Str 581 – Environmental Analysis – External and InternalEssay Preview: Str 581 – Environmental Analysis – External and InternalReport this essayEnvironmental Analysis – External and InternalSTR/581Environmental Analysis – External and InternalNike, the largest and most popular sports footwear and apparel corporation in the world (Lambert, 2013), experiences many internal and external environmental situations affecting senior leader decisions. To remain the top corporation in the industry, Nike must evaluate internal strengths, weaknesses, and resources. Furthermore, the external environment consisting of remote, industry, and external environmental factors provide opportunities and threats to the company.
Internal Organizational AssessmentIt is important for the Nike strategy team to assess internal environmental factors by identifying strengths and weaknesses when developing the short- and long-term strategies. Although the business world has put a great deal of effort into tools for analyzing external opportunities and threats, they have done less for internal analysis. “The development of tools for analyzing environmental opportunities and threats has proceeded much more rapidly than the development of tools for analyzing a firms internal strengths and weaknesses” (Duncan, Ginter, & Swayne, 1998, p. 1). The strategy team evaluated the strengths and weaknesses to determine which are the most significant and how each will add or subtract value.
Strengths: Brand recognition, High product quality, effective marketing strategy, capacity of innovation, strong distribution chain, strong R&D, Strong customer relationship/satisfaction (Nike, Inc., 2012)
Weaknesses: Overseas manufacturing dependency, decreasing US market share, high product price compared to competitors, currency exposure, medium retail presence (Nike, Inc., 2012)
Resources: Nikes strategy is to concentrate and strengthen their core competencies and outsource manufacturing and other functions (Espino-Rodriguez & Padron-Robaina, 2006). Nikes distinctive competencies include their brand image, marketing, and consumer devotion. In addition, other advantages are their experience as a global leader in the athletic footwear industry and extensive research and development for over three decades (Nike, Inc., 2012).
External Operating Environmental FactorsThe three interrelated factors of the external environment include the remote operating environment, the industry operating environment, and the operating environment. These operating environment factors have a great deal of influence and control from the company itself, such as the organizations ability to employ talented workers. The external environmental factors identified below shape the opportunities and threats of Nikes competitive situation.
Remote Operating EnvironmentsEconomic: Threats include economic Recession; slowdown of consumer purchases; variability of foreign currency, exchange rates, and labor costs; higher cost of goods; and numerous competitors. Opportunities include international expansion through brand recognition, and increasing economic conditions in other countries (Nike, Inc., 2012),
Technological: Opportunities include the increase in technology for research and development, scientific advancement in kinetics, increase in quality, and marketing information systems (Nike, Inc., 2012).
Political: Threats include an increase in government regulations in China and political instability overseas. Opportunities include deregulation in the United States and low interest rates (Nike, Inc., 2012).
Ecological: Large threat of natural disasters in China, Philippines, and other countries manufacturing and consuming Nike products (Nike, Inc., 2012).
Social: Threats include a lower discretionary income and change of demographic demands. Opportunities include a growing female athlete population and an increase in population wearing sports footwear and apparel for fashion (Nike, Inc., 2012).
International: Threats include a dependency on Chinese manufacturing and human rights concerns in developing countries. Opportunities include an expansion into emerging markets and an increase in global sporting competitions (Nike, Inc., 2012).
Industry Operating EnvironmentsEntry barriers: Todays athletic shoes are innovative and have a high degree of technological advances. Because of this, the industry requires large capital for research, development, and manufacturing creating a large barrier to entry (Hua, Wang, & Cheng, 2010). In addition, large shoe manufacturers, such as Nike spend millions on marketing and advertising using aggressive campaigns with celebrity endorsements (Nike, Inc., 2012). Second, economies of scale contribute to entry barriers because a new competitor in the market must compete with large production capabilities, well-established distribution chain, and extensive research and development (Hua et al., 2010). Government barriers to entry are low because manufacturers must apply to the same regulations.
Practical steps to overcome barriers to entry are also not only more effective. For many countries, and particularly to North America, barriers to entry have already been eliminated. Therefore, a national plan that does away with the barriers to entry will generate more effective measures to identify and control barriers. It is important to realize, however, that barriers to entry are not always limited to one country or area – for example the world economy or the way we access basic services, such as education, health care, and transportation (Hu-Li et al., 2013).
In addition, barriers to entry is not limited solely to a particular company, industry, or technology. The US and other developing countries have similar policies, which often require a unique set of standards and procedures for entry. Such policies would have an economic value, because they can allow companies to move fast for a wide variety of reasons. As many of the world’s top innovators continue to gain market share, the US will have an opportunity to follow suit and become a world leader in cross-regional innovation. In this regard, the USA recently set up a Global Competitiveness Forum (FCF), with a focus on national competitiveness. In 2014, the US announced a goal of reducing the economic impact of entry checkpoints, to the extent possible (Schneider et al., 2014). In 2015, the federal government enacted a new Federal Information Infrastructure Act (FISA), designed to provide greater certainty to companies seeking entry through national ID cards (Bryan, 2014), an approach that has significant implications beyond the ID card itself to include national borders as well – see e.g., White, Brier, de Souza, Dauber, and Hoeckl (2015). The current federal requirements for entry are currently in place, but the US can expect to adopt the same approach in the future (Eddy, et al., 2008). In a number of countries however, compliance in certain areas of the country that may be required has not yet been fully implemented. In addition, the country that enacted the Federal Electronic Application and Registration System (FADARS) in 2007, has very poor information regarding what information the U.S. government may require for any type of application, such as an online application form, a U.S.-issued passport, or documents that may be required online (e.g., a financial statement). For more information, see http://www.fda.gov/usg/fadars
Further, as discussed above, no single program must encompass all countries of origin. Consequently, the USA’s current system of entry policy is not designed to be inclusive of all countries. The country that imposes an entry-deprivation threshold in each country, in turn, determines the exact thresholds for entering those countries. In 2015, the US government enacted the Bilateral Comprehensive Agreement on Crime Prevention and Security (BCTA), which establishes a system that combines the United States and Canada and the European Union. This effort was critical in reaching the desired conclusion that a comprehensive policy of entry would effectively protect all people from terrorism. The government introduced a number of reforms that aim to have the BCTA to achieve the criteria for entry (McCall, 2009,
Powerful suppliers: Raw materials, including leather, rubber, cotton, and other textiles are