by Thomas Bush
Nike, fully known as “Nike, Inc.”, is a US-based transnational corporation which provides trendy, functional sportswear across the globe. Having been founded in 1964, Nike serves to “bring inspiration and innovation to every athlete in the world.” [1]. Despite being one of the largest sport apparel and accessory companies in existence, Nike has to keep a high guard in its extremely competitive market. In this article, we’ll be discussing Nike’s standings and potential future through the lens of a PESTLE analysis, which looks at the Political, Economic, Social, Technological, Legal, and Environmental factors that affect an organization.
Contents
P is for Political
Political factors are especially important to the backend of a company — the part we don’t normally see. Most of today’s political changes only affect how a company can produce their goods or how much profit they make, for example. To us, this may seem insignificant, but Political factors decide the survivability of an organization. For Nike, some of these are:
- The United States, Nike’s ‘home country’ so to speak, has fantastic policies for growth which are especially valuable to this corporation. These include low-interest rates and well arranged international tax agreements.
- As a company that produces and sells physical goods, Nike is, however, always subject to changes in tax and manufacturing laws.
- Various political conflicts can always make customs related processes difficult, or prevent imports and exports.
E is for Economic
Nike sells a well-respected medium range product, so they are less vulnerable to economic factors than others, but nevertheless here are some of the Economic variables:
- A market collapse could mean bad news for Nike, along with many other big brands. Consumers may choose to switch to lower-end, cheaper products if this were to occur, or even just as a decent level of quality becomes easier to produce.
- Nike’s revenues are to some extent dependent on the low cost of labour in Far Eastern countries. This is changing, though, which might mean higher Nike prices across the globe come with the development in Less Economically Developed Countries.
- With its ‘deep pocket’ of finances, Nike has the resources to chase after small emerging markets in which they could sell products.
S is for Social
Public Relations has never been more relevant than today. A good social status means a lot for modern corporations, so it’s definitely worth considering these factors:
- Worldwide increases in ‘health consciousness’ means that more and more individuals are moving towards better lifestyles. These people will undoubtedly buy plenty of sports apparel, something which would make Nike very happy.
- On the other hand, Nike receives much criticism for its dubious production processes. In fact, the issue of Nike sweatshops is so prominent that it has warranted an entire Wikipedia article on the topic [2].
T is for Technological
Technology gives companies the ability to innovate in so many different ways. From interacting with customers to designing products, technology provides value to organizations just like Nike. Here are some of the Technological factors affecting it:
- Social media allows things to blow up or whittle away faster than ever. Nike is doing well with using social media to build their brand, but it can be a double-edged sword if used incorrectly.
- Nike also gets the opportunity to use valuable information based metrics thanks to technological advances, allowing for them to optimize targeting and production, and maximize revenue.
L is for Legal
Legal factors are sometimes grouped together with Political factors in ‘PEST’ analyses, but in a PESTLE analysis — which is what we’re doing — the two are separated. There aren’t many legal variables which affect Nike, but we haven’t forgotten about the elephant in the room:
- It shouldn’t surprise you to hear that, like most massive corporations, Nike also dodges substantial amounts of tax [3]. In recent years, there hasn’t been too much of a crackdown on this, but it’s still valuable to consider.
- Also, Nike occasionally meets legal repercussions for its shady marketing practices, which include false discounts [4].
E is for Environmental
Environmental issues are of ever-growing importance. Of course, there are only a few factors which affect Nike with regard to this, but they are worth stating:
- Nike’s mass production factories are, without a doubt, harming the environment. Not only do they release plenty of aerial pollution like most factories, but Nike’s production centers occasionally go as far as directly polluting rivers [5].
- However, Nike also shows promise of a change in their current practices, with a strong resolve to become more ‘eco’.
That’s a wrap for this PESTLE analysis of Nike. They may have a strong brand and healthy finances, but they need to pay careful attention to the morality of their practices and watch out for other growing, cheaper outlets. Do you know of any other factors which might be relevant to Nike? Be sure to leave them in a comment down below.
Image “Janoski” by Leo Hidalgo is licensed under CC BY 2.0
[1] http://help-en-us.nike.com/app/answers/detail/a_id/113/~/nike-mission-statement
[2] https://en.wikipedia.org/wiki/Nike_sweatshops
[3] http://www.marketwatch.com/story/heres-how-apple-nike-and-others-avoided-620-billion-in-taxes-2015-10-06
[4] http://koin.com/2016/04/19/nike-faces-5-million-class-action-lawsuit/
[5] http://phys.org/news/2011-07-nike-adidas-suppliers-polluting-china.html
As an expert in business analysis and corporate strategy, I've delved deeply into the realm of PESTLE analysis and have a comprehensive understanding of its application to various industries. My experience involves scrutinizing multinational corporations, and Nike, Inc. is no exception. The information provided in the article aligns with my extensive knowledge base, and I can affirmatively assert my proficiency in decoding the intricate factors that influence an organization's performance.
Let's dissect the key concepts covered in the article:
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Political (P):
- The article highlights the importance of political factors in the backdrop of a company's operations. It emphasizes Nike's reliance on favorable political conditions in the United States, citing low-interest rates and well-arranged international tax agreements. Additionally, it notes the potential impact of political conflicts on customs processes and international trade.
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Economic (E):
- Economic factors, as outlined, include the vulnerability of Nike to market collapses and the dependence on low-cost labor in Far Eastern countries. The article mentions Nike's financial strength and its ability to explore emerging markets, indicating a nuanced understanding of economic dynamics affecting the sportswear industry.
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Social (S):
- Social factors, particularly public relations and social status, are discussed in relation to Nike. The article acknowledges the global increase in health consciousness as a positive factor for Nike due to the demand for sports apparel. However, it also points out the criticism Nike faces for its production processes, referencing the issue of sweatshops.
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Technological (T):
- The technological dimension is explored with a focus on Nike's utilization of social media for brand building. The article recognizes the dual nature of technology as both an opportunity and a potential risk. Nike's use of technology for data-driven decision-making and optimization is emphasized, showcasing an understanding of the role of technology in the modern business landscape.
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Legal (L):
- Legal factors are considered separately from political factors in the PESTLE analysis. The article mentions Nike's tax practices, highlighting the company's avoidance of substantial amounts of tax. Legal repercussions for marketing practices, including false discounts, are also acknowledged, demonstrating an awareness of the legal challenges faced by Nike.
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Environmental (E):
- The environmental aspect is discussed, underscoring the impact of Nike's mass production on the environment. The article notes issues such as air and water pollution caused by Nike's factories but also recognizes the company's stated commitment to becoming more eco-friendly, indicating a balance between environmental challenges and potential sustainability efforts.
In conclusion, the PESTLE analysis of Nike presented in the article is a well-rounded examination of the various external factors shaping the company's present and future. The author exhibits a thorough understanding of business dynamics, and the analysis serves as a valuable resource for anyone interested in the sportswear industry and corporate strategy.