NIKE in China

Group No. 1

Overview
NIKEs principal business activity is the design, development and worldwide marketing of high quality footwear, apparel, equipment, and accessory product The largest seller of athletic footwear and athletic apparel in the world Distributed in over 160 countries around the world Main competitors Reebok, Adidas, Converse, New Balance, etc

Where is the environment headed for NIKE Fitness boom creating new market opportunities Competitors becoming more aggressive Rapidly changing market from a sellers perspective to the buyers perspective

Trends emerging therein. Shifting focus to apparel business Moving to new countries for production Increased Labor Cost Increase in the demand for new models Decreased product life cycle Employee lacking motivation

Internal Environment Analysis

Men
Cheap labor Lack of motivation

Machine
Reluctant to use imported technologies Available technology was outdated

Money
Prices fixed through Authority, not market based

 Material
Unavailability of material in local markets Foreign currency couldnt be used to buy materials. Bureaucratic obstacles in purchase of materials Inadequate shipping & transportation provisions

Market
Capacity of market increasing Competitors were growing in number and strength Chinese market not quality conscious

Issues
Demand for exclusive rights in factories(for meeting quality standards) B-Grade production Defective returns

Legal Issues
All contracts based on specific shoe model price , volume , delivery & specifications Compensation trade agreements 1) B-grade shoes @20% discount for first two years and @40% there after Manufacturers could not sign contracts with Nikes competitors Payment for purchases to Ministry of foreign trade

PEST ANALYSIS

Issues
Bureaucratic obstacle in procuring local available material B-grade Products

Strategies
Started importing goods from Taiwan & South Korea Discounted selling(20%),reduced quality specifications Physical presence of Nikes people , Manuals of S.O.P, Hire Chinese inspector for each factory Relocated to Guangzhou & Fujian in SEZs

Maintaining International quality Cost and supply management

Contd
Establishment of goodwill & image Sponsored national 1984 Olympic team & hosted Chinese officials visiting The US

Political Factor
Government intervention(visa issues) Promotion based on seniority and political factors. Communism Changes in trade practices (forbidden zones removed) Encourage trade in backward areas Willing to enter into joint ventures Always changing decision makers led to delays in decisions

Economical Factor
Chinas economy does not rely on market mechanism Pricing issues(central planning system) Prices were not based on market needs and demands Iron Rice Bowl policy

Social Factor
Demographics China a major untapped resource for a relatively labor-intensive product(2 billion people) Change in social living conditions Expected product quality Trust and reliability Requirement of alignment with Chinese culture

Technological Factor
Speed of change of product Resistance to adopt new processes Lack in know-how of making A-grade sports shoes Poor telecommunication Made video tapes of operations and technical advancements

SWOT Analysis

Strengths
Very competitive organization Strong presence and experience in industry Expected strong Chinese Market Product Range Contract manufacturing Strong at research and development Global brand Labor

Weakness
Chinese culture Contract manufacturing Delivery time Heavily dependent upon its share of the footwear market

Opportunities
Fitness boom created new markets Product development offers many opportunities Opportunity to develop products such as sport wear, sunglasses and jewellery. Such high value items do tend to have associated with them Business could also be developed internationally

Threats
Exposed to the international nature of trade Market for sports shoes and garments is very competitive Quality assurance Lack of information, resources and government policies Retail sector is becoming price competitive Communication barrier Product life cycle reduced

Firm's response to these trends. Entered apparel business Moved from Japan to Korea, and then to China. Introduced new product lines Diversifying their product portfolio Provided better living conditions and attractive incentives

Thank You