Unit No : 02

Unit Name: Business and Business Environment

Business Environment Assignment 2

Bevin Biju Paul

Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

Contents
Business enviroment ............................................................................................................................... 4
Micro Environment ............................................................................................................................. 4
 Competitors – ......................................................................................................................... 4
 Customers – ............................................................................................................................ 4
 Distribution Channels – ........................................................................................................... 4
 Suppliers – ............................................................................................................................... 4
 General public – ...................................................................................................................... 4
S.W.O.T Analysis- ............................................................................................................................ 5
Macro Environment- ........................................................................................................................... 5
 Political – ................................................................................................................................. 5
 Economical – ........................................................................................................................... 6
 Social – .................................................................................................................................... 6
 Technological- ......................................................................................................................... 6
 Environmental- ....................................................................................................................... 6
 Legal – ..................................................................................................................................... 6
Impact of Micro and Macro environment on – .................................................................................. 7
1. Business Operations .................................................................................................................... 7
2. Objectives .................................................................................................................................... 7
3. Decision making .......................................................................................................................... 7
Impacts of Micro (a) and Macro(b) environment – ........................................................................ 7
About the Organization in Study – .......................................................................................................... 8
PESTEL Analysis of Nike Inc. - .............................................................................................................. 8
Political ............................................................................................................................................ 8
Economical ...................................................................................................................................... 8
Social ............................................................................................................................................... 9
Technological .................................................................................................................................. 9
Environmental ................................................................................................................................. 9
Legal ................................................................................................................................................ 9
S.W.O.T Analysis of Nike Inc.- ........................................................................................................... 10
Strengths ....................................................................................................................................... 10
Weaknesses .................................................................................................................................. 10
Opportunities ................................................................................................................................ 10

Bevin Biju Paul

Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

Threats .......................................................................................................................................... 11
About Competitor - ............................................................................................................................... 12
PESTEL Analysis of Adidas - ............................................................................................................... 12
Political .......................................................................................................................................... 12
Economical .................................................................................................................................... 13
Social ............................................................................................................................................. 13
Technological ................................................................................................................................ 13
Environmental ............................................................................................................................... 13
Legal .............................................................................................................................................. 13
S.W.O.T. Analysis of Adidas –............................................................................................................ 14
Strengths ....................................................................................................................................... 14
Weaknesses .................................................................................................................................. 14
Opportunities ................................................................................................................................ 15
Threats .......................................................................................................................................... 15
How competitors influence on decision making - ................................................................................ 16
Conclusion ............................................................................................................................................. 16
Bibliography .......................................................................................................................................... 17

Bevin Biju Paul

Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

Business enviroment
Any type of business has 2 different types of environments to deal with –

Micro environment and Macro environment

Figure 1 [ (googleimages.com, 2018)]

Micro Environment
According to [ (businessdictionary.com, 2018)] ,”Factors or elements in an organization's immediate
area of operations that affect its performance and decision-making freedom. These factors include
competitors, customers, distribution channels, suppliers, and the general public.”

 Competitors –
Those who sell same or similar products and services as your organization are known as
competitors, and the methods and strategies they use needs to be observed and taken into
account.

 Customers –
Anyone who purchases the products of the company is called a customer. It can be a person
or even a business. Anyone can be a customer as long as there is a purchase involved.

 Distribution Channels –
Wholesalers and retailers are known as distribution channels. There can be either a direct or
indirect channel, depending on how many intermediaries are involved.

 Suppliers –
The people who supply the raw material needed for production or other materials that are
needed for other work are known as suppliers.

 General public –
The public includes everyone who affects the business in a direct or indirect way. They can
help the company either achieve their goals or can even prevent them from doing so.

Bevin Biju Paul

Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

S.W.O.T Analysis-
It is a study undertaken by an organization or company to identify its internal strengths and
weaknesses, and as its external opportunities and threats. This helps the organization/company to
make decisions that will help shape the firm according to its strengths and opportunities and tackle
its threats and weaknesses.

Figure 2 [ (googleimages.com, 2018)]

Macro Environment-
According to [ (businessdictionary.com, 2018)] ,” The major external and uncontrollable factors that
influence an organization's decision making, and affect its performance and strategies. These factors
include the economic factors; demographics; legal, political, and social conditions; technological
changes; and natural forces.”

 Political –
These factors include how a government intervenes in the economy i.e. all the influences
that a government has on a business .This includes government policy, political stability or
instability, corruption, foreign trade policy, tax policy, etc. It also has a profound impact on a
nation’s education system, infrastructure and health regulations. These are all factors that
need to be taken into account when assessing the attractiveness of a potential market.

Bevin Biju Paul

Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

 Economical –
These factors determine the performance of an economy. They include economic growth,
exchange rates, inflation rates, interest rates, etc. These factors have an impact on a
company, since it affects the purchasing power of consumers. It also affects the way
business organizations price their products.

 Social –
These factors include population trends such as the population growth rate, age distribution,
income distribution, career attitudes, etc. These factors are important for marketers when
targeting customers.

 Technological-
These factors include innovations in technology that affect the operations of the industry
and the market. This refers to technology incentives, the level of innovation, automation,
research and development (R&D) activity, etc. With this knowledge you may be able to
prevent your company from spending a lot of resources on developing a technology that
would become obsolete very soon due to adaptive technological changes somewhere else.

 Environmental-
These factors include ecological and environmental aspects such as weather, climate and
climate change which especially affect industries such as tourism, agriculture and insurance.
They have become important due to the increasing scarcity of raw materials. These factors
have led to many companies and organizations getting more involved in practices such as
corporate social responsibility (CSR) and sustainability.

 Legal –
They include specific laws such as discrimination laws, employment laws, consumer
protection laws, copyright and patent laws, and health and safety laws. It is important that
companies need to know what is legal and what is illegal in order to trade successfully and
ethically.

Figure 3 [ (googleimages.com, 2018)]

Bevin Biju Paul

Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

Impact of Micro and Macro environment on –

1. Business Operations

2. Objectives

3. Decision making

Impacts of Micro (a) and Macro(b) environment –

1.
a. Micro environment helps in identifying and tackling the problems that are in the
grasp and control of the company thus making business operations easier to
work with. It also points out the strengths that can be worked on. Although it
can be a tiresome and it is definitely not an easy job, it is very important.
b. Although externals factors might not be in the control of the firm, Macro
Environment can help the firm adapt in order for smooth business operations.
2.
a. Micro environment helps in laying out the company’s objectives by weighing the
strengths against their weaknesses.
b. Objectives of the company are also shaped by external factors as they can either
make or break a company’s image or integrity. Thus Macro environment helps
to identify the opportunities in the external factors and avoid complications too.
3.
a. Internal decisions are made by comparing strengths, weaknesses, opportunities
and threats and are therefore crucial and important in building the company’s
foundation.
b. In order for the company to survive in the external environment, they have to
adapt likewise so that it doesn’t clash with the running of the organization.

Figure 4 [ (googleimages.com, 2018)]

Bevin Biju Paul
Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

About the Organization in Study –

Figure 5 [ (nike.com, 2018)]

Nike Inc. is an American multinational corporation/organization that is interested and occupied in

the designing, development, manufacturing, worldwide marketing and sales of sportswear and
equipment such as footwear, apparel, accessories and services. The Headquarters are located near
Beaverton, Oregon, Washington County, U.S.A.

PESTEL Analysis of Nike Inc. 1-

Political
o The United States, Nike’s ‘home country’ so to speak, has fantastic policies for growth which
are especially valuable to this corporation. These include low-interest rates and well-
arranged international tax agreements.
o As a company that produces and sells physical goods, Nike is, however, always subject to
changes in tax and manufacturing laws.
o Various political conflicts can always make customs related processes difficult, or prevent
imports and exports.

Economical
o A market collapse could mean bad news for Nike, along with many other big brands.
Consumers may choose to switch to lower-end, cheaper products if this were to occur, or
even just as a decent level of quality becomes easier to produce.
o Nike’s revenues are to some extent dependent on the low cost of labor in Far Eastern
countries. This is changing, though, which might mean higher Nike prices across the globe
come with the development in Less Economically Developed Countries.
o With its ‘deep pocket’ of finances, Nike has the resources to chase after small emerging
markets in which they could sell products.

1
Information from (pestleanalysis.com, 2018)
Bevin Biju Paul
Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

Social
o Worldwide increases in ‘health consciousness’ means that more and more individuals are
moving towards better lifestyles. These people will undoubtedly buy plenty of sports
apparel, something which would make Nike very happy.
o On the other hand, Nike receives much criticism for its dubious production processes. In
fact, the issue of Nike sweatshops is so prominent that it has warranted an entire Wikipedia
article on the topic .

Technological
o Social media allows things to blow up or whittle away faster than ever. Nike is doing well
with using social media to build their brand, but it can be a double-edged sword if used
incorrectly.
o Nike also gets the opportunity to use valuable information based metrics thanks to
technological advances, allowing for them to optimize targeting and production, and
maximize revenue

Environmental
o Nike’s mass production factories are, without a doubt, harming the environment. Not only
do they release plenty of aerial pollution like most factories, but Nike’s production centers
occasionally go as far as directly polluting rivers .
o However, Nike also shows promise of a change in their current practices, with a strong
resolve to become more ‘eco’

Legal
o It shouldn’t surprise you to hear that, like most massive corporations, Nike also dodges
substantial amounts of tax. In recent years, there hasn’t been too much of a crackdown on
this, but it’s still valuable to consider.
o Also, Nike occasionally meets legal repercussions for its shady marketing practices, which
include false discounts.

Figure 6 [ (googleimages.com, 2018)]

Bevin Biju Paul

Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

S.W.O.T Analysis of Nike Inc.2-

Strengths

o DOMINANT MARKET POSITION WITH A STRONG BRAND PORTFOLIO

It is no doubt that NIKE is one of the leading suppliers of footwear for athletes all over the
world. Controlling about 45% of the market share in the U. S, they were listed as one of the
top 30 of 100 most valuable brands in 2016. Their dominant market position is mainly due to
their portfolio of strong brands such as NIKE, Converse, Jordan, and Hurley. Each of the
brands specializes in different aspects, for example, the Jordan is more focused on the
collection of athletic wear for basketball players.

o FOCUS ON R&D ACTIVITIES

This has been one of the primary reasons why they’ve been able to maintain the top position
in the business. They focus on technical innovation that brings more comfort, while also
reducing injuries for athletes. They also make use of the services of experts in athletes such
as the coaches, trainers, and athletes who they consult to produce better products.

o MULTI-CHANNEL APPROACH
NIKE distributes their merchandise through retail stores, but both online and physical as well
as other channels. They own a lot of retail stores all over the world, and they also distribute
their products through a mix of independent distributors and licensees. In total, NIKE has
592 retail stores all over the world, and they also sell their products through their website
www.nike.com. Their multi-channel approach has substantially increased their reach and
their customer base in total

Weaknesses
o DEPENDENCE ON INDEPENDENT CONTRACT MANUFACTURERS
NIKE largely depends on independent manufacturers outside of United States to supply it
fabrics and also to produce most of its products. Hence they have limited control on the
quality of their product. Some of the countries where they have contract manufacturers
include China, Indonesia, and Vietnam. This means that any mistake on the part of the
contract manufacturers affects them too.

Opportunities
o GROWING GLOBAL FOOTWEAR MARKET
Recently, there has been tremendous growth in the total revenue generated from footwear.
There was an increase of about 4.8% in total revenue between the years of 2010 and 2014,
and there is also a forecast of an increase of about 19.9% between the years 2014 and 2019.
Owing to the company’s strong brand portfolio, they are in a good position to take
advantage of the growing need for footwear.

o GROWING ONLINE RETAIL CHANNEL

There has been a preference to shop online by customers recently. This is evident in the
statistics of the amount spent on online stores by citizens of the United States increasing

2
Information from [ (marketingteacher.com, 2018)]
Bevin Biju Paul
Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

every year and recently at a high rate. A similar trend has also been recorded in Europe in
respect to this. With NIKE’s online stores www.nike.com, and www.converse.com, they can
turn this in their favor thereby increasing their revenue.

Threats
o GROWTH IN COUNTERFEIT PRODUCTS
With the increase in internet usage, there is no doubt that there will be a bad side to this. It
has aided the full spread of counterfeit product all over the world. The number of IPR
seizures made in the United States increases by about 25% within a year, which shows the
rate at which counterfeit products are being pumped into the market.

o INTENSE COMPETITION
NIKE is involved in one of the most competitive businesses in the United States as well as in
the world. With a lot of strong competitors such as Adidas, PUMA, V.F Corporation, NIKE has
a lot to do to maintain their position as the leader in the market.

Figure 7 [ (googleimages.com, 2018)]

Bevin Biju Paul

Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

About Competitor -

Figure 8 [ (adidas.com2018, 2018)]

Adidas AG is a multinational corporation and organization which is founded and headquartered in

Herzogenaurach, Germany. They design and manufactures shoes, clothing and accessories. It is the
largest sportswear manufacturer in Europe, and the second largest in the world, after Nike.

PESTEL Analysis of Adidas 3-

Political
o Adidas supplies, ships, and distributes their products worldwide. This requires them to
extend international supply chains and follow political procedures when selling products
online. The company also uses political forces as a method of intervention of counterfeit
products.
o Each country abides by their own taxation system. Adidas is required to abide by these rules
for each sale and each product distributed overseas. The company tends to outsource the
development of their product to third world countries. Most likely because it reduces
manufacturing costs. But communities don’t condone this type of business.
o Additionally, Adidas must follow these laws:

 International trade agreements

 Product safety laws
 Labor laws

3
Information from [ (pestleanalysis.com, 2018)]
Bevin Biju Paul
Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

 Consumer safety product regulations

Economical
o The sports good industry is concentrated. The 50 largest companies contribute to roughly
70% of the industry’s revenue. Adidas is one of these organizations.
o The products Adidas creates are deemed “leisure items”. They’re not a necessity. Sales are
driven by sports buyer trends and preferences.
o Leisure products of different categories must compete against each other. Sports products
are competing against the gaming industry and music industry. The global economy
fluctuates. Manufacturers shift to accommodate this. Adidas must research where to sell
and distribute products. This ensures company growth and opportunities.
o Adidas manufactures products in China because they’re labor intensive with low cost for
creation. Especially compared to North American countries. Adidas must play smart with the
price of materials. But they face continuous challenges when importing/exporting goods.
And the rise of counterfeit products dampers Adidas’ sales

Social
o Adidas changes designs of their products. Designs match the interest of consumers. Products
are often available for any age, gender or lifestyle. But their core focus group are health-
conscious buyers with a love for sports. They must keep up with health trends and
preferences to cater to their audience.
o They also offer corporate volunteer programs. They support communities and foster the
health of individuals. Adidas also supports the Olympics, which allows them to leverage
marketing opportunities and catch the eye of new audiences around the world.

Technological
o Adidas tests their products under varying conditions. It’s because they cater to athletes.
They are trying to optimize performance for coaches and professionals in the sports
industry. For durable solutions to athletic problems, they use natural material replacements.
o They support online sales through their website and with social media. Now, they’re
studying the smart sportswear industry. Technology, like the Fitbit, is quite popular in the
health communities. Adidas can use these technological advancements to dive into new
industries and develop an edge over the competition.

Environmental
o Adidas decreases environmental impact. It’s their duty to monitor hazardous substances and
eliminate them. This may be why they offer natural materials in their products.
o They follow ethical business practices by committing to ensure supplies are following
regulations in every country their products are manufactured in.

Legal
o Adidas has ownership of intellectual properties and IP systems. They also have design
patents, defending their right against copiers and infringement. The patents also serve as
legal protection to end counterfeit businesses. As a big company, they naturally have
trademark production.
Bevin Biju Paul
Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

o Because if their connection to the sports world, Adidas endorses celebrity sponsorships as a
form of marketing. And follow full compliance with national and local laws

S.W.O.T. Analysis of Adidas4 –

Strengths
o Legacy & heritage:
With decades of heritage & legacy, Adidas has travelled a long way to establish itself as
a youthful brand. The brand was started in 1949 and has travelled a long way since then.

o Diversified portfolio:
Company has multiple product portfolio’s with varied range of footwear & accessories
under brand name Adidas (premium segment) & Reebok (mid range).

o Strong financial position:

With its 2400 store globally accounting $4.3billions, the company is in strong financial
position.

o Distribution network:
By selling it from online stores to company owned stores to supermarket stores, Adidas has
an effective distribution system for their products available through different channels.

o Branding by creating touch points with the community:

Celebrity endorsements & sponsoring major sports organizations such as FIFA, UEFA, NBA &
Olympics has increased the awareness of Adidas in the market & hence it has increased the
highly targeted customer base as well.

 Collaborations & memberships:

Strong relationship within the sustainability area with organizations such
as International Labor organization, International Finance Corporation has given the
company an edge over competitors so that they can have a sustainable business.

Weaknesses
 Premium price range:
High price range due to innovative technology & Production methods have made the brand
affordable to limited customers only, especially in developing countries.

 Outsourced manufacturing:
Adidas has 93% of production outsourced to 3rd party manufacturers (largely to Asia) to avail
of low labour cost & easy availability of resources. They are running a risk of over
dependency on outsourcing especially in Asian markets. Also, the overall quality of products
perceived by the consumers of developed economies is a major concern as far as brand is
concerned.

 Limited product line:

Adidas along with the recently acquired Reebokbrands, has got only 2 brands under their
group although they have got deep assortments within these brands. Thus, there is more
scope for product line expansion.

4
Information from[ (marketing91.com, 2018)]
Bevin Biju Paul
Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

Opportunities
 Changing Lifestyle:
With the saturation of developed economies, changing taste & preferences, education &
changing lifestyle of developing economies, there is a steep rise in the demand of
premium goods & services.

 Market development:
Entering into new markets will be the only way to succeed in the future because developed
economies are already having high competition.

 Expansion in product line:

Expanding its product line will open a new set of opportunities while at the same time it
can differentiate itself from the competitors by following this strategy.

 Increasing demand of premium products:

If we only consider the Indian market then there is a growth rate of 33% in demand of
premium products. This tells us the future business opportunity & expanding market size of
developing economies.

 Backward integration:
This will be smart strategy if followed by Adidas as it will help Adidas to secure their patent
rights & also integrate their R&D with the operational team in order to work in open system

Threats
 Competition:
Although Adidas is a global brand but it is facing fierce competition from other brands
like Nike which is No.1 brand and Adidas being in 2nd Position in this premium segment.
Besides this, there is regular competition from local players, substitutes and market
penetrators.

 Supplier Dominancy:
Due to majority of its production being outsourced; Suppliers have more bargaining power
then the company.

 Government Regulations:
With its 35% products manufactured in China & 93% of production happening in Asia, Import
regulations, duty & tariffs plays a critical role in the pricing and success of the company.

Bevin Biju Paul

Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

How competitors influence on decision making -

 Competitors shape and influence the decisions made by the organization internally and
externally; in the micro and macro environment.
 Companies need to differentiate their products from competitors in order to create a
demand for a better or improved product in order to capture the eyes of customers. If the
products of the different companies seemed similar, then there would be no reason for the
customer to choose your product over your competitor’s. Hence the decisions made by a
company should be different from its competitor.
 If a competitor has better strengths and opportunities and/or if they have fewer threats and
weaknesses compared to a company, the competitor might over shadow the company.
Hence it is crucial for a company to use its strengths and opportunities best to tackle their
threats and weaknesses.

Conclusion
This report shows how crucial it is to identify a company’s strengths and opportunities and make
best use of them to help deal with their weaknesses and threats.

Internal factors affect the micro environment and are usually within the grasp and power of the
company and external factors affect the macro environment and are usually hard or impossible for a
company to control so they have to adapt instead. These factors do play a big role in the decision
making of a company.

Bevin Biju Paul

Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456
Unit No : 02
Unit Name: Business and Business Environment

Bibliography
adidas.com2018 [Online] Available at: https://www.adidas.com/us [Accessed: 15 Nov 2018].

businessdictionary.com [Online] Available at: http://www.businessdictionary.com [Accessed: 15 Nov

2018].

googleimages.com [Online] Available at: www.google.ae [Accessed: 15 Nov 2018].

marketing91.com [Online] Available at: https://www.marketing91.com/adidas-swot-analysis/

[Accessed: 15 Nov 2018].

marketingteacher.com [Online] Available at: http://www.marketingteacher.com/nike-swot-analysis/

[Accessed: 15 Nov 2018].

nike.com [Online] Available at: https://www.nike.com [Accessed: 15 Nov 2018].

pestleanalysis.com [Online] Available at: https://pestleanalysis.com/pestle-analysis-of-nike/

[Accessed: 15 Nov 2018].

pestleanalysis.com [Online] Available at: https://pestleanalysis.com/pestle-analysis-adidas/

[Accessed: 15 Nov 2018].

Bevin Biju Paul

Pearson BTEC Level 5 HND in Business(RQF)
Regd No: 123456