Question: Using Porter's Five Forces and the Cost Advantage Strategy explain how NIKE has become a dominant fore in their industry.

Hint:

Porter's Five Forces: (1)rivalry, (2) buyer power, (3) supplier power, (4) threat of new entrants, and (5) threat of substitute products.

Cost advantage strategy:

(1)Economies of Scale or Scope:

Greater unit volume allows firms to have lower costs by:

• spreading fixed costs across more units
• specialization of equipment and people

(2)Learning and Experience

Greater cumulative volume drives cost differences due to greater learning and experience within companies with more cumulative experience in production.

(3)Proprietary Knowledge

Some companies develop proprietary knowledge in the production of their product or service, which leads to a cost advantage.

(4)Input Costs

Some companies may have lower input costs than others due to:

• greater bargaining power over suppliers or labor
• superior cooperation with suppliers (including lower transaction costs)
• sourcing from low-cost locations (e.g., country comparative advantage)
• preferred access to inputs

(5)Different Business Model

Eliminating activities or steps in the value chain or using a different set of activities altogether may allow a firm to deliver a product or service at lower cost.