Nike focus mostly on outsourcing and most of the products are manufactured

outside the United States.The combined cost leadership and differentiation

generic strategies boost Nike’s performance in the global industry. Nike’s cost
leadership generic strategy sustains competitive advantage based
on costs.Nike has a broader network than their competitors that enable them
to cancel the alliance with any organization that fails to meet
their standards.Due to the advanced technology goods are produced at a
lower cost with superior quality granting them the supremacy over other
copycats who cannot strive to meet the standards of the Nike. Another notable
cost leadership strategy is pricing strategy of Nike over Adidas.

Differentiation can be achieved through real product features or through

advertising that causes the customer to perceive that the product is unique
and to create a sense of willingness to pay for the product with the desirable
features.

The main competitors always of Nike are Reebok and Adidas and their
product are not entirely different from Nike’s products, as all products involved
in the design and marketing of both athletic footwear and apparel and for
 fitness projects but Nike is having differentiation and distinctive competency in
the area of marketing. Nike always creates the consumer brand awareness
and has strong brand power for a long time and also makes a position in the
market.

Nike’s Generic Strategy (Porter’s Model)

Nike Inc. uses a combination strategy for its competitive advantage. This type of
strategy includes two or more of the generic strategies from Porter’s model. The
following are the generic competitive strategies implemented in Nike’s combination
strategy:

1. Cost Leadership Strategy

2. Differentiation Strategy

Nike’s cost leadership generic strategy sustains competitive advantage based on costs. In this
generic strategy, the company minimizes production costs to maximize profitability or reduce
selling prices. In the late 1990s, Nike reduced costs and the selling prices of its athletic shoes
and other products. This generic competitive strategy helped the company regain its
competitiveness, especially against Adidas. Also, Nike’s differentiation generic strategy provides
unique products. For example, the company integrates cutting-edge designs for its shoes. The
combined cost leadership and differentiation generic strategies boost Nike’s performance in the
global industry. A strategic objective based on the cost leadership generic strategy is to grow
the company’s competitive advantage through new technologies to reduce production costs. A
financial objective based on the differentiation generic strategy is to maximize Nike’s profit
margins, such as on new sports shoes.

Nike’s Intensive Strategies (Intensive Growth

Strategies)
Product Development. Nike’s primary intensive growth strategy is product
development. This intensive strategy involves the introduction of new products to grow
sales revenues. For example, Nike’s mission statement highlights innovation applied
through new designs for shoes and related products. New technologies enhance the
products and set them apart from the competition. In product development, these
products remain attractive despite changing consumer preferences. Thus, this intensive
strategy supports Nike’s differentiation generic competitive strategy via product
innovation. A suitable strategic financial objective based on this intensive growth
strategy is to increase Nike’s market share through cutting-edge technologies integrated
in the design of sports shoes, apparel and equipment.
Market Penetration. Nike’s secondary intensive growth strategy is market penetration.
In this strategy, the company grows by increasing sales revenues in existing markets.
For example, Nike increases its stores and retailers in the United States to sell more
athletic shoes to American consumers. However, market penetration is just a secondary
intensive growth strategy because the company already has significant presence in the
global market. The cost leadership generic competitive strategy empowers Nike to
penetrate markets based on product affordability. A strategic objective linked to market
penetration is to increase Nike’s market presence by increasing the number of
authorized retailers. In addition, a financial objective related to this intensive growth
strategy is to increase Nike’s sales revenues through more sales to sports enthusiasts
in current markets.

Market Development. One of Nike’s supporting intensive growth strategies is market

development. This strategy facilitates the company’s growth by targeting new markets
or market segments. For example, Nike enters new markets in Africa and the Middle
East to increase its shoe sales revenues. Alongside product development, the company
applies the market development intensive growth strategy by investing in new
technologies to penetrate new market segments, such as segments composed of
bodybuilders. However, the saturation of Nike stores and retailers around the world
means that this intensive strategy has only a supporting role in the company’s growth.
The generic competitive strategy of differentiation helps the company enter new
markets, based on product attractiveness. A strategic financial objective under this
intensive growth strategy is to increase Nike’s profitability by entering new markets in
Africa and the Middle East.

Diversification. Diversification is the least significant in Nike’s intensive strategies for

growth. This strategy involves developing new businesses to achieve growth. Nike
implemented this intensive strategy in its early years, such as when it introduced
apparel and sports equipment to its product mix. Initially, the Nike brand was on athletic
shoes only. Diversification can support Nike’s generic competitive strategy of
differentiation through new businesses that supply materials for product innovation in
the athletic shoes, apparel and equipment business. A strategic financial objective
based on this intensive growth strategy is to improve Nike’s financial risk by entering
other industries.

Porter’s Five Forces Analysis of

Nike
Nike is known as a brand of sports shoes mainly. However, it also makes athletic
apparel and gear.  The recent years have been quite profitable for the brand. It is
because of the athleisure trends and for the high demand during the Olympics. Nike’s
Just do it slogan and the Swoosh logo set it apart from the crowd of brands. In history, it
has kept signing the best athletes for endorsing its brand and products. Here is a
Porter’s five forces analysis of Nike. Michael E Porter had developed this strategic tool
in 1980. It analyses five important forces that affect the state of competition in an
industry and its profitability. These forces are there in every industry and market. The
tool can be used to understand the state of competition and reduce competitive
pressure.

Bargaining power of suppliers: low

The bargaining power of Nike’s suppliers is low. Its products are made globally in 42
countries in 620 factories. While individual suppliers are small in size, they do not have
the ability of forward integration either. This reduces the chances of competition from
suppliers. Moreover, the number of suppliers is high and they are scattered throughout
the world. It is why individual suppliers cannot exert any pressure on Nike. The brand
sets standards for its suppliers to comply with. If a supplier does not adhere to the
standards, Nike can easily switch to another. However, in such a case, the supplier
would be losing a major source of revenue. Overall, Nike holds strong control over its
suppliers and audits them regularly through third party auditors for compliance.

“Nike requires its finished goods suppliers to verify they are sourcing materials from
vendors that are compliant with Nike’s Restricted Substances List (RSL) and with the
principles and guidelines outlined in Nike’s Code of Conduct. Nike is also working
towards mapping and understanding impacts further up the supply chain, to develop
standards for upstream suppliers of contracted manufacturers. Nike’s Supply
Agreements also explicitly require Suppliers to comply with all local and country-specific
labor laws” (Nike Supply chain disclosure).

Thus, the overall bargaining power of Nike suppliers is low.

Bargaining power of buyers: low to moderate

The bargaining power of Nike’s buyers is low to moderate. The number of its
competitors is not so small if not very large. Apart from Adidas and Under Armour, there
are other competitors like Puma and Reebok. There are many other local and
international brands also that compete with Nike. The switching costs for customers are
low. To some extent this force is moderated by the quality and marketing of Nike’s
products. Nike focuses on performance and design. It is why it has been able to build
good customer loyalty. This reduces the bargaining power of individual buyers which is
low to moderate.

Threat of substitutes: low to moderate

The threat of substitute products is moderate for Nike. It is because a large number of
competing brands make similar or matching products. There are several brands in local
and international markets that make low priced shoes compared to Nike. These brands
offer lower priced substitute products for Nike. To some extent this threat is moderated
by the quality and design of Nike products. Overall, the threat from substitute products
is moderate.

Threat of new entrants: Low

The threat of new entrants for Nike can be considered low to moderate. It is because
while the investment for starting the business is not very large, still there are other
requirements that are not easy to fulfil. Any new competitor may have to start at a local
or small level initially. Apart from production, there are marketing, distribution and
supply chain management that require investment, skilled workers and time. Building a
brand image and equity are also difficult. These factors moderate the threat from the
new entrants. For any new brand, it is not possible to create the kind of brand image like
Nike overnight. It takes time, efforts and capital investment. Nike’s strong position in the
market mitigates the threat to a large extent. Based on these factors the threat from new
entrants is low. While investment for production may be low, developing a notable brand
can be time consuming and requires a lot of capital investment.

Level of competitive rivalry: Strong

The level of competition in the sports industry is strong. Some of the major competitors of Nike
are Adidas, Under Armour and Puma. The industry has grown saturated and the existing
players are engaged in tough competition for deeper market penetration and to snatch away
market share from each other. Brands invest a lot in marketing and other things. The number of
top players and direct competitors of Nike is low, however that makes the competition even
intense. Overall, the level of competition in the industry is strong.