Value Strategy and the Macro Environment - Case Study Example

Value, Strategy and the Macro Environment: The Case of Nike Free 4.0 Flyknit Brand Introduction This paper is based on the value, strategy and elements of the macro environment of Nike Free 4.0 Flyknit running shoe for women. Three issues will be discussed as follows. The first one is about value creation and harm for the brand using the model developed by Porter and Kramer. The second aspect is the competitive strategy that is used for the brand. Lastly, how the elements of the macro environment affect the company and the industry in general are discussed. A. Value and Harm Creation All the value chain elements for Nike in general and the Nike Free 4.0 Flyknit brand in particular are important. This is because they either add value or have the potential to cause significant harm to the interests of the company (see appendix for more information). However, the most important element is operations. This involves all the manufacturing processes that are undertaken in the process of developing the product that is finally marketed and distributed by the company as Nike Free 4.0 Flyknit. Labour management is thus an important social issue that the company faces. This is because of its significance and strategic importance to the operations of the company. First, Nike outsources its manufacturing functions to factories in different parts of the world, particularly in Asia. Currently, there are over 1 million workers who are involved in the manufacturing of the different products of the company (Nike Inc 2014). This approach to manufacturing adds value to the brands of the company since it enables the company to manage its operational costs and effectively pursue its competitive strategy. However, the manner in which employees are treated in the factories that the company uses to manufacture its products may easily affect the reputation of the organisation. According to Nisen (2013) poor labour conditions in countries in which the manufacturing of Nike products take place have been affecting the reputation of the company. This may affect the profits of the company, customers’ perceptions toward Nike Free 4.0 Flyknit, and the welfare of the workers in the factories. In essence, the state of labour relations in the manufacturing factories that manufacture the products of Nike is a significant and strategic issue to the company. One of the ways in which Nike has responded to the issue in its corporate social responsibility programme is to audit its contract manufacturers (Nike Inc 2014). The auditing is done with reference to specific standards that are based on the need to eliminate issues such as overworking of workers, poor pay for workers and the existence of unfavourable working conditions in the factories that the company contracts to manufacture its products. This is in line with what Porter and Kramer (2006, p. 8) term as the need for business organisations to ensure that they foster positive relationships with the societies in which they operate. B. Competitive Strategy The competitive strategy that is used by Nike for the Nike Free 4.0 Flyknit women’s running shoe is based on the position of the company in the market. In general, Nike has been a dominant player in the sportswear industry for a considerable duration (Mahdi et al. 2015, p. 169). The company has managed to dominate the industry by posting higher revenues than other close competitors such as Adidas and Puma. In theory, companies that are leaders in a market pursue competitive strategies that seek to expand the total market of the products and services (West, Ford & Ibrahim 2010, p. 259). This approach is important because it is a dominant company which stands to gain a lot from a possible market expansion. Also, a firm that is dominant in a market may better placed to protect or expand its market share because of its access to resources as well as having put in place a good distribution channel (West, Ford & Ibrahim 2010, p. 260). In the case of Nike, the company has generally pursued such market leader strategies. These have been witnessed in different forms. First, the company has focused on innovation as a means of differentiating its products in the market (Nike Inc. 2015). Constant innovation has been used as a tool of ensuring that the company is able to tap into new technological developments. Through innovation, the company is able to develop new products that offer more value to customers. As well, Nike takes advantage of the brand loyalty that it enjoys among consumers to use a premium pricing strategy (Mahdi et al. 2015, p. 171). On one hand, the company manages to maintain a relatively low level of operational costs by outsourcing its manufacturing functions to different manufacturers in Asia. On the other hand, the company has managed to target customers who are willing to exhibit a high level of loyalty to its brand. The Nike Free 4.0 Flyknit is among a series of running shoes developed by Nike using a technology that eliminates the need for athletes to use socks with the shoes (Nike Inc. 2015). This approach therefore makes the product line revolutionary in that it is the first running shoe that athletes can use without having to wear socks. Additionally, the Nike Free 4.0 Flyknit is marketed for women athletes. This approach underscores the use of a broad differentiation strategy by the company. Therefore, Nike uses a broad differentiation strategy in marketing its Nike Free 4.0 Flyknit brand. The brand is marketed to the female athletes segment of the market as a highly innovative product. C. The Macro Environment According to Nike Inc (2013, p. 13), the manner in which the company is affected by the factors of the macro environment can best be understood in terms of the interaction of the activities of the company and global meta-trends. It is argued that the company seeks to maintain its sustainability strategy by focusing on turning the threats and opportunities that are created by global meta-trends into opportunities for innovation (Nike Inc 2013, p. 14). In general, an increase in the population translates into increased consumption and expansion of markets of products for different companies (Stead & Stead 2003, p. 58). In the case of Nike, an increase in the population, coupled with growing per capita income, translates to expansion of markets for the company’s products. However, increased consumption also means that the rate of environmental pollution also increases over time (Stead & Stead 2003, p. 59). Therefore, as much as the company is able to take advantage of the population increase in different parts of the world to increase its market share, it is affected by increased pollution that results from the increasing population. Changes in economic factors affect the operations of Nike in two distinct ways: the costs of production and the prospects of growth (Nike Inc 2013, p. 14). In general, poor global economic performance easily translates into increased costs of production for firms. In this case, increased production costs resulting from volatile global economic conditions affect the product value of the Nike Free 4.0 Flyknit brand. The natural environment has a considerable impact on the industry in general and Nike in particular. In the activities that take place in its value chain, the company uses different materials that are derived from the natural environment. For instance, the company uses water and energy in all the steps that are involved in its value chain. The activities include the designing, actual manufacturing of the products, their distribution to different markets and even the manner in which the products are consumed and discarded by end users. On the other hand, waste products and emissions are produced in all the activities that comprise the value chain of the company. Trends in technological developments are of great importance to the operations of Nike. In developing new brands of running shoes and other sportswear, the company relies heavily on new technologies. In particular, the development of the Nike Free 4.0 Flyknit brand was based on new technologies that enabled the designers to develop a running shoe that could be used without socks (Nike Inc 2015). Therefore, companies rely on new technologies to develop innovative products that can help them to remain competitive in the market. Similarly, political, legal and cultural issues affect the operations of Nike in different ways. For instance, the market for the products of the companies that manufacture sportswear relies on the existence of a global sports culture (Jarvie 2013, n.pag). The rise in the global culture for sports has led to its commercialisation over the course of time (Slack 2004, p. 23). Therefore, the operations of the companies that operate in this industry rely on these issues. Conclusion In conclusion, Nike uses a differentiation strategy in all its products. It focuses on research and development to develop highly innovative products as a means of expanding its share of the market. Such a strategy is common among firms that are leaders in a market, a position that Nike occupies in the sportswear market. The company has to deal with labour relations in the different countries in which the factories that handle its manufacturing function are situated. To address the issue, the company seeks to enforce standards of labour relations among its contract manufacturers. Lastly, all the elements of the macro environment have different effects on Nike as well as all the other companies that operate in the sports wear industry. References Jarvie, G 2013, Sport, culture and society: an introduction, Routledge, London. Mahdi, HAA, Abass, M, Mazar, TI & Shajua, G 2015, ‘A comparative analysis of strategies and business models of Nike, Inc and Adidas Group with special reference to competitive advantage in the context of a dynamic and competitive environment’, International Journal of Business Management and Economic Research, vol. 6, no. 3, pp. 167 – 177, viewed 9 September 2015, . Nisen, M 2013, How Nike solved its sweatshop problem, viewed 9 September 2015, via . Nike Inc. 2015, Nike Free 4.0 Flyknit, viewed 9 September 2015, . Nike Inc. 2014, Empower workers, viewed 9 September 2015, . Nike Inc 2013, Nike Inc FY 12/13 Sustainable business performance summary, viewed 9 September 2015, . Porter, ME & Kramer, MR 2006, ‘Strategy and society: the link between competitive advantage corporate social responsibility’, Harvard Business Review, December 2006, pp. 78-93. Slack, T 2004, The commercialisation of sport, Psychology Press, New York. Stead, WE & Stead, JG 2003, Sustainable strategic management, ME Sharpe, London. West, D, Ford, J & Ibrahim, B 2010, Strategic marketing: creating competitive advantage, Oxford University Press, Oxford. Appendices An illustration of the value and harm creation in the value chain for Nike Free 4.0 Flyknit brand Read More