Market Analysis of Nike
One important issue marketers need to realize is that it is essential to have a heavy commitment and solid customer focus and to attempt to satisfy customer wants and needs. (Kotler & Armstrong, 2012) Companies need to be able to gauge their threats and opportunities to fully understand the different roles in the marketing environment. Environmental forces, such as demographic, economic, technological, etc, can play a huge role in the marketing environment. Nike has been analyzed to give an example of the importance of understanding its marketing environment.
Nike has been in business since 1972 and has become one of the leaders in sports apparel that covers all ranges of uses and applications. The company was founded by Bill Bowerman and Phil Knight in 1964 and was first called Blue Ribbon Sports. The logo for Nike became the deciding factor in the renaming of the company. Bowerman and Knight were looking for a logo that would define their company and the “Swoosh” was designed by Carolyn Davidson, a Portland State University student in 1971. Nike was introduced to the public the following year under its new name, “NIKE.” With its successful business growth, many competitors appeared; however they did not yet threaten the market and the position of Nike. The business has been sharply growing since the first shoes were launched and sales have been increasing from $2,000 million to $16,000 million between 1990 and 2007. Despite competition, Nike experiences an average growth of about 5% each year. The greatest and the most successful marketing strategy of Nike was that sponsored by Michael Jordon in 1984. Afterwards Nike signed top athletes like Roger Federer, Michael Schumacher, and Tiger Woods to encourage fans of each athlete to consider Nike products. Using celebrities can be a gamble as they might also cause negative images if the particular
celebrity gets into any trouble. In addition, Nike prefers to use advertisements to particular groups or a special advertisement in a particular event, such as The Olympic Games and The World Cup. According to one study (Goldman & Parson 1998), the cost of advertising was about $978 million in 1997 and has increased each year. Nike has several main competitors like Puma, Adidas, and Reebok. In 2005, Adidas spent $3.8 billion to obtain Reebok, which makes them the largest rival of Nike. Moreover, Adidas has acquired the authority to launch the apparel in NBA which will allow them to expand even farther into the industry in the United States. Despite their competition, the marketing team for Nike has done extensive research to figure out what their customer wants and need with their products. Nike has a clear product positioning in the market, and because of that, consumers are more likely to purchase Nike products. As can be seen, nike business strategy
is the key element of its success. A well-organized grouping of the 4 Ps (Product, Price, Place and Promotion) has led to Nike becoming a giant in the sports industry. Nike sells a number of sport products that include basketball, tennis, football, cricket, golf and so on. The product range suits all ages, people and both sexes, whether children or adult, male or female. In addition, customer can get not only sports equipments, but also apparels in the Nike shop. The products are produced by contracted factories; the majority of these factories are located in the Asia region in order to decrease the manufacturing cost. Nike has a wide range of products that customers can purchase on different price levels. Nike’s branches are located in more than 110 countries in the world and more than 18,000 retailers in the United States (Goldman & Parson 1998). Moreover “Nike Town” and the on-line shop provide all categories of goods and a fast delivery service. The key investment in Nike’s promotion is advertising, spending about 3% to 10% of their annual revenue on it. Nike’s marketing team has utilized celebrity endorsements to attract and keep customers. No matter how the market changes, Nike is always re-evaluating their strengths, weaknesses, opportunities and threats and how to remain global leader in the industry. Nike’s major strength is its strong brand image and recognition worldwide making it one of the leading sportswear manufacturers. Even their slogan “Just Do It” has become a household phrase. Their products are seen as
quality worldwide and are more popular because of its association with many celebrities, due to advertising and promotion. They have built a strong customer base that encourages brand loyalty. Nike’s competitiveness in the sporting industry is also a major strength. Nike’s Founder and CEO, Phil Knight has often been quoted as saying that “Business is war without bullets. (marketingteacher.com, 2011). Nike has stayed ahead of the competition by improving their advertising and promotions. They are also constantly improving and expanding their product range; for example, customers can create their own shoes at www.nike.com. Nike’s strong financial position is another advantage, mainly because Nike does not purchase their manufacturing locations. Their strategy is to increase productivity and decrease cost by finding the least expensive location to manufacture their product. Nike’s strategy to utilize the least expensive manufacturing location has always come to bite them several times. Nike, along with several other brands, have been portrayed negatively because of poor wages and working conditions in their overseas factories. This bad public image has led to loss of existing customers and potential customers switching to more ethical brands. Nike’s marketing team has had to make it a big priority to counter any negative publicity and re-focus consumer’s attention on what they are doing about the allegations. The sportswear industry is very price sensitive and most competitors prices are about the same. Nike sells its products in Nike shops and the selling of its products direct to the consumers conflicts with other resellers of the brand. Most of Nike’s earnings are derived from selling into retailers. One of Nike’s main opportunities is product development. Developing their product range makes them more competitive and because products tend to go out of fashion quickly, Nike must introduce new products relatively fast because consumer demand the newest and latest products. Increase in internet shopping will no doubt reduce the cost and improve prices making them even more competitive. It is important for any organization to consider the environmental influences that have been particularly important in the past, and the extent to which there are changes occurring. Having this knowledge will any Nike to stay on top of their game. The macro-environment consists of all the outside institutions and uncontrollable forces that have an actual or potential interest or impact on the organization’s ability to
achieve its objectives. Any company that has international operations are subject to the usual risks of doing business abroad, such as possible revaluation of currencies, export duties, quotas, restrictions on the transfer of funds and, in certain parts of the world, political instability. Nike’s products manufactured overseas and imported into the United States and other countries are subject to customs duties collected by customs authorities. Nike is unable to predict whether additional customs duties, quotas or other restrictions may be imposed on the importation of our products in the future. A market executive stated that “the enactment of any such duties, quotas or restrictions could result in increases in the cost of our products generally and might adversely affect the sales or profitability of Nike and the imported footwear and apparel industry as a whole” (“Nike, Inc” 1996 10k report). Organizations need to be aware of new technology in order to turn these advances into opportunities and a competitive edge. Technology has a tremendous effect on life-styles, consumption patterns, and the economy. Advances in technology can radically alter existing industries and because of the industries competitive nature each company makes their own advances, and then copyrights them. Nike’s research team has spent more than 16 years dreaming, researching, developing and testing the possibility of attaching springs to the bottom of an athlete’s foot. Therefore, by advancing in technology, Nike holds a competitive edge in the market. Nike has also taken the lead in by being the first market with its e-commerce web site. Its web site offers online purchasing, a complete description of its product lines, store locations, and many more features to reach its market. NIKEID enables online customers to design key elements of the shoes they purchase. The goal for applying this system is to create a seamless flow of information shared by any browser using Nike employee around the world. Using this, employees can reduce time for getting information and they can obtain the information about their company and product anywhere. As a result, Nike increased more than 40% of their global sales (“Nike”). The economic environment consists of factors that affect consumer purchasing power and spending patterns. Economics factors include business cycles, inflation, unemployment, interest rates, and income. Changes in these major economic variables have a significant impact on the marketplace and can impact companies greatly because they cannot be controlled. Such things as
consumer-expenditure and family incomes play an important role in the marketing strategy and are an important part of Nike’s advertisement campaigns (Buck Annual Report). The demographic environment tells marketers who can be potential customer in terms of size, density, location, age, sex, race, occupation, and other statistics. Changes can result in significant opportunities and threats presenting themselves to the organization and major trends for marketers include worldwide explosive population growth (Kotler and Armstrong, 2012). All of these can provide Nike with the tools and assets it needs to promote its products in different areas of the world and gain a bigger share of the market globally. The industry has realized the influx of women’s sport players and is preparing to accommodate such an increase and as women increase their consumption the younger generation is decreasing because of the popularity of other footwear. It is important for Nike to understand the socio-cultural environment which is made up of forces that affect society’s basic values, perception, preferences, and behaviors. Changes affecting customer behavior can ultimately affect sales of products. Nike targets the social values of achievement, self-actualization, individualism, and conformity with slogans as “Just Do It!” becoming a cornerstone of Nike advertisements. Because Nike targets individuals in athletic fields, they find it necessary to attack the emotions of success and self-fulfillment. Over the past few years Nike has faced a number of issues including problems with their corporate image and since the resignation of the CEO William Perez, Nike has managed to turn this around with new management and better marketing decisions. Nike is addressing these issues and is trying to build an image of a “child-free labor” business. In order for them to advance they need to account for factors in the marketing environment that may affect their business when making decisions; becoming more innovative and focusing on new areas of the market.