Nike: Building a Global Brand Teaching Notes Summary This case concerns the development of Nike's international marketing

program. Although Nike met with great success in thwarting Reebok's competitive thrust in the U.S., overseas markets posed many challenges. The case concentrates on the European and Asian markets and provides some historical marketing perspectives. The issue faced by Nike is how to best build global brand equity. The case focuses on some key marketing decisions in 1992 and 1993 and then focuses on the subsequent challenges Nike faced, including an image crisis as well as intensified competition. Further, a discussion on expanding Nikes brand portfolio is presented. Class discussion can revolve around the following sets of questions that students should consider before class: 1. How would you characterize Nikes brand image and sources of brand equity in the United States? 2. How have Nikes efforts to become a global corporation affect its sources of brand equity and brand image in the United States, Europe, and Asia? 3. Are sponsorships and endorsements vital to Nikes business? For instance, what effect would Nike becoming an official sponsor for the Olympics have on the companys relationship with consumers? 4. Why did Nike become a target for critics of globalization? Do you think Nikes response to allegations of unfair global labor practices was appropriate and/or effective? Is Nike truly concerned about these issues? 5. Evaluate Nikes acquisitions and the brands now under its control. Do these acquisitions make sense for Nike? What, if any, brands should Nike try to acquire next? 6. How important is fashion to Nike? Are they a performance apparel company, or a fashion company? What is more important for Nike when they enter a new market like China? Fashion or performance? 7. Should Nike do anything different to defend its position now that Adidas and Reebok have joined forces? Teaching Objectives 1) 2) 3) 4) To examine issues in global branding To demonstrate the value of integrated marketing To consider how to manage a strong brand To explore PR issues for established brands

Teaching Strategy The Nike case is similar to the Levis Dockers case in that it is a brand with which every student will no doubt have experiences and opinions. The value to the case discussion is that students can still learn some valuable lessons about Nike and their marketing expertise. A good place to start the case discussion, after a quick summary of the historical origins of the brand, is in 1988, a time when Reebok held a sizable market share lead (30% to Nikes 18%). In fact, some students may have already been exposed to the HBR case that deals with Reeboks integrated marketing communication program from that time. Students can be asked to identify Reeboks and Nikes

brand image at that time. Essentially, Reebok has concentrated on creating associations to comfortable, fashionable, and for women. If students seem to be struggling, just remind them that Reeboks growth was driven by aerobics shoes and then ask them what associations might that suggest. Prior to 1988, Reebok was also seen as a hip, cool brand but, by this time, they were seen as a much more mainstream brand. The Nike brand image should be easier for students to elicit. Key brand associations were created to performance, high tech, top athletes (e.g., Michael Jordan), and sports. It should be pointed out how consistent, cohesive, and reinforcing this brand image was (and still is). It is important to ask students how this brand image was created to provide a point of reference for the discussion about Europe and other areas of international expansion. Basically, the brand was built from the ground up in a grass roots effort. It is worthwhile to note the duality of the brand image and how this characterizes strong brands. Nike has strong product performance associations (remind students what an innovation air technology was) as well as user and usage imagery. Nikes advertising in general, and the Just Do It campaign in particular, can be analyzed some in terms of its contribution to brand equity. The power of the slogan a three word summary of the self-empowerment that the brand represents can be emphasized. After analyzing the Reebok and Nike brand images, their respective positionings can be considered, time permitting. Nikes point-of-difference is clearly performance. Reeboks pointof-difference was style. Their respective points-of-parity follow from there. Students can be asked to judge the two positionings in terms of desirability and deliverability. The former is a question of how strongly the pyramid of influence operates in this market. At the top of the pyramid is the competitive athlete, which makes up roughly 5 percent of shoe buyers. Next, the weekend warrior or casual athlete makes up the next 15 percent. Since the vast majority of athletic shoes are never used for anything more athletic than walking, the base of the pyramid 80 percent of the total is the non-user. Some students might argue for Nikes high-end trickle down approach of using top athletes to represent the brand, while others will endorse Reeboks mass-market approach. Deliverability is less controversial however as Reeboks UBU is a huge misstep as compared to the focused, well-executed Just Do It campaign. The depth of the analysis of the U.S. experience will depend on the time available. To address the challenge of building a global brand, students must appreciate how the brand was built in the U.S. In particular, it is important to point out Nikes internal brand mantra, authentic athletic performance, and how it helped to guide brand-building efforts. Once the American experience has been covered to the degree desired, discussion can switch to the European market. A good opening question here is to ask students how brands should be built in a different geographical market. The answer, of course, is that they must be built from the bottom up just as had been the case in the original domestic market. The actual means by which they will built, however, may differ. In other words, the strategy will be the same awareness first and image next but the actual tactics in terms of the three main ways to build brand equity may differ. With this backdrop, students can then be asked what challenges existed for building brand equity in the European market in 1992. Perhaps the most important challenges were that: 1) the brand did not have the history nor heritage in the market and was starting more from scratch and 2) European consumers may vary in significant ways from Americans in terms of their sports experience. Students can be probed as to the severity of these challenges. Students from Europe may want to be asked to comment on attitudes towards sports over there. Next, students can be asked how Nike changed its formula from the U.S. market. As the case points out, they over-relied on their current U.S. marketing program, mainly for budget reasons.

A key lesson for students is that just because an ad campaign or some other aspect of the marketing program seems to work in an overseas market doesnt mean that it the right thing to do to build brand equity. Europeans may have liked and been entertained by Nikes advertising but not reached the level of understanding about the brand that Nike would have desired. In particular, the mantra of authentic athletic performance needs to be translated in a meaningful way. Nike had to change its sponsorship approach, making soccer a big part of this shift. Nike also had to change its advertising, making it less aggressive and more representative of consumer tastes in Europe. It also had to become more involved on a grassroots level with club sports, school teams, and local events. Students should be probed as to what building the brand from the bottom up or with a grassroots approach entails. Nikes approach in Asia was similar, with similar results. The case discussion can be extended with a look at Nikes image problems in the late 1990s. Students can identify the various contributors to these problems, such as labor relations, swoosh ubiquity, endorsement proliferation, and aggressive marketing. Nike became a lighting rod for criticism from various citizens groups, both domestically and abroad. Here, a discussion of the challenges of becoming a global brand in the 21st century can be useful. A global economy enables brands to vastly expand their reach geographically, yet at the same time accountability increases as well. Students can discuss Nikes steps to remedy its various image problems, evaluating them for their effectiveness. Also, the topic of global marketing can be addressed here. Students can enumerate the pros (e.g., economies of scale in production and distribution, lower marketing costs, consistency in brand image, scope, etc.) and cons (e.g., differences in: consumer behavior, consumer response to marketing, brand and product development, competitive environment, legal environment, etc.) of global marketing. Nikes marketing activities can be evaluated in terms of how they dealt with these benefits and drawbacks. Chapter 14 contains much information on managing international brands. Complicating Nikes ability to grow its brand was a global economic downturn in the late 1990s. Regardless of the prevailing economic conditions, Nike faced many challenges achieving growth with its brand. In many markets, demand for its footwear was not as high as it had historically been. Nike made successful moves into apparel, but its equipment business was still a small piece of the business. Students can discuss the benefits and hazards of leveraging Nikes brand equity over a wide range of non-footwear products. International growth continued to be strong, however, particularly in Europe and Asia. Discussion can include an evaluation of Nikes future prospects for growth in international markets. Latin America, Africa, and Asia, especially China, could be thoroughly analyzed. Also, Nikes brand portfolio expansion through acquisitions is an interesting issue to debate and analyze.. As a high profile brand, Nike is always in the news, and students always like to talk about the brand. The key to guiding this discussion is to make sure students are applying course concepts to do so. Key Lessons Importance of creating a strong foundation for brand equity o Depth/breadth, rich, cohesive brand image Advantages of brand mantra for brand focus Importance of proper positioning Value of strong corporate brand Dangers in taking short-cuts in building a strong global brand

Discussion Questions 1) How would you characterize Nikes brand image and sources of brand equity in the United States? Brand image o Elite athletes o High technology o Expensive/premium o Running o Irreverent o Aggressive o Cool Sources of equity o Heritage as an athletics-focused brand o Emphasis on technological advancement o Association with top athletes o Premium price positioning o Attitude as conveyed in marketing program Transferability o Image and equity would work for most sports o For some newer action sports, associations not as transferable o Sport is a constant in society, associations could transfer across geographical boundaries o Not as transferable for non-athletics products

2) How have Nikes efforts to become a global corporation affect its sources of brand equity and brand image in the United States, Europe, and Asia? Requires a diversified portfolio of athletes, covering all popular sports globally. Consider the bottom-up approach in each market, while maintaining the original strategy of building awareness first, and then image later. Students are encouraged to compare Nikes image and performance in different countries.

3) Are sponsorships and endorsements vital to Nikes business? For instance, what effect would Nike becoming an official sponsor for the Olympics have on the companys relationship with consumers? Sponsorship and endorsement played a key role in Nikes U.S. success Sponsorship and endorsement also important for establishing positive image abroad Image of Nike in U.S. tied to elite athletes, Nike actually began reducing number of endorsers because associations sufficiently high High-profile sponsorship probably more important in regions where Nike image not as high in terms of performance

4) Why did Nike become a target for critics of globalization? Do you think Nikes response to allegations of unfair global labor practices was appropriate and/or effective? Is Nike truly concerned about these issues? Nike very recognizable global brand Labor ethics very hot topic High cost of shoes & high image component of brand resentment

5) Evaluate Nikes acquisitions and the brands now under its control. Do these acquisitions make sense for Nike? What, if any, brands should Nike try to acquire next? Evaluation is subject to class discussion and arguments Brand diversity might lead to additional growth Consider brand image issues

6) How important is fashion to Nike? Are they a performance apparel company, or a fashion company? What is more important for Nike when they enter a new market like China? Fashion or performance? Primarily performance, but fashion is crucial to the longevity of the brand Consider Beijing 2008 Olympics Open for class discussions and arguments

7) Should Nike do anything different to defend its position now that Adidas and Reebok have joined forces? Nike should acknowledge that global competition is becoming fiercer.

The brand strategy should be maintained, so the company should continue pursuing successful global athletes. It is possible to consider acquiring other brands to diversify the companys portfolio.

Teaching Notes Summary The Red Bull case is unique because it deals with a single product that found new ways to build a brand in a very competitive category. It is a good case to supplement students learning about non-traditional marketing methods. Red Bulls founder, Dietrich Mateschitz, was an experienced marketing professional and approached the creation of Red Bull from a branding perspective. Red Bull essentially invented a new category energy drinks in Western markets, and marketed its product without much above-the-line advertising. The product was the primary marketing tool, and as a private company Red Bull exercised control over the distribution of its product. The company expanded very selectively into new markets, yet still achieved exponential growth. Red Bull became one of the major success stories in the highly competitive beverage market in the 1990s. Students should consider the following questions as a basis for discussion: 1) Describe Red Bulls sources of brand equity. Do these sources change depending on the market or country? 2) Analyze Red Bulls marketing program in terms of how it contributes to the brands equity. Discuss strengths and weaknesses. 3) How can Red Bull maintain its marketing momentum? Would you recommend that Red Bull develops any brand extensions? If so, what would they be? Would you use the same marketing strategy? 4) Evaluate Red Bulls move into herbal teas, fast-food chains, and magazines. Does it make sense for the company to expand into these areas? What are the potential benefits and dangers? 5) Because product usage was not marketed as being limited to one or even a few occasions, Red Bull users could continue to use the product even as their priorities shifted. The case states that, a Red Bull consumer first attracted to the product as a nightlife enhancer in his or her early twenties might later use the drink as a morning pick-me-up or a revitalizer during a long day of meetings. How effective is Red Bull at advertising to these varied groups? Teaching Objectives 1) To discuss how to build awareness and image using non-traditional marketing methods 2) To analyze channel and distribution strategies 3) To analyze the implementation of a global marketing program 4) To examine the task of dealing with competition

Teaching Strategy The Red Bull case can be used in tandem with the Starbucks case, since it reinforces many of the same points. Red Bull is a good case to discuss selection of brand elements, implementation of a marketing program, building a brand using non-traditional marketing means, and outlasting competition. Since the product is the star for the brand, the case goes into much detail about the history and design of Red Bull. Students can be asked to describe the product, since many will be familiar with the beverage, and analyze the brand elements. They should come up with something along the following lines: Flavor o Medicinal taste reinforces efficacy o Carbonation gives refreshment, energy, and mixer associations Packaging o New size & unusual shape creates interest o Single-serve cans, no multi-can packs, reinforced premium positioning o Visually appealing silver-and-blue Ingredients o Caffeine, taurine, other energy ingredients allow Red Bull to make claims about health benefits o Sugar for flavor Positioning o Revitalizes body and mind o Broad positioning, drink suitable for any occasion when consumer needs a lift o Early adopters: athletes, clubbers, hipsters, gives drink cachet/exclusivity Price o At least 10 percent greater than nearest competitor o Stakes out premium price point o High price makes health claims plausible in minds of consumers

Students can be asked to analyze these brand elements in terms of their establishing points-ofparity and points-of-difference with other beverage brands. Points-of-parity and points-ofdifference can be expressed in relation to usage occasions as well, as depicted in Figure 1 of the case. Red Bull relied on a word-of-mouth strategy to build awareness for the product in the early stages of its launch in Austria. The company made Red Bull available in convenience stores, bars, and clubs, giving access to the groups of consumers who began drinking the product ravers, clubbers, young people and formed the user imagery. As more people began drinking Red Bull, word of the products benefits spread throughout the country and beyond its borders. Because the product was not available for sale outside Austria for five years, a mystique developed around Red Bull and demand for it led to its appearance on black markets in other countries. Here the discussion can touch on topics from Chapter 6, such as buzz marketing and mixing and matching communications. Students can be asked what moves Red Bull made and what factors were unintentional that led to a buzz marketing effect. Students can also be probed as to what other companies can learn from the brand and how it is being marketed. As Red Bull began to expand into other European countries, its marketing program became more sophisticated. Many of the lessons from Chapter 14: Managing Brands Over Geographical Boundaries and Market Segments will be useful in this part of the discussion. Students can be asked to enumerate the aspects of the marketing program: television advertising, point-of-

purchase marketing, sports marketing, sampling, event marketing, and college marketing. Each aspect can be analyzed for its contribution to brand equity. Red Bull also exercised control over the distribution of the product, limiting the number of locations and the type of locations in which the drink was to be sold upon entry into a market. In the U.S., Red Bull adopted a cell approach to break the country down into manageable geographic segments. This limited launch strategy contributed to a buzz marketing effect because it was designed to reach the early adopters most likely to influence the general public. The Red Bull refrigerated units that appeared in bars, clubs, and convenience stores, as well as the van teams that distributed exclusively Red Bull, served as push strategy. Students can compare Red Bulls push strategy with its pull strategy. As Red Bull became more widely known, a variety of competitors emerged. These competitors pitched consumers with a number of positioning options, ranging from energy-focused to partyfocused, but none had the broad positioning of Red Bull. Students can discuss how the competitors limited positioning options in terms of usage occasion could effect Red Bulls positioning, as discussed in Chapter 3. Students can also examine Red Bulls strategies for dealing with competition, which include pre-marketing, price premiums, and adhering to its marketing program. Here it may also be useful to discuss other alternatives, such as a lower-priced fighter brand extension or an extension with a narrower positioning. This can lead to the broader question of how Red Bull can continue its exponential growth as its markets near maturity. In its first market of Austria, Red Bull achieved per-capita-consumption increases every year except one since its debut, but the question remains if the company can replicate this success in other markets. Lessons from Chapter 13: Managing Brands over Time, can be applied here. Key Lessons Red Bull was created from a strong strategic branding foundation Red Bulls ability to support health benefit claims with product efficacy helped to create a successful marketing program By targeting specific consumer segments and employing clever push strategies, Red Bull built awareness and image with little initial marketing expenditures Integrated marketing communications and much buzz marketing helped to maximize the benefits of Red Bulls marketing campaigns

Discussion Questions 1) Describe Red Bulls sources of brand equity. Do these sources change depending on the market or country? Sources of equity o Product efficacy o Hip image o Limited availability o Association with athletes/sports o Multiple consumption occasions o Sleek packaging Changes depending on market or country o Red Bull employs the same marketing strategy in every new market, so many sources of equity remain consistent across markets o Major consumption occasions may vary by market o Importance of sports association varies by market 2)Analyze Red Bulls marketing program in terms of how it contributes to the brands equity. Discuss strengths and weaknesses. Highly integrated, all marketing efforts consistent with fundamental promise of efficacy Limited availability at time of launch builds buzz awareness, also highly targeted in terms of user imagery Advertising mainly awareness, but some image component in terms of conveying consumption occasion and humor Sports marketing primarily image Point-of-purchase/on-premise mostly awareness, also image in terms of placement Sampling program builds awareness, product dispensed when consumers most likely to appreciate its affects 3) How can Red Bull maintain its marketing momentum? Would you recommend that Red Bull develops any brand extensions? If so, what would they be? Would you use the same marketing strategy? Red Bull should continue expanding in other countries using its successful positioning strategy based on occasions. Brand extensions could be considered, but marketing research needs to be conducted to assess the effect of such extensions on the image of the brand. Lower-priced extensions as well as extensions to new product categories are possible options. Consistency in the marketing strategy deployed is highly recommended unless marketing research proves otherwise. Discussions of different examples would be very useful in this case.

4) Evaluate Red Bulls move into herbal teas, fast-food chains, and magazines. Does it make sense for the company to expand into these areas? What are the potential benefits and dangers? Evaluation is subject to class discussions and arguments Benefits

o Diversify and grow the business o Capitalize on the diverse target markets o Herbal tea would be consistent with the healthy image o A magazine could generate good publicity to the brand Dangers o Fast-food chains could be risky to the healthy image

5) Because product usage was not marketed as being limited to one or even a few occasions, Red Bull users could continue to use the product even as their priorities shifted. The case states that, a Red Bull consumer first attracted to the product as a nightlife enhancer in his or her early twenties might later use the drink as a morning pick-me-up or a revitalizer during a long day of meetings. How effective is Red Bull at advertising to these varied groups? Successful among several age ranges (14-19; 20-29; and 29-39: See Exhibit 2) Students are encouraged to evaluate some examples and advertisements, and compare the effectiveness of this strategy to the performance of the brand in the market.