Competetive Dynamics

Nike is a very competitive organization. Phil Knight (Founder and CEO) describes Nike operation as “Business - the war without bullets”. Nike Competitive rivalry is very intense. Company tries to maintain leadership positions so it has to respond to competitor decisions quickly and effectively. At the Atlanta Olympics, Reebok went to the expense of sponsoring the games. Nike did not. However Nike sponsored the top athletes and gained valuable coverage.

Nike and its major competitors operate in Fast-Cycle market. Companies’ innovations are not shielded from imitation and usually imitation is inexpensive and easy. For example Nike Air was soon imitated by all leading manufacturers of sport shoes. Consequently it is impossible to develop sustainable competitive advantage and companies have to deal with rivalry every time. 

Market commonality and resource similarity make competitive process more difficult. The fact that all major sport goods producers compete in different niches,  results in high market commonality, which makes innovation process more difficult and shot lasting. Because resource similarity is also strong between Nike and its competitors companies are easily aware about each others’ strengths and weaknesses.

The athletic footwear industry is competitive and mature market. Companies which compete in this niche are knowledgeable about explicit trends of customer decision-making. Market leaders like Nike, Adidas and Reebok have made the industry what it is today. Consequently, those companies who couldn’t gain competitive advantage like Saucony and K-Swiss have been struggling for years just to keep their brands alive. This cutthroat environment has drastically reduced desire of new companies to enter sport apparel or sport shoe market.

Even though above mentioned niche is lucrative lure, there are very few companies which could take risk and step in the waters of uncertainty and risk. Major actors’ reputation, their strong brand value and diversified products threaten new entrants. However “big fish” like Nike or Adidas would not respond aggressively to small company which may enter the market. Main reason is that small new entrants don’t carry significant risk for Nike market share, so responding against new entrants with aggressive steps may loosen focus on major competitors. Consequently Nike tries to keep an eye at big players.

Economies of scale also contribute to the lack of newcomers into this market. In order to have an edge over the leaders, companies must be able to compete at all levels such as reasonable pricing, efficient production, and high product quality. These things are difficult to achieve without the resources of an established manufacturer.

Another key barrier to entry is the access of traditional distribution channels. When combing the shelves at stores like Sports Authority and FootLocker, it is evident that the leaders dominate the shelves. Lesser-known brands are viewed by retailers as being too risky to replace an established brand name like Nike or Reebok on the shelf.

All above mentioned explains the complexity of Nike competitive dynamics.