Economic factors and trends
Across the globe, there has been a gradual increase in GDP and per capita income. Through the increase in per capita income, access to disposable income has fueled the heightened level of demand for Nike’s products (Forgang & Einolf, 2015). Further, the global emphasis on reduction of obesity has led to the increasing demand for sports products in line with promoting the healthy lifestyle.
Political factors and trends
Various nations that were once deemed unfriendly have been adopting sports as a way to fostering political relations. Nations such as Iran, Russia, and China have become inclusive in the global sports tournament (Forgang & Einolf, 2015). The evident trend of using sports to foster political ties has had a direct impact on the demand for sports products and services from companies such as Nike.
Regulatory and legal factors and trends
Changes in various regulations have been deemed to foster the need for social responsibility among companies in the sports industry. International labor laws against the use of child labor have translated into an increase in sensitivity and strictness towards supplier relationships. Companies such as Nike and Adidas have been adopting strict regulations regarding the operations of their suppliers in the labor hiring process.
Societal factors and trends
Societal acceptance of the need for healthy living has taken an upward turn in the recent years. In nations such as the US, obesity has become an issue of concern that has been taken seriously by people (Thompson, et al., 2013). Therefore, with the trend of healthy living evident, companies such as Nike have marketed themselves as the option towards the provision of best apparel and shoes to maximize exercise or workout.
Technological factors and trends
Smart wear is an ongoing trend in the sports industry. The use of gadgets such as watches and smartphones to maximize one’s workout has led to a paradigm shift among the various companies (Thompson, et al., 2013). Accordingly, there has been a widespread invention of smart apparels, watches, phones with companies such as Nike capitalizing on the trend.
Geographic factors and trends
Globalization has changed the geographical environment. The notion of borders has been eliminated as a result of globalization and widespread use of the internet. With internet crossing the various geographical boundaries, companies have had to adopt the tool towards marketing and ensuring supply of their commodities. As a clear example, adoption of online business has enabled companies to sell their products to customers in various geographical areas in which they do not operate (Forgang & Einolf, 2015).
Porter’s five forces
Threat of new competition: medium
New entrants or competition in the sports industry pose a medium level of threat to companies. Accordingly, the sector has barriers of entry such as recognized brands and a need for financial investment into research and development (Forgang & Einolf, 2015). The two barriers dictate the decision-making process of potential new competition.
Threat of substitute products or services: Medium
There is a moderate performance of the companies that produce the substitutes for Nike’s products. Accordingly, the companies that compete and offer substitutes do not have the financial capability to invest in research and development of new sports products (Bennett, 2010). Therefore, the costly nature of research and development poses a challenge for the businesses in their quest to dominate the marketplace.
Bargaining power of customers (buyers): Medium
Buyers in the sports sector have a direct influence on the organizational performance and pricing process. The customers determine the pricing process of the various organizations at a medium level (Bennett, 2010). Accordingly, due to the low switching costs, it is easier for buyers to purchase from different companies. Nonetheless, with the evident target market, companies such as Nike sustain a medium level of control in bargaining due to their athletic customers who are not priced sensitive.
Bargaining power of Suppliers: Low
Suppliers have a direct impact on Nike since they provide the raw materials. As an important element, suppliers do not have high bargaining power due to their numerical disadvantage (Bennett, 2010). In the sports industry, suppliers are numerous emanating from both developing and developed nations.
Intensity of competitive/industry rivalry: High
The sports industry is highly competitive. As such, the industry is characterized by reduced levels of growth rate as a result of the extensive market penetration by various organizations (Bennett, 2010). Further, there is the prospect of market saturation with the domination of major companies such as Puma, Addidas, Under Armor and Nike.
- Bennett, A. G. (2010). The big book of marketing. New Delhi: Tata McGraw-Hill Education.
- Forgang, W. G., & Einolf, K. W. (2015). Management economics: an accelerated approach. Routledge.
- Thompson, A., Peteraf, M., Gamble, J., Strickland III, A. J., & Jain, A. K. (2013). Crafting & Executing Strategy 19/e: The Quest for Competitive Advantage: Concepts and Cases. McGraw-Hill Education.
