For years, NIKE, Inc. has been the worldwide leader of athletic shoe sales. The company’s successful brand image united competition and empowerment for the competitive, athletic user. However, NIKE is losing their grasp of the urban, casual runner. These runners exercise and run for fitness or enjoyment, avoiding the competitive atmosphere many of NIKE’s current brand statements are aligned with. Nike needs to reposition their brand towards a focus on fun and functionality. By compiling and examining a variety of information we will be able to interpret where NIKE currently stands in the athletic shoe industry and how they will be able to adapt their brand position to be more successful in the future. These adaptations will allow NIKE to reach a more casual group of urban runners and consequently increase sales forecasts, while maintaining a dominating portion of the market for athletic shoes.
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NIKE Inc. was established in 1971 by Bill Bowerman, a former track and field coach at the University of Oregon, and Phil Knight, a student-athlete at the University of Oregon. After several years of distribution under the name Blue Ribbon Sports, the duo decided to enter the athletic shoe manufacturing business. With the help of Jeff Johnson, the first employee of the company, the brand Nike was born. One year later, in 1972, a graphic design student at Portland State University developed a brand symbol that would one day be recognized globally: the Nike Swoosh. The company later adjusted its official name to NIKE, Inc.
The main headquarters of NIKE Inc. have been located in Beaverton, Oregon since 1990. Leading the executive team of NIKE Inc. is Mark Parker. According to the official NIKE website, “Parker joined Nike as one of our first footwear designers back in 1979, and he’s been at the center of Nike innovation ever since,” (About NIKE, Inc.). He is now President and CEO of the company. Alongside him are co-founder Philip H Knight, who serves as the Chairman of the Board of Directors, and Charlie Denson, who holds the position of NIKE brand president.
NIKE Inc. is a publicly traded company that sells athletic products under the NIKE brandname and affiliate brands. At the end of fiscal 2011, NIKE Inc. earned a $20.9 billion in revenue. The brand carries products for men and women and covers a range of products from cross-training shoes to the NIKE+ technology platform. Action sports, athletic training, basketball,football, soccer, running, and tennis are only a few of the many activities NIKE manufactures products for. Several NIKE affiliates specialize in one of these sports, such as NIKE Golf, a sub-branch that designs golf equipment, balls, footwear, bags, and other accessories for the global market. NIKE golf is not the only affiliate contributing to NIKE Inc. Cole Haan, a luxury brand with more than 180 retail location and a fiscal 2011 sales total of $518 million. Converse, known as “America’s Original Sports Company” realized $1.1 billion in sales in fiscal 2011. Hurley International, an action sports apparel company earned $252 million in sales that same year. Nike claims, “As part of our growth strategy, we continue to invest in opportunities that will generatethe highest possible long-term returns,” (About NIKE, Inc.). Altogether, the affiliate brands contributed $2.7 billion in Nike Inc. revenue last year.
The athletic shoe industry is segmented into more than fifteen specific groups. Among those categories, running shoes is the largest. According to American Time Use Survey, between the yeras of 2003 and 2006, 7.1 percent of people over the age of 15 engaged in running as a daily activity (https://www.bls.gov/spotlight/2008/sports/). Other activities include basketball, dancing, and hiking but have a lower participation rate. From the year 2005 to 2007 every retail channel, with the exception of department stores, has experienced an increase in athletic shoe sales. Shoe stores sales have increased 3.5% to $10,059 million, sporting good stores have increased 13.7% to $3,546 million, superstores have increased 7.1% to $2,072 million, and clothing stores have increased 3.9% to $1,323 million (Mintel, 2008).
Sales have consistently increased within the industry. From 2002 to 2007 there has been a steady growth of about 2.8% per year . This pattern is forecast to continue through the year 2012.Although the growth rate of the industry is low, sports participation rates have never been static. There are also outside sales from users who are not looking to purchase the shoe for athletic use. According to a 2008 survey, only 19% of people purchase athletic shoes solely for sports orexercise (Mintel, 2008).
Other factors that affect the purchase of athletic shoes are comfort, price, performance, style, brand, technology, and endorsement. In the same 2008 survey, users revealed they rate comfort at 99% importance and price at 94% importance. It is important to realize that, even though the respondents in the survey indicated only 13% importance to celebrity endorsement, there has been research that shows this is inaccurate. Mintel believes “respondents may be understating the importance of celebrity endorsement. Mintel’s Sports Enthusiasts-U.S., July 2007, found that 38% of obsessed sports enthusiasts purchased licensed sports clothing in the past months” (Mintel, 2008).
Like many industries, the athletic shoe industry is facing difficulaty due to the state of our economny. While there has been steady growth in the industry, inflated prices are causing sales to remain static (Mintel, 2008). The competition for market share in the athletic shoe industry is a thre at because of innovative brands in the industry. On the other hand, technological advancements in terms of promotion and product pose exciting opportunities. There are also opportunities to reach the consumers at department stores, where sales are currently down 21.8%(Mintel, 2008).
Many companies that vie to capture the purchases of consumers across the nation in the market of athletic shoes. However, NIKE dominates a majority of the market share for athletic shoes This fact is clearly evident from the pie chart located in Appendix A, Figure 1. According to the data from Market Share Reporter, the NIKE brand alone owns a 35.21 percent market share, a giant portion of the total market (Ed. Robert S. Lazich and Virgil L. Burton, III). Additionally, the same report notes that two NIKE subsidiary companies own marginal portions of the market, with Jordan brand shoes having a 10.83 percent market share and Converse owning 2.83 percent of the market. Jordan and Converse offer niche-specific athletic shoes. Jordan offers shoes tailored for basketball players and Converse aims towards style over function. These brands would not take away sales from NIKE if the company chose to market towards urban, casual runners.
NIKE has a few clear-cut competitors in the market for athletic shoes.Adidas stands as NIKE’s top competitor. Adidas has the marketing power to expand its brand and positive brand standing within the industry: the company will sponsor the 2012 Olympics in London (London 2012 Olympic Partners). Adidas can steal casual, urban runners who have preconceived notions of NIKE as a brand strictly for “the competitor”. Adidas’s brand owns 32 percent of the market for athletic shoes (Ed. Robert S. Lazich and Virgil L. Burton, III). The Reebok brand is a subsidiary of Adidas that also owns a decent portion of the market. While much of Reebok’s 6 income is from apparel and cleat sales, its athletic shoes own about 2.58 percent of the market for athletic shoes (Ed. Robert S. Lazich and Virgil L.Burton, III). Reebok, however, is aggressively moving to increase its market share this year. Their updated line of “Zigtech” shoes position the brand as a fitness shoe instead of a competitive shoe (Reebok Zigactive: Ochocinco vs. Annie). Reebok has also upped its social media efforts to cater to the interactivity consumers gravitate towards.
Skechers, with their shape up brand, own 4.61 percent of the market for athletic shoes (Ed. Robert S. Lazich and Virgil L. Burton, III). Skechers has built their brand’s image around the casual runner. Their shape-ups product has attracted some casual runners, especially women,
due to its combination of fashion and comfort in an athletic shoe.
Finally, Japanese company Asics owns a 2.83 percent share of the athletic shoe market (Ed. Robert S. Lazich and Virgil L. Burton, III). Asics has gained ground steadily in recent years after being virtually unknown in the past. They do not stand as much of a threat to NIKE in their current position.
Looking at all of NIKE’s competition this year, the two companies that pose the largest threat to NIKE are Adidas and Reebok. Adidas controls the largest portion of the athletic shoe market outside of NIKE and its subsidiaries. Their newer “Adidas is All In” advertisements seek to position their brand as an exciting product that can make any person feel like a rock star (Adidas Is All In). Reebok, though they do not control the largest portion of the shoe market outside of NIKE, is making a push to promote their products as catering to the lifestyles of the consumers. The company has recently launched an improved line, “zigtech”, that helps the consumer enjoy “the sport of fitness” with their innovative design and responsive cushioning (Reebok Zigactive: Ochocinco vs. Annie). In the coming sales year, Adidas and Reebok have the potential to steal urban, casual runners from NIKE’s current market holding.
NIKE currently positions its brand towards the competitive athlete. For years, the company’s motto has been “Just Do It”, embodying the spirit of athletes who perform well under any circumstances. On NIKE’s corporate website, the company states its mission is, “to bring inspiration and innovation to every athlete in the world...if you have a body, you are an athlete.” (About NIKE, Inc.) NIKE makes a statement by saying everyone can be an athlete by wearing their shoes, creating emotional attachments that connect consumers with feelings of empowerment; this gives NIKE the advantage of reaching the “self-expressive” level of benefits with its consumers. The idea that NIKE can give you a leg up on the competition is a heavy emotional benefit that drives the current brand image of NIKE’s athletic shoes. Consumers around the world also trust NIKE as a dependable brand (Mintel, 2011).
In its advertising campaigns today, NIKE attempts to capture consumers through functional and emotional benefits. In its “Make it count” campaign, NIKE shows people all across the country performing a variety of athletic activities in the NIKE shoes, showing the functional benefit of the shoes to be that they allow the owner to participate in any activity to their fullest (NIKE, #makeitcount). The ad then moves into the company’s new slogan, “Make it count”, creating the emotional appeal that NIKE shoes will help the consumers to create a difference in their lifestyles through their actions. Overall, the ad campaign creates a brand personality that marvels NIKE as both an exciting and successful product which gives consumers the ability to perform at a greater level while feeling important in their new shoes.
NIKE’s main competitor, Adidas, also attempts to reach the more active athletes who strive to defeat their competition. Adidas tries to prove that their shoe will make athletes more prepared to face the competition through the use of their shoes. On the company’s website, Adidas lists two of its goals in its mission. They say, “We are innovation and design leaders who seek to help athletes of all skill levels achieve peak performance with every product we bring to market. We are consumer focused,” (About Us, Adidas-group.com). This is where Adidas differentiates themselves from NIKE’s strategies. Adidas tries to create top-of-mind brandpresence while associating shoes with innovation and change. They help consumers see that they can live a life of glory with the brand’s shoes.
In their recent “Adidas Is All In” campaign, Adidas has effectively brought about functional and emotional attributes relating to the brand (Adidas, Adidas Is All In Commercial). Their sixty-second spot aired over television and the Internet, showing a functional benefit of asleek, comfortable shoe that can help the consumer accomplish active tasks to the best of their ability. Adidas, however, separates from NIKE through their emotional appeals. In the sixty-second spot, everyone from athletes to citizens are HAVING FUN and creating lasting experiences. When Adidas says that they are “All In”, they create a brand personality geared towards those looking for excitement in their athletic and running experiences rather then just function.
Following the lead of Adidas, Reebok creates a brand that is based around the consumer. Their slogan, “I am what I am”, stresses the idea that Reebok’s shoes can serve many different purposes to different types of consumers. On their company website, Reebok has a box at the top of the screen that says, “I want” with the ability for the consumer to add information based upon their interests (Reebok.com).
Reebok has created a brand image and personality that puts the consumer first. Their shoes inspire the consumer to be whatever they wish, but be aided in their tasks by what they wear. This is important, because Reebok isn’t forcing their consumers to have a competitive athlete persona.
Reebok also largely differentiates from its competitive field through its innovation in functional benefits. Their new lines of “Zigtech” shoes promote comfort and performance in their unique design. The common human being works out and matches NFL star Chad Ochocinco in all activites during the course of the commercial, showing the functional benefits of the shoe by saying that it will help to better your workout performance (Reebok, Reebok Zigactive: Ochocinco vs. Annie). At the end of the commercial, text says “The Sport of Fitness hasArrived”. In separating sport from fitness, Reebok has created an emotional appeal towards the runners and workout experts that can create brand loyalty.
NIKE, for years, has put forth a tremendous amount of effort in order to preserve a large following of consumers who remain loyal to the brand and what it stands for. The current users of NIKE branded shoes come from a wide variety of demographic backgrounds. Among the many consumers who use NIKE’s athletic shoes, a clear split among male and female consumers exists, with males making up 50.7% sales to the 49.3% of sales from females (Mediamark,2010). Most of the consumers of NIKE products went off to college, with 58.6% of the consumers having either attended college or gone on past a four-year college to graduate school (Mediamark, 2010). Some age segments purchase more shoes then others. The largest purchasers to increase the sales of the brand’s products; consumers age 18-24 make up the market sector that could be receptive to new ads focusing on a casual running experience that would encourage
urban runners to buy NIKE shoes. Consumers within the ages of 18 to 24 years old are more likely to try out new athletic shoe brands on a more consistent basis then any other age group (Mintel, 2008). This age group also uses athletic shoes in a fairly consistent manner, exercising more then any other age group. Around 54% of this age group runs or jogs regularly as opposed to much lower numbers in older generations (Mintel, 2008). Additionally, New Balance and Reebok have created more brand loyalty among older consumers (Mintel, 2008). It would be difficult to change the perception of NIKE products to older generations who have already formulated their beliefs about running shoe brands. In marketing a casual, non-competitiveatmosphere associated with NIKE shoes to urban runners between the ages of 18-24, the products can become top-of-mind to this age group. The age group stands as a mix of emergent consumers. In creating positive associations related to a casual experience with the products, NIKE can make the 18-24 year old consumers brand loyal going into the future and increase the company’s total sales now and in the future.
NIKE, Inc.’s newest ad campaign is an international campaign titled “Make It Count”, which focuses on the new Nike Fuelband product. (NIKE Inc, 2012). The “#makeitcount” text is also included in many of the advertisements. The campaign focuses on the concept of making what a person does in life “count” or hold significance by inferring that life itself is a sport that must be won. This campaign’s American advertisements focus on a spectrum of bright red, yellow, and green often blending together, while many of the ads also use neutrals and dull backgrounds to make the main colors pop. The commercials contain a mash-up of different advertisements Overall the ad entices viewers by creating a desire to see what the advertisement is about, but there is no explanation other than brief but intense imagery of strength training. This campaign is functional, introducing the mash up of different athletes wearing NIKE products and excelling at the activities they are performing. These commercials also include shots of urban environments, such as a busy street, graffiti covered walls, skylines, and a busy flight of stairs. Upbeat alternative rock music is a prominent feature, and many of these ads include font, or a voice over explaining the new “Nike Fuel” product. (Youtube/Nike, 2012) Both the print and commercial advertisements use a strong bold font in all capital letters, and the font is usually black, white, red or green depending on the background of the image (Appendix A, Figure 2).
Our greatest challenge in 2000 will be to maintain the operational and financial initiatives we worked so hard to implement in 1998 and 1999. We must maintain our inventory levels low enough that will allow us to adapt to quickly changing market trends. Financially, we must remain conservative in our cost structure. Cuts to operating expenses of almost $200 million this past year demonstrated that we are in a position to be nimble in light of our industry-dominating size. With the gradual economic recovery in the Asia Pacific region, we can capitalize on customers who are financially stronger. Our sponsorship of the 2000 Olympic Games in Sydney, Australia, and the 2002 World Cup in Japan and Korea will be the start of many opportunities to bring sports events into the mainstream for regional and global markets. With added exposure, we are challenged to respond to a market demand for fashionable athletic footwear and apparel. In this quest, we will succeed if we keep quality and performance at the core of our business.
The Internet is a rapidly changing medium. As the first company in our industry to offer e-commerce capabilities, we must proceed with caution and stealth in order to select an enduring strategy that will complement our existing distribution channels.Nike, Inc. 1999 Board of Directors*
Table of Key Financial Ratios
The key weakness of Nike, Inc. resides in our financial status. While we are not in financial trouble, we recognize that strengthening the financial well being of the company can only assist our company in the short- and long-run. We have many areas challenging our continued success such as increasing our profitability and bettering our management of cash, accounts receivable, and debt. Nike suffered a blow to sales and revenue sparked by bad publicity in 1997 about our international labor policies. Since then, we have attempted to overcome the bad press by raising and enforcing minimum age requirements for employees in overseas factories. Nike attempted to regain its mid-90's momentum as shown in 1998’s recovery, but the loss of Michael Jordan as our spokesman and the Asian financial crisis put a damper on gains that year. During 1999, the company made some changes in its products and deeply cut costs. These initiatives, in addition to the stabilization in the Asian financial picture, will combine to fuel the recovery that Nike expects in the near future. Nike's recent alliance with Fogdog Sports, an Internet sporting goods retailer, and our presence in the 2000 Sydney Olympic games will also aid in sales growth.
Nike's once loyal market is currently aging. This means that our customers are not as athletic as they may have been in the past. However, this poses as an opportunity for Nike because they have the ability to influence the next generation of Nike customers. The older generation of Nike brand purchasers have the power to influence their children - part of the next generation of Nike loyalists. In addition, by marketing different types of shoes to this market, these existing customers will continue to be loyal to Nike.
The phenomenon of the aging of our most loyal market segment questions whether there is a threat that the new generation will not be exclusively loyal to Nike. In the current market there are a number of other competitors that are not mainly athletically oriented. Examples include such manufacturer-retailers as The Gap and Old Navy. Their clothing and shoes are competing with Nike's. In addition, Nike is not keeping up with the latest trends and styles like some of its competitors have been. For that reason, the newer generation is attracted by Adidas and Tommy Hilfiger.
An opportunity produced by pressure groups is the ability to react in a positive manner to concerns of the public as well as customers. Consumer watch groups are paying especially close attention to Nike's use of sweatshops and child labor to produce our products. Nike's opportunity lies in being able to show the consumer force that we are indeed taking steps to reduce and eventually eliminate sweatshops and child labor through new policies and strict implementation procedures. Also, by responding to such consumer activism, we are portraying a positive image in that we are promoting ethics even while we are trying to be efficient and economical.
In the same manner, not responding to these consumer activist groups poses a threat to Nike. The negative publicity that Nike has received thus far has lowered its image to that of being an ethical company. Such publicity has the potential to ruin a company permanently. By disregarding the voice of concerned citizens, we are disregarding our customers, one of our most important stakeholders.
Effective Marketing Recovering International Economies
Declining Profitability Robust Economy
Largest Market Share Market Saturation
Poor Competitive Strategy Changing Demographics