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International Marketing Strategy of Nike Inc.

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The Nike ethos is characterised by an emphasis on the role of internationalisation as an entrenched component of their business strategy. This is reflected by their mission statement, which aims to “bring inspiration and innovation to every athlete* in the world” with the caveat that “*if you have a body, you are an athlete” (Nike.com, 2017). Significantly this emphasises a global outlook, that transcends the elementary definition of international marketing - “the marketing of goods, services and information across political boundaries” (Albaum et al., 2005). Many firms take mercantile approaches to marketing that “satisfy customer requirements profitably” (Marketing and the 7Ps, 2015). Nike, however, follows more holistic principles - “11 maxims” (Farfan, 2017) - that allow it to achieve its fundamental premise - to inspire its global consumer base, albeit in a financially rewarding manner. Armed with a global marketing orientation, Nike caters to a range of customers that have a plethora of demands, which vary along demographic, geographic, and cultural lines. Thus, their marketing model is predicated upon nuanced strategies that consider domestic market variables (domestic and foreign controllables & uncontrollables) (Ghauri & Cateora, 2014). Consequently, and because of the large role that internationalisation has played in Nike’s success story, this paper evaluates its marketing strategy; with a focus on micro, macro, and task analysis.

Publié dans : Marketing
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International Marketing Strategy of Nike Inc.

  1. 1. STUDENT ID No: 170026789; 170018420; 170021962; 160023288 MODULE CODE: MN5471 SCHOOL OF MANAGEMENT Taught Postgraduate Programmes MODULE TITLE: International Marketing (MN5401) PROGRAMME: MLitt Management MODULE COORDINATOR: Professor John Fernie WORD COUNT: 3624 + References DEADLINE DATE: 30.10.17 In submitting this assignment I hereby confirm that: • I have read and understood the University’s policy on plagiarism. • I confirm that this assignment is all my own work. • I confirm that in preparing this piece of work I have not copied any other person’s work, or any other pieces of my own work. • I confirm that this piece of work has not previously been submitted for assessment on another programme.
  2. 2. 1 Evaluating Nike’s International Marketing Strategy 1 - Introduction The Nike ethos is characterised by an emphasis on the role of internationalisation as an entrenched component of their business strategy. This is reflected by their mission statement, which aims to “bring inspiration and innovation to every athlete* in the world” with the caveat that “*if you have a body, you are an athlete” (Nike.com, 2017). Significantly this emphasises a global outlook, that transcends the elementary definition of international marketing - “the marketing of goods, services and information across political boundaries” (Albaum et al., 2005). Many firms take mercantile approaches to marketing that “satisfy customer requirements profitably” (Marketing and the 7Ps, 2015). Nike, however, follows more holistic principles - “11 maxims” (Farfan, 2017) - that allow it to achieve its fundamental premise - to inspire its global consumer base, albeit in a financially rewarding manner. Armed with a global marketing orientation, Nike caters to a range of customers that have a plethora of demands, which vary along demographic, geographic, and cultural lines. Thus, their marketing model is predicated upon nuanced strategies that consider domestic market variables (domestic and foreign controllables & uncontrollables) (Ghauri & Cateora, 2014). Consequently, and because of the large role that internationalisation has played in Nike’s success story, this paper evaluates its marketing strategy; with a focus on micro, macro, and task analysis.
  3. 3. 2 2 – Nike’s Evolution Nike has grown vigorously through successful internationalisation and is perceived as the leading global sports brand (statista.com, 2017). It operates in 120 countries (Iisd.org, 2013) with a workforce of 70,700, which culminated in revenues and profits of $32b and $3.7b in 2017 and the rank of 88th in the Fortune 500 (Fortune.com, 2017). The impressiveness of Nike’s growth is three-fold. Firstly, Nike’s relatively short history with humble beginnings (O’Reilly, 2014). Secondly, Nike’s business grew rapidly in a field dominated by established direct competitors like Adidas and Reebok (statista.com, 2017). Lastly, internationalisation is complex and regardless of size, success is never guaranteed in foreign markets - Walmart in Germany (Fernie et al., 2006). Therefore, from a marketing perspective, it is important to understand how Nike developed its successful international strategy. 2.1 – Nike’s Origins: A Production Orientation Nike’s story begins in Oregon in 1964, with Phil Knight (an athlete) and Bill Bowerman (an Olympic track coach) (Ghauri & Cateora, 2014). With $1200 they founded Blue Ribbon Sports as an American distributor for Japanese sneakers and by early 1970’s, the company transitioned into independent sports- footwear manufacturing for the domestic market (O’Reilly, 2014). Based on Bowerman’s athletic experience, innovation led to commercial success by introducing the Cortez (new foot cushioning) (Nike.com, 2014) and the Waffle Trainer (unique sole-tread) (Danforth, 2017). In conjunction with innovation, the “ethos of leveraging athlete insights to design transformative products” (Nike.com, 2015) became fundamental to Nike. From the beginning, they fostered dyadic partnerships with athletes; with dual-purposes. Firstly, Nike harnessed professional expertise when crafting high-performance mass-consumption footwear and secondly, Nike’s innovations were showcased on the largest platforms and aided brand image (Willigan, 1992). The Cortez was introduced successfully during the ‘72 Olympics and this catalysed Nike’s entrance into foreign markets (Canada,1972 and Australia,1974) (Fundinguniverse, n.d.). These wholesale export markets were chosen because the barriers to entry were easier to overcome (Fernie, 2017) as foreign uncontrollables
  4. 4. 3 (especially demographical and cultural forces) were similar to Nike’s home market (Ghauri & Cateora, 2014). In 1974, Blue Ribbon Sports was rebranded to Nike, after the Greek goddess of victory (O’Reilly, 2014). The apt name and Swoosh logo formed part of Nike’s new brand strategy that focused on production orientation (Fundinguniverse, n.d.). This was characterised by aggressive sales efforts (Fernie, 2017) that influenced customer perception, by differentiating Nike into particular reference groups, which impacted customers decision-making (Baines, Fill and Rosengren, 2017). Nike realised that group influence through celebrity endorsement resulted in “social learning” where “consumers learn through imitation” (Baines, Fill and Rosengren, 2017). The Cortez endorsement-ploy highlighted this as the shoes became “the most popular long-distance training shoe in the U.S.” (Nike.com, 2015). Thus, celebrity endorsements became central to Nike’s marketing strategy (Baines, Fill and Rosengren, 2017). Nike’s production orientation provided dividends in the late 70’s, when the firm experienced a surge in growth. Revenues doubled year-on-year and by 1979 “Nike sold almost half the running shoes bought in the United States” (Fundinguniverse, n.d.). To reflect its growing market share, Nike expanded operations by means of wholesales export and indirect-entry into the European, Asian and South American markets (Willigan, 1992). However, Nike’s motives for foreign market entry, were now as much related to aggressive sales efforts (i.e. market seeking), as it was efficiency and resource seeking (Ghauri & Cateora, 2014; Fernie, 2017). To supplement increasing demand, Nike’s internationalisation strategy focused on improving and increasing production capabilities (Fernie, 2017). Hence, manufacturing shifted to low and middle- income countries where production factors were more cost-effective (Willigan, 1992). Therefore, Nike developed international supply-chains with factories in China (Fundinguniverse, n.d.). Here, production-push factors were determinant upon Chinese tax concessions and foreign direct investments
  5. 5. 4 (bbc.co.uk, 2006). Meanwhile, when entering the European market, Nike capitalised on advantageous government regulations in Ireland; it bypassed high import-tariffs by creating local joint-ventures (Fundinguniverse, n.d.). By identifying market opportunities and employing “market entry as a dynamic strategic tool” for both sales and manufacturing, Nike’s international strategy consists of proactive motives (Fernie, 2017). Significantly, internationalisation created a competitive advantage for Nike over Adidas and Puma, because they “were still manufacturing in high-wage European countries” (Willigan, 1992). This reaffirms the strategic usefulness of internationalisation, and explains how Nike quickly eroded the market shares of established competitors. However, the move to low-income markets for the explicit purpose of cost-effective manufacturing somewhat contradicts Nike’s ethical façade; which is dictated by the maxim “Do the right thing” (Farfan, 2017). However, Nike’s decision to move-forward using high-tech manufacturing techniques will also result in job losses for low-income workers, all in the name of cost reduction is seen by many critics as unethical (Bissell-Linsk, 2017). This maxim is further debased when Nike places more emphasis on celebrity status than principles like in the case of endorsements with Illie Nastase, John McEnroe, Charles Berkley, and Tiger Woods (BusinessInsider.com, 2013). 2.2 – Nike in the 80’s & 90’s: Hurdles and a Change in Strategy The early 80’s represented continued growth (Fundinguniverse, n.d.) and Nike overtook Adidas to became the largest sports merchandiser in the US – their largest market (Fundinguniverse, n.d.). Furthermore, Nike’s dynamic marketing tactics were reflected in their maxim “we are on the offense – always” (Farfan, 2017). This resulted in numerous foreign joint-ventures, that allowed for safer expansion through “risk-spreading” (Fernie, 2017) and Nike targeted a greater number of foreign markets and other segments (e.g. women’s wear) (Willigan, 1992).
  6. 6. 5 However, by the mid 80’s, consumer trends changed, running popularity declined, and Nike struggled against competitive substitutes (Fundinguniverse, n.d.). Knight states that they “misjudged the aerobics market, outgrew its own capacity to manage, and made a disastrous move into casual shoes” (Willigan, 1992). This highlighted the limitations of using production orientation and the Nike marketing maxim of “Simplify and go” (Farfan, 2017). Nike realised it had to “Evolve immediately”1 (Farfan, 2017). They shifted to a marketing orientation approach (Willigan, 1992), with customer needs central to the internationalisation strategy (Fernie, 2017). Furthermore, Nike’s targeted consumers were a niche of athletes at the “top of the pyramid” (Willigan, 1992). Thus, they identified new market opportunities (Fernie, 2017) lower in the consumer pyramid including teenagers (Willigan, 1992). However, to attract these new segments they needed to “Master the fundamentals”2 (Farfan, 2017). Nike invested more into market research so as to increase end-user involvement (Baines, Fill and Rosengren, 2017). They adopted “the consumer decides” ethos (Farfan, 2017) which no longer relied on aggressive sales efforts that pushed the narrative that if “Michael Jordan is going to wear it … Joe American Public is going to wear it” (Willigan, 1992). Instead, Nike found “what colors are going to be in for 1993” and added them into the design process (Willigan, 1992). This marked the beginning of Nike’s shift to proactive marketing which took precedence over design. It developed another maxim - “Nike is a brand” (Farfan, 2017). Thus, it needed to create an image that resonated with consumers on a level deeper than just flash. Consequently, Nike has deployed transformative experiential marketing; it creates sentimental bonds between customers and products (Lachel, 2017). 1 Nike marketing maxim 2 Nike marketing maxim
  7. 7. 6 The Just Do It slogan reflects this. It inspires the entire consumer base, as demanded by the mission statement. Experiential marketing is responsible for many of Nike’s emotive advertising campaigns. As witnessed in the 2012 campaign “an overweight boy trudges up along a remote road” to the narration of “Greatness is no more unique to us than breathing. We're all capable of it.” (BusinessInsider.com, 2013). Such campaigns are significant because 60% of Nike’s consumers now purchase their products more for what they represent rather than high-performance (Willigan, 1992). This highlights Nike’s use of the self-concept approach to increase product attractiveness (Baines, Fill and Rosengren, 2017). Ultimately, by using marketing orientation, Nike returned to growth and by 1991 was the market leader in North America (Willigan, 1992). This reflects, the large role that marketing played in rejuvenating Nike’s fortunes and why it is now a vital part of Nike’s strategic management. 3 – Analysis of Nike’s Current Strategy Nike experienced a prolonged period of financial success as the industry’s global market leader (Fortune.com, 2017). However, 2017 has been very challenging. Due to excess inventory, Nike sales at flagship stores and 3rd party retailers have fallen with growth forecasts down (Kim, 2017). Furthermore, year-on-year market shares in its core businesses dropped (clothing -6% & shoes -5%); this contributed to disappointing fiscal results and the decision to reduce 2% of their workforce (Bowman, 2017). Therefore, a three-tiered analysis consisting of macro (external), task (competitors) and micro (internal) is undertaken (Fernie, 2017). 3.1– Macro Analysis At the beginning of the macro analysis, a broad-spectrum evaluation is undertaken through a PEST analysis. The PEST tool evaluates key factors impacting an organisations growth and survival, and is particularly useful when considering market entry. According to Ahmed (2016), Rowland (2017) and Bush (2017) the external factors that affect Nike’s organisational success are illustrated below:
  8. 8. 7 Fig. 1 – PEST Analysis The PEST analysis revealed that political and economic factors are the greatest barrier to entry. The ability to overcome them hugely increases the chances of market entry, as observed with Nike’s entry into China and Ireland3 . 3 See section 2.2
  9. 9. 8 3.2 – Task Analysis Harvard’s M. Porter created the Five-Forces Model, which is a “framework for classifying … the factors that determine the intensity of competition and levels of competition” (Grant & Jordan, 2015). It consists of five sources of competitive pressure that shape an industry's (or company’s) weaknesses and strengths (Grant & Jordan, 2015). Nike is analysed below through the model (Fig.2). Fig. 2 - Porter's Five Forces (Porter, 2008)
  10. 10. 9 3.2.1 – Rivalry among Existing Competitors Competition in the industry can be classified as high since there is a significant number of substitutes with the ability to threaten Nike market share as depicted below (Fig.3): Fig. 3 – Internal & External Competition [* represent 2016 revenue] 3.2.2 – Potential of New Entrants into the Industry If the barriers of entry for new firms are lower, they will require less resource-spend when growing a market share and therefore they will have a greater chance of being an effective competitor (Grant and Jordan, 2015). In turn, they may pose a greater threat to established firms. This is relevant within the sports footwear and clothing industry. Thus, Nike have created barriers of entry or “moats” that offer them distinct competitive advantages over aspiring entrants to the industry (Mourdoukoutas, 2014).
  11. 11. 10 Fig. 4 – Nike’s “Moats” (Mourdoukoutas, 2014) Through transformative experiential marketing, Nike has targeted a greater range of segments in the consumer pyramid (Willigan, 1992) versus other competitors. Even Nike’s most direct competitor, Adidas, is only half its’ size and thus Nike has advantage in terms of scale. This equates to absolute cost advantages due to economies of scale and more developed distribution channels (Grant & Jordan, 2015). Furthermore, Nike has sought to strengthen the bond between customer and product by means of creating greater self-identity within its’ product offerings, making it difficult for new entrants (Mourdoukoutas, 2014). 3.2.3– Power of Suppliers Within the Industry At Nike, footwear and clothing is a core business that contributes to 88% of total revenue (Tobha, 2017). Nevertheless, Nike owns none of the factories that manufacture these goods and instead outsources manufacturing to 3rd parties because of cost-advantages (Tobha, 2017). As Phalguni (2014) claims, Nike’s manufacturing network consists of over 700 factories in 42
  12. 12. 11 countries. In general, suppliers have the potential to affect the business as they control production factors (i.e. land & labour) (Grant & Jordan, 2015). However, since Nike outsources its production to a large number of 3rd parties, individual suppliers don’t have a significant bargaining power. 3.2.4 – Power of Customers Nike satisfies its customers through both wholesale and retail direct-to-customer channels (DTC) (Phalguni, 2014). Large wholesale customers can have a degree of bargaining power over Nike. Furthermore, consumer power is linked to price sensitivity (Grant and Jordan, 2015). Nike has often priced itself out of the lower tranches of the consumer pyramid due to inelastic demand, which concerns the closeness of substitutes like Adidas (Willigan, 1992) and Under Armour. 3.2.5 – Threat of Substitutes For Nike, the threat of substitutions is very real. The Business Insider highlights the resurgence of Adidas as key reason behind Nike’s recent drop in growth (Bowman, 2017). The German manufacturer has eaten into Nike’s market shares in several key segments (casual apparel and footwear) and for the very first-time Adidas shoes have performed better than Nike’s AirJordan range – an indicator of the threat of substitutes in a highly competitive industry (Bowman, 2017).
  13. 13. 12 3.3 – Micro Analysis Marketing mix refers to the various tools that help a company in formulating its marketing strategy (Ghauri & Cateora, 2014). Nike has been effectively using these tools to understand its target market and develop value offerings according to customer needs and wants. Considering the 4P’s of the marketing mix, their meaning has to be clarified. Therefore, Fig.5 is used to describe these elements. Fig. 5 - Marketing Mix (Chomiak, 2016 ) Nike has a market capitalization of $91.2 billion as of May 2017 (Forbes.com, 2017). Figure 5 illustrates the outcome of a well implemented marketing mix strategy with the right set of tools. In more details,
  14. 14. 13 3.3.1 - Product Nike is a global company with a portfolio based on Nike Inc. (2017) that includes a vast variety of products of footwear, apparel, equipment, and accessories for men, women, boys and girls. Nike owns 31% of the global footwear market with an average of shoes sales that reach 120,000,000 pairs (Statistic Brain, 2017). Fig. 6 - Nike's Product Range (Nike Inc., 2017) As mentioned in Section 2.2, Nike products are designed for athletes, yet the vast majority of Nike’s product are worn for leisure activities. Due in part to Nike’s maxim of “It is in our nature to innovate” (Farfan, 2017) they have been utilizing modern technology to upgrade and develop the performance of products. Indeed, they are using special materials like Kevlar to create new enhanced products (Campaignlive.co.uk, 2001). Moreover, as part of their marketing orientation Nike places an emphasis • Running • Training • Basketball • Soccer • Tennis • Golf • Baseball • Football • Cricket • Volleyball • Walking • Wrestling • Cheerleading • Aquatic Activities • Hiking • Outdoor Activities • Other Sports • Lifestyle Footwear • Tops • T-shirts • Hoodies • Pullovers • Jackets • Vests • Pants • Tights • Shorts • Surf • Swimwear • Socks • Bags Apparel • Timepieces • Sport Balls • Electronic Devices • Eyewear • Bats • Gloves • Protective Equipment • Golf Clubs • Other Sports Equipment Equipment Nike’s Products
  15. 15. 14 on customer satisfaction and product personalization. Hence, they offer a variety of colours, sizes and designs (MBA Skool-Study.Learn. Share., n.d.). However, recently they are trying to extend their from tangible commodities to digital services like smart watches (Apple Watch Nike+), which assist customers to train and to keep records of their training sessions. Mitchell (2012) points out that Nike transcends the tangibility of products and expands user experience by creating a digital product that customers can use and interact with, called NikeId. 3.3.2 - Price Nike is the sportswear and sport-equipment global market leader that has successfully competed amongst other established internationalised companies in the world like Adidas, Reebok etc. According to Pratap (2017), Nike is capable of adjusting and setting prices higher than its competitors. Nike’s premium products and market segmentation permit premium charges. Based on Nike’s President and CEO Mark Parker, Nike is focusing on increasing shareholder dividends (Investors.nike.com, 2014). Consequently, pricing favours increasing the growth of the profit margin rather than reducing product price for consumers. Nike’s marketing strategy and price controls are influenced by customer loyalty and the emotional connections between consumer and premium products (Willott, 2017). 3.3.3 - Place In 2016 Nike owned 700 stores globally and was active in 45 different countries (Statistic Brain, 2017). However, Ahmed et al. (2016) mentions that Nike positions its product in multiple ways using either independent distributors or through Nike’s exclusive stores. In the US market Nike owns 20,000 retail accounts and distributes its products in approximately 200 countries. On an international level, Nike has independent distributors. In recent times, as internet technology has grown, Nike based its channel of distribution on e-commerce.
  16. 16. 15 According to Ahmed et al. (2016) Nike’s channels of distribution include: • Nike stores / Niketown: Carefully placed in big cities, where customers under the scope of experiential marketing can see and try Nike’s products • Big Retail Chains which offer discounts: Outlets • Nikeid: Nike’s official online store direct-to-customer (DTC), where customers can customise the product based on their taste • ‘Flagship stores’: Big retail stores which sell on its behalf in great volumes, like franchising As Phalguni (2014) states, every single Nike product is transported through 57 distribution centres using a network of 18,500 accounts and 140,000 retail doors. Based on the same author, Nike’s future internationalisation strategy is based on growing its DTC policy, that should provide higher profits and bypass wholesalers. 3.3.4 - Promotion Nike’s promotion strategy is extremely successful as the firm has been in the Fortune List of 500 for the last 23 years and in 2017 was ranked 88th (Fortune.com, 2017). In fact, Nike’s Swoosh logo is one of the five most recognisable logos’ in the world - this provides Nike’s brand image with a sense of uniqueness (Baines, Fill and Rosengren, 2017). Nike is using advertising in both online (social media) and offline mediums, as exemplified by their ‘Unlimited Campaign’; it was very influential and had a great impact on consumers (Butler-Young, 2016). Moreover, Nike’s promotion strategy includes sponsorships and use of highly influential celebrities to represent the target segment in order to influence and inspire people, like LeBron James, Tiger Woods, Roger Federer etc. (Scribd, 2011). One of their latest’s technological accomplishments included the creation of the Unlimited Studio, which according to Wedgwood (2017) ‘demonstrates the absolute power of a great idea’. In addition, the general belief of our era concerning healthier and active
  17. 17. 16 living (Nielsen,2015) has been a great asset for Nike’s marketing strategy and vision. To summarise, Nike’s marketing communication mix uses these approaches (Gregory, 2015): • Advertising Nike Products (mass advertising using celebrities and social media) • Nike’s Personal Selling (in stores by qualified employees, enriching the customers’ experience) • Nike’s Direct Marketing (heavy advertising, salespeople) • Sales Promotions (coupons and offers) • Public Relations at Nike (sponsoring charity events, use of green technology) Concluding, Nike has a global and therefore a ‘geocentric’ (EPRG Schema) approach to its marketing strategy (Ghauri & Cateora, 2014). This approach has three key hallmarks: • Product design is standardised and pricing controls are similar across markets (e.g. Nike Free Run – consider price and models in key markets: USA, UK, China) • Advertising varies across markets to reflect the differences in cultures, interests, and values (e.g. “I am Tiger Woods/Hello World”) • The same market segments are targeted, irrespective of geography
  18. 18. 17 4 – Conclusion In conclusion, this paper assesses Nike’s marketing strategy in the context of internationalisation. Having considered Nike’s strategies, both past and present, a judgement can be made on the extent to which their strategies are effective. On the face of it, and with relation to the generic marketing definition pertaining to profit, Nike’s business strategy can be deemed highly successful as exemplified by their bottom line (Fortune.com, 2017) and standing versus competitors. More so, be it the use of production orientation at its beginning or thereafter with its shift to marketing orientation, the fundamental premise has always been one of serving the customer in a manner conducive to achieving its mission statement. Thus, Nike has cultivated an image that suggests it is more than just a company, it is a brand and in essence a way of life – one that is truly universal and independent of colour and creed. In practical terms, this mandates an international marketing strategy, and its products are now designed in the first world, manufactured in the second and third world, and retailed around the world. The fact that consumers are aware of this, is in no small part due to their successful implementation of dynamic marketing strategies ranging from an effective market mix to penetrating social media marketing. In essence, Nike is one of the best expressions of the benefits of international marketing. In particular, the cultivation of a brand image that is relatable for many people in many segments and foreign markets is commendable. Though, Nike’s road to success has not been an easy one and often it too has struggled to adapt to foreign environments, both in strategic and ethical contexts. Consequently, Nike is not the perfect metaphor for idealistic internationalisation. However, they have never forgotten their founders’ universal mission of inspiring everyone and this as permeated from the top down and into all aspects of its business, from advertising and branding to innovation and design. To that end, the Nike internationalisation story has been greatly successful. Nevertheless, while they have come a long way, their potential in the future is best expressed by their very first international slogan “There is no finish line” (fundinguniverse.com, n.d.). ***
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