Aurore

SWOT Analysis:
Nike

Today, we’ll use the SWOT Analysis tool to take a deeper look at the internal strengths and weaknesses of Nike to identify their potential opportunities and threats in the global apparel market.

What is a SWOT Analysis?

The goal of a SWOT Analysis is to identify and prioritize strategic initiatives for a market strategy using relative strengths, weaknesses, opportunities, and threats.

There are two opposing forces that impact strategic decision making: internal factors that are within the company’s control and external factors that are rooted in the market. 

In this framework, the first two steps are to identify and evaluate the internal factors that impact our business, which highlight company strengths and weaknesses. The next steps are to evaluate external factors to determine potential opportunities and threats. The result is a priority-ranked list of processes, capabilities, and resources that are categorized as strengths, weaknesses, opportunities, and threats relative to the market.

Illustration by Marty Gallardo

Step One:
Internal Factors

What are internal factors?

Internal factors are the defining characteristics of the business that drive internal growth. These can be capabilities, assets, processes, or resources of the company.

At this step, the goal is to identify the ten internal factors that have the most impact on the market.

Nike example:

Nike participates in the global performance-apparel market. This is a mature market with a number of powerhouse brands dominating market share. The key to gaining advantage in this marketplace is through product innovation and marketing.

In this case, the most impactful factors are in Executive / Board Management,  Technology and Research, Product Innovation, Marketing, and Sales.

Step Two:
Internal Evaluation

How well does our company perform on the Market factors?

After selecting the most important market factors, evaluate your company’s performance on the internal factors. Determine whether your company leads, lags, or performs on par for each factor.

Then, rate the impact that the factor has on having success in the market.

Nike example:

Nike performs on par or better than average on the internal factors that have the most impact on the market. Logically this makes sense, because Nike dominates the marketplace.

In the next steps, we’ll look at the external environment to determine whether Nike should leverage their strengths to attack opportunities or try to improve their weaknesses to defend against threats.

Step Three:
External Factors

How do we select external factors?

External factors are environmental components outside of the walls of the company that impact the market by applying pressure or providing advantage.

In this framework, we’ve categorized the external factors into areas of the business environment and socioeconomic and political environment. Select ten external factors that have the most impact on the marketplace.

Nike example:

In this example, the external factors that have the most impact on the market come from the business environment.

Eight of the ten most impactful factors are components of the Competitive Environment, Technology Environment, and the Investment and Funding Environment. The final two external factors are components of the Social Environment.

Step four:
External Evaluation

What is the risk our company faces from environmental factors?

After selecting the most impactful external factors, evaluate the level of exposure your company has on each. The level of exposure is a risk calculation. A high risk (high exposure) means that your company is severely threatened by the emergence of that factor.

Then, identify whether the external factor has a positive, negative, or neutral impact on profitability.

Nike example:

In this example, new products pose a moderate to low risk, high positive impact due to Nike’s current dominance in other areas of the industry. If a new product were to emerge in the global apparel marketplace, Nike is well equipped to combat any threats and use the emergence of the new product to increase share and profit.

Dashboard:
SWOT Analysis

Swot Matrix

The SWOT Matrix shows the internal and external factors on two distinct charts.

On the internal matrix, strengths are listed on the right and weaknesses on the left. The most important factors to consider are those that float at the top of the chart.

On the external matrix, opportunities are listed on the right and threats on the left. The factors in the upper-right quadrant are the most advantageous opportunities, and those in the lower left have the highest threat to profitability.

Nike example:

One goal for Nike is to strategically shift their internal factors such as executive, board management and product design towards the upper-right quadrant.

The next goal is to identify how they can leverage their strengths in the internal matrix to pursue opportunities or defend against threats in the external matrix.

SWOT List

The SWOT list is a prioritized ranking of the strengths, weaknesses, opportunities, and threats of the business.

Use this list to prioritize strategic initiatives based on leveraging strengths to pursue opportunities, defending against threats, or fortifying weaknesses.

Nike example:

In the performance-apparel market, health trends have the highest impact on profitability. Nike’s first step would be to understand and identify the current health trends that impact the market. It would be advantageous for Nike to leverage their strength in technology or product innovation to attack that opportunity.

next steps:
IE Matrix

What's next?

The Internal-External Matrix recommends a strategic initiative for your company based on your company’s strengths and weaknesses relative to the market.

Use this recommendation to create strategic tactics based on your company’s optimal strategy. For next steps, develop three potential strategic initiatives and use a QSPM tool to compare the attractiveness of each initiative.

Nike example:

To no surprise, Nike is in a position to grow their business. In a growth strategy, the goal is to build, expand, and spend on strengths before spending to fortify weaknesses.

In the SWOT framework, this concept can be referred to as an SO (Strength-Opportunity) strategy. Nike’s next steps are to create potential initiatives that leverage their strengths to pursue opportunities.

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