead of corporations such as Apple, Microsoft or Coca-Cola. The company has contracts with the most famous world athletes such as Cristiano Ronaldo, LeBron James and Tiger Woods which only strengthens its image as one that is professional, innovative and top quality.
The brand, of course, has a strong impact on the valuation of the company and its current growth. Nike currently employs more than 60,000 people around the globe and its stock is now reaching the highest levels in its history. The Market Cap of the Oregon-based corporation is now equal to approx. $112 billion, which makes it a tasty morsel for investors and gives the company vast amounts of money to invest further in innovation and new markets development.
Why is Nike so powerful right now? The foremost reason is that it can perfectly capable of making use of the opportunities which are ahead of it. From our analysis, we can clearly see that the most important opportunity for Nike right now is the China market.
Interestingly, Nike is one of the few brands which are actually succeeding in this Asian market. The analysts explain this growth by Nike’s attitude towards Chinese customers. Brian Buchwald, chief executive of the consumer intelligence company Bomoda says that “Nike is perhaps the pre-eminent foreign company in building direct relationships with the Chinese consumer outside of Apple”. This strategy can result in even bigger profits in the near future, especially keeping in mind the fact that the Chinese premium sportswear market is still far from its saturation point.
But the growth in China is only part of a bigger picture. Consumers around the globe are more and more focused on being healthy and fit. Marathons across the world attract more and more participants. Due to a number of reasons, including the pressure of better health, achieving goals and even being trendy, running as a lifestyle has become more popular than ever. This has forced Nike to constantly evolve its strategy and invest in new solutions such as wearable devices or applications connected with modern smart watches. With Nike’s capital this is more achievable than ever.
But Nike is not only about strengths and opportunities. As you can see in the picture below, the relationship between the weaknesses of the American company and its opportunities is also quite strong. It means that some of the weaknesses that Nike has can actually limit the use of its opportunities.
Interestingly, the most prominent among these weaknesses is something connected to Nike’s biggest asset — its brand. Even though the footwear company dominates the American market, the competition such as Under Armour is growing fast. This means that each problem with Nike’s brand can cause its competitors to grow, especially in the fickle millennial market.
Nike has learned that being in the spotlight can cause a lot of problems. During the Berlin Marathon, Eliud Kipchoge failed to set the world record because his shoes which were made by Nike disintegrated before the entire world. In March 2015, Nike signed a new sponsorship deal with the American sprinter Justin Gatlin and caused a lot controversy because Gatlin cannot be easily seen as a positive archetype of the modern athlete — he has previously had two doping bans and was suspended for four years between 2006-2010.
But it is not only about technical issues and controversial sponsorships. Nike still has to struggle with the image of being a greedy American corporation which exploits poor people in emerging markets, one which darkened the bright image of the company in the late 90’s. A series of scandals regarding poor labor conditions in Nike factories in Asia almost caused the American giant to collapse. The workers in countries such as Vietnam were earning as low as $47 a month, working overtime, having restricted access to toilets and water during their workday and were the object of physically and verbally abusive treatment. This caused a lot of protests around the globe and propagated a new modified version of Nike’s slogan: “Just DON’T do it.”
Apparently, a lot has changed since then and Nike has become more transparent and socially responsible, but the memory of its uncomfortable past only shows that the trust for the brand is not a given, and Nike must focus on carefully nurturing it.
The reason that Nike must be careful is that it operates in a very variable market. In retail, everything changes quickly, and young consumers follow the trends and move from one brand to another. Even though, as Mark Parker, the Nike CEO says, that people still prefer premium brands, it is possible that the market will change and Nike will have to find a new niche for its customers.
The competition, however, is still solid, and, therefore, one of the threats for Nike is that it can find itself in a massive price war where similar but cheaper brands can expand their share of the global market. It may be too soon for Nike to be worried, but a warning sign for them can be the case of Adidas, although it still holds the no. 1 in the world sports apparel market share, it has fallen dramatically in the footwear market in the United States, giving way to newer brands such as Under Armour or New Balance.
Even though the market is variable and other threats such as possible currency fluctuations and other global economic issues do exist, Nike remains strong — maybe even stronger than ever.
On the one hand, it has strengths which have a big impact on its opportunities. But on the other hand, as you can see from the picture above, the ratio between the different types of strategies is more or less balanced. Definitely, Nike is on a roll, but even now some analysts suggest that correction in its valuation is forthcoming.
It is definitely worth watching how things will work out for Parker’s company. Eventually, it doesn’t matter how fast you are going in the middle of the run — it only matters who is the first on the finish line.