Just like most American companies, Nike started out as a small company that evolved through time into a major industry player. Guided by its founder, Nike has issue after issue riding on with economic progress and the benefits of globalization. However, Nike remained to be a strong contender in the business amassing chunks of market shares.
Nike was established by Phil Knight in the late 50’s after taking up accountancy at the University of Oregon. It was here that he came to know Bill Bowerman who was his athletic coach during Knight’s varsity days. Knight praised Bowerman for being a tough and dedicated coach and an inspiring person. Upon his graduation, Knight got inspired into venturing in providing better running shoes for athletes like him. With this, he then went to Japan to do a proposal with Asics (then called Tiger Shoes) that would make him an exclusive American distributor of the company. He then continued on to do the business under the name Blue Ribbon Sports where he got his coach, Bill Bowerman, into the business as co-owner (“The Merchants of Cool”, 2001).
The business came into jeopardy after Tiger Shoes decided to take over the American market pushing Knight and Bowerman’s Blue Ribbon Sports out of the scene. Knight’s only reply was the establishment of a new shoe company: Nike.
Nike’s Market Positioning Strategies
Through Nike’s years of existence in the business, it has gained much of the American athletic gear and apparel market with 40% as well as 34% of the worldwide market. The company positioned itself as a high-end athletic lifestyle company which made impact to a lot of the youth today. Most of the profits that the company obtained have been from outside the United States with over 52%. Likewise, the company also depends on its apparel lines which is then outsourced in over 600 factories scattered over the world due to United States import restrictions.
Majority of the company expansion as well as positioning efforts and overseas activities have mostly been influenced by the quota restrictions of the United States. The company benefited a lot from these by going into new markets and spreading company awareness (“The Merchants of Cool”, 2001). Restructuring is expected to take place within the company as World Trade Organization agreements are expected to be implemented. Likewise, Nike currently seeks out to cut its overseas factories in move to further enhance profitability (“The Merchants of Cool”, 2001).
Competition, coupled with the declining profitability margins in the industry, as well as the saturation of players in the retailing industry are among the major issues that Nike continues to address. In order to stay afloat in the industry, Nike has already started the restructuring measures for the company by trimming down the sales force and shutting down some factories overseas to sustain their current profits. Another strategy is through the company move to seek out exclusivity among their multinational suppliers. This is brought about by the priority of secrecy of technological advances that the company may have as well as to avoid their competitors from copying new products and concepts. But this move by Nike is contrasted by the own suppliers diversification schemes.
The company has also been experiencing a repercussion in its current marketing strategies which promptly worked to their advantage in the past decades. Nowadays, the company became very known that it reached the point where everybody is into it and it appears not unique anymore, especially with the younger segments of the market which accounts for most of the company’s cash cows. The changing preferences of their key market demographic prompted the company to rethink their strategies. They also have realized that they have foregone several market opportunities and underestimated threats.
Nike then is working hard in order to further analyze the market and set out company goals according to what the consumers want. This way they could better sustain Nike’s growth and position themselves in a conventional way. The company saw that there is a current need to narrow down the saturated brand instead of just lurking ahead and eating itself from within. This new strategy is the rationale behind Nike’s acquisition of smaller company brands in order to cater to the lower price sensitive segments of the market.
Legal Problems and Other Factors Overseas
Nike has been recognized as a quality brand that encourages self-confidence as well as promoting athleticism among the youth. However, issues of an exploitative wage rate in their factories and severe labor conditions are just among the legal issues that the company faces in the international community. There have been previous movements in the labor markets wherein the company’s ethical practices have been in question among their overseas factories. Nike then addresses this through its redefinition of its labor stance as well as remaking the labor friendliness of the company. It can be summarized as repositioning the company into an image of a responsible corporate citizen who strictly follows labor codes and guidelines (Gall).
A lot of the negative labor impressions associated with the company are focused on the conditions of laborers in the general industries of fashion. The company was specifically emphasized after accusations of hiring child-laborers, the exodus of laborers into the third world countries as well as the environmental concerns that critics say the company neglected.
Nike’s General Strategy
The company is on a current move to minimize its corporate dependence on just the Nike brand and instead resorting to the acquisition of smaller firms in the market (Gall). Over the past couple of years, Nike has already acquired small firms like Saucony and Street Cred which caters to the alternative clothing segment and targets the youth as well. This move aims to diversify Nike from within and gain a larger market share in most market segments of the industry. The company believes that a lot more other alternative brands will minimizes the company’s saturation of the market while establishing itself in the global arena further. Nike did this through electing a new CEO, William Perez, which gained reputation in handling several brands in the past. Perez is then on a mission to modernize the company brands further and promoting them in the international business scene. This way, Nike would be able to restructure its current business portfolios to stay at par with international competition.
Nowadays, Nike also is developing a stance to penetrate their marketing strategies with the current trends in technology (Gall). The company is focusing on the opportunities in digital marketing schemes and e-commerce in further enhancing their financial capacities. For instance, NikeLab.com is among the online sites the company established in order to bring to the public their new product offerings as well as innovations on the products they previously released. Nike also maintains a strong communication with their customers which heavily influences their product development researches. The company’s loyal customers are the main factor why Nike constantly develops their products. The company is aware of their significance in their clients as well as communicating with them through various media environments (Kotler, 2003).
The company is also in a current effort to deviate from the common form of communication to the consumers by developing other alternative mediums that could further enhance the campaigns frequencies and reach of the company in the international sense. This strategy is brought about by the fragmenting tendency of the current advertising mediums by limiting the campaigns that companies employ (Kotler, 2003). So what Nike, as well as other companies does is to delve away from the common television medium and tap other opportunities that technology offers. Nike finds other ways to present itself along with their product offerings into the current as well as new target markets. This is answered by the increasing number of online users which the company sees as a vital alternative form of communication channel.
In their advertisements, Nike also studied the loss of the gray area in advertising wherein the message of the campaign as well as the presentation is overlapping. The company tapped this opportunity also through NikeLab.com wherein Nike could further analyze the consumer behavior of their clients as well as the emerging opportunities if the Internet. They would then use this in formulating new and alternative advertisement campaigns that could well attract consumers into buying Nike products. This way, product and service differentiation is made through Nike’s benchmarking principles whereas they could address the needs and demands of their consumers.
Nike also gains popularity from the various endorsements that they give out to athletes. These athletes then give out compensation to the company through the exposure of the brand in every game they play. This strategy incorporates the establishment of Nike being associated with the success of the player that wears or use Nike products. This way, the company establishes a culture of athletic excellence by free-riding on the popularity of athletes. Fans of these athletes are then prompted to buy the same apparel that their idol uses, thereby crating a smart move for the company. In short: profits.
Gall, S. Management in the 21st Century. Retrieved April 13, 2007, from http://stevegall.wetpaint.com/page/Management+in+the+21st+Century
Kotler, P. (2003). Marketing Management: Prentice Hall.
The Merchants of Cool. (2001). Retrieved December 11, 2006, from http://www.pbs.org/wgbh/pages/frontline/shows/cool/