The Nike Brand


            Nike started as Blue Ribbon Sports in 1957 selling cheap, but technically advanced, running shoes out of the back of a van. The company’s founders, Phil Knight and Bill Bowerman met at the University of Oregon, where Knight was a student and moderate middle-distance athlete and Bowerman was his coach. Bowerman had developed the practice of modifying his athlete’s shoes because he felt the original products were poorly designed. Knight capitalized on this idea and developed a business plan while at Stanford Business School, deciding that rather than manufacturing his own product, he would buy and market Japanese-made running shoes.


            The business model of Nike was developed by Knight. Knight was the first to outsource shoe production to lower-cost Japanese producers. At that time, the Japanese-produced shoes are reputed to have low quality. The strategy that Knight took was to sell his shoes at much more lower prices so he can gain a significant share of the market. Nike imported high0tech sport shoes from Onitsuka Tiger of Japan. In 1972, after parting ways with Onitsuka Tiger, the Nike brand was launched and the company officially changed its name to Nike, Inc. in 1978. Nike developed a strong working relationship with two Japanese shoe manufacturers, but because of the different economic changes that took place, Nike looked for alternative, lower-cost producers. In the 1970s Nike opened its own shoe factories in Maine and New Hampshire, hoping to develop a reliable and high-quality source to supply its growing domestic market. At the same time, the company began to cultivate potential suppliers in Korea, Thailand, China, and Taiwan. By the early 1980s, Nike closed its US factories and sourced almost all of its production from Asia. As time goes by, the Korean and Taiwanese economies developed and costs in these countries began to rise. Nike urged its suppliers to re-locate their operations to lower-cost countries. Manufacturing plants were opened in China, Indonesia and Vietnam.


            Nike products are currently manufactured in more than 700 factories, employing over 500,000 workers in 51 countries. Nike has only 22,658 direct employees, the vast majority working in the United States. Over the years, Nike has broadened its product range. Whereas in 1980, Nike sold 175 different styles of shoes, it offered 772 different styles in its Spring 1990 collection and almost 1200 different styles in its Spring 2000 collection. Nike also moved into other sectors such as apparel and sports equipment and expanded its sales beyond the United States into Europe, Latin America, and Asia (Locke and Siteman 2002).


 


Competitor Analysis


            Nike faces competition particularly from other international brands such as Reebok from the United Kingdom, Adidas and Puma from Germany and Converse from the United States. These brands are popular manufacturers of performance athletic shoes. Brands such as Reebok, K-Swiss (USA) and L.A. Gear (ESA) created fashionable shoes. All of these competitors exist within Nike’s area of expertise and create global pressure. There is virtually no barrier to entry that hinders shoe manufacturers from participating in the athletic shoe industry (Porter et al 2002).


 


Product Development and Quality


            Since the creation of the Nike brand, product design has always been the foundation for its competitiveness. Large resources are spent on developing materials that are more durable and can absorb the damaging impacts of sporting activity on the body. The original concept of the impact-absorbing soles was further enhanced with the development of the air principle, based on a sole and heel which incorporated an air cushion. Although the benefits of this system may be questioned, it quickly became very popular with athletes and with fashion-conscious youth. Product design and development take place at Nike’s headquarters in Portland, or on its 75-acre World Campus. Nike has always regarded itself as a business run by athletes for athletes. Because of this, product development has always been regarded as vital. The product range expanded from running shoes into a range of high-performance sports shoes covering most sporting activities. In addition to shoes, it began to produce a full range of sports apparel, including shorts, T-shirts, tracksuits, etc.


            Nike is proud of its claim to be the technological leader in the industry. Continuous product development is considered necessary because Knight believes that there are seven-year brand cycles in the industry. Accordingly, Nike continuously innovates to stay ahead (Stonehouse et al 2004).


 


Marketing and Advertising


            Nike is popular for its marketing strategy. Perhaps one of the most important and successful marketing move that Nike took was getting celebrity athletes to endorse its products. Beginning with track star Steve Prefontaine, Nike has accumulated a remarkable lineup of professional athletes such as Michael Jordan, Tiger Woods and Bo Jackson (Goldin 1996). Marketing, promotion and brand name are as important to Nike’s success as are product development and quality. Nike signed a number of top athletes to endorse and promote its products. In the USA, Michael Jordan is the supreme example of a Nike athlete but other top names like John McEnroe and Andre Agassi are also endorsers. In Europe, footballers Ian Rush and Eric Cantona were among those signed by Nike. Such athletes are paid substantial sums to wear and promote Nike products. As well as endorsements from athletes, Nike used slogans and television advertising to enhance its brand identity, The company spends substantial sums on television and other media advertising. Nike’s campaigns often generate controversy (Stonehouse et al 2004).


            Advertising is synonymous with Nike. In partnership with its advertising agency, Nike created some of the world’s most attention-grabbing advertising. Nike does not rely solely on television, cinema and outdoor advertising. Nike understands that its consumers seek information online and as such it targets different online audiences around the world. The internet has become an essential component in Nike’s marketing campaign. Nike produces a range of products which are unique to a particular sport or athletic activity. Nike’s marketing takes into account the different needs of athletes and consumers and uses its websites to communicate with these groups through in depth content, product information and athlete insights.


 


Production


            The production strategy of Nike is centered on outsourcing with 100 percent of its products imported from suppliers all over the world. Outsourcing the production process has made Nike more able to focus on its core competencies such as product development, innovation, research and marketing. Athletic footwear is technology- and fashion-intensive, requiring flexibility at both the production and marketing levels. Nike creates a maximum value by concentrating on preproduction (research and development) and post-production activities (marketing, distribution, and sales, linked together by perhaps the best marketing information system in the industry (Quin and Hilmer 1995).


 


Innovation


            Innovation is one of the most effective source of competitive advantage for Nike. Nike traces its history back in 1971 when, in an attempt to create a new and better sole for running shoes for his track athletes, Bill Bowerman poured rubber into his wife’s waffle iron. This resulted in a light waffle sole that has a reverberating influence in the athletic world. In order to ensure that the company constantly introduces innovation, the Nike Sports Research Laboratory (NSRL) was established. This is primarily Nike’s research and development center. Its role is to identify the physiological needs of athletes. The NSRL works directly with Nike’s design teams and has established partnerships with major universities throughout Asia, Europe and North America. State-of-the-art tools and equipments are being used in order to innovate on Nike products. The data collection employed by the NSRL includes virtually every variety of muscle sensor, pressure platform, breath analyzer, foot scanner and thermal imaging device. The center also uses high-speed video cameras that capture soccer kick data at 1,000 frames per second and a scanner that is capable of producing a perfect 3D digital image of a subject’s foot in seconds. There are also testing surfaces, such as a huge section of regulation basketball hardwood, artificial soccer turf. A 70-meter sprinter’s track runway and endless filed testing that takes place outdoors in various terrains. The NSRL takes an idea, and researches and prepares a design brief. The design brief is then passed over to the company’s “Innovation Kitchen” – an incubator for new projects.


 


Human Resources


            Nike capitalized on outsourcing. The company’s outsourcing strategy was very successful that its competitors also began outsourcing to low-cost countries. Nike’s outsourcing strategy was heavily criticized during the 1980s. Nike had been criticized for sourcing its products in factories/countries where low wages, poor working conditions, and human rights problems were rampant. The criticism reached its summit when employee relations problems involving underpaid workers in Indonesia, child labor in Cambodia and Pakistan, and poor working conditions in China and Vietnam were exposed. At first, Nike managers refused to accept any responsibility for the various labor, environmental and occupational health problems found at their supplier’s plants. Workers at these factories were not considered as Nike employees , and this Nike felt no responsibility towards them. By 1992, Nike’s hands-off approach was radically changed as Nike formulated its Code of Conduct for its suppliers that required them to observe some basic labor, environmental and health/safety standards. Since 1998, Nike has increased the minimum age for footwear factory workers to 18 and all other workers (apparel and equipment) to 16. It has also insisted that all footwear suppliers adopt US Occupational Safety and Health Administration (OSHA) standards for indoor air quality. To enforce compliance with its code of conduct, Nike has conducted numerous trainings with its suppliers as well as assembled a team of 90 compliance staff based in 21 countries, to monitor these suppliers. In addition to these compliance specialists, Nike has about 1000 production specialists working at/with its various global suppliers. All Nike employees responsible for either production or compliance receive training in Nike’s Code of Conduct Labor Practices, Cross-Cultural Awareness, and in the company’s Safety. Health, Attitude of Management, People Investment and Environment (SHAPE) program (Locke et al 2006). 


 


 


 


References


 


Goldin, G 1996, Nobody Roots for a Product, World Business, vol. 2, no. 6, pp. 22+.


 


Locke, R M and Siteman, A J 2002, The Promise and Perils of Globalization: The Case of Nike.


 


Porter, J, Harris, M and Yeung G 2002, Nike, International Business Management.


 


Quin, J B and Hilmer, F, 1995, Strategic Outsourcing, The McKinsey Quarterly.


 


Stonehouse, G, Campbell, D, Hamil, J and Purdie, T 2004, Global and Transnational Business: Strategy and Management, John Wiley and Sons, New York.


           



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