The Concept and Process of Marketing

Market Research- First the company carries out extensive market research into what consumers want. It organises product research in line with the results of market research. Along with constantly engaging in qualitative market research activities. "Nike thoroughly examines and compares the aforementioned performance standards to the actual results that have occurred as a result of implementing strategies to meet or exceed performance standards. These standards are important to Nike as a comparison of past performance to present performance as well as in our attempt to forecast future results in these areas." [7]

Market Testing & Product Development- It uses athletes throughout the whole of America, right from junior league to major league and international level, to test new products and to provide feedback in order to furnish the company with new, good ideas for ongoing product development; along with constantly developing its existing product range.

Nike test markets new products in smaller market areas before launching them onto a wider market.

"Nike continues to seek new and innovative ways to develop superior athletic products, and creative methods to communicate directly with our consumers. Nike Free, Nike+ and Nike Sphere are just three examples of this approach." [8]

Customer Focus- The Company constantly evaluates ongoing customer perception of goods and services, in order to implement improvements to technologies and product offerings. Customer centricity is at the core of Nike's corporate marketing strategy. It primarily proposes the basic philosophy of the company should be to serve customers rather than sell products, and in the course establish long-term relationships by treating customer as strategic assets.

Nikes Customer Service Mission "To represent the highest service standard within and beyond our industry, building loyal consumer relationships around the world." [9]

Nike Mexico Headquarters

Nike is a popular supplier of soccer equipment worldwide.

Source: (http://en.wikipedia.org/wiki/Nike%2C_Inc.)

Elements of the Marketing Concept

"The marketing concept holds that achieving organisational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than the competitors do."

(Kotler et al, 2005 pg: 16)

Nike Marketing Concept

Delivering Customer Satisfaction & Integrated Company Effort- Nike's philosophy of customer centricity is emphasized top down and bottom up from within the organization. This philosophy ensures that customer retention becomes a priority, and that all the staff are committed to building long and profitable relations with customers. They research the wants, needs and desires of their customers i.e. athletes by sponsorships, focused product testing, etc.

"Nike continues to seek new and innovative ways to develop superior athletic products, and creative methods to communicate directly with our consumers. Nike Free, Nike+ and Nike Sphere are just three examples of this approach." [10]

Nikes Customer Service Mission "To represent the highest service standard within and beyond our industry, building loyal consumer relationships around the world." [11]

Profitability Based On Customer Satisfaction- The concept of building an organization around the profitable satisfaction of customer needs has helped the American manufacturer to achieve tremendous success in high-growth, moderately competitive markets. "Nike's distinctive competency lies in the area of marketing... Nike continues to have the greatest market share in the U.S. branded athletic footwear market." [12]

Delivering Satisfaction Better Than the Competitors- "Nike is involved in the production of goods for a wide variety of sports, competing with every sports fashion brand in existence. Because of the absence of any single brand that rivals the products of Nike, the company has no direct competitors, with the exception of German company Adidas." [13]

"Nike utilizes innovation to produce top quality athletic footwear and apparel. As a result of devoting vast resources to the research and development of its products, Nike has captured the largest market share in the athletic footwear and apparel industry and continues to be the leader of quality products." [14]

Nike Great Branding

Source: (www.thesun.co.uk/.../city/article383981.ece)

Benefits & Costs of a Marketing Approach

[15]

Benefits

Costs

Product is tailored to the needs of the customer so that you can produce what you can sell. As well as research & development enables the market led company to go ahead and gain more opportunities. (Leading to a quality product with low costs) - "Nike utilizes innovation to produce top quality athletic footwear and apparel. As a result of devoting vast resources to the research and development of its products, Nike has captured the largest market share in the athletic footwear and apparel industry and continues to be the leader of quality products..... Continuous marketing research could prove to be key in assessing the market."

Knowing your customer enables you to not only communicate more efficiently with cost effective marketing communications but also leads to long term relationships with high customer satisfaction (Leading to dominance of the market i.e. growth in market share)- "Nike continues to have the greatest market share in the U.S. branded athletic footwear market. In 1998, the closest competitor, Adidas, held 15.5% of the market share while Reebok held 11.2%. The remaining competitors, including Fila, Timberland, Asics, Converse, and New Balance, among others, each hold approximately 3-5% of the remaining market share. While Nike's market share is still in the lead, it is expected to increase with new products...... Nike's brand images, including the Nike name and the trademark Swoosh, are considered to represent one of the most recognizable brands in the world. This brand power translates into bottom-line revenues."

Once marketing becomes an organization wide discipline, not only understands the different functions within a company but also is able to relate marketing activities to other functional activities. Leading to cross functionality in the company thereby making it successful)- "Nike's distinctive competency lies in the area of marketing, particularity in the area of consumer brand awareness and brand power....Two key attributes of a distinctive competency are its inability to be easily replicated and the value or benefit it offers to consumers. As Nike becomes a more integrated part of American and world culture, our brand power becomes increasingly difficult to replicate. The premise of a trademark and a slogan is that they are a company's fingerprints. Nike is able to capitalize on its unique identity due to our industry-leading financial strength. Nike reaches millions of consumers through large-scale marketing campaigns made possible by significant budgetary appropriations. Few companies have such a recognizable image and the resources to promote it."

Satisfied customer helps in creating brand loyalty and brand name which is undoubtedly the most important of corporate assets (Leading to creation of brand equity)- "Nike continues to have the greatest market share in the U.S. branded athletic footwear market....Nike's brand images, including the Nike name and the trademark Swoosh, are considered to represent one of the most recognizable brands in the world. This brand power translates into bottom-line revenues."

"The explosion of the Internet has resulted in the empowerment of customers, internet to a great extent has reversed the information asymmetry and allowed access to hitherto unavailable information about product features, price and peer recommendation." (Leading to more aware and demanding customers).-Seeing this Nike launched its e-commerce site in April 1999 by offering 65 styles of shoes to the U.S. market for purchase. Also NIKEiD enables online consumers to design key elements of the shoes they purchase. The program represents the first time a company has offered mass customization of footwear.

"The future potential of the company and its potential attractiveness is often controlled by the capital markets, companies and managers are constantly under immense pressure to demonstrate the financial strength every quarter." (Forcing companies to adopt a short term perspective on Profitability)- "Our company's current ratio is 2.26, just slightly below the industry average of 2.28. The current ratio, while not a major strength, shows that Nike is inline with the industry concerning ease of converting assets to cash to cover short-term obligations. The quick ratio of 1.43 is above the industry average of 1.17. Being slightly above the industry indicates that we could sell less of our inventory than what other companies in the industry would have to sell to meet current obligations. Neither the current or quick ratio exceeds the industry average substantially enough to be considered a true strength. The fact that we are not leaders is ultimately a weakness."

"Market research is mostly analytical leaving little room for qualitative assessments of customer relationships towards products, services, or brands."

Extensive market research is needed, which makes it time consuming resulting in time delay for the product to get to the market. Also, irrational consumer behaviour which tends to be fickle cannot be changed by any amount of research. (Leading to loopholes in market research and development)- "Focusing on applied research can be a weakness as well. Many new, innovative ideas come into existence as a result of basic, unspecific research. Though more risky and expensive, Nike would benefit from increasing the amount of basic research we conduct with hopes of uncovering potential opportunities of which Nike could take advantage.

Measuring marketing productivity poses as a major challenge for marketers. Customer satisfaction is an outcome-oriented attitude deriving from customers who compare the performance or value of the product with their expectations of it. "It is claimed that the customer satisfaction approach depends too heavily on outcome oriented measures like satisfaction and too superficially on direct experiential measures. A customer is said to be satisfied when a products performance if it is above the customers' expectations."

(Posing as a difficulty to quantitatively measure the outcomes)- "Nike has had much success as a result of collaborating with other companies within the sports and fitness industry. However, at times we expanded into markets for which we were not strategically suited. An example is the decrease in brands made available due to declining sales of in-line skating and roller hockey products at Bauer Nike Hockey. As a result, we have had to exit two manufacturing operations at our Bauer Nike subsidiary. We had to terminate 51 employees. Had we anticipated the decline sooner, perhaps gradual changes could have been made so that the end result may not have been as

finite in nature."

Nike- Brand Irony

Source: (http://www.blogaholics.ca/category/marketing)

Identifying Factors Influencing Marketing Decisions

The marketing environment surrounds and continuously impacts upon the marketing decisions thereby influencing the whole organization.

The micro-environment

"This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence.

The macro-environment

This includes all factors that can influence and organization, but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology." [16]

Nike Inc. SWOT Analysis: [17]

Strengths

Weaknesses

> "Nike is a very competitive organization. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.' Nike has a healthy dislike of is competitors. At the Atlanta Olympics, Reebok went to the expense of sponsoring the games. Nike did not. However Nike sponsored the top athletes and gained valuable coverage."

> "Nike has no factories. It does not tie up cash in buildings and manufacturing workers. This makes a very lean organization. Nike is strong at research and development, as is evidenced by its evolving and innovative product range. They then manufacture wherever they can produce high quality product at the lowest possible price. If prices rise, and products can be made more cheaply elsewhere (to the same or better specification), Nike will move production."

> "Nike's management analyzes its internal environment and makes decisions based on that analysis. Because of Nike's marketing research, the company has decided to revamp its apparel division to be more fashion savvy. As a result of product and pricing research, Nike has decided to continue to focus on the high end market while increasing its market share in the middle and low price ranges in an attempt to broaden Nike's product spectrum."

> "Nelson Ferris, a 47 year-old head of its corporate education department states that, "The Swoosh represents something other than just a company. It represents a whole value system."2 Ferris, a long time employee, even has a Swoosh tattooed above his ankle. "It stops being a job and starts to become a way that your are defining the way your are living on earth"

> Nike's "facilities abroad have attracted bad publicity in recent years. Though our facilities comply with local labor standards, generally, they have not met U.S. standards."

> "The organization does have a diversified range of sports products. However, the income of the business is still heavily dependent upon its share of the footwear market. This may leave it vulnerable if for any reason its market share erodes."

> "The retail sector is very price sensitive. Nike does have its own retailer in Nike Town. However, most of its income is derived from selling into retailers. Retailers tend to offer a very similar experience to the consumer. Can you tell one sports retailer from another? So margins tend to get squeezed as retailers try to pass some of the low price competition pressure onto Nike."

> "In general, Nike's products are considered to be of higher quality and as a result have higher prices relative to our competitors. While the prices are realistic given the nature of the products we offer to our consumers, at times our consumers may not agree."

Opportunities

Threats

> Athletic shoes and apparel have become a staple in wardrobes worldwide. This is due to both the increasing numbers of people exercising and the trend towards casual apparel.

> Competition is fierce at all levels in within the industry, especially among the leaders. This creates a sense of security for the companies that have been able to create a niche.

> E-tailing, or customer-designed internet merchandise, is threatening the traditional distribution channels, thus eliminating the "middle-man" distributors and allowing for increasing profitability.

> "Product development offers Nike many opportunities. The brand is fiercely defended by its owners whom truly believe that Nike is not a fashion brand. However, like it or not, consumers that wear Nike product do not always buy it to participate in sport. Some would argue that in youth culture especially, Nike is a fashion brand. This creates its own opportunities, since product could become unfashionable before it wears out i.e. consumers need to replace shoes.

> There is also the opportunity to develop products such as sport wear, sunglasses and jewellery. Such high value items do tend to have associated with them, high profits."

> "The industry has reached a level of maturity. While style and technology in athletic apparel and footwear has reached a leveling-off point, the important aspect now is for companies to differentiate their lines."

> "In terms of market saturation, many of the key manufacturers in this industry have been around for many years. Consumers may be scanning the market for new and different footwear and apparel products."

> "The market for sports shoes and garments is very competitive. The model developed by Phil Knight in his Stamford Business School days (high value branded product manufactured at a low cost) is now commonly used and to an extent is no longer a basis for sustainable competitive advantage. Competitors are developing alternative brands to take away Nike's market share." "Consumers are becoming savvier and may lean towards discounted items."

> "Nike is exposed to the international nature of trade. It buys and sells in different currencies and so costs and margins are not stable over long periods of time. Such an exposure could mean that Nike may be manufacturing and/or selling at a loss. This is an issue that faces all global brands."

Nike PEST Analysis: [18]

Political-

* In the past 5 years have seen industry (Sporting and Recreational Goods and Supplies Wholesalers) decline, but consolidation of suppliers, greater stock management and a government campaign to promote health and fitness may ensure short term future growth.

* 'The lifting of quotas on footwear imports has seen imports from China rise by more than 50%. Purchasing prices are thus expected to continue trending downwards, with retailers taking the opportunity to improve margins rather than pass cost savings to the end consumer. Heightened competition is a shoe in going forward, with aggressive marketing and wholesaler bypass likely to take hold.'

* Cut and Sew Apparel Contractors industry is in the decline phase of its life cycle as evidenced by the large number of operators, increasing number of cheap imports, due to new import policies lack of new start up operations and price based competition. Moreover, it has attained a controversial reputation due to its decades-long association with sweatshop labor.

Economic-

* 'Asia economic crisis: Nike makes almost every one of its goods in Asia, and with the terror that is the Asian economy, costs are up and prices are up.'

* 'Inflation is looming over the U.S. economy, which may spark a cutback in consumer spending.'

* 'Increasing financial recovery in overseas markets proves to be an area of expansion for the athletic footwear and apparel industry.'

Social-

* 'People's lifestyles are changing towards their diet and health. As a result the World is seeing an increase in the number of people joining fitness clubs and a massive growth for the demand of healthier sports shoes, apparel and equipment. Nike is operating to create healthier sports shoes, apparel and equipment.'

* An opportunity produced by pressure groups is the ability to react in a positive manner to concerns of the public as well as customers. Consumer watch groups are paying especially close attention to Nike's use of sweatshops and child labor to produce our products. Nike's opportunity lies in being able to show the consumer force that we are indeed taking steps to reduce and eventually eliminate sweatshops and child labor through new policies and strict implementation procedures. Also, by responding to such consumer activism, Nike is portraying a positive image in that it is promoting ethics even while they are trying to be efficient and economical.

* 'Nike's once loyal market is currently aging. This means that our customers are not as athletic as they may have been in the past. However, this poses as an opportunity for Nike because they have the ability to influence the next generation of Nike customers. The older generation of Nike brand purchasers have the power to influence their children - part of the next generation of Nike loyalists. In addition, by marketing different types of shoes to this market, these existing customers will continue to be loyal to Nike.'

Technological-

* E-tailing, or customer-designed internet merchandise, is providing with a totally new marketing intermediary without the middle-man, also Nike being the first time a company offering mass customization of footwear allowing it to increase its profitability and market share.

* 'One of technology that Nike has applied is Global Technology Network. Nike will feature new print and television advertising, taking a different look at women and sports and featuring everyday women.'

* 'The industry has reached a level of maturity. While style and technology in athletic apparel and footwear has reached a leveling-off point, the important aspect now is for companies to differentiate their lines,

Reference List

[1]

Philip Kotler, Veronica Wong, John Saunders, Gary Armstrong (2005) Principles of Marketing, pg: 4, Prentice Hall, Europe.

[2]

( Nike Inc. - Company Profile Snapshot: http://wrightreports.ecnext.com) [28 Nov. 07]

[3]

(Company Overview: www.nikebiz.com) [28 Nov. 07]

[4]

Philip Kotler, Veronica Wong, John Saunders, Gary Armstrong (2005) Principles of Marketing, pg: 6, Prentice Hall, Europe.

[5] (http://www.venturerepublic.com/resources/Market_orientation_marketing_strategy_brand_leadership.asp) [28 Nov. 07]

[6] (http://condor.depaul.edu/~aalmaney/StrategicAnalysisofNike.htm) [28 Nov. 07]

[7] (http://condor.depaul.edu/~aalmaney/StrategicAnalysisofNike.htm) [28 Nov. 07]

[8]

(http://www.nikebiz.com/company_overview/history/2000s.html) [28 Nov. 07]

[9]

(http://www.nikebiz.com/customer_service/) [28 Nov. 07]

[10]

(http://www.nikebiz.com/company_overview/history/2000s.html) [28 Nov. 07]

[11]

(http://www.nikebiz.com/customer_service/) [28 Nov. 07]

[12]

(http://condor.depaul.edu/~aalmaney/StrategicAnalysisofNike.htm) [28 Nov. 07]

[13]

(http://www.blurtit.com/q173791.html) [28 Nov. 07]

[14]

(http://condor.depaul.edu/~aalmaney/StrategicAnalysisofNike.htm) [28 Nov. 07]

[15] Collectively Adapted & Sourced From:

o (http://www.venturerepublic.com/resources/Market_orientation_marketing_strategy_brand_leadership.asp) [28 Nov. 07]

o (http://condor.depaul.edu/~aalmaney/StrategicAnalysisofNike.htm) [28 Nov. 07]

o Marketing Orientation Handout- Marion Fieldstead, Wirral Metropolitan College (2007)

[16]

(http://marketingteacher.com/Lessons/lesson_marketing_environment.htm) [28 Nov. 07]

[17] Collectively Adapted & Sourced From:

o (http://condor.depaul.edu/~aalmaney/StrategicAnalysisofNike.htm) [28 Nov. 07]

o (http://www.marketingteacher.com/SWOT/nike_swot.htm) [28 Nov. 07]

[18] Collectively Adapted & Sourced From:

o (http://condor.depaul.edu/~aalmaney/StrategicAnalysisofNike.htm) [28 Nov. 07]

o (http://www.ibisworld.com/industry/retail.aspx?indid=339&chid=1) [28 Nov. 07]

o (http://www.megaessays.com/viewpaper/13289.html) [28 Nov. 07]

Bibliography

Fieldstead Marion- Marketing Handouts, Wirral Metropolitan College (2007), England.

http://www.blurtit.com

http://condor.depaul.edu

http://www.google.com

http://www.ibisworld.com

http://marketingteacher.com

http://www.megaessays.com

http://www.nike.com

http://www.nikebiz.com

http://my.starware.com

http://search.yahoo.com

http://www.venturerepublic.com

http://wrightreports.ecnext.com

Kotler Philip, Wong Veronica, Saunders John, Armstrong Gary (2005) Principles of Marketing, Prentice Hall, Europe.