Nike Inc Five Year Market Extension - Business Plan Example

Five Year Marketing Plan: Nike inc. Table of Contents Executive Summary 2. Company 3. Strategic focus and plan MissionGoals Core competence/ sustainable competitive advantage 4. Situation Analysis SWOT analysis Industry Analysis Competitor Analysis Company Analysis Consumer Analysis 5. Product Market Focus Marketing and product objectives Target markets Customer Value Proposition Points of Difference 6. Marketing Program Product Strategy Price Strategy Promotion Strategy Distribution Strategy 7. Financial Data ad Projections Past sales revenue Five-year Projection 8. Implementation Plan 9. Evaluation and Control 10. Reference 1. Executive Summary Nike, Inc. is one the most renowned sports good company in the entire world, which serves as the leader of the athletic products market. Their innovative and contemporary products make it the choice of preference among the consumers who do not compromise on quality over money and wantto create an impact in the society. Nike can be rightfully called as the market leader and provides an effective model of marketing, advertising, production, sales and distributions such that it serves as an example for those who want to initiate their business in the sporting field. Nike, Inc. is the largest seller of athletic footwear, apparel, gear and accessories. There are only 18000 retail stores in the USA alone and it manufactures and designs products for all of those who want comfort in their lifestyle whether it be young men, women or children. Nike indulges in sports of all kind, whatever sports a person watches, he is sure to see the Nike logo on the sports apparel and footwear. Sports such as basketball, running, cross training, cricket, soccer, baseball, tennis, footballs and many other forms of sports serve as the main market of sales for Nike. Headquarters of Nike is situated in Beaverton, Oregon and approximately 56% of its sales are in international markets. The major competitors of Nike include other strong sharks of the market such as Adidas, Reebok etc. Nike was founded by Philip H. Knight who partnered up with a Japanese shoe making company and started importing shoes from Japan in to the local markets of USA. Soon the shoe selling business of Knight blossomed and expanded to various other regions and even countries. Nike focuses on bringing inspiration to every athlete out there in the world. Nike also focuses on various financial and non-financial goals such as to maintain the quality of their products and to instill innovation in each of their designs at the same time to double the profits and revenues earned from the consumers. These goals are also the basis of core competency for the company because Nike offers reliability and innovation like no other brand. SWOT analysis of Nike helps us to understand the various internal and external factors of the company that are considered as the strengths and weakness and also defines many other factors that may serve as opportunities or threats to the company. However, the biggest threats to the company are the presence of alternate cheaper brands in the market that offer quite similar products at cheaper prices but at the compromise of the quality. The athletic footwear industry is performing quite well in the market, However it has started to decline because of saturation of companies that produce the athletic footwear in the market. The major competitors of the Nike are Adidas because it follows an almost similar marketing, sales strategy. Nike manufactures most of its products abroad due to decreased labor costs in those regions. Nike never compromises on quality of the overall product and hence charges equivalently in such products but this never happens and it often gets lagged behind. Nike also allows it customers to customize their shoes according to their needs and wants. Customers of Nike mostly belong to the upper class or middle class societies who earn sufficiently to buy costly shoes and are brand oriented.The company’s marketing mix was also analyzed and the four P’s were also studied which helped evaluate the product, price, place and promotion strategies of Nike which helped reach Nike to the status that it is currently on. The five year Nike sales show a constant increase in its revenues and profits which means that the company is performing quite well. However the growth is now gradually increasing which might indicate that the company is on the verge of being constant and no growing. For future purposes, Nike, Inc. plans on expanding their market to developing markets of the world so that they may increase the profit share of the company. 2. Company Description Nike, Inc. (NIKE), entered the world of business on September 8, 1969. It is involved in the designing, progress, marketing and sales of a whole range of sports shoes, clothes, sports gear and accessories. The product of Nike can be found all across the globe. The company sells its products through designated retail stores or franchises which are available internationally. These stores and distributors are provided a license for sale and distribution. Nike focuses mainly on eight types of sports categories; Running, Soccer, Basketball and training of both men and women athletes, action sports and sportswear and lastly, golf (Reuters.com, 2015). The company also produces and sales products which are specifically designed for children, and for other sports activities as well such as cricket, tennis, wrestling, lacrosse, volleyball and other outdoor sports. The company functions in North America, Western Europe, Central and Eastern Europe, China, Japan and other developing markets (Reuters.com, 2015). The products made by Nike are mainly built to serve the athletic, but these can be worn casually aswell or for other recreational purposes. These products are sold under the name of NIKE whereas the plastic products manufactured are sold under the brand name of NIKE IHM, Inc. (Reuters.com, 2015). The major competitors of Nike includes other booming companies like Adidas, Reebok etc. (Hyanes, 2015) Nike now holds a share market of 37% approx. and its products are sold in more than 160 countries, this includes the factory outlets, franchises, retail stores and town outlets. The products at Nike are all manufactured though contractors which work independently and are mostly located overseas (Hyanes, 2015). The founder of Nike was Philip H. Knight who was a graduate from Stanford University and a business major. At first, the company was partnered with a Japanese athletic shoes making company but later this partnership was broken in 1972. It was in 1972 that Nike was promoted in the U.S. Olympic trials and it also served as an entry for Nike in to the international market. In 1980, Nike was open for sale to the public customers (Hyanes, 2015). 3. Strategic Focus and Plan This section covers three aspects of corporate strategy that influence the marketing plan: (1) the mission, (2) goals, and (3) core competence/sustainable competitive advantage of Nike, Inc. Mission Nike‘s mission statement is “To bring inspiration and innovation to every athlete in the world”. The co-founder of Nike, Bill Bowerman also quotes that any person can become an athlete if one has the body for it (Help-us.nikeinc.com, 2015). Goals For the upcoming years Nike, Inc. seeks to achieve the following goals: Non-Financial Goals 1. To maintain the quality of the product and make it easily reachable for the consumers 2. To meet the needs of types of customers 3. To organize Nike Women event series which will help motivate Women to participate in athletics 4. To maintain its position as number one brand providing athletic apparel and accessories. 5. To create products which are based on innovation and suit the customer likes. 6. To make environmentally friendly products such as the recycled polyester and color dry technology which reduces the consumption of water (About.nike.com, 2015). Financial Goals 1. To set target revenue of $27 billion by the end of fiscal 2015. 2. To Generate of $12 billion of cumulative free cash flow in 2015 3. To double the revenue till 2015 4. To evaluate consumer experience;this will help Nike to grow to approximately $23billion by the end of this year. 5. To build and strengthen international retail outlets by investing $500-$600 million over the course of five years (NIKE, Inc., 2010) Core competencies and sustainable competitive advantage In terms of core competencies, Nike, Inc. seeks to achieve a unique ability i.e. to provide distinctive and innovative products which are liked by all and to do this by maintain the quality of the product and at the same time looking out for sustainability. For this purpose Nike, Inc. invests heavily on its R&D department so that it may achieve products which are technologically advanced and have an innovative edge in them. 4. Situational Analysis Nike, Inc. is at present the world’s top supplier of sports shoes, clothes and accessories and has a 47% control over the shoe market. Nike provides its products to over 100 countries, wherein United states, Europe, Asia pacific and the Americas serve as it major target areas. With the help of quality production, innovation and design and marketing strategies Nike maintains its position in the athlete world and in the concurrent markets. SWOT ANALYSIS Figure 1 demonstrates a chart of SWOT analysis of Nike, Inc. This SWOT analysis helps to identify the strengths and weaknesses and opportunities and threats for the company. SWOT analysis of any company helps it give an idea of how it can improve its performance and where it lacks. Figure 1. SWOT analysis for Nike, Inc. INTERNAL FACTORS STRENGTHS WEAKNESSES Management The board of directors consist of people who have experience in the relevant field and have the ability to think “outside the box” The youngest member of the board is 49 and the oldest is 79. This means thate there is a lack of younger people on the board who has a fresh mind and new ideas for Nike Offerings Unique, High quality, high price products, innovative High price products may not bet suitable and affordable for all Marketing Nike is widely accepted all over the world and is known for its quality products Lack of focus on one main product and marketing is mostly for a range of products Personnel Good workforce who are experienced in what they do Belong to a wide variety of cultures, some of these workers are located in different countries and work according to their local methods. Finance Excellent growth in sales revenue Nike does not know how to manage cash and debt Manufacturing The manufacturing facilities are located in regions where raw material and labor is cheap Certain manufacturing facilities have attracted bad reputation and do not meet the international standards. R&D Applied research which costs less. Increased attention to research and development because of the need for innovation Lack of unspecified research EXTERNAL FACTORS OPPORTUNITIES THREATS Consumer/Social Corporate social responsibility practices have been developed and policies established Consumers may feel unattached because of the bad reputation of certain facilities Competitive Advertising/ promotion advantages, customer loyalty Strong competition which offer similar products at lower rates Technological Special emphasis on state of the art technology and innovation Increase utilization of technology increases the price of the product Economic Higher consumer income, capitalization of products with higher sales and income Insufficient utilization of resources, over dependency on economy of the region Legal/ Regulatory Non discriminative employment, taxes, free fair and sustainable trade Different regions with different regulations which re not properly managed, bad reputation among consumers The biggest threat to Nike is the availability of alternate shoe brands which are available at relatively cheaper prices as compared to Nike. This may to lead to a shift in consumer preference and may serve as an opportunity for the customers. However, there are many opportunities for Nike, Inc. such as there is an increasing demand for product innovation which is why Nike Inc. spends a large portion of its revue in to its R&D department. There are also chances of increase in Women’s athletes which is why Nike has recently started a campaign on promoting women’s sports. Industry Analysis: Trends in athletic industry Athletic footwear;the athletic footwear industry is the leading industry for which a number of companies deal with. In the United States, sports is quite common among individuals whether this foot wear is worn for sports purpose, fashion purpose or casually. The athletic footwear industry had a sale of approximately $27.4 billion dollars in the year 2009. However, the sales revenue has started to decline over the past 5 years (IBIS, 2010). Because the footwear manufacturing industry is on the verge of decline, the buyers are beginning to gain strength (IBISworld). Footwear wholesalers were responsible for making 36.1% of the market for the manufacturers in 2010 (IBISWorld). However, this number is also expected to falter because the retailers are beginning to gain strength. The margin which were set by the wholesalershave begun to decline because the retailers are now in direct contact with the manufacturers (Discroll) Competitors in the Athletic footwear industry The competition in the footwear industry serves as a threat for all those who deal with the footwear industry. There are many competitors in the athletic footwear industry which are more or less of the same size. These companies include Adidas, AG and the Timberland Company; these three being the largest footwear industries of the world (IBISWorld). This competition has further gained fuel in the international market due to the lower cost of labor and hence most of these companies are focusing on shifting their operations abroad. Because of such reasons companies like Nike and Adidas are competing for same locations (Nike). Other low profile alternatives are also considered as a competition for large companies such as Nike. If considering the fact that Nike has its basic operations from US and these shoes are manufactured abroad. Hence it is safe to say that a company that would institute low cost leadership strategy does not have the ability to compete with the company that has outsourced its manufacturing.Wholesalers and retailer would prefer to buy from industries in Asia or Vietnam because of them being cheap (IBISWorld). Company Analysis Since most of the footwear industries are manufacturing abroad such as Asia and Vietnam due to low labor cost. Therefore Nike ha most of its manufacturers in Vietnam, China and Indonesia and constitute approximately 42%, 30% and 26% of Nike’s brand supplies. Nike has also signed contracts with countries such as Argentina, Brazil, India and Mexico, wherein the products manufactured in this product is sold locally. Sponsorship is also an important factor to control the demand for athletic products. For this purpose Nike has sponsored a number of athletes such as Christiano Ronaldo, the tennis player Roger Federer and the Basketball Player Michael Jordan (Bidnessetc.com, 2013). Nike also utilizes a number of strategic planning and the main strategy of the company was to market and sell their products by selling innovative products to those involved in the sports and athletic fields. Nike focuses on innovation of its products and hence it places special focus on the quality of the product, it provides its customers with comfortable shoes. It also designs the shoes which are up to date and in accordance with the style and fashion that suits the needs of every consumer in the market whether it be men, women or children. Nike utilizes the latest technology in order to maintain the innovative status that it has acquired which never ceases to surprise the customer. It also enable customization for the customers who are interested in creating their own designs, this is achieved through Nike ID which gives the customer to design their own shoes based on their interests and likings(EzineArticles, 2010). Customer Analysis Customer Characteristics Typically the customers that purchase Nike products are in some way associated with sports and are young male and female athletes. But it is not necessary for someone to be a professional athlete to buy Nike products. The customers that buy Nike should have a middle income. Nike is present almost all over the world but the geographical domain is categorized into six major regions; North American, Western Europe, Eastern Europe China, japan and other emerging countries (Cheng, 2009). Nike customers are usually those that are brand loyal and enjoy the comfort of their shoes. They believe in creative mindset and also live a healthy lifestyle due to the sports and recreational activities that they indulge in. 5. Product Market Focus This section describes the five year marketing and product objective for Nike, Inc. and the target markets, point of difference, and positioning. Marketing and Product Objectives Current Market. Nike focuses a lot on it environmental factors and aims at improving the environmental effects that the company has on the society. For this purpose Nike plans on energy cuts, empowering its workers, rejection of toxins, responsible utilization of water, reduction waste and supporting communities. New Market. For future plans Nike plans on unleashing innovation for this purpose Nike plans on implanting sustainability into its processes of innovation. It also plans on revolutionizing its products and hence designs products that allow its consumers the comfort and superior performance and also reduce the impact that they produce on the environment. It plans on transforming its manufacturing process by improving the sustainability of the factory and choosing factories that prefer source over time. It also wants to implement the local culture into its products and to ensure sustainability in each and every aspect of the company (Nikeresponsibility.com, 2015). New Product. Nike plans on launching smart eye wear and fuel band which is considered as the new generation of products that are involved in the social products. With the release of this product, Nike is expanding further into the wearable industry (The Business of Fashion, 2013). Similarly there are other products which will be released in the upcoming years which will measure the performance of athletes. Target Market The target market for Nike, Inc. includes those that are mostly 18-40 years of age, irrespective of gender. These people are mostly athletic or indulge in sports activities professionally or as a hobby. Nike is for all types of socioeconomic classes but most of its consumers belong to the upper or middle class people. It also targets those people who want to look up dated with all the recent trends in sportswear. Customer Value Proposition Nike, Inc., offers athletes with sportswear which offers them comfort with a touch of the updated style and fashion trends, at the same time maintaining sustainability and innovation that the company is known for making sure that the products suit the likings of all. Points of Difference The points of difference are the characteristics that make Nike, Inc. products unique relative to its competitors. These points are as follows: Nike has a variety of products which serves all types of customers and those who indulge in different types of sports such as football, basketball, tennis etc. Nike is everywhere we see. Nike has innovative products that are not seen in any other sportswear brand. It also offers the power of customization to its customers with Nike ID. It combines sports with technology such as Nike and IPod or the shoes that record the athlete’s performance etc. 6. Marketing Program The four marketing mix elements of Nike, Inc. marketing program are detailed below. Product Strategy Product Line The three main products that are produced by Nike include sports footwear, apparel and its accessories. These products are available in a wide range of designs with different features, designs and packaging. Unique Product Quality Nike has variety of products to suit the likings of many. Many of these products are also accompanied with warranty and also offer replacement in case of any effects or problems in the product. Nike constantly changes the designs and pattern of their product so that they also remain different from the rest of their competitors. Packaging Nike also provides packaging services but this service is provided by collaborating with other brands such as selling iPod with their specific shoes ranges. Price Strategy Nike usually caters the needs of people belonging to middle class or upper class societies who have sufficient income. Hence, their pricing strategy aims at providing quality products with maximum profitability. Nike utilizes vertical integration in pricing, which helps in controlling price in the market and also affect the overall cost of the product. Production Strategy Key promotion programs feature advertising, sales promotion, public relations, celebrity endorsements and collaborations. Endorsements Nike is endorsed with a number of sports celebrities and athletes that are renowned all over the world such as football players, cricketers, tennis players etc. this helps in creating a brand image and gaining loyal customers. Apart from this Nike also sponsors sports events such as FIFA, tour de France etc. Advertisements Nike advertises many celebrities in their advertisement. It has been nearly three decades since the ‘Just do it’ campaign of Nike and it still is what Nike is popular for. The swoosh logo also plays an important role in advertisements. Collaboration Nike also collaborates with other brands to promote their own products such as iPod which is sold with a certain range of shoes. Distribution Strategy Since Nike operates all over the world, therefore it requires a multiple distribution channel which has the capacity to support the retail business Thus Nike sells through its retail stores, franchises and showrooms which ae exclusively for Nike products. Nike also provides its customers products which are bought online, the distributors also cover a large area and provide to the retailers, the factory outlets sell the products directly from thefactory and offers product to its customers at discounted rates. 7. Financial Data and Projections Past Sales Revenue Historically, Nike,Inc. had a steady increase in sales revenue. However, the data shows a steady growth from the year 2005 to 2014. Sales have continued to increase but slowly and gradually(Statista, 2015). The trend in sales revenue appears in Figure 2. Figure 2. Sales Revenue for Nike, Inc. Five Year Projection Five year financial projections for Nike, Inc. appear in Figure 3. Financial Element Year 2010 Year 2011 Year 2012 Year 2013 Year 2014 Cases Sold 10.61B 20.89B 24.12B 25.33B 27.79B Net Sales 18.96B 20.89B 24.12B 25.33B 27.79B Gross Profit selling and general and admin. Expenses 8.53B 9.42B 10.5B 10.93B 12.44B Operating Profit (loss) 1.91B 2.13B 2.22B 2.46B 2.96B Sources: (Marketwatch.com, 2015) 8. Implementation Plan Introducing Nike, Inc. to new regions is a difficult task and hence require many creative promotional activities to let the consumers know about the new areas where they will be able to find Nike products. The expected rollout schedule to enter these new markets is shown in Figure 4. Figure 4. Rollout Schedule to Enter New Markets Year New Markets Added Cumulative Markets Cumulative Percentage of Markets 2008 2 5 16 2009 4 9 22 2010 5 13 30 2011 3 15 38 2012 4 18 46 The implementation plan will be monitored carefully and strictly so as to evaluate the acceptance of the brand in these new markets. For example, certain products will be preferred more by customers of certain area wheras disliked by some. It is important to evaluate these preferances and then to deliver such products alongwith maintaining quality of the product. 9. Evaluation and Control Monthly set targets have been decided for each of these new markets. These targets will be compared to the actual sales along with tactical marketing which are altered to show the unique characteristics for each of these markets. The speed of the rollout program may have the capacity to increase or decrease in the new markets after the rollout initiates. 10. References Reuters.com,. (2015). Nike Inc (NKE.N) Company Profile | Reuters.com. Retrieved 14 June 2015, from http://www.reuters.com/finance/stocks/companyProfile?symbol=NKE.N Hyanes, E. (2015). NIKE, Inc. - Company Profile, Information, Business Description, History, Background Information on NIKE, Inc.. Referenceforbusiness.com. Retrieved 14 June 2015, from http://www.referenceforbusiness.com/history2/99/NIKE-Inc.html Help-us.nikeinc.com,. (2015). NIKE, Inc. - Nike mission statement. Retrieved 14 June 2015, from http://help-us.nikeinc.com/app/answers/detail/a_id/113/~/nike-mission-statement About.nike.com,. (2015). About Nike - Sustainability. Retrieved 14 June 2015, from http://about.nike.com/pages/sustainability NIKE, Inc.,. (2010). NIKE, Inc. Introduces 2015 Global Growth Strategy. Retrieved 14 June 2015, from http://news.nike.com/news/nike-inc-introduces-2015-global-growth-strategy Driscoll, Marie. Apparel & Footwear: Retailers & Brands. Standard & Poors, 2 Sept. 2010. Web. 2 Dec.2010. . Bidnessetc.com,. (2013). Nike Industry Analysis. Retrieved 14 June 2015, from http://www.bidnessetc.com/business/nike/industry-analysis/ Footwear Manufacturing in the US. IBISWorld, October 2010. Web. 1 Dec. 2010. . IBIS World U.S. Footwear Manufacturing. IBISWorld, 2010. Web. 1 Dec. 2010.. EzineArticles,. (2010). What Sets Nike Shoes Apart From Competition?. Retrieved 14 June 2015, from http://ezinearticles.com/?What-Sets-Nike-Shoes-Apart-From-Competition?&id=3676693 Cheng, A. (2009). Nike reorganizes into six geographic regions. (online). Available at: http://www.marketwatch.com/story/nike-reorganizes-six-geographic-regions-as .(Accessed 14June 2014) Nikeresponsibility.com,. (2015). Nike CR Report. Retrieved 14 June 2015, from http://www.nikeresponsibility.com/report/content/chapter/targets-and-performance. The Business of Fashion,. (2013). Nike’s New FuelBand and the Age of Social Products. Retrieved 14 June 2015, from http://www.businessoffashion.com/articles/fashion-tech/nike-stafan-olander-fuelband-and-the-age-of-social-products. Statista,. (2015). Nikes global revenue 2005 to 2014 | Statistic. Retrieved 14 June 2015, from http://www.statista.com/statistics/241683/nikes-sales-worldwide-since-2004/ Marketwatch.com,. (2015). Nike Inc. Cl B. Retrieved 14 June 2015, from http://www.marketwatch.com/investing/stock/nke/financials Read More