Nike Shoe Company
Nike inclusive is a company that basically indulges in the designing, developing and international marketing of quality apparel, equipment, footwear, and accessory products. The company started trading actively in sportswear back in the year 1999. The footwear is precisely designed and manufactured for athletic use. A large portion of Nike’s products is however used for leisure and casual purposes. Nike inclusive operates it own subsidiaries for manufacturing and the distribution of sports apparel. The main competitors of this company are Adidas, Reebok among others.
Describe the market structure within which the company operates and the pricing strategies adopted by the company
Nike operates in a very competitive industry. Competition is often very stiff as many companies contend for sales. A lot of finances are spent for marketing and promoting the products by competing firms through various channels in a bid to communicate to the target consumers who channel their money to purchasing the firm’s products. Over the years, there has been decline in the growth of sport shoe industry although new markets are up-and-coming with high growth levels. For example the corporate merchandise market and extreme sports market. The demand in sport shoe industry has a seasonal trend and this escalates the rivalry even more, (Porter, 1985).
The pricing strategies adopted by the company
The selling price adopted by a company for its products directly affects the profitability and eventually the viability of the company. This area usually receives a lot of attention from Nike’s management. To ensure the viability of the company products in the market and rise above its competitors, Nike uses the following pricing strategies, (Thompson, and Strickland, 2001).
Setting rather than managing prices; The brand manager adopts a reactive approach in making pricing decisions rather than a proactive approach. This means that the setting of prices at Nike inclusive depends on the prices adopted by competitors and the sales figures that Nike has.
Avoidance of customer value when pricing; It is not always accurate to predict the value that a customer has towards a given product. It is also not possible to quantify the value that the products give to customers. For this reason, Nike avoids the use of customer value when making pricing decisions. Although consumers may not buy a product whose price is higher than the satisfaction derived from the product , they will at all times purchase a product that has a price lower than its perceived satisfaction. By avoiding this approach, Nike keeps off under pricing its products in order to maintain the brand equity and customer loyalty, (Porter, 1985).
Establishing customer value for products; the brand managers at Nike inclusive rigorously engage in attempts to know the value that customers have for their brands. This is undertaken by carrying out detailed interviews with the customers on Nike’s brands. The company is hence able to gain a better understanding of the customer. The precise information obtained is used by brand managers to establish a basis for the pricing decisions in the company. Such information is reliable in developing an effective pricing strategy that is proactive, ( McGahan, 2004).
Describe the company products, strategic assets and distinctive capabilities of the company
Nike is an integrated company that solely focuses in the shoe industry. It comes up with designs, makes and markets sport shoes, clothing, and equipment as well as accessory goods. Nike is dedicated to restoring the environment, increasing value for its business partners, shareholders, and, customers, and securing intergenerational quality of life as expressed through its mission statement. (Grant, 2005).
Currently, the company trades its products to approximately 20,000 retailers in US and in about 110 other countries worlds wide. Almost all of the company’s products are manufactured by independent contractors. The company realizes between $8.8 billion and $9.6 billion in revenue annually. The shoes designed by Nike are particularly meant for athletic purposes but most of the users prefer to have them for leisure or casual purposes. Besides athletic wear, Nike also sells sports equipment like sport balls, casual wear for children, men and women branded Cole Haan. This is a subsidiary of Nike. Other plastic products are sold by Nike to manufacturers through another of the company’s subsidiaries by the name Nike IHM, Inc.
The major competitors of Nike inclusive are Adidas, Reebok among others. Nike has been closely monitoring changes in the economy. There has been a movement from use of standardized goods to niche commodities. In line with this as part of its corporate strategy, Nike has chosen to be flexible with the market trends. This is the main source of its success competitive advantage. In addition, to rise above its competitors the company has highly differentiated its products. Specifically, Nike started off as an athletic shoe company but today, its product line is inclusive of equipment, clothing, and accessories.
The Company is a market leader when it comes to pioneering novel products. For instance, the latest release is the Shox Line. This is a sport shoe designed to augment an athlete’s capacity to run and jump. A lot of research was done on this product and the highest level of technology used. The products of Nike are classic and trendy, the designs are simple not to mention fashionable. Nike has highly invested in mass production, creative, exceptional adverts and product promotions, (Hunger, J. and Wheelen, 2003).
This company has priceless physical assets and state of the art distribution amenities. To maintain contact with customers, Nike has contracted Hewlett-Packard for the supply of software, hardware and consulting services to host project named Nike Supply Chain,0 (NSE ). This is to help come up with a supply chain that is consumer driven and an outline for decision-making and for providing a competitive advantage that is sustainable. As a result Nike will be able to respond to the dynamic conditions, improve product quality and reduce investment risks, (McGahan, 2.004)
Besides, Nike has valuable human capital. The workers are motivated and are from an athletic background. The company as well has a solid balance sheet and strong financial position. The most significant source of sustainable competitive advantage is the indescribable assets like corporate brand and organizational culture. Even a blind man can talk of the adverts, promotions and corporate events. There is a well established research and development department to ensure new innovative and creative products.
Developing Strategies in the changing Global Economy
Nike is keen on the changing global economy and has been seeking competitive advantage over its rivals. Several changes have taken place in the shoe industry and this has been greatly beneficial to the industry. These changes are; (Hunger, and Wheelen, 2003).
- Rapid growth in footwear production
- Manufacturers today must have flexible designs and high output
- There is a massive increase in shoe designs increasing competition and volatility in the market
- High innovation and quality designs are a must for success.
- Producers have to be protective of their information and manufacturing technology.
One of the main reasons for the success in seeking competitive advantage in the changing global economy is flexibility. Nike has at all times remained flexible in the changing market by subcontracting to international countries that have low cost of labor, (Grant, 2005). Secondly, Nike highly focuses on differentiating of its products. Rather than dealing in one line of a product, the company has diversified and differentiated the products it offers to the market. For instance, Nike started out as an athletic shoe but today, it produces and sells a variety of products ranging from equipment, clothing all the way to even offering accessories. This differentiation has enabled Nike too successfully;
· Obtain and gain loyalty from buyers on its brand.
· Register an increase in sales.
· Command a fine price for all the company products.
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