Background of the Firm: A Brief History of the Firm and Its Operations
Nike, Inc. (Nike) is a multinational corporation that is based and headquartered in the United States. The company deals in the design, manufacturing and global marketing and selling of footwear, accessories, equipment, and services. It is the world's largest supplier of sportswear and apparel and the leading manufacturer of general sports equipment (Khatri, 2018). By the end of 2012 fiscal year ending May 31st, Nike, Inc. reported $24.1 billion as excess revenue (Gabrielson et al., 2008). Nike is the leading employer among all footwear companies. As at 2012, the company was reported to have over 44,000 employees. The company is also the most valuable among companies dealing in sports business. By 2017, The Nike Company was valued at $29.6 billion.
The Nike Company was founded in 1965 when it was then referred to as Blue Ribbon Sports. Bill Bowerman and Phil Knight are the founders of the Company (Larson, 2011). On May 30, 1971, the company officially adopted the name "Nike Inc.," Nike referring to a Greek name for victory. The Nike Company also operates over 22,000 retail stores in over 160 countries all over the world. (Larson, 2011). All over the world, it has won the heart of many sportspersons, and sponsors many high profile athletes, clubs, and sports teams. The Nike Company uses the very well known "Just Do It" trademark as well as the "Swoosh" logo.
Discussion of Strategies
For many decades, the Nike, Inc. company has established itself as one of the largest and leading sportswear company. This is greatly attributed to the entry and expansion strategies adopted by the company. By definition, strategy entails some specified paths for achieving the highest targets for an individual, company, or organization (Hill, 2008). The strategies a company adopts implies that it would be able to reach its optimum goals while at the same time utilizing minimal company resources. In this view, for the Nike Inc. Company to maintain to be a vigilant leader in the sportswear business, its expansion strategies must be superior as compared to the other global competitors in the sportswear business.
The Nike Company adopts some expansion strategies to establish itself as the world's number one in the design, marketing, and distribution of sportswear, accessories, and apparels. First, The Nike Company adopted the competitive advantage strategy (Teece, 2010). The company boasts of its innovation and research indulgence ability as compared to its worthy competitors such as Adidas and Puma companies. The company through its research and development department has continuously designed and manufactured footwear, athletic equipment, and apparel that have to meet the demands of the customers. For instance, the company over time has produced footwear and athletic equipment that causes no injury to the athletes; contribute to athlete's high performance and provision of comfort (Verbeke, 2013). Its competitive advantage has enabled it to expand its customer base and exploiting new markets in the world.
The Nike Company takes innovation and research very seriously as it considers these the heart of its growth strategy (Stonehouse et al., 2009). The company uses innovation and research to become more relevant and suitable for the sportswear business and to enter new markets as well as expanding the existing ones. Also, the company maintains its high competitive advantage and customer choice by meeting their demands.
Nike pring strategy has enabled it to explore new markets and expand the existing markets. It uses the premium pricing technique whereby it has established itself as the best cost provider as compared to their worthy competitors (Tong et al., 2009). With this strategy, the company targets consumers who have a special taste for the company products. Due to customer satisfaction with company products, some loyalty is established between the company and its customers. Therefore, the company takes this advantage as a platform to maintain contact with the customers with their prices. The company is sure that, their loyal customers will readily buy any of their products bearing the company logo.
Also, The Nike Company boasts of its absolute advantage strategy (Larson, 2011). The company has specialized in the design and production of sportswear products as well as other products aside from sportswear to explore new market. The company is greatly concerned about its product differentiation technique. To maintain its leadership in the sportswear industry, the company produces its products in three critical stages. In the first place, the company produces its products considering three groups of customers, that is, men, women, and children. Secondly, the company products are highly differentiated into footwear and apparels such as shoes, gloves, gym bags, and skates. Finally, Nike has obtained licenses for producing other products that are in line with the main company products (Larson, 2011). These products include school supplies, timepieces, and media devices.
Similarly, The Nike Company takes value in its advertisement strategy which has greatly expanded the Corporation's market. This has helped the company in advertising its products, for instance, by engaging in sponsorship agreements with some celebrity personality in the sports industry, famous professional teams, or college athletic teams (Larson, 2011). In the year 1982, Nike for the first time appeared in the television adverts. This was during the world marathon in New York (Shim et al., 1991). Due to the vigorous advertisements, the company can attract many customers towards purchasing the company products. Also, to emphasize selling their products globally, Nike hires some of the top sports personality in all sports such as basketball, soccer or tennis.
Also, Nike Company adopts the closed-loop business model strategy as compared to its worthy competitors. Under this strategy, Nike can minimize wastes in that, all the materials that are not sold or the remaining unused parts are recycled, reused and composted (Larson, 2011). The company, therefore, can manufacture its products using the materials that have been reclaimed from the manufacturing process and at the end of the product's useful life. Through the companies innovation, research and development department, new ways of recycling waste products are invented thus making the Company environmentally friendly.
Critical Factors Driving Adoption of These Strategies
As initially stated, Nike for several decades has dominated the sportswear industry. To achieve this, they have adopted the strategies elaborated in the preceding discussions. The company adopted these strategies because of several reasons. First, it is Nike's culture to embrace innovations and carry out research and development to maintain their global competitiveness. Initially, Nike footwear caused injuries and discomfort to the customers, but through research and innovation, Nike footwear has become the best in the market. Recent innovation such as the fuel Band, an electronic bracelet that monitors and takes measurements of any movement made all day through, ranging from paying tennis, walking or jogging. They are now the choice of most athletes due to the comfort they over thus providing customer satisfaction.
Nike pricing strategy is the best compared to other companies in the footwear industry (Kolk et al., 2006). It is a customer-driven strategy by the company in that, quality products that meet all the customer needs are provided. This was a special initiative by the company itself after realizing the loyalty the customers had with company products. It is a unique strategy that has ensured that the company maintains its highly esteemed customers and at the same time maintaining the Company profits. This is one of the reasons that has enabled the Company to be the market leader in the industry.The company's absolute advantage is partly due to the company strategy and partly due to regulation in the industry (Larson, 2011). Nike saw it appropriate to differentiate their products by the criteria of age and gender to make the most profits. In taking this step, all groups of people find it appropriate to shop at Nike as compared to other sports companies. Regulations in the industry enabled the company to obtain licenses for producing other brands of products in line with company main products. This has enabled Nike to offer products like school supplies, timepieces, and media devices thus broadening their market (Larson, 2011).
As far advertisement is concerned, all the companies dealing in sportswear carry out heavy advertisement (Verbeke, 2013). They do this through the televisions, radio, and the social media. Nike Company was therefore forced by the industry to also carry out a massive advertisement in all the advertising platforms. It is the quality of the advertisement that greatly matters in the industry. Nike took the internal initiative to hire highly profiled athletes in the sports industry to aid its advertisement campaigns. For instance, Nike in the past has secured a contract with basketball icon Michael Jordan for advertising for the company because the athlete boasts of a large number of fans following him in his social media platforms (Larson, 2011).
Nike adopted the close loop business strategy due to regulation to protect the environment (Verbeke, 2013). The company through research and innovation was able to come with beneficial ways to make the waste materials from the company products to be exactly as the original products. The National Environmental and Management Authorities of a particular country is the body that dictates the regulations for any business company or organization as far as environmental conservation is concerned. The Nike Company made use of this regulation coupled with its innovative culture to maximize the margin of their products allowing nothing to go to waste (Larson, 2011).
Outcomes/Results of Nike Strategies
Nike business strategies have enabled it to be outstanding and be the dominant leader in sports apparel. The aggressive approach and hiring of high profiled sportspersons such as Michael Jordan to aid in its advertisement have greatly benefited the company (Tony et al., 2009). Through the advertisement, the company was able to generate a general growth in total sales for the company's key products such as sneakers. Also, the success of the advertisement campaign has culminated in the increased demand for the company's common product ownership.
Due to the high quality of Nike products, most customers are attracted to the company's products thus increasing the company's profit margin. The customers find Nike the best place to shop and therefore any time they want to buy sports apparel they shop at Nike shops. Nike also focuses on the positive emotional outcomes of their products and thus has been able to win the loyalty of most customers (Larson, 2011). Also, the Nike shops have a wide variety of sportswear and other products that are non-sports such as bags. Thus, Nike can capture a greater share of the market and in the end contribute to improved cashflows culminating in greater profit margins.
Nike business segments the market through products differentiation and considering the age and gender of the customers (Larson, 2011). By doing this, the customers attracted to the company's products are greatly increased. This is advantageous to the company because the profit margins are increased. Nike, therefore, can maintain its leadership in the sportswear industry as long as it can continues to segment the market in appropriate ways. The general benefit of Nike's business strategy is that it has placed it at a better place to attract a large number of customers thus enabli...
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