Capstone

Bryce Hill

Dr. Brian Grizzell

8/30/2020

Business and Corporate Strategies

Nike is an American multinational corporation whose headquarters is in Oregon, Portland. According to a report issued by Forbes news in 2015, Nike is the top leading supplier and manufacturer of sports apparel with over 50 billion dollars in revenue. It is one of the largest companies in the United States dealing with design, development, manufacturing, marketing, and sales of accessories, footwear, equipment, apparel, and services. Given the competitive nature of the contemporary business environment, different businesses have crafted their strategies for maintaining their performance and competitiveness in the market (Miroshina, & Romanov 2018). This paper will dig deep into Nike’s business level-strategies and corporate level-strategies. Furthermore, it evaluates the competitive environment while assessing the company’s most significant competitor based on their strategies.

Business-level Strategies

Business-Level Strategies

Business-level Strategy is concerned with the position of a firm in an industry relative to the five forces of competition and its competitors. Customers are the foundation of a firm’s business-level strategies. The success of any business is determined by execution, preparation, and planning. The success of every business begins with the definition of its business strategy at both the business and corporate level. The business-level strategies explain the essential actions taken to provide value to the existing and potential customers as well as gaining competitive advantage via the exploitation of the fundamental competencies in specific service and product market. The business-level strategy is often influenced by the position of a firm relative to the five forces of competition as well as its key or close competitors.

In any business organization, the consumers are termed as the base of its business-level strategy. For Nike, the business-level strategy put in place act as the main competitive driver that guarantees competitive advantages in the long-term. At a business-level, Nike Inc. utilizes two major strategies to ensure that its customers access distinctive products and services while gaining a competitive advantage in the market (PANDEY 2017). This combination is cost leadership and product differentiations; this facilitate the winning a greater market share. The company differentiate its products from the close competitors via technology development, high-quality products, and product innovation.

Differentiation in Nike Inc., helps the company to establish its brand image in the competitive and wide global market. This strategy has been employed by different companies in various industries across the world among them being Walmart, Apple, Samsung, and Nokia. It incorporates its cutting-edge design for its apparels. By utilizing innovation and the advanced technology, Nike is able to produce and sell high-value products. For instance, customers can design their preferred product choices in Nike’s website and get it within a short period of time. By utilizing research and development initiatives, Nike is able to maintain continuous product development and innovation to sustain its competitive advantage in the global and competitive market.

Cost leadership is Nike’s primary business-level strategy. Nike, however, does not utilize the overall cost leadership strategy as compared to its top competitors as well as new companies in the industry. Despite offering higher end prices, customers are willing and ready to purchase them since have a unique value and quality in the product. Nike’s personalized procedures including the Nike ID, college and sport sponsorships enables the company to work on improving customer’s perception of their product which are geared or designed to meet the needs and wants of the customers.

Nike has also specialized in combining product differentiation and cost leadership to strengthen its competitiveness. With this combination, Nike is able to improve its global market performance. It utilizes the advanced and product-focused technology to cut the cost of production thus providing products at a lower price to its customers. Nonetheless, Nike ought to improve its utilization of product differentiation to gain long-term success in the competitive industry. This will entail the introduction of new and improved products in the market including new sport shoes together with advancement in technology to accomplish a continuous reduction in the cost of production.

By focusing in its main business-level strategy, i.e., cost leadership, the company is able to optimize its profit margin while maintaining its competitive advantage in the entire industry (Todorov & Akbar 2018). Customers have been noted to be constantly striving to improve its purchasing power by exploring different alternatives including buying more at a lower price and through pushing for income increment. Normally, businesses seeking to be cost leaders utilize this opportunity to provide great products at affordable prices to the average consumers. Nike believes that the most appropriate way to differentiate itself in the competitive global market is via competitive pricing. Business with the least or minimal cost of production have the capacity to provide the same level of product quality compared to their close competitors for a much more affordable and convenient price.

Corporate-Level Strategies

Corporate-level strategies are the actions taken to achieve a competitive advantage by selecting and managing of a mix of businesses competing in multiple product markets or industries. The corporate-level strategy is often referred or considered as the planning pyramid of a business that describes the main essence of the business. Besides, the corporate-level strategy and the business decisions are influenced by the target destination. In Nike, the largest share of income comes from global sales of apparel and shoes. Nike Inc. uses the same resources i.e., distribution channels and technology for other small products.

Even though Nike Inc. has had a continuous growth in the industry, the corporate-level strategies ought to be designed to maintain the growth of the company. Nike is focused on three primary corporate-level strategies product development, market development and penetration as well as supplier diversity for continuous growth of the company (Kim, Qian & Zhang 2020). Both the mart development and product development are categorized as expansion strategy. This strategy is pursued by Nike in different situations including when seeks to serve the public in additional services and product sectors or functions and when it decides to concentrate on strategic decisions on primary increased in the speed of activity within the underlying business definition.

It expands its productivity via product development that entails the utilization of technology in the introduction of new products and improving the existing ones. Nike finds its more important to penetrate into new and better markets as a pillar of its expansion strategy. It has been continuously opening retail stores in the United States and other regions across the world. With a strong and popular brand image, Nike finds it easy to penetrate and capture customers in new markets by targeting new market segments. Supplier diversity is another technique used to pursue its expansion strategy. The company’s customers are located in different regions globally. This calls for a balanced distribution of products to these regions based on the extent of demand. This has compelled Nike to diversify its market scale and maintain a continuous supply for sustainable production.

With the wide market for Nike’s products, it has become essential to diversify its suppliers to meet the needs of different customers. Supply diversity influences the long-term success of the company while ensuring that the needs of each customer are satisfied. The focus on expansion strategy can lead to introduction of new functions and markets. Even without any change in business definition, Nike can pursue major increases in the pace of its events. This strategy is considered as an entrepreneurial strategy which entails the development and introduction of new markets and products or even penetrating markets to build more shares.

The adoption of the expansion strategy by Nike is motivated by the increased volatility of the business environment making it a critical strategy for survival (Silva 2019). The top executives of the company feel more satisfied with the idea of business expansion while others believe that expansion benefits the society. With business expansion, Nike is able to generate more financial rewards. Expansion also enables the company to reap advantages from the scale of operations and experience curve. With product development, market development and penetration, Nike Inc. stand higher chances of taking a considerable market proportion.

Competitive environment

Competition is inevitable in the business environment. Every firm faces competition from their counterparts in the same industry. The goal of every company is to have a large market share and competitive advantages over its competitors. Nike Inc. is among the leading footwear brands globally. Reebok and Adidas also have a substantial market share. Other competitors include Asics, New Balance, K-Swiss, Under Armor, Converse, and Puma. The footwear industry is ranked among the most competitive industries across the world. This is attributed to the advancing technology and ease of market entry. Nike take advantage of its ability to access international platforms including the international sports competition to sell and promote their products. Firms that are entering the industry lack sufficient capital and resources to influence the market through advertisement and production of new or improved products to displace those existing the global market.

Market Cycle

Adidas is the top competitor to Nike Inc., as far as sportswear and footwear products are concerned. Adidas majors of product promotion via paid ad and other medias including television. Their ads are designed creatively and attractively to meet the eyes of the customers. Adidas have sponsorship deals with teams such as the Great Britain football teams, France football, and Real Madrid. Its business strategy is product diversification. This is different from Nike’s main business strategy i.e., cost leadership. Adidas is heavily investing in the development of technology to ensure that its customers access quality products. Its corporate strategies include combination strategy that brings together retrenchment, expansion, and stability strategy (Nayak 2017). Adidas is focused on taping new markets in large populated regions and regions where sporting activities are common. Following its global market and large networks, Adidas is on building effective management of its supply chain to maintain a continuous and sustainable production process. Nike is more likely to be successful in the long run given the vast resources and improved technology applied in its production. It also has a large market presence than Adidas. Nike will remain the best performer in both the slow cycle and fast cycle markets. During slow cycle time, Nike Inc. can launch a strategy that will trigger its competitive actions. Its competitive advantages are safeguarded against imitation which can be experienced in the fast cycle markets.

In conclusion, the sportswear and footwear industry has, for a long time. experienced high competition in the global market. This trend is attributed the price adjustments and the demand for innovative products in the market. Nike has a highly competitive advantage that emerge from its cost leadership as a business level strategy and expansion strategy as its corporate level strategy. Nike should increase its investment in research and development initiatives to improve and sustain its competitive advantages in the industry.

References

Kim, E., Qian, T. Y., & Zhang, J. J. (2020). 2 Strategic visionary management as enabler of commercial sport management. Managing Sport Across Borders.

Miroshina, S. E., & Romanov, E. (2018). Business Valuation of Nike, Incorporated. Review of Business and Economics Studies, 6(1), 78-82.

Nayak, T. (2017). " Just Do It"@ Ad Campaign: The Case of Nike Inc. Globsyn Management Journal, 11.

PANDEY, B. C. (2017). Nike Inc-Complete Analysis: SWOT, PESTLE and Marketing strategy. BookRix.

Silva, D. T. D. M. (2019). Equity Research-Nike, Inc (Doctoral dissertation, Instituto Superior de Economia e Gestão).

Todorov, K., & Akbar, Y. H. (2018). Index', Strategic Management in Emerging Markets (pp. 461-479). Emerald Publishing Limited.