Andries Fourie Cronje

Tshwane University of Technology 205104976

TSWANE UNIVERSITY OF TECHNOLOGY

COURSE TITLE: MBA

MODULE TITLE: MARKETING MANAGEMENT (MM)

NAME OF FACILITATOR: Mrs. V. Naidoo

ASSIGNMENT NUMBER: 1

STUDENT NUMBER: 205104976

NAME: ANDRIES FOURIE CRONJE

INDIVIDUAL ASSIGNMENT & DATE OF SUBMITION: 28 MAY 2011

I, DECLARE THAT THIS ASSIGNMENT IS ORIGINAL WORK AND ANY OTHER SIMILAR WORK HAS BEEN APPROPRIATLY REFERNECED IN THIS ASSIGNMENT.
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Andries Fourie Cronje

Tshwane University of Technology 205104976

ORGANISATIONAL BEHAVIOUR ASSIGNMENT 1 2011-03-19 AF. CRONJE SIGNATURE: .

Index Page
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Andries Fourie Cronje

Tshwane University of Technology 205104976

1.2.1. 1.4.

Introduction Theory 1.1. Product 1.2. Place/Distribution Channels 1.3. Price 1.3.1. Pricing strategies Promotion 1.4.1. Advertisements 2.1. Adidas Company history 2.1.1. Marketing mix of Adidas 2.1.2. Product 2.1.3. Price 2.1.4. Place 2.1.5. Promotion 3.1. Nike Company history 3.1.1. Marketing mix of Nike 3.1.2. Product 3.1.3. Place 3.1.4. Promotion 4. Adidas vs. Nike 5. Adidas/Nike Service delivery 6. Conclusion 7. Reference

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ITRODUCTION The sporting goods manufacturing industry consist of companies engaged primarily in the manufacturing of sporting and athletic goods. The functions of sporting goods manufacturers includes designing samples, buying raw materials, arranging for the
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Andries Fourie Cronje

Tshwane University of Technology 205104976

equipment to be made from these materials, and marketing the finished products to sporting good retailers and wholesalers. Finished products range from baseball gloves, footballs, and golf clubs to toboggans and playground equipment. (IBISWorld.com). Currently, the industry is heavily saturated with companies catering to the numerous and various different sports and activities enjoyed by consumers. The total market capitalization is $8 billion and growing. Most of the current companies are large corporate structures with products offered to various different sports (i.e. Nike, Adidas, Wilson), while other companies hold tremendous market share and prominence in their respective sport (i.e. Callaway, Schwinn). For the most part, sporting goods companies have two avenues of distribution. First, are wholesalers and retailers, such as Edgars, Total Sports, and small sporting goods stores. Second consists of company-owned and franchised specialty shops, like Adidas factory stores and Nike Factory stores. In order to gain exposure and popularity in the sporting world, the manufacturing companies tend to place their products with the top-rated and/or loved athletes. Sponsorships are commonplace in the industry and provide a win/win opportunity for the companies and athletes. Also, sporting goods manufacturers typically sponsor related major sporting events. To summarize, sporting goods manufacturing is a large industry with wellestablished brand names and vast opportunity to grow with the expanding product lines and technological improvements taking place within all sports.

THEORY MARKETING MIX DEFINITION:

Andries Fourie Cronje

Tshwane University of Technology 205104976

The marketing mix which consist out of the 4 Ps are the combination of elements that you will use to market your product or service. These four elements (4 Ps) are: Product, Place, Price and Promotion. 1. PRODUCT A good product does its marketing by itself because and gives benefits to the customer.

The design: it can be a decisive advantage but it changes with fads. For example, a pair of shoes must offer a good and fashionable design if the target market are young people. The packaging: It must provide a better appearance and a convenient use. In food business, products often differ only by packaging. The safety: Product must be safe to use. For example: if the target market is young children. The "green": Designing products in a environmental friendly manner will be to the companies advantage in some segments.

In business to business and for expensive items, the best mean of differentiation are warranties, return policy, maintenance service, time payments and financial and insurance services linked to the product.
2. PLACE/DISTRIBUTION

A crucial decision in any marketing mix is to correctly identify the distribution channels. The question how to reach the consumer" must always be in your mind. The place is where you can expect to find your customer and consequently, where the sale is realised. Knowing this place, you have to look for a distribution channel in order to reach your customer. Place is not where your business is located but where your customers are. Place means the real physical position of the customer in a geographic area or along a distribution channel.
2.1. Channels:

Selling to the customers: Whether you sell by yourself (as a retailer) whether you employ a sales force, you are in these cases in front of the final customer. There are not intermediaries between you and the customer. Unfortunately, except for the retail business, this situation is far to be the general case. Selling to the retailers: For example, you manufacture the shoes and you sell them to the shoe city retailers. This practice could be a bit complicated. Selling to the wholesalers: You sell your fun boards to these big men. On turn the wholesalers sell the shoes to the retailers which finally sell to their customers.

.As you can see, the choice of your distribution channel heavily depends on your product and place in the productive process. If you are in coal mining, do not expect to sell some coal buckets to the final consumer!
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Andries Fourie Cronje

Tshwane University of Technology 205104976

The next drawing summarizes the different possible channels: Producer is represented by the black square, the wholesaler by the maroon one, the retailer by the yellow and the customer by the green!

FIGURE 1 3. PRICE Price means the pricing strategy you will use. You have already fixed a hypothetical price to your customer profile but you will have to bargain it with the wholesalers and retailers. Do not be foolish:
3.1. Pricing strategies

You can choose between three strategies:

Competitive pricing: If your product is sold at the lowest price regarding all your competitors, you are practicing competitive pricing. Sometimes, competitive pricing is essential. For instance, when the products are basically the same, this strategy will usually succeed. Remember that the success of competitive pricing strategy depends on achieving high volume and low costs. If your prices are lower than your costs, you are going straight to bankruptcy! To avoid such a mistake, you have to take notice of the break even ratio. Cost plus profit: It means that you add the profit you need to your cost. It is also called cost orientated strategy and is mainly used by the big contractors of public works. The authority may have access to the costing data and should like to check if the profit added to the cost is not too high. Value pricing: It means that you base your prices on the value you deliver to customers. For example, when a new technology has a very large success, you can charge high prices to the customer. This practice is also called skimming. It is easy when you are in the introductory phase of the product life cycle. Value pricing is also common in luxury items. Sometimes, the higher the price, the more you sell: Fashionable clothing or restaurants for snob people.
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Andries Fourie Cronje

Tshwane University of Technology 205104976

4. PROMOTION Advertising, public relations and so on are included in promotion and consequently in the 4Ps. The function of promotion is to affect the customer behaviour in order to close a sale. Of course, it must be consistent with the buying process. Promotion includes mainly three topics: advertisement, public relations, and sales promotions. 4.1.Advertisement: It takes many forms: TV, radio, internet, newspapers, yellow pages, and so on. You have to take notice about three important notions: Reach is the percentage of the target market which is affected by your advertisement. For example, if you advertise on radio you must know how many people belonging to your segment can be affected. Frequency is the number of time a person is exposed to your message. It is said that a person must be exposed seven times to the message before to be aware of it. Reach frequency gives the gross rating point. You have to evaluate it before any advertisement campaign. Message: Sometimes, it is called a creative. The message must: get attraction, capture interest, create desire and finally require action that is to say close the sale. Public relations: Public relations are more subtle and rely mainly on your own personality. For example, you can deliver public speeches on subjects such as economics. These speeches will enable you to develop new relationships and their cost is nil! Sales promotion: It includes fair trades, coupons, discounts and are linked to the sales strategy.

Figure 1.2

2.1. COMPANY HISTORY: Adidas AG is a German sports apparel manufacturer and parent company of the Adidas Group, which consists of the Reebok sportswear company, golf company
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Andries Fourie Cronje

Tshwane University of Technology 205104976

(including Ashworth), and Rockport. Besides sports footwear, the company also produces other products such as bags, shirts, watches, eyewear and other sports and clothing-related goods. The company is the largest sportswear manufacturer in Europe and the second biggest sportswear manufacturer in the world, after its American rival Nike. Adidas was founded in 1948 by Adokf Adi Dassler, following the split of Gebrder Dassler Schuhfabrik between him and his older brother, Rudolf. Rudolf later established Puma, which was the early rival of Adidas. Registered in 1949, Adidas is currently based in Herzogenaurach, Germany, along with Puma. The company's clothing and shoe designs typically feature three parallel bars, and the same motif is incorporated into Adidas's current official logo. The "Three Stripes" were bought from the Finnish sport company Karhu Sportsin 1951. The company revenue for 2009 was listed at 10.38 billion and the 2008 figure at 10.80 billion. (Wikipedia: October 2010) 2.1.1. MARKETING MIX OF ADIDAS 2.1.2. Product: Adidas sells apparel, footwear, and accessories for men, women, and youth. Mens equipment includes footwear, shirts, shorts, pants, outerwear, base layer and eyewear. Womens equipment includes footwear, shirts, shorts, skirts, pants, outerwear, base layers, and eyewear. Youth equipment includes both boys and girls footwear, apparel, and eyewear. Adidas provide these products to the following sports disciplines: Running: Football (soccer): Tennis: Golf: Cricket: Basketball: Lacrosse: Rugby: Gymnastics: Skateboarding: 2.1.3. Pricing Adidas is, at its core, an international company with only roughly a quarter of its sales coming from North America. Moreover, it is rapidly expanding its presence in emerging markets like Asia and Latin America, which combined account for over a third of net sales. Because it targets the wealthiest segments of the market the company leads its competitors in sales in Japan, Korea, India, Thailand, Indonesia, and New Zealand; sales growth in its core emerging markets in Latin America and Asia have topped 24% in the last several years.
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Andries Fourie Cronje

Tshwane University of Technology 205104976

Pricing is the only mix which generates the revenues to the company. So it is very important for the company to look at various factors when considering which price strategy to use.

Brand value: the price should be decided in such a manner so that it matches with psychology of the customers. If you made a higher price than it will decrease the demand for the product and hence fewer buyers. Fewer buyers ultimately lesser will be the sales and hence profit. The price should not be too low because If the price is too low than then it will decrease the value of the product for the customers. They might be question on the quality of the product. Suitable for the targeted customer: As higher as well as the lower price will affect the value hence the price should be right. It should be matched with customers whom you are targeting. If you are targeting to high class then your price should be high and if you are targeting the middle as well as the lower class then the price should be matched accordingly. Generating the revenues quickly: price also affects the revenues and the profits of the company. If we talking in terms of profit maximization then marginal revenue should be equal to marginal cost.

2.1.4. Place/Distribution:

In 2009, the adidas Group established the Global Sales function, to promote and fully leverage the commercial activities of the adidas and Reebok brands. The function is organised into two distinctive channels: Wholesale and Retail: By catering more specifically to these two business models, the Group is in a better position to act on multiple customer and consumer needs, be more responsive to market developments, and manage channel synergies by establishing best practices worldwide. Wholesale: The main strategic objective of the Wholesale segment is to deliver profitable market share growth by becoming the most effective and efficient sales organisation in the sporting goods industry. The principles to achieve this include: Differentiating and segmenting product offering to Harmonising and standardising of selling models and processes to

match channel strengths. achieve efficiency and cost leverage and reduce working capital requirements Retail: Adidass strategic vision for Retail is to become one of the top retailers in the world by delivering healthy, sustainable growth with outstanding return on investment: focus on the consumer,
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Andries Fourie Cronje

Tshwane University of Technology 205104976

achieve operational excellence, exploit Retails portfolio of leverage the adidas global presence and scale

brands,
2.1.5. Promotion: Promotion includes all of the tools available to the marketer for 'marketing communication'. Promotion uses methods of communication with two objectives: Informing the existing and potential consumers about a product. To persuade consumers to buy the product.

1.2.5.1

Tools of promotion:

Advertising Public relations Messages Direct marketing Sales Media Budget

3.1. Company history: Nike, Inc. is a major publicly traded sportswear and equipment supplier based in the Unite states. The company is headquartered near Beaverton, Oregon, which is part of the Portland metropolitan area. It is the world's leading supplier of athletic shoes and apparel and a major manufacturer of sports with revenue in excess of US$ 18.6 billion in its fiscal year 2008 (ending May 31, 2008). As of 2008, it employed more than 30,000 people worldwide. Nike and
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Andries Fourie Cronje

Tshwane University of Technology 205104976

Precision cash parts are the only Fortune 500 companies headquartered in the state of Oregon, according to The Oreganian. The company was founded on January 25, 1964 as Blue Ribbon Sports by Bill Bowerman and Philip Knight and officially became Nike, Inc. on May 30, 1978. The company takes its name from Nike (Greek pronounc, the Greek goddess of victory. Nike markets its products under its own brand as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike skateboarding and subsidiaries including Cole Haan, Hurley International, Umbro and Converse. Nike also owned Bauer Hockey (later renamed Nike Buaer) between 1995 and 2008. In addition to manufacturing sportswear and equipment, the company operates retail stores under the Niketown name. Nike sponsors many high profile athletes and sports teams around the world, with the highly recognized trademarks of "Just do it" and the Swoosh logo.(Wikipedia: October 2010) 3.1.1 MARKETING MIX OF NIKE 3.1.2. Product: A wide range of shoes, apparel and equipment products, all of which are currently its top-selling product categories. Nike started selling sports apparel, athletic bags and accessory items in 1979. Their brand Cole Haan carries a line of dress and casual footwear and accessories for men, women and children. They also market head gear under the brand name Sports Specialties, through Nike Team Sports, Inc. They sell small amounts of plastic products to other manufacturers through Nike IHM, Inc. Bauer Nike Hockey Inc. manufactures and distributes ice skates, skate blades, in-roller skates, protective gear, hockey sticks and hockey jerseys and accessories Nike provides these products to the following sport disciplines: 3.1.3. Price: Nikes pricing is designed to be competitive to the other fashion shoe retailers. The pricing is based on the basis of premium segment as target customers.
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Basketball American football Running Golf Baseball Rugby Netball Cricket Tennis Athletics

Andries Fourie Cronje

Tshwane University of Technology 205104976

Nike as a brand commands high premiums. Nikes pricing strategy makes use of vertical integration in pricing where in they own participants at differing channel levels or take part in more than one channel level operations. This can control costs and influence product pricing. Nike uses Price Leadership strategy and value based pricing. This is when a company sets is price based on the value the consumer places on the product. Nike has spent a lot of money to promote their brand as top of the range. Customers buy the product for the Nike symbol and are willing to pay high prices regardless of the products actual value. 3.1.4. Place: Nike sells its product to about 20,000 retail accounts in the U.S. and in approximately 110countries around the world. Nike sells its products in international markets through independent distributors, licensees and subsidiaries. Independent distributors have little or no pressure for local adaptation because the 4Ps of marketing are managed by distributors. 3.1.5. Promotion: Nike has been one of the top retail industries for quite a long time. This is because they sell quality products, customer loyalty, but most of all, its great marketing techniques. Nike has a number of famous athletes to create a great deal of attention to their products. Nike has signed the top athletes in many different sports such as the Brazilian Soccer Team (especially Ronaldino, Renaldo, and Roberto Carlos), Lebron James and Jermane O'Neal for basketball, Lance Armstrong for cycling, and Tiger Woods for Golf. Sponsoring of events is another great promotional technique for Nike. It brings attention Nike's products. Web sites are a great promotional tool as they cover these events. Such events include Hoop It Up and The Golden West Invitational. Nike also personalizes websites. They make the websites exclusively for a sport such as nikebasketball.com , nikefootball.com , and nikegolf.com

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Andries Fourie Cronje

Tshwane University of Technology 205104976

4.

NIKE VS. ADIDAS Both Nike and Adidas are exploiting the growing footwear market. Nike is forever trying to bring out cutting edge technologies and innovative ideas to meet their customers growing needs. Adidas and Nike are competing with each other to gain number 1 position. They have priced their products with a huge margin that people are willing to pay because of the brand value associated. Adidas and Nike are both successful sports apparel manufacturer companies which sell sportswear clothes, shoes, sport tools, water bottles and more. On my opinion, I think both Nike and Adidas are cool. But of course different people have different opinions. While Adidas products are generally cheaper than Nike products, much of pricing can be directly proportional to the type of technology incorporated into their products. A conclusion that can also be drawn is the fact that the pricier products have the more advanced technology, but there technology ideas aren't that different, but Nikes are also the ones that are most likely endorsed by famous athletes, all of which Nike seems to have the upper hand in. But in soccer Adidas definitely has more support. Overall, I believe that Adidas is the better brand.

5.

NIKE/ ADIDAS SERVICE DELIVERY Nike and Adidas provide customers the best products in sportswear. They give importance to comfort, durability and value for money. They offer discounts during strategic occasions to increase sales. Nike and Adidas are continuously coming out with new and cutting edge technology to keep with the needs of the customers. Nike and Adidas guarantee good quality products. If you are dissatisfied with the quality of your Adidas or Nike product, as a customer you can first try and return it to the retailer for resolution. Nike and Adidas have a liberal return policy with authorized dealers and they encourage them to do everything possible to accommodate you locally for your convenience. If you purchased the product from their online store you can look at""How do I return or exchange a product from shopadidas.com?" for steps you can take for a return or exchange.
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Andries Fourie Cronje

Tshwane University of Technology 205104976

6.

CONCLUSION The 4 Ps in the marketing mix plays an important role in increasing the sales and making a brand name in the market. The right product on a correct price at a right place and with proper and constant promotion plays a vital role in marketing. Adidas and Nike used the tool of Marketing mix rightly to enhance the image and to conquer their specific markets.

References

Adidas Golf USA moves to Carlsbad; Adidas faces legal suit". Sports Business Daily. August 19, 1998. http://www.sportsbusinessdaily.com/article/30237. Retrieved 22 October 2010. "Taylor Made Golf Co". FundingUniverse. http://www.fundinguniverse.com/company-histories/Taylor-Made-Golf-CoCompany-History.html. Retrieved 22 October 2010. Freeman, Mike (August 19, 1999). "Taylor, Adidas merge, reshuffle". The San Diego Union-Tribune: p. C.1. http://pqasb.pqarchiver.com/sandiego/access/1246929281.html? dids=1246929281:1246929281&FMT=ABS. Retrieved 22 October 2010. www.scribd.com
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Andries Fourie Cronje

Tshwane University of Technology 205104976

Ward, Denise T. (May 14, 2001). "Profile: Mark King, Taylor Made For His Job". San Diego Business Journal. Archived from the original on?. http://www.allbusiness.com/company-activities-management/boardmanagement-changes/10623278-1.html. Retrieved 22 October 2010. Wicked Local, April 29, 2008, http://www.wickedlocal.com/lexington/news/business/x883026486, retrieved May 4, 2008

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