Analysis of Nike and Reebok Companies - Case Study Example

Name: ID: Subject: Marketing Course Code: BUMKT 1501 Due: Executive Summary This report focuses on analysis of the Nike and Reebok companies. They are involved with the making of diverse products. The paper, however, is concerned with the Reebok Shoes and the Nike Jackets. NIKE, Inc. (NIKE) is concerned with design, development and worldwide selling and marketing of services, accessories, equipment, apparel and footwear. It is a seller of athletic apparel and footwear globally. Reebok is in the footwear industry. It makes shoes for the children, men and women. All categories are considered. The report discusses the microenvironment factors and the macroeconomic factors. A SWOT analysis is done for both companies. Recommendations are given after the consideration of the market segmentation, target markets, target strategy and positioning strategy. Table of Contents Due: 1 Executive Summary 2 Table of Contents 3 Introduction 5 Nike 5 Reebok 6 Product Overview 7 Nike-Jackets 7 Reebok- Shoe 7 Market Share of Nike 8 Market Share of Reebok 8 Macro-environment forces 9 Legal and Political Factors 9 Economic Factors 10 Technological Factors 10 Microeconomic Forces 11 Competitors 11 Customers 11 Suppliers 11 SWOT analysis 12 NIKE 12 Reebok 12 Segmentation, Targeting and Positioning of Nike 13 Market Segments 13 Economic Segmentation 13 Demographic Segmentation 13 Geographic Segmentation 13 Target Market 14 Positioning 14 Segmentation, Targeting and Positioning of Reebok 14 Market Segmentation 14 Demographic 14 Geographic 14 Psychographic 14 Target Market 15 Positioning Strategy 15 Targeting strategy of Nike and Reebok 15 Recommendations 16 References 17 Introduction This report deals with two companies, Nike and Reebok. They are concerned with production and distribution of various products. However, emphasis on the Nike Jackets and the Reebok shoes is considered. The aim of the report is to understand these products and their companies. The marketing and business analysis methods are used. Consequently, helpful recommendations are drawn which will aid the companies to [perform better and to be very competitive. (Amuah, 2013) Nike Nike Logo Bill Bowerman and Phil Knight founded the company in 1964 and named it as Blue Ribbon Sports, but its desire to gain victory made it to gain the name Nike. The two distributed some Japanese Onitsuka Tiger shoes at the University of Oregon. It was after the end of the relationship between Blue ribbon sports and Onitsuka Tiger that the company introduced its own line and named it Nike (Nike Inc. 2014). In 1980s, the company went public whereby it successfully profited 50% of the entire market share in the United States. The advertisement done by Wieden + Kennedy of “Just Do It” made the company more famous in the 1988’s marketing. NIKE, Inc. (NIKE) is concerned with design, development and worldwide selling and marketing of services, accessories, equipment, apparel and footwear. It is a seller of athletic apparel and footwear globally. Seven key categories are the focus of the NIKE product offerings. These are: Action Sports, NIKE Sportswear (its sports-inspired products), Women’s Training, Men’s Training, Football (Soccer), Basketball and Running. Marketing for products that are intended for recreation uses, other athletics and kids’ products are widely made. The athletic footwear that the Company makes is specifically designed for athletic use that is specific. The Company also sell accessory items, athletic bags, accessories and sport apparel. In addition, it also markets apparel with league logos, and professional team and licenced college. (Nike Inc. 2014) Reebok Reebok logo Reebok is concerned with the footwear market which covers a wide variety of materials (leather, rubber, plastics and textiles). The products are made for men, children and women. It was in 1890, when the shoemaker Joseph William Foster came up with the best-known running shoe that had some spikes and would allow athletes to run faster than they used to do. The name Reebok was developed after a type of African gazelle or antelope. After the success of producing the spiked running shoe in 1895, Foster joined hands with his son and later founded a company known as J. W. Foster and sons. The two sons of Foster, Jeff and Joe renamed the company ‘Reebok’ in the United Kingdom just after getting the name from the dictionary that was won after a running race by Joe Foster and it was a South African edition (Reebok International, Ltd. 2014) Product Overview Nike-Jackets Samples of the Nike Jackets They are the men and women wear that are manufactured at different sizes and different colours. The Nike jacket was designed as a sport wear, but it is currently won in different events. Most of the Nike air max Jackets are won during cold weather because they are heavy and well styled to prevent cold (Nike Inc. 2014). Reebok- Shoe It is a pair of shoes designed for sports, but people wear it even in other occasions. Its style and fashion of the Reebok shoe aim at being won during the sport outdoor activities where the athlete require good and comfortable footwear. The shoe is designed, such that it prevents the athlete from developing foot problem during the sports (Reebok International, Ltd. 2014) Market Share of Nike There is a strong market performance of Nike across all geographies, product types and divisions of this American sportswear company. A major contributing factor to the realised success is the company’s brand apparel division. Behind the footwear division, this forms the division forms the second largest contributor to Nike’s valuation. There is a large market that Nike has in sports apparel and accessories that exist in different categories. Also included are the athletic bags and sports-inspired lifestyle apparel under the brand of Nike. Apparel basically entails belts, tops, skirts, socks, shorts, swimwear, inner-wear, sweaters, t-shirts, pants, caps and jackets (Mann & Byun, 2011). Nike enjoys a global market especially among them that fancy sports-inspired apparel being children, women or men. The estimation is that the market of sports apparel will grow at a 4% rate through 2019 reaching a total value of $135 billion. The company has outpaced the industry –wide growth by having a higher growth of 12.3% through the year 2010-2013. There is very high likelihood of Nike’s growing at a higher pace. This is as aided by the enhanced marketing activities, superior market position and an innovative product portfolio. (Urde, Baumgarth & Merrilees, 2013) Market Share of Reebok Reebok enjoys the largest market share in India. The global presence of Reebok is, however, more limited than that that of Nike. There are efforts towards usage of high-impact billboards as a key outdoor campaign that ensures competitiveness in the key runing markets of Bangalore, Delhi and Mumbai. Reebok is considerably the second leading manufacturer of footwear. It has a market share of 16% and domestic revenues of $1.28 billion. Manufacturing of products is done throughout Asia while outsourcing strategy is applied just as it is with Nike. The manufactures have been granted a specific code of conduct to abide by. They, however, lack an extensive global infrastructure for enforcing it. Air quality issues, overtime and wages are some of the areas that they are facing scrutiny over. There are constant efforts that are developed towards the achievement of a harmonised effect in these issues. The outsourcing of their production, focusing on core competencies and the creation of a global brand is the focus of Reebok in the market. (Luo, Sun & Wang, 2011) Macro-environment forces Legal and Political Factors The industry of clothing and footwear is affected by issues such as child labour laws and worker’s rights. The union workers in these industries may picket their employers. This may be so especially where their medical benefits and also their wages are not as favourable as those of the members of related industries. This will have in various activities such as production which may result in delays. This can be very critical especially where concerns like need for quick fashion adjustments are being demanded. The activists may also strongly intervene like in the case of retailers who are not careful observers of the child labour laws. This may result to a publicity that is negative which in return negatively affects the profits made reduced sales. In addition, a trade embargo against the imports of another company may result to the wholesalers in this industry to look for other suppliers. (Miner, 2011) Economic Factors There is more disposable income available to people during the economic boom periods. The retailers, wholesalers and manufacturers will record increased sales in these times due to the increased demand. The recession periods, on the other hand, have contrary impacts. There may be a lot of inventories that the retailers have due to the significantly low amounts of sales that is achieved. This may call for making sales at a substantially low price which causes the profit margin to be very constrained. The more generic brands may cause the retailers and the manufacturers to sell brands that are lower-priced so as to enhance competition. The consumers will usually go for cheaper brands in the event of having less disposable incomes. Another economic factor here is the provision of employment. Nike and Reebok provide employment opportunities to very numerous people globally. (Coleman, 2013) Technological Factors The internet is a fundamental consideration when the technological factors are considered. There are available social networks and websites which have made communication easy. The link between the customers and the industry has been well established. The advertisement made by the industry on various products and services as well as valuable information that need to be passed on are conveniently relayed by the use of the internet. The online services like online purchases and customer care have been made highly attainable. Nike and Reebok has therefore had high standard customer service keeping them in the lead in the market and allowing them to have an advantage over their competitors as they make of these platforms. (Petrie, 2011) Microeconomic Forces Competitors Nike and Reebok are competitors. Other included competitors are; Under Armour, Li Ning, Puma, V.F. Corp. and Adidas. Nike has the largest market share being the largest seller of fashion footwear in the world. Reebok has a strong hold in the US market and sponsors various sporting activities such as NBDL, WNBA, NBA and NFL. In order to compete favourably, Nike and Reebok have progressively integrated into their operation premium, high comfort and fashionable products. There are new designs that are set out in an effort to continually maintain the large market share or to expand it where necessary. Nike Inc. (2014). Customers To maintain a customer loyalty in the industry that is sustainable, these two companies have special attention that is given to their customers. This helps to maintain a proper balance in their tastes and preferences. Production that is sensitive to the fashions changes are of very key concern to both of the companies. The level of demand by the customers is what determines the effectiveness of the company and their profit margins. The product management has been pivotal which helps in the understanding that is very primary in the development and launching of new product to the market. The initial perceptions that the company engages in in relation to the customers is of great importance. (Viot, 2011) Suppliers Nike and Reebok have very many suppliers which come through a bid process. This helps in bringing assurance to the quality of the products as the suppliers compete with each other. The suppliers might have a limited number of customers which limits their bargaining power. The relevance that they have in the industry is, however, very high considering the fact that the tastes and preferences of the various brands that are released keep on changing. There is also a high level competition in the industry. This makes the companies to look for the best of the supplies for them to achieve a high quality mark in their production. (Lee, 2013) SWOT analysis NIKE Strengths Innovative product portfolio Superior market position Enhanced marketing activities Several top sportsmen around the world who are brand ambassadors Weaknesses Scrutiny on wages, overtime and quality issues Opportunities a large market that Nike has in sports apparel and accessories that exist in different categories e-marketing Threats Changing tastes and preferences demanding immediate changes of the fashion and styles High level of competition in the industry Reebok Strength Established outsourcing strategy Creation and distribution of a global brand Weaknesses Scrutiny on wages, overtime and quality issues A weaker global infrastructure of enforcing to enforce the manufacturers code of conduct. Opportunities Ability to have expanded global presence as the focus is directed towards production outsourcing and core competencies. E-marketing. Threats High level of competition in the industry Changing tastes and preferences demanding immediate changes of the fashion and styles Segmentation, Targeting and Positioning of Nike Market Segments Low, medium and high end customers are the market segments that NIKE can mainly differentiate. Geographic, demographic and economic differentiations are, therefore, fronts of segmentation. Economic Segmentation The low, medium and high end customers who are equally associated with the low, medium and high income levels respectively. Demographic Segmentation The company can segment the market into class, gender and age segmentation. The jackets are specially made for the ladies and for the men. Geographic Segmentation The geographic segmentation of the company is global. The capital cities and other commercially established locations in the world countries are considered. Target Market The company targets the market on the basis of equity and brand image in the different markets. The 16-55 age brackets with a pan Indian location is therefore the target market comprising of high-end, high income level category. This target market is very essential in the differentiation from the competitors i.e. Fila, Puma, Fila, Puma and Reebok. Positioning Nike has been acknowledged as a provider of high quality products granting designs, quality and service. This grants customer satisfaction that in turn yields loyalty. This helps the company to attain high volumes and profitability. Segmentation, Targeting and Positioning of Reebok Market Segmentation Demographic The company mainly targets the customers across all ages. The mid to high income that has an attachment to sports forms a very important customer base. Geographic The focus is on the capital cities and other main cities globally. This allows penetration to the local settings through these locations. Psychographic Reebok usually targets the middle and upper class people who love sports. This group has their tastes and preferences inclined to the fashion and the current trends that are prevailing in the market. Target Market As it is with Nike, the company also targets the market on the basis of equity and brand image in the different markets. The target market comprises of high-end, high income level category. This target market is very essential in the differentiation from the competitors. Positioning Strategy There are various positions that the companies in the industry are at a position of placing thin the mind of their customers companies. Fashion and quality are major factors in this consideration. The need to be sporty is also considered. Targeting strategy of Nike and Reebok Undifferentiated marketing strategy concentrated marketing strategy and differentiated marketing strategy. Nike and Reebok uses differentiated marketing strategy whereby different target groups or segments are considered. The economies of scale that these two companies enjoy are high. This helps them to get over the niche markets as the need of other smaller companies may dictate. The target of the Nike jacket and the Reebok shoes goes beyond strictly focusing on one particular group. Nike Target Market (Nike jackets) Target Market (Reebok Shoes) Demographic Ladies and men (20-45) Majorly the middle age of middle to high class Geographic Capital cities and other major cities globally Capital cities and other major cities globally Psychographic high quality products granting designs, quality and service Fashionable and quality products Recommendations The two companies, Nike and Reebok can increase their product lines in order to become more competitive. The integration of technology in all the operations will greatly enhance this. This will help in the expansion of the research by the marketing team on the trends in the in the industry and matters [pertaining to the tastes and preferences that is attainable. The effect of this will be to enhance the loyalty of the consumers which brings about high sales and high profits are achieved. To enhance sustainability, there will also need to be an extra set of operation in the corporate social responsibility endeavours. This has been achieved greatly in the set out of the sponsored activities by these companies especially those linked to sport. However, there need to be an expanded reach towards other sectors especially in consideration that they have a wider base of customer reach. In order to deal with the challenge of Scrutiny on wages, overtime and quality issues, the framework of management and operations need to be harmonised. This will ensure that the focus is primarily on the achievement of the set goals of the company without digression. References Amuah, H. B. (2013). Leveraging On Global Positioning And Product Design To Improve Brand Performance. Available at SSRN 2245115. Coleman, C. A. (2013). Classic Campaigns-" It's Gotta Be the Shoes": Nike, Mike and Mars and the" Sneaker Killings". Advertising & Society Review, 14(2). Lee, J. (2013). U.S. Patent No. D676,643. Washington, DC: U.S. Patent and Trademark Office. Luo, Y., Sun, J., & Wang, S. L. (2011). Emerging economy copycats: capability, environment, and strategy. The Academy of Management Perspectives, 25(2), 37-56. Mann, M., & Byun, S. E. (2011). Accessing opportunities in apparel retail sectors in India: Porter's diamond approach. Journal of Fashion Marketing and Management, 15(2), 194-210. Miner, M. C. (2011). U.S. Patent No. D642,362. Washington, DC: U.S. Patent and Trademark Office. Nike Inc. (2014). About Nike, Inc. Retrieved from; http://nikeinc.com/pages/about-nike-inc Petrie, J. G. (2011). U.S. Patent No. D636,582. Washington, DC: U.S. Patent and Trademark Office. Reebok International, Ltd. (2014). Company Overview of Reebok International, Ltd. Retrieved from; http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=299640 Urde, M., Baumgarth, C., & Merrilees, B. (2013). Brand orientation and market orientation—From alternatives to synergy. Journal of Business Research, 66(1), 13-20. Viot, C. (2011). Can brand identity predict brand extensions' success or failure?. Journal of Product & Brand Management, 20(3), 216-227. Read More