Marketing Audit of Nike

Nike is an incorporated company that primarily carries footwear products. The Company designs, develops and markets athletic footwear, apparel, equipment and accessory products. Former CEO and Pres. Philip Knight co-founded Blue Ribbon Sports with Mr. Bill Bowerman in 1962 which officially became Nike in 1978.

At first, Nike was known to distribute inexpensive, superior-quality Japanese athletic shoes to American consumers to break Germany’s domination of the domestic industry. Today, Nike Inc. manufactures and distributes athletic shoes to a global market and some 40% of sales come from athletic apparel, sports equipment, and subsidiary ventures.

Nike maintains traditional and non-traditional distribution channels in more than 110 countries with primary market regions in United States, Europe, Asia Pacific, and the Americas (not including the United States). Nike has some over 20,000 retailers worldwide including Nike factory stores, Nike stores, NikeTowns, Cole Haan stores, and internet-based Web sites sell Nike’s sports and leisure products. Nike is leading the sales in the athletic footwear industry with a 33% global market share. Nike Inc. achieved their current status by promoting “quality production, innovative products, and aggressive marketing” in their products. As a result, for the fiscal year end 1999, Nike’s 20,700 employees generated almost $8.8 billion in revenue worldwide.

ENVIRONMENTAL ASPECTS

ECONOMICS

Have changes in the economy impacted the organization or brand? Is it sufficient to respond to just the domestic economy, or do multinational considerations apply? What adjustments were made? Have they succeeded? What additional adjustments are being contemplated, and why?
In economy, the biggest threat for Nike is if the economy goes into recession. If recession occurs, Nike’s growth in sales, marketing and promotions will be affected.
Another important factor in economy is the maturing market in athletic shoes. There is also a growing adverse demographic change in the marketplace brought about by the sweatshop expose that Nike has not overcome yet.
Effects to Nike’s growth are also affected not only by domestic economy but also by the international economy. The continued weak Euro and Asian recession could potentially hurt Nikes international sales and growth. Nike’s extreme sports product line is seen as inferior quality compared to competitors and is hurting sales and brand image.

CUSTOMERS
How do customer view the organization or brand? Is there a clear understanding of customer wants and needs? Are there different market segments? Are there emerging market segments? What adjustments have been made? Succeeded or not? What other changes are being contemplated? Why?

In 1998, Americans spent $38 billion to buy over 1.1 billion pairs of shoes. Sporting Goods Manufacturers Association revealed that athletic footwear makes up almost 35% of all footwear purchases.
The existing domestic industry focus is on casual and comfortable shoes. Demand is up for the “brown shoe” casual footwear with a comfortable and rugged design. This is because of the increasing number of workplaces allowing casual dress codes.

Multinational customers account for a large part of Nike’s sales. In 1995, Nike’s international operations accounted for 36.06 of its total revenues. The company believes that demands from international markets will increase in future.

Nike must cater to a large portion of the new generation that demands the latest trends and styles. Nike should take into account the changing US demographics due to the rising proportion of Hispanics, Asians, and African Americans. These groups have different preferences that Nike should be able to satisfy. Nike should identify the next generation of loyal customers and provide for their needs.

COMPETITION

Who are the companies or brands with which the organization or brand competes? What are their sales and market share trends? How do their approaches to the market differ from the organizations, and from each other? Are there any specific weaknesses in any competitors that can be turned into opportunities? Are there any specific strength that are major threats? What adjustments have been made? Succeeded or not? What other changes are being contemplated? Why?

Competition is very fierce due to the number of companies competing for sales. Lots of money goes to marketing and promotions using various channels to reach the young demographic group of consumers who spend the most money on Nike’s products. Growth is slowing down in the athletic footwear industry. But new markets are emerging with high growth rates. These markets include extreme sports market and the corporate merchandise market.
Nike’s global market share was an impressive 30.4% in 1998. The closest competitor, Adidas, held 15.5% of the market share while Reebok held 11.2%. The remaining competitors, including Fila, Timberland, Asics, Converse, and New Balance, among others, each hold approximately 3-5% of the remaining market share.

MARKETING ASPECTS

OBJECTIVES

Are there clearly defined marketing objectives? Are they consistent with corporate mission statement and objectives? Are they measurable, attainable? How close to meeting marketing objectives was the organization or brand in the most recent complete year? Should the marketing objectives be modified? Why?
Nikebiz.com stated that Nike’s mission statement is “Through the adoption of business practices Nike is committed to securing intergenerational quality of life, restoring environment and increasing value for our customers, shareholders and business partners.”

Nike shows passion for their company, products, and athletes. They are determined to provide consumers with comfort and assurance. They also find ways to innovate and create. They adhere to their five brand principles namely: inspire, innovate, focus, connect, and care.

Another Nike’s objective is “to be the world’s leading sports and fitness company.”

Nike’s mission statement is similar to a vision statement and is potentially a weakness. The mission identifies the sports and fitness industry business they are in, it does not specify as to what products and services they provide. The mission statement does not mention distribution channels and customers. However, it portrays management’s beliefs and the desire to be number one and remain in the leading position in sports and fitness shoe and apparel industry.

STRATEGIES

Strategies Nike uses for reach each objective? Should they be modified? Why?

Corporate Strategies

The past two decades saw a change in economy from “standardized” to flexible”. Having a strict corporate organization used to be the rule, now it is common to have a flexible organization that uses subcontracting.

The main reason Nike succeeded in competing in the footwear industry for a long time is because they remain flexible in an unpredictable market by subcontracting overseas in countries with low labor-cost.
Another reason for Nike’s strength in competition is their product differentiation. Aside from athletic shoes, Nike’s product line now offers a broad range of clothing, equipment and accessories.

TACTICS

Are there defined tactics for each strategy? Are they innovative, or a repeat of prior tactics? Are the tactics fully integrated? Are there any mixed messages? Should they be modified, why?
Nike’s distinctive tactics are found in the area of marketing, specifically in consumer brand awareness and brand power. Nike’s catch phrases like, “Just Do It,” and symbols like the Nike “Swoosh,” are reminders of the Nike empire.

This tactic is effective because it could not be easily replicated and it offers value or benefit to consumers. Nike is becoming a part of American and world culture, the brand power becomes more difficult to replicate. The trademark and a slogan serves as the company’s fingerprints. Nike is able to capitalize the unique identity due because of its financial strength. Nike reaches millions of consumers through large-scale marketing campaigns. The public benefits from the strength of Nike’s image when they make a purchase. Consumers often associate Nike image with quality products. By associating star athletes and motivational slogans like, “Just Do It,” consumers identify their purchases with the prospect of achieving greatness. This image they create forms a tactic that competing companies can not easily duplicate by simply improving their products.

4 Ps-
PRODUCT

Is the current product line appropriate? What changes should be made in how products are being handled?
Nike sells a huge variety of products, including shoes for running, basketball, cross training, women and children. All of which are currently its top-selling product categories.
Nike also sells shoes for outdoor activities such as tennis, golf, soccer, baseball, football, bicycling, volleyball, wrestling, cheerleading, aquatic activities, auto racing and other athletic and recreational uses.
Nike began selling active sports apparel in 1979 as well as athletic bags and accessory items. The company sells a line of performance equipment under the Nike brand name, such as sport balls, timepieces, eyewear, skates, bats and other equipment. They also sell a line of dress and casual footwear and accessories for men, women and children under the brand name Cole Haan. The company markets headwear under the brand name Sports Specialties, through Nike Team Sports, Inc. They also sell small amounts of various plastic products to other manufacturers through Nike IHM, Inc.

Bauer Nike Hockey Inc. manufactures and distributes ice skates, skate blades, in-roller skates, protective gear, hockey sticks and hockey jerseys and accessories under the Bauer and Nike brand names.

PRICE

Pricing strategies

Nike uses vertical integration in pricing wherein they own participants at differing channel levels or engage in more than one channel level operations. This is also an attempt to control costs and influence pricing practices.

PLACE

Distribution channels and policy. Should additional channels be added, why?

Nike sells its product to about 20,000 retail accounts in the U.S. and in approximately 110 countries around the world. Nike sells its products in international markets through independent distributors, licensees and subsidiaries. Independent distributors has little or no pressure for local adaptation because the 4Ps of marketing are managed by distributors.

PROMOTION

Are both advertising and promotion strategies in place? Succeeded?

Nike has been one of the top retail industries for quite along time. This is because they sell quality products, customer loyalty, but most of all, its great marketing techniques.

Nike has a number of famous athletes to create a great deal of attention to their products. Nike has signed the top athletes in many different sports such as the Brazilian Soccer Team (especially Ronaldino, Renaldo, and Roberto Carlos), Lebron James and Jermane O’Neal for basketball, Lance Armstrong for cycling, and Tiger Woods for Golf.

Sponsoring of events is another great promotional technique for Nike. It brings attention Nike’s products. Web sites are a great promotional tool as they cover these events. Such events include Hoop It Up and The Golden West Invitational. Nike also personalizes websites. They make the websites exclusively for a sport such as www.nikebasketball.com, www.nikefootball.com, and www.nikegolf.com.

MARKETING INFORMATION SYSTEMS

Is accurate information being obtained and distributed in a timely fashion? Is market research being conducted effectively and being used for decision making? Should any changes be made, why?

Currently Nike utilizes IT in its marketing information systems in a very effective manner. Nike makes use of marketing information systems and apply it to the economics of innovation, segmentation and differentiation for most businesses. Nike has financially emerged as the leader of its industry because of the use of extremely valuable Information Technology, and applying it to every aspect of there development through
their distribution of products. In 1999 Nike signed a five year agreement with Lockheed Martin Integrated Business Solutions Co. (IBS) in its bid to develop further its marketing information systems and stay ahead of competition. This enables Nike to focus on its core competencies.

SUMMARY CONCLUSION

Nike, Inc. is a company rooted in competition. From equipping athletes with the finest sports equipment in the world to continuously improving financial performance, Nike dominates its competitors. Phil Knight and Bill Bowerman vision has become a huge reality in the 20th century. Product quality and innovation have carried them on this far. Despite a changing marketplace for athletic footwear, Nike continues to expand product lines and marketing reach to become a more powerful global brand. Nike should continue their strides in making advances in the athletic shoes technology in order to maintain their current leading position in the industry.

Environmental Analysis

• Internal – Strength

Nike’s management makes analysis on its internal environment and based their decisions on that analysis. Due to Nike’s marketing research, the company made its apparel division to be more fashion savvy. Product and pricing research, made Nike decide to continue its focus on the high end market at the same time increasing its market share in the middle and low price ranges to broaden Nike’s product spectrum.

• External – Weakness

Nike fail to foresee problems due to labor and factory conditions at production locations. This resulted in bad publicity and declining sales as society and consumers call for more “socially responsible” companies.
Marketing

• Market Share – Strength

Nike’s global market share was an impressive 30.4% in 1998. Adidas, held 15.5% of the market share while Reebok held 11.2%. Fila, Timberland, Asics, Converse, and New Balance, among others, each hold approximately 3-5% of the remaining market share. Nike’s market share is expected to rise due to summer Olympics in 2000 in Sydney, Australia, the 2002 World Cup in Japan and Korea, and the U.S. Speedskating team in the 2002 Winter Olympics in Salt Lake City, Utah.

• Distribution through E-commerce – Strength

Nike is first to market with its e-commerce web-site through the launch of its e-commerce site in April 1999 by offering 65 styles of shoes to the U.S. market. Nike improved its e-commerce presence by launching NIKEiD in November 1999. NIKEiD enables online consumers to make design for the shoes they purchase. Being the first to market, Nike enables itself to become established.

• Advertising and Promotion – Strength

Nike’s brand images, including the Nike name and the trademark Swoosh, are one of the most recognizable brands in the world. This brand power is one reason for its revenues. The trademarks coupled with aggressive advertising campaigns, celebrity endorsements,and quality products comprise the brand. Nike’s brand presence was evident at the 1999 NCAA Basketball tournament when 42 of the 64 teams participating wore shoes provided. Nike’s brand-building endeavors are focused on strengthening association with women’s sports. Some examples are sponsorship of the 1999 Women’s World Cup Soccer Tournament and U.S. Speedskating team in the 2002 Winter Olympics.

• Products – Strength

Increase emphasis by consumers on sportswear fashion enables Nike to make strides to appeal to a fashion savvy market. Nike’s apparel line does not only experience stiff competition from its typical industry competitors such as Adidas and Reebok, but also by clothing and accessories retailers such as Old Navy and Abercrombie & Fitch. Continuous marketing research is the key in assessing the market. Nike is planning on starting five structures within its current apparel division to focus on the following areas:

o Women
o Men
o Kids
o sports graphics and caps
o strategic response independently

Nike currently spends more time on developing programs to gain a better understanding of what customers truly want.

• Products – Weakness

Nike may have much success as a result of collaborating with other companies within the sports and fitness industry. But at other times, Nike expanded into markets for which it is not strategically suited. An example of this is the decrease in brands made available due to decrease in demand of in-line skating and roller hockey products at Bauer Nike Hockey. Consequently, Nike had to cease two manufacturing operations at the Bauer Nike subsidiary and was forced to terminate 51 employees. If Nike was able to anticipate the decline earlier, perhaps gradual changes could have been adopted to prevent such kind of limitation. The desire to prevent situations such as these from continuing to occur, Nike has realized to initiate more aggressive program to review product partnerships that are outside of its core basis of products.

• Pricing – Weakness

Nike’s products are viewed to be of higher quality and command higher prices than its competitors. Sometimes though consumers do not agree to this line of thinking. This could be a potential weakness. To substantiate its high quality/high price lines, Nike is placing emphasis on the latest technology and applying innovation towards the development of new products, particularly the Nike Alpha Project which is a new line of athletic shoes. In the past, Nike has overlooked the mid- to lower-price-point products, which could be a possible weakness too. Recently, it is pouring time and money to better develop competitive position at all price points to build strengths at each of these levels. There is a lot of sales potential in the lower price points and plan to meet the needs of those markets.

• Marketing Research – Strength

Nike focuses and relies on marketing research on a continual basis to aid in maintaining the company’s position as the leader in the athletic footwear and apparel industry. The result of such research efforts enables Nike to make decisions regarding its different divisions. It aids in their decision to revamp the apparel division, an area in which offers a number of possibilities. Nike will be organizing the internal business by gender instead of the sport category they are using now. They also intend to carry out more researches focusing in the buying habits of men, who oftentimes are item-driven, and women, who are more collection-driven, with product lines intended to suit specifcally their demographics.

RECOMMENDATIONS

Based on findings, the following recommendations are being made for Nike, Inc.:

• Since Nike’s All Condition’s Gear (ACG) for extreme sports product line has been experiencing a diminishing quality and brand image, it is highly recommended that Nike spend more money and resources to promote the product in turn generating more sales for the line. The ACG line may also require a better product design, materials and manufacturing processes.

• Nike should use its money efficiently. This could be done by including entertainment and other non-sports venues in their promotions. This is effective because there is a thin line between entertainment sports nowadays.
• Nike is currently gearing most of their marketing efforts for the sports footwear lines. To increase sales, Nike should go to other avenues such as expanding their line to casual footwear.

• Nike’s main strategy is in its differentiation. Therefore, they need to maintain their position as the leading brand of the athletic footwear technology. Providing cutting edge design through innovation and application of modern technology enable them to come up with new types of shoes and other products, adding to their growing list of product lines.

• Nike’s business is growing more and more reliant on the internet to conduct business. Nike has developed a new technology that will allow their customers to create their own shoes design online. They must take particular care in improving their website to make it more user-friendly. As of the moment, customers often find the too long to download.

• Nike should also increase their international marketing efforts in order to maximize their product sales. International market is laden with untapped opportunities which Nike should look into.

• Nike must continue to improve technology in order to remain the leader in athletic shoes. This is their competitive edge in order to prevent any potential threatening entrants.

• Nike should also conduct survey on their customers after their purchase on-line to know what the consumers really want. Trends and styles often change. This is why we On-line surveys could save Nike a great deal of time. Nike would be able to gather the information real-time and track it into a database instead of taking surveys on the street or sending them out to mailing lists which is time-consuming.

• Loyal Customer Program is also another program that Nike could look into. In this program, points are added to an account after a purchase. The points would vary depending on the amount of the purchase. Nike could make a catalog of things that customers could buy with the points they are able to accumulate. Nike could also make these points credits. After gathering so many credits, the customer is entitled to receive a pair of shoes. Or, if not, customers could avail of discounts on their purchase whether online or off.

Bibliography

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Johnson, E., Isom, C., Hudrlik, K., St. Arnaud, D. (2000). Nike. Retrieved on December 14, 2005, from http://www.scs.unr.edu/~isom/nikepaper.doc

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