Nike Inc Case Study

Company Analysis: Nike INC

Prepared for: Professor Douglas

Prepared by: Olga Palijcuka

November 10, 2016

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Company Background

History, Size & Growth

In January of 1964 Blue Ribbon Sports was founded by track athlete Phil Knight, and his coach Bill Bowerman. Their first sales were at track meets, out of the back of the car and in their first year of business they sold 1,300 pairs of shoes grossing $8,000. 1966 still under the BRS name first store was opened in Santa Monica, California.

In 1971 BRS’ relationship with Onitsuka Tiger was coming to an ending, and soon their own line of footwear was created bearing the “Swoosh” which was later registered with the U.S. Patent and Trademark Office. By 1980 Nike acquired 50% of U.S athletic shoe market and went public by the end of that year.

Throughout the 10 years in business as Nike, it expanded into various regions of the world as well as developing their product line, entering many different sports. Their revenue grew significantly by year since 2010, starting at $6.7 billion U.S. dollars. Currently just the footwear revenue is estimated at 8.5 billion U.S. dollars. Nike expanded into athletic apparel and sporting equipment and became the most known brand as well as the most recognizable logo around the world. The highest registered TTM was during the year of 2015 at 81.21%. Growing their customer awareness through heavy advertising has significantly increased and promoted brand activity throughout the world. (Nike, Inc. Success Story. (n.d.).

B. Segmentation Chart

The primary segment for Nike is the fastest growing Women segment with athleisure wear becoming more popular and acceptable in daily life of working people. During the year of 2015 Women’s segment including youth grew 15% in sales leaving it the highest growing demanded section. Nike focuses on empowering women by creating digital advertising that identifies with self-motivated and focused women. Nikes’ mission is to make people that aren’t involved in sports feel like they belong to the professional athletic segment of the world. Women are highly involved in fashion trends making Nike the perfect option since its’ largest world known brand, accompanied by comfort and functionality for sports or everyday athleisure life style. Nike is leading in developing new product and well strategized marketing campaigns are highly effective amongst new generation of social media and technology aware female consumers. ( 2015, Yahoo Finance)

Professional Athletes remain the reason for creation of Nike, the mission statement of the company and focus changed and evolved over the years trying to include regular working class people around the world and create the feeling of being athletic. Athletes that are recognized across the globe is the most successful marketing strategy for Nike. Brand awareness grows as leading athletes rely on functionality of Nike developed products, and show off their personal style during competitions, making people want to seem as involved in the sport like the professionals. Therefor Professional Athletes are not the main revenue contributors but play a huge role in marketing strategy attracting the main customers.

C. 4P’S

Product

• Nike offers plethora of different shoe models for different use, improving it each year and creating new trends for fashion statement. Shoes and Apparel are the leading products of Nike generating just under $13 billion US dollars in revenue in 2015 and responsible for 22.9% of worldwide footwear market share as a company on its own. (Statista, n.d.) Chart below offers very basic understanding of the type and use of products that are offered by Nike for consumers of different needs.

• Tennis, Basketball and Football (soccer) have exclusive lines of apparel and footwear carrying the name of world champions in that sport. This attracts consumers and gives them reassurance when purchasing, leaving them satisfied knowing that the brand is used by top athletes that trust Nikes’ design. (Nike Official Site Canada n.d.)
• Nike also offers technology infused footwear that tracks and keeps record of consumers’ activity. This technology was exclusively offered to Apple owners, but now with other brands developing it became accessible to users of other platforms and devices. Tracking technology was made in mind to personalize and connect to consumer on a deeper level, with both Nike and Apple being reliable, trusted and well-known brands creates potential and huge opportunity within growing digital sports market. ( Elaine., 2016) Recently Nike introduced a new line of self-lacing shoes that they believe will start a new era of athletic footwear. It has the ability to boost prices of the company and take back the shares that were lost to Adidas and Under Armour. Bells, S. (2016, October 3)
• Nikes’ marketing strategy creates customer loyalty by using consumers’ dependency on the technology that is exclusive to Nike. Customer who enjoys tracking their activity, uploading it online, sharing and competing online with score makes it difficult for them to pick any other brand for future use even if it provided more comfort or made more sense price wise. And on the other side Nike collects and uses valuable for them customer information that expands their research ability to create demanded product and be ahead of them game with other brands. (Towers., 2011)

Price

• Nikes’ footwear varies in price depending on the functionality as well as release date of the product. Price can start anywhere from average of $60 to $200 for a pair of shoes. Since Nike is the leading brand in sports wear it generally has higher prices than other brands selling same product. In 2014, the company successfully increased its selling prices and generated higher sales and revenues. This trend continues, as the firm enjoys increasing sales revenues while gradually increasing its prices. (G. L., June 5, 2016)

• Since Nike’s a well-known and reputable brand most people don’t mind paying top dollar for the products. This allows Nike to target the desired medium to high income share of the market and maximize profits. Nikes’ strategy wouldn’t work without brand equity, value of the product derived from consumers’ perception of the brand.
• Nike also offers high end products that are exclusive in quantity and availability, and are purchased by collectors. Those items can be priced anywhere from $1,000 to $8,000 like “Nike Dunk High Pro SB ‘Flom’” (Top 10 Most Expensive Nike shoes,, 2016)

Place

• Nike Inc. highly relies on retailers to sell their product, through various category specific store like National Sports and Spot-check, Footlocker, JD sports and Intersport. (P. Soni.,2014) They successfully operated over 1000 Nike retail stores across the world during the year of 2016. (Statista Total number of Nike retail…, n.d)
• Nike offers all of the products in one place on their official online store which is easily found accessed by all consumers. As well they have Nike Town retail outlets which offer cheaper than other retailers prices and sometimes sell discontinued or hard to find models.
• Nike has branch offices and subsidiaries in 51 countries which allows it to precisely control distribution and lower expense costs.
• Nike has one of the best industry-defining outsourcing manufacturing strategy. Nike factories are located in low developed countries like China, Vietnam, Indonesia and Thailand offering lower rate of production through lower than average wage cost.  

Promotion

• Nike is well known for being associated with celebrity athletes like Cristiano Ronaldo (soccer player), James LeBron and Michael Jordan (basketball players) who have a whole line of exclusive shoes and clothing with their name incorporated throughout. Nike spent over $8 billion dollars signing endorsements since 2002, which makes this company well known just for that reason alone. (Isisdore, C.,2015, June 5)
• To provide some comparison during the year of 2015 Nike spent $3.3 billion dollars on their marketing activities while their competitor Under Armour barely made it to $ 4-billion-dollar mark in sales. This gives some understanding on the financial gap between Nike and its’ direct competitors, which have a long journey ahead to be anywhere near Nike. (B.D. June 28, 2016)
• Nike recently increased their marketing budget for the third quarter of the year by 10% bringing it to $804 million dollars. The reason behind this, is the new focus on Women’s sportswear that they are forecasting to become an $11-billion-dollar industry by the year of 2020. (Ghosh, S., 2016)
• About a year ago Nike began experimenting with digital marketing, when they introduced You-Tube only series called “Better for it” targeting female millenniums which so far received over 80 million views. (Ghosh, S., 2016)
• Nikes’ direct marketing activity revolves around sponsoring various leagues and college teams supporting them financially and supplying product that is later promoted by the players during sport events.

D. Competitive Advantage

Throughout the history Nike has focused on 3 major fundamental pieces, which created continuous success. Nike has set an unreachable benchmark for other companies to go after. One of the major advantages is branding, creating a strong image behind a simple swoosh. The logo that is worldwide known even in the poorest of countries.