Executive summary
Nike, the American based athletic apparel and footwear multinational, is perhaps one of the organizations that have been taking extensive steps to enter the Latin American market, with special focus on Brazil. Although Adidas is the largest sponsor of the world cup event in Brazil, it is worth noting that Nike has extensively explored the market over the last few years.
The purpose of this report is to analyze the Brazilian sports shoe market and provide advice to the corporate leadership at Nike in order to help them develop the best strategies to increase the corporate competitive advantage as the company enters the lucrative but highly competitive market. Specifically, the report examines the specific operational, managerial and organizational problems that rival companies encountered in Brazil.
In addition, the report examines the strategies and business practices that these organizations used when entering the sport shoe market in Brazil.
A comprehensive recommendation willsadvice the CEO at Nike on how to develop effective market entry strategies for use in its Brazilian venture. The report is developed through answering threes specific questions that address the issues that are likely to face the company as enters the Brazilian market.
Introduction
The current trend towards globalization provides companies with a chance to expand their target market and enhance their profitability levels. The sports industry is one of the most popular sectors in the current global market. Nevertheless, the specific market entrance strategy a company uses determines its ability to cope with the wide range of challenges associated with market expansion.
There must be established contracts for managing the distribution of goods and services to a foreign market. Nike, one of the world’s largest makers and distributors of sports products, requires an effective market entry strategy to enter the Brazilian sports market.
As one of the most soccer enthusiastic societies in the world, Brazil offers Nike an opportunity to enhance its profitability level, despite the competition from other interested corporations like Adidas. This report examines the market entry strategy for Nike as it attempts to include Brazil in its of global markets.
What specific operational, managerial, and organizational problems did companies in that industry encounter in the country recommended in your country analysis for Brazil?
The TIM Strategy
Most American corporations seeking to enter new world markets, especially in the emerging economies, have been using an international market expansion approach as their primary entry strategies. In fact, manufacturing corporations have been using this strategy, including those in other industries.
Research studies indicate that the strategy is supported by the nature of their business, where distribution of products is the major corporate aim. From a centralized production site, American manufacturing corporations have been successful to enter foreign markets in Europe, Asia and lately, the Latin America.
Thus, it is recommended that Nike retain its centralized production system and engage in activities that increase its shoe distribution in Brazil. With this strategy, Reebok and Adidas are able to increase their presence in foreign markets, especially in Asia and Europe. Currently, Adidas is using the same strategy in South America, especially in Brazil (Siemers, 2010).
In the past, a number of corporations have attempted to enter the new and emerging markets using a number of strategies, but most of them end up failing to achieve the expected goals. For instance, Nike’s attempt to enter the Southeast Asian market faced a myriad of problems. For example, Nike’s entry into South Korea and Taiwan was expected to be the company’s major venture that would yield hefty payouts.
In particular, the company was attracted by the large, cheap and readily available labor. In addition, it was aware that the raw materials were readily available while the government control of business and labor in these nations was minimal. It was also relying on poor competition in these nations since Adidas and reebok were focusing on China and Japan and ignoring South Korea and Taiwan.
However, these aspects proved to be negative for the company’s mission. For example, setting up a manufacturing unit in South Korea proved to be a wrong idea because the process was long while advertisement campaigns failed to pay back. In addition, the country’s population was not well prepared for the company’s shoe products primarily because the competition was low.
However, the company decided to centralize its manufacturing unit in Taiwan and concentrate on distribution not only in South Korea, but also in other nations in the region, including Philippines, China and Japan. This method proved to be more effective than the previous strategy. For instance, the company gained a revenue increment of more than 50% between 2001 and 2003 due to this strategy (Siemers, 2010).
What strategies and business practices have companies in the same industry used to enter and operate successfully in that country?
Adidas and Reebok are the best examples of international corporations seeking to take the advantage of the Brazilian addiction with sports, especially soccer (Siemers, 2010). In particular, Adidas has set up a number of strategies, which have shown signs of paying back in the last few years. The company has been using strong marketing and advertising campaigns in Brazil to create awareness of its products.
For instance, Adidas has been using some of the popular soccer celebrities in the country to attract the attention of the population. It has been using the identities of these celebrities to brand its products. In particular, these are individuals taking important roles in the world cup event. The company expects to gain revenuesexceedinga billion dollars at the end of the World Cup event in Brazil (Mosendz, 2014).
Reebok is using sponsorship strategies to enter the market. In fact, it is the largest sponsor of the event, channeling several million dollars in the event. It has obtained rights to advertise in the stadiums and the media, which are granted by the local authorities as well as the world soccer governing body, FIFA (Redl, 2014).
Strategy
Nike is expected to use the centralization of production in its entry into the Brazil market. In this case, the company takes after the example set by Adidas and Reebok, which have been exporting products from their manufacturing units in Southeast Asia, India and North American to stock their Brazilian outlets.
Secondly, the company is using producing branding with the identities of popular soccer celebrities and individuals involved in the preparation and organization of the oncoming world cup event.
Using the real MNC you have selected to study for the purpose of this Team Report, what can your client CEO learn from their experiences in the country you recommended?
Structure
Nike has customer-based and employee-focused strategies that seek to spur the company’s growth towards a Multi-dimensional organization. Its product line or matrix concentrates on footwear, equipment and apparel, all meant for sporting events. In addition, the matrix includes the dimension of geography and sports culture in the local markets.
The company also develops products meant for different sports and different market segments. For instance, it provides different products for sportswear and action sports, basketball, soccer, running as well as male and female training (Siemers, 2010).
In the employee dimension, the company seeks to be an “all inclusive and equal opportunity employer” to ensure that it fits in the modern globalization aspects. For instance, it focuses on hiring Native Americans, Latinos, LGBT, Asians and Africans, which are classified as “employee and friends networks”.
Marketing
Similarly, despite having a relatively low cost of labor, few market regulations and a large population like India, Brazil’s sports culture is strong. Almost every Brazilian is a fan of football.
The country has been one of the most frequent holders of the world cup title. In addition, the coming of the event to the country in 2014 increases the population’s enthusiasm with the game (Siemers, 2010). To avoid the problems Nike faced in India, the company should focus more on soccer than other games, at least for now.
Finance and accounting
Nike is expected to generate more than $2 billion in sales of footwear and apparel in 2014 in its emerging market ventures. This is a 20% increase in its annual sales (Mosendz, 2014).
The world cup 2014 is expected to generate at least half a billion dollars within one month. Between 2013 and 2014, the Brazilian outlets boosted the company’s dales revenue by more than 70% due to the population’s devotion to the soccer game (Mosendz, 2014).
Human Capital
Like India, China and southeastern Asian nations, Brazil’s huge population and low cost labor are expected to be the main driver of the company’s sales revenue. For instance, it is recruiting young Brazilians into its sales and marketing sections across the country.
These individuals are readily available, skilled and ready for training. In addition, the country’s level of education is relatively high because it has a literacy rate of more than 86%. The culture is also defined by an international mentality that all Brazilians like soccer and Samba dance. In addition, the local language is Brazilian Portuguese, which is spoken by millions of people across the world.
Ethics and CSR
The company’s website states that the largest responsibility is to ensure that it brings about positive and systematic change for employees within their industry as well as supply chain system. It focuses on clarity, alignment, dignity and transparency (Nike Inc, 2014). Thus, these are used as guides to cope with problems of corruption, violation of human rights and other issues, which are sometimes frequent in Brazil.
SWOT analysis
SWOT Chart
Pert Chart
Conclusion
This analysis indicates that Nike has an opportunity to enhance its marketing strategies in the Latin America and Brazil in particular. The report shows that the company requires a strong marketing strategy to ensure that its products are present in the market. In particular, Brazil has a huge population characterized with a great enthusiasm for sports, especially soccer.
It is evident that the company requires an extensive and comprehensive market strategy to explore the Brazilian market. It is also clear that investing in Brazil is a good idea because the market is not well utilized, despite the presence of rival companies such as Adidas.
References
Mosendz, P. (2014). The World Cup Will Bring Adidas More than A Billion Dollars This Year. Web.
Nike Inc. (2014). Nike’s Code of Conduct. Web.
Redl, N. (2014). Reebok Problems Take Shine Off Adidas. The Wall Street Journal, 8 Nov 2013, A21.
Siemers, E. (2010). Nike Focuses on Brazil. Web.