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William Opoku

Unit 1

Learning Aim C & D

The Effects of the Environment of a Business Introduction: In my report I am going to be choosing a business I will be writing about to do with this assignment. I will be talking about the environment and the effects it has on a business. The business I chose is Nike because I love the brand and I think it will be a good idea to put it in my assignment, another reason why I chose is because it competes in a competitive market.

History: The company Nike was called Blue ribbon sports which was founded in 1964 by A track and field PE coach Bill Bowerman and one of his old students Phil Knight. They opened their first shop in 1966 and then made Nike as a Shoe Brand back in 1972, after this they changed the name of Blue-ribbon sports to Nike in 1978.

Task 1 P4: Discuss the internal, external, and competitive environment on a given organisation M3: Assess the effects of the business environment on a given organisation. Internal Environment. Corporate Culture. The internal Environment refers to the society, participants, activities and influences within an organisation that have the potential to affect the actions of the organisation, in particular the conduct of its human capital. Firstly, let me start by Nike’s dress code, Nike’s dress code depends where you work, but lets say you work in a factory shop you have to wear black Nike bottoms and every quarter they send you new Nike tops to wear and you can wear any Nike shoes but you’re not allowed to wear boots or sandals. If you work in a normal retail outlet store they will give you your own uniform to wear to serve the customers that come into the store. Corporate culture can affect a business in many ways either if its positive or negative it can still affect a business for example it can impact sales, profits, and employee’s morale. Corporate culture can also affect how the business will gain employees to work with 1

William Opoku

Unit 1

Learning Aim C & D

them so lets say your company culture is bad no one will want to work with you but if you have a great company culture more people will want to work with you. Corporate culture also affects the company’s workers as it will influence the employees behaviour in a good way it will keep them motivated. Corporate culture can bring a risk to a company depending on the business, lets say it’s a strong positive corporate culture this will benefit the business a lot and it will allow them to be the biggest in the market whereas if its weak and broken it will break and destroy the business driven focused and strive for their goals and making it different compared to other business on how they treat their employees. From seeing reviews on how Nike treats their employees it looks like 80% of the people that work for them enjoy it. For example someone said its ‘Rewarding and Exciting’ and many more positive news to do with how they enjoy their work time there. But for whereas someone working as an assistant manager they said that ‘The management team is horrendous and they wouldn’t recommend anyone to work their’, this tells me how Nike has a mixed environment depending on the department that you work in.

Corporate Social Responsibility (CSR)

Corporate Social Responsibility is when a company takes it upon itself to be socially accountable to itself, stakeholders and the environment. Nike is strongly engaged into corporate social responsibility.

External Environment. PESTLE ANALYSIS Political: Nike does not benefit anything Income Tax or VAT Tax, because Nike is an internally scoped, they will have to pay for tariffs so then they can sell their goods in certain countries. However if Nike don’t maintain their sales records and all their purchases this will lead them to pay extra with the compliance cost. Since Nike works in many European stores with 750 stores with some of them being EU countries and Non-EU, and Brexit has now been in placed this will change Nike’s profit and sales this is because the EU imposed a 17% tariff on trainer reports, so since we are out of the EU the UK can reduce this to 0%. This will be good and bad for nike because 1. Nike trainers would become cheaper and easy to buy leaving Nike customers to buy more of their products this will make Nike receive a significant amount of money due to their revenue and profits rising drastically, but the bad said is that Nike would pay more for their Corporation Tax.

Economic: The government uses fiscal policy taxation and government spending to guide the economy in the right direction by increasing or decreasing production and supply of goods and services. Fiscal policies will increase investment, build employment and pave the way for long-term economic development. This won’t be 2

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Unit 1

Learning Aim C & D

good for nike as tax related fiscal policies will lead to Higher taxes or an increase in taxable goods which lowers the consumers net income. Nike has also been helped by Federal Reserve so they can prosper by controlling inflation and reducing unemployment so it can increase the standard of living in many countries in the world especially UK and USA. Another economic problem is due to the Covid 19 and Brexit this is because the UK is close to or already in recession leading the government to take the fiscal policy.

Social: Nike has social media accounts on all major networks, including Facebook, Twitter, YouTube, Pinterest and LinkedIn. The company diversified its online footprint by establishing distinct sites for its brands that appeal to various target markets. Nike has caused many people to find it hard to save with people buying all their latest products to show off. According to a latest questionnaire/ survey it is to be said 30% of Nike’s Customers buy all their latest products to show off and do other things this has been a habit for these 30% as they find it hard to stop spending on Nike products. Nike’s mainly target audience is ages between 15-45 the young adults especially love the Nike products they are the main customers, but also people who like sports tend to buy their products.

Technological: With a global growth in revenue and effect, Nike. has also changed its marketing strategy to reach out to its clients and prospective buyers. One such move is to expand ads relying more on the internet medium than conventional outlets. Nike uses new platforms and smartphones to reach out to consumers and popularise their diverse products. In the past two years, Nike has grown the online retail market.

Environmental: With growing worries about global warming, it has become increasingly important for global businesses to minimise pollution that is detrimental to the atmosphere. New environmental regulations often limit their production in different countries if they do not comply with specific laws. With pollution in many countries especially China where one of Nike’s factory is The Chinese government has took chance to lower the pollution level in China which has left Nike to pay a lot for production cost also limited use of fossil fuels has been added to their problems. Nike is working to reduce its exposure to greenhouse gas emissions in the supply chain. With this Nike has been designed new technologies that would not only emit less carbon dioxide and carbon monoxide, but will also reduce the need for essential raw materials.

Legal: Nike has had many legal feuds with competitors such as Adidas. In the year 2014. Subsequently, Adidas filed a $10 million claim over the theft of trade information, campaign tactics and model concepts after hiring a few former Nike employees. Nike also won a legal battle against the Jacobus Rentmeester’s appeal in 2018 after He accused Nike of ripping his iconic photo of Michael Jordan doing the 3

William Opoku

Unit 1

Learning Aim C & D

ball in the hoop photo, and he said them using the photo to create their own silhouette of the Jump man’s logo. Nike also faced other legal problems for using Child labor in some of their factories in the Lower Income Countries. They were sued for this matter aswell. Another thing they faced was when labourers were saying they received low minimum wage for the work they committed this led Nike to get sued for their illegal activity.

Competitive Environment.

Nike has a lot of competitors leaving their level of competition to be really high they have competitors such as Adidas, Reebok, Puma, New Balance, and many more. Competitive advantage is an attribute that allows the business to out perform their competitors such as Nike beating adidas in profit and sales. A competitive advantage separates the organisation and its rivals. It contributes to higher prices, more customers and brand loyalty. Without this competitive advantage companies will find it hard to survive.

Task 2. P5: Select a variety of techniques to undertake a situational analysis of a given organisation. D2: Evaluate the extent to which the business environment affects a given organisation, using a variety of situational analysis techniques. Situational Analysis. Situational Analysis is when a set of approaches used by management to analyse the internal and external world of the enterprise in order to identify the capacities, clients and market environment of the company. Situational Analysis allows a business establish a basis for understanding the context in which the strategy is being applied. It offers a common reference point for preparation and priority acts.

SWOT ANALYSIS:

STRENGTHS: Nike is labelled as one of the best sporting/clothing brand in the world/market. One of Nike’s strength is them being in top of the market above all 4

William Opoku

Unit 1

Learning Aim C & D

their competitors such as Adidas, and Puma. Nike had a successful year back in 2017 when they released their shoes Jordan 11 Space Jam these shoes led Nike to increase in profits and also release the most successful pair of shoes in history and also Nike History. In an annual report Nike’s revenue in the financial year was US$32.4 Billion in 2016 it then increased to $82.45 Billion in 2018 this is one of Nikes biggest strength as they are able to increase their profit, sales, and revenue. Nikes Leadership led them to this success with likes of Phil Knight the chairman leading them to this success.

Weaknesses: One of Nike’s weaknesses is how they treat their employees in poorer parts of the World as I said in one of my previous paragraphs to do with legal factors Nike treats their employees really bad from likes of Child Labour Lower minimum wage and many more. This can destroy Nikes brand image and repuation as people in the world don’t like these kind of illegal things. Opportunities: One of Nikes opportunities is developing new goods for the consumer and connecting them with the brand is the best bet they can play with. There is a possibility to develop high quality items such as sunglasses, watches and high-end sportswear. High demand products can have high profit margins and returns. Sport is an important part of a lifestyle. Consumers are trendier than in the past, they buy sportswear, but they don't need to be used in sports. It is also important to create a product such as trendy sportswear is Nikes biggest opportunities.

Threats: One of Nikes biggest threat is their competitors such as Adidas and Puma this is a biggest threat to them as they don’t want them to overcome them in the market. Nike must keep on doing what they are doing like how they price their products so they can stay at top as the market leader in the industry. Nike has its production units outside the US, must negotiate with the various currencies and keep a close eye on the prices and margins of the goods. Which may lead to losses due to currency fluctuations in foreign trading.

PORTER’S FIVE FORCES Bargaining power of suppliers: The bargaining power of suppliers is really low due to the fact that they are literally nobody compared to Nike as a company. This leads them to fall in financial problems since they are all over the world. As I said before main factories of Nike suppliers are in Asia were raw materials are easy to get and labor is very cheap. All these things such as regulations laws to do with labor has led bargaining power of suppliers to be lower.

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William Opoku

Unit 1

Learning Aim C & D

Bargaining power of customers: The bargaining power of customers in recent times has eroded a lot it’s the same aspect to do with Nike aswell. Nike are also designing better customer experiences to retain their customers so they can enjoy the company more. Another critical aspect that has contributed to a rise in consumer purchasing power leading to an increase in competitive competitiveness in the athletic shoe market. The average negotiating power of the consumers is high, which is moderated to a limited degree by the brand's good reputation, marketing capability, and the level of confidence and consumer loyalty.

Threats of New Entrants: Threat of New entrants is really low due to the fact that many businesses and brand start at the bottom and its hard sometimes for them to get to the top of market ladder as they will be dealing with big brands such as Nike. There is a very significant commitment in creating a huge brand like Nike that needs investment in infrastructure, technologies as well as human capital and marketing.

Threat of Substitute Products: Threat of substitute products is also a major problem toward Nike this is because many of brands might be selling similar products. There is many locally scoped and internally scoped business that are selling the same products as Nike such as sportswear, footwear, and apparel.

Task 3: P6: Explore how the market structure and influences on supply and demand affect the pricing and output decisions for a given business M4: Assess how a given business has responded to changes on the market D3: Evaluate how changes in the market have impacted on a given business and how this business may react to future changes. Market structure: Nike’s market structure is oligopoly market structure this is because Nike and Adidas own 60% of the market to do with the sportswear and footwear market, so since they earn a lot of money they can pay athletes to wear 6

William Opoku

Unit 1

Learning Aim C & D

their clothing which encourages more to purchase their range of clothing and footwear. One of the features for this Oligopoly market structure is the companys sell the same or different products, and also the industry has so many barriers for entry. The oligopoly market structure affects pricing in a way that if prices are raised , the other would lose market share. If it reduces its price, the other firms will match the lower price, allowing both firms to gain less profit.

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