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Nike Marketing Strategies

Critically analyse, examine and evaluate the key issues involved in the process of development and implementation of its international marketing strategies for the American sportswear giants - 'Nike'.

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This essay will provide a detailed analysis of Nike's current corporate appraisal analysis. This will help to identify the company's current strength, weaknesses, opportunities and threats. This will help the companies decision makers understand where the organisation is now. This will assist in identifying the key issues involved in the process of development and implementation of Nike's international marketing strategies. We will have to consider the political, legal and cultural issued in implementing any future strategies for the international markets. The strategy will also consider various market entry modes and also resource both in terms of financial and human in implementing the strategy. Any strategy consideration will also involve a risk and impact analysis, hence, level of risk assumed in various markets and potential consequences. Finally, we will examine competitive rivalry in the industry and how Nike uses its brand differentiation strategy to counter such treats.

Company Background

Nike is the world market leader in shoe making and controls 20% US athletic shoe market. Nike also sells causal shoes and a line of athletic apparel and equipments. Nike sells its product through out the US and in about 200 other countries. The main markets in which Nike operates are North America, Europe, Asia Pacific and Latin America, making it a truly global organisation. The portfolio of Nike products includes footwear, sports equipment (i.e. bags), men and women clothing and accessories.

Nike Business and Financial Performance

For the nine months ended 2/28/05, revenues rose 14% to $10.02B. Net income rose 35% to $862.1M. Revenues reflect higher footwear sales in all foreign markets due, in part, to the benefits of changes in currency exchange rates, as well as price increases in the U.S. Net income also reflects higher gross margins, driven by improved year-over-year hedge rates. (http://www.forbes.com)

Table 1: Financial and Market Indicators

Sales

$13.10 Billion

Profit

$1.09 B

Assets

$8.56 B

Market Value

$22.96 B

Employees

24,667

Table 1 above highlights some key financial and market indicators for Nike Plc, this shows that from a financial and capital viewpoint the company is more then adequately equipped to implement any marketing strategies and servicing any international markets (as it has the financial resources required).

Table 2: Financial Ratios

Net Profit Margin

8%

Current Ratio

-3

Div/Yield

1.28%

Earn/Share ($)

4.31

P/E

18.06

ROA

14.32

ROE

23.21

Gearing

0.15

Table 2 indicates that the company is fairly efficient in converting sales to profit margin with a net margin of 8 per cent. The current ratio of -3 also indicates that the company has liquid resources to make any required outlays for implementing its marketing strategies (hence, financing advertising and promotional activities). The gearing is also very low indicating spare debt capacity. Table 3 indicates that Nike is enjoying a constant steady sales growth with a growth rate of 14 percent in 1 year and 7 percent over the last five years.

Table 3: Growth Rates

1 Year

5 Year

Revenue %

14.55

6.90

EPS %

26.75

17.49

Dividend %

37.04

9.04

Nike - The Macro-Environment/p>

The PESTEL framework helps to illustrate some of the macro-environmental influences that will affect Nike. This will assist directors of Nike Plc to consider ways in which strategies are affected and how they seek to handle aspects of their environment. A wide variety of environmental influences will affect Nike's international marketing strategies and subsequently its business performance.

The first influence will be that of government action. The sportswear industry, by its very nature is very labour intensive. Therefore, majority of the production takes place in low-wage countries. The majority of employees within the supply chains are young and female and they certainly work under unreasonable terms and poor working conditions. With Nike operating in 4 different continents it needs to consider government legislations like minimum wage and use of child labour. This will result in an ethical dilemma for Nike Plc, in terms of employee welfare, human rights and working conditions and is the company willing to become more socially responsible at the cost of increasing production costs. Environmental issues in terms of reducing pollution, and deciding not to sell in some markets and ensuring 'fair' terms of trade is observed by suppliers are all issued that will have impact on marketing strategy.

The company must also beware of other political threats and how those will influence its marketing strategies. For example in late 2003 the Russian government froze 44 per cent of the national oil giant Yukos (Johnson, G., Scholes, K., Whittingto, R.). Demographics will also influence the company's marketing strategies, in early 2000, the trend of aging population in the western economies was highlighted as a growing issue. This could lead to a change in demand from consumers from sports athletic shoes to comfort shoes. But on the other hand, the growing health awareness in the western world will result in more demand for sports and fitness commodities. Therefore, sociocultural influences will also be key in the development and implementation of Nike's international marketing strategies.

Another key issue influencing Nike's marketing strategy will be that of technology. The introduction of new level of telecommunication and information technology advancements, with Nike already using Internet web as a mode of market entry and selling and marketing communication, any future implementation of marketing strategy will have to be in harmony with its existing e-commerce solutions. Nike also needs to consider the issues relating to labour markets. With Nike's operations outside the US, as a result of so called 'offshoring' - relocating jobs overseas - many to India. The motive was major reductions in cost of running activities like production.

Finally, Nike must also consider issues in relation to environment, competition regulation and the world economy overall before developing and implementing its future international marketing strategy. Mode of entry into new markets via acquisition or merger by Nike may potentially be investigated by the Competition Commission and subsequently blocked if the government considers that such business acquisition will be against consumer interests. For example, in 2003 Morrisons was given permission by the UK government to mount a takeover bid for rival supermarket group Safeway. This followed a five-month investigation by the Competition Commission. Significantly it's finding had prompted the government to block rival bids from the bigger Tesco, Asda and J. Sainsbury (Johnson, G., Scholes, K., Whittingto, R.). Suppliers are a further key issue that should also be considered not so much as a factor that is in direct control of Nike but could have a large impact on its business and strategies. Nike will be heavily dependent on row materials like rubber, cotton, and leather to manufacture its core products. Therefore, any shortage of supply or price raises by suppliers will have to be considered in implementing the marketing strategy and setting pricing policies.

Culture and strategy

Culture will inform and drive strategy. This can underpin success or cause difficulties (Johnson, G., Scholes, K., Whittingto, R.). As Nike operates on a cross border level, companies approach business in different ways in Latin America, Asia Pacific and Europe, which is strongly shaped by the different national cultures. Therefore, in managing a company with such diverse range of cultures across different nations it is critical to consider the implication of any new marketing strategies on those cultures. Consider how customers will react to the proposed strategies and therefore, consider the suitability, acceptability and feasibility.

Competitive Rivalry

Nike also needs to analysis the level of risk in each of its markets and market segments and the level of competition it faces from competitive rivals. Competitive rivals are its most immediate rivals with similar products aimed at the same customer group. There are a number of factors that affect the degree of competitive rivalry in any industry. Firstly, the extents to which the competitors are in balance, hence, equal size. Nike faces competition from rival firms like Reebok sportswear, Adidas, Puma sportswear, Umbro etc. Therefore, the company faces intense competition and must try to gain dominance over its rivals through its marketing strategy.

The intense competitive rivalry makes the need for differentiation very important. A differentiation strategy required the need for brand creation and enhancement. Nike must ensure that any international marketing strategies will continue to enhance its already superior brand name through an integrated marketing communication. Reebok and Adidas offer the most intense brand competition. The brand in the form of an intangible resource is very important for current and future success of Nike, as it allows Nike to implement a product differentiation strategy to maintain its current market share and market leader status. There are different bases of achieving competitive advantages and differentiation is just one of them. Nike may also having considered all key issues decide to implement a marketing strategy that is of 'low price', hybrid or 'no frills'. But the final strategic decision will depend on resources n terms of finance and human, and also a consideration of ethical, social and cultural issues in existence in its target market. This may lead Nike to customise and tailor its international marketing strategies to fit each market in terms of its unique characteristics.