Facebook: Facing Off Against Tencent

Individual Case Assignment

Masha Cavazos

September 19, 2016

Nike’s Global Women’s Fitness Business: Driving Strategic Integration

Contents Contents 1 1. What are the key issues in the case? 2 2. Prior to the Change the Game proposal for global women’s fitness, how would you describe Nike’s strategy in the women’s market? What important lessons had been learned through these efforts to help shape the Change the Game proposal? 2 3. Describe the new strategy for global women’s fitness proposed by the Change the Game team. 3 4. What were the greatest internal and external barriers facing the team in implementing the new strategy? In what ways did they manage these challenges well? How are consumers’ needs taken into consideration? 3 5. What are the advantages and potential disadvantages to Nike of shifting from a product-driven to a consumer or category-driven business in the women’s market? Across the company? What new skills/competencies does the new approach require? What skills/competencies must the organization be careful not to lose? 4 6. How will Nike’s latest reorganization potentially help the global women fitness team moving forward? 5 7. What potential risks should the group seek to manage? 6 8. What are your recommendations how to create and sustain a competitive advantage in the global women’s fitness? 6 9. Risks associated with recommendations 6 10. Additional questions that would enhance the comprehensiveness of the case analysis 6 11. Case summary that highlights key marketing principles as reflected in the learning objectives and how they were applied to the case 7 12. What were the lessons learned from this case? 7 13. Exhibits 8 Exhibit 1: The Vision 8 Exhibit 2: Organizational Capabilities Model 8 Exhibit 3: Diamond E+C Framework 9 Exhibit 4: Blue Ocean Strategy 9

The Nike faces several major issues necessitating the Change the Game initiative:

Prior to adopting a new strategy of integrating Women’s Fitness:

· Product-driven business orientation

· Customary business priorities with lack of “outside the box” innovation drive

· No interdepartmental communication during product development (insights R&D) translated to inability to deliver integrated view to the consumer

· Lack of strategic integration/common vision across the departments, working in silos

· No correlation between product lines into types of sport

· Appeal to mostly male segment (testosterone driven)

· Poor differentiation in athletics among women – lack of understanding women’s needs

· Identification of the growth opportunity required the research of the trends, understanding of the consumer and ability to visualize major corporate restructuring.

· Disenfranchised local business successes in women’s markets, not leveraging collective power

· Inability to address women’s growing spending patterns with existing product offerings

· Absence of clear communication with the growing female market

· Fragmented supply chain – broken down by geographies, seasons, timelines and product lines

· Geographic diversity of the global market posed a challenge in creating overarching marketing strategy

As the team has looked at the trends in female market, it saw it as a great business opportunity, culminated with creating global women’s footwear division in 2001, addressing the differences of the women’s physique and style preferences. Creation of Nike Goddess retail marketing project has been another milestone in women’s direction. This limited chain of Nike stores with the 1-on-1 service philosophy (a la Starbucks for women) has given the nudge to see how the collection could be brought to life per customers’ demands. Thus, in 2003, when the Sport Lux collection sold out, this event served as a final lesson confirming the formation of the new strategy.

This break-through has alleviated the pressure of justifying the need to encompass the women’s fitness market, however the issues of developing product lines, broken down to various sports categories, synchronizing the product life cycles to deliver the line at the same time all around, sending the right message to the consumer posed a challenge of strategically formulating the new change to the senior management for launch approval.

This strategy was a set out to be a start of the “dialogue and an emotional connection with women”. Creating such bond and communication pathway would lead to understanding the company offerings by their female clientele, turning them from window shoppers into loyalists. As indicated in the article, the vision that was presented (Exhibit 1) was a powerful strategic principle[footnoteRef:1]: [1: HBR: Transforming Corner-Office Strategy into Frontline Action – by Orit Gadiesh and James L.Gilbert]

· It maintained the strategic focus on HER

· Empowered workers to innovate and take risks: the collection that the virtual team started working on was not submitted for approval to senior management

· Seized fleeting opportunities: women’s shopping patterns as well as athletic involvement on the rise have been grasped as a tremendous market opportunity

· Created products that met subtle shifts in customer needs: it grabbed the needs of women seeking to self-actualize themselves in athletic dimension and messaged the product offerings directly to them.

Internal Barriers:

During the Women’s Fitness integration

- Frequent staff rotation

- Multitasking between 2 priorities

- No guarantee of success

- Not full back up of the senior management

- Creating a dialogue with women: message and its delivery methods not yet clearly defined

- Lack of HR: Emma Minto – the only full time associate assigned with strategic lead.

- Competing Priorities – lack of resources. Most had to take on double roles

- No additional financial compensation for adding on additional tasks affecting staff motivation

- Various degrees of centralization in Footwear and Apparel businesses, specifically in product design and development

- No firm backing by senior management, 51% favor showed a lot of reservations

Post Women’s Fitness strategy integration Challenges:

- Category-driven approach company-wide global integration

- Scheduling operations across departments to meet unified deadline to deliver the collection

- Breaking the stereotypes of evolving one product instead of all-encompassing line of products

- Sustainability of SCM: synchronized delivery to all the vendors (6000 doors at the same time)

- Investment in integrating SCM wasn’t scalable, therefore only temporary

- No integrated systems to capture the results of the Women’s Fitness Business

- Prioritization of styles: 20% of styles sustains 95% of business

- The change adaptation is slow

- Needed to make “Believers” out of supporters and skeptics

External Barriers:

- Lack of market data supporting women’s athletic habits to present in favor of Women’s Fitness category.

- Undefined competition (Old Navy vs Adidas) presented inability to process the trends and aspirations of women in fitness department

- Estimation of market growth potential was based on the trends, such as sports participation rates or gym memberships

- Uneven market opportunity split among footwear (25%), apparel (70%), equipment (5%) representing difficulty forecasting of the collection success

- Various global fitness trends and demands (consumer needs) necessitating different approaches to collection priorities in terms of sport (Dance vs Cardio)

In what ways did they manage these challenges well? How are consumers’ needs taken into consideration?

Company’s mission addresses athletes, but defines athletes as each and every individual. It had no longer dominated product markets and pushed forward with dominance in sports and masculinity.

To get to this integrated approach and overcome all the listed above challenges, Women’s Fitness Team has prioritized the styles to be available for delivery to selected retailers. It emphasized the women’s physique peculiarities (print ads: Thunder Thighs, Shoulders, Butt) and build the feel of originality on these. Nike spoke to women of all athletic degrees of involvement to provide them with desired alternative and deliver female product. Being male focused was starting to become a philosophy of the past as the company started to move into all encompassing, category-driven mindset. Although they had sparse human and physical resources, the team juggled between 2 jobs without extra compensation, demonstrating full commitment. They have experimented with the investments into the infrastructure to monitor sales and ROI as well as synchronizing the deadlines across the business units. Overall, the company has made a significant shift with outstanding results.

The skills/competencies new approach required

In order to distinguish among different skills and competencies the new approach of delivering integrated collection vs differentiated products, the resource identification model was considered, see Exhibit 2. The most evident skills and competencies are identified as following:

Organizational skills:

· talent, motivation and enthusiasm to bring innovation

· product design, messaging and communication with target market

· operations efficiency ( ROI tracking, SCM, R&D)

Business Competencies:

· prioritizing of the vendors and collections, leveraging the brand’s reputation

· Structuring female lines into various categories, promoting the “underdog”, but utilizing financial backing from less perky categories

· Communication among business units to deliver integrated collection

· Value chain reorganization to comply with demand and expansion

The skills/competencies the organization must be careful not to lose:

MVS (Most valuable skills) as outlined in the organizational capabilities model below and evidently utilized by Nike corporation to benefit during the re-organization of its business are:

· Leadership: the team has fully comprehended that the cross functional working teams need to be “made believers”. Listening, encouraging and perseverance were some of the top contributing traits.

· Organizational Structure: dedicated resource planning, offering products in categories (men’s training, basketball, soccer, women’s fitness and sportswear) vs product in 3 business units (footwear, apparel, equipment).

· Management Processes: the team has rotated from virtual teams to facilitate the transition into company’s reorganization providing the experience from different businesses and departments.

The company will be able to tell a story with their product offering. It can, by means of advertising, campaigns, events, and other marketing tools, engage women in fitness, for various reasons (fashion, performance, self-image). From the business perspective this means the company will not only capture the new share of new market, but also take away market shares of the competitors. Secondly, Nike will be able to offer integrated fitness appeal based on the specifics of the country, not just follow the trends in particular product, but capture the gyms, tracks, studios members to full capacity in different corners of the world.

Outlined below are the risks and challenges associate with the reorganization of the company and the addition of the Women’s Fitness Business

- Fears of success in women’s business would erode men’s business, therefore diluting the brand

- Finding the right strategy to communicate to the most current and trends-based needs of women

- Frame the collection appealing to ALL athletes, that is to retain sports enthusiasts seeking performance and address the casual fitness participants to address the fashion aspect

- Describe the collection approach to all the customers in 3 different tiers

- Establish Dance Category until it reaches profitability to ease the pressure on the less “sexy” supporting categories to allow their potential expansion

- Manage the complex matrix organization allowing room for innovation and creativity

- Incentivize employees to deliver based on double-tasking to sustain enthusiasm

- Watch out for the competitor counter moves in similar direction, or potentially capturing unexploited category/capitalizing on men’s fitness thus taking the market share away from Nike

In order to give the recommendation how to create and sustain a competitive advantage, Diamond-E (+c) framework should give the platform to oversee the factors contributing and detracting from the sustainability of the competitive advantage. Although the strategic principle has been addressed by the company in its vision (see question2), the Diamond E+C framework gives a more overarching presentation of the internal and external factors, see Exhibit 3.

Resulting from the framework, the recommendations to sustain the competitive advantage are the following:

· Category Business Worldwide Expansion

· Lifestyle fitness: if you have a body – you are an athlete

· Women’s Emphasis

1. What support mechanisms does Nike have for the SCM integration? Supplier/Distributor relationship?

2. How does Nike address the global fitness trends and what is the strategy towards influencing them?

3. What programs are in place to help re-orient the staff company-wide for new category structure?

4. Which strengths does the company plan to utilize to sustain its competitive advantage in the long term?

5. What were the results from the integrating women’s fitness and how were they measured?

6. Does the management report negative results/mistakes this strategy may incur to avoid a wreck?

7. How did Nike perform in women’s business in other countries in terms of market share & sales?

8. What were the negative implications of being “testosterone driven” and how did Nike avoid losing men’s favoritism after adding women’s fitness category?

9. How did Nike find the right people and what strategies were set in place for future talent selection?

· With women’s market attention sparking up the interest in the company, Nike has initiated a study to identify the opportunities that would support business development and provide a platform for sustainable competitive advantage

· Nike, being very well established company, managed to set off a Blue Ocean Strategy (see Exhibit 4) within its organization when initiating Women’s Fitness Strategy.

· The company has reorganized its entire business structure to create barrier for entry, enhance relationship with the market and capture a bigger market share by offering integrated product.

· With little support from the management and great deal of independent planning and execution, this truly motivated team has delivered a proposal that “Changed the Game”

· The team has taken Organization, Management Preferences, Resources, alternative strategies, environment and of course the customer when proposing the new Business idea of delivering the entire collection vs offering new product line in one of the 3 key business units.

· The Business idea had a clearly articulated value proposition, messaging to the defined target customer and the logistics of the execution, including Value Chain and Supply Chain

· The Competitive Advantage was developed on the grounds of evaluating the risks and challenges therefore making it sustainable

· The company has supported their desire to innovate and has not stifled the creativity, thus obtaining a valuable business reorganization

· Overall business reorganization has posed as a tremendous opportunity grasp, allowing to identify with the customer niche and establish a sustainable competitive advantage

· Enthusiasm and motivation are key factors when powering through the break-through innovation, dealing with resistance and stepping into the unknown

· Outside of the box thinking – focusing on the integrated collection vs continuing to produce new product lines in each business unit has allowed the company to gain the competitive advantage that is not easy to replicate, thus Nike separated itself from the rivals, at least for the foreseeable future.

· Establishing overarching marketing strategy for Nike started from adopting a new way of doing business in only one direction and resulted in series of meetings and phases of evaluation of these processes. This was not a single stage overthrow process, but a series of research, planning, testing, coordination and execution acts. The new strategy did not only include focus on new business direction but also revision of the methods of execution: value chain, cross-functional communication, supply chain, integrated ROI reporting systems, prioritization of retailers and collections.

Vision presented to the senior management team at the end of phase one – April 2004:

“To shift the focus of women’s fitness from a brand-strokes series of initiatives to a sustainable, profitable brand-enhancing portfolio of sports businesses that in combination make Nike the aspirational brand of choice for her.”

10