Contemporary Issues in Global Business Management An analysis the business strategy of Nike Incorporation

Introduction Nike Incorporation has been successful in designing, developing and marketing diverse products such as apparels, footwear and other accessories. In its operation, the firm contracts manufacturing of most of its products to firms which are located overseas. This has enabled the firm to attain a high bargaining power over its suppliers (Lussier Kimball, 2009, p. 90).Advertising We will write a custom report sample on Contemporary Issues in Global Business Management: An analysis the business strategy of Nike Incorporation specifically for you for only $16.05 $11/page Learn More The firm has effectively positioned itself in marketing its products on a global scale. In the United States, the firm has established a strong distribution network through a number of retail outlets. For example, the firm runs approximately 20,000 retail accounts around the 110 countries in which it operates. Most of the firm’s products such as bags, bats, glov es, sports wear and other sports equipment are marketed under the Nike brand name. Nikes success can be attributed to its efficiency in implementing its internationalization strategy. Findings of a study of 132 organizations conducted by Veronica Wong and Professor Peter Doyle in 1998 revealed that marketing is one of the core drivers in the performance of business entities (Blythe, Coxhead, Lashwood, Partridge, Reed Simms, n.d, p.23). The American Marketing Association (AMA) defines marketing as the process which involves a number of elements such as planning, execution, promotion, pricing and distribution of the ideas conceived. Marketing is made up of a number of components such as product development. In addition, marketing must ensure that the businesses’ and customers’ needs are met. Finally, marketing must result into creation of value between the two parties (the business and the customer). Marketing is therefore considered to be a highly invaluable business a ctivity (Kaser Oelkers, 2007, p.4).This paper is aimed at illustrating the various marketing strategies adopted by Nike Incorporation. Industry analysis The United States apparels industry is relatively large. In addition, the industry is in its maturity stage which is evident by the slow growth rate and a high level of fragmentation. Demand for apparels in the US is satisfied by both domestic and international markets. Similarly, the US footwear industry has experienced a significant growth over the past few years as a result of growth in demand.Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More This has led into the industry reaching its maturity stage. In addition, the market has become very saturated. One of the reasons to explain this is the rise in intensity of competition. Some of the firm’s core competitors include the recently formed Addidas-Reebok merger, PUMA, Under Armour , Fila and New Balance Athletic. All these firms specialize in the production of sportswear. The global apparel and footwear market has become flooded with various sportswear brands. This has culminated into an increment in the consumer bargaining power. Consumers can easily switch from one product to another (Lussier Kimball, 2009, p. 90). However, the firm’s current strategy has enabled it to attain an effective market position. The firm has been able to create a relatively high level of customer loyalty. As a result, Nike Incorporation continues to lead in the footwear and apparel industry. In an effort to enhance its competitiveness, Nike Incorporation management team diversified its operations into the golf industry. This was achieved through the signing Tiger Woods who is a renowned golf personality as its spokesperson (Lussier Kimball, 2009, p.92). Competitive advantage Attaining competitive advantage is one of the ways through which a firm can be able to succeed in the long term as a going concern entity. According to Lussier and Kimball (2009, p.93), competitive advantage entails how a firm delivers unique value to its customers. In addition, competitive advantage is aimed at making a firm distinct from its competitors by enhancing its core competency. According to Porter (1998, p.70), there are three main strategies which a firm can incorporate in order to attain competitive advantage. These strategies include cost leadership, differentiation and focus strategy. Cost leadership entails ensuring that a firm becomes the leader with regard to low cost production. As a result, the firm is able to attain price competiveness by selling its products or services at a low price point compared to its competitors. On the other hand, differentiation entails production of unique products which are highly appreciated by the customers.Advertising We will write a custom report sample on Contemporary Issues in Global Business Management: An analysis the business strategy of Nike Incorporation specifically for you for only $16.05 $11/page Learn More There are various aspects which a firm can incorporate in an effort to differentiate its products. These include the product, sales, image, distribution and marketing. Focus strategy entails a firm being committed to be the best with regard to a particular product segment. Over the years it has been in operation, Nike’s Incorporation management teams have appreciated the importance of developing the firm’s competitive advantage. In order to achieve this, the management team incorporated the concept of product differentiation. The resultant effect is that the firm has managed to develop strong brand recognition by ensuring development of high quality products. In addition, the firm has a strong research and development team which ensures that the products developed meet the market demand. Product differentiation is achieved through effective designi ng such as by ensuring that the products such as the shoes are of different color. The high quality of the firm’s products has enhanced its reputation on a global scale. As a result, Nike as a brand name and the Swoosh logo has increasingly been recognized as status symbols globally. As a result, the firm has been able to increase its sales significantly (Porter, 1998,p. 72). The table below illustrates a competitive profile matrix comparing the firm’s competitiveness with some of its core competitors on the basis of quality of its product, marketing strength and price. A weighted scale of 10 is used. Critical success Nike Under Addidas- factor Armour Reebok Quality 5 5 5 Marketing 2.5 2 2 Price 2.25 2 2.25 Total 9.75 9 9.25 From the table above, it is evident that the Addidas-Reebok merger is likely to pose a threat to the firm’s competitive advantage. This arises from the fact that the merger has culminated into creation of a relatively st rong competitor. In an effort to remain competitive, the firm’s management team has incorporated the concept of continuous product improvement. To be effective, Nike Incorporation conducts continuous market research in so as to develop a product which meets the customers’ requirements. In addition, the firm has incorporated emerging technologies in an effort to improve the quality of its footwear, apparel and other equipments. The management team has also appreciated the importance of creating effective market awareness. One of the ways through which the firm achieves this is by integration of creative marketing campaigns. For example, the firm’s advertisements are a part of the pop culture.Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Its campaigns feature prominent personalities such as Michael Jordan, Bo Jackson and Tiger Woods (Robert, Lussier and Kimball, 2009, p. 92). Through these strategies, the firm has managed to develop a strong competitive advantage thus being effectively positioned in the market. Pestle Analysis In order to determine the existing market potential, it is vital for Nike Incorporation to consider evaluating macro environmental factors. One of the ways through which the management can achieve this is by conducting a PESTLE analysis (Worthington Britton, 2006). Political Analysis According to Campbell and Craig (2005, p.123), the actions taken by the political institutions through formulation and implementation of various policies can have significant effect on the operation of businesses. In an effort to ensure continued economic growth, the US government has relentlessly ensured that there is a stable political environment. The US government has formulated policies which enable Nike Inc orporation to effectively produce and market its products. One of the ways through which the US government supports Nike Incorporation is by ensuring stable macro economic environment by advocating low interest rates, creating an environment which promote international competitiveness through an effective and efficient tax system and ensuring currency stability. This has culminated into formation of a foundation conducive to Nike’s growth. In addition, the US government is committed at forming trading blocs with neighboring countries through economic integration. Some of the countries the US is considering include South Korea, Panama and Colombia. The economic integration is aimed at boosting the country’s apparel and footwear industry. Economic Analysis Over the past few years, the US has experienced a relatively high rate of economic growth. This led to an increment in the citizens’ disposable income and hence their purchasing power. However, the occurrence of the 2007 economic recession adversely affected the country’s rate of economic growth. The recession affected various economic sectors including the apparels and footwear industry. In an effort to minimize the effects of the recession, organizations adopted various strategies such as laying-off some of their employees so as to minimize their operational cost. To cope with the economic recession, Nike’s Incorporation management team came to a consensus to reduce its marketing budget. In addition, the firm reduced 4% of its work force. Despite these actions, Nike maintained its dominant position with regard to advertising due to its size. The firm only concentrated on sponsoring prominent athletes. In 2008, the firms marketing budget on advertising was $ 143.4 million down from $184 million in 2007 (The New York Times, 2009, para. 1-7). With the recovery of the global economy, there is a high probability of the firm increasing its sales revenue both in the domestic and t he international market. Considering the fact that the firm operates on a global scale, the firm is affected by currency fluctuation. Social environment Changes in the social environment can also affect the success of a firm (Baron, 2005, p.87). Currently, there is a trend which is emerging whereby consumers are increasingly becoming health conscious. As a result, a large number of individuals are joining fitness clubs. This trend has led to a rise in demand for fitness products such as footwear and apparels. This presents a feasible market opportunity for Nike to produce and market its products so as to meet the market demand. In an effort to ensure maximum level of customer satisfaction, Nike Incorporation gives the customers an opportunity to design their own footwear and apparels. In addition, Nike Incorporation should focus on developing new styles so as to be inline with the market demand. The firm can attain this by undertaking effective research and development. Technologica l environment The high rate of technological innovation with regard to Information Technology has significantly contributed to the success of Nike Incorporation. One of the ways through which the firm has utilized the technology is by improving on its products through research and development. In addition, the firm has also utilized emerging technologies in marketing its products. This has been achieved through integration of an effective marketing information system. In addition to product innovation, Nike Incorporation also utilizes its MIS in conducting other functions such as market segmentation and product differentiation. This means that Nike’s success is owed to its effectiveness in harnessing Information Technology towards various aspects ranging from product development to its distribution. Legal environment The US government has created a suitable legal environment for conducting business. One of the ways through which the government has ensured this is by integrati on of the Intellectual Property Rights (IPR). The IPRs entail diverse rights and responsibilities which are aimed at protecting a firm’s innovation, research and development and creativity from being exploited by other individuals. Some of the IPRs issued by the US government relate to patents, trademarks and designs. Through IPRs firms such as Nike Incorporation are able to invest towards development of brand equity. In an effort to enhance IPRs, Nike Incorporation has continuously worked with diverse policy makers such as governments so as to fight against counterfeiting (Public Policy and Advocacy, n.d, para. 5-6). Product In order to remain competitive, the firm conducts continuous product modifications. This ensures that its products are in line with the existing market demand. In addition, the firm ensures that its products promote customer safety by meeting the set safety standards. It is ensured that the various products meet the requirements of the market regions in which they are marketed. This arises from the fact that different regions have got different product requirements. To be effective in meeting the market requirements, the firm contracts the manufacturing process to firms which are located in the foreign market. This aids in ensuring that the product manufactured is in line with the existing market demand. Contracting to foreign firms enables Nike Incorporation to enrich the products style more effectively. Through market research, the firm is able to undertake effective product innovation. Pricing strategy The global economic recession negatively affected the purchasing power of consumers. For example, the recession led to a rise in the rate of inflation in most economies. This culminated into a decline in the consumers’ purchasing power due to reduction in their disposable income. The resultant effect has been a rise in the cost of living. Due to this, consumers have increasingly become price conscious in their purchasing pa tterns. In an effort to increase their sales revenues, firms in the apparel and footwear industry are increasingly adopting low pricing strategies. This has culminated into price war between firms. However, there is a high probability of firms with strong brands such as Nike succeeding. This arises from the fact that they can be able to adopt competitive pricing strategies despite the prevailing market conditions. One of the ways through which the firm is achieving this is by incorporating penetration pricing strategy. According to Lamb, Hair and McDaniel (2008, p. 53), the strategy entails setting the price of its products at a relatively low price point compared to that of its competitors. To be effective in the pricing strategy, the firm conducts competitor and consumer market research. The competitor market research is aimed at identifying the pricing strategy adopted by other firms in the industry. The resultant effect is that the firm is able to formulate its pricing strategy more effectively. Through the consumer market research, the firm is able to establish the degree of price sensitivity amongst the consumers. Through the low pricing strategy, the firm is able to appeal to a large number of consumers considering the fact that consumers are price sensitive and their consumption desire is to maximize their level of utility. In order to attract and retain a large number of customers, Nike Incorporation is integrating the concept of psychological pricing strategy in all its distribution outlets. Psychological pricing plays a significant role in ensuring that the firm’s products price appeals the emotions of different customers in their purchasing process. In most cases, Nike Incorporation adopts the psychological pricing strategy when introducing a new product into the market. The firm has also incorporated segmented pricing strategy. This is achieved by adjusting the price of its products depending on the type of consumer being targeted in the gl obal market. Segmented pricing is also incorporated while marketing to different customer categories such as the adult and children. Communication strategies Creating effective market awareness is one of the ways through which a firm can be able to succeed in the long term (Lamb, Hair McDaniel, 2008, p. 34). In addition, market awareness contributes towards a firm attaining an effective market position. Market communication is one of the ways through which a firm can be able to create communication (Koekemoer, Bird, 2004, p.76). In its operation, Nike’s management team has formulated a comprehensive marketing communication strategy. One of the core communication strategies which the firm has adopted is advertisement. Different languages are used in the firm’s advertisement campaign depending on the country’s national language. Over the years, Nike Incorporation has continuously advertised its products through various mediums which include television, print med ia and bill boards. In addition, the firm has also adopted other methods of market communication which includes sales promotion and public relations. Example of public relation campaigns which the firm utilizes include organizing fashion shows which are aimed at displaying the latest product offering. The firm’s decision to incorporate celebrities such as Tiger Woods has also played a significant role towards improvement of the brand’s value. In addition, endorsement of the firm’s brand by celebrities has also contributed towards creation of brand loyalty. For example, by wearing the firms’ clothes and designs, a firm’s brand can be improved significantly. This arises from the fact that consumers intend to associate themselves with successful individuals. In addition, firm also uses celebrities in their advertisement campaigns such as when promoting a specific product. Considering the intensity of competition, Nike Incorporation has adopted emergin g Information Communication Technologies (ICT). The core objective is to enhance increase the firm’s market share by increasing their market share. The firm has achieved this through incorporation of ecommerce. In marketing its products, the firm is increasingly utilizing the internet. Some of the internet technologies which the firm has incorporated include use of emerging social networking tools such as You Tube, wikis, blogs and Face book. Distribution strategy Product distribution is vital in a firm’s effort to ensure that it succeeds in the market (Kurtz, Mackenzie Snow, 2009, p. 57). A firm’s distribution strategy should ensure that the product can be easily accessed in the market. In marketing its products in the global market, Nike Incorporation has adopted a comprehensive product distribution strategy. The firm distributes its product to large retailers such as supermarkets in the countries in which it operates. Supermarkets form one of the largest poi nts through which the firm distributes its products. In addition the firm has established a number of distribution centers which ensure that the supermarkets are effectively stocked. The firm has also implemented a computerized point of sales program which enables the firm to track movement of inventories in the various distribution outlets. As a result, the firm is able to restock the stores more effectively. The role of marketing strategy Through its differentiation strategy, Nike Incorporation is able to able to position itself more effectively in the market. According to Lussier and Kimball (2009, p.90), attaining an effective market position is one of the defensive strategies that a firm can utilize. The firm’s Swoosh mark is one of the core selling features. This means that there is a high probability of the firm improving its sales revenue and hence its profitability level. In addition, adoption of the differentiation strategy will contribute towards the firm’s product being unique. The uniqueness of the firm’s products will contribute towards a large number of consumers considering purchasing the products relative to those of the competitors. In addition, product differentiation will enable the firm to address the diverse market needs (Morrison, 2006, p. 65). Through its market research activities, the firm will be able to undertake effective product development. In addition, the firm will be able to develop a high level of customer satisfaction by integrating the customers’ needs in the process of developing new products. This illustrates that there is a high probability of the firm increasing the size of its global market share. For differentiation strategy to be well undertaken, the firm will be required to conduct continuous market research (Brooks, Weatherston Wilkinson, 2004, p.54). This means that the firm will be able to understand the changes in the global market. The resultant effect is that the management team wi ll be effective in the planning process hence its ability to address future changes. In addition, product differentiation strategy will enable the firm to target the market more effectively. Conclusion From the analysis above, it is evident that Nike Incorporation has been very successful. This has resulted from its efficiency in formulating and implementing operational strategies. Additionally, the external environment has also provided an environment conducive for Nike’s operation. To be successful in the long term, Nike Incorporation should continuously adopt global strategies in its operations. This will contribute towards the firm attaining a high market share and at the same time retain its leadership. However, the firm’s management team should act locally in the various markets it penetrates. This will contribute towards the firm’s products being widely accepted in the market. Reference List Baron, D.P., 2005. Business and its environment. New York: Prent ice Hall. Blythe, J., Coxhead, H., Lashwood, M., Partridge, L., Reed, P. Simms, H., n.d.  Strategic marketing. London: Select Knowledge Limited. Brooks, I., Weatherston, J. Wilkinson, G., 2004. 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Taxation and intellectual property rights. Web. The New York Times. 2009. In recession, Nike is likely to cut marketing. Web. Worthington, I., Britton, C. 2006. The business environment. New York. Prentice Hall. This report on Contemporary Issues in Global Business Management: An analysis the business strategy of Nike Incorporation was written and submitted by user Trystan Parsons to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.