Porter’s Five Forces Analysis of Nike 

Nike is an American sportswear manufacturing multinational brand. Bill Bowerman and Phill Knight established the sportswear company in 1964. Today, we’ll discuss Porter’s five forces analysis of Nike; the bargaining power of suppliers and buyers; threats of new entrants and substitute products; and competitive rivalry in Nike five forces analysis.

Nike’s main products and services in the sportswear category are as follows;

• Sports Equipment
• Sports Accessories
• Athletic Wear
• Footwear and shoes
• Leisure items
• Casualwear
• Apparel and clothes

Porter’s five force analysis of Nike would focus on the bargaining power of suppliers and buyers; the threat of new entrants and substitute products; and competitive rivalry. Here’s Nike Porter’s five forces analysis as follows;

Porter’s Five Forces Analysis of Nike 

Let’s discuss Porter’s five forces analysis of Nike, and they’re as follows;

Bargaining Power of Suppliers of Nike

There are a vast number of suppliers of synthetic leather, rubber, EVA, and cotton and it reduces the bargaining power of suppliers. Some of the main factors impacting the bargaining power of suppliers in the Nike five forces analysis are as follows;

I-Online Sale

Nike has established an e-commerce platform by approaching customers directly, and it has further reduced the bargaining power of suppliers and intermediaries. The online platform contributed 21% of the total sales of the company by generating sales of 9.1 billion USD in 2021. The annual increment in sales of the company is roundabout 60%; the growth has removed the margin and bargaining power of suppliers.

II-Supplier Influence

Nike deals with a lot of suppliers to acquire raw materials and supplies, and there are various suppliers available in the market. It has allowed the company to reduce its reliance on one supplier and diversify its product and service portfolio by offering various services.

III-Strategic Approach

Nike is the world’s leading sportswear brand with a global influence and many suppliers prefer to work with recognized brands due to consistency in orders. The company has diversified its supplier’s portfolio and platform both physical and digital channels.

Bargaining Power of Buyers of Nike

Customers could easily buy whatever brand they like without incurring any switching costs, but there are limited options available to them. It makes the bargaining power of buyers and customers moderate; some of the main impacting factors in the Nike five forces analysis are as follows;

I-Nutrition Segment

In order to satisfy the health and fitness needs of customers, Nike has entered the new area and offered nutritional products to the customers. The company plans to offer various types of products and services in the health and fitness category.

II-Flagship Products

In to maintain customer loyalty and satisfaction level, Nike offers various types of flagship products and services like Nike Training Club and Run Club. They offer the following services;

• Expert guide in the health and fitness category
• Personal training
• Community platform
• Social events

III-Buyer’s Influence

There are a lot of brand options available for buyers and customers; they have to choose one brand product or service. It gives significant bargaining power to the buyers.

IV-Strategic Approach

Nike has significantly diversified its portfolio in various categories and areas like operations, products, and business. It helps the company to maintain pace with digitalization and online channels. The focus of Nike is to capitalize on its expertise and resources in the best optimum way, it would help the company to retain the attention of customers.

The threat of New Entrants to Nike

The threat of any competitor entering the sportswear industry is low due to legal issues, technicalities, and other operational hindrances. Some of the key factors influencing the threat of new entrants in the Nike five forces analysis are as follows;

I-Asian Market

Nike is facing tough competition in the Chinese market from competitors like Li-Ling and Anta Sports. Their focus is on targeting the local target with their specific needs and requirements; which Nike failed to do.

II-Local Competitors

Nike is competing with the localized brands and companies. For instance, the annual sale of the sportswear brand has decreased by 9% in 2021 in the Chinese market.

III-Industry Growth

The market worth of the global sportswear industry in 2021 was 191 billion USD; it would reach 249 billion USD by 2026. The growth in healthy lifestyle trends would amplify the growth of the sportswear brand.

IV-Strategic Approach

Nike should implement low-cost and localized trends and strategies; and innovative technology while recognizing the new market relevant to the product development. It would help the company to maintain a leadership position in the market.

Threat of Substitute Products to Nike

There is no substitute product available in terms of quality, but there are other entertainment options available that make the threat of substitute products moderate. Some of the main substitute options in Nike Porter’s five forces analysis are as follows;

I-Global Economy

Various international political issues have pushed the global economy into the recession phase. During the recession phase, people don’t spend their income and earnings on leisure activities.

II-Leisure Activities

The digital media and entertainment industry offers a lot of entertainment options to the customer’s market. It significantly attracts the attention of the young customer market; they would prefer to watch movies and play with friends indoors rather than go outside and exercise.

III-Virtual & Video Games

Speaking of digital leisure activities, video games, and e-sports are the top alternative and substitute products and services available to the customers. That’s why Nike is expanding its business digitally in the e-sports industry to target the online customer market. However, the company would have to face tough competition from the tech giant companies.

IV-Alternative Products

While shopping online or in the physical stores; Nike has to face tough competition from various alternative sports brands. They are like Puma, Adidas, Under Armour, New Balance, Reebok, and others.

V-Market Trends

If you study the consumer market trends and patterns, then you will realize the emerging healthy lifestyle trends. Customers want to spend their time and energy engaging in healthy activities.

Competitive Rivalry with Nike

Nike is facing tough competition from various local, national, and international brands. Some of the main factors in the Nike Porter’s five forces analysis are as follows;

I-Competitors

Adidas and Puma are the top competitors of Nike and they have acquired a significant market share. They have made it difficult for the sportswear brand to maintain its position in the market. Along with top brands, Nike also faces strong competition from the localized brands in the international markets.

II-Strategic Approach

In a highly competitive sportswear market, the growth rate of Nike is slower in the global market. The focus of Nike is to develop its product and gain a competitive edge, it would help the company to amplify its growth rate.

Conclusion: Nike Porter’s Five Forces Analysis 

After an in-depth study of Porter’s five forces analysis of Nike; we have realized that Nike is the world’s leading sportswear brand with a global influence. If you are learning about the Nike five forces analysis; then you should keep in mind the bargaining power of suppliers and buyers; the threat of new entrants and substitute products; and competitive rivalry.