Porters Five Forces

NIKE AND PORTER’S COMPETITIVE FORCES MODEL

Rivalry among existing players

Is there a strong competition among the existing players? Is there a dominant player or are all equal in strength and size? This rivalry usually results in struggle for competitive advantage among the rival firms. This struggle for competitive advantage normally requires a lot of the rival firms’ resources. Rivalry among firms depends on

• The structure of competition.

• Structure of industry costs

• Degree of product differentiation

• Strategic objectives

With rivals such as Adidas, Reebok, Puma, and others, Nike is operating in a very competitive industry. The situation is even more compounded by the recent merger between two of Nike’s closest rivals, Adidas and Reebok.

Entry of new competitors.

How easy or difficult is it for new entrants to start competing, which barriers do exist? Huge resources are also usually required to prevent the entry of new rival firms. With the advent of the Internet, countering the entry of new firms is a very difficult task as even faceless organizations can pool a surprise. Threat of new entrants depends on

• Economies of scale

• Capital / investment requirements

• Access to industry distribution channels

• Access to technology

• Brand loyalty

The nature of all the above factors in the sports wears industry favor ease of entry.

Availability of substitutes.

How easy can a product or service be substituted? For instance, can users of sports shoes substitute other type of shoes for Nike brand? This threat is in addition to the one from rival firms. Threat of substitutes depends on

• Quality. Is a substitute better?

• Buyers’ willingness to substitute.

• Relative price and performance of substitutes

• Costs of switching to substitutes. Is it easy to change to another product?

The teens that constitute a sizable part of Nike’s market have the cell phones and other things competing for their money.

Customer bargaining power

The customer might get so powerful that it can unilaterally determine the terms of the transaction. This might lead to low margins for the seller.

• Concentration. Are there a few dominant buyers and many sellers in the