Nike’s principal activities are the designing, production, developing and marketing of quality fitness and sports footwear, clothing, equipments and accessories. The company is primarily engaged in marketing athletic apparel and athletic footwear internationally. The Nike business became international in 1981 when Nike International was formed. The primary purpose to go international was to spearhead the efforts to exploit rising popularity of high quality sports goods, apparel and shoes. There were a number of modes the company adopted in going international. In 1981 it opened its first international plant in China and in 1985 it appointed Michael Jordan to endorse its version of the air shoe and called it “Air Jordan”, which greatly influenced international markets. In 1988 the “Just Do It” slogan was coined which became an international success along with the Nike brand logo “swoosh”. In 1994 Nike acquired Canstar Sports Inc, which was the leader in manufacture of hockey equipment and skates and in 1995 the company signed Tiger Woods the golfer for a $40 million deal to endorse its products. The Nike equipment division was created in 1996 which gave it an international boost in terms of increased sales and in 1999 the company commenced selling its products via its website. In 2003 Nike acquired Converse Inc for $305 million, which proved to be an excellent investment that boosted international sales and popularity. Nike was founded in 1962 as an importer of Japanese shoes, shoe upper production was started in 1967, and kicked of on production of shoes with the 1972 US Olympics with the opening of its first US plant. In 1979 Nike moved into its new headquarters at Beaverton, Oregon and began to make and market a line of sports clothing. By 1980, Nike’s groundbreaking designs and aggressive marketing enabled it to surpass the turnover of German shoe giant Adidas and in December the same year went public. With the generation of more capital the company expanded further and new plants were installed. In 1981 it set up factories in China and started to greatly benefit from its sales of work and leisure shoes, apparel and children’s shoes. Subsequently it tied up with the Japanese giant Nissho Iwai and formed Nike-Japan. In 1985 it purchased Pro-form, the maker of weightlifting equipment and consolidated itself in this new area. In 1986 it expanded further by introducing apparel for women and had by 1989 accounted for 23% share of the shoe market in the US. In 1991 it surpassed its US rival Reebok. Nike celebrated its 20th anniversary without any debt, with revenues exceeding $3.4 billion and profits of over $100 million from its own discount stores and Nike Towns outlets. Although Nike has had its shares of strikes and lock outs, it has survived the challenges in view of its proactive policies. The markets now served are entire Europe, China whole of North America, Australia, Asia Pacific region and some of the African countries. The Nike business is primarily concentrated in North America, Australia and China and a considerable market share in Asia Pacific countries and European markets. The majority of the concentration is in North America, Australia and China in view of its already established strongholds in these areas. The cultural environment that effects Nike popularity relates to forces that influence society, basic values and perception, which the company is able to comply with in all its segments. It has been observed that Nike has been very successful in regions that encourage free market economies but its products are rarely visible in other markets, such as communist, underdeveloped and Third World countries.
The Porter Model of the business industry in a region can be described as a framework for the development of analysis of industry and for business strategy. It was developed by Michael Porter in 1979 who used theory to explain the five forces that ascertain the intensity of competition and thus attractiveness of a particular business location and market in terms of overall business profitability. An industry is said to be unattractive as per the model if the combination of these five forces bring down the profit levels. Porter analyzed the micro and macro environments to explain the findings that required a reworking of the forces that affect its market in that area. Strategists usually use the Porter framework while evaluating the company’s strategic position in the given circumstances. The five forces that were found by Porter to be influencing such decisions were the threat of new companies, threat of substitute products and threat of established rival companies from horizontal competition, while the other two pertained to vertical competition and were bargaining power of customers and bargaining power of suppliers. It is clear that all these five forces can have a great impact in ascertaining the future profitability potential of a company in a given area or market, and hence needs to be researched in detail before making entry. The exact figures for Nike’s investment in foreign countries by way of Foreign Direct Investment (FDI) are not available, but it has invested heavily in plants in China, India, Vietnam, Thailand, Canada, UK and Australia. Nike has used to its advantage, opportunity and risk analysis grids and matrices, which primarily relate to the use of research based on graphical means of presenting risk data and analyzing the same for business viability in the given region. Only upon receiving positive research results in this regard, does Nike venture to invest heavily in the region. In regions where the opportunity and risk data does not provide positive indications, Nike does not invest, thus implying that it is not commercially viable to venture into those regions.
Nike collaborates with top athletes and Olympics gold medallists who have a mass fan following, to act as its brand ambassadors in several countries. Hefty endorsement deals are signed with them so that they promote its brands in the given region. Additionally Nike sponsors big sporting events in collaboration with organizers of tennis competitions, cricket matches, soccer events, golf tournaments and other popular regional sporting events. This has been constantly adding value to Nike’s brand image and that’s why the company has exploited this strategy for decades. Such collaborations are managed by signing contracts with organizers or by being the highest bidders for sponsorship of world sports events. Nike has made acquisitions such as Cole Haan dress shoes, Converse retro-style sneakers, Hurley International skateboard gear, and Bauer in-line and hockey skates. After the acquisitions are made the businesses are run just as any other plants and commercial establishments of Nike in keeping with its style of functioning.
All Nike products are globally standardized and bear strict quality certifications that are of the same level through all its worldwide plants and production facilities. Nike has strived to champion social causes on several occasions by addressing major social and environmental issues that arise in a company’s business, philanthropy and charitable donations, and by commendably sorting issues pertaining to its supply chain matters. In this regard Nike was able to resolve supply chain issues with 650000 workers in 800 factories by focusing on better working conditions and by publicly disclosing the supply chain. The quality policy of Nike’s business is very transparent in that it has redefined capitalism by systematically investing within the US to provide required goods and services and paying taxes and rewarding shareholders with excellent returns. Nike’s core business strategy remains the same throughout its operations in the world, but regional functions are in keeping with local traditions and worker compatibility to the required functions. Nike’s marketing mix comprises of advertising and sponsorships. By way of sponsorships, Nike has signed up top athletes and Olympic gold medallists who have a large number of fan followers, to endorse its products. The company sponsors track and field events and has also been the official sponsor at world soccer, tennis, cricket, and regional Olympics events. Nike sponsors some of the world’s top sports personalities so as to give them a boost and to further its brand image. Nike uses websites to promote and cover small regional events and has its own websites like nikefootball.com, and nikerunning.com. and nikebasketball.com, to promote such sports. The key competitors of Nike are Reebok International Ltd.; Adidas-Salomon AG; Fila USA, Inc.; PUMA AG Rudolf Dassler Sport; Skechers U.S.A., Inc.
Nike follows a policy of being independent of its competitors and does not believe in forming any cartels or marketing strategy in sync with them. The entire sale of Nike products are done from the company owned showrooms or the Nike Town outlets to maintain uniformity and consistency in customer services and in supply of the products. Since 2002, Nike has been concentrating on efforts to focus on building leadership capacities amongst its managers to enable the business to grow faster. Such programs enabled momentum for transformed leadership development in keeping with the company’s objectives.
Nike as a company is a top corporate being ranked as number 33 in the list of the world’s most popular brands as declared by Globalbrands, and is well poised to be a well established global company in view of its worldwide consolidation and use of best practices for carrying out the business.
References
Marketing Mix: We’ll Call You- Nike, 2008. Web.
Nike (Apparel Division) Leadership Challenge Deployment, 2008. Web.
Nike, Corporate Social Responsibility: Whether or How? 2008. Web.
Steinhauer, Jennifer, “Nike Is in a League of Its Own: With No Big Rival, It Calls the Shots in Athletic Shoes,” The New York Times, 1997.
“Where Nike and Reebok Have Plenty of Running Room,” Business Week, 1991.
Yang, Dori Jones, et al., “Can Nike Just Do It ?” Business Week, 1994.