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• Background Note 2
• SWOT Analysis 3
• BCG Matrix 5
• Problem Identification 5
1. Nike Functions 6
2. Value Chain 6
3. Sales 7
5. Branding 9
• Marketing 9
1
NIKE Inc.
Background Note
NIKE sells its product through some 25,000 retail stores in the
United States, and globally, it sells through independent distributors
and licensees in 160 countries. The Athletic Footwear Industry is
highly competitive, however, the market share data shows NIKE
and Reebok as the major players in the industry.
NIKE has faced public relations problems in Far East locations. Nike
is characterized of making its equipments in countries which
are in the developing phase, having very cheap labor,
authoritarian government and lack of human rights appeal
and union movement.
In doing this it has made greater margins on the cost of lower wages
to its workers. The negative publicity regarding Nike's
activities in Asia has come from a variety of sources.
Vietnamese activists have called for a boycott of Nike products
because of the company's activities. Nike faced problems in
Pakistan using child labor in manufacturing. Nike is also criticized for
using sweatshops in countries like Indonesia and Mexico. The
company has been subject to much critical coverage of the often
poor working conditions and the exploitative-ness of the cheap
overseas labor.
2
SWOT Analysis
This analysis will help summarize key issues from the business
environment and the strategic capacity of Nike. This can be used to
judge future strategic options with rationale outlook.
External Analysis
• Opportunities
o Product diversification & New
Markets
o Increase product line & Changed
target market
o New manufacturing countries
o E Commerce
• Threats
o Competition & Fashion Trends
o Contract manufacturing and copying of product
(intellectual property)
o Consumer lifestyle changes
o Sars / Negative publicity
Internal Analysis
• Strengths
o Product Range & Capacity for innovation
o Single Brand & Stars endorsement
o Contract manufacturing (Cost Advantage)
o Distribution expertise
o Large portfolio of products
o Research & Development
o Brand Equity
• Weaknesses
o Single Brand & Too many stars endorsement
o Contract manufacturing (indirectly involved in
Child labor)
o Spread portfolio of products
o Reliant on retailers
o Reduction of target market
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Application of Porters 5 Force model
• Potential Entrants
o Other sportswear manufacturers expanding their
portfolio
o Cheap copies from the Far East.
• Substitutes
o When required for professional use there is no
substitute goods, but as a fashion item there are
many other goods that could be purchased.
• Buyers
o The buyers of sports footwear have changed in
the past decade.
o There has been and increase in women
purchasing the shoes,
o Generation Y has a different tastes and purchasing
methods.
• Suppliers
o Using production facilities in the Far East has
given economies of scale to Nike. Although there are
problems arising from these factories, they are
switching to making there own goods, labour and
political unrest causes delays in manufacturing and
shipping of the goods,
• Competitive Rivalry
o Reebok, offering more choice of shoe, introducing
endorsement by sports personalities, sponsoring
sporting leagues
o Adidas have recovered from the problems that
plagued them, and have a good product mix,
covering a wide range of sports.
4
BCG matrix
Nike
5
• Nike had faced problems after sub-contracting in the Far East
getting negative publicity due to usage of child / cheap labor
in the past.
Nikes Function
Value chain
While viewing the criticism & accusation faced by the company, it is
felt that Nike is not 100% responsible since it is the sub-contractors
who operate and create conditions for workers. Low-cost
manufacturing is Nike's strategy, and it is realized by outsourcing
the manufacturing process to cheap labor countries. If Nike were
responsible for all of working conditions of workers at sub-
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contractors' factories, it would cost more to make footwear.
However, Nike should monitor working conditions & operate within
the countries legal environment
Nike’s supply chain provides a clear view of the global nature of the
company. Nike’s headquarters are in America, however, virtually all
of its production takes place outside of the United States.
Nike’s supply chain upstream begins with the materials used in the
production of its products. Many of these materials used in
production are available in the locations where the manufacturing
takes place, but some specialized materials have to be imported
from other sources.
Critical Success Reduce problems associated with distance, i.e. quality, consistency and
Factor value.
Change of cus Although still outsourcing, they would gain more control over production.
Sales
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packaging and overall image. People are buying into an ideal, not
just the item. Consumers believe that there is a link between quality
of a product and the price.
Critical Success Entry to new segments, by advertising and targeting the audience. Ensuring
Factor accurate and quick picking of the customers order..
Change of Shift to global marketing, selling world wide from the web targeting Generation Y.
Focus
Past options Although they have numerous retailers, they were heavily dependant on one
out let chain
Future Options To negotiate partnerships deals with few key outlet chains & continue to have
numerous retailers.
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Critical Success Ensure availability of product at key retail store to grab sales.
Factor
Nike Branding
Rationale Consumers are willing to pay a premium price, as they imply credibility, high
quality and up-to-date global trend.
Future Options Company can use its brand name to enter into new markets / segments.
Rationale Moving into a new market with a brand that is already global, one can reduce
cost of introductory and follow-up marketing programs.
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Change of Focus Concentrating on core products as Nike, allowing growth in new diverse
markets
Marketing
"Just do it"
Nike promotes its products by sponsorship agreements with
celebrity athletes, professional teams etc. In the run up to the
2006 U.S. Open, Nike began running Pretty, a television
advertisement featuring Maria Sharapova. The ad was a
popular and critical success, and went on to win several of the
industry's top awards, including two Cannes Gold Lions.
During the past 20 years especially, Nike has been one of the major
clothing/footwear sponsors for leading tennis players. Some of the
more successful tennis players currently or formerly sponsored by
Nike include: James Blake, Jim Courier, Roger Federer, Lleyton
Hewitt, Juan Martín del Potro, Andre Agassi, Rafael Nadal, Pete
Sampras, Marion Bartoli, Lindsay Davenport, Daniela Hantuchová,
Mary Pierce, Maria Sharapova, Serena Williams. Nike sponsors
several of the world's top golf players, including Tiger Woods, Trevor
Immelman and Paul Casey.
Nike is also the official kit sponsor for the Indian cricket
team for 5 years, from 2006 till end of 2010. Nike beat
Adidas and Puma by bidding highest (US$43 Million total).
Also sponsored China Olympic 2008.
Highly focused brand includes Nike, Adidas, and Reebok, they target
a precise market. However, there is evidence that a brand will widen
its target market as it reaches a greater level of maturity. In the
case of Nike, for example, there was a move into new sports areas
away from the running heritage. Nike’s target audience over a
period of time has also moved from more masculine alone towards
female and Generation Y that justifies their market leadership.
Now that the trends within the industry have changed with
increase in number of female consumers, Nike must review
their advertising policies and future option could be to
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choose a brand ambassador that appeal to a wider audience
and that may as well contribute to reduce advertising costs.
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• Select a brand ambassador that appeal to the local
inhabitants.
• Promote E- Commerce
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