Five Force Model For Woodland

Nike Brief HistoryNike has one mission relation To carry out the legacy of innovative thinking left by the founding members by developing products that enable athletes of all abilities to maximize their strength while beating competition and creating value for sh arholders. Nikes headquarters be hardened in Beaverton, Oregon in Portland and the companion operates in much than one hundred sixerty countries all over the world with more(prenominal)(prenominal) than 30,000 employees across all six continents (Nike 2011). Nike TodayNike today is the largest manufacturer of athletic footgear, c upsurgehing and equipment globally by gross sales with 2011 revenues of more than US $23billion ahead of closest rivals Adidas, Puma, K-Swiss and under(a) Armour which it competes with in the sports go merchandise. Nike has been steadily increasing its commercialize contri furtherion of the sportswear commercialize from an initial 3.7% in 2006 to 4.6% in 2011, even though this declin ed in 2009. some analysts expect this merchandise fortune to reach about 6.3% by 2017. The participation overly expects to make big gains from the London 2012 Olympics for its footgear division (MSN bullion 2012) Figure 1 Nike Apparel food market ShareFigure 2 Nike Footwear Market ShareHowever even though Nike is judge to attain big gains from the London 2012 Olympics, its competitors are non sitting still and letting Nike take any much(prenominal) gains. Adidas, which is one of main rivals of Nike, has invested more than 100million in the Olympics to not only salary increase its profile, but also close the market share gap with Nike. Adidas has already posted better sales and profit results in 2012 compared to Nike. In fact, Adidas, also the second largest garnish manufacturer in the world after Nike, has been outperforming Nike since 2006 (Torry 2012). Below, we willing do an industry analysis victimization Porters 5 Forces of Competition modeling to help us understa nd the various variables influencing competition and profitability for Nike within the sectors in which it is competing.Porters fiver dollar bill Forces of Competition Framework According to dole out (2005), there are many features of an industry in which a keep company competes that determines the level of competition it will face and the net it will get. The nigh famous classification was done by Michael Porter, known as Porters Five Forces framework which ignore help a company determine its probable profits by looking at five sources of competitive pressure. The five sources of competition are 1) competition from entrants 2) competition from substitutes 3) competition from established rivals 4) talk terms power of suppliers and 5) bargaining power of profaneers. Threat of innovation/Barriers to entryThe panic of entry is highest in the apparel market payable to the relatively lower be of manufacturing apparel compared to the footwear market where the biggest threat posed is basically from contemporary rivals already established in the market e.g Adidas and Puma, who although behind in market share, are currently implementing strategies that are helping them close the gap on Nike. Adidas has especially been gaining ground on Nike boosted by its strong presence in sponsoring the European soccer tourney where it sponsored eventual winners Spain (Torry 2012). According to Marketing weekly News (2012), Adidas is also planning on moving into the more contrive-aligned market of teenagers which could see it improve global market share.NEO, a fast fashion adidas sub-brand aimed at teenagers is Adidas attempts to enter new apparel segments that will even pair it against the the likes ofs of H&M and Zara in an effort to gain market share and squeeze more profits out of mature industries. Another threat of entry is posed by down the stairs Armour Inc. an established company in the athletic sportswear in the USA which in 2009 decided to enter the U. S athletic footwear market creating competition in a market which had been dominated by a few players like Nike and Adidas.Re cently the US sports brand has started entering markets which set about been traditionally fought over by Nike and Adidas. For example, Under Armour is using its sponsorship of Tottenham Hotspur in an aggressive digital marketing pull which it views as part of a wider strategy to steal market share from Nike and Adidas in the apparel category in Europe. This is the fuddleds first foray into master football game, which have been areas where Nike and Adidas traditionally dominated and performed well in but are nowhaving to brace for new competition from Under Armour (Sebastian 2012).Threat of substitutesSubstitutes in the footwear category tush take any other types of situation that consumers can choose to serve similar purposes. Substitutes here therefore include the likes of sandals, which can act as substitutes, even though they may not fulfill exact same purpose. It is difficult to think of other substitutes that can fulfill the same purpose as athletic plaza from the footwear industry since this an industry that has something very specific to offer to a targeted market. This direction that it is not meant to appeal to the general population and everybody.Thus consumers who are looking for shoes to run in will not look for boots as substitutes only if because boots are cheaper substitutes. This is due to the specialization of running shoes that makes substitutes hard to fill in by. But while athletic footwear has little substitutes, sportswear apparel can have substitutes that include normal everyday clothing which can be used for athletic purposes if necessary. For example, some consumers may choose to wear tight fitting t shirts to exercise in instead of using Nikes sportswear, making normal clothing from high street brands substitutes. Rivalry among firms (Industry structure)Adidas Although Adidas is currently not able to outcompete Nike in terms of sales and market share, it has been outperforming Nike and gaining market share since 2006 while Nike has been losing market share since 1998 when it still had more than 47 percent of the market, which has been cut back to 32 percent (MSN bills 2011). Adidas is also still the second biggest competitor to Nike competing for market share and has plans in the pipeline that it is laborious to implement in order to grow.One of them is heavy sponsorship of football tournaments all over the globe since football has the highest fan support with more than 2billion people who follow it, with Basketball behind it with 1.2 billion followers. One such plan has been paying off when Spain, the squad it sponsored at the 2012 Euro championships, won the tournament in style (Torry 2012). Puma Puma is another rival to Nike that has been having a bad time with financial figures not going according to expectation. Although the firm has been sponsoring some very famous names (it sponsoredthe Italian football team who reached the final of Euro 2012), while Usain Bolt wore the firms kit when he competed in the 100m at the London 2012 Olympic Games, Puma has served up a profit warning. It said that net earnings for the first quarter of 2012 were expected to be 13 percent below the 115m Euros reported during the same stop consonant last year.Puma is also expect to take a EURO 100m restructuring charge masking that the firm is doing not as well as expected so Nike has little worry from this rival. According to the Financial Times (2012), the main conundrum with Puma does not lie on the sporting field but in the stands. Pumas recovery over the past decade was driven mainly by its popularity with fashion-conscious youngsters. So it is not helping Puma that many younker are unemployed in the Eurozone. Puma generates more than 45 per cent of sales from Europe, the Middle East and Africa, so the fall in expending power has been hurting it badly, as do es rising competition in the sports life-style market. The company is also hurt by its dependence on shoes, which storey for about half of sales. Under Armour As stated previously, Under Armour has been the one company that has gained the most from any slip ups from both Nike, Adidas and Puma as it has been going strong for the last few years.Power of SuppliersThe footwear market is one of those industry categories where the demand is always there. Retailers have to buy whatever the big brands like Nike make whether they like it or not therefore this also means that suppliers like Nike and Adidas have a lot of power compared to other industries. One of the biggest factors that contribute to this is the fact shoes such as Nikes are made very cheaply but interchange at very expensive prices making them very desirable for retailers, which gives suppliers like Nike power. It is one of reasons why Nike has always been famous for sweatshop prices (Forbes 2012)Power of BuyersHighly Comp etitive market due to market saturation and slowdown in the sales industry worldwide, buyers more intellectual, have specific wants and needs and know where to get discounts and deals. As seen with the problems in the Eurozone experiencing high rates of unemployment as seen with the problems with Puma, many consumers have more judgement to choose what to buy andwhat not to buy as the world economies suffer.ConclusionNow that we have looked at Nike and the competitive pressures it faces in the industry as it tries to make profits and stay competitive, it is upto the company to find ways around some of these pressures, richly analysing what is driving the industry in general. Michael Porter did offer some suggestions to companies trying to sustain a competitive advantage with three strategies which were stress, cost leading or differentiation (Grant 2005). So depending on which strategy Nike chooses, it could choose to stick in better shoes by investing in R&D, focus on marketing or simply reduce prices to become the incapacitated cost leader in its industry like Walmart.