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+unning M M M M M M M M M M
,alking M M M M M M
Basketball M M M M M M
4hil%rens M M M M M
-ennis M M M M M
8i!estyle M M M M M M M
Skating M M M
4ross'-raining M M M M
Soer M M M M
It can be seen that Nike has products in all lines. Guring early 200/, Nike was lacking
products in the skating category. .owe!er, they quickly recognized this shortcoming and
introduced a skate boarding shoe. +lso, it can be noted that there are o!erlapping product
category lines between +didas and ?eebok. .ence, there is a high possibility that +didas is
competing with ?eebok and hence cannibalizing its own sales after the merger. 0ith such a
product line, Nike will be able to compete with all players in the industry. ,herefore, Nike is
at a strategic ad!antage.
(%vertising strategy:
,he ad!ertising strategy differs from company to company. 4enerally, Nike belie!es
in spending 72>( of its re!enues in ad!ertising and endorsement. Nike has planned to spend
"'.2 Billion until 20#' for endorsements alone. 0ith the huge size of Nike, it is tough for
other companies to allocate a big amount for their marketing e-penses. *oreo!er, Nike has
always an edge when it comes to ad!ertising and marketing. ,he table below shows the
ad!ertising strategy for the ma@or players in the industry.
4om"any Strategy
Nike
)ndorsing +thletes
%ponsoring %ports e!ents
9ity based ad!ertisements
Banners K Billboards
,hemes on bringing inspiration and inno!ation to e!ery athlete in world
+didas, ?eebok
%ponsoring %ports e!ents
)ndorsing +thletes
,hemes on impro!ing performance of e!ery athlete in the world
=uma
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*i-ing influence of sports, lifestyle K fashion
=uma concept retail stores
=uma fashion shows
New stuff ad!ertising campaigns
Building seasonal momentum during holiday seasons
Cther companies *inimal or less ad!ertising based on stores
Bran%ing Strategy:
Nike has in!ested a lot so far in de!eloping a premium brand that implies high quality
and care for the customer. Nike has a wide range of products ranging from athletics to life
2+
;Puma > Brand Communi&ation analysis,7 Brent (a0ute, 200*
1:
style and also in different price ranges. ,herefore, it is always a challenge to fight against
brand dilution within Nike. ,he following gi!es an idea of the customer5s perception of the
brands.
4om"any Bran%ing message an% strategy
Nike
+thletic, Influential, Cutgoing, +ggressi!e, hi tech, futuristic, retro cool
+merican way of li!ing
+ssociated with +thletes at top of their sport
,o bring inspiration and inno!ation to e!ery athlete in world
+didas, ?eebok
9lear, orderly, =ractical, hi tech, %ophisticated, %incere
9onser!ati!e )uropean style
,o impro!e performance of e!ery athlete in the world
+ssociated with elite soccer playersIteams, NB+ stars, .ip hop artists
=uma
)legant, colorful, fresh, spontaneous, indi!idual, metropolitan,
international
*i-ing influence of sports, lifestyle K fashion
Fashion brand, performance K casual footwear, fringe, e-treme sports
Cther companies Based on their product lines. 4enerally not a strong brand message
In general, Nike5s shoes are associated to be of high quality and stylish. ?eebok5s are
comfortable and casual, and the +didas brand boasts superior performance and is 1percei!ed
as a professional, technically orientated brand with strong )uropean roots6
2
.
-ehnology an% 0nnovation strategy:
Nike fields some of the best in class technological practices and has a few patents to
its credit. Nike emphasizes on these and has de!eloped a lot of new products with use of high
technology and sophistication. +n e-ample of that is the microprocessor shoe to gi!e great
e-perience and comfort to the customer. .owe!er, +didas is also working on high tech
inno!ations to pro!ide high quality shoes. :ately, +didas and Nike ha!e been doing
entertainment based marketing campaign by forming alliances with technologyIentertainment
companies. Nike had an alliance with +pple to sell Nike shoes with +pple i=ods while +didas
tied up with *icrosoft to sell +didas goods with *icrosoft Mbo- gaming systems. %o far the
success of these alliances is yet to be quantified.
&anu!aturing strategy:
2#
(an6, Ste)0anie. ;S)orts S0oe .ivals Ste) 9)7. The Wall Street Journal, * Man 200*.
1+
Nike follows a #00( outsourcing strategy. *ost competitors follow the outsourcing
strategy. )-ceptions to this are New Balance and other smaller players. New Balance claims
that >7( of its production is from the $% and other small companies produce in the $% as
well.
4om"etitor (nalysis in #merging & arkets:
In general, competition in the emerging markets is granular and from a lot of players.
.owe!er, the case in 9hina is !ery different. +ccording to a research report by Bof+ *errill
:ynch, Nike was the most popular sport brand in 9hina with #( market share in 2008, while
+didas ranked second with #7( share and :i Ning third with ##(. ,he brokerage estimated
:i Ning to ha!e o!ertaken +didas in 200 as the second2largest player in 9hinaNs "#0 billion
sportswear industry. ,here are speculations that :i Ning has o!ertaken Nike as well.
&0
0ssues o! onern
It is not easy to stay as the market leader always because e!erybody wants to be in
your place. Nike5s o!erall $% re!enue growth is declining as discussed earlier. C!erall
growth in other geographical regions has also dropped considerably. 0ith the merger between
+didas and ?eebok taking off slowly and strongly and surging of companies like New
Balance, Nike5s sustainability of its market leadership becomes challenging. ,here are a few
challenging issues that Nike is facing at this point of time.
1; &aturing in%ustry in 1S(
a. Tightening competition H growth of +didas, New Balance, =uma etc. as shown
in the pre!ious competitor analysis sections. =roduct differentiation alone will
not help as customers will not be able to understand the ad!antages of
technology beyond a certain le!el. ,here should be a price ad!antage as well.
. Problem of brand dilution H Nike has been de!eloping a premium and high
quality brand image so far. 0ith Nike entering low2price segments, there is a
,0
;C0inese S)orts Brand Bakes on $ike,7 Nivian 4ai'yin (=ok, /ores.&om
1#
possible chance of brand dilution and as a result customer loyalty might take a
hit.
&. Sk rocketing marketing e!penditures and risk of endorsements H *arketing
e-penditures are growing steadily. + new risk on athlete endorsements is seen
after the ,iger 0oods scandal. ,herefore, Nike has to decide on spending the
endorsement and marketing budgets wisely.
d. Premium brand"s susceptibilit to economic recessions H =remium brands are
always susceptible to recession. It is to be noted that Nike has not gone back to
its original growth rate e!er since the 2008 economic recession occurred.
2; 0nreasing om"etition in %evelo"ing eonomies
+midst hea!y competition to be a market leader in de!eloping economies, there are quite a
few issues to be noted.
a. #osing market share in $hina H :i Ning, as we e-plained in the pre!ious
section is in catching distance. It is worth noting that Nike does not ha!e a 9hinese
online website store to facilitate customers to come online and learnIbuy Nike5s
products
&#
.
. Price sensiti%it H Ge!eloping markets are generally price sensiti!e markets.
Nike5s premium and high quality brand image doesn5t sync with the e-pectations
of the customer. In other words, the differentiation strategy might not bring as
good results as it had brought in the $%+.
,. Signi!iant reliane on 0- an% so"histiation in managing su""ly hains
<2
Nike is hea!ily dependent on information technology systems across our supply
chain, including product design, production, forecasting, ordering, manufacturing,
transportation, sales, and distribution. Nike5s ability to effecti!ely manage and maintain our
,1
1:i Ning .oping ,o 4row *arket %hare ,hrough Cnline %ale,6 Sports Business &ail, Gecember 200.
,2
Nike, Inc. #02F 200, p. #8
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in!entory and to ship products to customers on a timely basis depends significantly on the
reliability of these supply chain systems.
=; #nvironmental sustainability
a. No direct control on compliance issues H Nike relies solely on its
subcontractors for manufacturing of its footwear. .a!ing already faced se!eral
issues on unfair labor practices at these subcontractor factories, Nike always
carries a risk of not ha!ing control o!er compliance to labor code laws. ,his is
considered by us as a big risk as another scandal of unfair labor practices will
completely collapse Nike5s position in the industry.
. Solid waste from shoes H ,here will always be a lot of solid waste from Nike5s
footwear manufacturing processes. +lso, being a market leader, it is the
responsibility of Nike to de!elop en!ironmentally sustainable business and stand
as an e-ample for others to follow. + possible option will be recycling, but Nike
still has no concrete strategy in this place.
+eommen%ations
Fous on -ehnology an% 0nnovation
o 0ith the market being mature in $% and de!eloped countries, product
differentiation is the best tool to gain market share. Nike should continuously
in!est in product design and inno!ation to be always with a leading edge o!er
the trailing competitors.
o Focus on setting up a reliable Information system that is capable of handling
comple- supply chains in a fool proof manner.
o =roperty, =lant K )quipment costs for 200 stood at "#.7> B as opposed to
"#.80 B in 2008 which is a &.7( increase. .owe!er, this needs to increase by
7 H >( e!ery year. C!erall, #7 H 20( of re!enues need to be spent on this
21
because the product design and inno!ation forms the backbone of the
company.
+evisit bran%ing strategy by %eou"ling hea" an% low ost !ootwear !rom
!lagshi" items
o 9heap and low cost footwear should be decoupled from the e-isting Nike
brand. ,hey might be sold under a different name, but not Nike. ,his might
help sa!or the premium brand image of Nike and help con!ey one message to
our brand. For e-ample, Nike starter shoes should be sold as @ust starter and
not Nike starter.
Follow both 3i!!erentiation an% .riing base% strategy
o 0ith the market matured in the $% and de!eloped countries, the competition
comes down to getting more market share than any other competitor in the
business. ,hus, an aggressi!e strategy that combines both differentiation and
pricing based strategies together will definitely ser!e better than @ust
differentiation. 0e saw that the operating margins for Nike are around ''(.
,his means that Nike has the scope to do a combined differentiation and
pricing strategy
o In a de!eloping market, the market grows with a price competition and later
transforms into a high quality based market with non2price competition. %ince
the industry in the de!eloping economies is growing, it is necessary to ha!e an
aggressi!e pricing based strategy as well. +s Nike has been building a high
quality brand image so far, it makes good sense to follow both differentiation
and pricing based strategy together.
4om"ete in !ull !le%ge in #merging markets> "artiularly in hina make a website
store
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o Nike is currently the market leader in 9hina. But competition is catching up
and :i Ning has been growing strongly. In this situation, Nike has to operate in
full fledge to capture market share in emerging markets. Basic things like an
online store in a country like china will seriously help dri!e a lot of business.
0nvest on sustainability researh
o It is high time Nike begins to in!est more on its sustainability research.
9ompanies like 9orp0atch are consistently watching Nike and this issue of
en!ironmental pollution will e!entually come up.
o +lso, if a proper recycling chain is established between the end user and the
company, the o!erall fi-ed costs will go down and hence profits might go up,
along with en!ironmental sustainability.
o Nike should also work with its collaborators in all forms to ha!e efficient
sustainable supply chains. ,his o!erall might reduce the costs for Nike and
benefit the whole society as well.
2,
+e!erenes:
#. Nike, Inc. #02F, 200.
2. NIF), Inc. ?eports Fiscal 200 Fourth Ouarter and Full Pear ?esults
&. 0ikiin!est.com, Nike, Inc.
'. 1%trategic +nalysis of Nike, Inc.,6 Ge=aul $ni!ersity, *arch #', 2000.
7. 9hristoph Golleschal, Qadidas,Q )quity ?esearch, 9ommerzbank, 28 February 2008.
/. 1+thletic FootwearR Industry +nalysis,6 ,ufts $ni!ersity, )conomics of *anagement
and %trategy, *ay, 200/.
>. 1.istory of Nike,6 %neakerhead.com
8. Nike Cfficial 0ebsite H www.nike.com
. Fapferer, 1Brand Identity =rism6
#0. 1)-panding the =laying FieldE Nike5s 0orld %hoe =ro@ect 9ase,6 ,he 0illiam
Ga!idson Institute, 3anuary 2002.
##. PahooS Finance
#2. 4oogle Finance
#&. 1=uma H Brand 9ommunication +nalysis,6 ,rent Fahute, Fall 200/.
#'. 1%ports %hoe ?i!als %tep $p,6 %tephanie Fang, The 'all Street (ournal, / 3an 200/.
#7. 19hinese %ports Brand ,akes on Nike,6 Ai!ian 0ai2yin Fwok, Forbes.com
#/. ?:i Ning .oping ,o 4row *arket %hare ,hrough Cnline %ale>@ Sports Business
Daily> 3eember 2AA9;
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