Nike SWOT Analysis

From their iconic “swoosh” logo to their equally iconic range of footwear, Nike, Inc. is one of
the most easily recognizable activewear brands in the world. But how did the company
achieve such wild success? Let’s take a look through the Nike SWOT analysis to figure out
how the brand came to dominate the sportswear market and carve out a place for itself in
contemporary sports culture.

A Brief Look at Nike, Inc.

While probably best known for its range of iconic footwear, most notably the Jordans brand
of sneakers, Nike, Inc. is also a leading brand in other sports gear such as activewear, sports
equipment, and wearable fitness tech. The company is undoubtedly successful in these areas,
being the most valuable sports apparel company in the world, with a net worth of $189.5
billion in 2023. It is also indisputably one of the most successful brands in the world, with a
brand value of $33 billion.

Nike directly employs over 79,000 people and indirectly employs countless others through its
over 600 offshore factory partnerships. It is a truly multinational company, offering its
products to over 170 countries, through more than a dozen unique brands, which each have a
distinctive brand image and cater to a specific customer base.

Nike business model is famous for finding the perfect balance between fashion and
functionality when it comes to their products, making them quite popular among both athletes
and non-athletes alike. With this in mind, this article seeks to examine the strengths,
weaknesses, opportunities, and threats to the brand.

Nike Strengths

Here, there are some of the advantages the Nike company has over its competitors.

Nike Possesses Strong Brand Equity

Aside from the fact the Nike brand is one of the most recognizable identities in the business
world, it also commands strong brand equity. In simple terms, brand equity is defined as the
commercial value enjoyed by a company based on the social perception of its products or
services by consumers.

There are three main components to brand equity; brand loyalty (how likely users are to
stick with the brand), brand awareness (how well-known the brand and its products are),
and brand association (how people feel about the brand). All these are key areas where the
company has a strong comparative advantage over competitors.

Through an audacious — yet carefully weighted — marketing strategy, Nike has been able to
position itself as one of the leading figures representing the cultural identity of the current
generation. The brand has also been able to cultivate a reputation associated with innovation,
quality, and a liberal ideological stance concerning critical contemporary issues, such
as racism, LGBTQ+ rights, and body positivity.

The Brand Enjoys an Enormous Market Share

Very few brands enjoy the proportion of market share that Nike does. The company has
consistently dwarfed its top competitors — such as Adidas, Puma, and ASICS — in terms of
both revenue and raw sales. This is especially evident in the U.S. market, where Nike is by
far the most popular sports apparel brand, especially when it comes to footwear.

Another positive indicator of the strength of the brand is the fact that unlike many of its
competitors, it has seen its revenue grow consistently in the past few years. The Nike
company made a total annual revenue of $46.71 billion in 2022, representing an almost 5%
increase from its total revenue in 2021.

Low-Cost Manufacturing Is a Key Part of Its Business Strategy

One of the reasons that Nike has been able to maintain its profitability over the years is that it
has invested heavily in low-cost manufacturing. It achieved this by outsourcing virtually
every aspect of the product manufacturing process to countries that have a favorable wage
structure, such as China, the Philippines, Vietnam, Indonesia, and Taiwan

Another factor that keeps costs low and profit margins high is the fact that Nike does not own
any of the factories where these goods are produced. These outsourcing companies are simply
given strict guidelines and protocols concerning the quality and production process for Nike
products. The company has also significantly invested in various innovations and
technologies that help reduce labor cost and material costs.

Innovative Marketing

Effective branding and marketing are the key pillars of any successful company. However,
Nike has taken this to a whole different level. Through the smart use of celebrity
endorsements (which will be discussed next), iconic catchphrases, the Nike “swoosh” logo,
and commercials such as the worldwide-famous ‘Just Do It’ campaign, as well as their ability
to align the brand with positive associations such as innovation, stylishness, maximum
performance, winning, self-empowerment.

Nike has also been able to successfully leverage social media to reach out to a broader
audience of potential customers. This is because the core demographic they market to are
young people between the ages of 15 to 45 years old who are highly active on a variety of
social media platforms. This explains why the company is one of the most expensive brands
in the world, with a brand value estimated to be about $33 billion in 2022.

Iconic Celebrity Endorsements

From the iconic Michael Jackson Pepsi commercial to David Beckham’s $160 million deal
with Adidas in 2003, major corporations have long been aware of the advantage of leveraging
celebrity popularity and influence to promote their products. Nike is well-known for running
one of the most successful celebrity endorsement campaigns in recent history, closely
associated with famous athletes and non-athletes like Michael Jordan, Rafael Nadal, Bella
Hadid, Cristiano Ronaldo, and Maria Sharapova.

There are several ways the company has used its brand ambassadors to further its brand value
and promote its brand image. For example, Nike ran a highly successful collaboration with
basketball legend Michael Jordan to create an iconic line of sneakers known as the Air
Jordan. The partnership was wildly successful, and the Air Jordan brand generated a revenue
of over $5 billion for Nike in 2022.

Nike also takes advantage of the public image of its various ambassadors concerning a wide
range of contemporary issues. This allows the brand to position itself positively as a
champion of social justice, equity, and inclusiveness. For example, the brand supported the
Black Lives Matter movement in a widespread campaign against institutional racism in
America using the slogan “Don’t Do It” and featuring prominent African-American
celebrities such as Colin Kaepernick, LeBron James, and Serena Williams.

A Range of Successful Side Brands

Despite what most people think, the Nike brand is not the sole brand of Nike, Inc (although it
is by far its most successful). They also support a range of successful side brands such as
Converse, Jordans, Umbro, Hurley, Nike Golf, and Cole Haan.
The probable reason behind the success of these brands is the ability of the Nike corporation
to apply the same principles which helped build up its primary brand to other divisions, while
still allowing them to support unique identities and develop a unique following with its
organic customer base.

For example, Cole Haan is primarily a luxury brand, Converse markets a wide range of
lifestyle apparel that caters to a younger generation significantly associated with skating
culture, and Umbro is mainly popular in the UK and markets itself as primarily a soccer
brand (which is understandable since that is by far the most popular sport in the region).

Getting Rid of Retailers

Nike has made headlines over the past few years for gradually cutting ties with its major
retailers, which include department stores, brick-and-mortar stores, and sporting goods
specialists. The company does not operate a significant chain of dedicated retail outlets and
therefore has mainly used third-party businesses to market its products to customers.

By promoting direct-to-consumer sales, they have greater control over customer experience,
pricing, profit margins, and brand image. They have achieved this by increasing their e-
commerce presence, as well as launching a suite of apps that allow customers to purchase
their goods directly from the brand.

A Successful E-commerce Platform

Many successful brands have followed a gradual shift away from the traditional brick-and-
mortar system towards online retail and e-commerce. Nike is certainly not one to be left
behind, as its e-commerce section has seen steady growth over the past few years. Direct-to-
consumer sales represented almost 40% of the total sales in 2021, with a brand revenue of
$16.4 billion within that same fiscal year.

However, the company is not satisfied with this achievement. Their short-term goal is to
achieve 60% direct-to-customer sales by the year 2025, further cutting out the need for retail
outlets and allowing them to increase their profit margins further and have greater control
over product prices.

Impressive R&D Department

Nike is more than just a company that sells sports footwear. They are also considered drivers
of innovation with regard to sports apparel and equipment. The company is well known for
outspending its closest competitors in this area. In fact, it has introduced some of the most
iconic developments in competitive sportswear, making it a favorite for many top athletes.

One of the secrets behind the success of the company in research and development is the fact
that it all sources its low-cost manufacturing process. This allows the company to focus on
high-value activities such as R&D as well as branding and marketing.

The Company Enjoys a High Market Valuation

Nike is the most valuable sportswear company in the world and also one of the most valuable
companies in the world, with a market capitalization of $189 billion. This allows the
company to attract a variety of investors as well as enjoy low-interest loans. It also increases
consumer confidence in both the products and its stock, therefore allowing the brand to drive
growth further.

Nike Weaknesses

Here, there are some of the potential internal threats to the success of Nike, Inc.

Controversial Labor Practices

As we mentioned earlier, one of the key factors behind the success of Nike was the low-cost
manufacturing process. One of the primary reasons behind this is the fact that their products
are produced in countries that have relatively cheaper wage structures. However, several
reports published in the late 1990s indicated that in the process, the company might have
been involved in unethical labor practices such as poor working conditions, long working
hours, and abysmal pay.

The company has made some effort to remedy this situation by establishing a Fair Labor
Association and Code of Conduct in 1991. It also performed health and safety audits of over
600 of its factories in the early 2000s. Since 2005 the company has also published annual
reports of the safety conditions in labor practices of its factories all around the world to boost
transparency. While this has gone some way in improving consumer confidence in the
company, the stain of the scandal still lingers with Nike to this day. The Brand Is Over-
dependent on the U.S. Market

While Nike may be correctly seen as a global brand, careful analysis shows a significant
portion of its revenue comes from the U.S. market. Well, this may not necessarily be a bad
thing, it can be likened to placing all your eggs in one basket. This is because it leaves the
company vulnerable to market shocks or economic downturns within the U.S. market.

Worrying Financial Indicators

While Nike is still by far the most valuable sports apparel company in the world, recent
worrying financial trends have been brought to the spotlight. One of them is the steadily
increasing long-term debt profile of the company. Nike’s long-term debt stood at about $8.9
billion in 2022, a 5.21% decline from the previous year but more than twice what it was just
three years prior and nearly forty times its value ten years ago.

Unfavorable Relationship With Retailers

We have already discussed the relationship between Nike and third-party retailers, and how it
has tried over the years to reduce its dependence on its services. While it has made
considerable strides towards this, a majority of its revenue still comes through these outlets.
This, therefore, exposes the company to some of the disadvantages associated with this
strategy, such as lower profit margins, as well as less control over their branding and
customer experience.

Their Revenue Stream Is Over-dependent on Their Line of Footwear

In the modern business world, specialization is definitely an advantage. However, businesses

must avoid the mistake of becoming overly dependent on a narrow range of products or
services. The Nike brand offers a wide range of sports-related products, but over 60% of the
revenue comes solely from their sales of footwear.

The Company Is Slowly Cultivating the Image of a Luxury Brand

Despite its beginning as a humble sports apparel company, Nike, through a series of popular
collaborations with high-fashion brand names — such as Louis Vuitton, Sacai, and
Jacquemus — has carefully cultivated the image of a high-end luxury brand.

While this may help the company open up its customer base to wealthier clientele who can
afford more expensive products, it also runs the risk of alienating its traditional customer
base. This is becoming evident in the prices the brand charges for some of its designer
products, such as the $8000 Nike Air Force One Vlone, $18,000 Nike Air Jordan 4 Retro
Eminem “Encore,” and the Solid Gold Ovo Air Jordan owned by hip-hop artist Drake which
was purchased for a mind-boggling $2 million.
Reduced Quality Control

One of the disadvantages of outsourcing your manufacturing process is that you have reduced
control over the quality of your products. While Nike is certainly a brand that pays close
attention to this fact and is well-known for the quality of their product, even they are not
immune to this flaw. Outsourcing can also increase the risk of the market being flooded with
counterfeit Nike products.

Nike Opportunities

Here, there are some opportunities the company can capitalize on to improve its branding and
revenue.

Investing in New Markets

Nike still has room to expand its role as a global market by making inroads into new markets,
such as increasing their presence in Europe, Africa, and Asian markets outside of China. Not
only will this significantly increase their revenue, but it will also reduce their over-reliance on
their North American market.

Another way they can invest in new markets is by diversifying their product range. Even
though the company is dominant in the sportswear industry, they are far from the market
leader when it comes to women’s sportswear. This is a potentially untapped market that could
create billions of revenue.

Increasing Their Product Range

Another area the brand could look into is investing in sports technology, such as wearable
sports gear like smartwatches and other forms of digital sports technology. They could also
invest in promoting their other sports products besides footwear.

There are several strategies the company has adopted to achieve this by exposing customers
to a wider range of their products through dedicated Nike product outlets such as NikeTown,
and Nike stores, as well as various retail outlets belonging to their subsidiaries. This can help
them market their less popular items, such as sports equipment.

Tapping Into the Future

We have already discussed the efforts that Nike has made to increase its online presence, as
well as improve the proportion of its direct-to-customer sales. However, there are other ways
the company can improve its online revenue.

One of these is by introducing artificial intelligence into their e-commerce activities. Nike
seems to be taking a step in this direction through their acquisition of the Boston-based
predictive analytics company Celect. The goal of this technology is to use predictive
algorithms to determine which products and apparel a particular user will be most interested
in and where they can purchase it from.

Another way the company has attempted to expand into newer technologies is by investing in
the Metaverse. They have done this by acquiring the virtual reality company RTFKT. RTFKT
is a virtual reality company responsible for creating a range of virtual products such as
sneakers, NFTs, and other forms of collectibles. The company attracted the attention of Nike
when it sold $3.1 million worth of virtual Nike sneakers in just seven minutes.

Introducing Anti-counterfeiting Technology and Methods

Counterfeit products are one of the greatest dangers to a brand obsessed with quality control,
such as Nike. Therefore, it is understandable that the brand has introduced a wide range of
methods and technologies to battle this threat.

Some of these include liaising closely with local and international law enforcement agencies,
creating a platform that allows users to report counterfeit Nike products, promoting direct-to-
consumer sales through a range of dedicated stores and online retail services, as well as
collaborating with large e-commerce platforms such as Amazon who unfortunately market a
large number of counterfeit Nike products.

Investing in Sustainability

A growing number of consumers are more environmentally conscious and would like to see
similar attitudes from the brands which they patronize. In line with this threat, Nike has taken
steps to ensure that its company embodies these values, and one of these steps was to
promote the use of recycled and sustainable materials in its products.

For example, the company introduced a new collection that was aimed at reducing its carbon
footprint by 75% when compared to the other products. The company has also started
encouraging customers to recycle used apparel as well as return old footwear to the company
for refurbishment.

Nike Threats

Here, there are a few external threats to the success of the Nike company.

Counterfeit Nike Products

As mentioned earlier, counterfeit products reduce the trust customers have in brand quality
and create a negative brand image. Counterfeiting is a serious issue and is believed to have
made up about 2.5% of international trade in 2019 (roughly $464 billion). This is especially
important for Nike because the brand is one of the most counterfeited in the world, with
footwear being one of the most commonly faked products.

Aside from the effects counterfeiting has on brand image, it also leads to significant losses in
revenue. This is because many customers may seek out counterfeit products, as they are
typically cheaper than the originals. Some reports have shown that Nike loses as much as
10% of its annual revenue to counterfeit products.

Competition From Other Sports Brands

Nike is undoubtedly significantly ahead of other sporting wear companies such as Adidas,
Reebok, Under Armour, and Puma. However, some of these companies, such as Adidas,
command a significant market share and pull in revenue that is indeed threatening Nike’s
continued dominance of the industry.

Another threatening issue is the fact that Adidas has been consistently growing at a faster
pace than Nike over the past few years. Adidas has grown at an impressive 17.6% since 2015,
while Nike has only managed to achieve a growth rate of 6.8% in that same time. Adidas has
also taken a page from the Nike playbook by investing heavily in attracting some big-name
celebrities such as David Beckham, Novak Djokovic, and Pharrell.

High Profile Patent Disputes

As one of the market leaders in terms of research and development, Nike fiercely protects its
intellectual property, such as patents. Therefore, it was certainly newsworthy when the
company got into a series of legal battles with its nearest competitor Adidas over accusations
of patent infringement related to the Nike Flyknit technology.
In response, Adidas filed several cases of its own, arguing that it had also committed patent
infringements by copying several of Adidas’ designs and technology. Both companies
eventually agreed to drop the cases and settle out of court. However, the scandal did leave a
lasting mark on both of their reputations and exposed the level of intellectual property theft
within the industry.

International Trade Tensions

As an international brand, Nike is exposed to the nuances of trade agreements, embargoes,

protectionism, as well as trade tensions. This is especially important now due to the
heightened tensions between the United States and China, with the latter being the largest
buyer of Nike products in Asia and one of the most significant markets outside the U.S.

Animal Abuse Scandal

Nike has always been a company that has done its best to place itself on the right side of
contemporary issues, such as those involving race, gender, and sexual orientation. However,
the company has found itself embroiled in an animal rights scandal due to its use of kangaroo
skin for the manufacture of its pineapple products.

Animal rights advocates have argued that this contributes significantly to the reduction of the
population of kangaroos and even drives the regional kangaroo population toward extinction.
Advocates have encouraged Brent to seek alternative leather sources, such as vegan leather.

Its Competitors Are Investing More Heavily in Advertising

In absolute terms, Nike spends more than its closest competitor Adidas on advertising, having
spent approximately $3.8 billion on advertising in 2018 (less than 10% of its total revenue),
while Adidas spent $3.5 billion (representing roughly 14% of its total revenue) in that same
year.

This shows that Nikes’ competitors are investing more heavily in advertising in an attempt to
carve out a larger market share. Even though Mikey still has the upper hand as far as
branding and marketing are concerned, to maintain its advantage, they need to focus on
matching the efforts of its rivals.