SWOT Analysis of Nike

4039 words (16 pages) Essay in Marketing

18/05/17 Marketing Reference this

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Nike Inc. was founded in 1962 by Bill Bowerman and Phil Knight as a partnership under the name, Blue Ribbon Sports. Our modest goal then was to distribute low-cost, high-quality Japanese athletic shoes to American consumers in an attempt to break Germany’s domination of the domestic industry. Today in 2000, Nike Inc. not only manufactures and distributes athletic shoes at every marketable price point to a global market, but over 40% of our sales come from athletic apparel, sports equipment, and subsidiary ventures. Nike maintains traditional and non-traditional distribution channels in more than 100 countries targeting its primary market regions: United States, Europe, Asia Pacific, and the Americas (not including the United States). We utilize over 20,000 retailers, Nike factory stores, Nike stores, NikeTowns, Cole Haan stores, and internet-based Web sites to sell our sports and leisure products. We dominate sales in the athletic footwear industry with a 33% global market share. Nike Inc. has been able to attain this premier position through “quality production, innovative products, and aggressive marketing.” As a result, for the fiscal year end 1999, Nike’s 20,700 employees generated almost $8.8 billion in revenue

RESEARCH OBJECTIVES

Nike company has been well known for many years by the customers. This is because Nike products already famous for the better quality and Nike is also one of the market leader in sportswear market. Therefore, we have chosen Nike company as our choice to investigate because we want to understanding more about how Nike company can be so successful in managed its company and how the Nike company can launch their company so systematic? Beside that, we also curious how Nike company can promote their product so successful until well known by the rest of the world? What strategies had been used by Nike company and what is the SWOT of Nike company?

One of the Nike product we have chosen to investigate more detail about is the basketball shoe, KD II. Basketball shoe product line is also one of the primary income for Nike. Therefore, we have investigated the basketball shoe model KD II to let us know what is the target market, what is SWOT for Nike company, what is the environmental forces and what is the marketing mix strategies have been used by Nike company.

TARGET MARKET

Nike’s target market is active people who enjoy high-quality sporting goods, especially footwear and its target market for their footwear are males and females between 18 and 35 years old.

Identify appropriate targeting strategy

Nike is using differentiated strategy for which it is targets more than one segments because Nike has many different product lines for example, sports wears, sports equipment, watch, accessories, sunglasses, jewellery and etc.

Nike KD II Series Basketball Shoes is using concentrated strategy because it is targets the basketballers who are always play the basketball.

Segmentation variables to use

The segmentation variables used by Nike KD II Series Basketball Shoes are demographic variable because it is divided the market according to the occupation of the people like the professional basketballers in NBA. Besides, the geographic variable is aimed to divide all the people into market based on city because the people live in city have higher disposable income compare to rural. And also the behavioristic variable divide the people into market according to the benefit expectations and brand loyalty.

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Market segment profiles

The market segment profiles for the Nike KD II Series are the one who are very active in playing basketball and most of them are Kevin Durant’s fans and like to enjoy high quality shoes.

Evaluate relevant market segment

Nike has to compare to its competitors which is Reebok. It has pretty good prices for its shoes and also depends on what type of shoe the customers need and want. For example, Nike KD II Series basketball shoes will be cheaper than its competitor. Nike has more than 30 % global market share in the athletic footwear category and almost 10% of the athletic apparel market since in 2008. In 2008, Nike spent almost $3billion dollars on marketing. In 2010, Nike revenue performance is almost $19,000millions. (Nike, 2010)

Select specific target market

Nike has adopted concentrated strategy to match its target market. And Nike has the financial resources to enter this market and it has effectively competed in this segments. Besides that, Nike has provided better service to customers’ need

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SWOT Analysis

Strengths

Nike is globally recognized for being the number one sportswear brand in the world. Nike has strong distributions, it supply its products almost at every part of the world. It manufacture variety types of sports products such as sports shoes, shirts, trousers, sports equipments and accessories. They manufacture high quality product at the lowest possible price by changing the place of production when there is a price hike to reduce the cost of production process. Nike is also strong in its research and development regarding its evolving and innovative product range. It has a strong sense of marketing campaign by sponsoring top athletes around the world with the highly recognized trademarks of “Just do it” and the swoosh logo. Nike has made quite a number of acquisitions including Cole Haan, Hurley International, Converse Inc. and Umbro. It also employed more than 30 thousands of workers all around the world.( Adam, 2009)

Weakness

Although Nike has diversified range of sportswear products, the revenue of Nike is highly dependent on footwear products. This will leaves Nike at a quite vulnerable spot if for any reason the footwear market fall. Besides Nike is considered as a expensive brand and it is difficult for the third world countries to afford Nike products. Nike was criticize by a number of social groups for overtime works, child labor, paying low wages and exploiting cheap workforces. The criticism by anti-globalization groups due its unruly and exploited manner was a great disaster for its reputation. Apart from that, Nike was for quite some time unwilling to disclose any type of information concerning its partnering companies. (Adam, 2009)

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OPPORTUNITY

Nike has many opportunities in its product development. The owners who are believe that Nike is not a fashion brand, however consumers wear Nike product because they do not always buy it to participate in sports but they derive a fashion trend. In youth culture, they are mostly argued that Nike is a fashion brand and this creates its own opportunities, since its products would become unfashionable before even the product wears out. For example , consumers will replace the product with the latest brand. Besides that, Nike has also increases its diversification in products range such as sports wears, sunglasses and jewellery. This will helps Nike to generate high profits. Nike also reduces the prices in Asian and third world countries to increase market share and it also gives a lot of effort on its corporate marketing mainly through the promotion of corporate brand and sponsorship agreement.(Adam, 2009)

THREATS

Nike has to face the problem of economic downturn in North America and Asian countries. Besides that, there are a number of private labels and generic products that compete directly to the status of the Nike company as the leading supplier of sports products. The market for sports shoes and sportswear is quite competitive because there is already full of different brands and companies and the competitors are constantly developing alternative brands to take away Nike’s market share. It has giving Nike a little room for new product innovation and growth of market share. Other than that, consumers are constantly seek for a better deal that conveys a good quality and if Nike charges at higher price for the product, the consumers would start to try to purchase others product that similar value and more cheaper than Nike’s product. This type of the price sensitivity among consumers will become a potential threat for Nike. (Adam, 2009)

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ENVIRONMENTAL FORCES

Competitors

Competition is tighter with the coming of Reebok and Adidas. The competition is happened around the world, globally, not locally and also the athletic shoe is going to be fashion-oriented.

Economic Forces

The economic condition will affect supply and demand, buying power, willingness to spend and also consumer expenditure levels. Besides the inflation occurs in a country will also result in price increasing of raw materials in the production process of Nike’s product.

Political Forces

There will have some trade agreement between some region for example North American Free Trade Agreement(NAFTA) and General Agreement on Tariffs and Trade(GATT). Nike also must follow the anti-dumping regulations by European Union(EU).

Socio-cultural Forces

Since 70-s, customers are more brand-minded and theirs preferences are changing into more fashion-oriented. And also at 90-s, woman’s consumer dominated the athletic shoe market because of the changing lifestyle.

Technological forces

Nike has integrated technology system to develop their product. Nike always adopted latest technology for their product and matched with their vision and mission.

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Legal and Regulatory forces

Nike has ensured that all of its products must have the trademark printed before it can be sold and also ensures all of its products are good and high quality during the process of product checking.

PRODUCT STRATEGIES

Branding Strategies

Nike has sponsored top athletes all around the NBA player. For example Kevin Durant is the one of the NBA player from Oklahoma Thunder City that has chosen by Nike as the spokesmen of the Nike KD II Series Basketball Shoes. He helps Nike Increase the sales from all the fans of all the athletes. Besides that, he also helps to increase the degree of the brand loyalty among the consumers. Nike also found a new way to build brand with creates a web sites call “NikePlus.com” that connect all the runners in the world.

Packaging strategies

Nike is introduced light weight shoe boxes in year 2009. Extension of the innovation will be applied to shipping carton in year 2010. Nike also using the recycle card board and design it into a very special shapes and colours for example chronicled the four decades of Nike’s pursuit of new materials and technology.

Labeling strategies

The sole of Nike KD II Series basketball shoes have marked all the warm up exercises must done by Kevin Durant before he starts his training with his team mate everyday and all the number plates of his houses and School that he stayed and studied before he becomes a NBA player. All the boxes of the Nike KD II series shoes have included a Universal Product Code (UPC), which is a series electronically readable lines that can identifying all the information of the product for example Price, Sizes, Colours and etc.

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Product Design & Features

The colour design of Nike KD II series basketball shoes have more than five colours. The logo of KD and the Nike logo were marked on the shoes to make the shoes more attractive and stylish. Furthermore, the cutting of the Nike KD II series is low cut and it will help all the basketballers move faster after wearing because it is very lightweight and feels like running on air. Besides that, it consists of super-responsive cushioning Rubber outsole with flex grooves for enhanced flexibility and traction

Product Support Services

Nike create a sites ” http://help-us.nike.com/ ” to provide more information and support to customer such as Payment Option , Returns and Exchanges of product, Special Offers, Product Launches, Sizing Information, Product Technology, Product Availability / Out Of Stock and etc.

PROMOTIONAL STRATEGIES

Advertising

Nike company has put a lot of effort to promote their product and brand through advertising. Nike company realize that advertising is a paid, non-personal communication about an organization and its products information can widespread to the public through the mass media. This is because advertising is highly flexible and it can reach a large target audience or focus on a small, precisely defined segment. Beside that, using advertising also can offer several benefit such as advertising is extremely cost-efficient when it reaches a vast number of people at a low cost per person. Which mean public only need to spend low cost but can gain the information for the product.

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Beside that, advertising also lets the source repeat the message several times. This can cause the people remember and recognize the product deeper and this can increase the company reputation. Hence, Nike company has put a lot of money to promote their product through the television, radio, the internet, newspaper, magazines, direct mail and outdoor displays. For the basketball shoe that we investigate, KD II, Nike company has advertise KD ii , the basketball shoe through the mass media such as internet, newspaper, magazines and direct mail especially through the internet. Nike company has create a web page that specialize for KD II in the Nike homepage. This can increase the reputation and of the basketball shoe, KD II and recommend it to the public.

Personal Selling

Nike company has utilizes a personal selling technique to all of their retail stores. The sales associates in these stores will direct contact and interact with the buyers of Nike merchandise. For the product we investigate, KD II, the Nike company also train some of the salesperson in the retail stores to know more about this new product when the KD II just introduce by the Nike company. The salesperson are the individuals that communicate directly with the consumers who are interested in Nike products and this will get the immediate feedback from the buyer so they are suppose to be knowledgeable of the brand and should be trained in asking customers the right questions in order to find out what they are looking for. The salesperson should know all the information of KD II and can give the right information such as the special of the KD II to the buyer. To make sure this is effective, Nike company will often send Nike representatives to retail stores that sell their sneakers to give little presentations to keep the sales associates up to date on the merchandise and the technology behind them.

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Public Relations

Public relations can build a good image of Nike company. This is normally achieved through donation and charitable events to worthy causes. Nike companies can also encourage their staff members to participate in the community activities. The main advantage of this promotion is the fact that third parties get to talk about a given company. When a newspaper or magazine writes a good review about a Nike company, buyer are more likely to believe it than if they just saw a huge poster created by the company. The reason for this is that reviews are assumed to be more neutral and less susceptible to biases. For example, Nike sponsors event such as Hoop It Up and The Golden West Invitational.

Nike company normally sponsors numerous sporting personalities in a wide range of sporting activities. Examples of such people include Kevin Durant in basketball, Ronaldhinho, Wayne Rooney and Christiano Ronaldo in football, Tiger Woods in Golf and Roger Federer in tennis. The purpose of doing this is to establish a strong brand in those sporting activities.

Sales Promotion

Sales promotion is an activity or material which acts as direct inducement offering added value or incentive for the product. Nike company has offer some free sample to the reseller and the salespeople and also offer some coupons to the customer. Customers can find coupon codes for basketball shoes, tennis shoes and other Nike casual shoes online. Unlike advertising, sales promotion are concerned with the short-term. Beside that, Nike company also offer premiums which mean giving gift to the customers for purchasing KD II. Nike company also organize some special events to promote KD II. In the special events, Nike company has invite the KD II spokesman Kevin Durant to attend the events. This will attract the customer to buy the basketball shoe product, KD II.

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DISTRIBUTION STRATEGIES

Marketing Channel Selection

All the Nike basketball shoes sold at the retail shop around the world and the retail more often found at the large city. Secondly customer can purchase the Nike basketball shoes through mail order or internet. We can also find Nike basketball shoes at the hypermarket in the large city.

Intensity Of Market Coverage

Nike is using Selective Distribution strategy it is because the price of the Nike basketball shoes are expensive and it often purchase by the people who are live in the city that have high income. Prevent selling fakes and variants Nike product to their customers, Nike has just setting some few places to sell their product. First, Nike retail store will not easily found at anywhere but more often will be found at the City. Nike has targeted all leading hypermarkets and big chain stores.

Supply Chain Management

Nike environmental programmed is not only about improving their product, but also about the performance of their suppliers. There are some business reasons for dealing with suppliers who are environmentally responsible and knowledgeable. First, contracted manufacturers are encouraged to go beyond what is required by law or collective bargaining to provide outplacement or retraining assistance. In addition, Contracted manufacturers are also required to make payment to workers of retirement or severance funds and respect their employees’ right to freedom of association and collective bargaining to the extent permitted by local law. (Nikebiz, 2009)

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Channel Management Issues

Nike is more focus on the largest city as their targets to open the Nike retail shop. Many people that stay far away from the city are hardly to buy the Nike basketball shoes, and this problem make all the people stay far away from the city choose to purchase other brands that sell near their town. Secondly, people seldom choose mail order or internet as their way to purchase Nike product because the cases of selling fakes and variants happening before so customers are afraid they will become another victim.

PRICING STRATEGIES

Pricing basis & objective

Nike KD II Series basketball shoes are designed to be competitive to the others fashion shoes. Nike products are higher priced, but Nike KD II Series basketball shoes are more lower price compare to other Nike basketball shoes because the spokesman, Kevin Durant was came from a very poor family and he hopes everyone can afford to purchases a nice and good quality basketball shoes after he has became a NBA player. Nike has done a great job of driving the perceived value of their products over the years through multi-product branding. (Cuizon,2009)

New product pricing strategies

Considering the major revenue increase over the last decade, Nike has proved its popularity and high demand for its products among people. Nike has a higher level of consumers who have associated themselves with the brand, and they are willing to pay higher price with the Nike Swoosh on it. Nike often adjusts their new products’ prices based on differences in the type of customer they are targeting, the specific product they are trying to market, and the location their products are found. The Nike KD II Series shoes are priced at $95 (RM295) and the quality is better than other basketball shoes because they are trying to target the lower income people and they like to play basketball. (Cuizon, 2009)

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Promotional pricing strategies

Promotional pricing strategies that used by Nike company was during the World basketball festival in New York City at the USA. This promotion is launched by Nike and USA Basketball Association. The purpose of this promotion event is to connect the global world of basketball and to celebrate the sport while leaving a lasting legacy within the community. Furthermore, Nike has offered the Nike KD II Series basketball shoes with the price at $88 (RM273) and also other Nike products such as basketball, jersey, accessory, and etc.

Pricing issues

Nike wants to increase its sales by doing a lot of promotion and reduce the price of its Nike KD II Series. Since that Nike and its competitors are also an oligopoly, if Nike continues reduce the price of the KD II Series, other like Reebok will also do a lot promotion regarding their products for the purpose of compete with Nike, eventually their can’t achieve high sales from their product and also their revenue performance will decrease.

CONCLUSION

Limitations

Nike KD II series basketball shoes are low cut basketball shoes, it is not suitable for the player that playing power forward position and centre position because it will easily get injured while rebounding the ball. Nike KD II Series basketball shoes are specially designed for the players like small forward and point guard that they are run very fast and to score points. Besides that, Nike KD II series basketball shoes are not suitable for people who are wide feet because the sizes are more concerned on the smaller feet people and the sizes have been standardized. Nike KD II series basketball shoes is not a very breathable sneaker, there are not many perforations anywhere on the upper.

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Recommendations

Nike company should designs the KD II series basketball shoes in low cut and also high cut because the high cut KD II series basketball shoes can help to reduce the risk of the player that are taking power forward position and centre position from getting injure. Nike should also produce KD II with the larger sizes for the people who are wide feet and it can provide more choices for people to choose.

Conclusion

Nike is the world famous maker of athletic footwear and apparel. Besides that, it is also the market leader in US athletic shoe. It designs and sells footwear and uniforms for a variety of sports as well as athletic equipment. Overall, Nike company sells its items in 690 Nike-owned retail stores worldwide and 23000 retail accounts in the US. Nike KD II is one of the basketball shoe product and it is more player-friendly sneakers on the market. Furthermore, the price of the KD II Series is cheaper than other Basketball shoe such as Air-Jordan basketball shoe because it is more focus on the lower income people. Lastly, Nike company has also put many effort in doing promotion of KD II series. In short, Nike company successful identify their target market by using different targeting strategies to reach the target market of KD II series. Besides that, the SWOT analysis has help Nike company understanding its weaknesses and to avoid threat from environmental forces and using its strength to capture the opportunities.

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REFRENCE AND BIBLIOGRAPHY

Adam. 2009. Nike swot analysis. Viewed on 15 March 2011. Available from:

Money Instructor. 2002. ‘Harvard referencing’. Viewed on 16 March 2011. Available from:

Cuizon, G. 2009. Audit on nike’s marketing strategies. Viewed on 13 March 2011. Available from:

Cuizon, G. 2009. Marketing audit of nike’s strategies. Viewed on 14 March 2011. Available from:

Nike, INC. 2009. ‘Harvard referencing’. Viewed on 12 March 2011. Available from: http://www.nikebiz.com/crreport/content/about/1-3-0-about-nike-inc.php?cat=about

Nike. 2010. ‘Harvard referencing’. Viewed on 20 March 2011. Available from:http://invest.nike.com/phoenix.zhtml?c=100529&p=irol-reportsAnnual

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