Strategic Management Tools - Nike Athletic Shoes Division - Case Study Example

Strategic Management Tools, a Case Study of Nike Athletic Shoes Division Case Questions: Nike Athletic Shoes Division Markets (a) Definition of business in its present existence and its market Nike is one of the most successful international Designers, manufacturers and distributors of shoes and sports ware in the world, with over $10 billion in sales for the athletic shoes division per year. (b) Justification of the definition given. The definition best describes the company basing on the following reasons; Since its establishment in 1972, Nike Company experienced growth in terms of products as well as markets. It developed from a USA base company in an international cooperation with subsidiaries in Europe, Asia and parts of Africa. The firm is not only involved in the manufacture of athletic shoes, but also invests in designing new shoes with enhanced performance and durability and has formed a strong distribution network to ensure these shoes reach to all corners of the globe in time and at a reasonable price. The Level in chain for Nike is broad in nature. The company obtains raw materials from various producers, uses them to produce shoes and then sales the shoes in the market. 2. External factor evaluation matrix (EFE) The EFE is an important tool in the evaluation of current business condition for the purpose of assessing the opportunities that a company has and the threats to its success in realizing set goals. Opportunities Weight Rating Weighted Score Expansion to new markets 14% 4 0.56 Diversification of products 11% 3 0.33 Innovative products 13% 2 0.26 Excellent marketing strategy 8% 2 0.16 Production of quality products 6%     Professional Endorsement of products 11% 3 0.33 Threats       Completion 11% 3 0.33 Change in consumer habits 7% 2 0.14 Capital acquisition 9% 1 0.09 Challenges in managing distribution 10% 2 0.2 poor (1), below average (2), above average (3), excellent (4) Total Weighted score 100%   2.4 3. Internal factor evaluation Matrix (IFE) Internal Strengths Weight Rating Weighted Score Over 30% market share 12% 4 0.48 Supplies to major athletic events 13% 3 0.39 Employee loyalty 14% 2 0.28 Experience of over 40 years 10% 2 0.2 Customer approval 8%     Financial ratios 5% 3 0.15 Internal weakness       Piracy of innovative brands 13% 3 0.39 Insecurity in target markets 6% 2 0.12 Changes in raw material prices 8% 1 0.08 Strict laws in importing raw materials 11% 2 0.22 poor (1), below average (2), above average (3), excellent (4) Total Weighted score 100%   2.31 4. (a) Internal, external (IE) Matrix By drawing lines from the calculated IFE on the X axis and EFE on the Y-axis, the two line intercept in one of the boxes basing on which a strategy to follow is deduced. IE matrix EFE 2.4 1.0 4.0 2.31 IFE 1.0 (b) Basing on the IE matrix above, it is advisable that the company currently is not in a position to expand but should rather “hold and maintain”. The IE matrix is made up of three strategically important regions; First, The cells labelled I, II and III represent the possibility of expansion. The company should therefore concentrate on improving market penetration, develop new markets and increase the products available on the market. The second region represented by numbers IV, V, and VI implies the company should be more concerned with market penetration of existing markets. The last region represented by VII, VIII, and IX numbers is an indicator the company should consider the possibility of exiting from the market as it tries rebranding to rejuvenate the business. 5. Recommendation (a) Strategy Nike Inc. should adopt a product specific marketing strategy that will assist in reducing product underperformance and increase in market share. Explanation of Stategy In this strategy, the company will establish sales teams that will market and track the market acceptance of specific products without focusing on other company products. First the company is to identify two or three products that are performing below the expected potential owing to the performance of similar products in the market by other companies. Then a team is selected to carry out market research and establish reason why the products are not performing well and strategies employed by competitors to market their products. The team will then draw a plan ready for implementation with clear targets markets, quantities and time frame for implementation. These teams will have to carry out evaluation after a number of months to check if the strategy is giving positive results. Support of strategy appropriateness The company wants to be felt by customers both in the high end and low end market. In applying this strategy, the product marketed will be appealing to all markets and customers will want to have a feel of the product. The team will identify areas in the plan that need adjustment in order to realize the objective which may include discounts for certain markets. Specific activities in the plan would include advertisement in the media, organization of promotional sale crusades and offering discounts and presents to entice consumers to but the goods. Surport as best strategy This strategy is the best for the company as it is easy to carry out, it has direct results that can be seen in terms of sales and it markets the name of the company thereby making it easy for subsequent products to be marketed. (b) Relate the proposed strategy to the tools analysis tools. Market share theory The theory proposes that in a given industry 70% of market share is taken by 3 major players with the remaining 30% going to many small firms. According to this theory, Nike should focus on maintaining market share through low cost product and innovation. The specific product marketing strategy in relation to athletic shoe production and marketing has a great potential for increasing market share for the company. By targeting a specific design of athletic shoes from the company brands, the brand will be on high demand on the market not just for professional runners but also the fans as it will be fashionable. It will be more cost effective and of greater impact for the company to market a single product internationally than to market all of its products at once. The Internal/external matrix The analysis above strongly suggests that the company should improve on market penetration of its products in the existing markets first before considering growth to new markets. This strategy of specific product marketing is the best way to ensure product market penetration is enhanced. It will take fewer resources to market a single product at a time and if successful, more funds will be available for marketing another product. Some products are of very high quality but have not penetrated the market fully owing to the lack of specific attention by the company. Reference Davis T.R. (1982). Strategy and Policy; Tools for Cases. Retrieved on 9th Sept 2014, from: http://library.stu.edu/dl/eRsrv-p/p0015.pdf Read More