The sports equipment sector is continuously developing because of the increased acceptance of modern sports technology and current trends among the young population. This market is divided into two sections: sports apparel and fitness apparel. Each segment’s target market is distinct. According to worldwide industry experts, the United States has the world’s biggest sports and fitness apparel market (Business Wire, 2020). The report’s geographic segmentation covers market value and volume for important countries in Europe, Latin America, Asia-Pacific, and North America. Adidas, Nike, and Puma are key companies in the worldwide sports and fitness industry.
Firms and their Market Positions
The global sportswear sector is highly diversified, with low-cost firms competing for market share alongside top designer name brands. In the United States, Nike is the leading multinational sports corporation brand and the world’s top brand in athletic gear and footwear. Nike’s worldwide income exceeds its main competitors, Adidas and Puma combined. North America is a significant market for Nike, providing for half of the company’s global revenue in 2020, primarily via footwear sales (Statista, 2020). Nike’s prosperity may be partly attributed to the company’s marketing technique and sponsorship deals with well-known players and professional sports teams.
Puma and Adidas were once owned by the same company, Gebrüder Dassler Schuhfabrik, established by Rudolf and Adolf Dassler. The corporation disbanded after a feud between the two brothers, culminating in forming the two well-known sporting brands, Adidas and Puma. Adidas is Europe’s largest sportswear manufacturer and the world’s second, behind only Nike, with annual sales of over 20 billion euros and a brand value of roughly 16.5 billion dollars. Adidas will employ 62,285 employees worldwide by 2020. Adidas, like Nike, sees footwear as its most significant segment (Mordor Intelligence, 2020). The footwear segment produced more than half of the Adidas Group’s net revenues in 2020.
Puma, another well-known athletic brand, intends to be the globe’s foremost appealing sports lifestyle company in the long term. Europe and the Americas are Puma’s most profitable markets, accounting for more than 75% of the company’s consolidated sales in 2020 (Statista, 2020). With partnerships with fashionistas such as Alexander McQueen and Sergio Rossi, as well as artist Rihanna, Puma has been attempting to add more edge, originality, and distinctiveness to its creations. Cooperation with celebrities and fashionistas is a typical technique these big sports businesses use to retain their market share by widening their product offerings.
Nike Porters Five Forces
Rivalry/Pre-Existing Competition – High
The rivalry is fierce due to several worldwide level corporations that compete directly with Nike. Nike’s main rivals are Adidas and Puma, making the battle fierce. Nike is the top big player in sports apparel in America with 18.3 percent of the market share, followed by Adidas with 6%. (Statista, 2020). Nike continues to dominate the sports footwear industry in America with a 21.1 percent share, while Adidas lags with a 5% share of the total market (Statista, 2018). Competitors are spending a lot of money building a brand and obtaining more market share to take the lead, which makes the rivalry fierce.
Substitute Threat – Moderate
Consumers have a great variety of sports footwear choices that may replace Nike’s athletic footwear since there are many other firms in the same sector. On the other hand, Nike mitigates this danger due to the high quality of their sports footwear. Nike’s primary rivals are Puma and Adidas, although other smaller local businesses also create and sell shoes, clothes, and accessories at cheaper rates. As an alternative, fake athletic shoes threaten to reduce Nike’s profit and sales margins (ABC News, 2016). Customers who purchase low-quality counterfeit Nike sports footwear may harm consumers’ perceptions and Nike’s brand loyalty. Nike’s substitution threat is modest.
Threat of New Entrants – Minimal
New entrants are quite prevalent in the sports footwear sector. On the other hand, Nike has a substantial market share in this business and may employ scale economies to lower prices. The growing popularity of internet commerce raises the prospect of new entrants into the industry. Nike additionally mitigates these risks by using learning curve efficiencies. Nike has learned and developed successful cost-cutting tactics for manufacturing, marketing, and distribution throughout time. This makes it harder for new competitors to participate. It took them a long time and a lot of money to get to where they are now. Those same resources may not be accessible to new businesses. The danger posed by new entrants is minimal.
Threats of Buyer leverage
Nike has a big customer base. Thus, individual customers do not constitute a significant danger. Customers of Nike experience minimal switching costs when moving from purchasing Nike products to one of their rivals’ goods, which increases the danger. Generally, buyer leverage poses minimal risk.
Threat of Suppliers leverage
Nike’s clients have little to no bargaining power. Its competitors are not insignificant if not many. In addition to Adidas, there are other competitors, such as Puma. Nike is up against a slew of various local and international rivals. Customers’ switching expenses are negligible. This force is mitigated to some degree by the caliber and marketing of Nike’s goods. Nike prioritizes performance and design. Because of this, it has been capable of establishing consumer loyalty. Consequently, individual buyers’ negotiation power, which is presently low to moderate, is lessened.
SWOT Analysis of Nike
- Nike is a highly competitive corporation that manufactures items for the world’s greatest athletes.
- Nike is an internationally renowned brand that is well-known around the globe, making its brand stronger and superior to other brands. The brand is of the highest quality, has a long lifespan, and outlast other brands.
- Nike distinguishes itself from the competition by allowing consumers to personalize sneakers to their liking, meeting customers’ wants/needs.
- Nike’s revenue is based on the footwear sector, yet many individuals are price-aware and are unwilling to pay Nike’s pricing.
- The majority of Nike’s revenue comes from sales to retailers. Retailers frequently offer the buyer a comparable price. Retailers attempt to get Nike to cut their pricing to make a profit.
- Nike receives poor exposure due to their hostile working circumstances abroad, which provides Nike a negative image of their brand.
- Furthermore, the company has a limited presence in new markets, owing to worries about pricing, counterfeit, and patent protection.
- Nike’s significant potential is to begin selling in regions such as China and India, where millions of new customers are increasingly interested in current trends.
- Nike has developed accessories and other goods apart from its footwear section, which will aid Nike in generating money outside of its footwear area.
- Nike can provide high-quality items at affordable costs while still making a good profit and maintaining revenue.
- Nike has to enhance their image of labor circumstances abroad; many people will not buy their items because of these labor conditions, which have given them a negative reputation.
- Nike must stay up with other rivals; they are performing well so far, but they must not falter; Adidas is proving a major danger, causing Nike’s sponsors to transfer to the Adidas brand.
Analysis of the Nike Value Chain
Nike Primary Activities
The primary operations in Nike value chain evaluation are firmly tied to product generation and delivery. They are classified into five major areas by Porter’s model, which includes:
Inbound Logistics (IBL):
Nike’s success is built on the principles of sustainability and quality, which are mirrored in inbound logistics. To provide high-quality goods and services, Nike maintains a supply chain that comprises suppliers, shipping, internal distribution, and quality control. Nike products are manufactured in 567 sites in 42 countries. Nike is also serious about environmental protection and emissions reduction (Edrawsoft, 2022).
Manufacture, assembling, packaging, and testing of goods are all part of operations, including equipment maintenance and repair. It demonstrates the significance of operational operations in creating value and establishing a competitive edge.
Cover all of the firm’s operations to store and deliver commodities to consumers while ensuring that the products are accessible to consumers immediately as possible.
Sales and marketing:
The promotion strategy, salesforce advertisement, pricing, and channel distribution are essential aspects of Nike’s sales and marketing operations.
Clients’ retention and a pleasant customer experience are dependent on services provided before and after the transaction. As a result, the business has a massive number of happy customers. Nike has several efforts in play to maintain its customer happiness. Nike’s loyalty program, for example, had over 100 million customers in 2017.
Nike Support Activities:
They perform an important function and are found in many organizations. To offer a fundamental foundation, most of these support activities encompass all areas of elementary activities.
Business infrastructure operations include quality management, legal relations management, finance, planning, accounting, and strategic management. Nike’s infrastructure projects help the company optimize the whole supply chain (Edrawsoft, 2022). These processes increase efficiency, lower overhead costs, and ensure that the system flows efficiently.
Nike employs around 80,000 personnel worldwide in various roles. The organization creates a healthy working environment and encourages people to develop their abilities and connect with its diverse and inclusive culture.
Research, technical innovation, and quality of products are critical since Nike promotes itself as a pioneer in revolutionary sportswear. Nike has made technology and researches a priority in product development, as well as in its equipment, machinery, manufacturing techniques, and waste disposal.
Nike’s Global Procurement team oversees the procurement process. They choose suppliers who can deliver high-quality materials at a cheap cost, as well as those that share their values of sustainable development and environmental protection.
This Nike Inc. research demonstrates that the firm has the necessary qualities to sustain its worldwide dominance in the athletic footwear, equipment, and clothing markets. Nike has a well-established brand reputation that is well-liked by most of the market. It is a symbol of luxury and class, and it has benefitted from significant celebrity sponsorships that let each purchase participate in something larger than themselves. Nike’s purpose is to emphasize stakeholders’ issues as part of its corporate sustainability strategy (Nike, 2022). However, if the organization refuses to adjust to the times, high prices and difficult working conditions may generate problems. The company must address concerns about competition, working conditions, imitation, and patent protection. Therefore, Nike Inc. should reconsider its strategies in these areas. The company must also collaborate with government organizations to address the issue of patent protection. Expansion into developing markets and the expansion of product lines may create a potential for future growth. Still, failure to outperform the competitors and handle important brand issues may result in significant obstacles down the track. Overall, Nike is a fantastic company that will have to work incredibly hard in the future to remain successful.
ABC News. (2016, April 18). Nike shoes among the most counterfeited goods in the world. https://abcnews.go.com/Business/nike-shoes-counterfeited-goods-world/story?id=38485256
Business Wire. (2020, July 13). Global sports equipment and apparel market (2020 to 2027) – by product type, sports type and distribution channel – ResearchAndMarkets.com. https://www.businesswire.com/news/home/20200713005371/en/Global-Sports-Equipment-and-Apparel-Market-2020-to-2027—by-Product-Type-Sports-Type-and-Distribution-Channel—ResearchAndMarkets.com
Edrawsoft. (2022). Nike value chain analysis | EdrawMax online. https://www.edrawmax.com/article/nike-value-chain-analysis.html
Mordor Intelligence. (2020). Sports apparel market | 2020-2027 | Industry report | Covid insights. https://www.mordorintelligence.com/industry-reports/global-sports-apparel-market-industry
Nike. (2022). Read Nike’s mission statement and find information about NIKE, Inc.’s innovation, sustainability, community impact and more. Nike News. https://about.nike.com/#:~:text=Our%20team%20shares%20a%20singular,constantly%20curious%20about%20the%20world
Robertson, R. (2021, December 2). How ethical is Nike? Good On You. https://goodonyou.eco/how-ethical-is-nike/#:~:text=Nike%20had%20been%20accused%20of,sportswear%20brand%20came%20under%20fire
Statista. (2018, August 10). Nike and Adidas: Market share by region. https://www.statista.com/statistics/895136/f
Statista. (2020, September 16). Sportswear: Largest companies by revenue 2019. https://www.statista.com/statistics/900271/l
Statista. (2021, March 9). Adidas, Nike & Puma revenue comparison 2006-2018. https://www.statista.com/statistics/269599/net-sales-of-adidas-and-puma-worldwide/