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Nike's Marketing

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Nike's Marketing Operations

Nike was first developed in Oregon by Phil Knight in the 1960s and founded in 1972. Nike is a major manufacturer of athletic shoes, apparel, and sports equipment. Nike markets its products under its own brand name as well as Air Jordan, Nike Golf, Team Starter, and under brands from wholly owned subsidiaries including Bauer, Cole Haan, Converse, and Hurley International. Nike's advertisement campaigns often incorporate new sporting ideology, which often involve sponsored athletes like Tiger Woods, Ronaldinho, and Michael Jordan. Nike is also well known for its strong sponsorship agreements with athletes, leagues and federations, as well many of the world's soccer clubs. Of course, Nike is in a very competitive industry and must fight to keep a competitive advantage. Furthermore, Nike must also deal with ethical issues that arise from sweat shops that are located in third world countries.

Nike's biggest competitors in the sporting world are Adidas, Reebok, Puma, Umbro, Converse, etc. Adidas, the biggest rival of Nike, has chosen to acquire Reebok for $3.8 billion in order to expand its market ("Nike, Inc"). This deal will help Adidas take on the top sporting-goods brand Nike as it gives Adidas a stronger presence in North America. Adidas is grounded in sports performance with such products as a motorized running shoe and endorsement deals with superstars such as David Beckham. Meanwhile, Reebok plays heavily to the melding of sports and entertainment with endorsement deals and products by Nelly, Jay-Z, and 50 Cent. This combination could be deadly to Nike as it will be a big blow to their market. The combined entity, with sales of $12 billion ($8 billion from Adidas and $4 billion from Reebok) will close the gap on Nike, which posted $14 billion in sales during its last fiscal year, ended May 31st (Howard). However, each brand is expected to maintain its own identity under the acquisition, which is expected to close in the first quarter of 2006, pending regulatory approval from the European Union and the Federal Trade Commission. Experts caution that by competing together, Adidas and Reebok could face more challenges in taking on Nike than by competing separately. "Any time two competitors join forces, there is a tendency to stop competing - a concept that looks good on paper but can be deadly in-market...If the new company tries to segment the target market, appeal to different consumers, the onus upon marketing brands" (Howard).

To further understand the market Nike is in, a SWOT analysis can help establish some base for which Nike focuses its principles. Strengths: Nike is a very competitive organization. For example, at the Atlanta Olympics, Reebok went to the expense of sponsoring the games while Nike did not. Nike, however, sponsored the top athletes and gained valuable coverage. Nike has no factories. It does not tie up cash in buildings and manufacturing workers. This makes a very lean organization. Nike is strong at research and development, as is evidenced by its evolving and innovative product range. They then manufacture wherever they can produce a high quality product at the lowest possible price. If prices rise, and products can be made more cheaply elsewhere for the same quality, Nike will move production. Nike is a global brand. It is the number one sports brand in the world. Its famous "Swoosh" is instantly recognizable and it helps consumers distinguish it immediately. Weaknesses: The organization does have a diversified range of sports products. However, the income of the business is still heavily dependent upon its share of the footwear market. This may leave it vulnerable if for any reason its market share erodes. The retail sector is very price sensitive. Nike does have its own retailer in Nike Town. However, most of its income is derived from selling into retailers. Retailers tend to offer a very similar experience to the consumer so one cannot tell the difference from one sports retailer to the next. Thus, margins tend to get squeezed as retailers try to pass some of the low price competition pressure onto Nike. Opportunities: Product development offers Nike many opportunities. The brand is fiercely defended by its owners whom truly believe that Nike is not a fashion brand. However, consumers that wear Nike product do not always buy it to participate in sport. Some would argue that in youth culture, Nike is a fashion brand. This creates its own opportunities, since product could become unfashionable before it wears out i.e. consumers need to replace shoes. There is also opportunity to develop products such as sports wear, sunglasses, and jewelry. Such high value items do tend to have high profits associated with them. Another opportunity is that the business could be developed internationally, building upon its strong brand recognition. There are many markets that have the disposable income to spend on high value sports goods. For example, emerging markets such as China and India have a new richer generation of consumers. There are also global marketing events that can be utilized to support the brand such as the World Cup and The Olympics. Threats: Nike is exposed to the international nature of trade. It buys and sells in different currencies and so costs and margins are not stable over long periods of time. Such an exposure could mean that Nike may be manufacturing and/or selling at a steep loss. This is an issue that faces all global brands. Also, the market for sports shoes and garments is very competitive. The model developed by Phil Knight (high value branded product manufactured at a low cost) is now commonly used and to an extent is no longer a basis for sustainable competitive advantage. Competitors are developing alternative brands to take away Nike's market share. Finally, as discussed above in weaknesses, the retail sector is becoming price competitive. This ultimately means that consumers are shopping around for a better deal. So if one store charges a price for a pair of shoes, the consumer could go to the store along the street to compare prices for the exact same item, and buy the cheaper of the two. Such consumer price sensitivity is a potential external threat to Nike ("Nike, Inc"). So it is obvious to see that most of Nike's problems deal with price competition and that is one of its primary concerns.

The external macro-environment consists of all the outside institutions and forces that have an actual or potential interest or impact on the organization's ability to achieve its objectives. Though uncontrollable, these forces require a response in order to keep positive actions with the targeted markets. The social/cultural forces are the most difficult uncontrollable variables to predict. It is important for Nike to understand and appreciate the cultural values

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