The company I am presenting is Nike which was founded in 1965 by the athlete Phil Knight. Nike is a well known brand which is selling its products worldwide and has 36% of the market share.
TASK 1:
I. Understanding customers needs
Understanding customer needs will help Nike to define new market opportunities and drive innovation and revenue growth in every aspect of its organisation. The most basic concept underlying marketing is that of human needs. Human needs are states of felt deprivation (Kotler and Armstrong, 2006). Customer logic is derived from evaluation of a company and its product based upon customer needs, customer benefits, and product features. For branded athletic shoes, Nike has to understand customer needs on a global level as the products are sold worldwide. Nevertheless, as being sold in different countries, consumers have different needs as they view the product differently. It is on a regional level that Nike performs its market researches to determine the demographic profile of the consumers (i.e. maturity and cultural outlooks or standards, maturity). For example, in America, Nike’s Air Jordan basketball shoes are considered for their performance characteristics, their association with a popular U.S. sport, and the endorsement from the pre-eminent star of that sport (Michael Jordan). Yet, in Europe, although awareness of basketball exists, the identification and technical aspects of the shoe are lost. The Europeans are known for their desire of things with a Western culture association and like fashion with trend associations. Therefore, because of this regional level of logic, marketing strategy becomes the focus as a key success factor in going global.
II. Keeping ahead of competition
The main rivals for Nike have always been Adidas and Reebok. As their products are not so different, Nike differentiated itself by creating and marketing well designed athletics and non-athletic footwear and clothing. The company managed to distinguish and establish its products by using a different marketing approach from its competitors and by improving its brand identity and consumer awareness. However, in 2006, its two rivals merged to get a 22% market share while Nike had 36%. The organisation, then, developed a new strategy to get ahead its rivals. They coupled sport icons such as Michal Jordan to endorse the brand and it was such a success that they decided to use Tiger Woods, the no.1 golf player, to introduce its new golf apparel and equipment. The association of a motivational slogan “Just Do It” with athletes that emphasize competition, fitness and sportsmanship, helped the company to position its product on the market as being of high-quality. The advantage Nike has is the competitors’ incapacity of replicating its quality products and benefits. Moreover, the company is always trying to introduce new product in the market which help them staying ahead while giving a positive influence.
III. Communicating effectively with customers.
Promotion is largely dependent on finding accessible store locations. It also avails of targeted advertising in the newspaper and creating strategic alliances. Nike has a number of famous athletes that serve as brand ambassadors and who represents positive relationships in the public eye. Customer awareness, loyalty and brand management are directly associated to the price, as a result preservation of the relationship between the price, quality and the brand reputation has to be consistent (Johnson and Scholes 2004).
Nike’s brand images, the Nike name and the trademark swoosh, make it one of the most recognizable brands in the world. Nike’s brand power is one reason for its high revenues. Nike’s quality products, public relations, loyal customer base and its great marketing techniques all contribute to the success of the company. By sponsoring local sporting events, Knight managed to offer customers a personal experience and to prove them how valuable they are by asking to athletes for feedbacks on how to improve the shoes. This showed to the public the company commitment to them. Moreover, Nike tries to extend its personal relationships by sponsoring events which are unrelated to the company and by participating to philanthropic causes worldwide. To better understand customers’ needs, Nike uses its customer’s information to send them personalised direct mail, invite them to events or to let them know of any new product release or sales.
IV. Social and ethical marketing.
Kotler (1998) define corporate social responsibility as “a commitment to improve community well-being through discretionary business practices and contributions of corporate resources”. Thus, corporate social responsibility includes the following:concern for the environment,commitment to ethical behaviour, respect for people, and concern for society at large.Some of the benefits of being socially responsible include: enhanced company and brand image, easier to attract and retain employees, increased market share, lower operating costs and easier to attract investors. A socially-responsible firm will care about customers, employees, suppliers, the local community, society, and the environment. Of course, a company has an obligation to be concerned about its stockholders. Phil Knight, owner of the company, is the one responsible of the corporation image and Nike suffered a backlash from its uses of offshore subcontractors’ poor working conditions and extremely low wages. Some consumers demanded greater accountability and respectability by engaging in boycotts and letter-writing complaint. Nike ultimately responded to the growing negative publicity by changing its practices. They understood that the customers’ perceptions of product attributes and corporate image features that lead to consumer willingness to purchase goods and service was falling into the negative. Nike began then using traditional advertising methods to broadcast its production practice in response to activist criticism. Nike now requires all of their suppliers to pay workers at least the locally mandated minimum wage and benefits. Since, they developed a Corporate Responsibility Policy which is released annually as part of the company’s commitment to reporting and transparency in order to help tackle these issues which now became their priorities.
TASK 2a
A PEST analysis (see Figure 1) is merely a framework that categorizes environmental influences as political, economic, social and technological forces. The analysis examines the impact of each of these factors the business. The results can then be used to take advantage of opportunities and to make contingency plans for threats when preparing business and strategic plans (Byars, 1991). Kotler (1998) claims that PEST analysis is a strategic tool for understanding market growth or decline, business position, potential and direction for operations. PEST also ensures that company’s performance is aligned positively with the powerful forces of change that are affecting business environment (Porter, 1985).
The economic recession had a large influence on Nike’s revenues and sales, as it has been observed by the decline in profit as compared to 2008. It is important for the company to understand the scarcity of employment and credits will give less opportunity to consumers to buy goods. As a result, competition will be higher and competitors would have to engage themselves in a promotional war to gain revenues. As Nike is an international company, analysing the state of the trading economy is essential. Factors such as the level of inflation employment per capita and the interest rate are important element to look at if the company wants to improve its marketing performance. Nike will have to increase turnover to keep up with the increasing demand if the economy recover. If it continues, a cutting back on costs will have to be done (i.e. reducing advertising costs and labour). All businesses are affected by economical factors nationally and globally. Interest rate policy and fiscal policy will have to be set accordingly. Within the UK the climate of the economy dictates how consumer may behave within society. Whether an economy is in a recession, boom or recovery it willaffect consumer confidence and behaviour.The understanding of the economics conditions will help the organisation to employ the best strategies and tactics.
During the 1990s, Nike suffered much bad publicity about poor labour conditions in its externally contracted supply companies which it initially denied responsibility for. Since suffering drops in sales due to media criticism, Nike has worked to improve conditions for labourers and has introduced a code of conduct and an auditing system for all suppliers (Locke, 2003). As cultural and social behaviour and mentality vary from one country to another it is important for the company to examine considerably the age distribution, the population growth rate etc. For instance, an ageing population may imply a smaller workforce, which would increase the cost of labour. For those reasons Nike may want to change several management strategies to adapt to these social trends.
While Nike presently employs state-of-the-art technology in its production, there is a chance another company will invent better and cheaper methods of production which could result in loss of sales for Nike. Technological factors include environmental aspects and ecological, such as automation, activity, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect quality and cost and lead to innovation. Changes in technology is changing the way business operates, Moreover online buyers can shop 24 hours a day from their homes so the Internet has huge impact on the organisation. Having an adequate and reliable Information system is a must if the company wants to keep up with changes and exchange information quickly within the operating environment.
TASK 2 b
The threat to the new entrants is low for the company. Nike who has a huge market share is able to control its costs to maintain performance advantage over emerging competitors in the industry. If a company wanted to enter the market, they will have to possess a very large capital investment to open new shoes factories and stores and conduct research to create an attractive line of product. Start-up companies may struggle to survive as it will be difficult for them to get a shelf in the major shoe retailers. However, a company could easily override those threats if they already possess a large and strong relationship with its customers. That could be the case of shops such as Aldo and San Marina who could use their connections to easily access the athletic shoe distribution channel. Also, buyers are usually afraid to buy new products from new competitors once they have a good relationship with the company they are used to.
The bargaining power of buyers is high as this industry counts a very large number of buyers. Therefore Nike must regularly market their products and personalize their brands against rivals to increase market share and sales. Personalisation and accessibility of the customers were helped by the utilisation of the online tools. For instance, the “nikeid.com” link allows customers to design and customize their own pair of shoe by allowing clients to individualize the desired colours and the option to personalize the footwear by putting their own name. The brand itself has a critical role in the customer buying behaviour; customers’ loyalty and trust will be quickly gained if the brad has a strong identity. A multitude of online shoppers are price sensitive and switching cost is low for them.
The bargaining power of suppliers is low. Indeed, there are plenty of suppliers in this industry; therefore there is very little differentiation among them which makes suppliers’ bargaining power non-existent. Corporation like Nike who has a definite advantage and power over them drive these latter’s to be dependent of their consumers to survive. Moreover, Nike has regulated its input procedures which are associated to the materials used, their labour force, services and logistics. Additionally, inputs are readily substituted and there are an abundant number of suppliers available. The presence of very low price labour worldwide assent consumers like Nike to switch rapidly and at a bargain price between suppliers.
Buyers’ ability to substitute is low. Indeed the only alternatives to the footwear are sandals, boots or bare feet. Therefore the presence of substitutes is very low as the reasons of a consumer buying footwear are due to the performance specification of the good. For instance, a tennis player would not wear sandals to play tennis. For those reasons there are no real substitutes for athletic footwear.
The competition between the rivals in this industry is entirely high. Indeed organisations like Adidas, Rebook and Nike have expanded hugely over the last 20 years. The apparition and development of the Internet and E-commerce has hugely contributed to the global expansion of the market. Online selling has enlarged the reach for these firms allowing them to increase sales while minimizing operating costs. Most of the competitors have a web site and the utilisation of the high speed internet has made of the online shopping the new trend of the twenty first century. Rivalry is intense in the footwear industry and those who govern the market have a strong powerful brand identity, huge capital and brilliant marketing strategies (see Figure 2).
REFERENCES
BOOKS:
1. Kotler, P & Armstrong, G. (2006) ‘Principles of Marketing‘. 11th Edition. New Jersey: Pearson/ Prentice Hall.
2. Johnson, G & Scholes, J. (2004) ‘Exploring Corporate Strategy‘. 6th Edition. Newburg: Financial Times/ Prentice Hall.
3. Kotler, P. (1998) ‘Marketing Management – Analysis, Planning, Implementation, and Control‘. 9th Edition. Englewood Cliffs: Prentice-Hall.
4. Byars, L. (1991)’ Strategic Management, Formulation and Implementation – Concepts and Cases‘. New York: HarperCollins.
5. Porter, M. (1985) ‘Competitive Advantage‘. New York: Free Press.
6. Locke, R.M. (2003) ‘Management: Inventing and delivering it‘. Edition. Cambridge: MIT Press: Cambridge.
INTERNET WEBSITES:
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3. Kiley, D, 2005 ‘Reebok and Adidas Merger Looks Good. But Will It Be Good?’ Business week [online]. Available at: http://www.businessweek.com/the_thread/brandnewday/archives/2005/08/_on_paper_the_a.html (accessed 24 February 2010).
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5. Cuizon, G, 2009 ‘Audit on Nike’s Marketing Strategies’ Suite101 [online]. Available at:http://corporate-marketing-branding.suite101.com/article.cfm/audit_on_nikes_marketing_strategies (accessed 3 March 2010).
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