Group 4: Athletic Footwear Industry

Tehseen Chauhan Supriya Gunthey Asheesh Ohri Mishika Parakh Nitesh Purohit Devanshu Oza Swaroop Sabnis Jyoti Singh 132 142 154 156 160 161 163 172

Define Industry

20,000 retail accounts throughout the U. S. using independent distributors and also has contracts with 110 other countries Also has agreements with Internet companies and subsidiaries Operates within the sports footwear and apparel market. Originally designing and producing running shoes, their portfolio has broadened to include a wide range of sports and leisure wear. This is all endorsed by top sporting personalities

Leading Athletic Footwear Brands

Threat of Substitute Products

Threat of Substitute Products

The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases Substitutes are a threat because: They are an attractive alternative product or service, which customers can easily shift to if there are low switching costs. The availability of substitutes invites customers to make price, quality and performance comparisons Competitively priced substitutes impose a maximum value on prices relevant industry can charge for its products or services

Threat of Substitute Products

The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases Substitutes are a threat because: They are an attractive alternative product or service, which customers can easily shift to if there are low switching costs. The availability of substitutes invites customers to make price, quality and performance comparisons Competitively priced substitutes impose a maximum value on prices relevant industry can charge for its products or services

Internal Rivalry

Market Description
Nike Adidas Reebok New K Puma Fila Type of Shoe/ Balance Swiss Company Asics Brooks

Running Walking

X X

X X X

X X X

X X X

Basketball X

Childrens X
Tennis Lifestyle Skating Cross X Training Soccer X X X

X
X

X
X X X

X
X X X X X X X X

X X

X X

Product Proliferation
Nike and Converse

Adidas Salomon AG and Reebok

Internal Product Proliferation

Producing a new product under the primary brand

Asics example

Direct a particular brand or create a new brand towards a new segment

Nike example

Brand Image, Product Identity and Customer Loyalty

1. Advertising
Total U.S.

Unmeasured

Magazines 2011 2010 TV

Internet

100

200

300

400

500

600

700

800

900

1000

Figure: Advertising spending of Nike in the U.S. in 2010 and 2011, by medium (in million U.S.D)

Brand Image, Product Identity and Customer Loyalty

Entertainment and Celebrity Marketing Campaigns Nike: Indian Cricket Team Michael Jordan Rafael Nadal Roger Federer Tiger Woods Cristiano Ronaldo

Brand Image, Product Identity and Customer Loyalty

Creative Niche Advertising

Puma
New Balance Campaign

Brand Image, Product Identity and Customer Loyalty

2. Distribution Decisions Retail Personalization
3. Grassroots marketing

New Product Development

Keeping up with competition New Products and Brand Image

Nike Free

Barriers to Entry

Barriers to Entry
Strong brand loyalty Economies of scale & scope Style conscious customers-image Access to endorsement & distribution Price disadvantage

Barriers to Entry

Economies of Scale Marketing Research and Development Economies of scope Umbrella Branding Consolidation

Barriers to Entry

Strategies for Entry

Target specific niche of consumer Product diversification Tommy Hilfigger to Gucci

Bargaining power of buyers

Bargaining power of buyers

Customers have low bargaining power owing to the following reasons:

Large number of buyers

Differentiated products
Nikes aggressive advertisement strategy

Bargaining power of suppliers

Bargaining Power of Suppliers

3 major materials used :- cotton/polyster, rubber, foam (commodity goods) Price is determined by market value No control over the prices of these goods Only choice is the quantity of production

Bargaining Power of Suppliers

These big companies either buy out the small companies and make them manufacture for them or buy a specific technology and pay royalties to them

Bargaining Power of Suppliers

They work with approved suppliers who meet their standards

So that the quality of product, factory working conditions, and logistics of delivery can be held to a high standard

Bargaining Power of Suppliers of Nike

Total no of suppliers 860 Out of which 70 produces shoes rest produces specific parts Faster services, flexibility, quality service Allowed nike to focus on core competencies (product design, marketing, technology)

Bargaining Power of Suppliers of Nike

Contract suppliers China Vietnam Indonesia Thailand

36% 36% 22% 6%

have manufacturing agreements with independent factories for sale primary within t hose countries ( india, brazil, argentina, mexico)

Bargaining Power of Suppliers of Nike

NIKE IHM, Inc.(China) and NIKE (Suzhou) Sports Company, Ltd. (Taiwan) wholly-owned subsidiaries of NIKE

NIKEs contractors and suppliers buy raw materials in bulk. Most raw materials are available in the countries where manufacturing takes place

Checklist: Changing Trends

Currently the buyers do not pose credible threat of backward integration. However in the future this trend may change and big retailers like Walmart can go for backward integration.

Checklist: Changing Trends

Currently the firms in the industry make relationship specific investments to support transactions with specific buyers. However, this trend may change in the future as the firms in the industry might focus more on their own retail outlets rather than relying on the transactions with retailers and other sports stores.

Checklist: Changing Trends

Currently the switching cost of consumers is very low. However, if the firms come up with technology that would make their products adapt and tune into the consumers lifestyle perfectly, then the switching cost for the consumers will increase.

Checklist: Changing Trends

Currently the degree of concentration in the supplier industry is low as compared to that of the Athletic footwear industry. However, with countries like China becoming rich, the labor resource wont be cheaper anymore and as a result of this, many suppliers might get out of this business.

SWOT of Nike

Strengths
Brand Name Financially strong Strong Competitive Position Effective Research and Development Effective Promotional Activities Excellent Supply Chain Management Has ownership of no physical factories, so production can be moved to a more cost effective location when necessary

Weaknesses

Use of contract manufacturers makes it difficult to control quality Heavy dependency on athletic footwear sales Use of contract manufacturing in foreign countries can create financial problem due to foreign currency fluctuations and interest rate changes History of violations of over time laws and minimum wage rates in Vietnam Accusations of poor conditions in the work place High Price

Opportunities

Creating sportswear items from incorporating the waste from regular manufacturing Expansion into sports glasses and jewellery lines Expansion in the Asia Pacific market to create larger market recognition

Opportunities

Reducing controversy surrounding their trade and production practices Expansion into high priced products Sports fashion goods Growing demand for fashionable products and clothes Women demand for athletic clothing and footwear is increasing

Threats
Operating businesses internationally opens them to the possibility of currency value fluctuations that can lead to losses Competitors are becoming more aggressive and creating high quality products that are taking profits from Nike Sensitivity to price among customers makes them purchase the most cost effective pair of sports shoes

Threats

Maintaining the reputation of being eco friendly Managing the financial conditions in the economy today

SWOT Matrix Strategies

SWOT Matrix Strategies

SO Strategies
Market Development

WO Strategies
Product Development

ST Strategies
Alternative Brands Market Penetration Backward Integration

WT Strategies
Innovative Products and their designs