Business Strategy of Nike - Research Paper Example

? \ Nike: Business Strategy Background Nike is a sportswear company that was established in the year 1957 by two young entrepreneurs with an intention of satisfying clothing needs of athletes. Primarily started as a store to import and distribute footwear products from a Japanese company called the Onitsuka Company, it went on to become an independent store after realization of profit limitations imposed by the latter. Consequently, in 1968, the company became an independent organization after Blue Ribbon Sports, the original company that adopted Nike by Knight, cut bonds with the former Japanese company. It then began to design, manufacture-through subcontractors- store, promote and market its products. The first market segment was in the United States of America, specifically in Oregon (Smith, 2012). Having operated in different names such as NIKEY and other names, before the 70s, the company first acquired its first design in the year 1971 at a cost of only $35.and acquired incorporation as Nike Inc. in the year 1978. at around this time, the company grows in terms of company infrastructure and its headquarters was opened in Beaverton, Oregon. The company later expands to other markets outside the U.S to regions such as Asia, where numerous manufacturing plants were opened. This expansion marked the first step towards global competition (Smith, 2012). At the end of the seventies, the company launched one of its most famous products, Nike Air, which began as a form of manufacturing technology. In the early eighties, the company took almost a half of the share capital of athletic footwear sold in the market. By employing traditional methods of communication, the company embarked on a serious campaign for reputation through spread of positive reviews from its customers and potential ones. It never made any electronic advertisement up until 1982 but still its reputation grew beyond expectation. But before then, the company had gone public and received a good response that saw it trade millions of shares all over the world. During the 1984 Olympic Games, athletes use Nike’s footwear products and thus showcase the company uniqueness in this provision. Since the company devised a mechanism whereby product brands were associated with great sportsmen, in 1985, the company formed a brand associated with the then young basketball superstar, Michael Jordan but its official launch happened in 1997. With engagements in newer advertising technologies, the company formed advertisement slogans, Just Do It, that experienced positive reception all over the world in 1988 and at this time, its revenue grew over one billion dollars. Toward the end of the millennium, the company had grown to world popularity and controlled almost all sports footwear, kits and had numerous endorsements. In the nineties, the company had embarked on using great sportsmen in its advertisement campaigns and consequently in this period, Tiger Woods and Jordan were endorsed in deals worth almost a hundred million dollars. In the beginning of this millennium, the company gained global dominance in the production of sportswear and tools such as balls. FIFA had adopted the company’s trademark and subsequently contracted it to be the official company providing sportswear and balls. It also engaged in the production of sticks for sports such as hockey. During this time too, the company diversified into the fashion industry and thus increased its revenue base whereby it launched products such as Air Force shoes, Sweaters and fashionable jeans and shirts (Smith, 2012). Current market position Currently, the company still stands as the world’s leader in manufacture and provision of sportswear and balls. It also has one of the largest fashionable shoes in the world. Although most of its products are relatively expensive, the company has maintained quality over the years and its products are of unquestionable standards. The company also is listed among the top two hundred companies in the world. With a total of more than three hundred stores all over the world, ten towns dedicated to promotional services and more than twenty thousand employees, NIKE remains one of the largest companies in the world. With these strong facts of information, it is important to understand how this company has managed to overcome market competition through strategy to its present position, through understanding of competitive strategy (Nilsson & Rapp, 2005). What is competitive strategy? Competitive strategy entails restructuring business activities to place a firm or business at the best position in overcoming market competition. Companies thus need strategies when market before and when competition stiffens in orders to stay vibrant in the market. This measure is very vital for business entities in realization and affirmation of their missions, goals and objectives. Therefore for businesses to stay in a good position in the business environment, both locally and globally, businesses need an edge over their competitors for survival purposes (Porter, 2007). Competitive strategy involves the use of multidimensional tactics by companies aimed at, either defending their market performance, offending their competitors to neutralize their competitor actions or retrieval mechanisms for the purposes of reducing playing grounds in order to overcome competition. When companies engage in product or service competition, they have to position themselves in a state that they would likely win market acceptance more than their counterparts. This positioning has to take into consideration various factors. Porter (2007) discussed three lines of strategy that companies or business entities have to take into consideration. These include, market intent and structure, which determine the position of a firm in the market. Intent allows firms to evaluate their goals, vision and objectives and thus device strategies aimed at giving them an edge over their competitions in the market. Structure gives these firms a wider playground for competition and therefore gives such firms a competitive advantage over their opponents (Johnson, 2011). He also discussed three types of strategies that give businesses firms a competitive advantage. In order for firms to lay effective strategies, such firms will have to consider three scopes of foundation. These include; cost minimization, product differentiation and market focus strategies (Montgomery, & Porter, 2001). Whereas cost minimization helps firms to stay competitive in the market in terms of preference as regards price products, it also makes firms more popular since customers easily identify with the company when products become cheaper than related products from similar firms. On the other hand, product differentiation entails enhancing product quality at the same product when firms respond to market competition. Better quality creates customer confidence in various products in the market. Market focus refers to strategies used by firms in seeking potential markets and retaining similar markets when competition rises. In this case, companies focus on finding new markets that will accept their products when competition in one of the markets rises beyond acceptance (Porter, 2007). All companies, at higher management levels, employ the use of strategy in overcoming competition and thus gaining a competitive advantage over their market rivals. Competitive advantage thus becomes a great value in edging out competitors in the market. Without a good competitive advantage, companies easily lose out to their opponents and consequently, their market share begins to reduce. Such trends reduce business benefits and later these firms are forced to make appropriate adjustments in response to dwindling revenue. When competition remains unchecked, negatively affected companies in the competition process are edged out of the market over a period of time. Quick and appropriate response to competition with realization of competitive advantage ensures that companies remain competitive in the market (Johnson, 2011). Porter’s five forces of competitive strategy under Porter’s Model Porter discusses a model of competition when employing strategic advantage. Firms need to consider various aspects at different business levels. Competitive advantages at local levels are totally different from the ones used at global levels. At times, local alternatives can be applied in combination with global advantages to give the company an edge above its opponents. Therefore these five forces which consider different dimensions such as market entrants and suppliers among others give the company an assurance (Porter, 2007). Nike’s Competitive Strategies 1. Product level competitive strategy Nike is a global brand that has survived in the sportswear market for the last four decades. For it to have sustained its business practices for this long period, the company has applied business strategy. Having started its business in the Oregon region, in this respect, the company has employed identification with product quality and endorsements with leading sportsmen as a platform of competitive advantage over its rivals in the business environment. This has continued to attract a lot of customers in relation to product demand and consequently, it has pushed business revenues beyond expectation. For instance, NIKE developed a product using Jordan’s name and later demand from the market a decade later whereby thousand of sales were made. This association strategy, coupled with product quality created a good business environment that has enabled it to continue carrying out its business practices. The company has positioned itself as a leading sportswear manufacturer and distributor, providing high quality sports gear for all types of sport. This has enabled it to capture the market in all regions around the world such as Abu Dhabi. This positioning has enabled the company to stand out and gain immense recognition across the sport world. Standing in this position, the company is without serious challenges from competitor companies such as Puma and others. This has enhanced its position to remain firm and thus continued to give it an assurance on market leading. By laying emphasis in production, marketing and distribution of sports gear, the company has managed to satisfy sports needs such as athletics, soccer, golf, hockey and skateboarding among others. This is evident when most athletes are seen wearing the company’s sportswear including shoes, shirts and pairs of shorts. Other sporting tools such as balls have also been witnessed in major sport events such as the Word Cup and the Olympics. In addition, the company is also taking care of fashion needs whereby trendy footwear, shirts and sweaters have been produced to meet the needs of such clients. By standing as a reputable company in the world and around regions such as Abu Dhabi, the company has managed to keep its promise of quality and sufficiency in production. Its products are long-lasting, which makes them to be of great preference to its customers. This has enabled the company to stand a great competitive position in production and distribution of sport and fashion gear. NIKE has employed different types of strategies in its strategic models. To begin with, in order to capture different types of market segments, the company has employed different types of strategies since its market is highly segmented. Although innovation has been considered low key for company growth, it has been able to capture various markets through a combination of its high quality products and responsiveness to market demands (O'Connell, 2003). For instance, during the launch of Jordan Air product demand in the mid nineties, quality was combined with demand for these types of shoes. In response the company provided these products as per customer expectations. In choosing the best business strategy, the company believes that anybody can be a sports person. The company therefore embarked on production of sports gear for all people of all ages and sexes. This has greatly increased its customer base to everybody around the world (O'Connell, 2003). 2. Industrial level competitive strategy In reaction to emergency of technology, the company first began selling its products directly online to its client in an attempt to reach clients across the divide and consequently, reduce operational costs. This strategy saw increased sales and thus growth of profits. On the same note, the company employed vertical merging in response to increased competition, an advantage that has seen it keep growth levels, however small, on trend. In addition it has managed to maintain and hold on to its sportswear products for all groups of people all over the world. Having been established almost a half a century ago, the company has grown to reach maturity levels such that, today, the companies boasts of large capital base, large client base and similarly large revenue base. Its chance of further growth at exaggerated levels is minimal since the company has already grown to maturity levels. Due to increased rivalry, the company has employed several strategies in mitigating its worrying situation. To begin with, the company has made use of capacity control in controlling its production, distribution and sale of its products. Secondly, the company has made it possible for customers to estimate the cost of its product at any given time and thus, it has managed to stay a head of its competitors in terms of price leadership. This has enabled to sustain customer interest in company products over a long period of time. Given that the increased levels of competition with companies of different niches in its final products, the company has been faced with reduced popularity. This has left implications of a declining market whereby the company will struggle to return to its growth trends. Even though it is a declining market, the company struggle hard to bring in other competitive strategies to combat its failing demand. These include the use of innovations, technology and price control to make it still the leading company in the world. 3. Global competitive strategy While entering the global market, the company devised different mechanisms. It started out by first moving to the then emerging markets such as Canada by opening stores in the region. Later efforts of sponsoring famous events saw the company move to regions in the eighties and later acquired sportswear companies in an effort to reach global clients. It also made several acquisitions of competitor companies in the process and consequently was able to increase its platform for reach the global market. It also opened many stores in different countries in an effort to make available its products in new markets around the world (Johnson, 2011). Although the company has grown beyond its initial levels, it has been able reach this level through alliances. From the time of commencement, the company emphasized on franchising in an effort minimizes its operation expenses that would have been incurred in purchasing machinery. Throughout the years, the company has only specialized design, promotion, marketing and distribution while leaving duties such as manufacturing to third party companies. In this effort, the company was able to minimize its global operating expenses. This was a great strategy for global outreach. Although the company has experienced problems, it has made several alliances to remain the top designing, promoting and marketing company that distributes sports gear. One such alliance involves cooperation with its competitor companies to win back design, promotion and distribution of sports outfits. For instance, when other companies entered the sports arena with intent of sponsoring such events, they in turn demanded to be promoted through the same sports. This led to re-branding sports wear to fit such great names such as Samsung, Emirates and LG. although these companies took a relatively great market share of NIKE, the company collaborated in the design, manufacturing and distribution of these new products (Johnson, 2011). However, in the recent past, the company has been experiencing reduced customer base due to serious competition from numerous multinational companies. Such competition has made it hard for NIKE to become as strong as it was before. Consequently, the company has experienced reduced sales all over the world. Its recognition has thus gone lower than expectation. However, in reaction to this, the company has diversified into other designs such as NIKE technology and other products such as Nike fashion stores whereby it specializes in trendy outfits for all generations, home use appliances and green technology in reaction to current challenges such as global warming. Conclusion Primarily started as a store to import and distribute footwear products from a Japanese company called the Onitsuka Company, NIKE went on to become an independent store after realization of profit limitations imposed by the latter. During the 1984 Olympic Games, athletes use Nike’s footwear products and thus showcase the company uniqueness in this provision. Since the company devised a mechanism whereby product brands were associated with great sportsmen, in 1985, the company formed a brand associated with the then young basketball superstar, Michael Jordan but its official launch happened in 1997.Currently, the company still stands as the world’s leader in manufacture and provision of sportswear and balls. It also has one of the largest fashionable shoes in the world. Although most of its products are relatively expensive, the company has maintained quality over the years and its products are of unquestionable standards and it has continued in carrying out its business practices (Pfeffer, 2008). The company has positioned itself as a leading sportswear manufacturer and distributor, providing high quality sports gear for all types of sport. This has enabled it to capture the market in all regions around the world such as Abu Dhabi. This positioning has enabled the company to stand out and gain immense recognition across the sport world. Standing in this position, the company is without serious challenges from competitor companies such as Puma and others. This has enhanced its position to remain firm and thus continued to give it an assurance on market leading. By standing as a reputable company in the world and around regions such as Abu Dhabi, the company has managed to keep its promise of quality and sufficiency in production. Its products are long-lasting, which makes them to be of great preference to its customers. This has enabled the company to stand a great competitive position in production and distribution of sport and fashion gear. In reaction to emergency of technology, the company first began selling its products directly online to its client in an attempt to reach clients across the divide and consequently, reduce operational costs. Although the company has grown beyond its initial levels, it has been able reach this level through alliances. However, in the recent past, the company has been experiencing reduced customer base due to serious competition from numerous multinational companies. Such competition has made it hard for NIKE to become as strong as it was before. By laying emphasis in production, marketing and distribution of sports gear, the company has managed to satisfy sports needs such as athletics, soccer, golf, hockey and skateboarding among others. This is evident when most athletes are seen wearing the company’s sportswear including shoes, shirts and pairs of shorts. Other sporting tools such as balls have also been witnessed in major sport events such as the Word Cup and the Olympics. In addition, the company is also taking care of fashion needs whereby trendy footwear, shirts and sweaters have been produced to meet the needs of such clients. References Johnson, M.U. (2011). Utilizing competitive advantage. New York, NY: Cengage Learning. Montgomery, C. A & Porter, M.E. (2001). Strategic choices : seeking and securing competitive advantage. Boston: Harvard Business School Press. Nilsson, F. & Rapp, B. (2005). Understanding competitive advantage : the importance of strategic congruence and integrated control. Berlin; London : Springer. O'Connell, F. (2003). The competitive advantage of common sense : using the power you already have. Upper Saddle River, NJ : Prentice Hall. Pfeffer, J. (2008). Competitive advantage through people : unleashing the power of the work force. Boston, Mass.: Harvard Business School Press. Porter, M. E. (2007). Creating and Sustaining Superior Performance : with a New Introduction. Berlin: GE: Simon and Schuster. Smith, G.O. (2012). NIKE: Through the market forces. Harvard, HVRD: Harvard business school. Read More