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Produce a Step checklist to outline the main factors influencing Nike from its wider environments Assignment

One of the biggest social influences on Nike is the tendency for modern societies to be fad driven. Customers are fickle. Some fads that have affected Nike include;

* Jogging

* Aerobics

* Limited Edition / Exclusivity

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* Brown Shoes

* Pop Music

* Tribal groupings

* Sport popularity

We have seen that Nike have been able to capitalise on fads in the past, for instance the jogging craze, the aerobics craze, and the trend for young people to wear sports good as fashion items. We have also seen how in the mid 1980’s when a craze for brown shoes came in that Nike’s sales suffered.

Nike is also affected in a big way by age demographics. Its customer group is to a large extent made up from 15-24 year olds (figure 1). As people are living longer and the proportions of our population change to bias to older we may well see pressure on Nike sales.

Gender is another issue. Nike’s main decision making body and design house is dominated by “jock” type people, that is to say white, male and athletic and these people may not be best placed to move the company forward into new market areas, for instance older black females.

Attitudes to social responsibility have changed particularly in the last 10 years, and particularly amongst young people (who just so happen to be Nike’s main customer group). This changing attitude can have a huge impact on Nike. When Nike finally realised that its core customers were reacting against it they were forced to change the way they dealt with social issues in its outsourced manufacturing plant. Nike has been persuaded to sponsor “worthwhile” community projects. This type of action must result in increased costs.

Technological Factors

Nike’s footwear has always been sold as a technological advanced product. It gained big advantages in its prime area of athletics with the invention of the “waffle sole” and later with its “air soles”. It is the case however that there is a possibility that one of Nike’s competitors could make a technological breakthrough leaving Nike in a vulnerable position. Nike is aware of this and provides a great deal of resources into proving innovation both in their product design and the way their product is presented to the public.

With the “faddish” nature of the shoe business technology is being used to speed up the process of design concept to retail outlet. Failure to respond to this could leave Nike at a disadvantage in the market place.

The Internet too has the potential to either help or harm Nike. The Internet allows customers much wider access to training shoes and sportswear in genera. Nike has responded with an Internet venture called Nike ID. This is a duel purpose system, which allows Nike to sell custom made shoes to the product whilst at the same time gathering market information. Nike also sells directly to the public using its online company FogDog.

Economic Factors

Nike is a global company and as such is affected by economic factors at many levels.

Taking the countries where Nike’s products are produced fist:

* Wage demands, if these are high then the base cost of the shoe is increased. We have seen Nike transfer manufacture from South Korea and Taiwan to Indonesia, Thailand and China in response to increased wage demands in those first two countries.

* The state of the producer nations economy, a strong economy is likely to lead to higher wage demands (as detailed above )

* Exchange Rates, will affect the landed cost in the USA ( or any other final destination )

* Import Tariffs, will affect the landed cost of a shoe

At home in the US;

* The state of the US economy – is it in recession or boom. As a large percentage of Nike’s shoes are sold in the USA the state of the home economy is vitally important. If consumer spending is weak due to recession then net income to Nike will be reduced.

* Interest rates affect directly Nike’s costs of expansion.

In respect to Overseas Customers;

* The state of the customers economy, will directly effect the level of imports it will take from Nike. Weakened economies will take few shoes.

* Import tariffs; affect the landed costs of shoes.

* The further economic development of Asia, Latin America and China will also affect Nike’s growth and indeed survival prospects. As Nike already has the majority of the sports shoe market in its home country the only way for it to go is down. To continue its progress it must grow in foreign markets and as sophisticated product it relies on well developed countries to purchase its product. This is well illustrated by the sales of its “world shoe” priced at only $15 it was designed to generate sales in developing countries, but in reality it was found that even this low entry point to the Nike range was too high.

* Increased local competition is likely to arise especially in and from the countries, which produce and produced previously Nike product.

Political Factors

The main political factors affecting Nike are;

* U.S. legislation

* Legislation in respect of employment in the countries making their shoes

* Changes in import and export laws – the USA gives some developing countries trade privileges which makes manufacturing advantageous.

* Health and Safety legislation in the shoe producing countries.

* The government’s makeup in the producer country.

We have seen throughout the world political pressure forcing improved conditions of employment. Whilst some countries have adopted these changes early the developing countries have set their priority on economic growth, but it is just a matter of time before political pressure will be bought to bear on these countries and force costly changes in employment and health and safety issues.

We also see a move across the world towards democracy. As governments become less autocratic and more accountable it is harder for companies like Nike to gain economic advantage through political contacts. It is much easier to influence a dictator for instance than a parliament.

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