mgmt

Thompson Crafting and Executing Strategy

Chapter 5 The Five Generic Competitive Strategies

Chapter 6 Strengthening a Company’s Competitive Position

Media Analysis

Jalen Buckner

Anna Phillips

MGMT 3900-07

13 October 2020

For this media analysis I will be basing everything off of chapters 5 and 6. Chapter 5 focuses on the various competitive strategies companies use to position themselves. As well as the advantages that each technique can offer, and which ones work best in certain situations. Chapter 6 is all about strengthening a Company’s position, so once you have a strategy how do you take that and improve where you are. I will be applying all of this to my chosen company of Nike.

Chapter 5 The Five Generic and Competitive Strategies

LO 1: What distinguishes each of the five generic strategies and why some of these strategies work better in certain kinds of competitive conditions than others

This objective goes over the various strategies companies employ to try and give them an edge. Some of these strategies may work well in any given situation, while others may be better in specific scenarios. It is up to each company to to try and figure out what is going to work best for them. Obviously Nike has done that with their broad differentiation strategy, as they have been at the top of their industry for a while now. So, let’s take a look at a few examples of this strategy they are using.

1. The number one way that they employ this strategy is obviously by targeting sports fans of any kind, from all over the world. Sports is a massive entertainment industry everywhere and Nike takes advantage of this by targeting a good portion of their marketing towards this large population of people. We see this a lot with their ad campaigns where they are using a specific signature athlete to advertise their company as a whole, or a specific release for a new shoe. How many times have we seen Nike ads featuring LeBron James, Kobe Bryant, or Serena Williams? Seeing some very notable athletes who also happen to be a lot of people’s favorites is a great way to appeal yourself to all sports fans and make them want to buy Nike products.

2. Nike also uses this strategy to appeal to people who may not even be sports fans, but instead they have a very athletic lifestyle or would like to have one. They have a whole line of products for things like running or training, so people who like to take morning jogs, or go to the gym and workout also have Nike products they can be interested in. There is also the prestige that goes along with Nike, so these people may believe they will train better, or run faster if they are wearing Nike as opposed to some other brand. All of this is thanks to Nike’s marketing and how they are able to appeal to anyone with an athletic lifestyle, or would like to give the image of one.

3. Lastly Nike also branches out and markets itself for families as well, as they have products for both adults and kids. They spend another good portion of their marketing on youth, which is a large market to try and appeal to. This gets kids attention especially if they like sports, and also introduces them to Nike at a very young age. So, Nike is already building up customer relationships from a very young age. By extension if they are marketing themselves towards kids as well it will bring their families in, which only increases their chance at getting more people to buy their products or become aware of their brand.

LO 3: The major avenues to a competitive advantage based on differentiating a company’s product or service offering from the offerings of rivals

This objective talks about all the different things that a company can do, once they have separated themselves from the competition. Making yourself stand out in business is huge because then you have way more options open to you, and you are not nearly as limited. Nike has been able to do just that, and it has opened up so many different opportunities for themselves.

1. One example of this is how the brand loyalty they have built up allows Nike to charge premium prices for their products, yet still be able to maintain their consumer base. This is only possible because people have come to trust them, and expect that when they buy from Nike they will get a good quality product. Compared to a competitor such as Adidas, Nike is far ahead in this category. This is one of the main reasons why despite having lower prices companies like Adidas and Under Armor cannot seem to catch Nike. People will always be more willing to pay more for a brand that they know and trust.

2. The way that Nike has built itself up also opened up the avenues necessary to make themselves a global brand. Having already differentiated themselves and marketing themselves so well makes it easy for them to be able to take their business to other to other countries and maintain the same success they see here in the United States. Many companies end up having trouble making themselves bigger outside of their country of origin, because they try to branch out to early before they have built themselves up enough. Or they just have established a good enough foundation in order to do so.

3. Lastly Nike’s successful differentiation allows them to increase their unit sales, because of all their marketing and the way they implemented their strategy to appeal to their target audience. The more they market in different areas, and the more those messages get repeated, the more likely new customers are to give Nike products a shot. Then once they try them out and like them, they might start to talk about Nike to their friends and family if they don’t already wear Nike. From there it just snowballs and new customers start to flow in from everywhere, and increase Nike’s unit sales.

Chapter 6 Strengthening a Company’s Competitive Position

This chapter is all about how a company can improve the position they already have. As well as how to know what the best way to improve your position is. Nike has clearly done a great job of this as well because they still have their spot at the top. If a company gets complacent with where they are then that is the easiest way for them to undo all of their success that they have built up. Nike despite being massive is no different, because their competitors are always going to look for ways to try and beat them, so Nike has to try and stay a step ahead.

LO 2: When being a first mover or a fast follower or a late mover is most advantageous

This objective talks about being a mover, or follower and when it is best for each. Each has their own advantages depending on the company, and what strategy they have chosen. All of them have their potential downsides as well, which is why it is vital to always know where you’re at as a company. Nike has often been a first mover and so far it has worked in their favor.

1. One big advantage of being a first mover is it helps to establish and build up the reputation of a firm and gives them brand loyalty. As I talked about earlier Nike’s brand loyalty is a huge part of their success, and one of the reasons they built that is because they are often a first mover in many areas. Because they are a first mover, once they have had success and built up that reputation it makes it difficult for other later entrants to take customers from a first mover like Nike, or to break into the market and try to take a significant share of the money in the market.

2. Because Nike is a first mover once their customers have spent money to buy their products, it makes it hard for their customers to then switch over to another brand. Especially if they have bought complementary products, like a Nike shirt, shorts, socks etc. Nike even has multiple different loyalty programs that offer various rewards for staying with them for an extended period of time. The incentives make it very hard for a customer to want to switch because they would have to start all over again with a new company. Plus the now attached loyalty the customer feels towards Nike, will make it more unlikely they will switch from Nike.

3. One final example of how being a first mover is advantageous is in the technical aspect, and while Nike is not a technology company they still take advantage of innovation in tech within their field. Nike is big on technological innovation within their field which is why we see them always trying something new with some of their new shoes or prototypes. Whether it’s some new sort of technology to help give more comfort, a never before seen design, or something like their self tying shoe prototype, Nike always seems to be one step ahead in innovation. This keeps their customers always expecting something new which can be a problem if they aren’t careful, but so far it has been a major advantage.

LO 5: The conditions that favor farming out certain value chain activities to outside parties

This objective takes a look at when a company should be trying to outsource certain activities. By doing this they can save costs and focus on certain areas in-house. Knowing what activities to outsource is crucial in order to make sure money is not being wasted.

1. One advantage to this is that many activities can be done cheaper from an outside source, which is why Nike has outsourced almost all of its production. They are adhering to the general rule that a company should not perform any activity that can be performed more efficiently from the outside. This also allows them to respond to consumer demands a lot quicker, and more efficiently since they do not have to worry about production. Instead they can focus on two of their core values which is providing high quality products, and looking for more new ways to innovate as I talked about earlier.

2. A major advantage that Nike gains by outsourcing their production activities is avoiding the risk that come with changing technology, and rapidly changing buyer preferences. Now whenever there is a new wave of technology that comes in to replace the old, or there are upgrades to the existing technologies Nike does not have to worry about the cost of implementing those changes. Also if buyers suddenly no longer love a certain product and prefer something else, now the supplier has to change out its stock and work on bringing in something else. All of the costs of these types of changes would be for the supplier to worry about, not Nike.

3. Lastly by outsourcing all of the production Nike can focus everything they have on their key components and what is already working. They can put all the attention they have on growing their largest shoe lines and making them even bigger. For example one of their most popular shoe lines is the LeBron’s, and if they did not outsource their production they would not have as much money and resources available to further grow and innovate within that shoe line. The same goes for all their other popular shoe lines or any of their clothing lines, and that is why this was such a wise business decision for Nike to make.

Conclusion

This all just goes to show how smart Nike has been in running its business and why they are so successful. First starting with their broad differentiation strategy that allows them to appeal to large groups of people. This in turn then opens up so many avenues for them to branch out and further expand their brand to be as large as they are. All of this being setup by their tendencies to be a first mover which makes them the trend setter within their industry, along with outsourcing production in order to focus on what they do best. Each of these decisions have made them extremely successful now, and sets them up to succeed in the future as well.

Works Cited

Pratap, Abhijeet. “Nike Sources of Competitive Advantage.” Notesmatic, 24 June 2020, notesmatic.com/2018/12/nike-sources-of-competitive-advantage/.