STRATEGIC MARKETING

Case 2-2: Nike Inc.

SUBMITTED TO:
Sir Mohammad Ahmed Butt

SUBMITTED ON:
December 30th, 2009

SUBMITTED BY:
Fatima Ali
 Nike Inc. 2

CONTENTS

1. Executive summary……………………………………………………………… 4

2. Introduction……………………………………………………………………… 5

3. History of the Case ……………………………………………………………. 6-7

4. SWOT Analysis ………………………………………………………………. 8-9

4.1 Strengths
4.2 Weaknesses
4.3 Opportunities
4.4 Threats

5. Strategic Objectives……………………………………………………………. 10

6. Market driven Strategy Objectives …………………………………………….. 11

7. Marketing strategy……………………………………………………………12-13

7.1 Segmentation strategy

7.2 Targeting
7.3 Positioning
7.4 Product strategy
7.5 Pricing strategy
7.6 Promotional strategy
7.7 Channel

8. Recommendations to Nike’s management……………………………………… 14

9. Attachments…………………………………………………………………….. 15
 Nike Inc. 3

Acknowledgement Letter

Firstly I would like to thank Almighty Allah who is the most

Beneficial and Merciful.
I am also thankful to my course facilitator Mr. M.A.Butt for
providing us the opportunity and guiding us through the
making of this report.

It was a great experience for in making this report and it was

a great learning opportunity as I got to know more about
Nike and I got the opportunity to apply my skills.

I hope that in future we will engage in such kind of activities

that contributes worthy knowledge in our study.
 Nike Inc. 4

EXECEUTIVE SUMMARY

Nike Inc. was founded in 1962 by Bill Bowerman and Philip H. Knight as a partnership
under the name, Blue Ribbon Sports. Since Germany dominated the domestic market in
America, Nike came with low-cost and high quality products for the American people.
Today, Nike manufactures and distributes athletic shoes in the global market and 40% of
its sales come from athletic apparel, sports equipment, and subsidiary ventures and they
have traditional as well as non-traditional distribution channels in more than 100
countries globally. Nike has attained a premier position in the market but in 1998, the
company has to face the issue of exploiting overseas workers and the changing consumer
needs negatively affected the sales of Nike.

In this report, I have discussed the case history of Nike that majorly covers the child labor
problem and the problem of change in consumer’s preferences after which I have done
the SWOT analysis and have come up with strategic objectives, market driven strategy
Objectives. Furthermore, the marketing strategy is discussed that covers the segmentation
strategy, targeting, positioning and channel distribution of Nike and the product, price
and promotional strategy it must adopt. In the end, I have given some recommendations
to Nike’s management to drive it towards success.
 Nike Inc. 5

INTRODUCTION

The chairman and co-founder of Nike, Mr. Philip H. Knight deemed my services as a
strategic marketing consultant to drive Nike out of the crisis it is facing. For this purpose,
I have studied both internal and external viewpoints in order to come up with a liable
solution. Moreover, I have also analyzed the social, economical, technological, legal,
customer, competition, international, organizational, marketing, finance and production
components after which I have prepared this report. Nike is facing child labor problems
that are negatively affecting the sales of Nike. However, it is also because of the
changing preferences of the consumers that Nike’s market share is decreasing. Further in
the report, I have come up with the marketing objective of Nike and strategies to cope up
with these objectives to drive Nike out of this crisis successfully.
 Nike Inc. 6

HISTORY OF THE CASE

It was in 1998 when Nike was blamed for exploiting the overseas workers and this was
when the managers were deciding not to hire people less than 18 years of age but the
Chairman of Nike, Philip. H. Knight just ended up saying, “Just do it.” Since this outcry
there was little control of Nike over its suppliers as Nike was getting negative press
converge and students were protesting against Nike at the college campuses. The sales of
sneakers and sports apparels were facing challenges due to the shift in teen fashions and
economic downturn in Asia. Retails stores were closing and unfavorable currency served
as another major problem.

Nike was co-founded by Knight who sold shoes out of his car trunk, its headquarters
today are in Beaverton and with the emergence of buccaneer style shoes, the sales of
Nike quadrupled and in 1996, Nike became an Establishment. The payroll of Nike was
trimmed by 1600 and most of the vice presidents at Nike have worked there for less than
two months except or one who worked for 27 years. A chief financial officer was hired
by Nike from PepsiCo. and many other vice presidents were hired from many other good
companies. The new team came up with an idea to reinvent Nike and they moved on to
non-traditional market and came up with products for extreme sports enthusiasts. Now
was the time for the executives at Nike to consider the costs as well and they had to hold
their expenses to increase the revenues. The growth at Nike during 1994 and 1997 were
fast and it was successful in blowing the competitors such as Adidas and Reebok as its
sales suddenly rose and investment also increased. However, in 1998, sales reduced by
8% but even after the recovery of the domestic market, sales rose only by 2%. The lean
focus adopted by Nike increased the net income by 13%. Nike counted the overseas
markets or the increase in sales but since the Euro was weak, sales were steady. In 1992,
Acura with NIKEMN license plates was the only American CEO to have corporate logo
tattooed on his ankle. The golfer, Tiger Woods was one of Nike’s top sponsored athletes.
In 1997, Nike introduced boots and casual leather shoes and Nike dominated the category
with the sales of 40% in the US.

Nike was blamed for exploiting workers by paying minimum wages to the workers in the
Third World countries and this was a major damage that could not be undone but to
reduce the impact, Nike introduced literacy programs for the workers in Indonesia and
some basic improvements were made. Nike replaced solvent toluene with water based
cement on most production lines. A separate unit called ACG i.e. all conditions gear was
made and this built its own staff, budget and marketing plan. Generation Y is individual
oriented but the kids still do not know that Nike sells skateboard shoes as well. ACG
knew that coming up with cool new products will not solve the problem but the company
needs a new image. Nike promoted its products in the store and print ads were printed. In
the millennium, Nike entered cyberspace and educated its executives about the Web, who
was trained to drive traffic towards Nike.com to increase online sales. The customers
 Nike Inc. 7

were also allowed to customize their products by choosing their own color and design. In
1999, sales rose so much that it became hard for Nike to fill up the demand. Polo shirts
and shorts were more in demand that did hurt the sales of higher priced items. Today,
Nike is selling its products in millions and is meeting the real challenge by delivering on
time. It was increased the financial accountability and have made the employees more
conscious about sales. For advertising, it pays the agency to make videos that highlights
the products that are being sold by Nike; however Knight acknowledges that creating a
big company culture is not an easy task.
 Nike Inc. 8

SWOT ANALYSIS

STRENGTHS

1. Competition: Nike is enjoying formidable competitive position vis-a-vis

competitors. It has given very tough competition to Adidas and Reebok and has
maintained its leadership in sneakers market.

2. Labor Component: Labor environment in the USA portrays stable position.

None f the labor unions has gone against Nike. It shows that Nike is
compensating its labor well.

3. Financial Component: Nike is financially very sound and has enough funds to
support any of its activities. It had evolved from being a $100n million to $9
billion company. Nike has never faced financial problems.

4. Production Aspect: Production at Nike is according to high standards. The

operational system including processes has been replicated in other countries as
well. Nike produces highest quality products which follow almost all of the
quality standards.

WEAKNESSES

1. Customer Component: Consumers are immensely seeking out value with a

weapon to determine the fate of any brand. Considering Nike’s labor practices
and changing Asian fashion, consumers are exhibiting fewer tendencies towards
Nike brand and its products. If serious and immediate actions are not taken, Nike
would face immense loss in respect of consumers’ loyalty which is decreasing day
by day,

2. Competition: Nike is facing fierce competition. This includes both; direct and
indirect competition. The competitive arena is continuously expanding. Although
Nike gave tough competition to Adidas and Reebok in past, it’s not facing un-
traditional competition from outside the boundaries of direct competition. The
new competition has come from non-branded leather and hiking shoes.

3. Organizational Aspect: The strategic dimensions including vision, mission and

strategic objectives need upward treatment. The company is not market oriented
which is proving to be its weakness. Nike has failed to meet consumers’
expectation about quality of sportswear.
 Nike Inc. 9

4. Marketing Aspect: Marketing management needs significant improvement since

they have failed to form favorable image of Nike among its consumers.

5. Human Resource Management: HRM at Nike is a main weakness and needs

improvement.

OPPORTUNITY

1. Technology: Nike is equipped with contemporary information technology and all

the productions processes of Nike use high and up-to-date technology.

THREATS

1. Social: The industry is facing a social shift in terms of heroism and females are
coming in the main stream of industry. Education standards are also getting
higher with time. This has made the consumers more rational and less emotional
when it comes to purchasing. The company is late to internalize the social shift.

2. Legal: The industry is confronted with legislations and its covenants to safeguard
the interest of stake holders. Since Nike is not abiding by the laws in a holistic
manner, it’s a threat for Nike.

3. International Component: International component for Nike apparently seems

less favorable and the parent country/company can feel consequential impact.
Internationally, people are raising their voice against Nike’s illegal act of
engaging child labor. People are boycotting Nike’s products; which is a serious
threat for the company.
 Nike Inc. 10

STRATEGIC OBJECTIVES

1. Initially, Nike must redefine the mission and the vision of the company that would
assist them in focusing more on the market and the consumers.

2. The situation must be completely studied and on the basis of the analysis of the
situation, a long run strategy must be defined to counter to the child labor and
other problems such as change in customer preferences.

3. New strategies must be defined to increase sales for which Nike must come up
with new products to satisfy the changing needs of the customers.

4. New market segments must be defined to obtain higher sales.

5. It is essential to provide strong leadership to Nike by replacing Knight with

someone else.

6. Adding flexibility especially in terms of communication will play a major role in

the success of Nike. Employees should be consulted while the strategic decisions
are being made and ideas must be shared with all the departments.

7. Steps to make operations fasters and easier must be taken by Nike’s management
for which new product types must be introduced.

8. More consideration should be given to the aspect of social corporate

responsibility.

9. To refrain the employees from leaving the organization, they must be properly
treated and they should be compensated with both monetary as well as non-
monetary benefits.
 Nike Inc. 11

MARKET DRIVEN STRATEGIC OBJECTIVES

1. Favorable image of the brand “Nike” must be developed in the minds of the
consumers for which the positioning of the brand has to be revised.

2. The entire focus should be on the consumers and their changing preferences and
the functions of the company must be defined accordingly.

3. All the stakeholders involved in the value chain must be properly treated to
maintain favorable relationships with them so that Nike can cater to the changes
occurring in the environment in a better way.

4. It is essential for Nike to know the changes occurring in the needs of the
consumers for which extensive market research must be done consistently.

5. Customization of products must be provided to increase market coverage.

6. The moves of both direct and indirect competitors must be closely studied to
come up with the idea what the competitors might be coming up next with and to
nullify their strategies by developing a competitive strategy.
 Nike Inc. 12

MARKETING STRATEGY

Segmentation Strategy:

Nike must identify new market segments such as non-sport segments should be identified
and they must be worked on after which only those segments should be served that are
profitable. These segments consist of off those who like adventure such as the children,
females and elders. Besides this, those sports segments such as swimming and skating
that are not yet explored must be served.

However, before coming up with new products, Nike must do proper analysis to identify
the competitive advantage of the new products before they launch the products in the
market. Only if the new products are profitable and they match the capabilities of Nike
should they be introduced in the market. For this, the demographics, psychographic
segmentation must be done and the lifestyle of the people must be closely studied in
order to know who the potential and the existing customers are so that Nike comes up
with better products that match their personalities.

Targeting Strategy:

Once the segments have been identified, in depth analysis of profitability and growth
must be done by Nike. Moreover, the competitors’ capabilities must be studied and
evaluated and they must be compared with that of Nike. Only on the basis of distinctive
capabilities must Nike target a segment so that Nike can serve these segments in a better
way than its competitors.

Positioning Strategy:

The way the consumers think about the brand is called positioning i.e. the place of the
brand in the minds of the consumers. Despite the fact that Nike’s products are unique, the
brand image in not very favorable in the minds of the consumers as people are easily
switching to competitor’s products and for this Nike should work on its brand image. For
this, various tools such as one to one marketing and experiential marketing must be done.
Besides this, Nike must sponsor sports events to make the consumers aware of their
presence in the market but before this they must develop their corporate social
responsibility. All this would help make consumers loyal to Nike.

Besides this, points of parity and points of difference must be identified to tell the people
the way in which Nike is unique from its competitors and why the consumers should buy
Nike’s products over the competitor’s products and positioning must be done in a way so
that the consumers are reluctant to switch to competitor’s products.
 Nike Inc. 13

Product Strategy:

Since Nike is continuously losing market share, they must improve their products and
should provide better quality products. For this, they should come up with products that
are more comfortable and products with new and better features. They must also come up
with a new product range and must introduce new products for the existing market as
well as new products for new market segments. A long run strategy must be developed
and new marketing plans must be introduced but the consumer needs should be taken
care of since it is essential to link the product with consumer’s preferences and to
promote them well to generate demand.

Pricing Strategy:

Consumers have become more savvy and intelligent and so they want value pricing,
therefore Nike should opt for value pricing. However, consumers are more concerned
about the quality of the product and not the price so Nike should work on the quality of
its products and should highlight the unique features of their products. It is impossible to
generate sales by selling low quality products at high prices, therefore this factor should
be worked upon.

Promotional Strategy:

To increase market share and the number of the consumers, Nike must do Internet
marketing and promotion to increase sales. To build a stronger image of the brand, Nike
must do advertising through various mediums such as sports magazines, Internet,
billboards and radio. To make consumer loyal to the brand, Nike must offer loyalty cards
to the consumers, experiential marketing must be done to give the consumers the true
essence of the brand and they should sponsor various sports events.

Channel Strategy:

Currently, the products of Nike are sold at Nike stores, at retail chains and on the
Internet. However, since the retail chains are closing down, Nike has to take some other
steps. Internet is a very good option for Nike to sell its products and it is convenient for
the customer as well. Customization facility should be provided to the consumers as this
is the best option to cope up with the changing needs of the customers. For this, Nike
should work upon their distribution system and the automatic replenishment system must
be made more efficient. All members of the channels must be treated as partners to
provide better value to the consumers in an easy way.
 Nike Inc. 14

RECOMMENDATIONS TO THE MANAGEMENT

• Nike must stop all child labor practices.

• To develop brand salience, Nike must opt for massive advertising.

• Nike must understand that the competition is tough and steps should be taken to
nullify the competitor’s strategies.

• People should be made aware of ACG products for which Nike must sponsor
extreme sports.

• A CEO with better leadership skills must be appointed for Nike.

• Since the employee turnover is high, Nike must take steps to reduce it for which
they must provide flexibility and authority to the employees.

• New segments in the market should be explored to increase market share and
sales.

• Nike should focus more on corporate social responsibility so that a positive image
of the brand in developed especially in areas where Nike’s products are sold the
most.

• Nike must adapt clear consumer focus in all its practices.

 Nike Inc. 15

ATTACHMENTS

- Cravens, D.W. & Piercy, N. F. (2008). Strategic marketing. 8th Edn. McGraw
Hill.

- Sir Mohammad Ahmed Butt