Nike in China (1)

8/2/2019 Nike in China (1)

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NIKE in China

Group No. 1


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Overview

NIKEs principal business activity is the design,development and worldwide marketing of highquality footwear, apparel, equipment, andaccessory product

The largest seller of athletic footwear and athleticapparel in the world

Distributed in over 160 countries around the world

Main competitors Reebok, Adidas, Converse, NewBalance, etc


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Where is the environment headed for NIKE

Fitness boom creating new market opportunities

Competitors becoming more aggressive

Rapidly changing market from a sellersperspective to the buyers perspective


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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


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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Available technology was outdated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


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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


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Issues

Demand for exclusive rights in factories(for meeting qualitystandards)

B-Grade production

Defective returns


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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


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PEST ANALYSIS


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Issues

Bureaucratic obstacle

in procuring localavailable material

B-grade Products

MaintainingInternational quality

Cost and supplymanagement

Strategies

Started importing

goods from Taiwan &South Korea

Discounted

selling(20%),reducedquality specifications

Physical presence ofNikes people ,

Manuals of S.O.P, HireChinese inspector foreach factory

Relocated to

Guangzhou & Fujian inSEZs


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Contd

Establishment of

goodwill & image

Sponsored national

1984 Olympic team &hosted Chineseofficials visiting TheUS


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Political Factor

Government intervention(visa issues)

Promotion based on seniority and political factors.

Communism

Changes in trade practices (forbidden zonesremoved)

Encourage trade in backward areas

Willing to enter into joint ventures

Always changing decision makers led to delays indecisions


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Economical Factor

Chinas economy does not rely on marketmechanism

Pricing issues(central planning system)

Prices were not based on market needs anddemands

Iron Rice Bowl policy


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Social Factor

Demographics

China a major untapped resource for a relativelylabor-intensive product(2 billion people)

Change in social living conditions Expected product quality

Trust and reliability

Requirement of alignment with Chinese culture


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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


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SWOT Analysis


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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


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Weakness

Chinese culture

Contract manufacturing

Delivery time

Heavily dependent upon its share of the footwearmarket


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Opportunities

Fitness boom created new markets

Product development offers many opportunities

Opportunity to develop products such as sport

wear, sunglasses and jewellery. Such high valueitems do tend to have associated with them

Business could also be developed internationally


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Threats

Exposed to the international nature of trade

Market for sports shoes and garments is verycompetitive

Quality assurance Lack of information, resources and government

policies

Retail sector is becoming price competitive

Communication barrier Product life cycle reduced


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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


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Thank You

Nike in China (1)

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