Nike’s Business Level Strategy |
Case Study Assignment #2 |
Andreea Mosailov |
Case study assignment # 2
Nike’s Business Level Strategies, P 142/3
1. What business level Strategies is Nike pursuing?
One of the strategies utilized by Nike in the past was the focused strategy; the company concentrated on producing basketball and track shoes but after its sales began to fall, Nike realized that targeting one small market segment is not enough in expanding its market share so the company started to create new lines of shoes for golf, tennis, soccer, rollerblading, cricket etc.
In the process of increasing its market power, Nike acquired a series of companies like Cole Haan, a very successful Chicago dress shoemaker, Comverse – a company concentrated on retro-style design, Hurley International and Bauer through Horizontal Integration. All these companies substantially increased Nike’s profit, eliminated some of its competitors and expanded its presence in the sportswear industry. For a companies like Nike that has not diversified beyond its core business corporate and business strategies are inseparable.
The differentiation strategy is achieved by producing innovative and high quality sport shoes for the average individuals or professional athletes. Through its continuous innovation Nike is proofing that it is the leader in research and development in the sportswear industry; its shoes are not only superior quality, have unique features but also make a fashion statement which is a necessary part of today’s sport lifestyle. Nike creates its competitive advantage using a high end technology to produce the famous Nike Air, Lunar Glide or Nike +.
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Nike also follows effective marketing and advertising process in its business strategy. With the help of advertising, the company has created a great demand for its products. Nike mainly uses celebrities athletes like Michael Jordan, Serena Williams or Tiger Woods. To do the marketing of its brands, Nike has focused on marketing as a part of its business strategy to the highest extent.
Nike is pursuing a cost leadership strategy through outsourcing. In today’s global environment one of the most viable strategies is outsourcing. Through that, Nike gained efficiency in the form of shifting risk, lowering wages and reducing capital requirements. In using outsourcing strategy Nike has a big power over its suppliers and makes most of its profit from countries like China, Indonesia, and Vietnam but it also has factories in South Korea, Italy and Taiwan etc; with 600 contract factories that employ more than 800.000 people the outsourcing capability and supplier relations helped Nike to make huge savings in their costs.
Nike is also using its research and development department to design shoes that can substantially reduce the manufacturing cost.
2. How Nike business-level strategies changed the nature of Adidas, Puma?
Nike’s product differentiation is a major component of its business-level strategy. To offer a great design, high quality products to its customers, the company focuses technology on a great level. This strategy changed the competition level in the footwear industry. As the brand name of Nike has become a leading one, other companies like Adidas or Puma are also focusing on brand development to cope up with the increasing level of competition. Branding has become a very important factor of success in this industry due to such product differentiation. In this regard, Nike communicates a provocative, aggressive winner attitude which can be related to the American sport attitude-“You don’t win the silver, you lose the gold!” This is all about being on the first place, proactive, combatant. Their images associated with sport leaders like Michael Jordan or Tiger Woods suggest performance, victory and excellence-“just do it!”
ConverseIntroduction The increase in the number of companies and the competitive prices that the companies offer has given rise to a competitive situation in the companies (Borden, 1984). Marketing activities in companies are framed based on the ‘marketing mix’ of the company (Borden, 1984). The marketing mix framework consists of 7Ps considering the modern scenario (Booms and Bitner, 1981, cited ...
Adidas is a sport brand with a European attitude that translates into style, authenticity and conviction. Their advertising uses images of relaxed and confident athletes like Ilie Nastase (the Romanian tennis player that was first associated with the brand in Adidas advertising) or David Beckam –“Nothing is impossible”. Both Nike and Adidas are targeting the same customer but with a different attitude. This differentiation is based on the differences between American and European culture.
Living at the intersection of fashion and function, Puma’s identity has become synonymous with sport-lifestyle and trendsetting youth. The company provides individuality to both its own brand and those of its consumers. Puma’s distinctive brand was represented by Pelé, Johan Cruijff, Enzo Francescoli, Diego Maradona and Lothar Matthäus.
As Nike deals in large range of shoe styles and specializes in soccer, tennis and athletics in its business that helps achieving a high level of profits, this has made the other companies to initiate new range of sport shoes in their business. To keep up with Nike, Adidas generates around 60 new shoe designs every year and the company is concentrated on product performance and superior fit. Adidas created Clima Cool TM that innovated the industry by adding the first breathable material.
Cost Leadership: The cost leadership strategy of Nike has influenced the industry to focus on the product quality. Adidas recently adopted the outsourcing strategy with virtually all the design and development work being handled in Germany and production being outsourced in Asian countries. Both Adidas and Puma are seeking to adopt new innovative technologies for improving their product qualities through reducing cost in all the areas of their business. The customers are mainly demanding high quality and branded products and as a consequence, the industry is experiencing changing demand of the customers. Due to this, Nike, Adidas and Puma are intensively competing with each other to provide stylish, a wider range of products a better quality to their customers.
Nike, founded January 25, 1964, is one of the world’s best known and popular brands. Created by Bill Bowerman and Phil Knight, Nike has become one of the world’s largest athletic apparel suppliers and today markets it product under its own brand name which includes Nike Pro, Nike Golf, Nike Skateboarding and the infamous Nike Air Jordan. At the end of 2012 the company had an estimated net worth of ...
Product differentiation and cost leadership, the business level strategies of Nike have changed the trends of the entire industry competition. The level of competition in the industry has increased tremendously as well as the means of being competitive are also focused on quality measures rather than cost. Now, all three companies are completely focusing on customer satisfaction.
3. Since 2007 have Nike’s strategies had continues success or have they needed to make adjustments? If so what and why?
As the world leading athletic brand, Nike continues to demonstrate that it is innovative, smart, environmentally friendly, and consistent with their product effectiveness and also Nike has proven to be a marketing genius; it has to keep focusing on being a marketing company versus a shoe manufacturer. For a company to continue to grow and stand the test of time it is essential to keep developing new products that meet the consumer’s needs and wants and lowering its costs through outsourcing. As looking of the challenges of today’s economy, especially after 2007 downfall, it is clear that Nike’s success relies in its ability to use differentiation and cost leadership strategy. With all that, some analysts believe that athletic shoe sales will slow down over the next few years. The slowdown will come with the change in consumer trends. For instance, the younger market is beginning to buy more casual shoes and work boots. Another reason for the slowdown is that people are buying more medium priced athletic shoes and not going for the high price brand name shoes.
This case study has taught me that with the right business strategy, marketing, product, and with the right advertising- anything is possible-”Just do it!”