Theoretic Background Ansoff Matrix SWOT Term Paper
- Length: 12 pages
- Sources: 20
- Subject: Business
- Type: Term Paper
- Paper: #54278168
Excerpt from Term Paper :
3. Limitation of individual model - synergies obtained by combining strategic analyses models
All analysis models presented in the previous chapter represent useful but not exhaustive methods of deciding the future of a company or its products.
As there is no perfect model, the joint usage of them might bring most value to the company.
Ansoff analysis generally assumes that diversification will bring higher returns when higher levels of risks are undertaken (diversifying the market and/or the product), should not be practically used by itself, as it does not say anything about a company's capacity of venturing in new markets or sustaining the development of new products, as it also does not say anything about the acceptance of the new product on the existent market and/or of the existent products on new markets.
Therefore, other analysis that will take into consideration both internal and external variables of a company (like SWOT analysis) will be necessary, because they will be able to reflect if the company has the capacity or the skills to venture into new markets or to develop new products, and in the same time - by studying the external environment, to see if these kind of strategic moves will be welcomed or not. PESTEL analysis can also help in understanding if the external environment is favorable to the strategic moves the company might plan.
Nevertheless, SWOT analysis has been criticized to offer sometimes outputs that are either trivial or too broad that it becomes rather meaningless when searching to make genuine marketing decisions. As commented by some specialists, "The assessment of strengths and weaknesses may be unreliable, being bound up with aspirations, biases and hopes. Therefore, it is important for strengths and weaknesses to be defined in the context of a situation" (Mintzberg, 1990)
Combined with the information and analysis regarding both internal and external environments, data obtained through different sources that can also include the SWOT and PESTEL analysis, a company can decide the best way to act on its product portfolio by making use of the BCG Matrix, which can give some suggestions regarding the best way to act in order to obtain an equilibrated situation between cash users and cash makers within the product portfolio.
Nevertheless, the BCG Matrix has its own limitations that can be dismantled by the parallel usage of other tools of strategic decision making. Some of these limitations are the lack of a clear definition of the term of "market"; the assumption that a high market share will automatically lead to profitability, which is not a realistic situation at all times; low share products or businesses can also be profitable; the employment of only two dimensions - the market share and the growth rate - could actually lead / tempt managers to emphasize investments only on a particular product or to divest prematurely; the matrix only considers the product or the business unit in relation to only one competitor - the leader, not taking into consideration other small competitors that might have fast growing market shares.
4. Nike Case Study
4.1. Nike - Past and Present
Initially starting as Blue Ribbon Sports, in the year of 1962, it became the today's well-known Nike Inc. In 1972, with its headquarters in Beaverton, Oregon, USA.
The name of Nike comes from the winged goddess of victory in Greek mithology. And it seems the name has been a good omen for the company.
Its founders were Bill Bowerman and Phil Knight, the first - a track and field coach, and the latter - a runner under Bowerman.
With such a modest start, it is almost unbelievable to see that the company transformed into a global leader within the sporting goods industry.
Today, the principal activities of the group are covering the design, production, development and market of high quality sports and fitness products, such as footwear, apparel, equipment and accessories, with a focus on the first two categories previously stated. The company caters its products to various athletic and recreational uses, such as tennis, soccer, golf, football, baseball, bicycling, wrestling, volleyball, aquatic activities, cheerleading, hiking, and so on.
Today's trademarks include NIKE ® and the Swoosh Design ®, that are being sold under brand names like Bauer ®, Cole Haan ® and NIKE ®.
It operates today in 21 centers of distribution in Europe, Latin America, Africa, Canada, Australia and Asia.
4.2. Nike - Composed analysis
Due to the characteristics of the case study and to the limited length of the present paper, a significant attention will be given to the Ansoff and SWOT analysis applied to Nike, the BCG and PESTEL analysis being only briefly approached.
If we were to historically approach the group from the point-of-view of the Ansoff analysis, we would be able to notice that all of the four strategies have been applied by the company during its lifetime. It remains to be seen, in combination with the various other analytic tools presented in the theoretical chapter, what would be the best move for the future.
To start with, it can be observed that the always active marketing activity of the company demonstrates a continuous strategy of market penetration.
Its advertising and promotion success - which can be also considered one of the strengths of the company - made the Nike brand images (the Nike name and the Swoosh trademark) to be considered today to represent one of the top most recognizable in the whole world.
This power of its brand will actually mean bottom-line revenues for the group. The Nike name itself, and its associated trademarks have been appearing continuously starting with player's shirts, hats, pants, to stadium walls and banners.
The aggressive advertising campaigns, combined with strong endorsements offered by association with celebrities, and the quality products help at enhancing the brand. In the 1999 NCAA Basketball tournament, Nike has demonstrated the power of its presence, when 42 out of 64 participating teams were shoes provided by the group. (Enderle et all, 2000).
Another strategic option specific to the Ansoff matrix and that has been adopted by Nike was the product development - the company has continuously developed new products that catered the same traditional market, with the aim of maintaining both the company's reputation of product innovator and of protecting its overall market share.
Its applied research mostly focuses on short-term projects aiming at successfully developing new lines of products.
Equally, the market development strategy has been more than obvious through the international expansion of the company's distribution network, as well as the continuous venture into gaining new segments of the market (women, children, etc.).
Diversification strategy has been mostly applied into related areas, following a horizontal path, gaining clients for products related to its existent ones, addressed mostly to the same type of clients.
Due to its position and actual global reach, possibilities of significantly increasing market share would mainly regard the conquest of clients from the competitors or of new market segments that have not been previously explored (lower price - good quality seekers might be one of these segments).
Nevertheless, a more complete overview over the situation might be given by using the SWOT analysis.
Nike can be fully defined as being a very competitive company. Its founder and CEO, Phil Knight, has been quoted various times as saying "Business is war without bullets." Nike shows a rater normal dislike of its competitors.
Nike has no plants: it does not use to invest in buildings and workers, reaching globally competitive manufacturing costs, which make it a very lean organization. It manufactures wherever is possible to produce its high quality products with the lowest possible costs. In the case of rise in prices and opportunities to make cheaper products elsewhere, the company will move its production.
Nike has very strong R&D activities, translating into its evolving and always innovative product range.
Nike is a global brand, being the number one brand in sporting industry around the world, its Swoosh trademark being instantly recognizable and liked all around the globe and even its co-founder and CEO, Phil Knight tattooed it on his ankle.
Against the fact that the company counts with a diversified portfolio, its income remains heavily depended on its footwear market share. This can materialize in big problems if the "worse case scenario happens and its market share erodes. (Harris, ____)
The retail sector is characterized by high price sensitivity and Nike does not owns retailers in Nike Town. Nevertheless, most of Nike's income comes from selling to retailers, who tend to offer similar services / experiences to consumers. Consequently its margins tend to become smaller, as the retailers try to transfer part of the low price competition pressure back to Nike.
Other weaknesses might be the dependency on 12-24 age demographics - most of which are not financially self-sustained, the negative image it started to gain due to its manufacturing…