Techniques and Theories of Marketing Applied by Nike - Case Study Example

Content Executive Summary 3 Introduction 4 Purpose of the report 4 Company Overview 4 SWOT Analysis 5 BCG Matrix 7 PESTEL 8 Porter’s Five Force Model 11 4 P’s of Marketing 12 Ansoff Matrix 13 Buyer Behaviour 14 Customer Value 15 Competitors 16 Competitive Advantage 16 Findings 17 Conclusion 18 Recommendations 18 References 19 Executive Summary Nike is a leader in the athletic industry and offers the customer a wide variety of footwear and apparel to choose from. The launch of running shoes for men is slowly becoming successful throughout the globe as the comfort level associated with this is high. Nike has grown over the years and this can be altitude to the strong policies and marketing theories that the company has developed. Nike has been successful in the implementation of various tools of marketing which has ensured that they continuously innovate and stay ahead of others. This report explores the different techniques and theories of marketing applied by Nike and how it helped to develop the company and evolve with products like the running shoes for men. The SWOT analysis helps to identify areas where Nike has worked to achieve the desired result. The BCG matrix shows the earning potential and where their products are placed. The PESTEL helps to define the environmental factors. Porters help to find how the external factors are influencing Nike’s decision. Making similarly the 4P’s and Ansoff matrix tells more about the product. The buyer behaviour and competitive advantage explain the relevance of the theories. The findings and recommendation thereby explain further steps that will help Nike stay ahead. Introduction Nike is a world leader and dealer in sportswear and equipment. The company is based in United States. The company began in 1964 and since then it has grown to become the major power in sports wear. The company deals in different sportswear depending on requirements. Nike running shoes for men is a major success and the company has promoted them well. Those shoes are used by athletes and the company has seen a surge in demand for it. The report will help to find the different advantages the company has with these shoes and how it was able to integrate the marketing theories and techniques for the benefit of the organisation. Purpose of the Report Identify the different marketing techniques and theories implemented by Nike and how successful they are Identify the value offerings for Nike running shoes for men and the SWOT the company has Identify the Porter five forces and their result and how the environmental factors are affecting the performance Company Overview Nike has been in operation since 1964. Nike is a “international brand company that designs footwear, and clothing of high range for athletic and leisure activities”. (Company Website, 2010) The company today is a leader in premium shoes and apparel. The success of the company can be attributed to the fact that “innovative management, research and development and understanding of the customer needs and market” (Company Website, 2010) contributed towards identifying the potential market and developing it. The companies’ range of shoes has been a huge success. Nike shoes used for running by men continue to gain popularity. The company policy of expanding the product line and ensuring customer loyalty has helped them stay ahead of their competitors. (Company Website, 2010) The continued success of Nike is therefore driving the company to enter new markets. SWOT Analysis The analysis of SWOT will help to identify how Nike based on its strengths and weaknesses was able to use different marketing concepts and the result it yielded for the company. The SWOT reveals: Strengths Nike has a broad range of sports products like shoes, footwear for ladies and gents which gives it an opportunity to continue to grow. It is a global brand which makes the customer recognizes the brand easily. (SWOT, 2010). It has a strong research and development wing which is helping Nike to continually come up with new products. It has a strong marketing campaign (Adam, 2009) which is lead by top athletes giving them an opportunity to utilize by advertise the product them. “Ability to source material from the cheapest source” (Adam, 2009) at the same time ensuring quality. Contract manufacturing has allowed Nike to invest very little in fixed assets thereby giving it more liquidity. Weaknesses Too much dependence on footwear segment for the profits despite having a diversified range of sports product. This is a concern for Nike. “The market is very price sensitive” (SWOT, 2010) which is making it difficult to retain customers as customers switch brands frequently. Opportunities Wide range of product offering the company the opportunity to market it as a luxury brand Opportunity to move into other areas like “sports wear sunglasses and jewellery” (SWOT, 2010) which will give them room for growth Opportunity to move into other markets as the brand has a renowned name Threats “Risk of currency fluctuation” (SWOT, 2010) as the company operates in different countries so there is a high risk that the value of currency fluctuates causing Nike to valuable profit. Intensified competition in the sportswear industry from Reebok, and other brands. “The segment is price sensitive” (SWOT, 2010) thereby making companies reduce the price when a competitor does so to retain customers The global recession is a concern as people postpone their expenditure on luxury items (Adam, 2009) which has caused sales to dwindle BCG Matrix The SWOT analysis helps to identify the BCG Matrix for Nike. It helps to find areas where the company needs to focus. It also identifies the sustainable competitive advantage for Nike. It is shown as follows: Market Growth Rate Stars Question Mark Running shoes for men Foot wear Apparels Cash Cows Dogs Relative Market Share Here, we see that footwear and apparel contribute the most towards the revenue and is the cash cow for the company as where the running shoes for men as a growing sector is a question mark because if the company follow a proper strategy it could become a cash cow or it might not. (Anweshabh, 2010) Nike, thus, has an advantage to move up which is seen in the GE Matrix. PESTEL Analysis The PESTEL analysis will help to explain how these factors have been included in the marketing strategies of Nike. It will also throw light on the effectiveness of the marketing concepts and theories that have helped Nike. The analysis is: Political The production and marketing strategy of Nike is affected by the political conditions prevalent in different countries where it is operating. The production was hampered for Nike when there was “a strike in the dock due to wage rise”. (Mullins, 2004) This caused huge stock to pile up. As a result, sales plummeted. Nike due to this had look for alternatives thereby affecting their strategy. Nike production also was hampered due to political unrest in India as Nike relies on India as it is a cost efficient products producer. (Mullins, 2004) This caused the strategy to go wayward and changes were needed. Nike was also affected by religion issues. This caused prices to shoot up and sales fell down. Their strategy backfired and the company was facing difficulty. Economic The strategy is also gets affected by the economic conditions prevalent throughout in the following. “Slowdown in an economy” (Mullins, 2004) like the recent global recession has caused sales to fall. Despite the company looking for different marketing strategies, sales are not increasing. Nike performance also was affected “due to consumer confidence in the economy as e started to believe that it will take time for the economy to come out of sluggishness”. (Mullins, 2004) This affected the overall growth trajectory The growth was also hampered and strategies were rendered useless due to barriers of entry into the European Union. This affected the strategic thinking process and entering into different markets became difficult. Social Nike strategies are also affected by the social culture. This makes the company use different marketing concepts and theories in different countries: “Change in the buying habit of consumer” (Mullins, 2004) has increased the sales of shoes used by men for running as people have become more health conscious Change in generation as the Y generation prefers a different types of footwear (Mullins, 2004) has brought a change in the way production is done and this has changed the concepts and theories used by Nike Technological The change in technology has enabled Nike to bring about a change in marketing theories used previously and now as: The changes in the quality, design and appearance of shoes for men have undergone a rapid change (Mullins, 2004) thereby making more people purchase them. This has also changed the buyer behaviour towards them. Environmental The changes in environment have led to Nike changing the concepts it was using before as: The ability to reuse a shoe by recycling is giving Nike the option of changing the marketing concepts applied before The changes in climate due to global warming have increased the role of Nike towards society by ensuring that pollution levels fall. (Mullins, 2004) This has made the concepts and marketing theories undergo change and look more into the social responsibility aspect Legal This also brought about a change in which Nike performed as it changed the concepts like Workers threatening to go on strike because they are paid poorly (Mullins, 2004) is making Nike look for alternatives of production and ensuring equality for all. “Entering into trade agreements” (Mullins, 2004) which was not seen as a great measure previously is being employed widely by Nike to ensure swifter marketing tactics and growth Porter Five Force Model The analysis of this model for Nike will help to explain how the different factors are exerting pressure on Nike and how the different marketing concept like the Porter Five Force Model is helping Nike to understand the benefit this model is giving them. Threat of Potential Entrants Nike faces threat from Reebok as the company is entering with a similar portfolio as Nike thereby intensifying competition. New entrant from the Far East who has similar shoes as Nike and are a copied lot (Rowley, 2005) Bargaining power of buyers Nike has seen a “change in the taste and preference of buyer behaviour” which has affected their bargaining powers especially for shoes. (Rowley, 2005) There has been a growth in women’s purchasing shoes which is acting as a contributor towards their bargaining power Availability of Substitutes There has been a growth in the availability of shoes used for leisure activities which has changed the way Nike operates in the shoe industry especially shoes used for running by men. There has been little or no change in the shoes for professional activities but it doesn’t form a core activity for Nike so the contribution is negligible. Bargaining powers of Suppliers Nike by producing goods in the Far East had the cost advantage but slowly with labour demanding more wages and prices all around the globe this has increased the bargaining powers of suppliers. Also this is making Nike look at a different alternative to ensure that bargaining is reduced but with limited success Rivalry among firms The rivalry has increased as Reebok is offering more variety and endorsement by sports personalities and this has hampered Nike. The intensifying rivalry is making companies replicate other very quickly Rivalry is also faced from Adidas who has improved its product line thereby intensifying more competition. 4 P’s of Marketing Product (Developing Value Offerings): The product offered by Nike is of high quality and durability. They offer a wide range of shoes, apparel and equipment mainly for sports athletes. (Cuizon, 2009) Nike running shoe for men is aimed at the athletes who run professionally and also for amateur people who simply jog in the morning and afternoons. Nike shoe have been designed to ensure that it is light while at the same time provides comfort while the user is running. Pricing (Capturing Value): The price set by Nike is competitive and matches with the price set by other manufacturers. The pricing is for the premium segment. Nike has ensured that even the shoes used for running by men are “priced in the premium segment” (Cuizon, 2009) as it is their target market and is based on the strategy that has been developed. Place (Delivering Value): Nike has ensured smooth delivery. This has been done by ensuring that Nike’s shoes are available at Nike “own brands and exclusive showrooms throughout the globe”. (Cuizon, 2009) It has more that 20,000 outlets. Nike is present in around 200 countries. The company has a solid pool of distributors and independent agencies. Promotion (Communicating Value): The Company has stressed on promotion. In store promotion is used as a weapon and along with it paper space and also advertisements where they use athlete to promote the product. Various athletes from the failed of football have endorsed Nike. This ensures that Nike is able to market the product accordingly. Ansoff Matrix This tool is a very handy one that Nike is using as it helps to discover their strategy. It also helps to give Nike a competitive edge. Nike can ensure that it uses the Ansoff Matrix findings successfully. It will help to deal with the future requirement and develop the marketing programs based on it. This will make Nike gain advantage and grow. Product Market Market current New current Market Depth Product growth Supporting its footwear product line Promoting its new running shoes for men to attract athlete and other users Developing new shoes and apparels both for men and women latest Market Development Diversification Sell Nike shoes and other products in new market to tap the opportunity and grow Entering into trade agreements with suppliers and dealers to ensure steady supply It can be seen that the above plan is helpful to determine the buyer behaviour which can guide in drawing the future development Buyer Behaviour Because of the opposition, it is becoming difficult for the companies in the sports retail market to influence the consumer's choice. Their choice depends on “various factors which influences the manner in which the buyer behaviour is governed” (Kotler, 2001). The buyer behaviour thus gets affected by the following: Buying Behaviour being complex: providing more information is required by companies to ensure maintaining their customers (Kotler, 2001). Such strategy is applied quite well by Nike through the constant informing their customers about different products, the features and ability to reach the higher level of comfort. Reducing Dissonance Buying Behaviour: “Ensuring customers don’t leave the product by ensuring quality” (Kotler, 2001). This clearly has been achieved in Nike by producing a variety of shoes and apparel that are comfortable and acceptable for different occasions. The variety in the shoe, like the shoe used for running for men and shoes for football and similar other products ensures that the customers have different options. Buyer behaviour directed towards variety: “Ensuring different variety so that customer remains loyal”. (Kotler, 2001) Nike has done it by having different type of shoes and apparel for different sports. To ensure loyalty special offers and programs are offered. Habitual Buying Behaviour: “Ensuring that the customer base increases and it’s on a regular basis”. (Kotler, 2001) Nike for this has continued with the base model in shoes and at the same time coming up with new innovative ones so that the regular customers find a shoe of their choice. Pursuing, this buyer behaviour pattern is helping Nike to understand the customers and come up with products accordingly. Customer Value The customers value the products of Nike highly. “Customers get the desired product with regard to quality, comfort, durability and price as an offering from Nike”. (PR Newswire, 2000) This is making the customer get value for money. Also, while comparing with the other brands the customers get a larger variety to choose from. The customer value increases can also be judged from the “presence of Nike in over 200 countries”. The customers using Nike products find them more comfortable and are ready to pay extra because of the brand created by Nike. Thus the users of Nike value their products highly and the comfort level makes the customer repeatedly purchase the product again and again. Competitors Nike faces stiff competition as the market is slowly getting concentrated. Nike faces competition from Reebok, Adidas, and Fila to name a few. Each of the competitors offers similar products with very little differentiation thereby increasing pressure. The shoes offered by all are very similar and all these companies work on similar business models which is making it easy for the customers to switch from one company to another. This is making Nike come up with different varieties and the need to improve the research and development is strong. All the competitors have followed soon what the others perform “leading to duplicity and similar products being sold under different brands”. (Koranteng, 1999). The company also faces competition from the local players. They replicate the design provided by Nike at a lower price thereby hampering the goodwill and reputation of Nike Competitive Advantage Nike has a comparative advantage compared to others. A research was conducted which highlights that Nike ranks number one followed by Adidas, Reebok and Fila and this research was based on certain parameters such as marketing mix, mission statement, marketing strategies and website stickiness to evaluate the customer preference for shoes based on it. (E-marketing strategy, 2002) The results are as follows: NIKE.COM REEBOK.COM ADIDAS.COM FILA.COM MARKETING MIX 1 2 3 4 MISSION STATEMENT 2 1 3 4 MARKETING STRATEGIES 1 4 2 3 WEB SITE STICKINESS 1 4 2 3 Total Score    5    11    10    14 This shows that Nike has the best marketing mix, marketing strategies and website stickiness which have enabled it to retain customers. (E-marketing strategy, 2002) This also shows that the different marketing theories and techniques employed by Nike have worked to their advantage. Findings Nike has been successful in establishing itself as a brand and have used various marketing concepts and theories to its advantage Nike needs to increase its marketing and sales for shoes for running for men so that it can be a cash cow for the company Nike needs to ensure that they continue with the same innovation and research towards development of product as the sector has intensified competition. Nike needs to ensure that the target market demands are met and needs to move to other countries to expand their reach The Nike running shoes for men needs to be advertised more promptly so that awareness spreads Nike, having an advantage of being a cost provider, by out sourcing the shoes to be manufactured elsewhere, has ensured that the management has less assets. Conclusion Nike t has been able to use many marketing concepts and techniques in their business model. This has helped them to achieve the target sales and grow consistency. Nike, by promoting their product vigorously has ensured that customers remain loyal. The company has outsourced the production function but has ensured that the production quality hasn’t suffered. The company has high quality standard which has ensured that it grows and expands rapidly. Recommendations Nike needs to promote its running shoes for men so that more people become aware of them. Nike needs to innovate more and come up with more variety of shoes and apparel as the industry is becoming more concentrated. Nike needs to move into different production lines like jewellery and other sports equipment so that their reliance on footwear is not their sole focus. References Adam, (2009), “Nike SWOT Analysis”, retrieved on April 15, 2010 from http://www.soopertutorials.com/business/strategic-management/3379-nike-swot-analysis.html Anweshabh T, (2010), “Differentiating the dogs from the stars”, BCG Matrix, Blue Water Press Cuizon G, (2009), “Audit on Nike’s Marketing Strategies”, the 4P’s of Marketing, Suite 101.com Company Website, (2010), “Nike Website”, retrieved on April 15, 2010 from http://www.nikebiz.com/ Kotler P, (2001), Marketing Management, page 201, 11th edition, Prentice Publication, Upper saddle River, New Jersey Koranteng J, (1999), “Reebok takes early lead in competition”, Advertising Age International, Volume 24, Issue 37, page 63-71 Mullins K, (2004), “Critically examine the main drivers for Nike’s growth”, Free Press, New York PR Newswire, (2000), “Nike selects critical mass to bring Nike iD to the next level”, www.prnewswire.com SWOT, (2010), “SWOT Analysis Nike Inc”, Marketing Teacher Ltd, retrieved on April 15, 2010 from http://marketingteacher.com/SWOT/nike_swot.htm Rowley T, (2005), “Porters Five Force Model”, Prentice Hall, Pearson, Harlow Read More