IBM 302
05-23-11
Jana Haman
Jonathan Chou
Andrew Chareunsouk
Brent Shannn
Zenia Villa
Jed Wu
Target market
Because Nike is such a large and globally recognized company, they offer a
large variety of products and thus have many target markets. They market not only
footwear but apparel, equipment, and accessory products for men, women, and
children. Nike is like Coca-Cola, in the sense that they design and market their products
for every possible group imaginable. The different groups of footwear they design for
include: running, training, basketball, soccer, sport-inspired casual shoes, kids shoes,
aquatic activities, baseball, cheerleading, football, golf, lacrosse, outdoor activities,
skateboarding, tennis, volleyball, walking, wrestling, and other athletic activities.
Basically, they market their products to anyone who does any physical activity or likes
the look of their shoes without being active.
Even though Nike promotes itself through every sport and physical activity
imaginable, they still have a demographic that they target. They try to create and market
their products to people of all ages and sex, regardless of where they live. This is why
Nike is successful. They not only start with the youth but progressively make footwear
and accessories for people as they age and start to pick up other sports also. Because
they market to every sport and physical activity, they also know that with each
activity/sport there are a different group of age demographic for them. For example,
most people who play basketball are younger and have more energy to do so and so
they design and market footwear and accessories that fit their market. With golf on the
other hand, the players are much older on average and so gear and accessories
becomes more expensive and of higher quality because they know this market
demands it. And again, with the sport-inspired casual shoes, they know that younger
people tend to be more trendy and spend more money on average than their older
counterparts to fit in and thus they can follow the trends of the market and design
products that they like. To say that Nike markets specifically to certain demographics
would be incorrect because they market to every demographic but do so by activity and
sport.
Nike is one of the biggest multinational companies in the world and has offices in
45 countries and has factories in over 47 countries as of 2007. Of this 47 countries, they
have over 652 factories with 132 in China alone. What does this say about Nike’s
geographic? It means that they do business on 6 continents and in over 45 countries.
Nike’s geographic is across the globe and the fact that sports and physical activities are
played across the world helps them. Every country in the world has some sort of sport
or physical activity that is done by its citizens with popularity varying between countries.
As long as this continues, Nike can continue to do business in all parts of the world and
in every condition and environment. Soccer for example is a sport that Nike supports
and sponsors and because it is a global sport that the majority of the world can play
helps them make products for global customers. Baseball on the other hand is played in
a handful of countries and thus has a smaller geographic region but yet commands a
large portion of Nike’s marketing efforts.
Nike is a master of psychographics and does so by finding what kind of lifestyles
their target market lives. They take each sport and activity separately and evaluate them
piece by piece and look at what kind of professions they have, how much money they
make, and what they like about the sport. Basketball is a high energy sport that requires
a lot of running and arm and leg extensions and create products that help enhance the
game for its players. They also know that basketball attracts a younger crowd that has
the energy needed to play the game. Based off this, they know that younger people
don’t have as much expendable finances as older, more well off people and target them
through more reasonably priced footwear and accessories but not skimping out on
quality either. The young crowd sees Nike and thinks quality but also know that they
have to pay a little more than other brands but they are willing to do that because of
what they stand for. Just like basketball, golf has its own lifestyle that its players live by
and its a more pricey one. They know that people who play golf have more money to
spend and know that they like quality and will pay the money for it no matter what the
material is. See, Nike knows its psychographics because it knows sports. Sports directly
translate into people’s lifestyles and Nike is a master of this.
Lastly, Nike sees and knows what their brand stands for and they use that to
their advantage. They know that when people see Nike, it stands for quality and
innovation and they push both of those in their advertising and in their products. They
use star power to promote their image of quality and innovation because when people
see stars, they think performance, top notch quality, and, “if they are using it, it must be
the best.” Stars not only use Nike because the pay more to the players, they also use it
because they prefer their brand over Adidas or Puma for quality and knowing what
players and people want. Nike sees that they have an influence on people and they use
that brand name for their advantage.
Product/Service
Nike is an athletic shoes and clothing company. Their main focus product is
shoes for athletes and shoes that require the need to improve one’s performance. Their
clothing line is a complimentary line in which they sell alongside with their shoes. Nike
is seen in all venues of sports, from Golf, Basketball, Baseball, Football, and many other
sports, the swoosh logo can be virtually seen everywhere when it comes to athletic
venues. Beyond athletics, Nike also targets casual wear in which a line of their shoes is
worn as a fashion statement, rather than actually being used for an athletic reason.
Nike also offers a lot of complimentary line of products that go with a certain sport. For
example, Nike does have development for golf balls, and also engineering development
for Nike branded golf clubs, which are seen as premier golf clubs among the golfing
industry.
Nike mainly does a lot of product placement among their sponsored athletes.
This has proven to be very effective, as many viewers and followers of certain athletes
would want to use the same equipment, or wear the same type of clothing as their
favorite athlete. Nike is also known to do a lot of custom labeling for certain big athletes.
Tiger Woods is an example of an athlete in which his entire line of clothing and shoes is
tailored and distributed by Nike. However, most of the clothing for Tiger Woods is not
distinctively labeled made by Nike, rather is it privately labeled as a Tiger Woods
collection. However, since Nike distributes and tailors the products, and often times the
collection is found in Nike factory stores, and it is known among consumers that it is a
Nike made product.
Beyond the products, Nike sells the company idea of going out to achieve your
athletic goal. Their slogan, “Just do it”, reflects on the company beliefs of just doing
what you want to do, and their products will be there to help you achieve it. Selling this
philosophy of doing what you want, and being the best at it as long as you have their
products help you along your way. “Mr. Gilmore, the notorious spree-killer, uttered the
words “Let’s do it” just before a firing squad executed him in Utah in 1977. Years later,
the phrase became the inspiration for Nike’s “Just Do It” campaign.” (Nytimes.com,
Peters) Inspired by the Utah murderer, Gary Gilmore, “Just do it” is now seen
everywhere as is immediately associated with Nike.
Nike also encourages a new campaign called Nike ID. Based on the idea that
each shoe is made for each individual, Nike ID allows the customer to create his or her
own shoe by customizing the color combination. Then each shoe is made to order for
each customer, that gives the customer a feeling that the shoe was made for him or her
only, and since the color combination is made by the customer, that design is exclusive
to the customer. “It confirms that the trend of customization is still going strong, and
that consumers are interested in acting as designers as well as mere customers of their
favorite brands both virtually and in person.” (Business Week, 2007) This is Nike’s new
approach to their products, and allows them to stretch way beyond the athletic segment.
With so many different competitors available for consumers to purchase, allowing them
to create exactly what they want will be the best way to stand out from the crowd.
“According to the company, the NIKEiD online business has more than tripled since
2004 with more than 3 million unique visitors going to www.NIKEiD.com every month.”
(Business Week, 2007) The Nike ID campaign has been very successful, and now Nike
is also seen as the brand that helps consumers identify themselves.
Pricing Strategies
Nike products are priced at higher points, but and has been successful by
relaying value with their products over the years through multi-product branding. Their
wide product range also takes advantage with this strategy. Nike has a high level of
consumers who have associated themselves with the brand, and will pay the higher
price point to own something with the Nike Swoosh on it. By setting higher price points,
Nike is able to push the perceived product value. If they were to set lower-thancompetitor prices, consumers might question the quality of Nike products because, after
all, how can they afford to set such low price points? Since consumers expect quality
from Nike products, they are more willing to pay the high prices.
Shoes range from $75 to $200. Tops such as T-shirts and tanks range from $20
to $45 while polos fit in the $25-$90 range. Jackets and hoodies may cost $40-$120 and
pants are between $30-$120. Any Nike gear such as gloves, mitts, balls, wallets, etc.
may cost anywhere between $20-$150.
Distribution Strategies
Nike utilizes a vertical marketing system that involves the key members of the
distribution process such as the manufacturers, retailers and wholesalers. These
members work together to meet the demands of the consumers. The producers of the
sports equipment collaborate with the wholesalers in the products, supplies, and
marketing. This is a key advantage of the company.
Nike markets its products under its own brand as well as Nike Golf, Nike Pro,
Nike+, Air Jordan, Nike Skateboarding and subsidiaries Cole Haan, Hurley International,
Umbro and Converse. The company sells its products through a number of channels.
Overall, Nike sells its items in about 690 Nike-owned retail stores worldwide and
through about 23,000 retail accounts in the U.S. and via independent distributors and
licensees in other countries. These Nike-owned retail stores include Niketown shoe and
sportswear stores, Nike factory outlets, Nike women shops, Nike stores, and its ecommerce site. The retail accounts include athletic footwear specialty shops, sporting
goods stores, discounters and mass merchants, and department stores. As of 2010, the
company employs 34,400 people.
The bulk of the company’s production has always utilized an outsourcing strategy
– it takes place overseas through subcontracting relationships of varying constancy and
strength. Today, all of Nike’s production is by subcontractors (“production partners”),
using a three-tier strategy of “production partners”: developed partners, volume
producers, and developing sources. Developed partners manufacture Nike’s latest and
most expensive “statement products,” which can inflict higher production costs. These
manufacturing companies usually produce lower volumes (making 20,000 to 25,000
units a day) and are more likely to collaborate in innovations with Nike. Many of these
manufacturers are vertically disintegrated, subcontracting nonproprietary shoe
components and materials to other local producers. Volume producers are larger in size
(making 70,000 to 85,000 units a day). They generally manufacture a specific type of
footwear (i.e., track & field shoes) and are vertically integrated. Nike does no
collaborative work in innovation with them because each company may produce for
seven or eight other buyers to keep up its volume. Nike’s relationship to these
companies is usually less loyal since they do not produce the most innovative products,
which make up the bulk of Nike’s products. Developing sources offer Nike very low
labor costs and a hedge against rising labor costs in other factories or exchange rate
risk. They all produce exclusively for Nike, which has a strong chance of developing
them into higher-level suppliers.
Promotional Strategies and Tactics
Nike has had a proud history of promotion and tactics to get where it is today. A
significant part of it’s core competencies are in these fields. Promotion wise, the
company executes campaigns across the globe mainly via popular athletes in a variety
of mediums. This strategy to utilize individual sports icons and sometimes whole teams
appeals to a broad audience. Athletes are the celebrities of the sports world, where
they create demand based on name alone. Nike’s history of sponsoring these world
class athletes in an array of sports is second to none. These athletes and club
sponsorships include but are not limited to:
Clubs: Portugal National Team, Netherlands National Team, Club América, Brazil
National Team, US National Team, FC Barcelona, Manchester United, Arsenal,
Juventus, Inter Milan, Shakhtar, Porto, Steaua, Boca Juniors, Red Star, Boca Juniors,
Corinthians, Aston Villa, Celtic PSV Eindhoven, and Dundee United
Basketball: Michael Jordan, LeBron James, Kobe Bryant, Carmelo Anthony,
Kevin Durant, Dwayne Wade, Ray Allen, Chris Bosh, Manu Ginobili, Pau Gasol, Steve
Nash, Tony Parker
Baseball: Derek Jeter, Alex Rodriguez, Jorge Posada, Robinson Cano, CC
Sabathia, Josh Hamiliton, John Lester, Jimmy Rollins
Football – Brian Urlacher, Adrian Peterson, Terrell Owens, Matt Ryan, Drew
Brees, Donovan McNabb, Tom Brady
Tennis: Serena Williams, Pete Sampras, Rafael Nadal, Maria Sharapova
Soccer: Mia Hamm
PGA tour: Tiger Woods
Promotion/Sales of Nike Inc. is broken down into the following forms of media:
●
Television - A powerful medium with reach, Nike attracts consumers with innovative
sight and sound. Their advertising campaigns have recently featured Lebron James
and Tiger Woods in an attempt to gain back positive notoriety.
●
Print - Nike features extensive ads featuring their products in magazines such as
Sports Illustrated, as well as many others. Newspaper ads appear on occasion.
●
Outdoor - the most cost-effective advertising vehicle-outdoor being billboards, bus
stop and highways are also utilized.
●
Internet - Advertising on the Internet is the fastest-growing media vehicle for the
company. Nike users have the capability of choosing different types and enjoying
different advertising's of Nike on the Nike official website, Facebook, Twitter, and
YouTube. The company segments by sport to keep everything easy to access for the
fan. Within the segment, there are special videos and adverts. For example,
Nikebasketball has a lucrative campaign featuring Kobe Bryant. In a short film directed
by renown Director Robert Rodriguez, Kobe plays an alter-ego named “The Black
Mamba” to promote his new Nike ZOOM shoes. The film stars huge celebrities in the
movie and music industry including Bruce Willis and Kanye West.
A common theme of Nike’s promotions and tactics involves power. Their use of
athletes, as well as their brand, aims to make an impact by instant recognition. Their
swoosh logo, and (to a lesser extent) slogan “Just Do It” are recognized globally. When
coupled with the best athlete’s in the world, the public has learned to associate the Nike
brand as a brand of status and quality.
Another way Nike creates brand recognition is not only sponsoring athletes, but
events featuring amateurs. The company has sponsored minor events including a high
school basketball tournament “Hoop It Up”.
Customer Service and Satisfaction
Nike’s customer service and satisfaction is not centralized but more
compartmentalized into the sub markets Nike is involved in. They do not have one help
line for all of their products but instead have it all sent to specific departments like Nike
Golf, Nike Apparel, and etc. Nike’s strategy is to offer great customer service but they
fall short of that goal. Many customers complain that when they call the help line for
their product that they keep getting redirected somewhere else to call or to go to a
website that directs them to another place. Their phone support staff does not have any
real product knowledge and therefore the customer cannot ask them specific questions.
Their warranty for their products is two years from manufacturing not from time of
purchase and many products sit on the shelves for long periods of time and waste away
the warranty. Nike states that they have the customer’s best interest in mind and want
to develop products based on what the customers’ wants and needs are. Nike’s tactics
are supposed to be centralized around the customer but they are not. Their quality in
their products has gone done. If the consumer actually wears the shoes what they are
intended for and not for just casual wearing, they will see the flaws and poor
workmanship start to show as the shoe deteriorates. All of this poor customer
satisfaction and service still allows Nike to grow its revenue just because of their brand
image. Nike’s strategy is to appeal to every single type of person; whether you are a
female or male, basketball, soccer, or tennis player, they have the shoe to fit these
niches and not with just shoes but with equipment and apparel. This is Nike’s strong
point in their customer satisfaction and service; Nike is for an athlete and “if you have a
body, you are an athlete.” (nikebiz.com) Another Nike tactic is to use social media to
help customers. They are on Twitter to help direct customers on where to purchase or
where to go for further information; however, the downfall of this is that customers feel
brushed off, the responders are not really personal but distant in their responses, and
the responders are not really informative. Nike should focus more on the actually
consumer and the quality of their products. Consumers will pay the money for the
quality.
Philosophy
Nike has an internal philosophy for its employees and then an external
philosophy for their company. The internal philosophy is called maxims. They describe
and say what Nike is. Their core purpose is “experiencing the emotion of winning and
crushing your competition.” (jacobtyler.com) Here are the 11 maxims for Nike:
1. “It is our nature to innovate.” The company sees innovation as one of its core
organizational competencies.
2. “Nike is a company.”
3. “Nike is a brand.” The “swoosh” logo is instantly recognizable around the world.
Nike sees this as the symbol of its global leadership. It will enter only those markets that
it thinks it can dominate. It says: ‘lf we can’t lead it, we don’t need it.”
4. “Simplify and go.” Nike products have short life-cycles in terms both of technology
and fashion. The company believes that making quick yet skilful decisions is key to its
success. This aspect of Nike’s vision, together with the seventh maxim, is particularly
powerful in articulating the company’s hugely successful use of emergent strategy.
5. “The consumer decides.” The company is keenly aware of the sophistication of its
customers and it treats them as its key stakeholder.
6. “Be a sponge.” Employees at Nike are encouraged to be curious and open to new
ideas, whatever their source.
7. “Evolve immediately.” Nike sees itself as being in perpetual motion–viewing change
as a key source of innovation. This attitude can easily be observed in the wide range of
products that Nike offers its consumers. It is another example of the company’s use of
emergent strategy to good effect.
8. “Do the right thing.” Nike thinks of itself as a responsible global citizen, embracing
the stakeholder view of corporate social responsibility. It encourages its people to be
honest and transparent and to promote diversity and sustainability.
9. “Master the fundamentals.” All the innovation in the world is useless if you can’t put
it into action. A crucial part of Nike’s success is its ability to refine its performance–the
recent growth in profits suggests that it’s achieving this.
10. “We are on the offense–always.” To stay ahead in an extremely competitive
environment, Nike urges its people to act like leaders in their field to achieve victory.
11. “Remember the Man.” The late Bill Bowerman is still held in high esteem
throughout Nike, both for his understanding of athletes’ needs and for his innovative
spirit. (jacobtyler.com)
Nike’s external philosophy, which just about everyone knows: “Just Do It.” “It
quickly became both universal and intensely personal. It spoke of sports. It invited
dreams. It was a call to action, a refusal to hear excuses, and a license to be eccentric,
courageous and exceptional. It was Nike.” (nikecacs.com) The swoosh logo seen on all
their products represents this philosophy of “just do it.”
Employees
Nike has run into many problems in the treatment of their employees. They have
been accused of running sweatshops in China, Indonesia, Vietnam, and other countries.
They ignore labor laws and work employees long days without breaks or compensation
pay. They have broken child labor laws in their factories. All of these instances reflect
poorly on Nike. They underpay their workers, have bad working conditions, no
protective equipment, work them illegally long hours, and this is all done in order to
make these highest profit margin possible. Nike has improved but the manufacturing
factories are in countries with cheap labor and it is hard to regulate those factories. The
employees that work in the corporate offices and in the stores are treated much better.
They have networks within Nike so people of different cultures and backgrounds can
communicate with one another. Nike also encourages its employees to do some sore of
volunteer work and to be active in their communities. Nike is trying to correct past
mistakes and to help people in poverty. Nike is trying to improve their image globally
and to show what they value.
Competition
Nike began as a small Oregon based shoe distributing company with only $8000
in revenue its first year. Today Nike, Inc. is the world’s largest global manufacture of
sports apparel with a third of its revenue coming from the United States, with another
third coming from Europe, the Middle East, and Africa grossing over $1.9 billion in
revenue in their 2010 fiscal year. As a sports apparel manufacturer Nike competes with
similar firms which manufacture sports apparel such as Adidas, Reebok, Puma, New
Balance, and Under Armour. Along with their global presence comes global competition.
Adidas, a German sports apparel company who once dominated the market with sales
which towered above Nike’s in the 1980s and 1990s have since found themselves
dethroned to becoming second place runner ups to Nike, Inc. and their closest
competition.
When we take a look at and analyze the sport sneakers and athletic wear
industries we are faced with the question, “What are these firms’ competitive
competencies?” If we begin to look at the way that these firms operate we can continue
to ask a series of questions about how they do business such as “is manufacturing a
skill this firm does better than anyone else?” or “will this firm be able to leverage their
manufacturing expertise in the future? The response that we would receive from these
questions would be “No”. In today’s world most if not all the firms in the sports wear
industry produce and manufacture their products in the same manner. What is setting
Nike apart from its competitors in today’s market is their aggressive strategy and
philosophy on advertising, name branding, research, development, and marketing.
Phil Knight, co-founder of Nike gave us a look into the philosophy of Nike, Inc.
when he said that "There is no value in making things any more. The value is added by
careful research, by innovation and by marketing." Ever since their original “waffle
soles” Nike, Inc. has had a history of creating new innovations with their creative shoe
lines such as Nike Jordans, Air Force Ones, Nike Air, and Nike Dunks to name a few
which have all been widely successful. New and innovative marketing techniques like
the creation of NIKEiD which allows customers to customize their Nike shoes online
adds an edge to their online sales. Today, Nike, Inc. is continuing its development,
designing shoes with increased performance potential from even lighter and even more
durable materials, bolstering their reputation of high quality goods over their
competitors.
Today Air Jordans is a house hold name, but back in 1984 while Nike was still a
struggling shoe company, signing Michael Jordan is what helped put them on the map.
Now high profile endorsement of their goods and their brand name is a strong piece of
Nike, Inc.’s business strategy. Nike, Inc. endorses more elite athletes from more sports
from Kobe Bryant and LeBron James of the NBA to pro golfer Tiger Woods. If there is a
big name celebrity status athlete you can be sure that Nike will do what it takes to see
them wearing Nike gear opposed to anything from their competitors Adidas-Reebok.
In order to represent the quality sports apparel they produce, the iconic Nike
“swoosh” is one of the most highly celebrated cooperate symbols. Their slogan, “Just
Do It” is ranked one of the highest and most effective recent marketing campaigns,
running for over twenty years now. Nike’s marketing has enjoyed great success in the
urban scene as well
With its recent acquisition of Converse, we can see that Nike is displaying
interest in expanding its reach from sports attire to casual wear as well. With the
popularity of the classic Converse Chuck Taylors, Nike, Inc. is enjoying the benefits of
expanding into industries. Lately the demand for casual nonperformance shoes has
been increasing and new specialty brands such as Crocs and Heelys are growing in
popularity, especially amongst younger consumers. As these two industries create new
markets amongst a new generation of shoe buyers, they are drawing attention away
from the traditional athletic shoes towards the trendy affordable sporty fashion
statements, a market which Nike used to own. Nike, Inc. could respond similarly to
these new competitors because of the amount of financial leverage they have. Through
the further acquisition of these two and similar shoe industries Nike, Inc. has the
opportunity to add a breath of fresh air with new talent as well as take advantage of their
excellence in manufacturing and supply chain management to squeeze additional
profits from their new assets, effectively expanding their presence in the shoe industry.
Social Responsibility
When it comes to social responsibility, Nike has been the poster child for
negative publicity. Nike has been known as a company that tries its hardest to find the
lowest cost for producing its goods. “Naomi Klein, in her widely read book "No Logo"
deals quite extensively with Nike, accusing them of abandoning countries as they
developed better pay and employment rights in favour of countries like China, where
these are less of a cost.” (MallenBaker.net) Nike has always had an issue with
exploiting labor of countries that are not fully developed, all with the justification of
having lower prices that result in saving money for the consumer. “Conditions for these
workers has been a source of heated debate, with allegations made by campaigns of
poor conditions, with commonplace harassment and abuse. “ (MallenBaker.net) Often
times cost cutting has led to sever consequences for citizens in other nations. However,
knowing all the negatively publicity, Nike has began doing a public relations blitz to
counter all these problems. Often times being seen as the head documentary example
of what a company shouldn’t be doing, Nike hopes to counter those images. Nike has
launched a website, www.nikebiz.com, in hopes of education the public about their
methods of business and how they are socially responsible and continue to innovate
towards a better future. Though the images of the past still haunt them, Nike is trying its
best to reshape that image. “Our focus now is getting to the root of the problems. We're
looking end-to-end from the first phase of our product creation process to the outcome
in the lives of workers in the factory that bring our product to life.” (nikebiz.com) Nike
has offered auditing programs from third parties to verify that their factories are in
compliance of labor laws of the country of origin. Nike continues to keep their factories
in check, and also continues to create new methods of being more socially responsible.
Group Evaluation
We believe that some strategies implemented by Nike will help them with longterm goals while other strategies do need to be rethought. Some strategies that work
are their different product lines that target different segments, their pricing strategies,
distribution strategies, and promotional strategies. A strategy that needs to be revised is
their customer interaction. Nike carries a variety of shoe lines and products available to
consumers and this is good to gain more market share in the industry. Their pricing
strategies are competitive and have done well. Nike’s promotional strategies are always
innovative. Nike is about connecting with athletes and their promotional strategies
reflect this. Their distribution strategies work well with the company’s product mix. One
strategy that does need to be fixed is their customer strategy. Nike needs to have a
more centralized and knowledgeable staff that consumers can talk to and as well as
centralizing their information channels. Also, their warranty needs to be changed to
meet the satisfaction of the consumer such as from the date of purchase and not from
the date of manufacturing. Nike needs to improve on their customer service and
satisfaction if they would like to continue to increase their revenue.
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