Nike not renewing franchise agreements in Russia

Reporting by Reuters; Editing by Simon Cameron-Moore and Tomasz Janowski 25 May 2022, Reuters

U.S. sportswear maker Nike has not renewed agreements with its largest franchisee in Russia, the Vedomosti daily reported on Wednesday, marking the latest exit by a major U.S. brand since Russian forces entered Ukraine in February, 2022.

On Monday, Starbucks Corp. said it was pulling out of Russia and McDonald's trademark "Golden Arches" were lowered near Moscow, following the sale of its burger chain to a licensee.Nike said on March 3 it would temporarily suspend operations at all its Nike-owned and -operated stores in Russia in response to Moscow's actions in Ukraine and has said that those still open are operated by independent partners.

Inventive Retail Group (IRG), which operates 37 Nike-branded stores in Russia through its subsidiary Up And Run, said there had been a shortage of goods since Nike halted shipments."In the current realities we cannot continue to support the operation of mono-branded Nike stores and will be forced to close them," said IRG PR Director Ludmila Semushkina.

IRG President Tikhon Smykov told employees that the company's franchise agreement would not be renewed, in a letter seen by the Vedomosti newspaper."We started a joint business in 2012, we lovingly built up the best chain of stores in the country and ended up 10 years later in a situation where that business cannot exist," Smykov wrote.

Nike has made other efforts to distance itself from Russia, pulling its kit sponsorship for Spartak Moscow, one of Russia's most popular football clubs, which subsequently axed its second-tier team, citing financial difficulties."God willing, we will have local producers the same level as Nike," said Moscow resident Konstantin. "It might be not too soon, but I think it will happen, God willing."

1. Analyses specific type of entry mode strategy undertaken for initial international expansion into Russia by following multinational companies:-

(i) Nike

(ii) McDonald's

2.The general environment is composed of factors external to an industry which usually beyond a firm's control that affect a firm's strategy. Evaluate with relevant

justification, one (1) general environment factor that has the greatest effect on the decision of Nike to end franchise agreements in Russia.

3.Using Porter's five forces model of industry competition, evaluate one (1) strongest competitive force affecting Nike's strategic decision as per the above case study.