Sunteți pe pagina 1din 20

Nike Inc.

Expanding Internationally

December 12, 2013

By: Jared Donovan,

Nick Lasko, William
Heines and Benjamin

John Carroll University

Table of Contents

Executive Summary..............................................................2
Firm History........................................................................................................................
Nike Products......................................................................................................................
Recent Sales profit................................................................................................................
Industry Overview................................................................................................................
Key Competitors...................................................................................................................


Marketing Plan....................................................................5
SWOT Analysis.......................................................................................................
Target Market..........................................................................................................
Segementation Bases.................................................................................................
Marketing Mix: 4 Ps (Recommendations Included).......................................................



Executive Summary
First the introduction describes a brief history of Nike, as well as describing Nike
products and other products marketed by them. Recent sales/profit history of the firm
describes how successful Nike has been and shows how established and successful their
business has been. Then goes further into depth with an industry overview and trends
(supported with data/statistics from trade journals) of Nike as well as key competitors.
Next, the marketing plan will entail further in depth analysis of SWOT analysis, target
markets, segmentation base(s), and marketing mix. Lastly we touch up on the
recommendations within the marketing mix (four Ps) our group has provided and
elaborated on, as well as draw up our final conclusions.

Firm History
The Company known as Nike has been around since the late 1960s, however the
Company was not always Nike. Before looking at how the company got its name we will look at
its foundation. Bill Bowerman was a highly respected track and field coach at the University of
Oregon. Bowerman was always trying to find ways to give his athletes a competitive advantage.
He started to develop his own type of shoes but no companies would accept his ideas. Phil
Knight, a runner from Oregon ran for Bowerman at the University graduated and earned his
MBA in Finance from the Stanford. The two men eventually became partners and formed Blue
Ribbon Sports. Their first employee was Jeff Johnson. Johnson handled the print
advertisements and other aspects of the company while Bowerman and Knight made executive
decisions. Not long after, they developed the Nike Swoosh logo. The years after seemed to go
quite smoothly; Bowerman developed soles of shoes like the world has never seen. Their
endorsers sky rocketed and they truly began to flourish as a company with the signing of Michael

Jordan, who some say is the greatest player in NBA history. They developed the Air Jordan
series which is still popular today, along with numerous other shoe brands.

Nike Products
The focal point of this report will be Nikes footwear products and how they can expand
their products internationally. Nike has over 100 different shoe brands, which gives the
consumer a better selection to choose from. The company produces cleats for all types of sports,
tennis shoes for fitness, casual walking shoes, and even sandals. The list of Nike footwear goes
on and on. However, Nike does not only produce footwear. Nike produces jerseys, hats, bikes,
every type of clothing and even aquatic gear. Because of such a large product breadth Nike has
been able to appeal to numerous demographics.

Recent Sales profit

According to DailyFinance.comi Nike has been able to establish strong emotional
connections with athletes by building one of the most widely recognized brands in the world.
Interbrand puts Nike in the 26th position of its Best Global Brands 2012 Ranking, well
above Adidas, which is in the 60th position. Nike uses it innovative and creative ideas to
continue to raise the bar. Figure 1 below shows the companys recent financial history from
Bloomberg BusinessWeek:

Figure 1: Bloomberg BusinessWeek: Nike Financialsii

As the Chart above shows, Nikes revenue has been increasing consistently for four years, and
has been for many years before that. In todays world economy for Nike to be able to flourish
like it has is extraordinary. According to Donald Blair, CFO of Nike, despite general weakness
in the global market, Nike has been one of the top outperformers this year. With the release of its
Q4 profits, Nike not only boasted increased profits of 22 percent, but they also exceeded top and
bottom-line estimates.

Industry Overview
The current market for sports apparel is one of the most areas of business today. According to an
article posted in 2011 on market the future of the athletic footwear market is likely
to be favorable as the preference for a healthy lifestyle gains continuous momentum amongst the
population of the US. The women segment will continue to dominate the future athletic footwear
purchases in the US along with an increasing preference towards fitness and sports activities
(marketresearch.comiii). Also, Nikes world market is becoming increasingly more powerful.

Nike has been able to penetrate some areas of the European market because of the London
Olympic Games. If Nike continues to develop more products geared towards women and also
foreign preferences, they could significantly increase their profit.

Key Competitors
Nikes top competitors include Adidas, Under Armor and more recently, H&M. Both Adidas and
Under Armor are well known in the sports apparel world, with Adidas controlling much of the
European regions, Under has also made a significant mark on U.S. consumers. H&M is a more
style based company, however according to daily finance the company announced that it will
sponsor the Swedish Olympic athletes for the Winter and Summer Olympics.

Marketing Plan
SWOT Analysis
Since its beginning in 1960 Nike has become the most successful sports apparel brand in
the world. Nike has maintained its status as the top selling brand because of their innovative
products and marketing techniques. Customers have responded positively to Nikes products and
continue to do so today. Nike seems to be one step ahead of its competitors; this is because they
have very successfully utilized the many facets of marketing available to them. To understand
how Nike Inc. has functioned at such a high level of success we will take a look at their
strengths, weaknesses, opportunities and threats (SWOT analysis).

Because this report will focus on Nike footwear we will direct most of our attention there.
First, we will examine the strengths of Nikes footwear products. The root of Nikes success
comes from Bill Bowermans philosophy of constantly moving forward and developing new
ideas. Because Nike has maintained Bowermans philosophy throughout its existence, the

company has created superior footwear products. Nike is currently ranked number one in the
world for athletic footwear and sports apparel. Not only does Nike produce footwear, but they
produce many different types of footwear, ranging from Air Jordans, Air Max, Nike Shox
and numerous other shoe types. Nikes product depth is unmatched which gives them easier
access to the different types of demographics. Referring back to, Nike's
strong brand has enabled the company to set high prices, and therefore enjoy a higher gross
margin in footwear than most of its competitors. Just in the latest quarter, the company posted an
increase of 110 basis points in gross margin to 43.9%. Because the company has produced
consistently innovative and reliable footwear products they have established a brand loyalty to
their customers and their endorsers. Nikes athlete endorsers may be one of its greatest strengths.
Athletes such as Michael Jordan, Lebron James, Tiger Woods and Adrian Peterson are just a
small fraction of the athletes who signed with Nike. Each athlete creates an image that the
consumer observes at admires. Because the company has had such success with athlete
sponsors, customers want to buy their products because they are used by the best athletes in the
world. Not only is Nike using American athletes as endorsers but foreign athletes as well, which
gives them a strong presence among countries overseas.

There are minimal weaknesses in Nike Inc.s marketing department, however there are
weaknesses. Emerging to markets around the globe is a strength for Nike, however overseas
shipments cost a price. Nikes import shipments are very expensive. Adidas, one of Nikes top
competitors has lower import prices making them more competitive than they should be. In the
current global economy, consumers are always searching for the best deals on products and on
average Adidas has sold its merchandise for lower prices from an international standpoint. Retail
stores are also emerging as a tough price competitor. Retail stores such as Walmart are able to
maintain low prices on their merchandise, which attracts the average middle-class consumer.

Most consumers would prefer to pay a much lower price for a similar product rather than the full

As Nike Inc. grows and expands across the globe it is faced with many opportunities.
The focal point of our report is the expansion of Nike into China and other Asian countries.
Consumers in countries like China are similar to those on U.S. soil but they have subtle
differences. If Nike is able to fully integrate themselves into the Chinese market, their success
would virtually destroy its competition. There are over 1,300,000,000 people in China and each
of them presents an opportunity to create loyal Nike consumers.

Nike has made it easier on

themselves because they have developed so many different types of shoes. Having a wider
variety of footwear creates more opportunities to sell their products. One demographic may not
like a certain product but might like another one. If Nike can continue to grow and expand its
product depth to adapt to foreign customers, their international profit could rise significantly. As
Chinas population and economy grow, it enables consumers to spend more, which is a good sign
for any company attempting to place themselves in the Chinese market.

Adidas and Under Armor are two of Nikes strongest competitors also trying to expand
their product worldwide. Adidas has had significant success internationally. According to
internetRetailer.comiv, Adidas total sales increased 11.7% to about $19.32 billion (14.83 billion
euro) from $17.29 billion (13.32 billion euro) in 2011 and continue to grow. Adidas is also more
popular among Asian countries, including China which could pose a big issue for Nike. Another
competitor, H&M also has a strong market in China. Chinese fashion I much different than the
fashion we see normally in the United States, or even Europe. Adidas and H&M brands
currently have a stronger appeal to the Chinese market because of the types of styles they
produce. Furthermore, Adidas and H&M are able to maintain lower importation prices than

Nike, giving them the ability to produce their products and ship them to where the need to be for
a lower expense, which raises their overall profit.

Target Market
Being that Nike is so established and so successful, Nike has powerful brand image that
everyone knows when they buy a Nike product they are buying a quality brand. The target
market Nike hits is based on the target audience that appeals to their marketing strategy the most.
Nike created a unique understanding of how people respond to images of lifestyle and they
equally try to create the image first and then respond to the market that emerges and target
towards this market. The market that they seem to have the most trouble reaching to is the
market in China. Nikes target market within China is as with the United States is anybody that is
looking to buy new shoes, cleats and any type of athletic sportswear. However Nike realizes that
in a country with as many people, that target is far too broad and has downsized its target market
to people with the same interests as before, but younger as they target kids through young adults.
This target makes sense because Nike is trying to establish itself as a trendsetter within China,
while trying to establish its dominance. One way they became so dominate in the States is that
they established great brand loyalty; many people only wear Nike shoes and only use their
products. By targeting kids and young adults, Nike is hoping to do the same thing in China. They
want to build strong brand loyalty with their younger customers that will in turn cause the
customer to buy their brand repeatedly over time rather than buy from multiple suppliers within
the same category. Nike realizes how important brand loyal customers are and how it is an
important source for their firm. They are important because the marketing costs of reaching loyal
consumers are much lower because the firm does not have to spend money on advertising and
promotion campaigns to attract these consumers. By targeting anyone in the age group of a kid to
young adult Nike is making the right decision. Being a trendsetting company, especially one that

likes to think of itself as revolutionary, they wouldnt have any success if they marketed their
product to an older generation, that wouldnt understand their product. Instead they chose to
market themselves to new consumers who want the new and cool product, something Nike
strives on doing and have done in the past.

Nike has a lot of submarkets being as big as and established as they are. They are
obviously most popular for their shoes, which are always changing and adapting to athletes
athletic needs. In China however, their culture is a bit different. The target market in China tends
to not be as worried as much as the athletic qualities of the shoes more as the fashion and sleek
look of shoes or sportswear. Nike needs to incorporate a diversification strategy as they need to
develop new products, for a new market, much like Adidas has done. Nike should take notes
from Adidas, who realized that within China being fashionable is just as important as being
athletic, so they revamped their product line with new products like trench coats and high heeled
tennis shoes. If Nike wants to maintain its status as the most popular sportswear company, they
need to take notice of this and adapt to Adidass strategy of revamping their product line with
fashionable products being the forefront of their new line.

Segementation Bases
Many types of customers appear in any market, and most firms cannot satisfy everyones
needs. For example, among Internet users, some do research online; some shop, some look for
entertainment, and many do all three. Each of groups might be a market segment consisting of
consumers who respond similarly to a firms marketing efforts. The process of dividing the
market into groups of customers with different needs, wants, or characteristics is called market
For Nike, they segment their customers based on how the products are used and gender.

Nike in the United States focuses on the following segments: running, basketball, football/soccer,
mens training, womens training, action sports, sportswear, and golf. Similarly in China, the
segments Nike focuses on include: basketball, running, mens and womens training, soccer, and
Nike has been around for quite a while now actually dating all the way back to 1964
when it was one known as "Blue Ribbon Sports". Nike's initial target market started out as a side
gig for Phil Knight and Bill Bowerman as they went around college to college selling running
shoes to local track runners with their unique waffle iron design which was initially done by Bill
Bowerman which he used to make with his wife's waffle iron. In time, Nike sprung in to a much
bigger developing shoe for all sorts of sports from baseball to tennis, basketball, soccer, and even
golf. Nike understood they had to tackle all sports to be the dominant brand in athletic
sportswear which Nike has well done so. Nike's big sport is basketball whichever way you look
at it. It is where Nike builds its popularity, although they do gain some credit for tennis and
running but basketball by all means is Nike's key sport.
Nike in China is very large as well as basketball is seen as its biggest contributon to their
sales. Nike products in China have been on a decline though as of late. Young adults in China are
slowly, but surely becoming more fashionable. Therefore, Nike needs to begin making their
products more appealing to this behavioral segment base. Ever since Nike hit markets in China,
it has been the largest active footwear company. Lately, Adidas has been closing the gap between
the two as they have begun making products that are seen as more fashionable than Nikes
Nikes widespread market dominance has made them the primary target for all of its
competitors. This is why their competitors, such as Adidas have been appealing to customers
more as fashion becomes a more popular trend. All of Nikes competitors want to take market
share from them. A threat for any apparel company is staying fashionable. Nike, itself

acknowledges: We must respond to trends and shifts in consumer preferences by adjusting the
mix of existing product offerings, developing new products, styles and categories, and
influencing sports and fitness preferences through aggressive marketing. Failure to respond in a
timely and adequate manner could have a material adverse effect on our sales and profitability.
This is a continuing risk.v
We recommend that in order for Nike to continue to dominate the market in China and
develop even further as a company, they need to focus on making their footwear products more
appealing to the latest social trends. The social trend being that young adults are becoming more
fashionable all around the world. Other companies are taking notice and making changes. Nike
needs to begin making these changes as well if they want to continue to be above Adidas for
market share in China. Its brand name will always be there and be popular, but in order to stay
successful in China and remain the number 1 retailer, they need to begin making their footwear
more appealing to their target market.

Marketing Mix: 4 Ps (Recommendations Included)

For a company to be successful they need to have an excellent supply chain that can get
their products out to the public quickly and efficiently, this is why Place is just as important as
any other aspect of the Four Ps. This is something that Nike excels at as they have 774 factories
worldwide, with over a million employees. In China alone they have 213 factories and just over
263 thousand With this many factories set up in China alone they have no problem
making their goods available to the public and can cheaply ship out their products to retailers in
Nike has plenty of retailers within China as well as they are plastered within the major
cities, there are currently 11 outlet stores in Hong Kong, 7 in Shanghai, 3 in Beijing and 2 stores
in Guangzhou.vii Their products are also available in many independent retailers as well. In

regards to place Nike has done well, they get their goods where they need be on time and without
any problems, as they should, considering they have 213 factories in China alone. The quickness
and efficiency that Nike gets their products out on the market is essential for any company,
especially one as big as Nike, if they want to be successful. Nike has done a great job at this and
there arent any needed recommendations.
Finding the right Price for a product is all about figuring out how much average customer
values it. The more they value the product the more a company can charge for it. In America
Nike is a premium brand and for many people is a must have product, which is why they can get
away with high prices. This is not the case in China and they have to rethink their pricing
strategy by either lowering prices or making them more valuable. In China there is a much
greater emphasis on education and fashion then in the Statesviii and because of this emphasis the
average Chinese customer doesnt value sporting apparel and shoes as much as the average
American. This means that Nike cant reach their goals without either lowering their prices or
creating extra value in their goods.
Adidas has done that in China and with great success. In 2012, both of these companies
experienced an inventory pile up as they had more produced more products then they could sell.
Adidas responded to this pile up by lowering the prices of their goods and as a result sales for
Adidas increased 15%ix. While Nike kept prices the same and didnt report a rise in profit.x When
there is a pile up of inventory it means that a company is producing more products then they can
sell, obviously this is bad for business and can result in massive profit loss. Both Nike and
Adidas faced the same problem and they responded in difference ways; Adidas lowered priced,
and Nike kept the same prices.
Adidas strategy worked and Nikes and if Nike wants to keep their prices the same, they
need to find a way to create more value in their products. There are multiple ways of doing this;
Nike traditionally does this with advertising and emotional branding, which has worked well in

the States but not so much in the China as their culture is completely different. This will be
touched upon even more once we start talking about promotion, but its safe to say Nike hasnt
increased the value of their goods through branding in China. The other way is to increase the
value of a companys goods is to come up with different products that customers value more than
the old ones. This is something the Adidas has done extremely well as they have changed their
focus from sportswear to more fashionable wear and this accounts for a large increase in their
profits as well.
Nike should take a page from Adidass playbook and start to produce products that arent
as athletic based but more fashion based, if they want to still be able to compete with Adidas in
the future. Pricing is huge when it comes to being a successful company, if you charge to little
you lose out at potential profits and if you charge too much nobody will by your product. When
it comes to China, Nike needs to rethink their pricing strategy and either create more value
within their products or lower prices.
Product development offers Nike many opportunities. The brand is fiercely defended by
its owners whom truly believe that Nike is not a fashion brand. However, like it or not,
consumers that wear Nike product do not always buy it to participate in sport. Some would argue
that in youth culture especially, Nike is a fashion brand. This creates its own opportunities, since
product could become unfashionable before it wears out i.e. consumers need to replace shoes.
There is also the opportunity to develop products such as sport wear, sunglasses and jewelry.
Such high value items do tend to have associated with them, high profits.
Business could be better developed internationally, building upon its strong global brand
recognition. There are many markets that have the disposable income to spend on high value
sports goods. For example, emerging markets such as China have a new richer generation of
consumers. There are also global marketing events that can be utilized to support the brand such
as the World Cup (soccer) and The Olympics. Nike has no factories. It does not tie up cash in

buildings and manufacturing workers. This makes a very lean organization. Nike is strong at
research and development, as is evidenced by its evolving and innovative product range. They
then manufacture wherever they can produce high quality product at the lowest possible price. If
prices rise, and products can be made more cheaply elsewhere, Nike will move production.
Nike continues to use athletes to convey the message that anyone can aspire to greatness,
a harder sell these days in a nation where Chinese parents, long focused on academic
achievement, are putting ever more emphasis on hitting the books than the basketball or tennis
court. Adidas, by contrast, has shifted from a hard-core sports message to one focused on fashion
and lifestyle, said Jimmy Qin, a vice president at sports consulting firm Octagon. Kids in China
are growing up wearing Nikes, but as they get older and participation in sports diminishes, they
gravitate towards wearing more fashionable shoes. Therefore, Nike needs to start focusing their
product on fashion and lifestyle, instead of athletics to sell more shoe products.
Nike has been promoting in China for 30 years, the worlds largest sporting-goods maker
is losing customers to Adidas AG (ADS)s more fashionable street wear and Hennes & Mauritz
AB (HMB)s cheap, hip clothing. Making matters worse, Nike is knee-deep in unsold
merchandise after projected post-Olympics sales bump didnt materialize.
Eighteen months ago, Nike was so bullish on China it predicted sales there would double
to $4 billion in four years. Now it says China sales will probably fall for the next two quarters,
which would make it five in a row. You have to be a smarter retailer now, said Camilo Lyon,
an analyst for Canaccord Financial Inc. in New York who recommends holding the shares. Now
the consumer has become more educated and global and sold to a lot more. Everybody is forced
to become sharper.
Nike executives have blamed the reversal in China on a sluggish economy and changing
consumer tastes. The company continues to believe it has the right strategy to capitalize on the
countrys tremendous growth potential. The 2008 Olympics in Beijing helped boost sales, which

doubled to $2 billion by 2011. While China made up 9.6 percent of Nikes revenue last fiscal
year, the company generated 25 percent of its profits there before interest and taxes.
Last summer, it became clear that Nike inventories were growing faster than sales.
Revenue from China, excluding the effect of currency exchange-rate fluctuations, declined 5
percent to $2.45 billion in the fiscal year ended May 31. These results came as Chinas retail
sales grew more than 10 percent. Many Chinese youths are gravitating to less pricey fast fashion.
Sally Wang, an 18-year-old from Zhejiang province, used to wear Nike and Adidas when she was
younger and hardly ever dons sportswear anymore. When you are younger, you dont really
care and wear whatever your parents buy you, she said. But when youre older and can choose,
Nike and Adidas are rather pricey to me.
Nike has been promoting its products with successful athletes using them, this being
called Ego branding. Youths in China typically represented a significant portion of sales for a
while. Lately, trends have been changing and with Nike becoming so pricey these days,
customers are gravitating to cheaper priced shoes. Also, trends are changing, as fashion is
becoming popular and having the latest fashionable shoes is preferred by Chinese natives at a
young age. Nike needs to begin promoting their products in a more fashionable sense, and less as
high-profile athletes wearing them in sporting events.

Nike is a popular name brand all across the world. One of the biggest aspects of Nike is
footwear. They have been the number 1 retailer of footwear in China ever since they entered the
market. Lately, Nikes competitors have changed their strategies and have become more fashionoriented. With this, their sales and market share have increased. Nike consumes a significant
portion of the market share in China, but they are holding onto it by slim margin to their
competitors. As Nike moves forward, they need to rethink their strategy and delve into the latest

social trend, which happens to be fashion. If they begin to produce more fashionable footwear,
they will not only continue to hold the largest market share in China, but also increase their lead
and maintain their streak as the most dominant sportswear company in the world.

iEnd Notes Campos, Adrian. "InvestorCenter." Daily Finance, 16 Sept.
2013. Web. 11 Dec. 2013.

ii Bloomberg Business Week: Nike Financials: Bloomberg News. "Nike Just Doesn't Do It With
Lost Sales Year in China." Bloomberg, 17 July 2013. Web. 11 Dec. 2013.

iii Research, Ken. "The US Athletic Apparel and Footwear Industry Outlook
to 2015 - Evolving Niche Segments in Sportswear." Market Research. N.p., 1 Feb. 2012. Web. 11
Dec. 2013.

iv Brohan, Mark. "Global Web Sales Grow Nearly 80% for Adidas." Internet
Retailer. N.p., 25 Mar. 2013. Web. 11 Dec. 2013.

v Nike 10-K Report, July 20, 2010. : Grewal, Dhruv, and Michae Levy. Marketing. 4th ed. New
York: McGraw-Hill, 2012. Print.

vi : "Nike Sustainability - Interactive Map." Nike

Sustainability - Interactive Map. Nike, n.d. Web. 11 Dec. 2013.


viii Bloomberg News. "Nike Just Doesn't Do It With Lost Sales Year in China." Bloomberg, 17 July 2013. Web. 11 Dec. 2013.

ix :
Burkitt, Laurie. "Adidas Sportswear Is Hot on Nike's Heels in China." The Wall
Street Journal, 7 Mar. 2013. Web. 11 Dec. 2013.

x CFO GLOBAL HQ. "Case Study: Nike CFO Don Blair Reveals Strategy
for Profit Growth." CFOGlobalHQ. N.p., 30 Oct. 2013. Web. 11 Dec. 2013.

Works Cited

Bloomberg News. "Nike Just Doesn't Do It With Lost Sales Year in China."
Bloomberg, 17 July 2013. Web. 11 Dec. 2013.
Brohan, Mark. "Global Web Sales Grow Nearly 80% for Adidas." Internet Retailer. N.p., 25 Mar. 2013.
Web. 11 Dec. 2013.
Burkitt, Laurie. "Adidas Sportswear Is Hot on Nike's Heels in China." The Wall Street
Journal, 7 Mar. 2013. Web. 11 Dec. 2013.
Campos, Adrian. "InvestorCenter." Daily Finance, 16 Sept. 2013. Web. 11 Dec.
CFO GLOBAL HQ. "Case Study: Nike CFO Don Blair Reveals Strategy for Profit Growth."
CFOGlobalHQ. N.p., 30 Oct. 2013. Web. 11 Dec. 2013.
"Ego Brand Building: The Nike Brand Strategy of Vanity Marketing." 602 Communications RSS. N.p.,
n.d. Web. 11 Dec. 2013.
Grewal, Dhruv, and Michae Levy. Marketing. 4th ed. New York: McGraw-Hill, 2012. Print.
Jacklet, Ben. "Nike's Great Leap." Nike's Great Leap. Oregon Business, Aug. 2008. Web. 11 Dec. 2013.
"Locations." NIKE, Inc. -. Nike, 2013. Web. 11 Dec. 2013.
"Nike Brand Strategy: Emotional Branding Using the Story of Heroism." 602 Communications RSS.
N.p., n.d. Web. 08 Dec. 2013.
"Nike Marketing Strategy: How Nike Branding Flatters Athlete Egos." 602 Communications RSS. N.p.,
n.d. Web. 11 Dec. 2013.
"Nike Sustainability - Interactive Map." Nike Sustainability - Interactive Map. Nike, n.d. Web. 11 Dec.
Research, Ken. "The US Athletic Apparel and Footwear Industry Outlook to 2015 - Evolving Niche
Segments in Sportswear." Market Research. N.p., 1 Feb. 2012. Web. 11 Dec. 2013.