ORGANIZATIONAL CHANGE & DEVELOPMENT

(BMT6167)

CLASS ASSIGNMENT

ENVIRONMENTAL ANALYSIS

SUBMITTED BY
ARUN RAGAVENDAR A (19MBA0039)
BAISALI BISWAS (19MBA0048)
LEKSHMI SOMAN (19MBA0049)
GOKUL A (19MBA0093)
ENVIRONMENTAL ANALYSIS

 To analyze the environment, the first thing to do is to define and determine

the environmental forces that are relevant to the organization and the
concerned industry as well as to the geographical area served by the
organization.

 Secondly, the strategists must ensure that information is available related to

the predetermined forces.

 This is about scanning the environment and forecasting what might occur in
the future favorable or unfavorable.

 The last stage is interpreting the information collected from the environment.

NIKE

Nike, Inc. is an American multinational corporation operating in the apparel and

accessories industry whose business involves designing, developing,
manufacturing, and globally marketing and selling apparel, accessories, equipment
and footwear. The company was established in 1964. The company made revenue
of $ 29.799 billion in 2014 showing its success in the industry.
ENVIRONMENTAL ANALYSIS OF NIKE (DEPENDENCIES)

CUSTOMER
General LOW
Sportsperson HIGH MEDIUM
Health conscious MEDIUM
SUPPLIER
Pou Chen Corp. HIGH
PT Pan Bros. HIGH
Fulgent Sun Group HIGH
COMPETITORS
Adidas HIGH
Reebok MEDIUM
Puma MEDIUM
REGULATION
Government HIGH
Safety & Health HIGH
Forced & Child LOW
labour

Customers – Target customer between age (15-40)

Nike focuses on 3 types of customers which are as follows:

WOMEN
 Nike is expanding women's apparel.
 Sales of Nike's training and running apparel for women grew by double
digits in the last quarter.
 Nike says the women’s' line added $2 billion in additional sales by 2017.
YOUNG ATHELETES

 Kids who play sports are a growing part of Nike's business,

 Nike gets young athletes to wear its products through sponsorships with
local leagues, clubs & federations.

RUNNERS
Much of Nike's innovation efforts are focused in the running category.

Other Points
 The customer’s purchase power is moderate.
 Some customers are price sensitive and tend to select products that are
cheaper.
 As customers are gradually becoming knowledgeable about the quality of
shoes and apparels, they are willing to buy high quality and expensive shoes
and apparels.

Suppliers – Third party manufacturers and factories

POU CHEN CORPORATION

Pou Chen Corporation is the largest manufacturer of branded athletic and casual
footwear in the world. Its customers include Nike, Adidas, Asics, New Balance
and Timberland. It makes more than 300 million pairs of shoes annually, and
accounts for roughly 20% of the global wholesale value of branded athletic and
casual footwear.
PT PAN BROTHERS
PT Pan Brothers is an apparel manufacturer with a client roster that, in addition to
Nike, includes major brands such as Uniqlo, The North Face, Adidas, Hunter,
Lacoste, H&M, J. Crew, L.L. Bean, Geox, Ralph Lauren, Armani, Prada and
Columbia.

FULGENT SUN GROUP

Fulgent Sun Group is a sports and outdoor footwear manufacturer based in Taiwan.
The company makes shoes in Vietnam, Cambodia and China. 1 3 In addition to
supplying Nike, Fulgent Sun is a contract manufacturer for other major brands

Other Points

 The main suppliers in this industry are the manufacturers.

 Nike has outsourcing contracts with suppliers in developing countries such as

China, Mexico and India.

 The suppliers do not have to negotiate power with the companies the power
of suppliers is moderately low.

Competitors

The major competitors of Nike are Adidas, Puma, Reebok

ADIDAS is one of the topmost Nike Competitors. One of the key advantages of
Adidas is that it operates via both – the Adidas brand and also has a strong
subsidiary in Reebok. The combination of both gives a strong valuation to Adidas
as a top competitor of Nike.

REEBOK is considered the 2nd biggest Nike competitor across the world.
PUMA is the third Nike competitor which is known for its running shoes as well
as apparels and Clothing. Globally, Puma is still one of the strongest Nike
competitors. It lacks for an equal level of sports sponsorships which Adidas and
Nike have. But it is evident from the revenue generated by Puma that the brand is
loved by many.

Other Points

 The first threat is price competition.

 Large companies can attract customers and make more sales by discounting
their retail price, but small companies cannot afford the loss of discounted
price.

 The second threat is brand images.

Regulations/Government policies

 The US policies have fortunately enables NIKE to grow and market its
products.
 The support accorded to Nike by the US government, particularly in the
general macroeconomic stability, low-interest rates, stable currency
conditions and the international competitiveness of the tax system, form the
foundation critical to Nike’s growth.

Limits

 Nike’s market share stands at about 27.4% in 2019, ahead of its industry
rivals Adidas and ASICS, making Nike the world’s largest company in the
global footwear market.
  Sports shoes are increasingly becoming an essential fashion accessory
among global consumers and the sports shoes market is witnessing demand
for trendy and comfortable footwear among all age groups.
 This is the primary factor which has been driving the growth of the global
footwear market.
 With its advanced footwear innovations and well-established global sales
network, Nike is expected to continue to hold the largest market share in the
global footwear market over the next five years.
 Nike has always been at the leading edge of innovation, technology
development and cutting-edge marketing campaigns that help them surpass
all the other footwear brands in the world in terms of popularity and sales.

Market

 Since the athletic footwear market is saturated with no scope for much
growth in the market Nike can choose from either Market Development or
Diversification Strategies.
 If Nike opts for Market Development it means that Nike will focus on the
emerging markets such as India, China, etc. with its existing products.
 Whereas if it opts for Diversification, it would mean Nike focusing on new
markets with new and innovative products.

Organizational Capacity – fulfilling the missions

 Nike’s mission is to do everything possible to expand human potential. They

do that by creating groundbreaking sport innovations, by making their
products more sustainably, by building a creative and diverse global team
and by making a positive impact in communities where we live and work.
  At Nike, operations manager constantly apply continuous enhancement
strategies to support the company’s production goals and needs based on the
market. Long term capacity planning for Nike deals with investing in new
facilities and equipment.

Institutional Norms:

Specific legislation

 Nike specifically and directly forbids the use of child labor in facilities
contracted to make Nike products.
 The Nike Code of Conduct requires that workers must be at least 16 years of
age, or past the national legal age of compulsory schooling and minimum
working age, whichever is higher.

Best Practices

 Zero Waste - Nike has set a goal for contract manufacturers to send zero
footwear manufacturing waste to landfill or incineration globally by
2020. Using materials efficiently when making products is essential for
minimizing environmental impact and cost.
 Water Management – They reserves water and use less water.
 Low carbon manufacturing – Renewable energy systems has reduced the
energy usage required for the production purpose.
Changes in Nike in the past 3 years

Customers

 In mid-2017 Nike unveiled its plan for growth called the Triple Double
Strategy. Through it, the company promised to double its “cadence and
impact of innovation,” double its speed to market and double its “direct
connections with consumers.”
 The cornerstone of the Triple Double Strategy is the Nike Consumer
Experience, which includes Nike’s own direct-to-consumer network, as well
as a vastly streamlined slate of wholesale distribution partners.

Suppliers

 Future orders in the year were down year over year. This has greatly affected
investor sentiment. All in all, this was not the best year for the leading
sportswear manufacturer.
 The latest quarter witnessed the lowest future orders in the last five quarters.
Future orders are a key metric used to gauge sales in the coming quarters; it
is directly indicative of the demand for Nike products.

Competitors

 The company has recently been struggling with increased competition from
a resurgent Adidas and is facing pressure from Under Armour in its
basketball division in North America. This has affected Nike’s revenue
growth over the last few quarters.
 Adidas has primarily scored with fashion shoes promoted by celebrities such
as Kanye West. In June, Adidas expanded its partnership with this artist,
who moved to the company from Nike in 2013 due to creative differences.
Regulations

 In 2017, the company updated their NIKE, Inc. Code of Conduct to better
reflect their priorities across labor, health and safety, and the environment,
as well as to further align with the expectations of key stakeholders for Nike
and our industry.

 The 2017 update to their Code of Conduct does not represent a major change
in their requirements for suppliers. Rather, they have elevated key
expectations from the Code Leadership Standards to the Code of Conduct to
emphasize the depth of their work and standards on health, safety, and the
environment as well as to highlight important labor requirements.

Changes in Nike in the next 3 years

Customers

 According to a research note to clients by Susquehanna analyst Sam Poser,

Nike’s strategy of direct-to-consumer sales and trimming of excess
inventory is showing signs of progress.
 Nike is on target to meet its revenue target of $50 billion by 2023 on the
back of expansion in China and e-commerce.
 As digital sales grew 79% and were 30% of total revenue, a goal that was
initially set for 2023.

Suppliers

 The market place strategy includes ensuring that products are available in a
timely manner to meet demands, which require a strong focus on inventory
 management, providing more efficient direct-to-consumer operations and
taking advantage of the considerable profit potential of women’s categories.
 NIKE will improve inventory management, consumer connectivity, speed-
to-market and responsiveness to consumer demand.
 The company has reduced discretionary spending with expenses down 6%
for the quarter but will continue to invest in digital strategies and supply
chain management to foster greater efficiency in business operations.

Competitors

 Adidas’ share of the athletic footwear and apparel market is “rapidly

decelerating.
 Nike is beginning to balance scale and scarcity well, across the spectrum of
retail partners and across merchandise categories,”

Regulations

 Creating value for the consumer and concentrating on long-term profit

strategies is a way forward for the brand.
 Strong leadership, a diversified business model including wholesale, retail,
and direct-to-consumer across many countries will allow NIKE to rebound
strongly for the remaining part of 2020. NIKE’s clear strategy moving
forward, its leadership’s high confidence in the brand and deep customer
loyalty put it on solid footing to prosper as it emerges from the pandemic.
PESTEL Analysis of NIKE

Political

 The United States, Nike’s ‘home country’ so to speak, has fantastic policies
for growth which are especially valuable to this corporation. These include
low-interest rates and well arranged international tax agreements.
 As a company that produces and sells physical goods, Nike is, however,
always subject to changes in tax and manufacturing laws.
 Various political conflicts can always make customs related processes
difficult, or prevent imports and exports.

Economical

 A market collapse could mean bad news for Nike, along with many other big
brands. Consumers may choose to switch to lower-end, cheaper products if
this were to occur, or even just as a decent level of quality becomes easier to
produce.
 Nike’s revenues are to some extent dependent on the low cost of labour in Far
Eastern countries. This is changing, though, which might mean higher Nike
prices across the globe come with the development in Less Economically
Developed Countries.
 With its ‘deep pocket’ of finances, Nike has the resources to chase after small
emerging markets in which they could sell products.

Social
  Worldwide increases in ‘health consciousness’ means that more and more
individuals are moving towards better lifestyles. These people will
undoubtedly buy plenty of sports apparel, something which would make Nike
very happy.
 On the other hand, Nike receives much criticism for its dubious production
processes. In fact, the issue of Nike sweatshops is so prominent that it has
warranted an entire Wikipedia article on the topic

Technological

 Social media allows things to blow up or whittle away faster than ever. Nike
is doing well with using social media to build their brand, but it can be a
double-edged sword if used incorrectly.
 Nike also gets the opportunity to use valuable information based metrics
thanks to technological advances, allowing for them to optimize targeting and
production, and maximizes revenue.

Environmental

 Nike’s mass production factories are, without a doubt, harming the

environment. Not only do they release plenty of aerial pollution like most
factories, but Nike’s production centers occasionally go as far as directly
polluting rivers.
 However, Nike also shows promise of a change in their current practices,
with a strong resolve to become more ‘eco’.

Legal
 Nike also dodges substantial amounts of tax. In recent years, there hasn’t
been too much of a crackdown on this, but it’s still valuable to consider.
 The local regulations and practices influence Nike’s business strategy and
operations in foreign countries.