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This presentation examines and outlines how one of the marketing concepts, distribution, is employed by Nike. The analysis of Nike’s distribution management practices is based on Kotler et al’s ideas on distribution; provided in part six of chapter fifteen in their book ‘marketing management’.
Distribution refers to channels that a product follows before it reaches or is accessed by the final consumer. A distribution channel is defined by the number of intermediaries between a producer or manufacturer and the final consumer.
Distribution has a very close connection with other elements of marketing. Distribution channel characteristics have a direct impact on the other elements of marketing According to MacCalley (4), through a marketing channel “manufacturer or marketer motivates, communicates, sells, ships, stores, delivers and services the customer’s expectations and the product’s needs”.
Through the channel, the marketer communicates brand qualities. Unless outlets are well managed, brands can be compromised because brand contact points convey brand qualities (Kotler et al 165). A product can be sold through a single channel, dual channels or multiple channels. The channels can either be exclusive i.e. only distributing a particular product or inclusive i.e. used for distribution of other products as well.
Overview Nike Inc.
Nike Inc started operations in 1968 by Frank Knight and Bowerman. From humble beginnings, the American firm has grown steadily to become one of the greatest multinationals specializing in sporting wear. Nike currently has its headquarters in Oregon, a suburb in Portland.
However, it operates in more than 160 countries around the world. It has a diversified product mix with a number of product lines. It has five major product lines which include footwear, club gear, national teams gear, and apparel. The product lines deep i.e. are very diverse with many products.
NIKE’s Distribution Channels
Nike employs both direct and indirect channels of distributions. The direct channels include the fully owned distribution subsidiaries and retail outlets. Indirect channels include independent distributors and other licensed agents.
Nike goes for short distribution channels consisting of not more than two intermediaries. Through its subsidiaries and retail outlets it is able to deal directly with consumers.
Where independent distributors are engaged or licensed agents, two channel levels are used. The use of both direct and indirect channels helps to ensure high market penetration.
Nike pursues intensive distribution due to its strong brand. Intense distribution strategy ensures that people do not have to travel to find Nike products. However, for some specific products, some sort of exclusivity is exercised. Due to design characteristics, some products are distributed exclusively by given channels.
Figure 1: Showing Nike’s distribution channel
As figure 1 above shows clearly, Nike uses a multi-channel mode of distribution (NikeBiz). Through a multi-channel system, it has achieved a well choreographed distribution mix. Through its own subsidiaries and retail outlets, it’s able to do direct marketing and use of sales force. It has independent distributors and licensed agents who help distribute its goods. What is not well developed in Nike is online selling and telemarketing.
The bulk of its sales happen through retail accounts. As a multinational, NIKE distributes its products in many countries of the world, using its own outlets and contracted agent outlets. One of the biggest subsidiaries that Nike operates is called Converse Inc. Another important subsidiary that Nike runs is called Exeter Brands Group LLC (NikeBiz). Through the subsidiaries it manages to move volumes or different brands under the big or umbrella NIKE brand.
Nike chose to go international due to waning sales in the USA. Initially, it used independent distributors in countries such as the US and European markets e.g. England. However, to consolidate control over the distribution channels, the company bought off all its independent distributors.
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Nike operates distribution subsidiaries but engages in outsourced manufacturing This strategy helps in avoiding extra costs in terms of import duty and management costs. In some countries like Japan, Nike has formed a strategic partnership or joint venture with a company called Nissho Iwai. The company had well established trading outlets, and the partnership helped NIKE to easily break into the market.
Nike has five very diverse product lines. It combines a number of distribution channels because it uses single channels to distribute all of its products. The use of a single channel to distribute many products helps cut down on costs thus increasing competitiveness. In some areas, Nike uses parallel channels of distribution to ensure proper distribution or market penetration.
To accommodate the different product lines, NIKE developed special retail outlets in a number of towns across the world. The outlets are called NikeTown and aim at offering both a diversity experience to customers as well as providing the whole assortment of NIKE products under one roof. The cool response to the NikeTown experience led to Nike expanding that chain to more areas especially in Europe and USA.
Nike has been able to compete favorably against its competitors by being relevant to market characteristics and delivering goods where they are most needed. At the conception stage, Nike concentrated on the American market because the Jogging frenzy was providing ready market for its products. Overtime, Nike has been able to diversify and expand into other markets.
In each market, it chooses a distribution strategy or channel that best suits the characteristics of the country. In England for example, it sought partnership with independent distributors. However, due to need to control distribution channel some more, it did away with the independent distributors and instead established its own fully owned subsidiaries (Nikebiz 1).
Good distribution strategies and general visionary leaders have seen the company continuously record growth and profits. Table1 below shows how Nike compares with other major competitors in the industry
From the table, based on Van Dusen (1), it is clear that over the years, Nike has been able to chart a growth path that has ensured phenomenal growth. Through innovation and awesome marketing, Nike Inc managed to beat the long time leader in the footwear industry, Adidas (NikeBiz).
It got listed on the stock market in 1980, a public offering that helped it expand its operations even more. At the moment the company has a strong presence in the world especially in the US and European Markets. At the moment, it is estimated that Nike holds a global market share of close to 40% (NikeBiz).
Nike has become an iconic brand in the world market; towering above earlier leaders like Adidas which later merged with Reebok. Despite the merger between the two, Nike has maintained its market leadership position.
The phenomenal success of Nike is attributed to good product designing and awesome marketing. Part of the marketing efforts involved creating a working distribution mix that enables access to demand rich markets. By using a multi-channel system, Nike has continued to capitalize on every available market opportunity.
Kotler Porter, Keller Kevin Lane and Suzan Burton. Marketing Management. Melbourne: Pearson/Prentice-Hall, 2008
McCalley, Russell, W. Marketing Channel Management: People, Products, Programs, and Markets. Westport: Greenwood Publishing Group, 1996
NikeBiz. Company Overview: If You Have a Body You Are an Athlete. 2010. Web.
Van Dusen, Steven. The manufacturing Practices of the Footwear Industry: Nike Vs Competition.1998. Web.