Business Model and Strategic Plan Part II: SWOT Analysis Paper When examining internal and external factors of a company, a SWOT analysis is utilized. Its used to determine how those factors influence both the decisions and ultimately the direction of that company. A SWOT analysis helps companies identify achieved and achievable strengths and weaknesses, as well as opportunities and threats. Businesses can assess their market standing utilizing the SWOT format. This analysis can help them gain a better understanding of the steps necessary to gain competitive edge. As some companies look to capitalize on the growing trend in health eating, people are continuously looking for alternatives to achieve a healthy lifestyle. Nike’s new product and division, Nike’s Ambrosia, is set to bring quality food based products and sports drinks geared towards athletic performance and recovery. In order to ensure success, it is in Nike’s best interests to complete a SWOT analysis including an evaluation of economic, legal and regulatory forces and trends.
Nike’s new product and division will consist of a reliable team who puts the health and welfare of all it athletes first. The mission of this new division is: provide nutritionally balance sports-themed waters, sports drinks, chews, and bars at an affordable price. The vision for the new division is: develop products that allows athletes the ability to start strong with energy, rehydrate, refuel, recover and rebuild their bodies for tomorrow*. This new division will capitalize on Nike’s strengths. Nike is a strong global brand recognized around the world. Lots of people buy their products. Nike Ambrosia plans to capitalize on this strength when promoting the new division because the team can affiliate its products with Nike’s other brands and sponsorships at sporting events. Nike has a number of high profile endorsers that can pitch the product in ad campaigns.
Ongoing perception of poor labor practices is something that has plagued Nike for years. A few decades ago the company was under fire for its labor practices and working conditions in many of its overseas manufacturing plants. Another weakness is high prices that are aligned with the Nike brand. The key stakeholder’s in the company support higher margins and profitability in order to command a higher premium on the products it sells. It is important to know that the economy present risk when there is a decline in demand or a recession occurs. Normally consumers will use discretion and decrease spending on nonessential items. As a result, Ambrosia will be affected by negative perception, high prices, and limited market share. The sports drinks and supplements products are in competition with other brands not to mention free products like water and fruit juice. Therefore, Nike has to continuously re-invent new ways of beating the competition via marketing campaigns.
As a result of Nike’s focus on R&D, the company is typically on the forefront on innovation. While products some product lines may not have been as successful as hoped, Nike still has its eye on the next “big thing”. The strength of the company as a brand coupled with its focus on R&D allow it to expand into other markets besides footwear, athletic wear and sports gear. While Nike already has a presence in many emerging markets, there are still significant opportunities for growth. Rapidly growing economies like China, along with other emerging markets like India and Brazil, have the potential to drive future earnings growth. With the advent of Ambrosia, Nike is poised to take on the likes of Gatorade, Powerade and Vitamin Water.
The food supplement industry is highly competitive, both in the United States and around the globe. There are several significant companies that produce similar products. Some of the primary ones are Gatorade and Powerade. The rapid changes in consumer preferences constitute significant risk factors for Nike. Too, demand for Nike’s products depends on the relative popularity of various sports and fitness activities, as well as changing design trends, so any major shifts in these trends could temper business results. If competitors have more success attracting customers with more appealing better tasting products, this would also hurt business prospects.
Since the majority of Nike’s sales are generated outside of the United States, the company is exposed to significant currency fluctuations. The recent strengthening of the U.S. dollar has hurt reported results, due to the foreign amounts being translated into U.S. dollars for reporting purposes. While the company does have certain hedges in place, they are designed to lessen the impact of unfavorable exchange rates, not fully eliminate the risk. The dollar is expected to continue to strengthen in the coming months, so this will remain a concern for the near term.
Nike remains the dominant force in the global market so its venture into sports-themed waters, sports drinks, chews, and bars seems like the a natural progression. The company continues to be extremely profitable in both developed and developing markets. Further penetration of its products in emerging markets could lead to strong growth for years to come. The company’s commitment to R&D and integration of emerging technologies into its products could also open up new opportunities for growth and so I believe the companys strengths and opportunities far outweigh its weaknesses and threats.