Nike's External Environment

Nike's Changing External Environment

The following are potential factors that could affect Nike's business decisions. Some have already begun to occur, while others are merely possibilities.

Demographic:

1. An aging population will result in more retirees with more free time.
2. Changing popularity of certain sports among various geographic regions will result in different sales of different product lines. While hockey will never catch on in the South, Lacrosse has spread from the East Coast and is quickly increasing in popularity.

Sociocultural:

1. General shift to a more health conscious society. 24/7 fitness centers, the increased general desire to maintain a healthy lifestyle, and the proliferation of yoga/pilates will all result in increased sales of workout apparel/equipment. 
2. Nike has faced pressure for using sweatshops in the past. There has been news recently of factories in China having to install nets outside of their dormitories to catch workers attempting to commit suicide. Not that there is any connection to Nike, but social pressure to change manufacturing locations/processes could result in some significant challenges for Nike.

Legal/Political

1. Potential legal repercussions of manufacturing facilities (sweatshops).
2. Political pressure from outsourcing jobs, there is currently a push (and always I guess?) to bring jobs back to the US. Apple has recently announced that it would begin manufacturing certain products in the United States. 
3. Changing political relations between the United States and the Far East. China has been accused of spying on the US. Doing business in a company that spies on the US could result in an interesting predicament for many companies manufacturing products in China.
4. Counterfeit products pose a different problem for Nike. Nike will have to work to ensure that fake Nike products are never sold widespread, and that when purchased, it becomes known that they aren't an authentic Nike product. Fake products can easily ruin the reputation of real Nike products.

Economic

1. Financial incentives/subsidies for manufacturing in the US could result in industry-wide changes.
2. Economic changes in the Far East could result in an increase/decrease in production costs.
3. Changing oil prices result in variable distribution costs.
4. General economic conditions will affect the sale of various product lines. While shoes/clothing are generally safer, luxury items ("wants") such as golf clubs, tennis rackets, or fitness watches are more susceptible to an economic downturn.

Technological

1. Improved manufacturing processes could result in decreased production costs.
2. Improved distribution methods could result in decreased distribution costs.
3. New or improved clothing technology/fabrics/designs could result in new product lines or divisions.
4. Innovations in sporting equipment would also result in new product lines.

Global

1. Increased globalization will likely result in decreased barriers to distribution.
2. Free trade agreements could ease/hurt international distribution or production.

Porter's Five Forces

Potential Entrants - while not a huge concern for Nike, it is a potential problem. Niche companies are able to chip away at certain product lines within Nike. Aside from the established companies (Under Armor, Adidas, Reebok, etc.), it is unlikely a new Nike will emerge. Nike should focus on market share and competitors in each.

Industry Competitors - Competition among established firms is tough. Under Armor, Adidas, Nike, Reebok, etc. all have similar products with similar features. Nike should work to continue to develop its brand and reputation.

Suppliers - Nike is Nike. Nike also manufactures in huge quantities, and therefore has significant power over its suppliers. 

Buyers - Buyers have little power over Nike's prices. Nike can set its prices because it knows people will pay extra for the swoosh, and even more for the Jumpman logo.

Substitutes - This is most prevalent during an economic downturn, when consumers are more conscious of purchases and may not be willing to pay $5 extra for a shirt just for the swoosh.