Situational Analysis for Nike Boots - Case Study Example

 Executive Summary Nike is a major sports gear manufacturer and plays a dominating role in the global markets. Nike Boots are a recently introduced product of the company and hence are not as famous as other Nike products but the brand is gradually making strong inroads into the footwear markets of the world. The price tags associated with Nike Boots are usually higher than other brands in the same product categories. But they have immense potential in occupying a significant share of the market in comparison to Nike competitors. This paper will examine the various issues pertaining to w and will conduct a situational analysis for the product in analysing and investigating the market situation, target markets, consumer behaviour, consumer trends and marketing mix situation as employed by the company. Introduction Nike is considered as the world’s most recognizable brand in sports although it is a relatively new entrant to boots that were introduced in the late 1990s. Until Nike entered the market for boots, Adidas dominated the world boots market along with other brands such as Puma and Reebok. It was certainly worth the wait for Nike since the global markets opened up during that period with the rise of economic powers such as China and India. More and more international markets are opening up as the developing world gathers financial strength with the rising purchasing power of the large middle class in these economies. Ever since the introduction of Nike boots, the company has managed to push the design boundaries with the introduction of revolutionary designs and products that were a strong alternative to similar products of other brands such as Puma and Adidas. Nike’s Mercurial boots proved to be a better option for consumers in view of their light weight and extra speed. Nike used advanced technology and materials in making the boots to look stylish and light weight and very soon they made an impact in becoming one of the fastest selling boots. A big reason for the success of the Nike Mercurial boots was its endorsement by Ronaldo, who wore them during the 1998 world cup soccer. Until 2000 Nike had introduced technological features to enhance shoe performance and used celebrities and sports persons as its spokes persons. Marketing depended almost entirely on advertisements (Puggatch, 1998). According to Young (2009), Nike now focuses on strategies that convey personal benefits associated with using its products and the values satisfied by using them. It aims at creating an image of performance, competition, achievements and at making the best efforts. The product aims at providing maximum utility, durability and performance for athletics on the one hand and self esteem, style and comfort for casual wear on the other. Nike understands that creating value for the customer is a vital source for attaining competitive advantages. For those that use the boots for sports, the product proves to be of very high quality, a great way of testing abilities and satisfaction in addition to being comfortable. For those who wear the product for casual wear, it is a common and simple attribute to attain comfort and satisfaction. Nike promotes good work culture and enforces an ethical working system in all its facilities through out the world. In frequently introducing new attributes and products, Nike improves its performance in searching for new designs and styles and customers have a wide variety of choice while making purchase decisions. By adopting these strategies Nike is able to improve its brand image and expand its market share. Marketing strategies at Nike aim at connecting with the customer without emphasizing the need to pitch directly for the product or to talk directly about the product attributes. The attempts are primarily towards portraying the core values of the sport and most ad campaigns are collaboration advertisements with other strong branded products such as the Apple iPod (McDonald et al, 2001). Marketing Mix According to Hayes (2001), Nike uses athletes to act as brand ambassadors to woo customers for its sports shoes. The company’s commercials and advertisements directly equate sports with its products. In this way consumer aspirations are addressed and customers begin to associate themselves with the brand personalities as depicted in advertisements and commercials. Nike uses brand building strategies such as promoting the concepts of sense of achievement, hard work and sacrifice as related to the products. Such actions make customers to aim at removing their shortcomings by way of motivation and drive in enhancing their satisfaction levels and sense of achievement. In keeping with these goals, Nike uses marketing mix in meeting its sales objectives as also the aspirations of different consumer segments. Market mix is considered an important element in the business world since different customers have different requirements. Marketing strategies that do not consider these parameters often suffer in terms of business failures. Marketing mix is an essential concept in present day marketing strategy and is considered as the set of tools that are controlled in blending responses in the required target markets (Kotler, 2004). It essentially implies all that the company can do in order to create a positive impact on the demand of its goods. The marketing mix strategy for Nike boots has one major function; to strategically communicate the existence and the mission of the organization amongst its customers. For Nike, its marketing mix policies provide varied routes by using communication tools in relation to its customers. Nike also uses symbolic forms of communication by way of images that convey the quality, prices and distribution channels of its products. Essentially, for Nike, the marketing mix serves not in serving individual entities but as a group of interconnected entities that must be set up in combination with each other. The best way to understand the concept of marketing mix is to consider the company’s marketing policy from the perspective of the 4 Ps of marketing. The concept was first introduced by McCarthy (1960) whereby marketing strategies included the framing of policies in regard to product, price, promotion and placement. Nike’s marketing strategy, especially in regard to boots is framed on the basis of location of its different markets throughout the world. For Nike the product is an important element in the marketing mix since it is a tangible product and can be presented in keeping with and creating consumer aspirations by using brand management strategies that make consumers to associate with the brand personality as depicted in advertisements (Kotler and Armstrong, 2004). According to Lazer (1971), product is the most important part of the marketing mix because manufacturers can display their technological expertise and hence associate with clients, which makes the product and policy strategies very significant for companies such as Nike. Market pointers such as profitability, sales and durability are also important indicators for Nike in terms of establishing an effective strategy for its marketing mix. It is for this reason that the company has in place different production strategies in different countries. The product is an important element and determinant of the marketing mix for Nike since it greatly impacts other aspects of the marketing mix such as pricing and advertising. It is correct to say that without an effective and efficient product policy Nike cannot succeed in other elements of the marketing mix. Nike understands that fixing prices for its products is not a simple process and endeavors to do so by adopting principles that attract more customers. Nike products attract customers on the basis of price and value perceived in fulfilling expectations of customers. Placement of Nike boots are done in a way that products are available to customers by adopting efficient strategies of sales, advertising and other contractual considerations. The company uses various strategies of making its products available to different market segments. Promotional strategy is the means to communicate the advantages and value of the product to the target audience. Nike uses promotion strategies through its marketing communication that caters to the need to interact between different groups of customers by way of advertising in newspapers, radio and television and bill boards. The idea is to convey messages to the target audience about the value fulfillment by Nike products (Young, 2009). Resources and Capabilities Nike uses its resources and capabilities in splitting customers in a given market into different segments and groups. In regard to its boots, Nike undertakes product designing, marketing and the over all integration of systems on its own while other functions are given on contract. Nike has also launched invention oriented ventures in several developing countries and although they have not all proved to be success stories, the company has been able to highlight the significance of such initiatives in terms of combining them with its inside out and outside in capability (Simanis and Hart, 2001). Although Nike is said to be targeting markets that the company is not very familiar with, it continues to target the middle classes in emerging economies (McDonald et al, 2001). For its boots, Nike has designed context specific products although a new marketing campaign has not been specifically designed nor has a separate distribution network been established. Instead, Nike has relied on the existing capabilities of internal performance metrics and its established distribution systems in meeting sales targets. The success of the venture has been made possible by identifying the outside internal resources and capacities that are not context specific such as the capabilities to associate with partner companies that are ready to share their technologies and expertise in order to benefit from low cost marketing. Measures have also been taken for appropriate internal performances and means of local distribution so as to enhance the company’s chances of success. Competitive and Macro Environment Situation According to McDonald and Hart (2001), companies that adopt mature marketing strategies are able to benefit to a great extent in competitive environments. In meeting marketing objectives people play a vital role in terms of planning, decision making, market segmentation, consumer targeting, positioning and pricing policies. It is essential for Nike to explore the marketing theories and practices, especially in regard to the market for boots. In keeping with the spirit associated with sports, increasing numbers of people have started to become interested in sports and related activities so as to excel and to remain healthy and fit. Such attitudes have enabled the sports industry to grow at a fast pace during the last three decades. Nike has several competitors such as Reebok, Fila, Adidas, Puma and Converse. These companies dominate the market for sports goods and are the industry leaders. The industry for sports foot wear is also experiencing rapid changes emanating from the intense competition that forces all players to be consistently in the race to be one step ahead of the others in terms of product design, style and durability as also the status that is attached to the different brands in this product category. As an industry leader Nike commands a market share of 47%, with Reebok and Adidas having 16% and 6% shares respectively (Hayes, 2000). Nike is also the most popular sports brand in the world and commands high credibility in terms of the style and durability of its sports shoes. It is in keeping with this reputation that Nike boots are gradually making strong inroads in the segment. This category of shoes is becoming popular and Nike is making vigorous efforts to enhance its profitability by using effective global sourcing practices (Puggatch, 2009). SWOT Analysis Nike is a strong and competitive global organization and adopts a healthy approach towards its competitors. Its core strengths lie in the fact that it is a lean organization in having the capability to shift its manufacturing facilities at places that offer the best economies of scale. It is strong in research and development which enables it to always offer many innovative ranges of products. Although Nike is a strong sports brand its major source of revenue is from the foot wear market which makes it vulnerable to the rigors and sensitivity of factors that could erode its market share. It is known that the retail sector is much price sensitive and most of the company’s income is derived from selling through retailers who aim at offering similar experiences to customers irrespective of the shoe brand. Consequently, margins tend to be low because retailers have the tendency to pass on maximum benefit to the customer (McDonald 2007). According to McDonald (2001), Nike has several opportunities due to its consistent efforts in product development. Moreover, consumers have the tendency to be in touch with and to patronize the latest designs to satisfy their aspirations. Youth culture makes customers to be constantly conscious of fashion which creates opportunities and potential for Nike to grab a larger share of the market in its ability to innovate and offer latest products. Nike has the potential to develop sports accessories such as sun glasses and sports jewelry which carry a high margin of profits. Nike’s strong global presence makes it possible for it to access larger markets that have higher levels of disposable incomes in markets such as India and China. There are a constant chain of global sports events which can be used by Nike to launch new products and to tap new markets. However Nike has to do away with the threats it faces in terms of being exposed to the nature of trade in the international markets. In view of its products being sold in different currencies, profit margins are not stable and sometimes losses occur since the global markets for sports shoes are very competitive. There are a large number of competitors at work to take away the market share of Nike. The retail sector is gradually becoming price competitive which implies that shoppers look for better deals in buying products that are relatively cheaper (Young, 2009). Recommendations Nike should continue to set global standards across industry lines and play a leadership role in the sports goods industry. The company should take more aggressive steps in implementing a code of conduct amongst its people so that they are better trained and steps be taken to improve the over all relationships amongst management and employees (O’Rourke, 1997). In recent years there has been tremendous increase in attempts by corporations to ensure compliance of codes of conduct in regard to subcontracting of production in foreign countries. Nike needs to strengthen its external monitoring systems by enabling the provision of accurate information about how best the company and its suppliers are acting on the code of conduct to enable best business practices. Nike needs to implement a process whereby performance is improved over time and stakeholders are assured that the company’s performance is meeting the agreed standards. Nike must ensure better cost effectiveness in view of the increasing competition and technological advancements (McDonald, 2001). Conclusion Nike is a dominating organization in the athletic footwear industry and has enjoyed tremendous and consistent success since the end of the 1990s. Nike continues to expand on sales and profits even at a time when other companies in the same segment struggle to maintain their market shares. The sports shoe market is highly competitive with relatively very few competitors, especially in the market for boots. Nike has been able to grab a large chunk of the market share in recent years through consistent efforts made over time in innovating towards better products and providing value for money to an increasing customer base in several parts of the world. However Nike needs to be ever cautious in maintaining its market share in view of the increasing competition and attempts of its competitors to grab larger market shares. Nike also needs to make some changes in the way it deals with its workers in view of different cultures in its different markets. It must devise a feasible code of conduct for employees in different parts of the world so as to make working a rewarding and satisfying experience for them. List of References Hayes Scott. (2000). The Story of Nike, Mankato, MN: Smart Apple Media. Kotler, P & Armstrong, G (2004), 'Principles of Marketing', Tenth Edition, New Jersey: Pearson Education Inc Lazer, W (1971). 'Marketing Management: A Systems Perspective' New York:  John Wiley & Sons McCarthy, E J (1960). Basic Marketing - A Managerial Approach, Illinois: Irwin McDonald, H., & Hart, S. (2001). Expanding the playing field: Nike's world shoe project. Working paper. O’Rourke, Dara. (1997). Smoke From a Hired Gun: A Critique of Nike’s Labor and Environmental Auditing in Vietnam As Performed by Ernst and Young." San Francisco: Transnational Resource and Action Center, 1997. Puggatch Todd, (2009). External Monitoring recommendation for Nike, http://www.unc.edu/~andrewsr/ints092/group1/monitor.html, Accessed on 04 October, 2009. Simanis, E., & Hart, S. (2001). The Monsanto Company: Quest for sustainability. Washington, D.C.: World Resources Institute. Young Andrew, (2009). Report on Nike, http://www.calbaptist.edu/dskubik/young.htm, Accessed on 04 October 2009. Read More