Nike. Inc

Marketing Management Assignment
NIKE Inc.
Daniel Prieto
MBA 08/09 class
1 Introduction
The following document presents the actual marketing situation for Nike Inc. in the Chilean
market and in the sport shoes category. Although the document is brief as to develop a
deep analysis, it shows the highlights for every important concept included in an appropriate
marketing analysis.
It is a very important case to analyze in order to explore the ways of Nike through which it
has become a leader in the market. Nike is one of the biggest companies in the world in the
business of sportswear and apparel, and it’s considerate one of the best companies in the
world in marketing management and innovation. (Jobber)
2 Marketing Issues and Activities
2.1 Macro environment Issues
2.1.1 Political environment
Chile has a very stable democracy and a successful liberal market economy. The economy
is open and conducive to business activities. (In Transparency International's Corruption
Perception Index 2006, Chile is the highest ranked Latin American country and is 20 out of
163 countries overall.)
Chile's successful economic model has not changed. Achieving higher rates of economic
growth is a priority for Chile. (Foreign & Commonwealth Office)
2.1.2 Economic environment
Under economic environment perspective Chile is the best performer in the region, both in
terms of the attractiveness of its environment for private investment in infrastructure and
development of its infrastructure network. Nevertheless, the indexes highlight a number of
areas in which there is room for improvement. In terms of environment’s attractiveness for
private investment or possible marketing campaigns, the next figure shows that Chile is
outperforming the rest of the region in every dimension assessed. (World Economic Forum)
2.1.3 Socio cultural environment
Language and a common history have promoted cultural homogeneity in the country. Even
the Araucanians and certain Aymara minorities in the north share the values of the Chilean
identity, while continuing to cherish their own cultural heritage. Having the whole country the
same official language and at the same time sharing the same national identity makes the
flow of communication very good for any firm with operations in Chile. (Travel Document
Systems)
2.1.4 Technological environment
As a technological environment, we would consider in this analysis just the rate of access to
internet by Chilean population. This is because consideration of other variables of
infrastructure will be absolutely correlated. So considering this, Chile has been considered
as a technological leader in the region according to the Measurement of Information Society.
This aspect is important to consider because Internet is not just one of the most important
media of communication nowadays, but also an important media to develop business across
Internet such as marketing activities. (Mundo en linea)
2.2 Micro environment Issues
2.2.1 Competitive intensity
In the athletic shoe industry the number of competitors is stable, partially due to high entry
barriers.
Nike is not a big dominant of the Chilean sport shoes market as in the U.S.
The rivalry among existing firms is high where weak firms are easily acquired by fierce
competitors. This may have a high impact on profit potential.
2.2.2 Marketing infrastructure
From a technological point of view, Chile has one of the best available infrastructure (in the
region) to develop an adequate communication plan across the internet.
Despite the unfavourable geography to distribute products, a good infrastructure in
speedways and ports in the offshore of the country, allow Nike to have a strong integration
with customers, retailers and wholesalers throughout the whole country.
2.2.3 Customer characteristics
The customers of Nike have variations depending on which country we are considering. In
the case of Chile this distribution is as follows:
The main group of customers is from 15 to 30 years old, and covering of 75% men
and the rest women.
The sport shoes have become with the last years a product not just to practice a
specific sport, because people nowadays are using these shoes as a fashion style to
wear in a normal non sport day.
Related with the previous point, there are 2 main kinds of customers’ preferences of
shoes: the normal sport shoes not expensive and very fancy to the customer, and
professional line of shoes (expensive shoes) oriented to get a good performance in
the practice of some specifies sport.
2.3 Company Issues
2.3.1 Company strategy
The company targets top-line revenue growth to $23 billion by fiscal 2011 based on growth
across its brand portfolio, up from $15 billion in fiscal 2006. Over the next five years, the
company anticipates 75 percent of this growth will be generated by the Nike brand and will
be driven by a consumer-defined category strategy. By focusing on creating premium
consumer experiences built on product innovation, brand leadership and elevated retail
presence, Nike is targeting further geographic expansion and deeper market penetration in
all regions. Through disciplined operating management, the company continues to target
long-range mid-teen earnings per share growth. (Nike Inc.)
2.3.2 Diversification
The company’s products and services include:
Athletic footwear (football, running, soccer, etc.)
Golf (Clubs, balls, apparel, etc.)
Outdoor (apparel, footwear)
Hockey (apparel, equipment)
Skateboarding (apparel, shoes)
Cycling (apparel, footwear, eyewear, equipment)
Youth lifestyle apparel and accessories (ice skates, hockey sticks, etc.)
2.3.3 Standardization v/s adaptation
Nike has developed in its international scope an adapted marketing mix, in the sense that
every region (even countries sometimes) has their own approach to achieve the objectives.
Of course this related to environmental issues that the company has to confront in every
region of the world where they have presence.
2.3.4 Organizational structure
With over 21,000 employees worldwide, the company was organized into departments by
both geographic divisions and product categories, which created overlapping management
responsibilities and a fluid leadership structure. (Kenan-flaguer business school)
2.3.5 Market segmentation, targeting and positioning
The market segment in the sport business is well differentiated by the specific practice of
sport and at the same time according to the implementation needed to do the specified
sport: sportswear, sport shoes and apparels. The targeting of Nike is relative the region. In
the case of Chile, the target group is represented for just some sports (mainly football,
running, tennis and basketball) and focused in sportswear and sport shoes. The positioning
into the target segment bases is strong because of differential advantages: quality and
innovation.
2.3.6 Performance
Nike has based its existence mainly because of its marketing orientation philosophy.
Considering that its products are not part of the commodity industry, the high levels of
profitability (high performance) is directly correlated with marketing functions developed by
Nike.
3 Marketing Mix Strategies
3.1 Product
Nike is considered a very strong brand in the market mainly due to:
The excellent consumer perception because the value of the brand makes the
product more rewarding even, which becomes an intrinsic preference of the
costumers.
Profitable brand because of the premium prices and a high market share.
3.1.1 Strong Brand
And in general, Nike shows a trust sign of quality and image between the customers. The
person who wears the brand implies to be associated as a sports participant or maybe
someone who admires successful athletes such as Michael Jordan and Tiger Woods.
(Martin)
Brand Extension. Nike introduces into the market the product called “Nike CommVest”, a
product designed specifically for mountain search and rescue operations with a focus on
pure function. (Businessweek)
Quality Product. Taking into account that Cotton is one of the most important elements in
sport shoes, the company has defined policies and process in order to control the quality.
The Nike's organic cotton supply chains use third-party accredited certifiers. (Nike Inc.)
3.1.2 Co-Branding
Nike and Apple created together running shoes that provide users with instant information on
time, distance, speed and calorific burn rates. (Temporal).
Nike and Philips launched a new generation portable audio players (Domain-b.com).
3.1.3 R&D: Innovative capabilities
Innovative products to provide a good athletic experience as Air Jordan XX, and Nike Air
Native N7, which have been developed after two years of combined research, development
and fit testing in cooperation with the Native American community.
3.2 Pricing
Nike uses Price Leadership strategy and value based pricing of the sport shoes. This means
that the company sets its prices based on the value which the consumer places on the sport
shoes. Customers buy the product for the Nike symbol and are willing to pay high prices
regardless of the products actual value.
In Chile the high competition has made Nike to establish prices considering closer
competitors’ prices: Adidas, Reebok and Puma.
Nike has tried to increase its participation into the market differentiating the prices for
customers in order to cover more segments of the market.
3.3 Promotion
Nike advertising in Chile is characterized by introducing new and innovative shoes into the
market and its advertisement is absolutely competitive oriented due to the hard market
shared with important brands.
In Chile, Nike advertisement is mainly outdoor and placed in the more crowded public places
for advertisement. Despite this, there is some advertisement on television, specialized sport
magazines like “Don Balon” and “D13”. Another very important way of communication is
through the official web site ww.nike.com.
The appeal of Nike advertisement is oriented to customers, trying to get an emotional
connection with customers making them be part of a style of life represented by the brand.
The “just do it” campaign is a clear evidence of it.
3.4 Distribution
Nike operates in Chile using a Vertical Commercialization System, which is divided in
contractual and corporate. In the first case, the company is in charge until the final
distribution of the buyers. The second, the company develops contracts with delivery chains
companies of sport shoes. This is achieved generating franchises to companies that only
market products of NIKE.
Nike doesn’t leave the whole responsibility to the distribution channels that are not under
their control in order not to lose participation in those decisions that affect their market and
because the necessity of channels with prestige, contacts and resources, important ways of
covering and good channel of communication for feedback.
4 Conclusions
The Chilean market share of Nike is small, which is a very good opportunity to get a
big market considering the expertise that the company has in other markets.
Chile represents a very good option to expand the market, say into the country and
also in southern region.
Nike is under threat considering the strong competition by new brands and low cost
of productions.
In terms of advertisement, it is not common to see sport idols representing
advertisement.
5 Recommendations
Considering the last conclusions we can obtain several recommendations:
1. Expand the market share in Chile
2. Use the country as a platform to jump increase the market share in the southern
parts of South America.
3. Develop and specialized web site for Chilean market.
5.1 Plan of actions
In order to have an aggressive marketing strategy to meet the previous recommendations,
Nike needs to adopt the following actions:
1. Define a local structure to manage the marketing activities with a marketing director
responsible for operations in the region.
2. Define strategies to accomplish the expansion into the Chilean market and south
region of the continent
3. Define a plan of implementation in order to reduce the risk of fail because of bad
implementation.
4. Identify barriers and eventual problems in the implementation of the new strategies in
order to minimize risk and apply contingencies plans.
5. Execution of activities
6. Evaluation of the action plan
6 References
Bob Baum Associated PressShoes. “Clothes: The money engine that runs sports.” 15 April
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Businessweek.
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7
<http://www.businessweek.com/magazine/content/05_27/b3941413.htm>.
1
2009
Domain-b.com. Nike, Philips introduce portable sport audio range players. 4 3 2003. 7 1
2009
<http://www.domainb.com/companies/companies_p/philips_india/20030304_players.html>.
Foreign & Commonwealth Office. Foreign & Commonwealth Office. 01 01 2007. 08 01 2009
<http://www.fco.gov.uk/en/about-the-fco/country-profiles/southamerica/chile#back_to_top_link>.
Jobber, David. Principles and practice of Marketing. Mc Graw Hill, 2007.
Kenan-flaguer business school. “Expanding the playing field: Nike's world shoe project.”
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Martin,
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Mundo en linea. Chile se mantiene como líder tecnológico de Latinoamérica, pero estanca
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<http://www.nikebiz.com/media/pr/2007/02/6_growthPlans.html>.
—.
Nikebiz
:
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Responsability.
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<http://www.nikebiz.com/responsibility/considered_design/environmentally_preferred.html>.
Temporal, Dr. Paul. Co-Branding: Nike runs with Apple. 1 1 2002. 7 1 2009
<http://www.temporalbrand.com/publications/articles-150606.shtml>.
Travel Document Systems. Travel Document Systems. 01 01 2008. 08 01 2009
<http://www.traveldocs.com/cl/index.htm>.
World Economic Forum. Benchmarking National Attractiveness for Private Investment in
Latin America Infraestructure. Benchmark. Cologny/Geneva: World Economic Forum, 2007.