SWOT analysis of Nike Corporation and the Air Max 2012 Women's Running Shoe

¶ … SWOT

Nike Air Max 2012 Women's Running Shoe

Situational and SWOT Analysis

Term

SITUATION ANALYSIS

SWOT ANALYSIS

Nike Corporation is one of the consistently most profitable and innovative providers of athletic apparel, accessories, footwear and ancillary products globally, generating $20.8B in revenues in their latest fiscal year, generating $9.8B in profits. As of the close of fiscal year (FY) 2011, Nike is organized into six divisions including China, Eastern and Central European Operations, North America, Western Europe and the newest division, Emerging Markets. Nike is organized also by product areas with over two dozen business units operating today across a wide spectrum of business, consumer and government markets. The company is well-known for its ability to quickly transition new product concepts from Research and Development (R&D) into production, often distancing their competitors in speed and quality of supply chain planning, marketing execution and product launch (Stonehouse, Minocha, 2008). Renowned for their global brand, Nike is considered one of the top ten best-known globally today (Tsai, 2006) (Nike Investor Relations, 2012). Based on these dominant strengths, many consider it to be the global leader in each market it competes in. In fact, the company grapples with significant weaknesses as well, as the management team seeks to align with opportunities in key markets while alleviating potential threats.

The intent of this analysis is to evaluate their strengths, weaknesses, opportunities and threats, completing a thorough SWOT analysis with specific attention paid to the Nike Air Max 2012 Women's Running Shoe. The structure of this report begins with a situation analysis followed by the thorough review of Nike's strengths, weaknesses, opportunities and threats. Conclusions and recommendations follow the SWOT analysis. Included throughout the SWOT analysis are insights gained from a financial analysis of Nike Corporation. The results of the financial analysis are provided in the Appendix of this document.

II. SITUATION ANALYSIS

B. Competitive Analysis

The competitive intensity of the global shoe industry combined with the speed and cost savings of contract manufacturing have completely re-ordered the structure of this industry. The greatest potential threat that Nike faces today is the limited control they have over contract manufacturer's supply chain quality levels, ethical compliance to global standards of employment, and pricing thresholds for products (Nike Investor Relations, 2012). These weaknesses will be discussed in greater detail in the weaknesses section of this analysis. Nike dominates the women's shoe marketplace however, with well over 45% share in the U.S. alone (Nike Investor Relations, 2012). As the women's fitness segment is one of the fastest growing in the company, it is also attracting the majority of competitors as well. Dominant competitors include Adidas in Europe, with a commanding market share in core men's market segments of over 30% and a highly integrated supply chain with Asian production centers (Nike Investor Relations, 2012). Additional competitors include Crocs, K-Swiss, Rocky Brand, Reebok, and Timberland. For a financial comparison of these competitors relative to Nike please see the last table in the Appendix. Nike has been able to dominate these competitors by having the best overall financial performance including an industry-leading 77 days to sell inventory, as noted in the last table of the Appendix. Nike also has the highest working capital per share at 15.681, leading all competitors on this measure of financial efficiency. The most critical success factor behind Nike dominating many of its competitors globally is the continued focus on creating a competitive advantage in its supply chain operations and use of advanced analytics and enterprise software that can be used for delivering business intelligence (BI) reports and insights (Doorey, 2011). Nike has been able to also create a competitive advantage by using these analytics to predict and get in control of potentially difficult and costly ethical lapses by contract manufacturers, which is exactly what happened in China during a major production run of ladies shoes (Kanter, 2008). In 2011, 97% of all Nike products were manufactured off-shore, through contract manufacturers (Nike Investor Relations, 2012). Vietnamese-based manufacturers are the majority of the producers of Nike products (37%) followed by China at 34%, Indonesia at 23%