Marketing strategy - company overview - Marketing Essay Example
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In 1971, Nike Inc. was founded by marathon enthusiast Phil Knight together with prominent track coach Bill Bowerman. It was first known as Blue Ribbon Sports, a company that specializes and manufactures running shoes for professional track and field athletes. Blue Ribbon Sports was manufacturing shoes at that time in order to meet the demands for efficient running shoes by track and field enthusiasts. Blue Ribbon Sports was then relaunched in 1978 as “Nike”, which was named after the Greek goddess of victory. The change in the company name was crucial for the company-wide revamp; and in order to entice more consumers to patronize the brand itself. Nike’s initial annual sales turnout garnered $8,000. In 1984, Nike reached the pinnacle of the athletic running shoe industry by overwhelming Adidas to lead all athletic shoes in terms of retailing. Total revenues for Nike reached a milestone after its dethroning of Adidas as the leading manufacturer of athletic footwear. This was a sign that Germany’s long history of domestic domination reached its vulnerable point.
Today, Nike manufactures not only running shoes but athletic footwear for a myriad of sports as well. Nike has manufactured athletic shoes for sports such as: golf, soccer, baseball, cycling, tennis, wrestling, aquatic sports, and other recreational uses. In order to promote their brand, Nike has entered the sports apparel market in 1979. It has produced athletic bags and accessories, which bear the Nike “Swoosh” logo. Nike produces its casual wear in a collaborative effort with Cole Haan. Cole Haan incorporates Nike’s technology into its casual apparel and footwear. It has over 20,000 retailers around the world and operates in more than 100 countries. Its primary market regions are the United States, Europe, and the Asia Pacific. It distributes and promotes its products through Nike promotes and sells its products through Nike factory outlets, Nike Town shops, Nike Women shops, and other sportswear stores (Nike, 2008). The company is proud of its 33% global market share, which makes them the unprecedented sales leader in the athletic footwear and sports gear industry. Nike owes its success to its charismatic advertising and high quality production. Nike itself made the company a global icon. In 1999, Nike has generated one of the largest revenue turnouts with $8.8 billion in total revenues (Bizcovering, 2008).
Nike has a variety of athletic equipment for its diverse group of consumers. The company produces a myriad of athletic footwear and apparel, which addresses the needs of both the professional athlete and ordinary people. It has manufactured athletic footwear for basketball, training, running, women, and children. Surprisingly, each product is the retail leader in their respective categories. Nike has surpassed its reputation as a running shoe company. Furthermore, the company has engaged into the manufacturing of athletic footwear in other sports. Nike has manufactured performance footwear for sports such as: tennis, wrestling, aquatic sports, golf, soccer, baseball, cycling, and other sports. Nike bolstered their product line by complementing with the production of various Nike apparel in 1979. Every bag and accessory that Nike manufactures bears the Nike Swoosh logo, which promotes the brand even further. One of Nike’s proofs of product ingenuity is that it maintains productive and healthy partnerships in order to complement products like Apple and Cole Haan with their signature technology. Cole Haan incorporates Nike’s technology into its casual apparel and footwear. With Apple, Nike has aligned itself with the reputable computer software company in order to mitigate the demands of an enjoyable workout experience with the release of the Nike+iPod kit. Nike’s Research and Development is always at the forefront to provide consumers fresh and innovative technologies that will enhance their performance. (Gemmary, 2008).
Nike owes much of its success to its massive advertising campaigns. Its advertising prowess is its claim to fame as the leader in the competitive athletic footwear industry. The innovative advertising tactics that Nike employs is its primary weapon to overwhelm its competitors. The company is adamant in augmenting its advertising campaign at all costs. “At all costs” also means that Nike has a penchant for signing up celebrity athletes as brand endorsers with hefty contracts in tow. Its stable of celebrity athlete endorsers includes: Lebron James for Basketball, Ronaldino for Soccer, Tiger Woods for Golf, Manny Pacquiao for boxing and Lance Armstrong for cycling. Coupled with marketing tactics, these celebrity endorsers augment Nike’s advertising arsenal. Nike’s celebrity endorsers have a manic impact and apparent media influence brought by their fame and athletic amalgamation. Nike enjoys healthy competition as well. During the Atlanta Olympics, Reebok sponsored the event; yet Nike counter-attacked by sponsoring a number of athletes instead. This gave Nike little yet efficient exposure during international sports events. Nike also sponsors fledgling athletes in the NCAA by supplying them with sports gear. Such scenario creates a future potential market segment for Nike. Undoubtedly, the youth is the primary market segment of Nike. Furthermore, Nike’s promotion is enhanced by internet websites like Nike.com and Nikebasketball.com, which enables consumers to be more familiar with the brand.
Nike is always adamant on manufacturing high quality products that are complemented with their innovative technology. Nike’s benchmarking is one of its strengths as a company. It never compromises its quality standards. However, Nike commands a higher price compared to its competitors. However, Nike rationalizes such with its sophisticated technology evidently applied to its products. The company uses a pricing technique called “vertical integration”, which they operate in various channels. It also allows them to engage in alternative channel level of operations. Recently, Nike has conducted an athletic footwear market study for them to ascertain price margins. With this in mind, Nike makes a deliberate influence in pricing and moderate costs (Gemmary, 2008). Nike’s inventory has been a significant factor in Nike’s pricing. Its inventory has increased by almost 300% in the fiscal years of 1994 from 1998. Surprisingly, total revenues have increased as well by 250%. The inconsistency between inventory and sales is hampered by the fact that Nike decided to write-off a significant amount of inventory over this same time period (Ocampo, 2008).
Nike operates and sells its products within a network of distribution channels and country policies. Nike has more than 20,000 retail affiliates in the United States alone. It operates in more than 100 countries. It sells its products on an international scale through domestic distributors and subsidiaries. However, Nike once encountered a marketing problem in Europe with its distributors. Eventually, Nike bought the licenses of these distributors in order to promote the brand the Nike way. It only shows that Nike is adamant in monitoring and moderating progress of its brand (Ocampo, 2008). In order to push through with brand progress, Nike formulated marketing strategies to lure and entice local consumers in Europe to perceive Nike as an expensive and aggressive American brand. Nike produced sports equipment for consumers to be widely exposed to the brand. In the late ‘90’s Nike revamped its marketing strategy, and decided to give emphasis on its apparel sales. Consumers perceive athletic apparel as a complementary product to shoes. With this in mind, Nike produced casual wear and accessories for consumers to be more familiar with brand. Nike transcended its brand familiarity of performance sports and athletic footwear. The sports market apparel has been good to Nike, and has been relatively successful. It accounts for more than 50% of revenues in Europe (Porter et al., 2002).
Competitive Advantage and Corporate Strategy
The scope of Nike’s competitive advantage includes worldwide competitive similarity, market barriers to penetrate, and the eclectic cultures of each target market. The company’s competitors reach Europe all the way from the United States. Among them are: Adidas, Reebok, and Puma. Nike is submerged into a saturated market, which every company rivals Nike in the production athletic performance shoes. Such companies like Adidas and Reebok have attempted to engulf Nike’s market share by manufacturing a series of shoe lines enhanced by fancy technology and fashion twists. With this in mind, international logic discrepancies emerged from such notion. Nike’s market share and expertise are apparently threatened bys such marketing moves on its competitors’ part. In addition to this, market barriers in the various segments imply that there are no secured areas within Nike’s competitive sphere. This creates opportunities for regional markets, which will be vulnerable to competitors. With this in mind, Nike is urged to adapt the cultural and distinct preference of each market segment. Nike reaches out to its market segments in order to meet the demands of these market segments’ particular taste and preference (Porter et al., 2002).
Europe was the most difficult market region Nike encountered. German athletic shoe giant Adidas have solely engulfed the entirety of the European athletic gear market. It saturated the European market with a glut of athletic footwear and sports gear. . Over 75% of Europe’s athletic shoe and apparel market were dominated by Adidas, as well as a portion of it by Puma. These two companies have keenly etched their names on the European sports scene. They sponsor sports such as: tennis, rugby, track and field, and soccer. Adidas is known to give celebrity athletes hefty contracts as well in order to endorse their products. Adidas is the Coke of the European athletic shoe industry, similar on what Nike is to the United States. British company Reebok has also attempted to thwart Nike’s athletic shoe supremacy. Though it failed due has limited distribution tactics that has hampered its sales in the U.S., as well as in Europe (Porter et al., 2002). Recently, Nike has adhered to an apt marketing strategy, which is anticipated to bolster its customer base in Europe; and etched its market niche as well. Adidas will receive their own dose of medicine due to the fact that Nike is complementing its advertising arsenal and marketing prowess by signing up celebrity athletes in Europe as well. Nike applies such marketing technique in order to generate increased revenue turnout, and overwhelm market shares of European brands as well. With this in mind, Nike is assured that consumers in the competitive athletic shoe footwear in Europe will be enticed to buy and patronize the Nike brand (Porter et al., 2002).
Nike is always up to any marketing challenge thrown at them. Founders Phil Knight and Bill Bowerman have been successful in making innovations in technology for athletic footwear the company provides professional athletes and casual consumers with high quality products that augment their performance. With this in mind, Nike is able to generate large revenue turnouts. Nike’s financial conditions are ever progressing due to the upfront advertising it employs in order to promote its brand. The “Swoosh” logo is almost synonymous to victory and success. Nike has also ride the waves of change as it strives to make its research and development a crucial part for their brand to be the leader in the athletic footwear industry. Nike has already surpassed expectations as a mere running shoe company. Nike’s Research and Development have always been at the forefront to make Nike products efficient and charismatic to consumers. Nike puts a premium on the aspect of product innovation. Nike’s research and development provides the company fresh and innovative ideas, which they apply in their products Nike will remain as the leader of the athletic footwear industry as long as it adheres to its charismatic advertising tactics and unique marketing techniques. Nike is considered a world-renowned icon. Nike is the Coke of the athletic footwear and apparel industry. Undoubtedly, it is the number one sports brand in the planet.
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March 22, 2008, from www.cs.ucla.edu/~gavin/pub/IntlBusMgmtNike