Nike on the Market - Assignment Example

Nike Nike Introduction Nike started its business as the “Blue Ribbon Sportswear” in 1964. With time it expanded, first introduced a new kind of shoe in 1972 and then it merged into Nike and started its operations since 1984. They have four major competitors in the market namely Adidas, Puma, New Balance and Converse All Star. In order to have an understanding whether the Nike’s criteria of using the marketing mix is standardized or adapted across international markets, it would be feasible to analyze how the company carries out its working using the marketing mix as a base (Carbasho, 2010). Market standardization or Adaption across markets When a company enters the international market, they either has to either adapt or standardize their image through product, pricing, promotion and placement that constitute the marketing mix. In this global market, many large organizations like Nike may need to find a balance between the two. However, it is seen that few elements of the marketing mix can only be standardized and others may only be adapted. Both of them have some advantages or disadvantages. Standardized marketing mix may increase sales and profitability and the image of the product is universally made. Companies may use adaptive marketing mix when they want to extend into new segments in the global economy. They cater to different regions and cultures. Hence, both are necessary (Kotler, 2008). However, in order to have an understanding whether Nike uses standardized or adaptive marketing mix, the following elements are being examined. Standardized VS Adaptation: Marketing Mix of Nike Nike has always shown their customers that standardization is the key, whether it is for product, price or promotion. It cannot be applied on placement as there are different distribution channels and subsidiaries involved. Products: It is necessary for any company to market their goods and services in such a way that they create a competitive advantage over other companies and provide benefits to the market. The products are also required to compatible with the local and international culture of the customers. In this regard, product standardization is seen when a company is able to sell their products in the international market without changing the product, reason being that the taste and requirement of the customer are similar. Products of Nike are standardized as they are sportswear. Nike targets the niche market. Their products include a wide range of footwear, apparel, and accessories like watches, bags watches, etc. and equipment such as cardio or cycling machines. All these products are standardized and are required for the sport lines. Nike also makes customized products with a personalized symbol or ID at premium prices. These products can be adapted if the company is catering to individuals who have any specific regional or cultural difference. However, research indicates that Nike produces standardized products as they are catering to sports group who use standardized products. Price: Every company needs to analyze internal or external factors before agreeing on product prices. They may either standardize their prices or make use an adaptive strategy that changes it prices taking care of customer preferences, competitive situation, inflation, changes in tariffs, duties, etc. However, as mentioned above, Nike caters to the elite class hence they have an exclusive price range. The company wants to maintain the quality of the product and so they take special care of the fact that the product is not cheap and the customer’s feedback do not come negative. It is seen that the wholesale price zone is better. Nike used standardized prices by targeting active retailers, improved communication and increased brand recognition. The reason behind why the company used a standardized price is because the brand promises high quality accessories that are subjected to rigorous testing using extensive R & D technology. Promotion: Promotion is a blend of advertising techniques with sales using public relations as a means to build and maintain relationships with customers. Hence, companies may use adapted or standardized means. Standardized promotion is carried out when a company uses the same promoting technique in all the countries of the world and in adapted promotion, the company decides to create different advertising message in different countries and cities. Nike uses standardized means as it has promoted their brand using well-known Athletes as the brand ambassador. The message the company sends through these well known celebrities is a means of influencing people across the globe. Moreover, the swooshing sign of Nike has been used as a means to promote the brand image as well. Sometimes, language, religion as well as laws of a particular country can affect promotion but as far as Nike is concerned as they are catering to sports line so the requirements of athletes are the same in every country. Nike gained international recognition by sponsoring sports stars like Michael Jordan, Tiger Woods and Ronaldo, etc. Place: It is difficult to standardize the place, as every product and service requires a network of agencies and distribution channels that perform the activities to accomplish marketing goal. There are always different places of distribution, shops, markets, retail outlets, etc. Multinational companies like Nike require channeling their resources by operating through subsidiaries. Nike has been using direct and extended marketing channels. There are many departmental stores worldwide and they have started online sites as well with athletic catalogs. The stores are innovative, sports oriented with active music at the background in order to attract more customers. Summary The company’s ability to use standardized or adaptive marketing mix is an important decision as it has a considerable impact on the performances of the company. Research indicates that Nike uses standardized system of the marketing mix. In this regard, it is concluded that this strategy brings more volume of sales and lower costs. Moreover, there is a standardized image of the brand created at the global level, which integrates all the requirements of the people. However, sometimes it is hard to standardize all the elements as the cultural dimension of every country or region is different and customers may feel the product needs modification or they may feel the prices are too high. Hence, a company needs to listen to the demands of the customers in order to improve and develop their product. Nike may use an adaptive strategy where the customers are differentiated but on the broader perspective, Nike’s name and slogan, “Just do it” has made brand loyal customers. Hence, they continue to use Standardized marketing mix. It can be concluded that the recognition of the brand name has contributed to the success that will help them generate more revenues in the future, as well. The organization needs to know how the product or the service is being recognized in the market. Sometimes if the products fails to meet the criteria drawn by local or international needs then it can lead to disaster. In the same way, if there is inflation, change in government policies or increase in tariffs, etc. then companies have to reestablish their prices so that people start buying the product. A company that places lower prices may be able to target large clientele. As far as promotion is concerned, adaptive strategy would be to use a different language while advertising. Nike’s promotion through a brand ambassador or using catalogues and billboards are standardized and applicable to the international market. However, they can also remove some forms of advertisement in some countries where the company’s image is at stake. Placement of the product can be standardized if the distribution channel and the system of franchise are same in all the countries. Some companies may not have problems in promoting their product in a standardized place but in order to compete with all other companies; it is necessary to change the décor or the placement of products as per country’s requirement. Hence, mostly companies require standardized and adaptive marketing strategies in order to meet the changing requirements of the customers and cater to the heterogeneous and homogeneous market (Codita, 2011). Internationalization Process Theory (IPT) According to this theory, there is increased participation and integration of operations in the international market. It involves strategic interventions, restructuring and utilizing the resources in the best possible way in the international environment in order to have a global presence. There are many theories of IPT and the following trade theory is seen applicable in Nike (Jones, 2009). Absolute Cost Advantage Trade Theory Adam Smith proposed this theory in 1776. According to him, any country should specialize in export in such an effective way that there is an absolute advantage for the country. The cost of producing a product is less and when trading is carried out, there is an absolute advantage. In this way, there is no concept of any mutual benefit for any other company or country (Zhang, 2008). While using this theory in practice, Nike determines the timing of entry in the international market with consideration on entry modes and risks involved in manufacturing and distributing their products. The industry life cycle and growth strategy are needed to be emphasized for time entry. Research indicates that Nike using a cost-effective production as a means of internationalization and outsourcing. Buying any product in lower costs always has an edge over competitive forces as they are able to sell their products at a lower price, targeting more customers in return and generating more profits. Nike does not manufacture its own products, but buys them from contractors from poor countries of the world. Hence, they pay fewer wages to the workers and resell the product in the developed countries in high prices. In this way, they obtain a good profit margin. This case of Nike shows that how they used the internationalization theory of absolute advantage by expanding their products worldwide. Besides this, during outsourcing, Nike ensures that they meet quality and delivery so they have involvement with the contractors operations. Expatriates that are working for Nike may become eligible to become permanent personnel and work with corporate R & D headquarters that provide quality assurance. In this way, the contractors may become a part o Nike’s network and perform their operations functioning as a liaison (Petersen et al., 2010). Multi-national companies like Nike use internationalization strategy to move from domestic to the international market, but sometimes they need to work in such a way that there are no legal issues involved. At one time there was a situation when Nike was subject to a lot of criticism. Media found out that there were many young children working in factory outlets of Nike in Cambodia and Pakistan. These children were made to manufacture soccer balls. The company took immediate action but it is seen that they are still using this practice of manufacturing low cost goods in under developed countries to sell them off in the international market (Boggan, 2001). The internationalization theory provides implications for companies to sell their products in an effective way. Companies require this theory to remain competitive in the international market. It helps in developing networks, build and maintain business relationships and make employees committed to the organization. Nike invests appropriately in this regard, have relationships with the distribution channels, customers maintaining their recognized brand portfolio to generate an “absolute advantage” over the other companies. Conclusion After examining the internationalization strategy of Nike, it can be concluded that the company uses a standardized market mix and this is the reason why their internationalization strategy is not very diversified except that they are manufacturing products through a low cost strategy. This production strategy where they exploit the internal resources to gain new clients has increased their scope. It is necessary to quote that the company does not produce a single product itself. They outsource their processes with lowest costs, provide quality assurance and then ship them to all the countries. The product line of Nike is also unchanged and standardized that makes them cater an elite crowd. However, even established companies like Nike need to keep a competitive advantage in order to overcome complex situation and market reactions. List of References Boggan, S., 2001. Nike Admits to Mistakes Over Child Labor. [Online] Available at: [Accessed 29 April 2014]. Carbasho, T., 2010. Nike. Santa Barbara: ABC-CLIO. Codita, R., 2011. Contingency Factors of Marketing-Mix Standardization: German Consumer Goods Companies in Central and Eastern Europe. New York: Springer. Jones, M.V., 2009. Internationalization, Entrepreneurship and the Smaller Firm: Evidence from Around the World. New York: Edward Elgar Publishing. Kotler, P., 2008. Principles of Marketing. New Delhi: Pearson Education India. Petersen, B., Welch, L.S. & Benito, G.R.G., 2010. Managing the internalisation process. Management International Review , 50(2), pp.1-10. Zhang, W.-B., 2008. International Trade Theory: Capital, Knowledge, Economic Structure, Money, and Prices over Time. New York: Springer. Read More