PESTEL & Porter's Five Forces analysis

NIKE: PESTEL & Porter's Five Forces Analysis Name Institutional affiliation NIKE: PESTEL & Porter's Five Forces Analysis Introduction Nike Inc. was founded as a Japanese shoe importer and by 2015, the corporation had grown to be the world’s largest manufacturer and seller of athletic footwear (Nike, 2016). The company now produces athletic footwear, clothing, accessories, and sports equipment for markets in the North and South America, Middle East, Europe, Asia Pacific, and Africa (Hanrahan, 2014). The mission of the company is to inspire and innovate every athlete in the world. The products are available in over twenty thousand retail stores, including those operated by Nike. Resultantly, the company is the most competitive sports and fitness in the world. In the recent years, Nike has devoted much of its resources to enhancing its business, such as developing the information systems, logistics, and the supply chain management. Also, the company has improved in the marketing and production of cutting-edge running shoe design. Additionally, Nike has ventured in creating a balance between the creative and business ideas, through a new financial and managerial approach to enhance growth. Nike marketing uses popular athletes to sponsor their products that appeal to a wide audience, such as the Air Jordan brand that is popular among young adults (Ros, 2011). The company continues to face significant competition from other sports organizations, such as Adidas and Under Amour (Dogiamis & Vijayashanker, 2009). A market analysis using PESTEL and the Porters Five Factors offers an opportunity to understand the position of the company in the market. PESTEL Analysis The PESTEL analysis focuses on the external factors that affect how business is carried out in an organization. The PESTLE refers to the Political, Economic, Social, Technology, Legal, and Environmental factors (Lynch, 2006). Political Factors Nike is the number one sportswear in the world, with its profits, turnover, marketing, sponsorship, and advertising surpassing all other competitors. Additionally, it is considered to be leading into the labor practice initiatives. According to Nike’s code of conduct, the company seeks to not only do what is required, but whenever possible, as it is expected of a leader (Hanrahan, 2014). Despite various claims by some nations that Nike has exploited its workers due to low wages, the company maintain that it upholds ethical considerations in the allocation of resources and work, to improve their relations with subcontractors who are involved in the production. Most of the products are produced in Indonesia, Vietnam, and Thailand due to its low labor costs, although the countries are often faced with political unrest. Despite this, the company is fortunate about the policies implemented by the US government that will foster its growth in business. The company enjoys low-interest rates and stable currency conditions, as well as competitive taxes. The growth of the company worldwide is challenged by tariffs and non-tariffs that are constantly changing within the countries. Economic Factors The company has the responsibility of being a major world manufacturer of sportswear and apparel that generate over US$18.6 billion according to 2008 statistics. Like many other companies, Nike is also recovering from the 2008 to 2009 global financial crisis. The impact of the crisis was experienced in the western countries, as well as the Asia-Pacific countries. The cost of labor and raw material continues to increase with the growth of economies in Asia where the manufacturing is based. The growth and development of the organization are dependent on the international economy. Consequently, a weak Euro and the Asian recession are some of the setbacks the company is facing. Nevertheless, the global market has been effective in stabilizing the business in times of recession and sales have not suffered a lot. Social Factors The increased demand for healthy lives through fitness opportunities has resulted in increased demand for company products. Additionally, people are becoming brand conscious, and Nike has been effective in satisfying their preferences with quality and variety. The outsourcing of labor in emerging nations raised critical claims that affected the consumer growth. The company has had to work hard to regain their customer base that had lost trust in Nike’s corporate social responsibility (Nike, Inc., 2015). Technological Factors Nike has embraced the use of advanced IT to market and meet consumer needs. The Simple Object Access Protocol (SOAP) and Massively Parallel Processor System (MPPS) are some of the technological solutions that have been implemented in the transaction and supply chain (Bevilacqua, Cometa, & Delgado, 2011). Additionally, use of the internet has enhanced sales, as the supply chain is simplified and consumers can pay less for the products. The designs and materials used in the manufacturing of the products, are innovatively utilized to fulfill the market requirements. Environmental Factors Nike upholds a positive stance on environmental issues. The organization is compliant with the ISO-1400 policies that advocate for green products. Since the 1990s, Nike championed the reduction of carbon emissions and proper disposal of waste, and implementation of sustainable philosophy in the use of natural materials. Legal Factors The fact that Nike is a multinational company with operations in various jurisdictions, it has the mandate to ensure that the business and workers are compliant with legal provisions of each country. Quick adoption of the legislative framework facilitated the expansion of the company. When the company closed factories in Pakistan, it was faced with the criticism of leaving people unemployed, which had a significant effect on the business. The company was sued under the California Unfair Competition and False Advertising Laws after allegations of paying workers below the minimum wage for its operations in Indonesia. The case was settled after a defeat in the Supreme Court. Subsequently, the company has faced bad publicity that is not good for business. Porter's Five Forces Analysis The Porter’s Five Forces are important to identify where the power lies in the business in the industry. The Porter’s model is a significant contributor to the planning, and where the company should focus on to take advantage of its strengths and improve on the weaknesses to increase competitiveness (Smit, 2010). Barriers to Entry The threat of entry is one of the main factors to consider in the apparel market due to the relatively low cost of developing products, compared to the footwear market where the competition is mainly from the established companies such as Adidas and Puma (Euromonitor International, 2015). Considerably, the competing organizations have implemented strategies that will facilitate them to close the market share created by Nike. Adidas has so far gained considerable ground due to its involvement in the European Soccer tournaments. Under Amour, which has ventured into the athletic sportswear business in the USA al...