Nike PESTEL analysis

Nike PESTEL Analysis

Background

Nike is the world’s largest athletic shoe manufacturer. It’s also one of the most successful, generating over $30 billion in revenue in each of the last four years.

As a global company, Nike’s growth depends on a suite of macro external factors.

Following is a detailed look at each.

Understanding the Nike PESTLE analysis

Political

The United States is a core market for Nike, with the company having a large consumer base in the country. Nike also has a large manufacturing base in China and also has a presence in Vietnam, Indonesia, and Thailand.

Trade tensions between the United States and China threatened to increase tariffs on footwear by as much as 25%. To mitigate this problem, the company has sought to diversify its supply chain geographically.

Economic

Like most companies, Nike is vulnerable to a downturn in the economy. During the GFC in 2008 and the COVID-19 pandemic, global revenue dropped significantly as stores closed and discretionary income plummeted.

The pandemic in particular has highlighted Nike’s dependence on physical stores to make money. In response, the company has sought to strengthen its eCommerce arm. But the company may struggle because its staple products of shoes and apparel are difficult to size online.

Social

The past few decades have seen the rise of the so-called sneakerhead culture, created in part by basketball and the growth of hip hop music. Some estimate that the sneaker resale market alone is valued in the billions of dollars.

Nike capitalized on this trend early, partnering with Michael Jordan to promote a line of shoes that were not only functional but also collectible.

Technological

Technology is a major disrupter in most industries. Sports apparel is no different.

Nike’s dedicated R&D facility, dubbed the Nike Sport Research Lab, has produced a multitude of innovative and market-leading products.

One such example is Nike Fit, which uses machine learning, data science, and artificial intelligence to scan consumer’s feet and find the best fitting shoes.

Legal

Nike is no stranger to legal battles. Invariably, these battles are fought with major competitors over proprietary shoe or apparel technology.

Indeed, Nike has had a long and public battle with Adidas over patent infringements. Sketchers is another competitor that has been sued by the company for imitating patented designs.

Environmental

Once associated with sweatshops and negative environmental impact, Nike has made great progress in rebranding itself as more environmentally responsible.

The company has pledged to use 100% renewable energy by 2025. It is also planning to phase out single-use plastic bags and has designed a line of eco-friendly shoes and apparel made from recycled plastic.

Key takeaways:

  • Nike is the largest and perhaps most well-known athletic shoe company in the world. However, a reliance on the U.S market makes it vulnerable to tariff hikes and deteriorating US-China relations.
  • Nike owes a large part of its success to the sneaker culture. Through high-profile endorsements, Nike shoes are not only innovative and functional but also collectible.
  • Nike has been involved in several legal battles with competitors such as Adidas and Sketcher over patented technology.

Read Also: Nike Business Model, Nike SWOT Analysis, Nike Competitors.

Read Next: Pestel Analysis, SWOT Analysis, Porter’s Five Forces, STEEP Analysis, SOAR Analysis, BCG Matrix, Ansoff Matrix.

Read Next: Organizational Structure.

Related to Nike

nike-vision-statement-mission-statement
Nike vision is “to bring inspiration and innovation to every athlete in the world.” While its mission statement is to “do everything possible to expand human potential. We do that by creating groundbreaking sport innovations, by making our products more sustainably, by building a creative and diverse global team and by making a positive impact in communities where we live and work.”
nike-competitors

Organizational Structure Case Studies

airbnb-organizational-structure
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.
ebay-organizational-structure
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
ibm-organizational-structure
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
sony-organizational-structure
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
facebook-organizational-structure
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, product management, investor relations, and so on).
tesla-organizational-structure
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structureTesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
mcdonald-organizational-structure
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
walmart-organizational-structure
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.

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