International Strategic Marketing 8
Table of contents
Five forces model
Nike Case Summary
Nike is a major publicly traded sportswear and equipment supplier based in the United States. It is the world's leading supplier of athletic shoes and apparel, and a major manufacturer of sports equipment.
They have a market share in the United States exceeding 40%. Nike also distributes its products outside the US. In 140 countries, Nike sells products through independent retailers , distributors etc.
In the ever changing markets, Nike is facing multiple challenges to remain market leader.
Foot Locker was always a great partner for Nike. Foot Locker, as the world’s largest footwear retailer, was an perfect way for Nike to distribute and introduce their new products. But Foot Locker wants to meet consumer demands. So Foot Locker said that they would reduce the more expensive Nike shoes, and focus on more midpriced shoes. This caused a break in the close relationship between Nike and Foot Locker.
Nike is basically a distributor. They do not produce their products by themselves. Nike’s products are manufactured by third parties. So the main focus at Nike is on R&D and marketing. Innovation, and making the consumer actually want the product is key for Nike.
Nike products are manufactured in Southeast Asia. The producer of Nike products are independent contractors where Nike does not own any of. The main reason why Nike products are manufactured in these countries is because of the low wages. Low cost labor significantly increases the gross margin on their products.
These low wage countries had some significant downsides, thought . When the working conditions, as well as allegations of abuse and harassment became public (done by activists) Nike suffered serious bad publicity. For a company that heavily relies on marketing and PR, this is a serious problem. While Nike tried to neglect these allegations, activist continued to blame Nike.
Because the focus at Nike is heavily at marketing and R&D, Nike always tries to create the right image for the consumer. They do this by constantly innovating (such as the Nike+ series), and attaching famous sports players to the brand. Players such as Tiger Woods, Roger Federer and Wayne Rooney.
The last years Nike sees that competitions is catching up and in several segments demand is decreasing. While these are all external factors that influence the company, Nike remains stable in terms of sales, gross margin and operating profit (increased to 10,2 percent in 2002, from 9,3 percent in 2001).
While Nike remains to have positive numbers, the industry growth is hard to predict. While, for example, women casual tennis footwear sees an explosive growth, premium priced athletic shoes is clearly declining.
Also competition is not standing still. The main competitors of Nike are New Balance, Adidas, and Reebok.
New Balance is a company focused on athletic sports. They operate in the market segments of running, walking , tennis basketball etc.
Along with this, New Balance expanded their target market by acquiring Dunham Bootmakers. With this they were now also on the market of outdoors such as hiking, boat shoes and sandals. Another acquisition of New Balance took place in 2001 with PF Flyers which gave them acces to the casual market.
Another competitor, Adidas, is the world’s number two on footwear and apparel worldwide. Adidas is very much comparable to Nike. With high end technology, and important sponsors.
The last of the very important competitors is Reebok. Reebok is the largest growing company. The company changed of strategy when they got the exclusive NFL deal and stated sponsoring the in-field gear of NBA teams.
The challenge for Nike is to...
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