Marketing Channels: NIKE - Essay Example

Marketing Channels: NIKE affiliation Introduction Nike is the major market in the United s supplying quality athletic footwear, sportswear, supplier of equipment’s and clothing. The name of the company, Nike, which means in Greek the goddess of victory, has been in the market ever since the year 1964. The co-founder and chairperson of Nike, Philip Knight, have been running the company for more than forty-eight years. In his tenure, he has been focusing on few core areas of corporate- supply chain management, sales and building of brand name (Ramaswamy 2008, pp.9–14). For long, Nike has been introducing its manufacturing in countries that are low-cost in charges including Indonesia, Korea, Vietnam, and China. In addition, while networking with several of its manufacturing partners, which did not necessarily provide low production cost, Nike was able to create a global chain of supply that indeed has gained vital importance to the success of the company. In order to ensure and maintain its smooth integration with all its manufacturers globally, the global supply chain of Nike became critical to the firms future. Nike Company is globally considered one of the most successful international corporations. Despite its global status as the leading producer of apparel and athletic shoes, the company has been marred by frequent accusations. Although a great deal of the accusations has fallen on the management of the company, also the host countries governments should take the blame for allowing sweatshops operations in their states (Henderson et al. 2009, p.2). Clearly, the company needs to make changes in its policies. One strategy that Nike would wish to employ would be to involve itself with international agencies that will assist it with adjustments in policies that will help in correcting its problems. Another change will be the company abandoning its long-term strategy of being defensive and admitting its problems, at the same time outlining its improvement strategies (Wokutch 2001, pp.207–237). Marketing Channels: NIKE Nikes original channel structure Throughout its history, Nike has been able to establish its wide value chain. The achievement has been because of long period of hard work starting with all its involved suppliers and manufacturers, going through the life cycle of the product and finishing with either the retail or direct channel of sales. Nike Company did not focus its strategies on direct-to-consumer sales rather it distributed its manufactured goods through variety of its channel of retail sales (Nike (.com) 2011). The major consistent of these channels were centers for retail outlets and retail distribution. However, the original strategy of Nike outsourced most of its footwear manufacturing to low-cost Asian manufacturers or the South American manufacturers practically. The large apparel company had an aim had an aim of creating a long term trusting affiliations while relying on its hundreds of producers. The process of generating new models and designs was being done in-house. After the creation of a design, the lifecycle of the product continues for eight months before its production is moved online. Furthermore, it takes approximately nineteen days for the final orders of the product to be made (Epstein et al. 2010, pp.353–356). Nike was not interested in reaching the end consumer rather than considering the sales of its retail. The distribution, in addition, was tremendously compound. The company had created “in-house power” that had been selling their products to specialty athletic department store retailers, multi-sport general athletic department stores, and general purposes shoe stores (Doorey 2011, pp.587–603). In addition, Nike had several individually owned shops that were more deliberate on building brands instead of selling the company’s products. Those shops were referred to as "Niketowns" that in the year 1999 they were thirteen overall in comparison with Nike-53 outlet stores. The powerful firm, which had gained over forty percent of the market share in the United States, was giving them an additional influence on their merchants. The lifecycle of the product could take more than a year and a half. The company decided that it was not appropriate to attempt equivalent demand for a model with the supply (Jones 2006, pp.48–49). In the past, imperfect information concerning retailer’s inventory levels was the major Nikes issue, and the company was hoping to improve its inventory monitoring methods. In order to meet its certain prospect sales, Nike was capable of planning its manufacturing and distribution strategies far in advance. After budgeting for one million dollars to invest in a few local distribution centers that were bulky to replace its numerous numbers of small centers, it started doing tis by providing its retailers with discounts (Parpis 2009, p.12). Moreover, the Nike small towns (Niketowns) were established in a high-traffic, upscale shopping neighborhoods. The selling of wide range apparels and footwear under Nikes name and the merchandises section made the company more like a showcase of the products. Nike set up an extensive range of direct channels of sales. The aim of the “Niketowns” was not to make profits and increase the company’s revenues but to have an additional opportunity to building the company’s brand name. In addition, some of the Nike stores carried some footwear’s, specialty products and apparels that were hard to find in the market and other typical retailers (MediaGuardian 2001, pp.3–5). Overall, the original channel structure of Nike was based on the retailers rather than the vast end consumers. It was paramount for the company to create hundreds of long-term and short-term relationships as well as building up a reputation as a strong player in the market. Nevertheless, this channel made the company availability contain suitable means of disposing excess inventory devoid of giving up too much control of the brand name. The prices and quality of the products were unswervingly managed in order to diminish the impact on the core brand (Helstein 2003, pp.276–292). New online Nike strategy: E-commerce Subsequent to all the other channels that have been developed by Nike, E-commerce is the major goal for several companies. Nike entered online marketing towards the end of the 1999; this was the period when internet business boomed had picked up. By that time, most of the apparels and footwear players on the market had established web presences. The competitors of Nike such as Adidas, Reebok and Converse also increased their internet business. Some of the products of Nike that were similar to those offered in shops were also set up in online stores by Copeland and Locker’s sports. Nike had issued permission to ten other retailers to sell its products online. The image and quality of the brand were preserved in the process, and they had great importance (Srinivasa Rao & Purkayastha 2012, pp.1–16). Nike can make itself very popular in online marketing if only it takes advantage of the created its website, nike.com. The company can also enter E-commerce business that can create more visibility online. The customers loyal to the company will be able to check out all the Nike products available that they cannot find in the neighborhood retail shops and purchase them online. Some of the advertising options discovered and there were some strategic concerns that it should have been put into consideration. The company needs focus on all its systems of operations involved because of the fact that E-commerce business is more complex. Through some of the developmental attempts that the company has to make so that it cannot estrange its retailers, Nike has to put all its older requirements into consideration. That is from packing to the end-consumer services (Brustein 2014, pp.41–42). On the other hand, there are several advantages regarding Nikes online business. Firstly, the company has a golden chance to advertise itself more to a wider target audience. Even though the brand name had already been established in the market, Nike should aim at keeping on with creating awareness in the mind of its consumers. Secondly, the company has an opportunity to track down its data-using internet to store information on the frequency of customer visiting, customer information on interests and preferences among many other. At this time, Nike has no experience concerning how to handle technical problems or retail management. Most of the company’s competitors in the internet field have different strategy and operation in their capabilities for E-commerce (Greenberg & Knight 2004, pp.151–175). Establishing new channels Nike should be able to create and come up with new channels for product distribution by going online. This will give its customers the chance to look out and know how the products look like. Even though the company considers additional expansion into E-commerce, they created the retail outlet, “Niketown”, for further success because of its far great location, infrastructure ad strategy. Nike can never be able to continue its business without the assistance of United Parcel service. All of its operations need delivery of products to the consumers who are not familiar with the company. Hence, without establishing new channels, the assistance of United Parcel service should step in. In fact, it provides five hundred dedicated customer service operators. Without the services of united parcel, Nike would not comprise positive experience from online selling. Afterward, the company aim at developing and covering new skills including web designing, system infrastructure and other areas of IT in order to survive in online marketing (Truini 2001, p.3). Segmentation, targeting, and positioning Online business has been on description as businesses operating without stores. The introduction of online business took advantage and gained popularity when the internet retail became popular. Online and mail-order retailing business could be equivalent to ordering and distributing. As companies are incredibly experienced with direct selling, they are expected to have higher competitive advantage in online distribution. From the perspective of logistics, the investment to build and maintain online channels are inferior compared to other channels of distribution. The internet gives an opportunity for the consumers to search for information. As known from practice, approximately two-thirds of the total customers go online to search for information about the available products, as well as the new products in the market. While the relevance of multi-channel retailing is enhancing practically, channel choice is becoming a main segmentation criteria (Datamonitor 2011). Even though Nikes retailing partners are anxious in expanding into online sales, this strategy would be successful in the end. In order for Nike Company to develop the channel of distribution, it has to comprehend its customer segmentation that is being targeted by its products. The targeted audience by Nike should focus on sportsmen and athletics. On the other hand, Nikes channel segmentation should be anchored in high quality and low cost retailers, which will provide fast and efficient production process. For many years, Nike has been sponsoring several tennis, football teams, volleyball and many others among the various fields of sport. This the company’s main message throughout the market is “sport”. Targeting of sportspeople is a good marketing approach especially when a celebrity is being sponsored, this gives the consumers the perception of success as well as analysis of different forms of values deliveries (Koch 2004, pp.56–62). Nike is intending to have preferences for making adjustments to the marketing strategy and take advantage of online marketing channels rather than the wholesale changes. A general alternative strategy will be producing existing offline segmentation that are targeting differentiation and positioning in the online channels. The main propelling subject in the use of internet marketing strategy is targeting the right group of customers. Hence, the use of internet marketing strategy will be based on goals for online contribution of sales and leads of this channel must be inconsistent with the customer category and can be easily be reached through the channel. Nike has several new opportunities since the company enters online business. The company’s website, nike.com, which was launched in the year 1996, was proceeding with a lot of caution. Even though there was a lack of E-commerce during that time, no exertion was made for driving the customer traffic to the website through advertising and marketing expenditures. The site had logged approximately fourteen million visitors within two years. After which, the company positioned its brand in the market as well as in the online business that turned out to be successful (Murphy & Matthew 2001). Nike gap analysis and modification of strategy Regarding the fact that the company’s competitors have already entered online marketing and business by the year 1999, Nike has no choice left but to modify its marketing strategy into following the suit and go online as well. Moreover, during this time, customers were excited with the new internet boom, and there was no need for companies to perform market research. In addition, all their competitors were prepared to permit their retailers to sell their products over the internet (Holmes 2006, p.50). On the other hand, Nike has realized that going online is going to cut many costs and expenditures since marketing would have moved virtually. The company found it hard to see how it could fulfill its need with the devoid of continuing support from its brick and mortal partners. Even though the company is struggling with the fear of its careless retailers diluting the value of the Nike brand, it sees advantages of switching from traditional retailing to online marketing (Chung et al. 2013, pp.271–293). Despite the fact that the company’s competitors are less powerful and smaller, they are relying more on their traditional retailer sales as their partners. These companies are treading unconscientious in their primary forays into E-commerce and possess little or no experience selling products directly to the customer market. Even though Nike has realized that its competitors have exclusively different selling strategy online, they still have the desire to develop and innovate even more concerning the marketing ways of brand building. Channel conflicts When one channel member’s action prevents the channel to achieve its goals and objectives, then channel conflicts take place. Conflicts are always dangerous as well as common in occurrence to the success of the distribution efforts. The total performance of the channel and the whole effectiveness can be harmed by any of the members of the channels. These conflicts can be caused by certain disagreements over the domain of benefit and responsibility of the channel (Tsay & Agrawal 2004, pp.93–110). After Nike will gain popularity and become part of its most reliable partners, Foghog, it will agree not to sell to the other virtual retailers. It will be negotiated that some of Nikes most vital brick and mortal partners, The Athlete’s Foot, will be angered by this plan. The company knows that it will have difficulties in keeping its traditional retailers content while trying to expand the company’s direct sales effort at the same time. All the low-level competitors of the company are scared that Nike would expand itself further virtually since it does not want to incur losses and reduction of revenues through direct sales. Nevertheless, the company knows that there will be difficulties in keeping balance with its traditional retailers before gaining some experience to learn about direct selling. The company is hoping that its websites will expand the pie further rather than taking the retailer’s market share (Chang & Gotcher 2010, pp.287–297). Despite the fact that Nike knows this, it still knows that its website, nike.com, can be more successful in the future. The company has realized that there is a conflict between the members in its channel of distribution. However, it is deciding to overcome the conflict through finding the perfect problem-solving solution to the situation. Moreover, the company will do so to avoid any further concern over unfair competition. In other words, the company will keep its traditional retailers that otherwise will be a tremendous loss of company profit and connections over the production and sale of footwear and apparel. Nike will effectively overcome its conflicts with time since it has priority in evaluating its retail relationships. The company will then continue building its successful brand throughout the world and all over the internet (Webb & Hogan 2002, pp.338–356). Moreover, there exist geographical gaps where people need to experience the shoes buying process. The creation of centers where the customers can come see and feel the company’s products will increase the company’s brand popularity and revenue. Conclusion Nike is still one of the greatest and successful footwear and outlet companies of all times throughout the globe. It established its brand so good that it is to date being recognized by several people just using its sign. The company efficiently targeted and distributed all its products by being able to generate the right services and output (Cole 2001, pp.115–117). However, it is highly recommended for Nike to focus on new strategies in order to keep its significant success in the market. In order for the company to continue achieving its stated goal, it needs to create several stores where people will be able to not only touch but also feel the product. There is no further desire to continue more in small town marketing since that is an outdated method of market, but the company can venture into the modern era of internet and make it efficient enough. Today, the market is a place where every individual is aiming at reaching the top. Several businesses are developing new strategies, ideas and innovations among other ideas in order to overcome their competitors in the market. Only the best companies in terms of strategies reach the top, and the better consistency in terms of strategies a company has, the higher its chances of staying on top for a longer period (McClusky 2009). In conclusion, without competition and challenges in the market, there would be no point of reaching the top most level in business, the market has a place for every business; the sole purpose of competition is who is going to find it first before the other identifies it. Therefore, Nike has to keep its strategies at par to match both the market as well as the consumer demands. Its strategies must be unique and different from its competitors. The uniqueness of a brand in the market helps it to be spotted easily. Customers identify brands of commodities depending on its uniqueness and its presentation in the market. For Nike to continue to maintain its market superiority in footwear and apparel sells globally, its strategies must be up to date and match hand in hand with what the end consumers who are the customers need to see and find. References Brustein, J., 2014. Nike Backs Away From the FuelBand. Bloomberg Businessweek, pp.41–42. Chang, K.H. & Gotcher, D.F., 2010. Conflict-coordination learning in marketing channel relationships: The distributor view. Industrial Marketing Management, 39, pp.287–297. Chung, K.Y.C., Derdenger, T. & Srinivasan, K., 2013. Economic Value of Celebrity Endorsements: Tiger Woods’ Impact on Sales of Nike Golf Balls. 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Hybrid channel conflict: causes and effects on channel performance. Journal of Business & Industrial Marketing, 17, pp.338–356. Wokutch, R.E., 2001. Nike and Its Critics: Beginning a Dialogue. Organization & Environment, 14, pp.207–237.  Read More