Nike
Summary of Nike’s world shoe project (A)
Nike's Footwear Director for Emerging Markets was challenged with “expanding the playing field” in emerging markets with a range of affordable, durable, and easy-to-produce sports shoes. The goal was to effectively reach the huge untapped segment of “Tier 3” countries, characterized by a population of 1 billion and an average of $2,000 purchasing power parity. By January 2001, the initiative had sold only 404,520 pairs in China. Compared to the booming 1.2 billion population of China, this was disappointing. Three key issues contributed to the disappointing sales. First, internal organizational challenges prohibited the growth of the line. Rigid profit margin expectations handed down by corporate headquarters created an environment that encouraged the sale of Nike’s high-margin products to high-end customers. Regardless of the low cost of the World Shoes, they were still slapped with a high profit margin, resulting in overpriced products compared to local Chinese products. Second, because of the current distribution network and infrastructure that Nike had in place for its high-end footwear, the World Shoes, distributed through the same channels, didn’t reach the proper target market.
The Series 100 and Series 400 were simply placed on a shelf next to the expensive Air Max in an urban retail store. The consumers in the intended market segment, who lived primarily in rural areas, didn’t necessarily shop at these places. However, Nike had no system to distribute the shoes outside of its three major metropolitan areas. Finally, no marketing plan for the World Shoes existed in China. (Marketing was left up to the local country managers.) Neither the Chinese retailers nor the consumers had any understanding of the value of the World shoe line. This Case ends without any indication of what will become of the World Shoe project. In two days, Tom Hartge will meet with CEO Phil Knight and the fate of the
Nike's Footwear Director for Emerging Markets was challenged with “expanding the playing field” in emerging markets with a range of affordable, durable, and easy-to-produce sports shoes. The goal was to effectively reach the huge untapped segment of “Tier 3” countries, characterized by a population of 1 billion and an average of $2,000 purchasing power parity. By January 2001, the initiative had sold only 404,520 pairs in China. Compared to the booming 1.2 billion population of China, this was disappointing. Three key issues contributed to the disappointing sales. First, internal organizational challenges prohibited the growth of the line. Rigid profit margin expectations handed down by corporate headquarters created an environment that encouraged the sale of Nike’s high-margin products to high-end customers. Regardless of the low cost of the World Shoes, they were still slapped with a high profit margin, resulting in overpriced products compared to local Chinese products. Second, because of the current distribution network and infrastructure that Nike had in place for its high-end footwear, the World Shoes, distributed through the same channels, didn’t reach the proper target market.
The Series 100 and Series 400 were simply placed on a shelf next to the expensive Air Max in an urban retail store. The consumers in the intended market segment, who lived primarily in rural areas, didn’t necessarily shop at these places. However, Nike had no system to distribute the shoes outside of its three major metropolitan areas. Finally, no marketing plan for the World Shoes existed in China. (Marketing was left up to the local country managers.) Neither the Chinese retailers nor the consumers had any understanding of the value of the World shoe line. This Case ends without any indication of what will become of the World Shoe project. In two days, Tom Hartge will meet with CEO Phil Knight and the fate of the