Abstract
The factors such as worsening economic situation in the world, increased competition from other shoe manufacturers, price-conscientious customers, falling demand, and supply cuts play into Nike’s loss of its market positions. The biggest blow was delivered to Nike’s luxury and the upmarket segment with major retailers’ decisions to opt-out of the pricey shoes and make a shift towards consumer trends, which dictate the purchase of middle-priced footwear.
Taking the above problems into account, the case study seeks to propose and substantiate the solutions that would mitigate Nike’s ramifications and foster its market position. An array of solutions might be proposed, although only the most justified and workable need to be selected and implemented eventually. The case study will provide choice and rational substantiation of the selected solutions. Finally, a SWOT analysis will be carried out to highlight the strengths and weaknesses, as well as opportunities and threats. A deep SWOT analysis will help to ascertain whether the proposed solutions are feasible and workable against the backdrop of current economic and social trends.
Nike: Case Study
The golden years for Nike, which were the 90’s when the company’s orders increased its inventory supply, are long gone. Currently, Nike has to tackle an array of problems in order to retain and foster its market positions. Major factors that play into Nike’s loss of the market may be attributed to worsening economic conditions all over the world. Consumers are becoming more price-conscientious, shifting their interest from upmarket and luxury brands towards less expensive, middle-priced models. Nike’s supply problems with Foot Locker, a major shoe retailer, added more to its financial problems in 2002. The Foot Locker and Nike feud resulted in Nike’s losing $1 billion out of $9.9 billion in word sales.
Aside from financial ramifications, Nike is also facing severe criticism from human rights activists and organizations which are accusing Nike of violating workers’ rights by choosing to concentrate their production in developing countries with lower wages and less trade regulation. Agreeing to human watch organizations’ conditions and shifting production to the US or other developed countries would mean increased labor and production costs coupled with higher taxes.
The major problem that Nike faces is the declining demand for upmarket, luxury sneakers. The falling consumer interest in over $100 footwear results in approximately 15% – 20% of the total global revenues loss.
The market currently shows an increasing trend towards casual, non-expensive wear, although, at the same time, consumers willingly spend ridiculously large amounts on the latest gadgets and phones. This presents an intriguing contradiction to market analysts, and a paradigm shift needs to take place in the minds of consumers in order to be willing to spend more on the upmarket items. This may be achieved by changing consumer trends from casual to luxury footwear. Currently, Nike is strongly associated in consumer minds with sports or casual wear, and that is the main reason why they are not willing to spend more than $100 on shoes. Nike has used Michael Jordan to endorse its products, although basketball is not as popular in Europe as it is in the United States. Rather than try to capture the European market, Nike continues hiring US baseball and American football players to endorse its products, the most recent celebrity-endorsed was Andrew Luck (McLuskey, 2012).
The first solution to Nike’s problem is reconsidering its endorsement concept in order to capture the bigger part of the European market. Nike needs to hire European iconic football players from Europe to endorse the upmarket show models. Football players are highly praised by their fans all over Europe, and their approval of Nike products may well cover that 10-15% of the upmarket segment. It appears that Nike is losing a considerable share of the European market by focusing on US celebrities for endorsement purposes.
The second solution lies in promoting Nike’s brand through a number of Internet platforms, such as YouTube. Nike’s market analysts need to realize that more and more people, especially the youth, prefer to use YouTube and other Video platforms not only for entertainment but for receiving news and keeping up to date. Top bloggers with large audiences may be attracted to promote Nike’s products by unaggressive marketing strategies, such as simply wearing any of Nike’s wear in their videos. Adidas, for instance, is extensively using YouTube and other social media platforms to market and promote its products (Geddes-Soltess, 2012). It is advisable that Nike should follow the new Internet trends and capture more people who follow top bloggers’ fashion advice.
Product placement is also highly instrumental in shaping consumer interests and trends. The well-known reference to Nike’s future power-laced shoes in ‘Back to the Future’ is a perfect example of what a product placement needs to be like. To promote products more effectively, a part of Nike’s marketing budget needs to be allocated for product placement in famous movies and TV series.
Out of the three solutions proposed, it appears that using SMM and YouTube platforms is the most feasible and less costly. Hiring athletes from Europe may be a huge strain on the marketing budget. Product placement in newly-released movies may be effective, but a rather costly solution as well. YouTube bloggers, on the other hand, may require much less financial investments. Another advantage is that SMM bloggers may be contracted to advertise Nike for a long period, a year or more, meaning that each of the weekly videos will feature some of Nike’s products. Presence in social media may provide a strong impetus for the drive of the upmarket segment.
Nike’s strengths lie in its long-standing popularity in the market. The company has established and maintained its position in the market, and it is one of the leading sports brands. The weaknesses may stem from the shift in market trends, and the youth preferences towards more casual style. As a company with a long-standing history, Nike has a lot of opportunities to seize, although it needs to keep up with modern trends.
To implement the proposed solution, the first step would be to shortlist a number of most popular and influential YouTube bloggers. It is highly advisable that the bloggers be from different countries, and not only from the US. This would help capture a more diversified market in each country that the content maker will represent. They need to be contracted for a long period of time, which will be enough to lead to changes in consumer minds. Aside from mere product placement, social media campaigns need to be developed to increase and foster brand awareness.
Nike is currently going through a management shift as its co-founder, Phil Knight, decided to resign in the near future (Townsend, 2015). Perhaps the new management will be able to pump fresh blood into the marketing concept of Nike.
Reference List
Geddes-Soltess, Z. (2012). Adidas Uses Social Media for Derrick Rose Campaign. Web.
McLuskey, D. (2012). Nike Adds Top NFL Draft Prospect Luck to Stable of Endorsers. Web.
Townsend, M. (2015). Nike Expects Sales to Hit $50 Billion by 2020. Web.