Situation Analysis
Athletic footwear industry is very much concentrated (Eric 2006). The industry consists of a large number of smaller and segmented players. One of the key characteristics which define the industry is the purpose and price of the shoes. However, there is a given degree of overlap amongst the various shoe categories especially with regard to casual wear and performance shoes.
For example, a considerable proportion of individuals wear athletic shoes in non-athletic settings. This is an indication that there is a potential for an increment in the size of the market for athletic shoes.
Currently, large firms dominate the athletic shoe industry account for 95% of the entire market while small firms account for only 5%. Some of the key competitor s in the industry includes Adidas, Nike, Reebok, Puma, Skechers, Van, K-Swiss, Asics, Saucony and New Balance (Eric 2006).
Nike Incorporation is the leading firm within the athletic footwear industry. The firm deals with designing and marketing various a variety of athletic footwear. Nike Air Max is one of the leading athletic footwear produced by the company. The product is effectively designed to appeal the consumer. Nike Air Max has an air cushioning and an innovative foam cushioning.
This makes it to be effective with regard to impact absorbing. A thin plate is sandwiched between the cushioning systems to ensure effective support of the feet (Loscher 2006). The price of a pair of Nike Air Max shoes varies from $ 99 to $149 for men while ladies shoes range from $99 to $ 119 (Loscher 2006). A significant proportion of consumers consider Nike Air Max to be of high quality and stylish.
In 2004, Nike had a market share of 42% as illustrated in the pie chart below. The lucrative nature of the industry in relation to profitability has led to a large number of investors venturing the industry. The resultant effect has been an increment in the degree of rivalry. The high degree of rivalry has had a negative effect on the firm as it is evident in the reduction in its market share.
In order to attain a high competitive advantage, firms in the athletic footwear industry are adopting various market positioning strategies. One of these strategies relate to formation of mergers and acquisition. For example, in 2003, Nike Incorporation acquired Converse Company.
This was followed by the Reebok and Adidas merge in 2005 (Fried, Shapiro & Deschriver 2007). Currently, Nike Incorporation has a market share of 33% of the entire global footwear industry (Cuizon 2009).
The success of a firm in the global market is dependent on a number of macroeconomic factors. These relate to both internal and externla environment. The key external enviroments relate to political, economic, social and technological environment.
Political analysis
The United States government has developed and implemented effective policies which have played a significant role in the success of Nike athletic brands (Eric 2006). Some of these policies relate to low interest rates, economic stability such as taxation policies and ensuring stability in the currency. This has enabled Nike’s athletic footwear products to be competitive internationally.
Economic analyis
The athletic footwear industry was adversely affected by the global economic recession. The table below gives an illustration of the change in sales during the period ranging from 2007 to 2009 in the United States.
From the table, it is evident that there was a significant reduction in sales in 2008 compared to 2009. The total sales reduced by 3.2% in 2008 and by 1.4% in 2009 (Boyle 2010).
As a result of the 2007 global economic recession, the firm experienced a reduction in its sales which persisted to 2009 as a result of reduction in consumer purchases. The firm’s cost of operation was further driven up by the economic crisis in Asia considering the fact that the firm manufacures its products in Asia.
Social analysis
Currently, there is a shift in the consumption behavior amongst the consumers. One of the major trends relate to increased health consciousness. As a result, there has been a significant increase in the number of individuals joining fitness clubs (Eric 2006). The change in consumption behavior has led into an upward shift in demand for various fitness products such as shoes and apparels.
This presents a feasible business opportunity for Nike Incorporation to exploit through marketing of Nike Air Max. This arises from the fact that Nike Air Max is specially designed to ensure comfort and flexibility of the consumer.
Technology analysis
In the 21st century, there has been an increment in the rate of technological innovation. This has led into transformation of businesses in various economic sectors (Eric 2006). In an effort to attain a high competitive advantage, Nike Incorporation has integrated information technology in its operation.
Some of the areas in which this has been applied relate to production, marketing and distribution. With regard to marketing, this has been achieved through incorporation of Marketing Information Systems. This has enabled the firm to attain a high competitive edge compared to its competitors.
Internal Analysis
SWOT analysis
Objectives
Communication objectives
Varey (2002) posits that the success of every firm is dependent on the effectiveness with which the firm has established a relationship with the consumers. Currently, there has been an increment in the degree of similarity amongst various product categories with regard to performance, design and price which are the core benefits sought by the consumers.
As a result, it has become vital for firm’s to draw consumer’s attention. One of the ways through which this can be achieved is by marketing communication (Egan 2007). According to Masterman and Wood (2006), setting communication objective is vital in the marketing communication process. This arises from the fact that objectives act as keystone upon which the firm sets the direction and limits of the strategic decisions.
Considering the competitive nature of the industry, Nike Incorporation intends to increases awareness of its Nike Air Max with a margin of 25% within a period of one year. Awareness of Nike Air Max will be made across consumers of varying demographics. In order to attain this, the firm intends to create intense awareness of its Nike Air Max shoe.
Some of the key consideration in the communication process is to create global awareness amongst potential consumers on the characteristics of the Nike Air Max. Through effective communication, it will be possible for the firm to influence consumers in their decision making process. This arises from the fact that the communication will not only be informative but also persuasive.
Market share
Through communication, the firm intends to increase the size of its overall market share from its current level of 33% to 50% within a period of one year. According to the latest report released in August 2010, Nike had a market share of 62% amongst the athletics footwear products (Nike Sneaker 2010).
Through its Nike Air Max market communication campaign, the firm intends to increase its market share with a margin of 20%. This will be achieved by selling the product to new customer categories and by venturing into new markets.
The firm also intends to increase the volume of its Nike Air Max athletic shoes with a margin of 15% within two months.
Effect on Competition
It is the firm’s objective to attain a high competitive edge with regard to creating product awareness. The firm intends to be ranked as the most effective with regard to brand promotion. As a result of brand promotion, the firm will be able to communicate to the consumers on the benefits associated with consuming the product. In addition, it will be possible for the firm to influence consumers’ attitude towards Nike Air Max.
Marketing communication will ensure that consumers associate the product with high value which will play a significant role in reducing the intensity of competition that Nike Air Max is currently facing from other athletics footwear products.
According to O’Guinn, Allen and Semenik (2008), effective brand promotion through market communication campaign can result into consumers developing confidence that they are receiving value for their money.
Target
The success of a market communication process is dependent on the effectiveness with which the right audience have been identified (Shah 2009). The target audience refers to whom the firm intends to communicate to (Jobber 2007).
In marketing communication planning, various audiences are identified depending on the target markets. Identifying the target audience is vital in market communication process. This arises from the fact that the proper identification of the target audience has a direct impact on the effectiveness of the marketing communication.
Considering the fact that marketing communication planning is aimed at stimulating sales of a particular product, selecting the target audience is paramount in influencing the consumers’ decision making process (Kodish & Pettegrew 2008). For example, in a family setting, the father has an upper hand in making decision regarding the purchase of electronic products.
This means that firms marketing electronic products would consider the father as the core target audience (Shah 2009). To be effective in targeting the audience, various descriptive variables should be put into consideration.
Some of the variables relate to demographics, lifestyle, geographics and psychographics. In addition, benefit sought and usage as the core behavioral variables should also be put into consideration (Koekemoer & Bird 2004).
In marketing Nike Air Max, Nike Incorporation uses both genders (male and female) in identifying its target audience. This has enabled the firm to design and develop Nike Air Max footwear which meets the demand of the customers of varying ages.
Apart from using demographic variables in targeting its audience for Nike Air Max, Nike Incorporation also targets consumers who are style conscious.
In the process of targeting, developing and marketing Nike Air Max, the firm’s marketing department also puts greater emphasis on consumers who consider enhancing their image. The change in consumer behavior presents a feasible market opportunity considering the fact that the change is not only amongst the non athletics consumers but also athletic consumers.
Nike Incorporation has also incorporated institutional consumers such as athletic clubs as a part of its target audience.
Developing the strategy
In order for Nike Incorporation to be effective in marketing Nike Air Max, the firm’s management team has incorporated the concept of Integrated Marketing Communication (IMC) (Pickton & Broderick 2005). Decision to incorporate IMC arose from the fact that the firm intends to create awareness of Nike Air Max to diverse customer categories.
In its IMC strategy, Nike Incorporation has integrated both traditional and emerging market communication strategies. Some of the traditional market communication strategies that the firm’s management team has considered incorporating include advertising, public relations, sales promotion and direct marketing.
According to O’Guin, Allen and Semenik (2008) advertising creates value in a product by instilling a positive perception amongst the consumers. In its advertising strategy, the firm has makes use of various mediums such as television, radio and use of print media such as magazines and newspapers. Outdoor advertising is also used through incorporation of billboards which are strategically located.
The firm uses the simple and catchy ‘Just do it’ slogan and the Nike Swoosh in all its advertisements. Use of the logo and the slogan has contributed towards the consumers developing a positive attitude towards Nike Air Max. According to Cashmore (2009), the swoosh logo has over the years been associated with victory.
Considering the fact that the firm targets institutional consumers as part of its core customers, the firm’s management team has integrated direct marketing so as to be effective in marketing Nike Air Max amongst these consumers. Through direct marketing, Nike Incorporation marketing department is able to identify and develop a relationship with the institution’s decision making unit thus influencing its decision making process.
In an effort to develop a positive public image, Nike Incorporation has integrated public relations. This is achieved through sponsoring various sports. In marketing Nike Air Max brand, Nike Incorporation has integrated the concept of sports sponsorship. According Arnis and Cornwell (2005), Nike Incorporation has been able to venture into new markets through sports sponsorship.
For example, in an effort to venture the Australian market, Nike sponsored Shane Warne who is a national cricketer. This enabled the firm to develop an affiliation with the Austrian culture hence creating an edge in marketing its products in Australia.
Sales promotion in form of price and quantity discounts is also integrated in marketing Nike Air Max.
In order to create product awareness to a large number of customers, Nike Incorporation has integrated emerging market communication technologies (Doren, Fechner & Green 2000). Some of these tools include use of the internet marketing through inclusion of Nike Air Max in the firm’s website. In addition, the firm has also incorporated social communication networks such as Facebook, Twitter, MySpace and You Tube.
The firm will also enter into a contract with search engines such as Google and Yahoo. Through the contract, the firm will be able to post Nike Air Max in the search engine. Use of search engines and social communication networks will enable a wide number of consumers to be informed about Nike Air Max.
Budget
To ensure the success of the marketing communication campaign, the firm’s management team has set a substantial amount of money in its marketing budget. The table below gives an illustration of the estimated cost.
Evaluation
Over the past three years, Nike Incorporation has experienced an increment in its net income. The firm’s financial year ends on 31st May every year.
During the 2008-2009 financial years, the firm witnessed a reduction in its net income as a result of its financial year. However, this trend was negated during its 2009-201 financial year. The table below gives an illustration of the firm’s financial performance over the past four years. All figures are in million dollars.
Upon implementing the market communication campaign, the firm’s management team will conduct continuous evaluation on its effectiveness. Considering the fact that it is challenging to measure communication, the firm’s marketing department will evaluate the changes in its sales revenue. This will aid in the determination of whether the campaign is successful with regard to sales enhancement.
Reference List
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