Exploring Strategy

Exploring Strategy

Nike is a global leader in apparel and supply of sports shoes. It manufactures athletic equipment that attracts annual sales revenue of more than $20 billion. Bill Bowerman created the firm as Blue Ribbon Sports in the year 1962. In 1978, the organization was rebranded as Nike Inc. in reference to the Greek Victory Goddess. Currently, Nike owns subsidiaries such as Converse, Umbro, Cole Haan, and Hurley International. Nike centers its mission statement on the leadership of corporate citizenship through the initiation of proactive programs to reflect utmost care for the global family of customers, teammates and Nike’s service providers (Korzeniewicz. 2014). Nike’s strategy is prioritized on customers to ensure their satisfaction. The prioritization is evident on Nike’s website, where the organization’s strategists customize the products to raise the level of customer loyalty.

The growth of Nike into a global brand has been uneven. Failures and successes teach the organization on the importance of co-creation with the esteemed customers. Indeed, Nike’s customer base spans to different countries across the globe (Katz, 2013). The expansive network gives Nike a new value source because it remains connected and informed on market needs. With this understanding, Nike provides internet sites for customers to share their experiences, interactions, and suggestions. Nike can establish relationships and build trust by learning from the customers while providing their needs to improve the brand image.

Evaluation of Sustainability, Feasibility, and Acceptability

Suitability

Nike’s focus is on youthful customers because it is the largest market segment in the United States and other parts of the globe where the firm is operational. Notably, the majority of the youth are active in sporting and fitness activities. Therefore, they are more likely to purchase Nike’s products if they are designed specifically to meet their needs (Leavy, 2014). Additionally, young working population prefers trendy and revolutionary products such as those designed by Nike. Considering this, increased sales as a result of Nike’s strategy allow the organization to sustain its operations while expanding its market to emerging international markets.

Even though Nike products target athletes, the brand is diversifying to the provision of fashion footwear and clothing to the young customers at reasonable costs. Still, the segmentation is along distinct types of youthful customers that demand multiple types of sports shoes (Rugman and Verbeke, 2011). However, pricing and feasibility are not constraining factors because Nike is a high-valued brand and the customers are willing to incur an extra cost.

The main line of Nike products targets athletes as one of the customer segments. The comfortable soccer boots, for instance, enhances the player’s performance. Even though they are expensive, the high pricing is hardly a concern for the top world players because they are well supported by their club managers or sponsors. During the 1994 World Cup in France, Nike sold its soccer boots for only $45 million, but after a decade, the sales revenue generated from the sale of soccer boots has climbed to $1billion. The success is a testament to the feasible nature of Nike’s customer strategy, market segmentation and its focus on customer satisfaction (Harvey and Saint-Germain, 2011).

The rise of internet technology and e-commerce has resulted in a transformation of traditional customer segmentation strategy. In the modern times, Nike and other multinationals no longer target a specified consumer group using its brand. In fact, employment of mass customization enables the footwear customers to sign into an online platform and design personalized product in terms of colour or size. Submission of such specifications is mutually beneficial to the organization and the customer. On one hand, the busimess entity saves on the cost that would be spent in research and development activities to provide a product that suits the needs of a targeted market (Donaghu and Barff, 2010). On the other hand, integrating the customer’s ideas into the production process encourages professionalism and provides the buyer with a personalized product.

            In a move to boost Nike’s competitiveness, the company pioneered the sale of sports footwear using an online platform. Nike’s website became operational in the year 1999. Since then, the customers have an opportunity to purchase their products and services via online brick and mortar retail stores globally (Carty, 2012). Besides, UPS (United Postal Services) has partnered with Nike to deliver products purchased online to the US customers.

Feasibility

Economically, this strategy is sensible because in the long run, the markets their unique products and services online to a larger audience while utilizing minimal resources. In addition, it is relatively easier to sustain the strategy as most of the online users are youthful population. As an international organization, Nike obtains economies of scales given its size and reach. Besides, as a large multinational, Nike has adequate financial resources and infrastructure to successfully pursue the strategy (Park and Kincade, 2011). Nike has been operational for more than half a century. Therefore, the firm has economic experience on how to execute operation and introduce new strategies to maintain profitability and annual sales revenue.

One of the fundamental concerns to consider when devising is the environmental effect and capability. Use of the website for advertising and product design process is economical because it cuts on the operational cost (Vollmer and Precourt, 2011). While customer satisfaction is achieved, the resource saved from the initiative can be redirected to innovative activities to stamp the position of Nike as a market leader. Engagement in corporate social activities such as the creation of environmental awareness is made possible by this strategy as well. Furthermore, Nike aims at limiting the impact of its products during the manufacture and disposal process. While it is true that a Nike shoe produces solid waste, the firm uses a cured and biodegradable rubber to make shoe soling. Besides, the workforce has engineered a creative and innovative way to regrind the soles for reuse.

Acceptability

Nike’s strategy meets the expectations of customers and shareholders because it yields the expected performance outcomes with regards to stakeholder reactions, business risk, and return (Shepherd et al., 2010). There are non-financial and financial benefits to all the stakeholders. First, Nike provides original and innovative products to the young people. A is unrivaled by other competitors in the industry. In essence, Nike upholds its position as market leader in the production and sale of athletic footwear (Mahdi et al., 2015). The resultant competitive advantage presents Nike’s stakeholders with numerous opportunities and resources to improve the quality of service delivery.

In the short-run, the shareholders should expect lower financial benefits from the strategy. The economic downturn after 2008 has led to a slump in sales hence a slower rate of growth for Nike. However, the introduction of a new customer-oriented strategy will lower the impact of recession by allowing the firm to rebound and stabilize. In the long run, the shareholder’s wealth will increase while the conditions at the workplace improve (Leavy, 2015). The implementation of this strategy ensures that the customers receive value for their money.

Middle-class population in the US and EU prefer to purchase commodities with an associated brand value.  They youth, for instance, are inclined towards fashion-oriented shoe products for leisure sports and fitness activities. Because of this, Nike aims to tap on the customer needs for profitability and to meet the financial obligations for sustaining the business operations (Chen, 2013). According to Nike’s management, the organization cannot reap benefits from the product. Rather, the shareholders and business owners benefit from the product sales. It is not the intention of Nike to sell footwear using commercials because of a possible diversion of the firm’s attention from product quality improvement.

Nike’s management understands that there are risks involved when a new strategy is adopted to boost the performance of the organization and to enhance the level of competition. For example, the strategy may fail to meet the needs of the targeted market segment. In addition, the strategy can be costly for the organization to sustain (Fromartz, 2011). However, Nike’s customer-oriented strategy proves to be a risk worth taking. Of keen to note is that the firm’s success is heavily reliant on providing trendy products to attract a new wave of customers.

By focusing on the young working class population, Nike has a chance to specialise the production process and to improve the quality of its products. In this way, the organization curves a market niche and a brand to reassert its position as a global leader in creativity and innovation of athletic wear (London and Hart, 2014). The innovation of product is at the core of Nike’s strategy because athletic market leadership is unattainable unless products that attract the attention of the consumers are introduced periodically. The world of sports and athletics is constantly changing. Therefore, despite the risks involved, Nike ought to be dynamic and to shift focus on maintaining closeness with the existing market.

Merits of the Alternative Strategy

The alternative strategy for Nike is to advance its operations and to expand into the foreign markets, especially in countries such as china where the targeted market population is higher while the cost of labour is lower (Locke and Brause, 2012). Nike intends to be an aggressive brand and to maintain its status as a world leader in footwear production. Globalization paves the way for the organisation to interact with consumers of diverse cultures (Roth, 2011). Additionally, the firm’s expansion will provide job opportunities hence improving the standards of living of the workforce.  Expansion into the international market involves participation in an extensive CSR management structure that is beneficial to the local residents in foreign countries (Waller and Conaway, 2011).

Moving into growing economies ensures the survival of the organization during the harsh economic times. For example, in 2008, America’s economy faced numerous challenges that led to closure of operations in most of the domestic firms. Contrastingly, China’s economy boomed, thus demonstrating the importance of the firm’s expansion into the emerging markets. As the organization becomes a global brand, sales revenue and profitability will be realized. The income generated can be reinvested in research and development for innovation.

Nike’s expansion program involves hiring independent contractors that understand the local market in the foreign countries. They take over the responsibility of product development, design, and marketing to ease the responsibility of Nike as a brand (Locke, 2013). The delegated duties encourage introduction of new creativity concepts because the contractors inject resourceful ideas into the organization. Potentially, the domestic market is saturated with products from Nike’s competitors. Therefore, moving into foreign market provides an opportunity for the corporation to showcase its products to new markets segments. In the process, Nike increases chances of generating higher revenue through increased sales. Moreover, this tactic marries with the customer-oriented strategy through improved creativity and innovation.

Nike is moving its factories to countries such as China and Indonesia where there is an abundance of cheap labour. The financial resources saved are used to cover the expenses in advertisements and to hire successful sports personalities (such as Tiger Woods) for product promotion. Even though the organization is sharply criticized for exploiting workers in the developing world, this alternative strategy has been successful in boosting the firm’s revenue for use in CSR activities and the creation of environmental awareness (Hammer, 2012). In the year 2009, Nike raised minimum wages for all workforces in Asian factories. 

Acquisition of Umbro allowed the organization to diversify its services to include football wear. As a result, the organization becomes an authentic, connected, and distinctive brand in the sports industry. In addition, the acquisition enables the corporation to deliver quality products that elevate customer experiences to help the organization to gain more than 30 billion by the end of 2016 fiscal year (See Appendix).

Bibliography

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