Nike Corporate Level Strategy Analysis.
Nike's corporate level strategy includes a moderate level of diversification. The operational relatedness between businesses is very high. They share most information and technology needed to succeed. Nike falls into the category of related constrained, since less than seventy percent of revenue comes from a dominant business and all businesses share product, technological and distribution linkages. Nike's diversification is related because the firm builds upon or extends its core competency and resources/capabilities to create value. Also, economies of scope are incorporated. For example, Cole Haan line of luxury footwear and Bauer hockey utilize cost savings from capabilities and competencies that were developed in one of its businesses, Nike, and used in the others. Nike expects activity sharing among units to result in increased strategic competitiveness and improved financial returns, which it has seen. Moreover, intangible resources are difficult for competitors to imitate and/or understand. This allows the other businesses to gain an advantage immediately over competitors. .
Incentives and Resources.
Nike has many incentives to diversify, but most of them are internal. Nike has never left its core competencies. It is hard for you to tell whether or not Nike has diversified in the true sense of the term. Nike enters new markets and forms new parts of the company. If they acquire another company for their technology or resources, they always name these companies, "NIKE". .
Nike has chosen to diversify for internal reasons like lower firm risk. Nike realized that if they were to stay exclusively in the athletic shoe market the risk of market loss was substantial. With competing companies like Reebok, Puma, and Adidas, Nike knew that they would lose market share in the shoe market. This reason forced Nike to look to different areas of the sports world.