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Introduction
Background
With more people on the planet than ever before, companies must adjust output to
meet consumer needs. Companies must be able to supply consumer demands and one of
the best companies to do so is Nike Inc. With good planning and judgment, Nike has
been dominating its market for a long time. By providing quality products at reasonable
prices, Nike has met the interest of many people. Reaching to all market sectors as well
as innovations that make normal shoes look plan, Nike has a dominant role in the athletic
shoe industry.
Nike Inc. is one of most popular and successful companies the world. Nike has
been dominating the shoe industry since its first debut in 1972 at the Olympic Trials in
Oregon. This was due to the competitiveness and inspiration of Nike’s two executives
Philip H. Knight and Bill Bowerman. Before becoming a powerhouse company, Nike
started out with Knight selling shoes out of the trunk of his car. The shoes were from a
company in Japan that was the main producer of athletic shoes at the time. Once Knight
got the vision of providing these shoes in the US, he went to Japan and met with the
Tiger Company. From that Nike started to become globally known. In 1979 Nike was
said to control about 50% of the US running shoe market (Black 1). From good
leadership, Knight and Bowerman transformed the company into a global business,
which prospered into a dominant company for athletic footwear.
Purpose
The purpose of this report is to show how and why Nike Inc. plays a dominant
role in the athletic shoe industry.
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Discussion
Innovations
Nike sells its products throughout the US and in about 160 other countries
worldwide. By entering all areas, Nike can control its market by simple economics. The
amount of output can be regulated to meet market conditions at a certain time, and prices
are set by industry standards. By having output regulation powers, Nike can use their
resources more efficiently. Another reason why Nike has become a global dominator is
because out sourcing. This is when companies find cheap sources of labor to produce
their product. By going to China and hiring labor, Nike has increased profit margins
drastically (Dusen 1). Almost all production is given to subcontractors that are either over
seas or domestic. With ideas and innovations like this Nike Inc. has the benefit of selling
more products over many of its competitors.
By providing quality products at reasonable costs, Nike has turned a new leaf for
the athletic shoe industry. Many of its competitors are less in control of each market
sector due to Nike’s large role in the market. For Nike to be ahead of its competition,
new and improved merchandise must be produced. One way Nike did so was with the
Nike Sports Research Lab. This lab was designed to test the function of new technology
rather than to design fashion. The highly qualified workers are paid for three major areas
of study, biomechanics, physiology, and sensory. With these three areas, researchers can
test athletes in extreme conditions to see what is most beneficial to their needs
(Innovations 1). Having resources like these allows Nike to see what consumers may
need or want during certain activities.
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More innovations from Nike are some of the specialty companies formed by
Nike. Converse retro style sneakers, Hurley a skateboarding type of clothing, and Bauer
hockey equipment all are Nike products (Holmes 1). By having specialized products
consumers have more choice as to what will benefit them the most. Some of the stores
that Nike owns’ provide all of these products under one roof. Niketown the official Nike
store let’s customers see their entire line of products that are out at that time. By doing
this Nike can receive feedback on new products and can learn about what customers
really want. This allows them to engage first hand with the customers and learn about
new trends and needs.
New Technology
From all the research and design, Nike produced some of the world’s greatest
shoes. Nike tries to employ a variety of cushioning systems in each shoe to make their
shoes comfortable for everyday use. Cushioning systems are needed to reduce shock,
protect from impact, and distribute pressure. With these ideas in mind Nike has
developed shoes that utilize all of these components into one shoe. The four cushioning
systems pioneered and sold by Nike are Nike Air, Nike Air Max, Nike Air Zoom, and
Nike Shox (Timeline 1). By having a variety of high quality shoes on the market, Nike
has an advantage over the competition that is that people can use preferences to decide
what they want.
Nike separates itself from competition with cutting edge products. Making shoes
that are comfortable and affordable are some key issues that Nike executives keep in
mind. Nike Air technology is known throughout most of the footwear industry. And by
having a creditable name customers feel that Nike has more to offer than the leading
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competition. Also in order to get these specialized products, consumers will only find
that Nike is the one and only suppler.
Strategies
To make a successful company go global, tactical strategies must be made and
executed to perfection. Philip Knight once said “We make sure the product is the same
functionally whether it's for Michael Jordan or Joe American Public” (Timeline 1). With
desire to make every product the same, Nike has gained support from millions of
customers.
Another tactic that Nike has successfully executed is advertising. With a famous
company logo (the swoosh) and a catchy slogan (Just Do It), Nike is recognized in most
of the world. The Nike swoosh symbol is one of the most recognizable symbols of the
20th century (Short 85). Being recognized with a simple symbol shows that Nike has
reached a point of global success. Some methods of utilizing the symbol are through TV,
internet, and mass media. Nike sponsors teams and events to help show awareness of
their products by providing uniforms, footwear, or apparel for publicized events. One of
the biggest ways that Nike advertises is through celebrity and athletic endorsements.
Endorsements
Endorsements are a good way to show off a product or company. Nike is one of
the best examples of endorsing famous athletes. One of the most famous athletes of all
time is Michael Jordan. He was one of the all time greats at basketball and was endorsed
by Nike. For Nike to sign an athlete like this was a very big event. Not only was Jordon
known in the US but was globally admired for what he did. For Nike to actually get
someone like this to advertise their product, they had to pay Michael in excess of $34
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million (Leahy 363). An amount of money like this, for someone to wear a company’s
product is not practical but the affects on Nike are far more benefiting cal. Nike had
made hundreds of millions of dollars using the Jordon name and by selling his shoes as
well as apparel throughout the world.
Jordon was not the only high profiled athlete to be endorsed by Nike. LeBron
James another very well known basketball player signed a contract with Nike that will
earn him $90 million for seven years of endorsing Nike. Tiger Woods being a star golfer
landed him a contract with Nike for five years that got him $100 million (Nike 1). With
endorsements like these, Nike is sure that they will benefit from these deals. Even
though they will spend a lot of money, the return on these investments will be far greater
than the original amount invested. By endorsing such great athletes the Nike name will
be publicized at every event these athletes participate in. With long term commitment
with these athletes Nike has signed the rights to use these people in marketing there
products. This allows Nike an advantage over competitors because they cannot use any
of these athletes in promoting their product.
Conclusion
Nike Inc is one of the world’s most respectable companies. From the start of
selling shoes out of the back of a car from Philip Knight to the signing of a $100 million
contract with Tiger Woods proves that the company has came a long way. With excellent
leadership and coordination the company is on top of the athletic shoe market and looks
to prosper in the future. With commitment to ensure that all customers will be satisfied
with their product, Nike has gained support from millions of customers. The company’s
role in the athletic shoe industry has grown drastically due to more high profiled
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endorsements and new products that the competition does not have. With Nike making
swift moves to increase revenue, its competition will need be more creative if they want
to be as dominant as Nike is, in the athletic shoe industry.