Abstract
Nike is the major player in the global sportswear industry due to its significant market share. The prominent role of the firm in the sportswear market is attributed to the adoption of strategic knowledge as its core competitive advantage.
Nike has outwitted its rival in the market as a result of its unique ability to integrate strategic knowledge with consumers’ taste and preferences, supply chain management and product design and development.
The firm’s strategic knowledge in these areas involves an intricate blend of tacit and explicit knowledge about consumers, design, advertising and supply chain management- which is tremendously hard for rivals to emulate. Nike is thus expected to sustain its leadership in the sports apparel market in the near future.
International Branding
The standard consumer market is flooded with thousands of brand adverts every day. However, a small number of these commercial messages achieve their objectives in the market. In order to create a lasting impression in the sports apparel market, some of the highly successful companies have adopted marketing strategies that appeal to all consumers of their products.
The idea of branding has evolved considerably over the years as rival companies such as Nike and Adidas compete for market share (Lindstrom, 2006, p.1). This paper will thus analyze the development of Nike as an international brand and its current position in the market.
Throughout the 1980s, Nike employed Organizational Selling Proposition (OSP) as its branding strategy. In the 90s, most brands had achieved enormous popularity in the consumer market. As a result, Nike switched to the Brand Selling Proposition (BSP) to market its brands.
Soon, the company’s brand acquired enormous strength as end users became preoccupied with the Nike brand which was visibly engraved on wallpapers, sportswear and brushes. The contemporary hi-tech innovation has led to the emergence of a new branding strategy-Me Selling Proposition (MSP) – where end users are able to own brands.
Currently, buyers can access internet sites run by Nike to tailor the company’s products specifically to their personal tastes and preferences (Lindstrom, 2006, p.2). In 1998, the worldwide market share for Nike was about 30.4%. In spite of a slim decline in the previous years, the sportswear company continues to enjoy a substantial share of the branded sportswear market in the United States.
For example, the market share of Nike’s nearest rival, Adidas, was 15.4% whereas Reebok was 10.9%. Although the market segment held by Nike is currently the biggest, it is projected to increase when new products are introduced in the market (Enderle et al, 2000, p.18).
Nike is the current leader in the e-commerce because it was the first sportswear firm to market its products through its electronic commerce website. The firm opened its electronic commerce website in 1999 by displaying over 60 different types of sportswear shoes to the American market for consumers to buy. Nike enhanced its e-commerce prominence in the same year when it launched NIKEiD on its website.
The branding strategy allowed online end-users to modify key features of the company’s products they preferred. NIKEiD programme signified the first time a firm had introduced mass customization of sportswear. The program enabled Nike to gain a substantial sportswear market segment.
The company’s brand images, such as the trademark Swoosh and the Nike name are the most visible brands in the globe. This brand influence was transformed into high sales revenues. The company’s name and its related trademark-Swoosh- are common features the world over, ranging from stadium walls and banners to hats, shirts and pants worn by sports celebrities.
For example, Nike displayed its brand prominence during the NCAA Basketball competition in 1999 when over 60% of the competing teams donned Nike’s shoes. Some of the current branding strategies pursued by Nike include enhancing its presence in women’s sports.
For example, Nike sponsored the Women’s World Cup Soccer event in 1999 and the United States’ Speed skating team in the 2002 Winter Olympics (Enderle et al, 2000, p.18). Nike has revamped its computer systems to optimize it branding strategies worldwide.
By systematically analyzing new markets, it has attained global prominence in these market sections-such as fashion and soccer- that it once ignored. Nike has also marketed effectively new brands such as hockey skates, Hurley International skateboard gear, Bauer in-line, Converse retro-style and Cole Haan dress shoes to global status (Holmes, 2004, p.5).
The current position of Nike in the Market is fairly stronger when compared to its competitors. This is attributed majorly to its international operations that have enabled it record significant sales. For instance, Nike sponsored over 80% of China’s teams during the 2008 Olympic Games.
It is thus projected that sales revenues accruing from Olympic Games will sustain Nike’s stock price in the short run. In addition, the firm plans to increase its supply chain in China from the current 290 cities to over 450 cities in three years time.
Basketball is among the most fashionable sport in China and the firm has made significant investment in that sector, especially in the United States’ National Basketball Association (NBA) section (Kirtikumar, 2008, p.8).
Nike was once a minor player in the soccer section but is currently making massive investment in the sport. For instance, in 2007, Nike acquired Umbro to solidify its status in the soccer section. The firm’s entry in the soccer field contributed to the global prominence of its brand when five teams-sponsored by Nike- qualified for the quarterfinal stage of the 2008 European Championship.
Nike’s entry into the soccer industry will also enhance its brands and sales in Russia and South America which are emerging markets (Kirtikumar, 2008, p.9). In the previous three financial years, the index for correlation between Nike and consumer discretionary segment has been 0.012 which implies that the stock of the firm is not related in any way to the movement of consumer discretionary segment. This is due to the fact that majority of consumer discretionary stock rely a lot on United States for their returns whereas Nike does not (Kirtikumar, 2008, p.13).
Theoretical and literature analysis of stages of growth of Nike
Nike is generally identified as the major player in the sportswear industry due to its significant sales volume, market share and global accomplishments. The firm was founded in early 1970s and its names-Nike and Swoosh- represent its major achievements in the sports apparel industry.
Since its inception in early 1970s, when the company changed its name from Blue Ribbon Sports to Nike, the firm has witnessed a significant growth in sales from a paltry $1.9 million to record over $148.9 million in 1980. Nike’s products have reached a number of countries such as Australia, Asia and Canada and its merchandises are being produced in Korea, United States and Taiwan.
In early 1980s, Nike International was established to manage the firm is growing global business, which entailed over 39 countries. By early 1990s, the firm recorded over $2.2billion in sales revenues and had a workforce of over 5280 employees.
The firm’s worldwide operations has persisted at an extraordinary rate such that in 2006, its sales volume surpassed the $16 billion mark with a gross profit of over $7 billion and a workforce of over 28500 workers globally (Stonehouse & Minocha, 2008, p.25).
As a result, Nike has won several global honors such as the Industrial Design Excellence medal in 2005. It was also named by Ethisphere Magazine as the most ethical firm in 2007. Nike has continued dominance in the sportswear industry is attributed to the firm’s unrivalled familiarity with: marketing, design and development of innovative products; management of supply chain; and consumer tastes and preferences (Stonehouse & Minocha, 2008, p.25).
Customer knowledge
Initially, Nike’s products were designed to attract a small market which was made up of serious, aggressive sportspersons. By targeting this group- mainly young athlete- the firm narrowed its focus on designing highly efficient running footwear.
Given that Bill Bowerman and Phil Knight-founders of Nike company- were former athletes, they had substantial implicit and explicit knowledge about what athletes expected from their shoes. Their first Nike products were used during the United States Olympic track and field trials and in 1975.
Bowerman and Knight developed the first impact-absorbing sports shoes based on their tacit and implicit awareness about runners’ requirements for high-performing shoes. Their ability to coalesce tacit facts about consumer needs and explicit acquaintance of technology was converted into knowledge-based core competence in plan and development and turn out to be their initial source of competitive advantage in the sports market (Stonehouse & Minocha, 2008, p.25).
The next phases in the advancement of the firm’s knowledge-based competency involved the formation of strategic knowledge. Majority of the American sports celebrities used Nike’s exercise shoes and the unique swoosh symbol made the shoes an instant hit to television viewers as they watched high profile athletes perform.
As a result, a new trend came out where youth started to copy sports celebrities by donning Nike training shoes. Nike was able to study this new development and adjust its marketing strategies appropriately. Thus, it was on the basis of explicit knowledge that the firm adjusted several of its main strategic plans with respect to marketing, design and development, supply chain management and sponsorship and promotion that contributed to their worldwide dominion (Stonehouse & Minocha, 2008, p.26).
Design and development
In order to satisfy the needs of its huge consumer base of athletes and the fashion-savvy youth, Nike adopted two tactical strategies. First, it decided to widen the range of its products to encompass a variety of sports disciplines such as soccer which was unpopular in the U.S. Second, Nike enlarged its portfolio range to make it appropriate for not only sports but also casual wear.
Thus, design and development turned out to be crucial element that defined the company’s competitive advantage. Another vital element was the ability of the firm’s designers to grasp the fashion flavor of the youth and utilize it to product suitable products.
As a matter of fact, the most important technological and design created by Nike was the invention of ‘Air’ principle which integrated an air cushion on the sole of the shoes. It not only helped athletes to soak up the impact of their bodies but also was popular among the youth.
Design and development is still an ongoing process at Nike’s center of operations where over2400 workers are currently engaged in creating strategic products that will enhance the company’s market dominion (Stonehouse & Minocha, 2008, p.26).
Marketing
Marketing is another major strategic activity being developed at World Campus on the basis of implicit and explicit knowledge of end-users. The company’s outstanding performances are not only attributed to its tacit and explicit knowledge of the customers.
Promotion, marketing and brand name are also crucial to Nike’s achievements as are other factors. Once more, the firm’s ability to understand the psyche of its youthful customers is vital when Nike tries to persuade them to purchase its products.
Nike has also used some of the sports celebrity athletes to promote its brands. These athletes include: Tiger Woods; soccer’s Ronaldo and David Beckham; basketball’s Michael Jordan; and Andre Agassi, a tennis player (Stonehouse & Minocha, 2008, p.26).
Strategic Learning and Knowledge Creation
Innovation is considered as a critical element to Nike’s achievements and this is emphasized by the velocity of change in the sports and fashion industry. Thus, the importance of strategic learning and creation of knowledge is highly emphasized at Nike.
Design teams at Nike are highly encouraged to think creatively in order to design new products that are at par with customers’ needs. One of the main challenges that Nike encountered was its inability to craft, communicate and manage the Corporate Strategic Plan in its global operations (Stonehouse & Minocha, 2008, p.27).
The problem was solved through the adoption of four critical elements: strategic plan; business and financial plans; performance management; and business review and eight-quarter vision. The Strategic Plan was crafted at Global Executive level and included several feedbacks from the business review processes.
The Plan, which would be relevant locally, also had some aspects of the Global plans. The Plan was vital for identifying viable business strategies that enabled the firm to focus on future operations. For instance, the comments from business Reviews and the implementation of Field of Play methodology enabled Nike to identify programs to be adopted and market prospects that were irrelevant to its global business. The translation of Global strategy into regional plans was also vital in identifying individual market opportunities.
The regional plans were then subjected to thorough validation process at the global directional plan (Stonehouse & Minocha, 2008, p.28).
Business and Financial plans consisted functional goals, quarterly timelines and vital metrics. These strategies would be swapped within the organization to make sure that every function was conscious of each other’s plans, letting them to integrate support where needed.
This procedure would ensure effective connection and communication between functions. Moreover, the details of the plans shaped the foundation for generating staff plans to augment the functional plan. Performance Management was also a vital component to the process and was augmented by an all inclusive variety of tools to gauge financial performance vis-Ã -vis set targets specified within the Business strategy. A variety of micro reporting structures culminated in a succinct Quarterly scorecard review (Stonehouse & Minocha, 2008, p.28).
These Reviews-done by the Executive and Function Management staff-offered middle-level Managers a chance to meet the executives and also for the Management to support non-performing operations. The Business Review- also called ‘eight quarter forecast review’- was the last and crucial stage of the process.
It was done thrice in a year in order to offer middle-level management a chance to present their business proposal that covered a two-year period. This plan was organized at country and divisional stage and reflected a worldwide format. The plan consisted of sales estimates and margins at the category stage. It enabled management to make out business prospects and also provide insight on consumers, competitors and market.
This process was later conveyed to the Executives to formulate the new Global Strategic plan for future business operations (Stonehouse & Minocha, 2008, p.28). The next section will dwell on the correlation between strategic learning, innovation and creativity as the basis of knowledge-based Competitive Advantage (CA).
The relationship between Strategic Knowledge, Learning and Creativity
Strategic knowledge is a distinctive blend of implicit and explicit knowledge. It denotes the knowledge that enables a firm to create and develop knowledge based core competency which allows it to surpass its business rivals. Nike is an ample example of a company that has effectively used strategic knowledge to outwit its competitors.
Nike has been able to employ its strategic knowledge to discern consumers’ taste and preferences, supply chain management and product design and development. The firm’s strategic knowledge in these areas involves an intricate blend of tacit and explicit knowledge about consumers, design, advertising and supply chain management- which is tremendously hard for its rivals to emulate (Stonehouse & Minocha, 2008, p.30).
Nike’s competitive advantage stems from its ability to integrate its strategic knowledge to shape the firm’s core competences. This is the major facet of its business operations that sets Nike apart from its rival and enables it sustain its competitive advantage in the sportswear market.
In addition, the significance of Nike’s strategic knowledge stems from its ability to know the tacit knowledge that controls customers’ buying habits, which is later utilized to design apt products and develop optimal marketing plans.
This tacit knowledge is also integrated into Nike’s global supply chain operations where retailers can gain from the company’s advertising, pricing plan and the exceptional supply chain. Organizational learning and creation of knowledge are thus crucial to Nike’s competitive advantage (CA) as they guarantee continuity. The firm’s strategic Knowledge enables management teams to create succinct business plans that foster a culture of creativity and knowledge sharing within Nike’s family (Stonehouse & Minocha, 2008, p.30).
The life cycle of Nike
Studies suggest that the life cycle of Nike Company is at the maturity stage since the firm is currently generating stable sales. With respect to sports sector, athletics has emerged as the most profitable segment for the firm’s sale.
For example athletic accounted for over 28.5% of the entire market held by Nike in 2002. The basketball sector also yielded significant sales as Nike posted $3.24billion in sales revenues and a market share of 20.6%. The exceptional performance in the sportswear market is attributed to Nike’s novel management plans, new lines of products, entry in to new markets and sustained demand for its brands (Dermesropian et al., 2004, p.12).
Nike relies greatly on Strategic Outsourcing to drive its global operations. A huge portion of its brands are manufactured outside the U.S. For instance, in 2003, the firm contracted several firms outside the country to produce Nike’s brands (see Appendix 1). Only one percent of the total brands were produced in the U.S (Dermesropian et al., 2004, p.15).
Advertisement is one of the major strategies used by Nike to promote its products. Magazines and Net Television are the prime marketing avenues employed by Nike. For instance, in 2003, the firm used $39.7million for magazine adverts and a further $32.3 million on Net Television ads for its brand products.
Nike has also employed other avenues for its marketing campaigns. These include: Syndicate TV with 2.8% of total costs; Cable TV with 16.9%; Outdoor marketing with 1.9%; and Internet with 0.9%- of the aggregate advertising expenditure (see appendix 2).
Nike is thus expected to consolidate its prominent status in the footwear industries given the massive investments in advertising and strategic outsourcing plans (Dermesropian et al., 2004, p.16).
References
Dermesropian, R., Drago, JA. Grigaite, G., & Lopez, T. (2004). Nike. New York: St. John’s University Student Managed Investment Fund.
Enderle, K., Hirsch, D., Micka, L., Saving, B., Shah, S., & Szerwinski, T. (2000). Strategic Analysis of Nike. Web.
Holmes, S. (2004). The New Nike. Bloomberg Businessweek. Web.
Kirtikumar, K. (2008). Nike: Underpriced, Defensive Stock. Web.
Lindstrom, M. (2006). Brand Sense. Build Powerful Brands through Tough, Taste, Smell, Sight, and Sound. Web.
Stonehouse, G., & Minocha, S. (2008). Strategic Processes @ Nike-Making and doing Knowledge Management. Knowledge and Process Management Journal, 15, 24-31.
Appendices
Chart 1: Manufacturing Countries
Source: Dermesropian, R., Drago, JA., Grigaite, G., & Lopez, T. (2004). ‘Nike’. New York: St. John’s University Student Managed Investment Fund.
Chart 2: Nike Advertisement costs in 2003
Source: Dermesropian, R., Drago, JA., Grigaite, G., & Lopez, T. (2004). ‘Nike’. New York: St. John’s University Student Managed Investment Fund.