Unit I Case Study
Case studies are an important learning strategy in business classes as they provide an opportunity for you to critically analyze events that have taken place in real-life businesses. This develops your critical thinking and research skills as you research the competition and industry in which your business resides with an end goal of formulating a recommendation for the challenges faced by the company. Select one of the three case studies listed below, which can be found in your textbook. Evaluate the case of Marketing Excellence Nike, and respond to each of the questions below using both theory and practical managerial thinking as well as supporting research.
1. How has the industry in which Nike resides been doing over the last 5 years?
2. What are the pros, cons, and risks associated with Nikeâ€™s core marketing strategy? How have they managed to develop a strong customer relationship with their target market?
3. Who are the top three competitors of Nike, and what are their advantages/disadvantages with respect to their product/service development?
4. Looking at the competitors you discussed in question #3, what would you recommend as being the next steps for these competitors and subsequently the next steps for Nike to combat these competitors?
Marketing Excellence Nike (CASE)
Nike hit the ground running in 1962. Originally known as Blue Ribbon Sports, the company focused on providing high-quality running shoes designed for athletes by athletes. Founder Philip Knight believed high-tech shoes for runners could be manufactured at competitive prices if imported from abroad. Nikeâ€™s commitment to designing innovative footwear for serious athletes helped build a cult following among U.S. consumers.
Nike believed in a â€œpyramid of influenceâ€ where the preferences of a small percentage of top athletes influenced the product and brand choices of others. Nikeâ€™s marketing campaigns have always featured accomplished athletes. For example, runner Steve Prefontaine, the companyâ€™s first spokesperson, had an irreverent attitude that matched Nikeâ€™s spirit.
In 1985, Nike signed up then-rookie guard Michael Jordan as a spokesperson. Jordan was still an up-and-comer, but he personified superior performance. Nikeâ€™s bet paid offâ€”the Air Jordan line of basketball shoes flew off the shelves and revenues hit more than $100 million in the first year alone. As one reporter stated, â€œFew marketers have so reliably been able to identify and sign athletes who transcend their sports to such great effect.â€
In 1988, Nike aired the first ads in its $20 million â€œJust Do Itâ€ ad campaign. The campaign, which ultimately featured 12 TV spots in all, subtly challenged a generation of athletic enthusiasts to chase their goals. It was a natural manifestation of Nikeâ€™s attitude of self-empowerment through sports.
As Nike began expanding overseas, the company learned that its U.S.-style ads were seen as too aggressive in Europe, Asia, and South America. Nike realized it had to â€œauthenticateâ€ its brand in other countries, so it focused on soccer (called football outside the United States) and became active as a sponsor of youth leagues, local clubs, and national teams. However, for Nike to build authenticity among the soccer audience, consumers had to see professional athletes using its product, especially athletes who won.
Nikeâ€™s big break came in 1994 when the Brazilian team (the only national team for which Nike had any real sponsorship) won the World Cup. That victory transformed Nikeâ€™s international image from a sneaker company into a brand that represented emotion, allegiance, and identification. Nikeâ€™s new alliance with soccer helped propel the brandâ€™s growth internationally. In 2003, overseas revenues surpassed U.S. revenues for the first time, and in 2007, Nike acquired Umbro, a British maker of soccer-related footwear, apparel, and equipment. The acquisition made Nike the sole supplier to more than 100 professional soccer teams around the world and boosted Nikeâ€™s international presence and authenticity in soccer. The company sold Umbro in 2012 for $225 million.
In recent years, Nikeâ€™s international efforts have been focused on emerging markets. During the 2008 Summer Olympics in Beijing, Nike honed in on China and developed an aggressive marketing strategy that countered Adidasâ€™s sponsorship of the Olympic Games. Nike received special permission from the International Olympic Committee to run Nike ads featuring Olympic athletes during the games. In addition, Nike sponsored several teams and athletes, including most of the Chinese teams. This aggressive sponsorship strategy helped ignite sales in the Asian region by 15 percent.
In addition to expanding overseas, Nike has successfully expanded its brand into many sports and athletic categories, including footwear, apparel, and equipment. Nike continues to partner with high-profile and influential athletes, coaches, teams, and leagues to build credibility in these categories. For example, Nike aligned with tennis stars Maria Sharapova, Roger Federer, and Rafael Nadal to push its line of tennis clothing and gear. Some called the famous 2008 Wimbledon match between Roger Federer and Rafael Nadalâ€”both dressed in swooshes from head to toeâ€”a five-hour Nike commercial valued at $10.6 million.
To promote its line of basketball shoes and apparel, Nike has partnered with basketball superstars such as Kobe Bryant and LeBron James. In golf, Nikeâ€™s swoosh appears on many golfers but most famously on Tiger Woods. In the years since Nike first partnered with Woods, Nike Golf has grown into a $523 million business and literally changed the way golfers dress and play today. Tigerâ€™s powerful influence on the game and his Nike-emblazoned style has turned the greens at the majors into â€œgolfâ€™s fashion runway.â€
Nike is the biggest sponsor of athletes in the world and plans to spend more than $3 billion in athletic endorsements between 2012 and 2017. The company also has a history of standing by its athletes, such as Tiger Woods and Kobe Bryant, even as they struggle with personal problems. It severed its relationship with Lance Armstrong in 2012, however, after strong evidence showed that the cyclist doped during his time as an athlete and while competing during all Tour de Frances. Nike released a statement explaining, â€œNike does not condone the use of illegal performance enhancing drugs in any manner.â€ Prior to the scandal, the company had helped develop Armstrongâ€™s LIVESTRONG campaign to raise funds for cancer. It designed, manufactured, and sold more than 80 million yellow LIVESTRONG bracelets, netting $500 million for the Lance Armstrong Foundation.
While Nikeâ€™s athletic endorsements help inspire and reach consumers, its most recent innovations in technology have resulted in more loyal and emotionally connected consumers. For example, Nikeâ€™s lead in the running category has grown to 60 percent market share thanks to its revolutionary running application and community called Nike+ (plus). Nike+ allows runners to engage in the ultimate running experience by seeing their real-time pace, distance, and route and by giving them coaching tips and online sharing capabilities. Nike expanded Nike+ to focus on key growth areas like basketball and exercise and recently launched Nike+ Basketball, Nike+ Kinect, and Nike+Fuelband, a bracelet/app that tracks daily activities.
Like many companies, Nike is trying to make its company and products more eco-friendly. However, unlike many companies, it does not promote these efforts. One brand consultant explained, â€œNike has always been about winning. How is sustainability relevant to its brand?â€ Nike executives agree that promoting an eco-friendly message would distract from its slick high-tech image, so efforts like recycling old shoes into new shoes are kept quiet.
As a result of its successful expansion across geographic markets and product categories, Nike is the top athletic apparel and footwear manufacturer in the world. In 2014, revenues exceeded $27 billion, and Nike dominated the athletic footwear market with 31 percent market share globally and 50 percent market share in the United States. Swooshes abound on everything from wristwatches to skateboards to swimming caps. The firmâ€™s long-term strategy, however, is focused on running, basketball, football/soccer, menâ€™s training, womenâ€™s training, and action sports.
What are the pros, cons, and risks associated with Nikeâ€™s core marketing strategy?
If you were Adidas, how would you compete with Nike?
Justin Ewers and Tim Smart, â€œA Designer Swooshes In,â€ U.S. News & World Report, January 26, 2004, p. 12; â€œCorporate Media Executive of the Year,â€ Delaney Report, January 12, 2004, p. 1; Barbara Lippert, â€œGame Changers: Inside the Three Greatest Ad Campaigns of the Past Three Decades,â€ Adweek, November 17, 2008; â€œ10 Top Nontraditional Campaigns,â€ Advertising Age, December 22, 2003, p. 24; Chris Zook and James Allen, â€œGrowth Outside the Core,â€ Harvard Business Review, December 2003, p. 66; Jeremy Mullman, â€œNIKE; What Slowdown? Swoosh Rides Games to New High,â€ Advertising Age, October 20, 2008, p. 34; Allison Kaplan, â€œLook Just Like Tiger (until You Swing),â€ Americaâ€™s Intelligence Wire, August 9, 2009; Reena Jana and Burt Helm, â€œNike Goes Green, Very Quietly,â€ BusinessWeek, June 22, 2009; Emily Jane Fox and Chris Isidore, â€œNike Ends Contracts with Armstrong,â€ CNNMoney.com, October 17, 2012; Nike Annual Report 2012.