Nike Inc. PESTEL/PESTLE Analysis & Recommendations

Nike Inc. PESTEL PESTLE analysis, political economic sociocultural technological ecological legal external factors shoes case study
Nike Air Citius+ 2 running shoes. A PESTEL/PESTLE Analysis of Nike Inc. enumerates notable opportunities for international growth and brand image improvement, considering the firm’s remote or macro-environment. (Photo: Public Domain)

Nike Inc.’s growth partly depends on external conditions. These conditions are outlined in this PESTEL/PESTLE Analysis of the company. The PESTEL/PESTLE Analysis model identifies the external factors that present opportunities and threats in the remote or macro-environment. In the case of Nike Inc., the PESTEL/PESTLE Analysis enumerates such external factors that influence the company’s strategic decision-making processes. As one of the major firms in the global sports shoes, apparel and equipment market, Nike Inc. must address these external factors to ensure business dominance in the industry, especially when considering the presence of aggressive competitors like Adidas.

A PESTEL/PESTLE Analysis of Nike Inc. identifies key issues that the company must include in its strategic formulation. To maintain its position in the athletic shoes market, Nike Inc., must address the opportunities and threats based on the external factors that shape the conditions of its remote or macro-environment.

Political Factors Affecting Nike’s Business

Nike’s sports shoe business is subject to the effects of the political landscape. This component of the PESTEL/PESTLE Analysis model deals with governmental influence on the remote or macro-environment of businesses. The following political external factors determine some of Nike’s strategies:

  1. Stable political climate in most major markets (opportunity)
  2. Expanding free trade policies (opportunity)
  3. Improving government support for infrastructure (opportunity)

Stable political conditions in most major markets present opportunities for Nike to grow its business in these areas. Also, expanding free trade policies facilitate better market penetration overseas. Moreover, improving government support for infrastructure, especially in developing countries, gives Nike more opportunities to expand its operations in these markets. Based on the political external factors in this component of the PESTEL/PESTLE Analysis, Nike Inc. experiences opportunities to improve its market presence and global expansion in the sports footwear, apparel and equipment market.

Economic Factors Important to Nike Inc.

Nike’s business performance depends on the state of economies where it sells its athletic footwear, equipment and apparel. This component of the PESTEL/PESTLE Analysis model identifies the economic concerns that affect the remote or macro-environment of the business. The following economic external factors are significant in determining Nike’s performance:

  1. Economic stability of developed markets (opportunity)
  2. Rapid growth of developing markets (opportunity & threat)
  3. Slowdown of the Chinese economy (threat)

Developed markets like the United States are relatively stable, thereby proving Nike Inc. with the opportunity to continue its slow but stable growth in these countries. The company also has opportunities to rapidly grow by increasing its operations in high-growth developing countries. However, the rapid growth of developing markets also threatens Nike by increasing labor costs in the company’s supply chain and production facilities. In addition, the slowdown of the Chinese economy threatens Nike’s performance, which is now significantly dependent on the Chinese market for sports shoes, apparel and equipment. The economic external factors in this component of the PESTEL/PESTLE Analysis show that Nike Inc. must emphasize global expansion strategies while devising new ways to capture growth in developing countries.

Social/Sociocultural Factors Influencing Nike’s Business Environment

Social issues impact the attractiveness of Nike’ athletic shoes, apparel and equipment. This component of the PESTEL/PESTLE Analysis model deals with the effects of social conditions on the firm’s remote or macro-environment. In Nike’s case, the following sociocultural external factors are most significant:

  1. Increasing individual wealth in developing countries (opportunity)
  2. Increasing emphasis on product safety (opportunity)
  3. Improving positive attitudes about leisure (opportunity)

In developing countries, Nike has opportunities to tap consumers with increasing individual wealth. Also, the company has opportunities to develop safer products and use marketing campaigns that highlight the safety of its sports shoes, equipment and apparel. Nike can also adopt new product development strategies to address needs for products for leisure activities. Based on the external factors in this component of the PESTEL/PESTLE Analysis, Nike Inc. has considerable opportunities for product development and business growth.

Technological Factors in Nike’s Business

Nike’s business changes according to technologies available for business processes and athletic footwear, apparel, and equipment. This component of the PESTEL/PESTLE Analysis model identifies the technological conditions that lead to significant change in the remote or macro-environment of companies. The following technological external factors affect Nike Inc.:

  1. Increasing R&D investment among firms (threat)
  2. Rapid technological obsolescence (opportunity & threat)
  3. Widespread use of mobile technology (opportunity)

The increasing R&D investment among firms threatens Nike, as these competing firms aim to develop more technologically advanced sports shoes, equipment and apparel. Rapid technological obsolescence also threatens Nike by putting pressure on the company to increase its product development efforts. Nonetheless, this external factor provides opportunities for Nike to integrate advanced technologies in its products. In relation, the company has opportunities to integrate mobile technologies in its products to capture consumers who frequently use mobile technologies, such as mobile apps and online tools. The external factors in this component of the PESTEL/PESTLE Analysis show that Nike faces considerable threats as well as opportunities based on new and changing technologies.

Ecological/Environmental Factors that Impact Nike Inc.

Ecological issues influence Nike’s remote or macro-environment. This component of the PESTEL/PESTLE Analysis model deals with the impact of ecological concerns on business performance. In the case of Nike and its sports shoes, apparel and equipment, the following ecological external factors are notable:

  1. Expanding environmental law (opportunity)
  2. Climate change (opportunity)
  3. Increasing sustainability strategies among firms (threat & opportunity)

Expanding environmental law creates opportunities for Nike to improve its environmental and sustainability programs, which are currently recognized as among the best in the industry. The company also has the opportunity to use these programs to address climate change, which affects supply chains and the appropriateness of Nike sports shoes and apparel in certain regions. The increasing sustainability strategies of firms threaten Nike by imposing more pressure for increased sustainability efforts throughout the industry. Nonetheless, this external factor provides the opportunity for Nike to further improve its sustainability standing. This component of the PESTEL/PESTLE Analysis indicates Nike’s opportunities to improve the environmental impact of its business.

Legal Factors in Nike’s Business

Legal terms influence businesses like Nike. This component of the PESTEL/PESTLE Analysis model considers the effects of laws or regulations on the remote or macro-environment of businesses. In Nike’s case, the following legal external factors are important in the sports shoes, apparel and equipment business:

  1. Improving employment law in developing countries (threat & opportunity)
  2. Expanding consumer law in developing countries (opportunity)
  3. Expanding health and safety regulations (opportunity)

Improving employment law in developing countries is a threat because it leads to an increase in labor costs in areas where many of Nike’s production facilities are located. However, this external factor also provides an opportunity for the company to apply higher standards for labor and employment. In addition, Nike has the opportunity to improve its brand image by highlighting customer satisfaction in marketing its sports shoes, apparel and equipment. Similarly, the company has opportunities to improve its health and safety measures to address expanding health and safety regulations. Based on this component of the PESTEL/PESTLE Analysis, Nike Inc. has major opportunities to improve its brand image and corporate reputation.

Nike’s PESTEL/PESTLE Analysis – Recommendations

Nike Inc. must address a variety of opportunities shown in this PESTEL/PESTLE Analysis. It is recommended that Nike must pursue a more aggressive approach to international expansion based on free trade policies, with focus on high-growth developing countries. This action can help address the potential decline of Nike’s performance in the Chinese market. Another recommendation is for the company to invest more in research and development (R&D) to tap potential demand for sports shoes, apparel and equipment integrated with advanced computing technologies. The external factors in this PESTEL/PESTLE Analysis also highlight the importance of improving Nike’s sustainability and employment practices. These actions address regulatory and sociocultural concerns and, consequently, improve Nike’s brand image and corporate image.

References
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  • Nike, Inc. Form 10-K, 2015.
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