Company Analysis for Nike - Essay Example

Nike Analysis of Introduction Nike is a leading provider of sportswear retailing in most parts of the world. Nike Company has about 20,000 retail accounts in the USA alone. The Nike Company has independent distributors in Asia, Africa, among other continents. It has contracts some 110 countries. It does this in a bid to increase its market presence in most parts of the world. Of course, the overall aim is to have a huge market share and compete with other sportswear companies such as Adidas and Reebok. The company has endorsements with different companies and football clubs. All these are measures that the company uses as marketing strategies. The company has agreements with internet companies such as Yahoo and Google. It uses them as a marketing platform for its products. It operates within different companies and subsidiaries. It entered the market originally with different footwear designs. It also deals in apparel designs such jerseys for different football teams and designs sports gear for other games as well. The company produces running shoes with their trademark logo “Nike” inscribed most of the labels they produce. Today, the company’s logo has grown to include a large range of leisure and sportswear. All this is endorsed by famous sporting personalities such as Tiger Woods. The Company is recognized by the Federal Statistical Classification Agencies that classify business establishments in the United States. This is the body that is charged with collection, analysis and publication of statistical data relating to the businesses within the USA. According to North America Industry Codes, Nike has the code 316211. 31 denote Footwear manufacturing Industry. 62 denote Rubber while 11 denotes plastics. In short, Nike falls under Footwear Manufacturing industry according to NAICS Codes. Products Nike Company designs, develops and markets high quality and active sports equipment, apparel, as well as other accessory products. The company produces several brands of shoe styles every single day to keep up to speed with different needs of its customers. It deals in trends that appeal to different tastes of its customers (Bogomolova, 2011). This is perhaps a critical success factor for the company. Different customers have a variety of products to choose from. They strive to meet current standards by studying the market and carrying out feasibility studies about new products, a measure that ensures they stay ahead of their competitors. The management of the company ensures that they have closer working relationships foe effective deliberation of duties. The products are of high quality; guaranteed standards that ensure customer loyalty in their products. Nike ensures that it makes products that satisfy the needs of different segments of the market. For instance, it makes products for children, women and men. Presently, the company sells shoes for all ages; about 300 designs of athletic shoes; has 900 styles that target various sports market. It manufactures shoes for both males and females aged between 18 and 35. Major Competitors Nike faces stiff competition from sportswear giants Adidas, Reebok and TaylorMade. They sell the same products as Nike. This makes the competition stiff. The company has issues with the old continuous marketing. They have to do this is they have to assess the market. This will mean that they change strategy and tact in order to maintain their market share in the sports market. Originally, the company owed much of its success to the collaborations with other companies. To ward off competition, Nike expanded its sports and fitness industry into markets where it was not strategically placed. The management of the company decided to initiate more aggressive programs and review product partnerships. Below is a brief overview of the sportswear companies that compete alongside Nike. Adidas Purpose: To produce and distribute apparel, equipments for sport and footwear, adjoining field products and commercialization of the Adidas registered trademark. Mission: To manufacture leading sports brands in the world. They have the attitude of “impossible is nothing”. This is the attitude that drives their brand communication initiatives and helps to strengthen their bond with customers. It is the main competitor that Nike Company faces. Reebok Mission: The mottos “always challenge” and “lead through creativity” affirms their uniqueness in provision of different and unique products in the market. Focus: They focus to become a brand that is consumer-driven. They emphasize on the individuality of a buyer. So far, they have endorsed big names such as Alexander Ovechkin, Sidney Crosby and Allen Iverson. TaylorMade Mission: To have the best golf brands in the world. They revolutionized golf by bringing metal-wood category of golf. Today, it has the biggest market share in this category. They strive to extend improve positions of their brands. They hope to develop and implement advanced technologies in all the products they deal in such as balls, clubs, apparel and footwear. Currently, they endorse a total of 55 professional golfers, some of who have been ranked number one in the world. The three competitors control favorable share of the Sportswear market. According to reports released, Adidas controlled 10.1% share of the market; Reebok 9.9% and TaylorMade 0.8% of the Market. Industry Structure Overall, Nike has leading share of the market, but faces fierce competition from Adidas and Reebok, being its closest competitors. In terms of sales, Nike still controls the market by selling more of sports apparel, shoes and sporting equipments. It has the highest number of endorsements and can be considered as number one in the sportswear industry. Nike and Reebok were the companies that asset the standards with each competing with the other toe-to-toe. In the recent decades, Nike has grown in leaps and bounds. In the recent years the popularity of the competitors has risen. The Adidas group, under the leadership of Armour, has gained tremendous ground in terms of sales and release of new products into the sports market. Nike achieved mush of its growth in the 1990s. This was due to the fact that the internet turned the world into a global village. It took advantage of the weakening sales in some companies and strategized to take advantage of the loopholes at the moment (Saroj & Joseph, 1984). The growth of technology also meant that they could produce new designs to meet various needs of customers. The company made 4% cuts in prices with the main aim of attracting more customers to buy their products and apparel. This was in line with predictions that had been made earlier. The sportswear industry is saturated. It had become challenging and different players in the market must devise new ways to stay relevant in the market. Newer companies pose a threat to the industry. To stay ahead, Nike Company must be a fast mover in terms of selling more products. Nike focuses on scale of economies; in Pricing, Technology and costs of production (Losyk, 2006). Success Factors for Nike Innovation The company realizes the fact that innovation plays an important role in the Sportswear, both the footwear and apparel. In order to stay ahead of the competition, a company must ensure that they provide products that are relevant to the market. The company keeps introducing brands and designs that appeal to the market. They ensure that they develop styles for different ages and sporting occasions. Innovative ideas come in handy in realization of the company’s visions. The company has had. The company has over 300 styles and labels and records. It can choose any of these and use them to provide a differentiation in the market. It introduces so many variations of the same product into the market so that different buyers can choose what to buy depending on their different budgets and capabilities. There are products for nay age and preference. It sells different styles at different prices so one has the liberty of choosing to what to buy at prices that are convenient to them. Economies of scale Nike is a big company with a huge capital base. It can therefore choose to sell its different products at relatively cheaper prices as compared to its competitors that may not be in a position to sell cheaply. The whole idea is to sell more at the right price so as to maximize on profits (Form 10-K Report, 2011). Economies of scale come in the sense that there are no new entrants into the market. To have a competitive edge over the established market leaders, companies such as Nike are enforcing reasonable pricing of their products. They ensure efficient production and ensure that the products they produce are of high quality. Nike can achieve this because already they have a huge market base and working capital (Lin, 2012). They have the resources needed to achieve growth in the sportswear industry as a whole. Entry and Exit Barriers Entry Barriers Athletic footwear is an industry that is so competitive. What is more, it is a mature market. Market leaders such as Reebok and Adidas are already established. Every company is struggling to keep their brands alive, even if it means keeping their prices down. This has not gone well with Nike. In a bid to keep the competition healthy, the company has been forced to make several adjustment programs such change in prices that have reduced profit margins (Craig, 29). Another entry barrier that affects Nike Company is the difficulty to access traditional distribution channels. Adidas and Reebok dominated the shelves on a quicker look at the shelves. Smaller entrants into the industry face the challenge of getting even with bigger and already established companies such as Nike. On the other hand, this is an advantage to athletic ware giants such as Nike. The internet had helped Nike to have a deeper penetration of the market. With the internet, and the partnerships that it has entered into with other companies, customers, most of them the youths, can access their products and wears of interest online. The overhead costs are being diminished significantly. Nike has more retail distributors of its products so penetration of its products into traditional markets is not such a big issue. This is a direct advantage to new and smaller entrants. They can slice the market and without high initial costs (Kelliher & Anderson, 2010). This makes it possible for them to enjoy profits and begin productions as fast as possible and acquire new markets. This is a strategy that works for Nike as well. Exit Barriers Nike as a company has had no reason to exit the market. It is a strong player in the market. Generally, when a company decides to exit a market, they must leave at the earliest opportune time, when they have not accumulated so much debt or when they are not indebted in any way. They must not have any lawsuits filed against them prior to their exit. They must be on the same page with stakeholders as doing the contrary would spoil their reputation. Nuke has not reached such a level as to opt out of the market. So far, the company has no claims of residual assets attached to its name. Environmental Analysis At Nike, its management analyzes the internal environment, making decisions based on the analysis. Nike carries out marketing research. It has revamped its apparel division and is now more fashion savvy than never before. This is a strategy that works so well. It did research on product and pricing and consequently invested in the high end market. It increased its market share in the low and middle ranges in a calculated move to broaden its product spectrum. Its failure to foresee challenges in the factory and labor conditions led to bad publicity and decline in sales. Consumers and the society called for more “more responsible” companies. Strategy Analysis Pricing Nike produces high quality products. They therefore have a higher price as compared to those of the competitors. This is a weakness on their part that denies them considerable market share. To mitigate the effects of these, the company is reevaluating its pricing, using emerging technology and ensuring that they include innovation to develop new products that will be cheaper. This is christened the Nike Alpha Project, the newest line of cheap athletic shoes. The lower pricing will have huge potential for the company. Marking Research Nike invests in research to maintain the company’s position as the global leader of footwear. They revamped their apparel to meet different tastes following the outcomes of the research they conducted. They address buying habits of different segments of the market, and the product lines they can include. Human Resource Nike employs a dedicated team of workers. It has labor policies that ensure its employees are well treated. Nike increased the minimum age of factory workers to 18 to avoid bad publicity and maintain its good reputation and set the age foe accessories, equipment and apparel workers at 16. They expanded education programs for Nike workers to make them more literate. There employees are well paid to motivate them. They have since implemented most of the work policies. Ethics Nike suffered a major setback when it was accused of unethical behavior. This had a negative impact on their products and image. A trade embargo was placed on Vietnam. Nike is accused of funding communist parties. They placed profitability as a priority at the expense of the dignity of the American people. It has since made attempts to change the marketing situations throughout various factories that it owns. This has renewed the faith of the corporate world on Nike as a company. Social Responsibility Nike has a corporate social responsibility that discusses how to improve work conditions for international employees. They care for all Nike families all over the world. They commit to respond to concerns of consumers and address their safety in different environments. They also participate in different corporate activities and sponsorships throughout the world. Conclusion Nike Corporation just like any other market leader has employed several strategic marketing and operational procedures that has resulted in the huge market share the company enjoys. The company has succeeded in employing diversification as a marketing strategy thereby introducing various products in the market all of which have employed relative success thereby sustaining the company’s markets share globally. Recommendation However to remedy the few marketing setback the company faces, Nike must implement the following: 1. The company should employ extensive social responsive marketing in order to increase its brand and product awareness in the market and influence the society positively. 2. The company must embrace the social developments in its marketing. Such command that the company’s marketers use such technological developments as the social media in marketing and delivering its products. 3. Maintain high ethical operation, operational ethics ensures that a company maintains appropriate relationship with its customers. Additionally, an ethical work environment ensures that employees compete favorably thereby increasing the company’s profitability. References Bogomolova, S. (2011). Service quality perceptions of solely loyal customers. International Journal of Market Research, 53(6) 793-810. Craig, S. (2009, January 29). Merrill Bonus Case Widens as Deal Struggles. Wall Street Journal. Form 10-K Report (2011). Kelliher, C. & Anderson, D. (2010). Doing more with less? Flexible working practices and the intensification of work. Human Relations. 63(1), 83-106. Lin, Tom C. W. (April 16, 2012). A Behavioral Framework for Securities Risk. 34 Seattle University Law Review 325 (2011) . Losyk, B. (2006). Getting a grip on stress. What HR managers must do to prevent burnout and turnover? Employment Relations Today. 33(1), 9-17. Saroj, P. & Joseph, A. A. (1984). Sources and Outcomes of Stress in Organizational Settings: Toward the Development of a Structural Model. Academy of Management Journal, 27(2), 330-350. Read More