Capstone assignment 4

Introduction

Nike Inc. is one the largest footwear manufacturing company across the globe that deals with designing, developing footwear, equipment, service and accessories. Nike products are sold in approximately 110 countries with about 20,000 retail accounts. By the end of 2018, the multinational company operated 1,182 stores globally with 392 of them situated in the United States. Nike has incorporated various business and corporate level strategies to ensure that it continues being one of the most successful companies in the globe. Just like any other multinational company, Nike experiences a great extent of competition from other firms thus it is very important for it to develop new business strategies which will act as a competitive advantage to address the competition from other firms.

Business level strategies

Business level strategies are plans that a company develops to describe how it aims at building a sustainable competitive advantage. The nature of competition in various industries has been changed due to these strategies which have allowed further developments in products quality and cost. Nike uses a business level strategy that is similar to a differentiation strategy. When a company incorporates the differentiation strategy it aims at being unique by providing products and services that are greatly valued by customers (Petrie, 2016). The strategy is aimed at distinguishing products and services with other similar products offered by competitors in the market. The differentiation strategy entails paying key attention to various aspects of a product such as the design, features and brand image in order to successfully come up with a unique product. Nike has been able to build the image of their brand and differentiate themselves from their competitors through product innovation, development of technology and offering high quality products.

Nike does not utilize the cost leadership strategy to a great extent because the products that it produces are higher end prices that the customers are willing to pay for due to the value and uniqueness they see in them. A cost leadership strategy is aimed at maximizing the level of profits by decreasing the production costs. Through personalization procedures such as NikeID and college sponsorships, Nike has been able to convince customers that their products are one of a kind and have been able to greatly create value for the customer. However, the company has incorporated the strategy in various instances such as in the late 1990s whereby it decreased the cost of its athletic shoes and other sporting equipment’s. Nike does not also incorporate a focus strategy to a great extent because it has a wide market segment. They have various products ranging from shoes to sporting equipment that are sold worldwide. Instead of using a focus strategy, the company aims at being the best in all these areas. The attributes such as swoosh that the company has developed for their products and the ‘Just Do It’ motto create value for customers and differentiates their products from those of their competitors.

The company has also incorporated a majority of high profile athletes that they sponsor and use them to build their brand. This has a significant impact on the customer base of the company’s products. High profile athletes from various sports such as Michael Jordan, Tiger Woods and Rory Mcllroy have enhanced the brand image of Nike (Cavaleri, 2018). Nike has been able to build its reputation to a great extent thus the products it produces are viewed as valuable which makes it very difficult for the company to lose their customers.

I think the differentiation strategy is the most important for the company’s long term success. This is because Nike has focused on the differentiation strategy to establish the company as the standard in athletic wear. The company focuses on its product line thus developing products which meet the customers’ expectations which facilitates customer satisfaction and retention. The marketing strategy of the company has a key role to play in its success. The company has been able to establish itself as a leading fashion brand and brand for athletes. The company has also achieved its success due to their commitment to research and development. The commitment has enabled the company to be highly innovative and develop high quality products and create value for the customers. The ability to personalize workout shoes and the partnership with Apple for fitness training are some of the examples of innovation. Nike will continue being a leader in the industry if it maintains the same level of innovation.

Corporate Level Strategies

The company has divided its products in various ways. First they manufacture products for three demographics: men, women and children. Each group is carefully evaluated in terms of their physical appeal and abilities. The company also incorporates strong diversification to strengthen the differentiation of its products. Performance equipment, apparel and accessories are the main methods of developing diversification that other sporting companies try to recreate.

The wide range of sports that Nike deals is aimed at making each athlete happy. The different products for different sports helps the company increase its customer base. Nike is constantly looking for a new product to add to their list with a view of raising the satisfaction of customers and strengthening the relationship between the company and the customer. It is also advantageous to produce a wide range of products because a high level of product lines reduces the level of risk. The company has also introduced NikeID for customization which helps customers to get what they want thus strengthening the customer satisfaction (Grant, 2016).

Nike has adopted various corporate strategies to ensure that is maintains its top position in the industry. The strategies include:

(i) Product development

The primary strategy for Nike’s growth is product development. The strategy entails constantly introducing new product with a view of maximizing profits. The company’s mission statement ‘’is to bring inspiration and innovation to every athlete in the world.” The mission illustrates that the company is committed to developing new designs and products through innovation. I think that the strategy is the most important for long term success because new technologies enhance the quality of products and separate them from the competition. Through product development, products are still valued and attractive despite changing the preferences of the consumers. This corporate strategy supports the company’s differentiation strategy through product innovation.

(ii) Market penetration

This strategy entails growing sales in the existing markets to increase revenue. For instance, the company increased its stores and retailers in the U.S with an aim of increasing sales to their American consumers. Market penetration is a secondary growth strategy because the company has a significant level of customers across the world. The company aims at penetrating new markets through product uniqueness and affordability. Nike aims at increasing the number of its retailers to increase its market presence.

(iii) Market development

This strategy enhances the company’s growth through targeting new markets. For instance, Nike expanded its operations to Africa and the Middle East to increase their sales. The company incorporates this strategy by investing in new technologies to penetrate new market segments. The financial purpose of Nike under this strategy is to maximize its profits by increasing its customer base by penetrating new market segments (Berger-Walliser, 2016).

(iv) Diversification

This strategy is the least significant in the company’s corporate strategies for growth. The strategy entails coming up with new businesses to achieve growth. The company used this strategy in its early years when it introduced sports equipment’s and apparel into its product line. Diversification supports the differentiation strategy through new businesses that supply materials for product innovation. The strategic financial purpose under this strategy is to reduces the company’s risk by entering new industries.

Competition

Nike has a global revenue of 33 billion dollars. Its brand is valued at 27 billion dollars and is the leading company in the footwear market. Just like any other top firm or organization, Nike is faced by top competitors who produce similar products. The following are the major competitors of Nike:

(i) Adidas

Adidas has a global revenue of 16 billion dollars and its brand is valued a 7 billion dollars. The key advantage that Adidas has over Nike is that it operated in both the Adidas and Reebok brand. The combination of the two makes Adidas the top competitor of Nike. Adidas competes with Nike not only on the footwear but also on accessories and clothing (Nayak, 2017). The major product that Adidas deals with is footwear that comes with diverse designs and style. Its footwear is athletic and strong.

(ii) Puma

Puma has a global revenue of 3.4 billion dollars and is common for its running shoes, clothing and apparels. The founder of Puma and that of Adidas were brothers but had a fallout in1948 which lead to the creation of the two companies. It is evident that Adidas and Nike are far ahead but based on the revenue generation of Puma, it is evident that its products are loved by many. Puma aims at developing its brand by supporting peace, sustainability and creativity. The company has also invested in manufacturing watches and other accessories.

(iii) Fila

Fila is also one of the largest footwear companies and also one of Nikes key competitors. The company uses the pricing strategy to attract their customers. The company’s products are of high quality but relatively cheap compared to those produced by Nike, Adidas and Puma. The company is commonly known for its cost advantage and the design of its products.

I think that despite the competition that Nike faces, it is most likely to be successful in the long-term compared to its competitors. The company has invested heavily in innovation and technology which is one of the major determinants of the companies that will succeed in the coming years. The company has also entered into a partnership with Apple for fitness training. The company is dedicated to offering value to their customers thus increasing its customer base and customer retention.

Conclusion

Nike Inc. is one the largest footwear manufacturing company across the globe that deals with designing, developing footwear, equipment, service and accessories. The company uses the differentiation business level strategy to a great extent and the cost leadership strategy less. This is because the products that the company produces are higher end prices that the customers are willing to pay for due to the value and uniqueness they see in them. I think the differentiation strategy is the most important for the company’s long term success because it has focused on the strategy to establish the company as the standard in athletic wear. The company has adopted various corporate strategies such as product development, market penetration, market development and diversification to maintain its top position in the industry. I think that the product development strategy is the most important for long term success because new technologies enhance the quality of products and separate them from the competition. Nike is faced by major competitors such as Adidas, Puma and Fila. I think that despite the competition the company is likely to achieve tremendous success in the long run due to its heavy investment in innovation and technology.

References

Berger-Walliser, G., Shrivastava, P., & Sulkowski, A. (2016). Using proactive legal strategies for corporate environmental sustainability. Mich. J. Envtl. & Admin. L., 6, 1.

Cavaleri, S., & Shabana, K. (2018). Rethinking sustainability strategies. Journal of Strategy and Management, 11(1), 2-17.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

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

Petrie, J. G. (2016). U.S. Patent Application No. 29/520,561.