Nike Growth Strategy - Essay Example

NIKE Critically Assess Their International Fashion Retail Growth Strategy Table of Contents Table of Contents 1 Introduction 2 Company background and description of Growth Strategy 2 Internationalization strategy of Nike Inc 2 Analysis of the Growth Strategy 5 Conclusion 6 References 6 Introduction Company background and description of Growth Strategy Nike Inc is recognised as one of the leading American multinational organizations of athletic foot-wears, equipments, apparels and accessories. Nike is not only engaged in marketing but also in designing and development of the athletic products. Being headquartered in Washington, it successfully operates in more than 110 countries in the entire globe with varied designed products and accessories. It achieved total revenue of US$24.128 billion and net income of US$2.223 billion by the end of 2012. In spite of renowned brand image, vision of the company under consideration is to enhance and accelerate the supremacy of their portfolio in the market among others. Side by side, the organization of Nike Inc also desires to attain sustainable long term growth in its entire global portfolio of brands and product lines. Moreover, the prime cornerstone of the growth strategy taken by Nike Inc is innovation. It is through innovative products Nike Inc desires to achieve revenue of more than $23 billion and more than $12 billion of cumulative cash flow by the end of 2015. Along with this, the management of Nike Inc also dreams to attain a competitive advantage in the segment of athletic products among other rivals. Other than this, they also desired to present inventive and fashionable products to the customers so as to enhance the level of loyalty and faith (Nike Inc, 2012). Internationalization strategy of Nike Inc At the time of entering foreign markets such as Japan, Europe and others Nike Inc used the strategy of opening flagship stores and franchise. Flagship stores proved quite successful for Nike Inc due to its strength of generating compelling products that might excite the target customers. Major befit of franchising is that the company does not have to take the total risk of foreign investment. The franchise owners take all possible risks and also finance the maximum percentage of start up cost. On the other side, the company takes more than 50% of profit for from the franchisees as their brand value. This is one most cost effective entry process of any business for foreign market entry. Along with franchising, the company also prefer opening of flagship stores in new markets as an effective entry mode. Though this mode is comparatively more cost and risk associated strategy but the company can present strong market awareness and brand presence in the new market. Again, the flagship store mode of entry allows the company to enjoy 100% profit from sold goods in these stores. In 1992, the company under consideration decided to enter India in association with SIEPL or Siera Industrial Enterprise Private Limited. The objective of Nike was to tap the Indian market and to receive royalties through a major percentage of the sales revenue. In Europe, Nike mainly uses the flagship entry mode to enter into new markets. The WestEnd Store of the company is the resultant of partnership with Timera Group which is also a leader in whole sale and retail manufacturing across the areas of U.S., Europe and Middle East. In India companies having wholly owned subsidiaries are treated as local companies and therefore Adidas is treated as an Indian company in that country and have the access to do retailing. On the other hand, Adidas has followed the footsteps of Nike and used the entry strategy of flagship to enter markets of European countries. Adidas took the entry strategy so as to compete with other leading brands operating in the same industry in European market. This strategy allows to enhance the brand presence in the foreign markets. International strategy is described as the policy to increase the market share and brand value of an organization by expanding in foreign markets. However, in order to do so, it is extremely essential to undergo a vivid market research over the markets so as to analyze the preferences and requirements of the customers. By doing so, the organization might undertake such type of innovative measures within the designs and features of the product lines so as to fulfil the demands of the customers. This might prove effective in enhancing its brand image and profit margin to a certain extent among other competitors. Other than this, with the help of such type of strategies, greater economies of scale might be attained by the organization thereby amplifying its level of loyalty within the minds of the customers. Similarly, Nike Inc also implemented such type of global or international strategy to enhance its level of sustainability in the entire globe. Therefore, in order to make the global strategy effective for the organization of Nike Inc, the management decided to offer high level of concentration over the concept of innovation. This is because innovation acts as the cornerstone to fulfil the demands and needs of the customers of foreign markets. Apart from this, the management of Nike Inc also tries to offer innovativeness in the designs of the products and accessories so as to increase its dominance in sports segment. However, in order to introduce varied types of inventive designs, it is extremely essential to enhance the skills and talents of the human resources. In order to do so, varied types of trainings and skills development programs are implemented within the organization. This might help to enhance the level of quality of the products of Nike Inc over other competitors (Nike Inc, 2013). Other than this, effective teamwork and culture of Nike Inc also acted as main pillar of the growth strategy. Due to such underlining policies, the internationalisation strategy of Nike Inc proved effective in enhancing its level of sustainability in the foreign markets. Analysis of the Growth Strategy Although, the growth strategy taken by Nike Inc is to enhance its revenue to more than $23 billion by 2015, still the organization might face varied types of challenges in the coming future. As evaluated by SWOT analysis, the organization of Nike Inc might face fierce competition in the coming years in the foreign markets. Due to which, it might become over dependent on the foreign markets to increase its dominance, thereby declining its market share in United States. Side by side, in order to compete with its major competitor, Adidas, it might also enhance the prices of the products and so the target customers might get deviated to other brands. So in order to retain its competitiveness among Adidas, it tried to present inventive products with tools such as Nike Materials Sustainability Index, which helps less environmental impacts. Other than this, Nike Inc also decided to present innovative products with the help of an inventive manufacturing process like Nike Flyknit that might reduce wastes at the time of knitting the shoes. Such inventive processes helped Nike Inc to retain its competitive advantage over its main competitor, Adidas (Kim, 2010). Other than this, it also presented jerseys with recycled bottles so as to reduce its costing and to present it in low prices as compared to Adidas. This helped in fulfilling the demands and requirements of the customers of the foreign markets thereby maintaining its portfolio. Not only this, Nike Inc also presented varied types of products for the women athletes as well just as Adidas at the time of entering any new foreign markets. Thus, it acted as the catalyst in fulfilling the growth strategy taken by the organization of Nike Inc to enhance its level of sustainability. Along with this, the revenue generation by the products of Nike Inc in the year 2012-2013 also increased by (footwear: 70%, apparel: 25% and equipment: 5%) as compared to Adidas. Therefore, due to such strategies and policies, Nike Inc enhanced its brand recognition and customer relationship as compared to Adidas. Along with this, the demand of its products also enhanced mainly due to its strong research and development capability and innovative nature. Side by side, its strong marketing or promotion strategy also helped in fulfilling its motive to expand in varied foreign markets (Businesswire, 2010). Conclusion Conclusively, it might be depicted from the above mentioned points that due to the strong R&D and innovation capability, Nike Inc became able to retain its portfolio and recognition in the market. Along with this, its strong customer loyalty and faith also acted as a boon for the organization to fulfil its strategy of internationalisation as compared to its prime competitor, Adidas. References Businesswire. 2010. Nike Outlines Global Strategy for Creating a More Sustainable Business. [Online] Available at: http://www.businesswire.com/news/home/20100122005661/en/Nike-Outlines-Global-Strategy-Creating-Sustainable-Business [Accessed on November 07, 2013]. Kim, J. 2010. Nike Introduces 2015 Global Growth Strategy. [Online] Available at: http://sneakernews.com/2010/05/06/nike-introduces-2015-global-growth-strategy/ [Accessed on November 07, 2013]. Nike Inc. 2013. NIKE, Inc. Introduces 2015 Global Growth Strategy. [Online] Available at: http://nikeinc.com/news/nike-inc-introduces-2015-global-growth-strategy [Accessed on November 07, 2013]. Nike Inc. 2012. Our Sustainability Strategy. [Online] Available at: http://www.nikeresponsibility.com/report/content/chapter/our-sustainability-strategy [Accessed on November 07, 2013]. Read More