Michael G. Castro
MBA6008 – Global Economic Environment
February 15, 2013
Being the world’s leading innovator in athletic footwear, apparel, equipment and accessories, Nike holds to their mission to bring inspiration and innovation to every athlete in the world (Bowerman, 2011). Not only does Nike design, develop, and sell a slew of products and services to help athletes, they also market sports-inspired products for everyone else whom Nike classifies as an athlete because in their eyes, if one has a body, then they are an athlete.
Nike’s main driver is in its emphasis on sports, however it is in the apparel industry. At the end of fiscal 2011, Nike, Inc.’s affiliate businesses contributed approximately $2.7 billion of the company’s $20.9 billion in revenue (Bowerman, 2011). In this fast paced industry run strictly by demand, Nike tops the apparel world beating out a fashion icon in Ralph Lauren and two large conglomerates by the name of VF, which owns brands like Jansport, The North Face, Wrangler and Timberland; and PVH, which owns Calvin Klein and Tommy Hilfiger (Fortune, 2012).
Nike must solve for a nearly never-ending array of variables. This paper will cover some of Nike’s business–affecting forces in terms of analyzing their macro and micro economical forces. In addition to the factors, economic implications on global operations will be covered Nike’s industry and business.
The Macroeconomic Environment of Nike
Macroeconomical factors are those external forces that are uncontrollable and that can affect how a business operates. With these factors being so out of the control of the business, these often lead to a variety of changes in operating, management, production, and marketing. These factors will be categorized using the PESTEL (Political, Economical, Social, Technological, Environmental, Legal) framework, which is designed to provide managers with an analytical tool to identify different macro-environmental factors that may affect business strategies, and to assess how different environmental factors may influence business performance now and in the future (BusinessMate, 2009).
From a political standpoint, government must create economic policies that will foster the growth businesses. Nike, fortunately, has been helped by the US policies that enable it to advance its products and business. The support allowed Nike, by the US government particularly in the general macroeconomic stability (government sponsored enterprise obligations), stable currency conditions (foreign subsidiaries major banks and money market funds) and the international competitiveness of the tax system, form the foundation critical to Nike’s growth (NIKE, INC., 2012).
Being such a mainstream multinational company being sold in approximately 170 countries and employing roughly 38,000 employees across 100 sales offices and showrooms, about 65 administrative offices and more than 700 retail store worldwide (Nike Responsibility, In Fiscal Year 2011, 2011), Nike is subject to income tax and a variety of other taxes in the U.S. and numerous foreign jurisdictions (NCRR, 2012). With that said, Nike recognizes and complies with all tax laws and regulations governed above them. As a result, Nike closely monitors, with the help of governments, changes in tax laws and advocates, when necessary, in avoidance of double-taxation (NCRR, 2012). Nike will work diligently to advocate any unfair regulations that would adversely affect their profitability, primarily when compared to other competitors (NCRR, 2012).
By far, the largest threat for Nike would be the economy. During recession, Nike’s growth will be adversely affected. With our own economic strife in the U.S., Nike is feeling the pinch of the economic recession internationally. This severely hinders Nike’s day-to-day production...