According to company legend, Phil Knight developed Nike’s business model in the early 1960s.
We grow by investing our money in design, development, marketing and sales and contract other companies to manufacture our products.
By outsourcing production to lower-cost producers, Knight believed that he could undersell competitors and break into new markets. As a result, (then) Blue Ribbon Sports began to import high-tech sports shoes from Japan. (Senthil, 2003)
The Nike brand was launched in 1972 and the company continues to cultivate suppliers in lower-cost countries. By guaranteeing a significant number of orders and by placing Nike employees at factories to monitor quality and process, Nike was able to help vendors establish an extensive network of footwear factories throughout Southeast Asia. Today, Nike's employs over 500,000 workers in 51 countries. Nike has only 22,658 direct employees, most located in the US. (Locke, 2003)
Product Diversification
Over the years, Nike has broadened its product width and moved into the apparel and sports equipment sectors. Nike has expanded its geographic segment beyond the US into Europe, Latin America and Asia. Last year, the company made about US$9.5 billion in revenues, of which 59% came from footwear sales and 29% from apparel. (Locke, 2003)
Table 1: Nike’s 2001 Sales Revenue Breakdown.
Brand Management, Brand Image and Leverage
The most enduring meanings of a brand are its values, culture, and personality. Brands give the seller the opportunity to attract a loyal and profitable set of customers. Strong brands help build corporate image, making it easier to launch new brands and products and gain acceptance by distributors and consumers. (Kotler, 2000)
Good brand management lies in controlling, as far as possible, the influences that shape beliefs. Two important characteristics of brands are functionality and representa-tionality (easily identified and admired). (Senthil, 2003)
In 1992 Nike opened its first ‘NIKE TOWN’ store. In 1995 Nike acquired Canstar Sports (makers of hockey equipment) and signed golf star Tiger Woods to a $40m endorsement contract. In the same year, Nike acquired a license to place its logo on National Football League uniforms. In 1996 Nike was heralded Marketer of the Year and Nike was more recognized and coveted by consumers than any other sports brand. In 1997, Nike launched the Jordan athletic footwear and apparel division. The company also entered a new market segment and formed a strategic alliance with Marker International to produce snowboarding apparel and related products. In 1999 demand for athletic shoes weakened and Nike reported its first drop in sales since 1994. In 2000 the company launched a line of athletic electronics, including MP3 players and heart monitors. (Senthil, 2003)
Weakness:
Nike’s brand has made them the unparalleled market leader in athletic footwear, apparel and equipment. Nike has been languishing for the past three years when competitors like Adidas and Reebok won their market share. Nike's image has suffered since issues about working conditions of Asian supplier factories surfaced. People reacted strongly against the company's policies and this has resulted in deterioration of the Nike brand value. Knight's strategy of valuing star endorsements over employees also left much to distaste. At one point of time, the company chose to sign a contract with a sports star rather than pay employees. (Senthil, 2003)
‘Nike’ does not have many stores (Nike Town), they mostly distribute most of their products to retailers, such as Footlocker, JJB, Sports Division and many other stores. For example this is a disadvantage, because ‘Nike’ cannot show consumers their entire range of products. If their Were a large amount of ‘Nike’ stores they could even enlarge their market share.
In 1996 allegations were made against Nike workers within their Asian factories were underpaid and mistreated. The allegations included:
- Salaries were less than required by local law
- Working conditions were unsafe and protective clothing was limited
- Worker were forced to work overtime
- Pregnant workers were fired
The marketing category that ‘Nike’ are based in may also be its weakness, because they are in the acid led market, this may be a weakness, because they only take in half of consumer needs and requirements and the rest they contribute towards design.
This could sometimes mean that not all of their products are successful. For example if they only took a few consumer needs and requirements and the rest they thought of, it may not be what consumers are looking for.
Allegations were made that ‘Nike’ allegedly were breaking the human rights law by unlawfully treating their workers around Asia, by not paying workers the minimum wage, treating them inhumanly, etc. This could be weakness for ‘Nike’ people protest against and their image may suffer resulting in fewer consumers.
Opportunities:
The female sports market is largely untapped by major sports brands.
Nike are in a unique opportunity to leverage their substantial brand image to target the female sporting apparel and equipment market segment on a larger scale. (Senthil, 2003)
‘Nike’ are mostly recognized as great trainer designers and manufacturers, but there is a great opportunity for ‘Nike’ to design shoes. At the moment they do not really design shoes only those that are designed for Golfers. We are confident that if ‘Nike were to design shoes, they would be successful.
There is a lot of competition in the footwear industry and ‘Nike’ own most of the market share, which means that they have a lot of funds. This would be a great opportunity to exploit the other footwear industries that have not got a large market share. For example ‘Nike’ could lower the price of their trainers, so that it puts their smaller competitors out of business.
‘Nike’ could also advertise their products and try to sale their products in different places around the world, such as like Asia. For example this could be a good opportunity of increasing sales and awareness of ‘Nike’
Threats:
‘Nike’s’ major competitors are ‘Reebok’ and ‘Addias’. The threat could be that these footwear industries create better footwear than ‘Nike’, which could lose ‘Nike’ consumers. To counter this threat ‘Nike’ must make sure that they design products that consumers would buy, for example large range of products.
Social trends could also threaten ‘Nike’ although they set the fashion, other trends may come into fashion. For example people may want to through in the casual trend and decide to dress smarter. If a new footwear business were take Nike’s consumers, they may lose custom, which could be disastrous.
Recently Nike has experienced difficulties in positioning itself effectively with younger consumers, who have purposely avoided overtly commercial brands. Since 1997, the industry has suffered through a down turn. Although Nike started to recover in late 1999, like most clothing and footwear makers, Nike is vulnerable to the moods of the fickle teen market. In the mid-priced shoe segment, brands such as Sketchers have cut into Nike's market share. (Senthil, 2003)
Interbrand revealed 41 of the top 100 brands declined in value between 2000 and 2001. A study of American lifestyles by advertising agency DDB, found that consumers between the ages of 20 and 29 who said they were loyal to known brands fell from 66 percent in 1975 to 59 percent in 2000. Nike is struggling to increase volumes, raise prices and boost margins. (Senthil, 2003)
4Ps of marketing
It is recommended that Nike follow a focus strategy. Nike should focus on the female age 20-40 age groups with specific targets of ‘trend’ sports shoes, apparel, and equipment. Nike should differentiate itself by way of style and quality leadership. Nike should also capitalize on the opportunity of selling to females to shift recent negative associations with the brand image.
Products
It is recommended that Nike concentrate on broadening their current product portfolio and develop new products for the female sporting apparel and equipment market. Nike may utilize their widely recognized brand image to launch new products under the new Nike ‘Goddess’ label. It is recommended that Nike develop new products to cater for popular ‘Female sports’ with apparel and equipment for sports such as golf, swimming and ‘trend’ sports such as Pilates and Yoga.
Pricing
In price Nike has to come up with various options for those who are looking for economical products and for those who are looking for reliable products so that, it can deliver products to entire segment who want cheap product and who want quality products. In order to achieve this Nike has to further expand its production in Asia to get cheap product under high QC to offer the products globally at economical prices that even buyers in Asian countries can afford.
Nike should maintain their current price structure of being the higher priced more stylish product to buy.
Promotion/Advertising
In Promotion Nike has to still strength its Swoosh brand as the only brand to cater entire demographic for their sports needs. It has real competitor like Reebok, Addidas, etc who have the same quality and pricing strategy and can overtake Nike at anytime if Nike does not propagate its products to the target segment. For this Nike has to budget extra revenue for sponsorships, sports events, advertisement, etc. This will maintain the Nike visibility in the eyes of the customers. Besides promotions, Nike should proactive communicate with the buyers directly enabling Nike to get first hand feedback from the customer as finally they are the one who will buy the products and they will jump to other brand if they would get product of their choice at their convenient.
Another key to Nike’s marketing success are its now famous advertisements. Nike invests as much as 9 million pounds a year on its advertising alone. Nike adverts sell not only the Nike apparel but also it sells you dreams. Nike ads are different because they use top athletes to allow the consumer to buy into the mystique of athletics glamour and sporting success. Nike makes you believe that purchasing their products will enable you to perform like the athletes featured on its ads. Nike has used athletes like Michael Jordan, Tiger Woods, Roger Federer, Rafael Nadal, Thierry Henry, Lebron James, Ronaldinho ,Rooney and much more stars to convey its message (like you can see on YouTube, http://pl.youtube.com/my_playlists?p=DCDB2784D9BBE6CB ). Nike not only uses these stars in its ads but it also sponsors them. They pay the stars to help market their clothes by wearing them and also promoting Nike associated programs. Nike even sponsors over the edge athletes to reinforce its “just do it “ advertising slogan. Nike picks different types of athletes to sponsor form different types of background so that their campaign does not just stop at the sport orientated audience but so that I reaches people who can identify or strive to have these athletes persona or character.
Human beings are generally quite conscious on what they spend their money on usually spend on things that are beneficial to them on some level. Over the years, Nike has done a good job of emphasising how beneficial its products are by its remarkable ability to market itself. Nikes marketing campaign is based on the idea that Nike products will in some way bring fulfilment and success. The foundation of Nike marketing is the just do it slogan. With this little slogan Nike has crossed barriers that even some religions cannot conquer. This little phrase is like a global language once spoken you identify it with Nike and at the same time identify with yourself. “Just do it” is an advertisement strategy that is universal and yet powerfully individual; It spoke of sports, it ignites and invited dreams, it is command to action an rejection to excuses a licence to be unconventional, daring and extraordinary. Just do it at the end of the day did something for you and in return you did something back you became loyal to the Nike brand.
References
- Kotler, P. Marketing Management the Millennium Edition Prentice-Hall New Jersey, 2000.
- Beech, J. & Chadwick, S. (2006). The Marketing of Sport. London
- Module Materials, Chapter 3, ‘The marketing plan’
