Nike

Introduction

This project addresses how Nike has applied principles of marketing (STP and 4 Ps of marketing) in their business. Much of the data presented in this project is based on publicly available information for Nike. Pricing has not been sufficiently addressed in this project due to lack of freely available data.

Nike being recognized as a very strong brand in the marketing world, it would have been very easy to address the "advertising, branding and promotion" aspects of Nike. Lot of papers or projects however would have addressed this in the past. During this study I came across interesting information that could not have been left out of this project. Two of those topics are mentioned below:

Mass Customization: Nike has been one of the world leaders in the space of Mass Customization. One of the publicly available papers (written by a Stanford University student in year 2000) has helped me understand the concept of Mass Customization and how it helps Nike maintain Brand Loyalty with a user segment that is tech-savvy and stylish.

Adidas-Reebok Merger: Two of Nike's competitors got together early this year. Needless to say, this poses a marketing challenge to Nike. They may face a threat of losing market share globally due to this merger. In this project, I have made some recommendations on how Nike should face this challenge.

Nike - Birth and Growth

Nike got its start in 1962 as Blue Ribbon Sports, when Phil Knight started selling shoes out of his car. Knight was an avid runner, and thought there was a market for athletic shoes designed by athletes for athletes. He was right.

In the beginning, Knight's company was a grassroots organization. Knight would sell shoes at "local track meets" out of his car. His grassroots strategy was born of low capital and necessity, but became one of the strengths of the company. Blue Ribbon shoes developed a reputation of authenticity and high quality due to this grassroots strategy.

Still, the company was not an instant success. Blue Ribbon opened its first retail outlet in 1966. In 1969, Blue Ribbon posted sales of $300,000.00. Knight finally quit his job as Assistant Professor of Business Administration at Portland State University to concentrate full time on the growing enterprise. In 1973 the company was renamed to Nike Incorporated (renamed after a Greek goddess and chosen for simplicity). They also signed Steve Prefontaine to endorse the Nike brand running shoes.

In 1980, Nike surpassed Adidas as the number one athletic shoe company in the United States. Nike had sales of $270 million and almost a 50% share of the U.S. market. From then on, there was no looking back. The company has managed to retain the number one position by a Lion's share.

2. Business Description

Nike is a global company today. Much like any global company, it has split operations into 4 major regions; US, EMEA, Asia and Americas. Given below is an overview of the various regions.

Region Overview Countries Served

US Region The US, namely the Pacific Northwest, is the home of Nike. The company's world headquarters are in Washington County, Oregon near Beaverton, a suburb of Portland. Whole of US.

Nike's US distribution centers for footwear are in Wilsonville, Oregon, Memphis, Tennessee and Greenland, New Hampshire

EMEA (Europe, Middle East & Africa)

Nike first sold footwear in Europe in 1978. The current EMEA headquarters are in Hilversum, The Netherlands.

The Middle East has been included in the region since the beginning as a geographical area followed by the Nike Partners organization. The region's latest addition, Africa, came under the control of the European region in the middle of 2000. Nike branch offices and subsidiaries are located in 27 countries in the EMEA region: Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Israel, Italy, Lebanon, the Netherlands, Norway, Poland, Portugal, Russia, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey and the United Kingdom

ASIA Nike's roots run deep in the Asia Pacific region. Nike Asia Pacific has been in operation since 1977, when it began selling footwear in the region and subcontracted factories in Taiwan and Korea. Nike Japan was established in 1981. Nike has 13 branch offices and subsidiaries in the Asia Pacific region: Australia, China, Hong Kong, India, Indonesia, Japan, Korea, New Zealand, Southeast Asia (Singapore, Malaysia, Philippines, Thailand), Sri Lanka, Taiwan and Vietnam.

AMERICAS Canada was Nike's first foreign market. The company started selling shoes there in 1972. Nike expanded its business to South America in 1978. Nike branch offices and subsidiaries are located in five countries in the Americas region: Canada, Mexico, Brazil, Argentina, and Chile. Nike operations in all other countries in the Americas region are managed through partner organizations based in Panama, Ecuador and Paraguay.

Source: Nike Website

Operational Revenue

The following graph shows Nike revenue from 1991 to 2002, with US and European revenues broken out. Obvious from the graph is a sharp increase in revenue in the early and mid 1990's, and downturn, and a further incline starting again in 2000. US revenue increased until around 1998, but as a percentage of total revenue, US revenue has declined steadily. European revenue has increased steadily, but as a percentage of total it has remained relatively flat, with a slight upward trend recently.

Exhibit 1

3. Subsidiaries & Alliances

Along the way, Nike acquired some great companies that extend their reach within and beyond sports:

With its headquarters in Yarmouth, Maine, Cole Haan sells a line of dress and casual footwear, apparel and accessories for men and women under the brand names Cole Haan, g Series and Bragano

Based in Greenland, New Hampshire, Bauer Nike Hockey manufactures and distributes ice skates, skate blades, in-line roller skates, protective gear, hockey sticks, hockey jerseys, licensed apparel and accessories under the Bauer and Nike brand names. Bauer also offers a full line of products for street and roller hockey

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