This is the detailed PESTEL Analysis of Nike of discover how political, economic, sociocultural, technological, environmental, and legal factors can influence the company’s operations and strategy.
Nike Background and Introduction
Nike is a globally recognized brand of footwear, athletic apparel, sports accessories and equipment’s. It was founded by Phil Knight and Bill Bowman as Blue Ribbon sports in 1962. The first Blue Ribbon shoe was a soccer show which was introduced under the Nike brand name. It referred to the Greek goddess of victory and Swoosh trademark. The company took the name Nike Inc. in 1978.
The company has head quarters near Beaverton, Oregon which is part of Portland metropolitan area. Nike is world’s leading supplier of footwear and is one of the Fortune 500 companies of the world. It has employed more than 30,000 people across the globe in 2008.
The company has launched many products under its own name like Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Skateboarding and other subsidiaries including Hurley International, Converse etc. Nike sponsors world known athletes around the world with famous trademarks like ‘Just Do It’. (S, 2010)
Political Factors
Nike has been fortunate in this regard because the US government has established such policies which will foster its business growth. Nike enjoys low interest rates and stable currency conditions and competitive tax arrangements which helps it immensely to advance its growth. The government has taken initiatives in terms of transparency in global value chain and Nike has benefitted from that. However the company faces hard times in outsourced manufacturers in nations like Vietnam, Indonesia and Thailand which suffer from political unrest now and then.
The increasing risk of terrorism in the home nation has also adverse effects on the company’s business. The trade protection policies in certain nations affect the sales and services of Nike. Nike has to take certain risks for its advanced growth in a world where tariffs and non tariffs on goods are constantly changing with the countries. (Pestle Analysis Of Nike Macro Environmental Factors Business Essay, 2013)
Economic Factors
Nike bears the responsibility of being a major world manufacturer of sports footwear and apparel and generated revenue of US$18.6 billion in 2008. (ending May 31, 2008)
Like all other consumer-facing organizations Nike is suffering from a setback since the fiscal crises of 2008-9. Nike has not only suffered from an economic set down in west but in Asia- Pacific regions too. Since the goods are manufactured in Asia, the cost of labor and material is increasing. Nike has taken advantage of its brand equity to establish itself in emerging economies where the labor wages are low.
It has defended CSR (Corporate Social Responsibility) critiques in those nations by saying that they are providing employment opportunities and continued to pay the established labor rate. This shows a clear division between design and strategic functions that happen in the US, and the manufacturing which happen in outsource. (Pestle Analysis Of Nike Macro Environmental Factors Business Essay, 2013)
Nike’s economic growth also relies on international economy. A weak Euro and Asian recession is going to be huge setback for the company. But the global market has been able to help Nike in times of recession and its sales haven’t suffered much. (S, 2010)
Social Factors
With the increasing demand of fitness among people these days, diet and health are gaining prominence. People are actively becoming a part of fitness clubs and fitness apparels and shoes have become all the rage. People are being brand conscious and their preferences and demands are diversified, this is where Nike comes in satisfies its consumers with quality and variety. (Varier, 2011)
In macro-economic sense, Nike is a global benefactor and has social responsibility when it comes to health and fitness. However, Nike has faced many controversies regarding its CSR position in global value chain. Nike followed the general industrial code and divided its labor to outsourcing emerging nations because of low wages. The company’s take on labor ad working conditions was brought under discussion on global level and caught the eye of many. This affected its consumer’s growth because the customers become conscious of their faith in company’s CSR.
Nike has to work hard to gain back the trust of its consumers. In terms of HRM (human resource management), these kinds of lapses also make an employee rethink the company’s leadership qualities. (Pestle Analysis Of Nike Macro Environmental Factors Business Essay, 2013)
Technological Factors
Nike uses advanced IT to market its products and targets the needs of its customers. It uses an optimum model in which transaction and supply chain are linked via SOAP (Simple Object Access Protocol) and MPPS (Massively Parallel Processor System). The online technology has enabled customers to make contact-less payments via mobile phones. (Pestle Analysis Of Nike Macro Environmental Factors Business Essay, 2013). This advancement has reduced the cost of workforce which would be otherwise needed at a service store. Nike has strived to make innovative products which are technically advanced and fulfils the requirement of its consumers. (Varier, 2011)
Environmental Factors
Nike has maintained a positive stance in terms of environmental issues. As the green products are gaining popularity Nike has complied with IS0-1400 as its overall policy. Nike took the initiative in early 1990s where it appointed ‘sustainability champions’ to monitor its initial projects in terms of reduction of carbon emissions and purging waste. The company put into operation the sustainable philosophy by using natural materials. After this measure it was observed that the productivity of staff increased as it had a positive impact on their psychology. (Pestle Analysis Of Nike Macro Environmental Factors Business Essay, 2013)
Law/Legal Factors
As Nike works globally it has to correspond with laws and legislature of each country respectively. For instance countries like U.S and U.K follow a common law system which works in the favor of shareholders but the law in countries like Germany and France etc. is code oriented and focuses on the interest of large stakeholders. Nike had to adopt their legislative framework quickly to expand. The company faced hard time with the charges of ‘sweated labor’ while expanding its business worldwide. Nike closed its factories in Pakistan and moved its business to China and Indonesia. Due to this it received a backlash of leaving the unemployed labor unattended which had an adverse affect on its business.
In 2003, Nike faced the allegations that it is paying below the minimum wage to its labor in Indonesia. Nike was sued consequently under California Unfair Competition and False Advertising Laws. Nike settled this case in California Supreme Court after facing defeat and suffered greatly at the hands of bad publicity. (Pestle Analysis Of Nike Macro Environmental Factors Business Essay, 2013)
Bibliography
Pestle Analysis Of Nike Macro Environmental Factors Business Essay. (2013, NOVEMBER). Retrieved MARCH 24, 2016, from Essays, UK: https://www.ukessays.com/essays/business/pestle-analysis-of-nike-macro-environmental-factors-business-essay.php?cref=1
S, A. (2010, DECEMBER 2ND). Pest Analysis on Nike. Retrieved DECEMBER 24, 2015, from MANAGEMENT PARADISE: http://www.managementparadise.com/forums/principles-management-p-o-m/208704-pest-analysis-nike.html
Varier, A. (2011, January 31). Nike. Retrieved from slideshare: http://www.slideshare.net/abhishekvarier/nike-6758237