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Running head: NIKE’S COMPETITIVENESS IN THE FOOTWEAR INDUSTRY
Nike’s Competitiveness in the Footwear Industry
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Institution
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NIKE’S COMPETITIVENESS IN THE FOOTWEAR INDUSTRY
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Nike’s Competitiveness in the Footwear Industry
Nike is a multi-national sporting shoe manufacturer located in the U.S. The company
which was formed in 1964 as Blue Ribbon Sports manufactures, distributes, and sells sports
shoes, apparel, and sports equipment. Matter of fact, it is the world’s largest supplier of athletic
shoes and apparel. The headquarters of Nike are in Beaverton, Oregon and the company has a
worldwide supply chain for its products. The company has retail stores in over 1142 locations
around the world, and its manufacturing plants are mainly located in Asian countries such as
China, Cambodia, and Pakistan (Mahdi et al., 2015). Nike is a dominant player in the athletic
footwear industry but must initiate innovative product development to increase market growth
and discard the threat of competitive rivalry from Adidas.
Nike’s business units are divided according to the products handled as well as the
locations of the units. The main unit is the footwear business unit. Other units include the apparel
segment, equipment and “other” segment, the North American segment, EMEA, Asia Pacific,
other emerging markets, and global brand divisions. As already seen in the business units, the
company handles footwear, apparel, and sports equipment as the main products. The company is
also involved in extensive sponsorships for teams and individuals in sports. For this analysis, I
adopt a specific analysis of the company’s footwear unit. The reason for choosing the footwear
unit for analysis is because it is the most significant business unit which is well-structured and
visible in the industry.
Industry Identification
Nike operates and competes within the footwear industry where it mainly manufactures,
distributes, and sells sports shoes for athletics and casual wear. The footwear industry includes
companies engaged in manufacturing and selling footwear such as dress shoes, sneakers,
NIKE’S COMPETITIVENESS IN THE FOOTWEAR INDUSTRY
slippers, athletic, and sandals. The specific unit of the business industry that Nike is placed in is
the athletic footwear whereby the shoes produced by Nike are mainly for athletics purposes.
Other than merely designing and manufacturing for suitability, the industry also experiences
customization for style and identity. The sports footwear industry thus involves competitive
comfortable designs that target a subset of sportspersons. For instance, shoes may be designed
for track events while others may be designed for specific sports such as basketball or even
rugby.
The global athletic footwear industry was valued at around 80 billion dollars in 2015.
Grand View Research (2013) predicted average growth of around 2% compound annual growth
rate between 2016 and 2024. Therefore, judging from the anticipated growth, it is evident that
the industry is a mature one almost reaching a level of stagnation. The anticipated growth is
mainly due to increased participation in sports activities and also the increasing global
populations. Also, it can be anticipated that the growth can be attributed to the increasing
adoption of healthy lifestyles which include exercising. The industry is expected to grow further
due to the innovation in providing lightweight and increased functionality footwear for different
subgroups.
The global athletic footwear industry is characterized by a few dominant players with
many other local or international players as well. The key players include Nike which is the
leading supplier of athletic footwear, Adidas which is Europe’s largest and most successful
sportswear company, and Puma which comes third regarding dominance in sports footwear.
These three companies have subgroups and have acquired various brands in several areas thus
becoming the three most dominant players in the athletics sports footwear. According to
Statistica (2018), Nike is still the most dominant player with revenue of 19.87 billion dollars in
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NIKE’S COMPETITIVENESS IN THE FOOTWEAR INDUSTRY
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2016. The company was followed by Adidas revenue of 10.68 billion dollars with Puma closing
the top three with revenue of 1.71 billion dollars. These figures show that Nike is the dominant
market player and it made more sales than the other two combined.
Adidas and Puma are the main competitors of Nike. The most direct rival is Adidas
which has been the biggest rival of the business, especially in Europe. Puma is also considered a
direct competitor, but it does not pose a significant threat to Nike’s sales. The basis for the
competition is mainly through the sales of athletic footwear and also the sponsorship of sports
teams and individual athletes. Soccer teams have received massive sponsorships from these key
players with Nike sponsoring different entities such as Michael Jordan, the National Football
League and many other teams and sportspersons. Adidas also sponsors several national teams
and individual sports personalities. Another basis for competition is the production of
lightweight, eco-friendly shows that provide great ergonomics for the users.
Threat of Competitive Rivalry
Competition against Nike Inc. determines its market share of the sports footwear
industry. The performance of individual firms is scrutinized using the five forces provided under
Porter’s model. Three forces affect Nike’s threat of competitive rivalry. The first force is that of
low market growth. This low market growth is mainly due to the organization’s high market
penetration and seemingly the high market saturation. Since the organization has penetrated most
of the markets worldwide, the growth rates have stagnated. Further, this is a strong force since
the company and other firms compete in a slowly growing market.
The second force affecting the athletic footwear industry and Nike, in particular, is the
high aggressiveness of rival firms in large markets. Adidas and Puma compete aggressively for
unsaturated markets where Nike has not achieved a significant dominance. Lastly, the third force
NIKE’S COMPETITIVENESS IN THE FOOTWEAR INDUSTRY
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affecting its competitive rivalry is the moderate number of firms that affect the company’s
market share. As identified earlier, only Adidas and Puma pose a significant threat to the
company’s market share. Therefore, this third force is a moderate force that gives the company a
competitive advantage in the industry. The threat of competitive rivalry is thus moderate and
could be awarded a scor...