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Prepared as per the requirement of MBA Course Project

Suraj Prasad Simkhada

Nikes History and Performance In 1962, most of the sports shoes sold in the USA came from Germany. At that time, a young man by the name of Phil Knight was training with a running coach by the name of Bill Bowerman. He was also studying Accounting, and dreaming of the day that he would run his own business. He was developing his business model as he progressed he planned to bring in cheaper, imported shoes from Japan to compete with the German shoes. This was the beginning of a company called Blue Ribbon Sports. Today, we know that company as Nike. Anyones shortlist of the worlds leading brands would surely include Nike, the global icon for the athletic set. Anyone under the age of 20 probably thinks Nike has been around since the beginning of time, but in reality the story of Nike is only three decades old. While todays consumers know Nike as broad-based athletic footwear, equipment and apparel company, Nikes beginning was rooted exclusively in shoes for elite distance runners.

The story of Nike provides a compelling case study of how a company entered one target market, and then used its success therein as a springboard to expand into other segments. Here, we look in greater depth at Nikes entrepreneurial roots, at how the capabilities Nike developed in running shoes enabled the company to expand into other market segments, and at how a company started on a mere $1000 investment became one of the worlds best known brands. Nike, the athletic footwear and clothing manufacturer, is a good example of a multinational corporation that has incorporated corporate social responsibility into its overall business strategy. In fact, Nike might argue that the move was necessary for its survival.

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The majority of Nike's manufacturing takes place in developing countries, where its suppliers employ more than 500,000 workers. For a large multinational company with so many interests abroad, it is not always easy to be transparent. However, Nike has launched its 'Transparency 101' program, which is designed to ensure that the public is aware of everything the company is doing. Transparency 101 is monitoring factories in each country where Nike operates and ensuring that the practices in each are in line with its code of conduct. For example, in February 2001 Nike, in co-operation with Reebok, commissioned an independent auditor to look into labor conditions at a factory in Mexico that manufactured products for the two companies. The auditors' report is available on the company website. The company's success in these areas since it endorsed the principles has been recognized by various groups. For example, Fortune Magazine ranked Nike number one in the apparel industry on its annual list of 'America's Most Admired Companies'. Similarly, the Far Eastern Economic Review (FEER) has ranked Nike among its top-ten best multinational corporations in Asia for corporate leadership and issue-specific leadership. The Review noted that in the previous year, Nike had improved in almost every category. Nike's plans for the future include:

A continued effort to eliminate PVC in its products; The 'Reuse a Shoe' program which, since its inception, has enabled some 13 million pairs of athletic shoes to be recycled;

Working with organic cotton farmers to create a larger market for their cotton: Nike's use of organic cotton has been climbing each year since 1997, and it had a goal of 3% organic cotton use in every unit of the company by 2010;

Reducing emissions at factories worldwide and encouraging the adoption of environmental management systems in each plant.

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A major challenge that still faces Nike is the monitoring of labor conditions in the factories operated by its many overseas suppliers. The company has been commended for its openness in admitting to unacceptable practices, and its challenge now is to eliminate them.

Key Success Factor for Nike: a. Celebrity endorsement is the key factor. Nike management has been finding the right synergy between celebrity and product. Theres one fact that advertisers need to keep in mind when using celebrity endorsements and that is to never let the celebrity become your brand. The companys commitments to designing innovative footwear for serious athletes help it build a cult following among American consumers. Nike found that product and brand choices of consumers are hugely influenced by the preferences and behavior of their beloved celebrities. So the company signed an upcoming popular runner named Steve Prefontaine for their advertisement in 1973 and Prefontaines irreverent attitude matched Nikes spirit. At the end the thought of using professional athletes in their advertising campaign proved both efficient and
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effective. It is also important to be clear about why a brand should use a celebrity so unacceptable quality cannot be masked by a celebrity presentation. Is it to boost sales or to boost image its about selecting a spokesperson whose characteristics are congruent with the brand image. b. Another important reason for Nikes success was that they read the consumers mind perfectly. Nike run their marketing by using top athletes in their advertisement all over America and found that it put a huge influence to the consumer mind. They do not sell Nike air max shoes, it sold a way of life, which is key to its success. This flag is incentive for people, and the philosophy behind energy and determination, is that everyone concerned, whether you are not athletes. Nike uses motivational type of language to inspire consumers. No matter who you are, your hair or skin color is what you suffered physical or social life, what limitations, Nike convince consumers that you can do this.

c. Competitive Intelligence Business intelligence has become a big principle in industries throughout the years. The important part of the success was due to the farsight of Nikes management team. Nikes CEO knew what runners wanted for their shoes and had made a very basic strategy work. Make the products that fit their consumers thoughts.
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Vulnerable situation of Nike and its watch outs: Theres one fact that Nike advertisers need to keep in mind when using celebrity endorsements and that is to never let the celebrity become the brand. If that happens, Nike may get the risk of killing their brand and no sooner has the hype around celebrity fade. And brand spokesperson also should be selected whose characteristics are congruent with the brand image. He should be ethically sound, without any legal issues, with a positive image in the society. The market also should be expanded in other countries according to the need, requirement and cultural differences. Repeating the same design in the market also makes a firm vulnerable to losses. So newer designs and innovative products should be continuous. Using renowned sportsman as brand ambassador is another factor may be helpful. And the organization also has to diversify range of sports products. Nikes market share may erode due to its high competition with other brands and that always makes vulnerable situation to lose market share. However the income of the Nike is still heavily dependent upon share of the footwear market.

Firms should be proactive in creating awareness about newer products among the public. Health benefits of sprots should be emphasized to keep fit, long life, reduced expenses etc. fit people more motivated, have better performance on work place and thus are more liable to get promotions and salary increments. Nike should also be proactive in creating new ergonomic designs based on the research conducted scientifically, by involving sportsmen and other needed persons. A pricing strategy should be made so that the consumer gets value for money, besides getting good. So, selecting a spokesperson whose characteristics are congruent with the brand image, and that helps Nike to maintain its status.

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Recommendations to senior marketing executives for going forward: Like any multi-national company, Nike used the process of global marketing concept because the managers felt that the company could benefit by doing so. However, it is worth noting that the company actually started out as a global network for its marketing; the very first shoes that they sold were made in Japan, and imported into the United States. Today, the global reach of Nike is much more significant. They have manufacturing operations in 45 countries, and their products are sold in almost every country on Earth. This sort of expansion cannot happen without a detailed plan, and a plan needs to be sold to the decision makers if it is to be accepted. And Marketing plans are kind of like football. If your kicker doesn't know where the goal posts are, it's kind of hard to kick a field goal. So, here are a few areas that Nikes senior management must consider.

1. SITUATION ANALYSIS: Where are we at now? How does our present situation compare to where we thought we'd be a year ago? What are the new Strengths, Weaknesses, Opportunities and Tactics that we should be aware of or taking advantage of? What is in the way of our company reaching our sales/business goals? 2. OBJECTIVE: What do we want to have happen in the marketplace?

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3. USP: What is our unique selling proposition? What do we do better than anyone else? What are we known for? What could we be known for? Given what we want to be known for, can we back it up with our products or services? Is it a promise we can "deliver?"

4. TARGET AUDIENCE: Who are we trying to communicate to? Are we reaching them? Why or why not? Are we wasting too much money reaching the wrong people? (If you are just a small florist in Santa Fe, New Mexico, you probably don't need to be marketing your store to the entire world.) Have we clearly defined our target audience? Where do they live? How do they think? What do we know about them? How do they approach the purchase decision?

5. HOW WILL WE MEASURE THE SUCCESS OF OUR MARKETING? Are we just advertising to advertise? How are we measuring our success? Are the means in place to measure the Return on our Investment? How do we measure success? By sales? By inquiries? By the number of e-mail addresses we collect? By attendance? It is impossible to know how well you are doing if you have not established the means by which to measure your success.

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Nikes consideration in its marketing activities: 1. Traditionally, Nikes marketing emphasis has been one focused on celebrity endorsements. Nike signs athletes who are outstanding in their sport then builds campaigns around their personalities. So it has focused on these campaigns requirement of spending millions of dollars on advertising and events. 2. Although Nike could have been content to coast and continue their tried-and-true marketing regimen, they realized that upstarts like Under Amour pose a threat to their status and reformed their marketing strategy. 3. Nike understands their target audience is always changing and evolving due to constant market changes, driven primarily by technology and the Internet. 4. In response to their changing environment, Nike created a special group dedicated to designing technology products. This group was separate from the traditional shoes and clothing products Nike was known for. 5. The groups mission was to find ways to connect and engage with consumers. Nike was willing to revamp their organization and redirect their marketing budgets to transform their brand in order to stay relevant. 6. Nike has clearly embraced a whole new mindset, one that involved significant internal and external changes. Nike went from a brand that paid millions of dollars to reach millions of consumers at special events to a brand that can now connect with millions of consumers most anytime they want to through their social channels. 7. Interestingly, Nike has increased their marketing budgets; however, they have shifted the spending significantly to the digital channels. 8. Consistently Nike talks with and to, not at, consumers. You feel part of a community, and that is ultimately the greatest goal. While the site is all about community, Nike never loses sight of their goal to sell products; they simply choose to do this by helping and engaging, not selling. 9. Nike considers its overall activities and it focuses of customers feedbacks. 10. It is newly adopting SoLoMo Mindset. SoMoLo is an acronym for Social+Mobile+Local marketing and it is an increasingly common term referring to a New Marketing Landscape which is currently adopted by Nike. The power of SoLoMo is a compelling consumer experience achieved through relevance not interruption.
Suraj Prasad Simkhada

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References: 1. http://pdfcast.org/download/nike-case-study.pdf 2. www.nikebiz.com 3. http://www.huffingtonpost.com/max-gladwell/solomo-anifesto_b_1221647.html 4. http://en.wikipedia.org/wiki/Nike,_Inc 5. http://shoes.about.com/od/athleticshoes/a/nike.htm 6. http://nikeinc.com/pages/history-heritage 7. http://www.nike.com/nikeihm/about/history.shtml 8. http://maximizesocialbusiness.com/solomo-best-practices-nike-case-study-8724/ 9. Kotler, P., & Keller, K. L. (13 edi). Developing Marketing Strategies and Plans. In Marketing Management (p. 48). Prentice Hall.

Suraj Prasad Simkhada