wever, political risks are imposed if Nike were to invest in China due to the issues on their legal and regulatory sectors. Political economy is a term of legal systems of a country which are interdependent between interacting and influencing one another (Hill et al, 2008). This causes a risk in financial and/or reputational loss because of the difficulties in complying to the host country’s rules and regulations (World Bank,2012).

There are many policies that will affect foreign investors when investing in China as this may affect the way investors manage their companies in the state. In 2018, China had introduced the Environmental Protection Tax Law, which was one of its key goals in their Five-Year plan to improve the country. The Environmental Protection Law refers to atmospheric and water pollutions, solid wastes, and industrial noise. The effects of the new law had created additional costs for firms in China as they had to modernize their installations to prevent themselves being taxed. Therefore, Nike has to understand the consequences before entering China’s market to sustain minimum risk to their entry.

Porter’s Diamond Theory

The Michael Porter’s Diamond Model is a diamond-shaped framework that focuses on explaining why industries within a particular nation may be competitive nationally, while others might not. The model is made by Michael Porter, who wanted to find out the elements to determine competitiveness of nations and sub-sectors, and to determine the kinds of contributions provided to develop competitive structures of countries (Sultan and Qaimary, 2018).

The model is based on four factors, and if the conditioners are favourable, domestic companies will continue striving to innovate and upgrade themselves. By applying this model, it would determine the factors Nike will have to consider in order to stay competitive in the industry.