Nike, Inc.

and the Athletic

Footwear Industry
Strategy and Competition
Analysis
Prof. Ben Gomez Casseres
By:
Polina Petkova, MBA 2011
Sudarsan Pattairaman, MBA 2011
!"1#"2010
1
Firm Overview
Nike, Inc. is the biggest manufacturer worldwide of both athletic footwear and apparel
in terms of sales. It specializes in the production and sale of athletic footwear, apparel and
equipment. For the fiscal year 200 it announces re!enues of about "#.2 billion.
#
It is a
global company that besides in the $%, which accounts for &'( of its re!enue
2
, operates in
)urope, *iddle )ast, and +frica. Nike has manufacturing plants and operations throughout
+sia. ,he global slowdown in both sales and consumption in the retail industry affected Nike
and it recorded a re!enue growth of only about &( in 200. Net income fell by 2#( and was
e-pected to continue to fall in 20#0.
&
.owe!er, net income in the third quarter of 20#0 is
almost double in the net income in the same period of the pre!ious year bringing it up to "'/
million.
'
Nikes Global Business Strategy
0hen first founded in 1962 under the name of Blue Ribbon Sports, the strategy was
1to distribute low2cost, high2quality 3apanese athletic shoes to +merican consumers in an
attempt to break 4ermany5s domination of the domestic industry.6
7

,oday Nike offers athletic shoes at e!ery marketable price point to a global market.
Nike sustains its leading position through emphasizing quality products, constant inno!ation,
and aggressi!e marketing. Nike sells its products in more than #80 countries under not only
its namesake brand but brands such as 9ole .aan, 9on!erse, .urley International, and $mbro
Inc.
/
It uses distribution channels such as company2owned stores and websites or sports
retailers, such as Foot :ocker.
#
$ike, %n&. 10'(, 200#, ). 2*.
2
%id., ).+*
,
$%(-, %n&. .e)orts /is&al 200# /ourt0 1uarter and /ull 2ear .esults
3
4ikiinvest.&om, $ike, %n&.
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5Strate6i& Analysis of $ike, %n&.,7 8ePaul 9niversity, Mar&0 13, 2000.
/
4ikiinvest.&om, $ike, %n&.
2
+s mentioned earlier, Nike is a truly global company, which means that its success
story is transferrable o!er borders. It di!ides its sales into four main regions2 the $%, )urope,
*iddle )ast and +frica ;)*)+<, +sia =acific, and 9entral and %outh +merica. For 200 each
of these regions accounted respecti!ely for &'.#(, 28.>(, #>.&(, and /.>( of total re!enue.
>
Segmentation Strategy:
Nike realizes that in order to be number one they need to offer a wide range of
products to be able to de!elop a culture and fulfill their loyal customers5 needs. Nike5s
strategy in terms of segmentation is e-cellent. ,heir core product is footwear but they also
manufacture apparel and equipment and thus, they spread their influence in other sport2related
markets. Nike also has se!eral sub2brands to grasp different consumer groups.
Nike5s main source of re!enue is athleti !ootwear, which is also its core
competency. It accounts for 7'( of total re!enues. It is designated for running, cross2training,
basketball, soccer and it includes e!en a casual footwear line. %ales in this segment increased
by #'( in 200 from which a big portion was a result of the increase in sales in the +sia
=acific region.
8

,he second most profitable segment for Nike is a""arel, such as t2shirts, shorts,
sweatpants, and licensed apparel made specifically for uni!ersities with their own logos. 0ith
an increase of only 0.2(, apparel sales accounted for 2>( of the company5s re!enue in 200.

.owe!er, sales in this segment grew by #'( in the pre!ious period, between 200> and 2008,
due to the growth of 27( of re!enues in emerging markets, such as ?ussia, and other )*)+
countries but also a substantial re!enue growth of 70( in 9hina.
#0
$nlike footwear, which
main market is the $%, the ma@ority of apparel sales come from the )*)+ region accounting
for &8( of total apparel re!enue.
:
%id.
+
$ike, %n&. 10'(, 200#, ). +:
#
%id.
#0
4ikiinvest.&om, $ike, %n&.
,
#$ui"ment, such as balls, golf clubs etc. accounts for /( of total re!enues in 200
and #&( come from other bran%s under Nike, such as 9ole .aan, 9on!erse, $mbro etc.
these different sub2brands supplement Nike product lines. For instance, $mbro specializes in
selling soccer apparel and footwear. Nike 4olf targets golf players and offers specialized golf
equipment, apparel and footwear. 9ole .aan on the other hand offers premium dress and
casual footwear. .urley International offers products suitable for snowboarding, skating, and
surfing.
&arketing Strategy:
%ignificant role for the competition of market share in the footwear industry plays
marketing in order to strengthen the brand image, de!elop product identity and e-pand
customer loyalty. 9ompetition between players is non'"rie but rather based on
%i!!erentiation in brand image and product inno!ations. ,herefore, substantial in!estments in
marketing campaigns are required. Nike in!ests annually between ##( and #&( of re!enue in
marketing.
##

(%vertising strategy: Nike5s strategy was to create dominant presence in media. Nike
created media presence in se!eral trend setting $nited %tates cities. ,A ads linking Nike to a
city were used, but real dri!ers were huge o!ersized billboards and murals on buildings that
blanketed cities with messages featuring key Nike2sponsored athletes, not products. ,he
company focuses its marketing on elebrity en%orsement, i.e. athletes in basketball, golf,
soccer, and tennis. :ately, Nike has also began to sponsor big sporting e!ents so as to create
huge awareness and brand following. In 2008, Nike spent significant amount on ad!ertising in
the Bei@ing 2008 Clympics and the Football 9hampionship. +fter the recent ,iger 0oods
scandal Nike plans on re!isiting it celebrity endorsement strategy. It can be noted that the
Dswoosh logo5 is one of the most famous in the world due to these huge ad!ertising efforts.
11
$ike, %n&. 10'( 200#, ).23.
3
Bran%ing Strategy: Nike5s strategy in this front is to de!elop a "remium bran%
associated with high quality product that satisfies customer needs. Nike5s brand is associated
with an aggressi!e attitude portrayed by, 1you don5t win sil!er, you lose gold,6
#2
which
clearly suggests that winning is !ital. ,he Nike customer associated the Nike brand with being
the D+merican5 wayE Being indi!idual and aggressi!e like *ichael 3ordan and 3ohn *c)nroe.
Nike built its brand around sports, attitude and lifestyle. Nike backed this strategy with
marketing campaigns like 13ust do it6 and with the companies front athletes like *ichael
3ordan and ,iger 0oods.
Selling Strategy: Nike5s strategy in early 2000s was to de!elop, flag ship stores,
NikeTown shops in bigger cities, first national, and then abroad. Nike was the first company to
establish flagship stores and it turned out to be a sensation.
#&
,here are independent small
retail stores that sell Nike products all around the world as well. +lso, on seeing the potential
of the low price market, Nike took efforts in 2007 to tap in to the low price segment by
striking a deal with big retail discount stores like 0almart and rolled out starter shoes at a
cheaper price, competing with pri!ate label brands. .owe!er, to a!oid brand dilution, Nike
did not use the swoosh logo in these shoes. 9urrently, Nike has a high quality website and
uses it as an online selling channel. NikeId
14
, a part of the website allows a customer to
customize his own shoes and buy it. ,he website is a!ailable in #' languages and is different
according to the country requirements.
&anu!aturing Strategy:
12
;<istory of $ike,7 Sneaker0ead.&om
1,
(a)ferer, ;Brand %dentity Prism7
13
$ike =esite > ===.nike.&om
!
Nike manufactures all of its footwear from outside $nited %tates. Nike has contract
suppliers in 9hina, Aietnam, Indonesia and ,hailand
#7
. ,hese countries accounted for &/(,
&/(, 22( and /( of total NIF) brand footwear respecti!ely. Nike also has manufacturing
agreements with independent factories in +rgentina, Brazil, India, and *e-ico to manufacture
footwear for sale primarily within these countries. =rimary reason for this is that it is cheaper
to manufacture in %outh )ast +sia and transport it to $%+ and )urope, regardless of the
transportation and tariff costs in!ol!ed.
Organi)ational Strategy:
0ith o!er 2#,000 employees worldwide, the company was organized into departments
by both geographic di!isions and product categories, which created o!erlapping management
responsibilities and a fluid leadership structure. For e-ample, a footwear manager in )urope
answered to both the Aice =resident of Footwear and the Aice =resident of )urope. .owe!er,
there was no formal communication link between the regional !ice presidents ;those in the
$nited %tates, )urope, +sia2=acific, and :atin +merica< and the product !ice presidents
;footwear, apparel, equipment<.
#/
*uman +esoures &anagement Strategy :
,he sweat shop debacle in late #0s has led Nike to form a distincti!e strategy to
pro!ide a good working en!ironment for employees. ,hey ha!e se!eral internal guidelines
and compliance standards apart from state laws for ensuring proper working conditions for all
workers in its contracted supplier factories.
Gue to the magnitude of Nike and their number of stores and manufacturing plants
throughout the world, Nike has taken the time to recognize the importance of each indi!idual
1!
Nike, Inc. #02F H 200, p. '
#/
1)-panding the =laying FieldE Nike5s 0orld %hoe =ro@ect 9ase,6 ,he 0illiam Ga!idson Institute, 3anuary
2002
*
and what they can contribute to the team. For this reason, Nike does not call its employees,
Demployees5 but rather Dteam members5 because each part of the team has something to add to
the business.
,hey ha!e also admitted that they ha!e a !ery large array of workers and this brings
many di!erse cultures and points of !iews together. +ccording to one of its statement,
di!ersity and inclusion is a crucial factor in Nike5s diplomacy in their many locations and
globally. In identifying the differences they ha!e set apart the opportunities to better
understand how their teams will work together and what ad!ersity they may face because of
this. In order to stri!e to reach this mission they ha!e put into action these strategiesE
#>

9ulti!ate di!ersity and inclusion to de!elop world2class, high2performing teams
Ignite change and inspire critical con!ersations around di!ersity, inclusion and
inno!ation
9reate !enues and en!ironments for open dialogue, di!erse opinions and a multitude
of perspecti!es
+ll of the abo!e will in future !enture apply and assist them in working more efficiently and
ha!ing more satisfied employees for longer periods of time.
Strategy (nalysis
,o analyze and e!aluate the abo!e strategy, it is necessary to understand the internal
and e-ternal forces in the en!ironment. ,o begin with, we did a basic %0C, analysis of Nike
and then performed an e-tensi!e =orter5s fi!e forces analysis of the footwear industry in the
$% and the emerging markets from Nike5s point of !iew.
S,O- (nalysis:
Strength ,eakness O""ortunities -hreats
1:
Nike 0ebsite 2 httpEIIwww.nikebiz.comIcompanyJo!er!iewIdi!ersityI
:
Brand Image
*arket leader
in most of the
world
Gi!erse
product portfolio
%trong
ad!ertising
)-perienced
*anagement team
$nder constant
scanner of .uman
rights companies due
to its history of
unethical labor
practices
=remium player in
a price sensiti!e
sector
)merging
markets
9an be a
leader in
de!eloping
en!ironmentally
sustainable
business
*ature industry,
susceptible to
recessions
Gependence on
contracted suppliers
H compliance issues
)!er 9hanging
customer preferences
Gependence on
endorsed athletes
%easonal
business
.orters Five Fores / Footwear 0n%ustry in the 1S 2 3evelo"e% 4ountries:
+ivalry : 56ery *igh7
+
Threat of New entrants
(ow!
"#igh $arriers to %ntry
Ca)ital %ntensive
Stron6 Brand /ollo=in6
-&onomies of s&ale
<i60 . ? 8 Costs
%ndustry in &onsolidation
)0ase
Internal &i'alry (#igh!
/ier&e Com)etition' Adidas,
.eeok, $e= Balan&e
Mature %ndustry
Mostly $on'Pri&e
&om)etition
8ifferentiation strate6y
%ndustry in Consolidation
)0ase
Su(stitutes (ow!
@t0er ty)es of s0oes
@t0er s)ort a))arel
$uyer )ower (#igh!
-veryt0in6 de)ends
on Customer
Preferen&es
Pri&e sensitivity
issues
Brand follo=in6
.etail and vendor
&onsolidations
Gro=in6 )o=er of
retail &0ains e.6.
4almart
Supplier )ower
(ow!
.a= Materials are
aundantly availale
C0ea) resour&es,
&ommodity items
%ince the athletic footwear industry in the $% is a mature industry, competition is
targeted towards attaining market share. 9ompanies need to introduce products at numerous
price le!els in order to compete and reach all areas of the market.
In this sense there are only a few players who are able to compete in all sectorsE Nike,
+didas2?eebok, and New Balance. %maller firms in this industry focus on specific type of
shoes hence targeting specialized sub2markets, i.e. +sics on running shoes.
?i!alry among the big players is fierce. %ince they cannot compete on price they need
to differentiate their product through constant inno!ation. +lso, continuous efforts are needed
towards strengthening their brands.
In order to stay competiti!e and ha!e presence in all sectors, many mergers and
acquisitions, i.e. +didas and ?eebok, are taking place and the market is going towards
consolidation. +s a result, maintaining a single brand image for companies like Nike becomes
really a tough ask. 0e will discuss ri!alry more in details in the 9ompetitor +nalysis later on.
-hreats o! New # ntrants: 58ow7
Barriers to entry in the athletic footwear industry are high due to se!eral factors.
It is as !ery capital intensi!e industry. )!en though it would not be difficult for a new
company to obtain the raw materials and the labor needed to produce shoes, there is almost no
chance for them to gain popularity in such a mature industry with some of the strongest brand
names in the world. Brand loyalty is e-tremely strong and it would be !ery hard for a new
entrant to 1steal6 loyal customers from the already e-istent players.
)conomies of scale play a huge role as well and the bigger players ha!e an ad!antage
of producing the products at a lower price than compared with newer entrants. +s the output
is bigger and the fi-ed costs of factories, machinery, marketing and ?KG will be decreased
per unit. Both marketing and ?KG constitute high costs and since new entrants will not be
able to take ad!antage of the economies of scale they will be less competiti!e.
#
+nother barrier is the fact that access to endorsement, which we discussed, is !ery
important in the industry. ,he bigger players ha!e already established agreements with both
teams and athletes. New entrants will not be able to pay hefty sums for such agreements.
%imilar conditions apply for distribution opportunities and retailers. ,hey want the well2
established brands on their shel!es that customers want rather than a new unknown brand.
,he industry itself is in a consolidation phase and only the big ones will sur!i!e. ,he
large companies are strategically and constantly acquiring smaller companies. %ome of the
most popular acquisitions include ?eebok by +didas, 9on!erse by Nike, %aucony by %tride
?ite, etc. %mall companies are bought before they become a threat to the bigger ones and
before they ha!e a chance to gain market share. In other words, it is impossible to grow in this
industry because someone will take o!er your company.
Substitutes : 58ow7
In theory there are a se!eral substitutes of athletic shoes. .owe!er, the percei!ed threat is low
since they ha!e unique functions.
First, in the sports industry, other types of apparel could also be seen as a substitute, in
terms of building image and style.
%econd, in the same product category, other types of shoes are also substitutes, such as
slippers, heels, boots, flip2flops, etc.
)!en though sneakers are still the most popular type of footwear in the world,
there is substantial threat coming from the number of other types of shoes.
:ifestyle athletic shoes sales, for instance are growing at the fastest annual rate and
=uma is undoubtedly the leader in this segment2 with more than 70( sales
growth.
#8

1+
;At0leti& /oot=earA %ndustry Analysis,7 Bufts 9niversity, -&onomi&s of Mana6ement and
Strate6y, May, 200*.
10
9ompanies such as %te!e *adden and %ketchers are also seen as threats. %te!e
*adden5s 1thick high heeled shoes6
#
are !ery popular and since thick heels are
considered a more comfortable !ersion among women they could be a substitute
for sneakers. %ketchers introduced non2athletic heel2less shoes also called 1sneaker
mules6
20
,hese shoes, first gained popularity in )urope but now are also becoming
popular in the $nited %tates.
Su""lier .ower : 58ow7
,ypically athletic shoes are manufactured using three ma@or raw materials2 cotton,
rubber, and foam. ,he rubber is !ulcanized through a simple chemical process that impro!es
durability and stability.
21
.owe!er, all of these materials are commodity goods. In other
words, the suppliers do not ha!e the power to bargain the price of their product, since there
are numerous suppliers. .ence the supplier power is low.
.owe!er, there has been some standardization of production in the industry due to
growing concerns of labor practices of the suppliers and manufacturers. ,hese practices ha!e
been damaging the image of some companies including Nike. ,herefore, the big companies
prefer to work only with appro!ed manufacturers and suppliers that are known to follow these
labor standards. Both +didas and Nike ha!e created a system to ensure that all the high
quality of the product, the working conditions, and the distribution are at high standards.
22
If
the supplier fail to meet these standards contracts are discontinued. ,herefore, suppliers are
trying to establish themsel!es as reliable because once they gain Nike as a customer they
know that they will request enormous !olumes. .owe!er, to reach this le!el, the supplier
needs to make in!estments in their facilities to impro!e working conditions and many
suppliers cannot afford to do so.
1#
%id.
20
%id.
21
%id.
22
%id.
11
Buyer .ower: 56ery *igh7
,he buyers for this industry are retailers and end users.
,he footwear retailers, i.e. Footlocker, 0al2*art, range in sizes. .owe!er, the top 27
retailers account for two2thirds of the sales of athletic footwear2 appro-imately "#7 billion in
!alue.
2&
New retailers are entering the market, such as 1big bo- stores6 and !endors that open
their own stores. ,he lack of concentration among buyers brings down the margins and gi!es
the power to the !endors. ?etailers also ha!e no power in determining the design of the
product. ,herefore the big footwear manufacturers generally dictate the price of their shoes.
In order to gain more power buyer companies ha!e started merging2 Footlocker 2Foot
+ction, %port +uthority2 4art. ,his consolidation will transfer some of the power from the big
players because in order to be industry leaders they will need these well2recognized retailers
as well. 4rowing margins suggest that buyer power has been increasing.
2'
,he end user of the industry is also considered a buyer and he has unlimited power.
)!ery company is fighting for the loyalty of the end user through constant inno!ations and
brand management. .owe!er, if the user is dissatisfied, he can easily switch the brand to
another one. ,herefore, o!erall we consider buyer power to be high.
.orters !ive !ores analysis: #merging &arkets
2,
%id.
23
%id.
12
Threat of New entrants
(#igh!
Cess"$ot eD)lored Markets
i.e. everyone =ill e
interested
$on So)0isti&ated market
needs
Co&al )layers advanta6e >
Conservative 6overnment
)oli&ies to 0el) lo&al
)layers
&i'alry (*ery #igh!
/ier&e Com)etition from
6loal rands -.6 Adidas,
Puma, $e= Balan&e et&
Co&al )layers =it0 &ultural
advanta6e and )ri&e
&om)etition
Su(stitutes (ow!
Bare foot, =alkin6 =it0
sli))ers e.6. %ndia
Ceat0er oots and sli))ers
$uyer )ower (*ery
#igh!
Customer needs to
e edu&ated
<i60 )ri&e sensitivity
Brand ima6e to e
re'estalis0ed
$eed to edu&ate and
&at&0 retailers,
distriutors et&
Supplier )ower
(ow!
C0ea) laor, needin6
Eos in Sout0 -ast
Asia
.a= Materials are
aundantly availale
C0ea) resour&es,
&ommodity items
+s we see in the fi!e forces analysis picture abo!e, most of the attributes pertaining to
%upplier power and %ubstitutes remain the same. .owe!er, there are considerable changes in
the nature of the market, the buyers and hence we see some changes in ri!alry, new entrants
and buyer power.
-hreat o! New entrants: 5*igh7
%ince the markets are quite new and une-plored, e!ery big player in the world is
looking to enter into these markets.
,he market is less sophisticated and customers will get satisfied with basic le!el
products. .ence, less capital is needed to produce basic le!el goods.
%ince there is no ma@or brand following, it is not capital intensi!e for a new entrant to
enter into a regional market.
1,
)!en though the global players can ha!e low production cost, the marketing and other
e-penses grow high and they are competing with smaller players here unlike in de!eloped
countries. +s a result, o!erall threat of a new entrant is considered high here.
Buyer .ower : 56ery *igh7
,he buyer power remains high in both de!eloped and emerging markets. .owe!er, the
reasons for that differ as followsE
,he customer is not aware of the product or brand. .ence, he needs to be educated
about the features and the comfort the footwear pro!ides.
)merging markets in general are !ery price sensiti!e. ,he premium sector will grow
with time as the market becomes more sophisticated.
,he retailers and distributors need education to do the business and operations and
hence, it is a daunting task for making them mo!e from their regular local !endors to a new
!endor.
-hreat o! +ivalry: 5*igh7
,he o!erall threat of ri!alry is high here as well, arising from two dimensionsE
4lobal competitors like +didas, ?eebok, =uma etc
:ocal competitors who are already in the business and ha!e a cultural ad!antage in
understanding the customer.
In general, with three out of fi!e forces being high, emerging market does not look like a
fa!orable en!ironment. .owe!er, on continuous marketing and educating efforts, this market
might be transferred into a growth region for all companies.
4om"etitor (nalysis
,o understand the position of Nike in the industry, it is important to perform a
competitor analysis. Nike5s ma@or competitors in the footwear industry are +didas K ?eebok,
New Balance, =uma, %ketchers and other players combined together.
13
&arket Share:
+s of 200>, Nike has a dominant global market share of &#( followed by +didas and
?eebok together at 22(. ,he corresponding figure in $% ho!ers around &/( followed by +didas
and New balance at distant second and third.
27

Source+ C0risto)0 8olles&0al, Fadidas,F -Guity .esear&0, Commerzank, 2+ /eruary
200+.
Finanial analysis:
26

Com)any
-arnin6s
)ers0are
Mkt Ca)
Current
ratio
.eturnon
av6assets
.eturnon
av6eGuity
$et)rofit
mar6in
.evenue
Millions
$etin&ome
Millions
%n&ome as I
of sales
.evenue
6ro=t0 J200#K
$ike ,.!1 ,!.32B 2.#: 11.!: 1+ :.:! 1#,1:*.10 1,3+*.:0 :.:!2+:#+# 2.+:I
Puma 1,.*, ,.**B 2.1# *.33 10.*2 !.12 2,3*0.:0 12!.# !.11*3,02+ '0.#0I
Adidas 1.#! +.+0B 1.!+ 2.** *.+! 2.,* 10,,+1.00 23! 2.,*00+0#2 0.30I
9nder Armour 0.#+ 1.*,B ,.:, #.0* 12.*: !.3* +!*.31 3*.:+ !.3*2,,*#* 1!I
$e= Balan&e 1,*30.00 0.*0I
Private Com)any
From the analysis shown abo!e between the ma@or competitors, it is quite ob!ious that
Nike is leading the market in most of aspects. .owe!er, the company to note here is $nder
+rmour as this company has high growth rate despite the fact that other companies are
e-periencing a slow sales growth. Nike should put some effort to study the strategy of this
company.
2!
C0risto)0 8olles&0al, Fadidas,F -Guity .esear&0, Commerzank, 2+ /eruary 200+.
2*
2a0ooL /inan&e, Goo6le /inan&e, S-C /ilin6s of t0e &om)anies
1!
.ro%ut .ort!olio (nalysis:
29
2:
Com)any =esites.
;At0leti& /oot=earA %ndustry Analysis,7 Bufts 9niversity, -&onomi&s of Mana6ement and
Strate6y, May, 200*.
1*
,ype of
%hoeL9ompany
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+unning M M M M M M M M M M
,alking M M M M M M
Basketball M M M M M M
4hil%rens M M M M M
-ennis M M M M M
8i!estyle M M M M M M M
Skating M M M
4ross'-raining M M M M
Soer M M M M
It can be seen that Nike has products in all lines. Guring early 200/, Nike was lacking
products in the skating category. .owe!er, they quickly recognized this shortcoming and
introduced a skate boarding shoe. +lso, it can be noted that there are o!erlapping product
category lines between +didas and ?eebok. .ence, there is a high possibility that +didas is
competing with ?eebok and hence cannibalizing its own sales after the merger. 0ith such a
product line, Nike will be able to compete with all players in the industry. ,herefore, Nike is
at a strategic ad!antage.
(%vertising strategy:
,he ad!ertising strategy differs from company to company. 4enerally, Nike belie!es
in spending 72>( of its re!enues in ad!ertising and endorsement. Nike has planned to spend
"'.2 Billion until 20#' for endorsements alone. 0ith the huge size of Nike, it is tough for
other companies to allocate a big amount for their marketing e-penses. *oreo!er, Nike has
always an edge when it comes to ad!ertising and marketing. ,he table below shows the
ad!ertising strategy for the ma@or players in the industry.
4om"any Strategy
Nike
)ndorsing +thletes
%ponsoring %ports e!ents
9ity based ad!ertisements
Banners K Billboards
,hemes on bringing inspiration and inno!ation to e!ery athlete in world
+didas, ?eebok
%ponsoring %ports e!ents
)ndorsing +thletes
,hemes on impro!ing performance of e!ery athlete in the world
=uma
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*i-ing influence of sports, lifestyle K fashion
=uma concept retail stores
=uma fashion shows
New stuff ad!ertising campaigns
Building seasonal momentum during holiday seasons
Cther companies *inimal or less ad!ertising based on stores
Bran%ing Strategy:
Nike has in!ested a lot so far in de!eloping a premium brand that implies high quality
and care for the customer. Nike has a wide range of products ranging from athletics to life
2+
;Puma > Brand Communi&ation analysis,7 Brent (a0ute, 200*
1:
style and also in different price ranges. ,herefore, it is always a challenge to fight against
brand dilution within Nike. ,he following gi!es an idea of the customer5s perception of the
brands.
4om"any Bran%ing message an% strategy
Nike
+thletic, Influential, Cutgoing, +ggressi!e, hi tech, futuristic, retro cool
+merican way of li!ing
+ssociated with +thletes at top of their sport
,o bring inspiration and inno!ation to e!ery athlete in world
+didas, ?eebok
9lear, orderly, =ractical, hi tech, %ophisticated, %incere
9onser!ati!e )uropean style
,o impro!e performance of e!ery athlete in the world
+ssociated with elite soccer playersIteams, NB+ stars, .ip hop artists
=uma
)legant, colorful, fresh, spontaneous, indi!idual, metropolitan,
international
*i-ing influence of sports, lifestyle K fashion
Fashion brand, performance K casual footwear, fringe, e-treme sports
Cther companies Based on their product lines. 4enerally not a strong brand message
In general, Nike5s shoes are associated to be of high quality and stylish. ?eebok5s are
comfortable and casual, and the +didas brand boasts superior performance and is 1percei!ed
as a professional, technically orientated brand with strong )uropean roots6
2
.
-ehnology an% 0nnovation strategy:
Nike fields some of the best in class technological practices and has a few patents to
its credit. Nike emphasizes on these and has de!eloped a lot of new products with use of high
technology and sophistication. +n e-ample of that is the microprocessor shoe to gi!e great
e-perience and comfort to the customer. .owe!er, +didas is also working on high tech
inno!ations to pro!ide high quality shoes. :ately, +didas and Nike ha!e been doing
entertainment based marketing campaign by forming alliances with technologyIentertainment
companies. Nike had an alliance with +pple to sell Nike shoes with +pple i=ods while +didas
tied up with *icrosoft to sell +didas goods with *icrosoft Mbo- gaming systems. %o far the
success of these alliances is yet to be quantified.
&anu!aturing strategy:
2#
(an6, Ste)0anie. ;S)orts S0oe .ivals Ste) 9)7. The Wall Street Journal, * Man 200*.
1+
Nike follows a #00( outsourcing strategy. *ost competitors follow the outsourcing
strategy. )-ceptions to this are New Balance and other smaller players. New Balance claims
that >7( of its production is from the $% and other small companies produce in the $% as
well.
4om"etitor (nalysis in #merging & arkets:
In general, competition in the emerging markets is granular and from a lot of players.
.owe!er, the case in 9hina is !ery different. +ccording to a research report by Bof+ *errill
:ynch, Nike was the most popular sport brand in 9hina with #( market share in 2008, while
+didas ranked second with #7( share and :i Ning third with ##(. ,he brokerage estimated
:i Ning to ha!e o!ertaken +didas in 200 as the second2largest player in 9hinaNs "#0 billion
sportswear industry. ,here are speculations that :i Ning has o!ertaken Nike as well.
&0
0ssues o! onern
It is not easy to stay as the market leader always because e!erybody wants to be in
your place. Nike5s o!erall $% re!enue growth is declining as discussed earlier. C!erall
growth in other geographical regions has also dropped considerably. 0ith the merger between
+didas and ?eebok taking off slowly and strongly and surging of companies like New
Balance, Nike5s sustainability of its market leadership becomes challenging. ,here are a few
challenging issues that Nike is facing at this point of time.
1; &aturing in%ustry in 1S(
a. Tightening competition H growth of +didas, New Balance, =uma etc. as shown
in the pre!ious competitor analysis sections. =roduct differentiation alone will
not help as customers will not be able to understand the ad!antages of
technology beyond a certain le!el. ,here should be a price ad!antage as well.
. Problem of brand dilution H Nike has been de!eloping a premium and high
quality brand image so far. 0ith Nike entering low2price segments, there is a
,0
;C0inese S)orts Brand Bakes on $ike,7 Nivian 4ai'yin (=ok, /ores.&om
1#
possible chance of brand dilution and as a result customer loyalty might take a
hit.
&. Sk rocketing marketing e!penditures and risk of endorsements H *arketing
e-penditures are growing steadily. + new risk on athlete endorsements is seen
after the ,iger 0oods scandal. ,herefore, Nike has to decide on spending the
endorsement and marketing budgets wisely.
d. Premium brand"s susceptibilit to economic recessions H =remium brands are
always susceptible to recession. It is to be noted that Nike has not gone back to
its original growth rate e!er since the 2008 economic recession occurred.
2; 0nreasing om"etition in %evelo"ing eonomies
+midst hea!y competition to be a market leader in de!eloping economies, there are quite a
few issues to be noted.
a. #osing market share in $hina H :i Ning, as we e-plained in the pre!ious
section is in catching distance. It is worth noting that Nike does not ha!e a 9hinese
online website store to facilitate customers to come online and learnIbuy Nike5s
products
&#
.
. Price sensiti%it H Ge!eloping markets are generally price sensiti!e markets.
Nike5s premium and high quality brand image doesn5t sync with the e-pectations
of the customer. In other words, the differentiation strategy might not bring as
good results as it had brought in the $%+.
,. Signi!iant reliane on 0- an% so"histiation in managing su""ly hains
<2

Nike is hea!ily dependent on information technology systems across our supply
chain, including product design, production, forecasting, ordering, manufacturing,
transportation, sales, and distribution. Nike5s ability to effecti!ely manage and maintain our
,1
1:i Ning .oping ,o 4row *arket %hare ,hrough Cnline %ale,6 Sports Business &ail, Gecember 200.
,2
Nike, Inc. #02F 200, p. #8
20
in!entory and to ship products to customers on a timely basis depends significantly on the
reliability of these supply chain systems.
=; #nvironmental sustainability
a. No direct control on compliance issues H Nike relies solely on its
subcontractors for manufacturing of its footwear. .a!ing already faced se!eral
issues on unfair labor practices at these subcontractor factories, Nike always
carries a risk of not ha!ing control o!er compliance to labor code laws. ,his is
considered by us as a big risk as another scandal of unfair labor practices will
completely collapse Nike5s position in the industry.
. Solid waste from shoes H ,here will always be a lot of solid waste from Nike5s
footwear manufacturing processes. +lso, being a market leader, it is the
responsibility of Nike to de!elop en!ironmentally sustainable business and stand
as an e-ample for others to follow. + possible option will be recycling, but Nike
still has no concrete strategy in this place.
+eommen%ations
Fous on -ehnology an% 0nnovation
o 0ith the market being mature in $% and de!eloped countries, product
differentiation is the best tool to gain market share. Nike should continuously
in!est in product design and inno!ation to be always with a leading edge o!er
the trailing competitors.
o Focus on setting up a reliable Information system that is capable of handling
comple- supply chains in a fool proof manner.
o =roperty, =lant K )quipment costs for 200 stood at "#.7> B as opposed to
"#.80 B in 2008 which is a &.7( increase. .owe!er, this needs to increase by
7 H >( e!ery year. C!erall, #7 H 20( of re!enues need to be spent on this
21
because the product design and inno!ation forms the backbone of the
company.
+evisit bran%ing strategy by %eou"ling hea" an% low ost !ootwear !rom
!lagshi" items
o 9heap and low cost footwear should be decoupled from the e-isting Nike
brand. ,hey might be sold under a different name, but not Nike. ,his might
help sa!or the premium brand image of Nike and help con!ey one message to
our brand. For e-ample, Nike starter shoes should be sold as @ust starter and
not Nike starter.
Follow both 3i!!erentiation an% .riing base% strategy
o 0ith the market matured in the $% and de!eloped countries, the competition
comes down to getting more market share than any other competitor in the
business. ,hus, an aggressi!e strategy that combines both differentiation and
pricing based strategies together will definitely ser!e better than @ust
differentiation. 0e saw that the operating margins for Nike are around ''(.
,his means that Nike has the scope to do a combined differentiation and
pricing strategy
o In a de!eloping market, the market grows with a price competition and later
transforms into a high quality based market with non2price competition. %ince
the industry in the de!eloping economies is growing, it is necessary to ha!e an
aggressi!e pricing based strategy as well. +s Nike has been building a high
quality brand image so far, it makes good sense to follow both differentiation
and pricing based strategy together.
4om"ete in !ull !le%ge in #merging markets> "artiularly in hina make a website
store
22
o Nike is currently the market leader in 9hina. But competition is catching up
and :i Ning has been growing strongly. In this situation, Nike has to operate in
full fledge to capture market share in emerging markets. Basic things like an
online store in a country like china will seriously help dri!e a lot of business.
0nvest on sustainability researh
o It is high time Nike begins to in!est more on its sustainability research.
9ompanies like 9orp0atch are consistently watching Nike and this issue of
en!ironmental pollution will e!entually come up.
o +lso, if a proper recycling chain is established between the end user and the
company, the o!erall fi-ed costs will go down and hence profits might go up,
along with en!ironmental sustainability.
o Nike should also work with its collaborators in all forms to ha!e efficient
sustainable supply chains. ,his o!erall might reduce the costs for Nike and
benefit the whole society as well.
2,
+e!erenes:
#. Nike, Inc. #02F, 200.
2. NIF), Inc. ?eports Fiscal 200 Fourth Ouarter and Full Pear ?esults
&. 0ikiin!est.com, Nike, Inc.
'. 1%trategic +nalysis of Nike, Inc.,6 Ge=aul $ni!ersity, *arch #', 2000.
7. 9hristoph Golleschal, Qadidas,Q )quity ?esearch, 9ommerzbank, 28 February 2008.
/. 1+thletic FootwearR Industry +nalysis,6 ,ufts $ni!ersity, )conomics of *anagement
and %trategy, *ay, 200/.
>. 1.istory of Nike,6 %neakerhead.com
8. Nike Cfficial 0ebsite H www.nike.com
. Fapferer, 1Brand Identity =rism6
#0. 1)-panding the =laying FieldE Nike5s 0orld %hoe =ro@ect 9ase,6 ,he 0illiam
Ga!idson Institute, 3anuary 2002.
##. PahooS Finance
#2. 4oogle Finance
#&. 1=uma H Brand 9ommunication +nalysis,6 ,rent Fahute, Fall 200/.
#'. 1%ports %hoe ?i!als %tep $p,6 %tephanie Fang, The 'all Street (ournal, / 3an 200/.
#7. 19hinese %ports Brand ,akes on Nike,6 Ai!ian 0ai2yin Fwok, Forbes.com
#/. ?:i Ning .oping ,o 4row *arket %hare ,hrough Cnline %ale>@ Sports Business
Daily> 3eember 2AA9;
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