SWOT 

Analysis of Nike
Here’s a detailed breakdown of Nike SWOT analysis. 

Nike’s Strengths – Internal Strategic Factors

1. Strong Brand Awareness and Brand Value

Nike is one of the most recognizable brands in the world as its name alone is
memorable, easy to pronounce, and very unique. Its swoosh symbol is easily recognized
by everyone. According to Interbrand global brand ranking report, Nike is ranked at # 10
position with a brand value of $50.2 Billion.  

2. Huge Customer base

Nike has millions of customer from around the world who loyally follow Nike’s trends,
participate in Nike events, and even provide customer feedback. Due to its huge
popularity, Nike’s market cap has grown to $193 billion as of April 2023.

3. Aimed For Sustainability

Nike’s CEO Mark Parker has addressed that they will continue to acknowledge
the environmental issues in the communities. The CEO ensures that Nike will help to
contribute in finding a solution against these environmental issues.

4. Iconic Relationships

Nike’s long-term partnership with Michael Jordan has proved to be beneficial in terms of
sales for the company. Their collaboration resulted in “Air Jordan 1 Shoes”.
Additionally, Nike teamed up with the famous basketball player to help design the “Air
Jordan 1 Shoes”.

5. Side Brands

Nike’s ability to maintain and enhance its side brands such

as converse and Hurley have enabled it to enjoy unparalleled success for decades.

6. Low Manufacturing Cost

Most of Nike’s footwear is manufactured in foreign countries. In the fiscal year

2022, Vietnam produced 44%, Indonesia produced 30%, and China produced 20% of
total Nike’s footwear. Other operations are in Argentina, Brazil, India, Italy, and Mexico.

7. In-house Professionals

Nike has a team of professionals that design its shoes and other athletic accessories.
Nike believes that their business has flourished due to the thorough research that is
conducted for each product.
8. Superior Marketing Capabilities

Nike has excellent marketing campaigns. The brand heavily relies on demand creation
expense, which includes advertisement, promotion, endorsement contracts, media print
and complimentary products. In the fiscal year 2019, 2020, 2021, and 2022 Nike spent
$3.7 billion, $3.6 billion, $3.1 billion and $3.8 billion respectively. The brand has
successfully utilized social media and marketing campaigns to target more customers.

9. Black Community Support

The brand has excellent marketing campaigns and recently released “Don’t Do It” ad

campaign in support of Black communities against racism.

10. High Market Share

Nike is a market leader in footwear industry. Nike has captured approximately 39% of

the global athletic footwear market and 13% of global athletic apparel market.
Image source: Statista

Nike’s Weaknesses – Internal Strategic Factors

1. Poor Labor Conditions in Foreign Countries

In the last 20 years, Nike has been consistently targeted regarding their poor labor
conditions. These issues include forced labor, child labor, low wages, and horrific
working conditions that were deemed “unsafe”.

2. Retailers Have a Stronger Hold

Nike’s retail sector makes Nike weak due to its sensitivity against pricing. 65% of Nike
products are sold directly to wholesalers or retailers. With retailers serving as their core
customers, Nike does not put up a fight against their pricing structures whatsoever.

3. Pending Debts
Although Nike’s income statements prove to be prosperous, a quick glance at their
balance sheet could paint a different picture. Nike is still facing financial threats. As of
FY22, Nike’s total long term debt was $8.9 billion

4. Lawsuits

 Recently, a former employee accused Nike of discrimination based on his

Croatian origin.
 Four former female Nike employees filed a class-action lawsuit against the
company in August 2018. According to these women, Nike has a toxic company
culture for women. The women filed their case against the sportswear
company claiming that the company violated the Equal Pay Act. The women
said the company engaged in systematic gender pay bias where men were paid
more than women for the same amount of work.
5. Lack of Diversification

Nike’s over-dependence on sporting apparel or lack of diversification is a major

weakness. The pandemic has discouraged physical interaction and gathering
with sporting events canceled or postponed. Several sporting teams are on the brink of
collapse. If the crisis discourages sporting events for longer, Nike’s losses can be
catastrophic.

6. Contradicting Strategies

Nike pledged to shift all its facilities to 100% renewable energy with net-zero carbon
emissions under the “Move to Zero” scheme. While the strategy is great and welcomed,
it contradicts Nike’s strategy that favors innovation over sustainability. This creates the
perception that Nike is not committed to addressing climate change and its pledge is just
a marketing stunt.

7. Dependency on North America especially US Market

Even after having established itself globally, Nike still relies on the U.S Market in terms
of sales and revenue. In the fiscal year 2022, about 41% of Nike’s sales came from
the North America, while the rest of 59% came globally. Despite its fame, Nike
depends on the U.S for substantial sales and growth.
 Image source: Nike annual report
8. Sexual Harassment

Former female employees also pointed out that sexual harassment and misconduct was
very common in the company. The New York Times conducted interviews with 50 former
and present Nike employees to investigate the company culture. Through the interviews,
it was established that Nike did have a toxic working environment, where sexual
misconduct was rampant.

Multiple female employees reported that they had complained to the HR but saw no
action being taken from their part. The women were left devastated and felt unsafe while
working at Nike. Some even left their jobs. The entire controversy has significantly
affected the company’s image.

Nike’s Opportunities – External Strategic Factors

1. Emerging Markets

Although Nike already has a presence in many foreign countries, there is still plenty of
opportunities for Nike. This is because emerging markets like India, China, and
Brazil are gradually flourishing.  

2. Innovative Products

Although Nike has produced many products, there is still a lot to innovate. Nike has
extended its reach in technology in association with fitness and health. Products
like wearable technology that monitors physical activities, is the first step in
building innovative technology products. Combining technology with athletic wear can
prove to be beneficial as it is an aspect of the fashion industry that still hasn’t been
explored much.

3. Efficient Integration
The supply and production of Nike’s products depend on independent manufacturers.
The brand can either acquire a few of these or make some of its own for a more efficient
and streamlined supply chain.

4. Cutting ties with big retailers

Nike has decided to cut ties with some of the biggest multi-brand retailers and wholesale
partners. According to the report, Nike will no longer work with wholesale retailers such
as Zapoo’s, Dillard’s, Fred Meyer, Bob’s Stores, etc. The step is taken for better
product positioning and greater customer experience.

5. Acquired Artificial Intelligence Start-up

With its vast financial resources, Nike can acquire small or medium companies or
startups. It recently acquired predictive analytics platform – Celect to expand its online
sales capabilities and predict customer’s shopping behavior.

6. Merges with the Metaverse

Recently, Nike acquired RTFKT, a digital shoe-making company. Yes, you heard that
right, the company designs shoes, but for the virtual stratosphere only. However, RTFKT
also claimed that it partnered with FEWOCiOUS (a young artist) to sell real shoes along
with their digital versions. Nike is banking on the opportunity to market their digital
shoes on the Metaverse, where players can use their Metamask wallets to purchase
different types of in-game merchandize.

7. Exiting From Wholesale Distribution

Recently, Nike announced it’s going to be exiting the wholesale distribution market in the
U.S. The company plans to only market its products at Nike stores, app,
and websites. According to Nike, the move away from distributors is going to help
them double their profit margins. Moreover, Nike will also have the opportunity to
spearhead the customer shopping experience as well as control prices.

8. Nike to End Use Of Kangaroo Leather For Its Shoes

Nike has announced a significant move that will please both animal rights activists and
consumers. The athletic apparel giant will no longer use kangaroo skins in their shoes,
ending a controversial practice. The decision comes after Puma made a similar move
weeks ago. 

Instead of kangaroo leather, Nike will use synthetic material in its new line of Tiempo
football boots, the Tiempo Legend Elite, set to launch this summer. The company also
ended its partnership with its sole kangaroo leather supplier in 2021, reflecting its
commitment to more sustainable and ethical practices.

9. Consumer Direct Strategy

Nike has accelerated the consumer-direct strategy, which means shifting its focus to
digital business and subsequently closing physical stores. In fiscal year 2022, 42% of its
Nike revenue comes from online sales. Clearly, the pandemic is shaping up how Nike
interacts with its customers.

Image source: Nike
annual report

Nike’s Threats – External Strategic Factors

1. Counterfeit Products

Counterfeit products can significantly affect the revenue and reputation of Nike. The
company deals globally and the risk of counterfeit products has become higher. A
number of merchandisers and retailers offer counterfeit Nike products at lower prices.

The low-priced products are made from low-quality materials but still have the Nike label.
This can tarnish the image of the brand as the customers might feel that Nike has
started producing low quality products.

2. Increased competitive pressure

Although, Nike is a dominating the athletic industry, competition, and new emerging
brands are still potential threats to the company. With higher competition ratio, Nike has
to spend more money on marketing and advertising.

Nike spent $3.8 Billion specifically on marketing and demand generation in fiscal year

2022. To overpower competition, Nike’s safest bet is to design innovative products that
are tailored according to the needs of athletes.
3. Marketing Budget Pressure

Companies like Under Armour , Adidas and Lululemon are spending more on marketing

and advertising campaigns, increasing the pressure on Nike.

4. Currency Foreign Exchange Risks

Since the brand operates globally, it is affected by fluctuating foreign exchange rates.
Nike reports its financial earnings in U.S dollars. This affects its revenue as the U.S
dollar is exposed to volatility against other financial currencies.

5. Patent Disputes

Regardless of whether a company is wrong or right, patent disputes are hotly and
fiercely contested in the public domain and expose some dirty secrets about sides in the
dispute. Nike and Adidas have been engaged in a fierce patent disputes over Primeknit
and Flyknit shoes in U.S. and German courts.

6. Economic Uncertainty

Regardless of the industry, all companies are susceptible to the negative effects of a
global recession. During lockdown, Nike had reported a decline in sales and sales can
drop further in the future if the recession strikes as hard as predicted by experts.

7. Trade Tensions

Nike depends on different markets across the world evidenced by the recent increase in
its stocks rallied by an increase in sales in China. With China and the US as its biggest
markets, a large chunk of Nike’s sales will be threatened if the trade tensions between
the two giants escalate.

8. Patent Conflict towards Adidas Primeknit Shoes

In an appeal to a U.S. agency, Nike filed a complaint that Adidas has been infringing on

the company’s Flyknit shoe technology patent. The company also stated that the
German shoe manufacturer had used Nike’s Flyknit tech in 49 shoe designs (which
uses Primeknit tech).

However, according to an Adidas representative, the company will fight these claims and
stated that Adidas has started using their Primeknit technology after numerous years of
research and development. 

9. Risk to Kangaroo Population

Nike has been accused of putting the Australian kangaroo population at risk of

extinction. The leading athletic brand uses kangaroo skin to manufacture leather
football shoes. Animal rights activists and advocates have urged Nike to rethink
its strategies and to use plant-based alternatives. So far, Nike hasn’t responded to these
allegations.
10. Nike Faces A Wave Of Retail And Warehouse Thefts

Nike experiences a surge in theft crimes throughout its supply chain, including
warehouse and train thefts. According to the National Retail Foundation, retail theft has
become a massive problem in the United States, with an estimated cost of $95 billion.

The company has reported that thieves are stealing from shelves and vehicles. This
forced Nike to close a popular outlet store in its hometown of Portland. In addition, two
suspects were arrested in Memphis for stealing Nike merchandise worth about $60,000
from five rail cars. Despite having 344 stores across the United States, including outlets
and Converse stores, Nike finds it hard to prevent theft along its entire supply chain. 

11. Nike Sues Lululemon Over Patent Infringement

Nike has filed a complaint in Manhattan federal court against Canadian athletic apparel
company, Lululemon, alleging patent infringement of at least four footwear products. 

Nike claims that Lululemon’s Blissfeel, Chargefeel Mid, Chargefeel Low, and Strongfeel
footwear have caused economic harm and irreparable injury to the company.  

Although this isn’t the first time Nike sued Lululemon for patent infringement, the recent
complaint alleges that three patents have been infringed, including one addressing the
performance of footwear when force is applied. While the company seeks unspecified
damages, Lululemon has yet to comment on the matter.