BUS4002 Business Report: Nike's Strategy, Markets, and Competition

This business report provides a comprehensive analysis of Nike, a multinational corporation, focusing on its competitive position in various markets. It compares Nike with its competitors, particularly Adidas, highlighting Nike's strengths in marketing, celebrity endorsements, and value-based pricing. The report examines Nike's business model, emphasizing its product awareness strategy and the benefits of its pseudo-holding company structure. It also delves into Nike's revenue streams, market share in the US and globally, and its innovative technologies like Fly Knit. The report concludes by discussing the challenges Nike faces when trading across borders and offers recommendations for enhancing their business operations. Desklib offers a wide range of business reports and study resources for students.

Student’s name:
Student’s number:
Module Code:BUS4002
Hand-in-date:
Supervisor’s Name:
Project Title: Business Report on a multinational company
1

Table of Contents
Introduction................................................................................................................................3
Comparative Analysis of the company’s competitive position in its various markets..............5
Issues Nike needs to consider when trading across borders:...................................................10
Discuss what the company needs to consider to enhance their business:................................14
Conclusion................................................................................................................................16
Bibliography.............................................................................................................................18
2

Introduction
Business report can be described as an orderly, objective communication of the factual
information that can serve as the purpose for the company. With the help of the business
report, the company will able to develop effective marketing strategy. When the company
tries to target any specific section of the customers and at the same time, wants to enter new
market, the company will hand over the business report to the advertising agency for the
promotional activities. Additionally, the business report will also help in making important
decision regarding its operation. Business report plays an important role to actively manage
the company.
This business will be conducted by considering Nike as the sole reference. This business
report will compare Nike with the other companies of the similar industry. This business
report will also help in understanding the strategic position of the company. Additionally,
with the help of this business report all the essential information of the company will be
provided. This business report will display the challenges that are faced by Nike while
operating the business across the globe. The management of the company should develop the
strategy, which will help in mitigating the challenges that can affect the business of the
company. With the help of the strategy, the management of the company should be able to
increase the market share. This will also help the company to attract more customers. The
business report will also outline some recommendation, which will help the company to
overcome the challenges to operate the business effectively.
About the organization
Nike is an American multinational corporation company. The company is involved in
designing, manufacturing, development and marketing worldwide sales of apparel, footwear,
services and accessories. Headquarter of the company is located is near Beaverton, Oregon,
in Portland metropolitan area. Additionally, Nike is the world’s largest supplier of apparel
and athletic shoes. As per the reports, in the year 2017, the total revenue of the company was
estimated to be US$ 34.35 billion (nike.com., 2018). In the same year, the operating profit of
the company was estimated to be US$4.95 billion. The total number of the employees
employed by the company was estimated to be 74,400. Nike markets its products under its
own brand and at the same time, it markets with the other name such as Nike Dunk, Air
Force 1, Nike + and others. The subsidiaries company of Nike are Hurley International,
3

Jordan and Converse. Nike is also considered as one of the most innovative company across
the globe. Some of the innovative shoes of the company are Nike Hyperadapt 1.0, Nike Air
Vapormax and other (Nike News., 2018). These products will provide better experience to
the customers. Nike also sponsors high profile players and sports team of the world. As of the
year 2017, the brand of Nike was valued at US$29.6 billion
Figure: Nike’s Logo
(Source: nike.com., 2018)
4

Comparative Analysis of the company’s competitive position in its various markets
Nike, established as Blue Ribbon sports back in the 20th century, is currently the world’s
largest sports brands manufacturer, distributor and retailer. With an operating income and
total assets worth more than $ 4.95 billion and $ 23.26 billion respectively, it is the leader in
its markets in terms of both revenue as well as consumer bases. It is also one of the world’s
largest recruiter in both manual labour as well as its tech departments. With more than 74,500
employees, belonging to various cultural and ethnic backgrounds, Nike is ahead in its aspects
of their Corporate Social Responsibility as well.
Bill Bowerman and Phil Knight are the two names that are associated with the company’s
founding and establishment. The company’s present name, Nike Inc., came into existence
from the 30th of May 1971 (nike.com, 2018). Many experts are of the view that Nike is a
company, which has revolutionised marketing through their extensive focus on consumers’
demands. However, to understand Nike’s operational functions and their relevance in the real
world, a comparative analysis of Nike with its present market conditions has been done
below.
In the present market, Nike is the first name that is most associated with celebrity
endorsements as a part of their extensive marketing campaign. Various major sports starts,
over the years, have been an integral part of Nike. These celebrities, through their influence,
have helped Nike in getting access to their fans and followers. This is also a major reason
behind Nike’s success in terms of being the leaders with the maximum number of customers
in the domain of sportswear and athletic wear (Grant, 2016). Although USA is Nike’s single
largest market, it is represented internationally through more than 45 major retail stores
globally and shipments of products that reaches over 120 countries, internationally. Having
initially focussed on Basketball as the major sport to endorse, Nike is currently synonymous
with various major football clubs from all around the world. Some of the clubs that Nike
sponsors are Barcelona, Chelsea, Borussia Dortmund, etc.Another major reason for Nike to
introduce them into the world of football is that it is considered a global sport, with more than
206 countries being an active part of the same (Mahdi et al., 2015.).
From the perspectives of their business models, Nike has been somewhat different from other
major companies in the industry. For example, Adidas, Nike’s greatest competitor and the
second company in the industry in terms of revenue, have categorised their products into
5

three different segments. According to officials of Adidas, this lets them have a greater
segmented customer base, which in turn helps them in making effective decisions such as
pricing and distribution. However, Nike has not followed such paths when it comes to their
market segmentation techniques. Nike has divided its products into just two categories, one
for their sportswear, athletic wear as well as all apparel, and the other for their products not in
the apparel segment. Behind such a decision, lies Nike’s basic underlying principle of having
greater product awareness than their rivals. The company believes that a small but
knowledgeable consumer base is more likely to drive sales than a large and ignorant
consumer base (Aversa and Haefliger, 2017). Taken directly from the books of Digital
Marketing, Nike is a company, which believes in advertising their products ten times to a
million people rather than advertise their products once to a consumer base of 10 million.
An in depth analysis of Nike’s promotional strategies also reveals a great deal of insight as to
what has prompted the company to become the greatest singled out leader in their respective
industry. Nike is a company, which has showed its management’s strengths through the
development of their pseudo-holding company. Many brands owned by the company are
allowed to function as independent brands, which makes Nike liable to their profits and not to
their losses (De Marchi et al., 2017). For example, if Converse, one of the most well known
brands functioning under Nike, were to go bankrupt, Nike would just lose some working
capital and net profit. This allows Nike to function almost independently with great focus on
their operational functions and not just their balance sheets. This is considered by many
experts the sole reason behind Nike’s efficiency in coming up with creative innovation in the
field of sportswear (Vigneron and Johnson, 2017).
In terms of pricing strategies, Nike has always focused on value based pricing rather than
obsolete models. For example, the industry of sports and athletic wear is based on a market
skimming strategy, where the products are prices based on their looks and colours (Kapferer
and Laurent, 2016). Nike’s biggest competitor, Adidas also uses this strategy to price their
products of all three segments. Nike, on the other hand, have used value based pricing very
effectively, where the company assesses how valuable the consumer thinks the product to be,
and then sets its price accordingly. The greatest advantage of such a method is that it helps
companies in identifying the consumers’ perceived value of not only the products but also the
organization as a whole (Hanet al., 2017). In comparison, Nike’s products are generally more
expensive than similar products of their competitors. However, since Nike’s pricing is based
on value, the consumers see the product as something that is a necessity and is cordially
6

priced. Many new emerging companies in various different domains are adopting these
strategies, which are aimed at increasing brand and consumer loyalty (Bridges and Harrison,
2015).
Having discussed Nike’s strategy in comparison to the market’s overall strategies, the report
shall now discuss some of the statistics that determine how successful Nike has been over the
years, as well as its present competitive position. According to Porter’s Five Force Analysis,
Nike functions in an industry that has a high rate of competitiveness. The threat of substitutes
is mostly high although the threat of new entrants is almost negligible. The bargaining power
of suppliers as well as consumers is medium, and only affects final processes of the business.
Figure 1: Revenue from the footwear segment
(Source: Statista.com, 2018)
As evident from the figure above, Nike has been able to lead in terms of business done in
their footwear segment of the industry. This image is again repeated if the overall sales of all
these companies are taken into concern. In many previous instances, Nike has been able to
generate more revenue than two or three of its competitors revenues combined. This is
accredited to the fact that Nike is also subject to the largest consumer bases if compared
against the rest of the industry.
7

Figure 2: US Athletic Footwear Market Share
(Source:Finance.yahoo.com, 2018)
Out of the seven brands taken into concern, only NewBalance and Skechers are the
companies that would not be able to compete against Nike on a global basis because of sheer
dominance in market share that Nike has portrayed over the years (Da Costa, 2016). In the
figure given above, if Nike, Jordan and Converse’s market share are taken into concern, it is
quite evident that Nike owns more than 50% of the entire market share in USA alone.
Although experts are of the view that USA magnifies Nike’s dominance in the global stage, it
would be false to say that Nike s strong because of only USA’s market.
8

Figure 3: Global Market Shares of the Athletic Footwear Industry
(Source:Finance.yahoo.com, 2018)
Even in the global scenario, Nike is the sole leader with more than 31% of the market shares.
Its nearest competitor, Adidas, is still a long way from catching up with them, which gives
them a sort of a monopoly to drive their sales forward with every passing year. From aspects
of revenues, Nike has seen steady growth in sales and profit margins in the last decade.
Where any other companies have found it quite difficult to adapt with the constantly
changing consumer demands, Nike has been able to act through contingency plans in crises.
According to many market analysts, the greatest advantage that Nike has had over the years
of their functioning is the high capital that they have always been blessed with. Whenever
other companies have struggled to meet consumer expectations, Nike has come up with
innovative ideas to give a completely new look to their already existing products. At the same
time, their innovation has helped them portray the fact they believe in sustainable
development, mainly through manufacture of completely water-resistant products that shall
require 98% less water than other similar products of different technologies. Another new
technology that Nike has revolutionised is the Fly Knit technology. This, being water-
resistant, also reduces the carbon footprint that such products generally have on Earth.
Figure 4: Nike Global Presence
(Source: Statista.com, 2018)
Over the last two decades, Nike has seen a constant growth in not only its profit margins, but
their online presence as well. As depicted in the figure above, the company has seen a growth
in the number of retail stores that the company boasts of, on the global stage. In 2017, as the
official statistics depict, Nike operated through a total number of 1142 retail stores in a
9

worldwide basis. At the same time, Nike has greatly been helped due to the emerging
importance of e-commerce and the internet overall. One aspect of e-commerce where Nike
has left all its competitors behind is the aspect of communication with their consumers. All of
the social media platforms have been used by Nike to increase brand value and brand
awareness. At the same time, Nike has focused extensively on building strong relationships
with their consumers, which is very evident from their interactions with their consumers.
While the industry has focused on introducing new products as and when they see fit, Nike
has relied on feedback from consumers to develop their innovative products.
Issues Nike needs to consider when trading across borders:
With increased globalization, there has been an increase in cross-border trade, which
comprises of goods, services, capital, investments as well as information (Irwin, 2015). Due
to such conditions, Nike has also looked to create successful international markets all over
the world. However, with the respect of cross-border trade, many new limitations also come
into existence, which are to be cordially followed by any organization if it wishes to function
sustainably. International laws have been made stricter due to which companies now have to
pay extra attention to all aspects of their international trade, including ethics and
responsibilities (Fransen and Burgoon, 2015). Since Nike has been functioning on an
international basis for more than three decades now, the company is very adept at analysing
and identifying threats of having such a global presence.
Initially, knowledge is the first barrier, which can be a major constraint in terms of
conducting business overseas (Snarr and Snarr, 2016). For Nike, this knowledge is of utmost
importance because without proper knowledge of the company, the consumer base will not
support the existence of the company in a country, which has not been able to accept their
basic principles as a very core competency of the company themselves. Many a times it
happens that, a company does not conduct enough research to assess the economic conditions
of the country, due to which any prior risks cannot be eliminated and potential risks cannot be
deduced (Feenstra, 2015). This is also the same with Nike, because many of their retail stores
are present in various developing countries. These countries have an overall flatulent
economy due to which international businesses have to focus greatly on all of their rules and
regulations. According to officials, Nike conducts various researches to get an overview of
not only the political conditions but their physical conditions as well. Due to this, factors like,
climate, hygiene, acceptance, all of the factors are taken into concern.From similar aspects,
10

Nike also has to focus on consumer behaviours, buying preferences as well as policies and
trade agreements that exist in the particular region.
Nike has to focus on the barrier of language in order to successfully expand into an
international market. Being a global leader, Nike has to keep in mind such factors because
not adhering and respecting the language of the land, would also give rise to various ethical
issues, which would have serious impacts on the brand’s image as well as their perceived
value (Deresky, 2017). In terms of operating retail stores in international markets, Nike also
has to focus on etiquettes as well as body language, to maintain strong relationships with their
consumers. Although the company focuses extensively on communicating with its
consumers, there always remains a risk to hurt the sentiments of a particular people when the
country concerned is large and comprises of various emotional attachments. For example,
Nike’s largest international market is that of China. While entering the country, Nike had to
keep that the Chinese are a proud civilization who would not be very open to an international
company entering their markets and the dominating it. However, through correct applications
of theories and models, Nike was able to build consumer loyalty as well as increase the
perceived value of their brand.
One of the major issues that Nike has to face when entering a potentially new market is the
corruption that might be existent in the country. Due to high tax rates and formidable
donations made, Nike has been associated with many scandals over the past, although most of
them have gone unproved. This is a major factor of concern because such scandals hurt the
very principle on which the company is based, and they lose quite a number of loyal
customers based on such grounds. One of the most important issues however, for Nike, has
been the availability of cheap and quality manual labour. Over time, Nike has been affected
by various allegations related to the company’s sweatshop workshops, where children
ranging from 8 years old to 12 years old were put to work for minimum wages.
All of such allegations are something that the company wishes to discontinue in terms of their
everyday functioning. Another major issue that the company is prone to is the aspect of
bribing. This is quite predominant in developing countries because people need some sort of
guarantee before buying products from a company, which is not from their native country.
While the internet has reduced some of the knowledge barriers that Nike was initially prone
to, there still exists many such offshore markets where Nike have to pay extra fees so that the
native companies act as a source of confidence for their parent organization (Jary and
Wileman, 2016). This is also a major reason behind Nike’s many acquisitions and ventures.
11

Although not illegal, many experts believe that there is still a side of Nike that is not
published in the articles and newsletters for the whole world to know.
One of the biggest challenges faced by Nike in terms of their cross-border trades is the aspect
of logistics. Shipping, customs and transportations are some of the many factors that have a
say in the company’s profitability as well as inventory management (Armstrong et al., 2014).
Although Nike has not faced any such major challenge in its history, it is also a fact that the
company has to spend heavily for managing all such inventories. If not the most; it is
definitely one of the areas that consumes the maximum resources and is one of the most
tedious processes to undertake. Nike has been able to effectively use various theories and
techniques to keep their focus positive and on the most concerned grounds in respect to their
international markets.Nike has to focus greatly on transferring the shipment documents to
both the shipper as well as the consumer.
The fact that makes it so important is that, Nike delivers to many countries where the parent
organization is not physically present. Therefore, in terms of the 7Ps Marketing Mix, the
company loses credibility in terms of physical evidence if the consumers of a particular
region are dissatisfied with the quality of the products shipped. To overcome such negatives,
the company has hugely focused on creating virtual databases along all of their functioning
countries. Through these databases, Nike monitors and supervises their shipments and have
greatly reduced negative feedbacks arising from regions they are not physically present in.
Having discussed some of the negative issues that might pose a considerable threat to Nike’s
functioning in cross-border trade, the report shall now focus on some of the positive issues
that motivate the company to expand into newer regions by the day. Firstly, operating in new
areas provides Nike with enough Intel on how the consumers of a particular place works, and
what measures the company needs to take in order to ma9intain competitive advantage from
such an opportunity. While most of the focus is laid on feedback generation and evaluation,
Nike has also tried to put into effect the process of trail analysis in their newest markets.
They have categorised products based on relevance rather than price. For example, a Nike
retailer in Houston is more likely to focus on baseball products rather than football
merchandise to drive sales. Having a differentiated approach towards consumer bases also
lets the consumer know that the company is fully prepared to meet their demands as and
when they change. At the same time, Nike is also concerned at segmenting their customers in
a new region in terms of not only their income, but their buying preferences as well.
12