Situation in Footwear Industry - Nike vs Competition - Case Study Example

Task: Nike Introduction Nike is one of the top shoes companies that started in 1964 as a casual agreement and handshake between Coach Bill Bowerman from the University of Oregon and a middle-distance runner called Phil Knight. The two men started by forming blue ribbon sports and introduced the Japanese brand Onitsuka running shoes that they later exported to U.S. They formalized their business deal in 1967 and called it BRS Inc. Johnson, a stakeholder in the company dream about changing the company’s name to Nike, a Greek word meaning “goddess of victory”. After talking to the company’s boss, they agreed to rename the company; thus, calling it Nike. They opened their first blue ribbon retail store at Santa Monica in California in 1966 (Carroll 846). By the end of 1980, Nike had overtaken more than half of the athletics footwear market using traditional advertisement. The company carried out its first formal advertisement in 1982 on TV. In 1980, Nike assumed the state of a publicly traded entity because it began the year with a sale of 2million shares on a common stock. Today, Nike continues to grow by buying subsidiaries such as Cole-Haan, Umbro and Hurley. It is among top 200 fortunes Company (Carroll 846). Factors of Production at Nike Varied factors assist Nike in becoming a successful company. To start with, the company has enough physical space (land), which is a natural resource that supports the company in running the businesses. Dusen (1) indicates that this allows the company to set up administrative facilities in areas that are accessible. The company has various retailers around the world with its headquarters being in Oregon. The land also helps the company in extracting oil, which it uses in operating the machines that produces the plastic shoes. The land contains the natural resources such as trees, which contain rubbers necessary in the provision of the sole that makes a shoe. High quality labor is also an important production factor that helps Nike to be a successful producer. Nike has expert designers who cooperate in producing high quality footwear and apparels. Workers within the company are determined. This helps them in devising high quality products. In addition, the company has salespeople in their retail stores around the globe who offer high quality services to their customers (Carroll 847). The changing face of Nike The company gone through many changes since it started. Initially, it begun as a cottage but finally ended up a global player. Between 1995 and 2008, Nike owned Bauer Hockey and opened up many retail stores around the world. Currently, the company is famous around the globe and sponsors high profile athletes and different sports team (Carroll 848). It is noted that the company has addressed issues of child labor, which threatened to distort its presence in the society. This is by focusing on specific consumers, for example, African-Americans (Panda 18). Nike manufacturing Currently, the company enjoys a 47% market share from the domestic footwear with a total sale of $3.77 (Carroll 850). Most of the company’s producers are outside U.S especially countries such as Vietnam, Indonesia, China, Philippines, Italy and South Korea. It is equally stated that the company relies on suppliers who coordinate its manufacturing process (Swamidass 834). Additionally, it focuses on research as well as development processes. The company also formed manufacturing agreement with companies from Argentina, Brazil, India and Mexico, which specializes in manufacturing footwear’s and selling them within their countries. A large percentage of the Nike brand wears manufactured outside U.S are on independent contracts with more than 34 countries including Thailand, China, Mexico and Indonesia. The company uses varying materials such as natural and synthetic rubber, plastic compounds, foam, nylon and polythene in their manufacturing services (Carroll 850). Services Nike participates in varied services that help it become a successful company. For example, the company offers mobile phone services and features available on other mobile devices. It offers customer care services and Nike Id services that allow the company’s customers to customize the products purchased from the company (Carroll 846). Entrepreneur characteristics at Nike Nike Company has different characteristics that help it increase its profits; hence, becoming a successful company. The company is a self-starter since it comes up with a positive idea that gives it the opportunity to increase its profits; hence, expanding its production. The company has an ambitious working team that enables it to achieve the set targets. The employees at the company are optimistic since they always foresee things in a positive manner; hence, avoiding circumstances that can hinder their progress. Finally, the company is time bound since it keeps updates of the innovations; thus, predicting their future by looking at their experiences (Carroll 846). Reasons for success Nike is one of the top shoes companies that have successfully established a wide market globally. Nike’s success is based on its excellent quality products and marketing concepts. For instance, the company created a brand that is preferable to most consumers makes it influential (Haig & Matt 84). The image of the firm’s brand has stuck into the consumers’ minds because it uses celebrities in its advertisements. The firm uses famous athletes; thus, influencing many individuals to use their products especially in America. An example of an athlete is Michael Jordan who has contributed considerably to the accomplishment of the company through the Air Jordans. He has been the leading figure for Air Jordans that have raked millions of proceeds to the company. The Jordans are available in diverse colors and variety. Air Jordan supports several NBA players. Additionally, the firm is successful because of its ability to study their consumers perfectly. It uses captivating languages to influence consumers. For instance, its philosophy says that the company not only sells its products, but it also sells a way of life. Nike is also growing because of the introduction of internet sales. This is a cheaper way of doing business since many consumers can be reached (Carroll 845). It is clear that promotion and publicity are fundamental contributors to the success of the entity so is appropriate relations (Carbasho x). Furthermore, the company sponsors many athletic departments. For instance, it has sponsored a cricket team in India, several soccer teams in Brazil, and famous soccer teams like Manchester United. The company offers free uniforms that have the company’s logo to these teams and this has contributed to its success because it has helped in enhancing its visibility (Carroll 846). Nike’s prices are higher compare to its competitors; however, it has more consumers than its competitors. This is because the corporation centers on the quality of its products instead of price. This has made the consumers to take Nike’s products seriously and to value them (Carroll 846). Major world market Nike is a global company whose major world market is the US. The firm has its headquarters in Beaverton, Oregon. It sells its products to retailers through its stores, through independent distributors and licensees globally. The company sells approximately 27,000 retain counts internationally. It has three main consumers outside the US, and they account for the 9 percent of the firm’s total market (Carroll 850). Deciding to expand internationally The company started to develop by supplying it products internationally. It moved to Japan where the demand for its products was high. The company later spread to other less developed states like china and Thailand. Its brand became very famous, and by the year 1999, the company had opened about 500 factories in 45 countries (Carroll 848). Barriers to international trade The major barriers to international trade for Nike are tariff, quotas, and nontariff barriers. Additionally, the emergence of major players who previously played meager roles is also a reason. The company is forced to raise the prices of its products; thus, lowering the demand for its products because of tariffs (Carbaugh 100). Most countries use tariffs to protect their domestic producers. Quotas are also major barriers to Nike’s international market. Quotas make the company supply low amount of products to certain countries. This lowers the numbers of sales for the company because regardless of the high demand, the company can only import the specified amount of products. Other obstacles for the firm are the nontariff barriers. Some countries have strict shipping regulations that hinder the importation of Nike products in the countries (Carroll 852). International distribution The profitability of the company is based on high sales that result from international distribution. This is evident in the availability of international retailers located in varied parts of the society (Zentes & Dirk 108). The company delivers the high quality products to its consumers internationally and this has made it gain the consumers’ loyalty. Nike has about 14 distributers globally and the independent distributors are usually given the high premium goods. The company also sells its products at lower prices in its retail stores globally by offering discounts (Carroll 847). Conclusion Nike is a leading footwear firms in the United States. The company has managed to attract many consumers globally compared to its competitors. This is because it focuses on the quality of its products. Additionally, it has invested in effective commercial where celebrities are used to advertise the products. For instance, some of the famous athletes have been used in commercial to influence many consumers. Some of the things that hinder international distribution of the company’s products entail high tariffs, quotas, and nontariff barriers (Carroll 850). Works Cited Carroll, Archie B. Business & Society: Ethics & Stakeholder Management. Mason, OH: South-Western Cengage Learning, 2009. Print. Carbasho, Tracy. Nike. Santa Barbara, Calif: Greenwood, 2010. Print. Dusen, Steven. The Manufacturing Practices of the Footwear Industry: Nike vs. the Competition. UNC. 1998. Web. 2012 http://www.unc.edu/~andrewsr/ints092/vandu.html Haig, Matt, and Matt Haig. Brand Success: How the Worlds Top 100 Brands Thrive and Survive. London: Kogan Page, 2011. Internet resource Top of Form Panda, Tapan K. Contemporary Marketing The Changing Face of Marketing in 21st Century. Hyderabad, India: ICFAI University Press, 2006. Print. Carbaugh, Robert J. International Economics. Mason, Ohio: South-Western Cengage Learning, 2009. Print. Swamidass, Paul M. Encyclopedia of Production and Manufacturing Management. Boston: Kluwer Academic, 2000. Print. Bottom of Form Zentes, Joachim, and Dirk Morschett. Strategic Retail Management: Text and International Cases. Wiesbaden: Betriebswirtschaftlicher Verlag Gabler, 2011. Print. Read More