Corporate Strategy of Nike - Essay Example

NIKE CASE STUDY based on Corporate Strategy Question The cse study underlines tht Nike obtins strong position of the mrket. In generl, when compny succeeds in creting more vlue for customers thn its competitors, tht compny is sid to enjoy competitive dvntge in n industry. Competitive dvntge is mesured reltive to rivls in given industry. ccording to Porter, generic strtegies re bsed on the competitive methods nd scope of the orgniztion, both of which compromise its strtegy. These strtegies re differentition nd cost ledership, differentition focus nd cost focus. In order to differentite, ccording to distinct ptterns of strtegic behvior, Nike enters new mrket, the footbll tem kit. By focusing differentition on product, businesses could commnd premium prices for their products. Products represented top-of-the-line offerings in the industry. In this mrket, degree of differentition is not lrge. Nike entrees mrket where competitors cn differentite their products nd tht is why hve less rivlry. Rivlry is reduced where customers hve high switching costs - i.e. there is significnt cost ssocited with the decision to receive products from n lterntive competitor. Nike proposes to its customers competitive prices nd ensure customer stisfction. Nike's min competitor (Dniels et l 2006), dids, follows the strtegy which hs gret impct on competition. The nlysis suggests tht ny superior mtch between compny competencies nd customers needs permits the firm to outperform competitors. In generl, Nike bses its competitive strtegy on overll ledership nd differentition constructing the most efficient fcilities (in terms of scle or technology) nd obtins the lrgest shre of mrket. These dvntges, in turn, give them substntil led in terms of experience with building the service. Experience then leds to more refinements of the entire process of production, delivery, nd service, which leds to further cost reductions. Nike hs mrketble portfolio which ensures its ledership position on the mrket. The study reveled tht Nike does not pursue low-cost strtegies. Within these globl competitive environments, Nike overwhelmingly emphsizes differentition strtegies, where competitive positioning is predominntly bsed on qulity offerings nd brnd imge. Qulity is lmost universlly stressed s necessry determinnt of competitiveness. nother theme evident in the findings is the importnce strtegy-industry fit plys in determining business unit performnce. Here it is recognized tht perceptions of industry pressures my be more importnt thn the ctul pressures in determining strtegies nd hence performnce (Johnson & Scholes 2003). Question 2 In order to improve its strtegies position, Nike should chieve competition dvntge nd re-position itself. The compny cn position itself s premium brnd which proposes exceptionl qulity. While ll businesses my emphsize qulity, some my select strtegy bsed on further differentiting their offerings ccording to the qulity of the products nd services they provide. Indeed, in this study one of the dominnt competitive positioning strtegy types identified is 'high-qulity" (Johnson & Scholes 2003). Here, the emphsis on qulity permetes every ctivity long the vlue chin; qulity is clerly the overriding determinnt of competitive positioning. The exceptionl qulity is crucil for footbll tems nd the 2008 Europen Chmpionship. In this cse, qulity domintes competitive positioning nd differentites businesses in globl scle. Here, qulity is consistent with both innovtion nd speciliztion (Dniels et l 2006). Mngeril perceptions of strong pressures re evidence tht lrge number of businesses competing in globl industries mke imprecise ssessments of globl industry opportunities nd threts. It is possible to ssume tht Nike's competitors will follow cost focus strtegy nd cost differentition. dids, direct competitor of Nike, provides comprble buyer vlue but perform the ctivities less efficiently. In contorts, Nike performs the ctivities in unique wy which rises the vlue to the consumer nd thus llows them to commnd premium price - the concept of differentition. Similr to Nike, dids is well positioned on the mrket nd hs strong brnd imge. JJB Sports, minor competitor of Nike, will follow cost focus nd proposes low price (Johnson & Scholes 2003). The mrket segments will concentrate nd the mrketing position it proposes to dopt in ech segment (i.e., the extent to which it positions itself close to competitor but estblishes differentition through product fetures nd price/qulity difference, or the extent to which it ttcks holes in the mrket estblished by gp nlysis). The blend of controllble mrketing vribles required producing the response wnted in the trget mrket (Johnson & Scholes 2003). s it ws mentioned bove, the best choice for Nike is to reposition itself nd proposes exceptionl qulity for footbll mrket. The mrketing mix cn include new products, prices, promotion, pckging, dvertising, field sles nd distribution (Johnson & Scholes 2003). s the industry mtures nd pressures for globl integrtion become more pervsive, mny businesses in the "interntionl, product innovtion" nd "globl, combintion" strtegy groups will significntly improve performnce levels by incresing emphsis on low-cost nd globl integrtion strtegies. The impliction here is tht significnt number of businesses tht currently pursue regionl differentition strtegies cn improve performnce by leverging existing competitive dvntge cross regionl boundries nd dopting globl, low-cost strtegies (Dniels et l 2006), Question 3 Synergy nd cquisition strtegies will help the compny to restore its competitive dvntge. With the growth in interntionl trde hs come prlleled growth in the use of cquisition strtegies s mens of implementing globl strtegies. cquisitions cn be defined s forml greements linking one firm to nother (Johnson & Scholes 2003). While externl integrtion strtegies (both between firms nd between businesses within the sme corporte orgniztion) re often pproved t the corporte level, it is the business unit tht typiclly instigtes the reltionship. No mtter wht the source, cquisitions re cler element of globl strtegy. Forml externl integrtion strtegies cn tke severl forms including joint ventures, licensing greements, supply greements, nd mrketing/distribution greements, mong others. While interbusiness integrtion strtegies tke severl legl forms, the focus is on providing mutul benefits to the prtners. These benefits, like those developed through internliztion, lso stem from competitive dvntges chieved through tngible nd intngible sset trnsfers. The flow of tngible ssets from one business to nother principlly involves two forms of colitions: supply greements nd mrketing/distribution greements. Supply greements link opertions t the rw mterils nd intermedite products stge of production. Mrketing/distribution greements link orgniztions t the finished product stge of opertions. Colitions bsed on globl distribution offer other economic dvntges including circumventing ntionl government investment nd trde regultions, ccessing ntionl mrkets whose culturl idiosyncrsies would otherwise be intimidting, nd reducing overll sles costs through the utiliztion of world-scle distribution networks (Hnson et l 2005). This strtegy is dvntgeous for Nike becuse colitions tht exclusively exploit intngible sset trnsfers generlly tke the form of R&D prtnerships nd licensing greements. Expenses for reserch nd development cn clerly be very high, nd given the rpid ccelertion in the diffusion of new technology, it is essentilly impossible for ny single business to mintin indefinitely position of technologicl ledership in every relted field (Hnson et l 2005). Thus, one type of intngible integrtion strtegy involves the development of interntionl informtion networks (Dniels et l 2006). The im of this strtegy is to obtin nd sustin competitive dvntge including the generl public, specil interest groups, nd so on. Strtegies should be designed to link either discrete ctivities within the firm or between firms. While internl nd externl strtegies both strive to cpitlize on the firm's distinctive competencies, there re fundmentl differences in how they go bout "mtching" the firm to its environment. Corporte strtegies re bsed primrily on exploiting host ntion mrket disequilibri through internliztion dvntges. Externl strtegies re fundmentlly designed to increse the business's scope of ctivity, lso lrgely through the dvntges of internliztion (Dniels et l 2006; Hnson et l 2005). Question 4 Unfortuntely, no specific competitive strtegy will ensure success, nd some compnies tht hve successfully implemented competitive strtegies hve found tht they could not sustin the strtegy. In order to minimize risk nd void threts, the compny should tke into ccount its externl position nd internl strengths (Johnson & Scholes 2003). PESTEL Politicl risks: democrtiztion of the globl environment minimizes risks, but still some of them re importnt for globl compnies like Nike. They include: politicl interference, supply chin vulnerbility. Legl Environment: legl regultions nd lws re fvorble for Nike. Economic sitution: high rtes of growth nd high level of investments, liberliztion of mrket proposes gret opportunities for mrket development. High oil prices will hve negtive impct on the price level. Culturl nlysis: footbll is one of the most populr gmes round the world, so it will ensure stble mrket position nd populrity for mny yers. Technologicl fctors: innovtions nd technologicl improvements will help Nike to deliver exceptionl qulity nd meet the heist possible stndrds. lso, technologicl chnges will improve communiction with suppliers nd potentil consumers. Environmentl fctors: environmentl lws nd regultions will ffect production system. Potentilly ll globl businesses re ffected by their respective politicl environments, businesses with globl opertions re prticulrly susceptible to vriety of politicl pressures. On conceptul bsis, politicl strtegies tend to be directed towrd either identifying ttrctive ntionl mrkets or winning host ntion concessions (Johnson & Scholes 2003). Porter's 5 P's Rivlry mong existing firms ws lso chnging in response to developments in competition (Porter, 1985). The reltive ese with which Nike emerges in lrge mrket, suggests tht the thret to existing Nike is not essentil becuse compny hs strong brnd imge, Supplier Power: thret of forwrd integrtion, impct of inputs on cost differentition. Threts of Substitutes: switching costs, buyers re pt to use Nike products. Buyers Power: low volume of buyers, strong brnd imge, price sensitivity, product differentition. Brriers to Entry: positive EU policy, Brnd Identity, competitive position. Rivlry: it is not lrge, high fixed costs, diversity between competitors. SWOT The micro environment comprises the industry in which the business competes. Nike opertes on the dynmic mrket where the min objective is to mintin the high level of service qulity nd develop strtegies to improve their services (Johnson & Scholes 2003). Strengths: strong brnd equity, finncil success, cretivity, specil reltionship with the English Footbll ssocition (F). Weknesses; lck of flexibility nd difficult differentition (focus on price nd convenience); Opportunities: fvorble economic position, potentil to grow in new mrket segment. Threts: competition from dids JJB Sports, protectionist policies which llowed JJB Sports to buy 15% shre of Umbino. Question 5 It is possible to sy there will not be improvement on the mrket becuse ntionl sttes nd compnies try to protect their mrket from incresed competition nd MNEs (multintionl corportions). These strtegies re undesirble for Nike, but they will help to regulte the mrket nd protect locl firms. Bsed on the cse study, it is possible to predict the future of Nike.(Dniels et l 2006). Thus, globl compnies will enter globl mrkets using cquisitions nd mergers with locl suppliers. On the one hnd in the next ten yers Nike will retin its dominnt position s the top compny. Its new technology chievements nd overll business strtegy, potentil nd cpbility to support high performnce environments re the key elements for the next yers (Dniels et l 2006). Its business is strong in ll of these res nd the synergies between systems nd processes will mke the trnsition simple llowing the storge divisions to keep up their current momentum. It's time of intense competition-fortunes cn be mde or lost in the blink of n eye. With these three min strengths, its mrketing strtegy, growth rte, nd technology, mrket development strtegy, Nike cn cpture lrger shre of n existing mrket for current products through mrket sturtion nd mrket penetration or develop new mrkets for current products (Dniels et l 2006). Industril orgniztion economics suggests tht firm's performnce is directly relted to the degree to which it cn chieve nd sustin competitive dvntge, view bsed on rivlry between competitors rther thn providing for the needs of customers. Nike hs seen substntil growth over recent yers, with distribution providing the strongest route to mrket nd retil lso providing good growth. Nike is seeking to mximize its 'globl rech', in the belief tht those tht offer globl service will be in the strongest competitive position (Dniels et l 2006). It is evident tht strtegy includes the determintion of the bsic long-term gols concerns the conceptuliztion of coherent nd ttinble strtegic objectives. Strtegic llinces nd mergers will help Nike to ensure stble mrket position nd compete with dids nd locl competitors. chieving competitive dvntge in globl industry requires executives nd mngers to mintin well-defined strtegic focus. Focus is simply the concentration of ttention on core business or competence. Competition comes bout becuse business firms, in their serch for new segments, compnies try to mke the most of their uniqueness (Dniels et l 2006). The hopefully, is the estblishment of differentil dvntge tht cn give the edge over wht others in the field re offering. Bibliography 1. Daniels, J., Radebaugh, L., Sullivan, D. 2006, International Business: Environments and Operations. Prentice Hall. 2. Johnson, G., Scholes, K. 2003, Exploring Corporate Strategy. Hemel Hempstead: Prentice Hall. 3. Hanson, D., Dowling, P.J., Hitt, M.A., Ireland, D. and Hoskisson, R.E. 2005, 'Strategic Management: Competitiveness and Globalisation', 2nd Ed., Nelson Australia Pty Ltd. 4. Porter M.E. 1985, Competitive Advantage. New York, Free Press. Read More