The chosen international business organization for this project report is Nike, Inc. Nike is a multinational company which is majorly based in America. It is involved in several activities, ranging from designing, manufacturing, and also the marketing of accessories, equipment, including the sales and delivery of services. To be specific, Nike specifically deals with footwear such as athletic shoes and sports clothes also. In general, Nike Company majorly deals with sports clothing, accessories, and equipment. It manufactures this equipment, then markets and sells them to various markets.
Originally, Nike was known as Blue Ribbon Sports. It was founded on January 25, 1964. The founders of this company were Phil Knight and Bill Bower man (Wierenga & van der Lans 2017). Phil was a track athlete from the University of Oregon. Bower man, on the other hand, was his coach. Originally, the company distributed shoes on behalf of another company from Japan, which was known as Onitsuka Tiger. As time went by, it expanded its territories and started to manufacture its own sports shoes. By this time, the partnership of these two companies had gradually weakened and was always coming to an end. Finally, each company now operated on its own. Later on May 30, 1971, the company changed its name to Nike, which remained to be the official name of the company up to today (Avagyan, Landsman & Stremersch 2017). The two founders named this company after the goddess of victory in Greek, who was known as Nike. Nike has its main headquarters in Beaverton city. Other several outlets and offices are spread all over Washington.
The company performed well in the market, making more profits from sportswear. For the first time, it nationally broadcasted its television ads in 1982, with the help of an agency called Wieden+Kennedy (W+K). The Cannes Advertising Festival consequently announced that Nike Company was the honored to have the tag of being the company which had advertised most, in 1994 and also in2004. Actually, it became the first company to be the “advertiser of the year”, for two years. Nike was also awarded the Emmy Award, for being the best commercial. In fear of the revolution of 1988, Nike seized to air out ads on televisions. This company was of the earliest companies to utilize internet marketing where it earned a lot of profit. By the end of the year 2012, Nike had bought a stock which was worth $10 billion (Dagger & Danaher 2014). Nike is now one of the biggest international business organizations in the world. It still continues to manufacture sportswear and markets them to local and some international markets. However, entering international markets has not been easy for this company.
Application of theory to practice
Marketing process and strategies
For any business company to be successful in marketing, the marketing process and strategies are very essential. Below is a detailed explanation of the concepts marketing process and strategies and how they have been practically put in use by Nike Company.
The first step of the marketing process is conducting a market research (Bischi & Baiardi 2015). Some scholars also refer this to as situational analysis. It includes a thorough and detailed analysis of the customer needs, capabilities of the company itself, the macro and micro environments surrounding the company, the existing past, the present, and the future aspects of the market where the company intends to enter, among many other aspects.
According to a research carried out by (Mochen & Jr. 2016), one of the major competitors in the market is Reebok. The operation of this company is relatively similar to that of Nike Company. Rebook Company is involved in both the design and manufacture of sport and non-sport footwear. However, the research revealed that Reebok financial strength has been declining over years. As at the time of the research, the stock price of Reebok Company had reduced by 17% (Conrad et al. 2015). Further research showed that the customers for athletic shoes and apparel were so many. The demand for such footwear was high while Reebok could not manage to supply enough to the market. After detailed data analysis, Nike identified that there was a business opportunity in the American market and therefore entered the market. It thrived well and competed favorably with other organizations.
After having established a strong base in its home ground, Nike decided to enter international markets. Though through its marketing strategy, it was successful in some nations, Nike was not successful in China (Schmidt, Spann & Zeithammer 2014).The major reason behind this failure was the presence of some unfavorable government barriers. China had tariffs which discouraged importation of goods to their country. For those commodities which were legalized to be imported to the country, a high percentage of value added tax was imposed on them. Footwear from the Nike Company was legalized to be imported, but Nike could not afford to pay for the high value added tax, which was imposed on its products. Internationalization of their products, therefore, became difficult. The similar stiff competition was also experienced in Europe where Adidas Company had 13.2 % of the total shares, while Nike had 12.4% of the total shares (Lusch & Vargo 2014). However, in many nations, Nike entry to international markets was successful.
The second step of the marketing process is creating a market strategy that is customer-driven. A company proceeds to this step after identifying a business opportunity. There are several marketing strategies that a company can put in place. One of these is segmentation. Segments are portions. Segmentation is, therefore, the process of dividing a market into portions which are meaningful (Leonidou, Fotiadis & Zeriti 2013). Here, the business organization seeks to identify certain groups of people who have a high demand for the business' products, and are interested and willing to purchase such products. A business segments its potential customers for various reasons. One of these reasons is to make it easier for personalization of market campaigns. A generalized campaign about a business' product, without segmentation, is very expensive.
After Nike did segmentation, demographically, the research showed that footwear and sportswear, in general, was largely purchased by the youth (Shih 2014). This formed one of its segments. After considering people’s lifestyles, the research panel also realized that sportswear was largely purchased by players in different games, ranging from football, volleyball, basketball, among many other names.
Targeting is also another marketing strategy. It refers to the process of evaluating the opportunity in each group of potential customers segmented (Papadopoulos & lop 2014). A business therefore now groups each segment according to the opportunity available. Several criteria are used to target each segment. Some of these are discussed below.
One of them is the criteria size. For the segment to be targeted, it has to be large enough. When a large number of potential customers are segmented on one segment, it becomes easier to target them. Marketers tend to concentrate more on where the segments are large (Czinkota & Ronkainen 2013).
Nike Company also did targeting. This strategy was successful in some countries such as Saudi Arabia, while it failed in others like China. After noticing that, there were potential customers in Saudi Arabia; Nike Company diverted its attention from smaller segments and focus on the major ones, like the one in Saudi Arabia. Till today, Nike supplies the play kits for the national football team of Saudi Arabia (Jr., Cannon & McCarthy 2013). It also supplies sportswear to most universities and colleges in the same country. However, in China, the segments were small. Nike tried to deliver its products to China but after realizing that there were more losses than profits, it reduced its attention to this nation. However, some small target segments still exist in China.
Nike, with the use of positioning strategy, proceeded and advertised widely in Saudi Arabia, to make it known to the public that all best sportswear comes from Nike. This was very successful. The brand logo, which is branded on the sportswear, help to further spread the name of the company hence making it famous. Recently, local but stable football teams have started to order their games kit from this company (Elenkov 2014). Nike, therefore, ends up accruing more profits from this nation. Good relations between the United States and Saudi Arabia make it favorable for the international entry to the market, of Nike Company.
Evaluation of marketing mix of Nike Company
The marketing mix is still another essential factor in marketing. To fully understand the marketing mix, it is crucial to understand the 4Ps, which summarizes the whole process of the marketing mix. These are product (services), place, price, and promotion (Paliwoda & Thomas 2013).
Product refers to the tangible product which offered by the business organization, to the customers (Akaka, Vargo & Lusch 2013). If the products not tangible, it is referred to as a service. For a product to be successful in the market, the company or business organization has to make a decision on what features to include in the product. These decisions are made from the views of the potential customers of that product. Therefore, for the product to accrue more sales in the market, it has to include all that the customers need. The color and texture of the product should be appealing to the eyes of the potential buyers.
Once all the above product concepts have been dealt with, the marketing mix process moves the next step of pricing. It is in this stage where the commodity is given value. The price of a certain product is determined by several factors. One of these factors is demand and supply (Eteokleous & Leonidou 2016). If the demand for a certain product is high in a certain segment, the company supplies more quantities to that segment. Customers tend to purchase more when the price of the commodity is low. When there is a surplus in the market, the company may choose to lower the price of products, to get rid of the excess in the market. Failure to do this, inflation might occur.
According to research carried out by (Morschett, Schramm-Klein & Zentes 2015), 25%-30% of the capital in the United States, is bestowed in the hands of the youth. Nike Company utilizes this opportunity by providing several varieties of sportswear to the youth. The price is standardized to ensure that it is within their purchasing power. However, in international markets like China, Nike products face a lot of competition.
Pricing concept now determines the success of the next marketing mix strategy which is promotion. Promotion is carried out when the business organization has the product and its price. Promotion aims at communicating to the public about the product, its features, and its price. Promotion is done through several methods. This includes email marketing, social marketing, marketing by use of videos, search engine marketing and also through public relations. All these promotion concepts, aimed at making the product known and familiar to the potential customers. Nike massively makes use of internet marketing. This is mostly done through social platforms. Through Face book, Twitter, LinkedIn, among many other platforms (Majaro 2013), Nike makes a lot of sales.
Finally, place represents the last P of the marketing mix. Place refers to the locations where the goods can be delivered to potential buyers. Where the segments are large, appropriate positioning is done to ensure that each segment has enough of what it needs (Cavusgil et al. 2014). With the current technology, positioning has been advanced. Nowadays, transactions are done online, after which the goods are now delivered to the respective destinations.
Marketing models also play a very important role in the entry behavior of companies to international markets. Nike Company mostly utilizes the SWOT analysis model. SWOT is an acronym which is used in business studies to stand for “strengths, weaknesses, opportunities and threats” (Rauch, Wolfsmayr & Borz 2015). This, in short, summarizes all the activities which take place in any enterprise. A company can, therefore, determine its strengths and weaknesses through this model. The following is a detailed analysis of Nike Company using this model.
One of the strengths of Nike Company is bestowed on its board of directors. The board of this company is inclusive. It is composed of both managing directors and also independent directors. The managing directors are trained and well equipped with the best skills of management that the company needs. On the other hand, the independent directors bring forth the external experiences which are essential for the success of the company. Additionally, Nike Company has its strength in promotion. Nike is a worldwide company which is known for massive advertising. The company uses a brand, which bears the name of the company. The trademark with the word “swoosh” is also used in its adverts. Mass advertising helps the company to develop new international markets and therefore make more profits.
Another major strength of Nike Company is the location of its facilities. Nike has its enterprises, facilities, and offices across the globe. Most of its offices are located in the United States. Other notable offices are also located in South America. Several minor outlets are also spread all over the nation. This strength makes Nike company to be termed as a global company.
However, despite all these strengths, there are also some weaknesses that, through research, have been noticed. One of these is in human capital. Though technology has brought us the innovation of machines, human capital still remains an essential factor for any company to be successful. Human labor is still essential. Nike has employed several specialists in different business fields. These include sales persons, technicians, drivers, casual workers, among many others. However, the wages paid to these workers are not sufficient enough. The company in some interior international markets has employed employees who are less than 18 years (Gmelin & Seuring 2014). This has been a major challenge since the international business regulations do not allow this.
Opportunities for Nike Company still exist. The need for footwear is increasing day and night. This is due to the increasing number of youth who are joining the Athletics and games competition. A notable number of people, who are utilizing health concepts such as exercising daily, are also increasing. This, therefore, creates an opportunity for Nike Company, to produce more footwear and sportswear, to cater for this increase in demand for products related to it.
Another opportunity still exists as a result of internet marketing. Originally, goods would follow a long distribution channel before the final product would reach the final customer. To be specific, middlemen intervene in the distribution channel and hence increasing the price of the final customer. Profits are therefore minimized as a result of this. Recently, internet marketing has been introduced. This helps to eliminate the middlemen in the distribution channel and therefore profits which would go to the middlemen now goes directly to the company (Naert & Leeflang 2013). This is, therefore, an opportunity that Nike Company should make use of, for a better use.
However, there are also some threats. This is factors that threaten the life of a company. Threats of a company should be dealt with as soon as possible for smooth running of businesses. One of these threats is that Nike Company has now grown up to its limits. It is actually approaching its off point. On the other hand, the technology and style it uses have also been exploited to its maximum. This situation creates a phase of dormancy (Stark 2015). The company, therefore, does not seem to grow. The only option left is to advance the different lines of products and technology that already exist. This is a serious threat that is recently facing Nike Company.
Additionally, inflation is another threat. Nike has most of its market in its home country that is The United States. Currently, United States is facing serious problems due to inflation. When inflation occurs, the spending of the consumers reduces. As a result, big companies such as Nike, end up making losses since its products are not bought. This is, therefore, a threat to Nike Company.
Product life cycle model
Another major marketing model that Nike makes use of is the product life cycle model. This cycle explains the behavior of the product, the owner of the product, and the sales, in four major stages. A detailed explanation of this model, in relation to Nike Company, is as epitomized below.
The first stage of this model is the introduction stage. It is in this stage where the company introduces its new product to the market. Since it is usually the first time for the product to explore the market, the company does a lot of advertising and promotion of that product, for it to gain popularity in the market (Kim, Kara & Kayis 2014). However, since the product is new to the potential customers, they may not buy it for the first time. The company, therefore, is likely to suffer a loss both in the sale of the product and in massive promotion. Companies rarely get profits on a product which is entering the market for the first time. Nike, for the first time it was introducing its sportswear to the market, it made losses in certain markets, while small margins of profit were portrayed in some markets. The company had anticipated this but it was ready to incur losses. Nike advertised massively in televisions among other broadcasting stations, to make sure that sportswear and apparel, gained popularity in the States markets.
The second step of the product life cycle is the Growth stage. This is the most effective stage of this cycle (Schlegelmilch 2016). When the product has now gained popularity, it spreads and becomes diverse in the market. As a result, more people purchase it and hence the profits increase. It is in this stage where the company may choose to reduce the price of the product and supply more of it to the market. The companies name becomes popular in this stage. Additionally, new but similar business enterprises arise in the market. This brings forth, new competitors in that certain market. The target business then thrives to compete favorably with such competitors. If the right marketing procedures are applied, a company may still maintain its high sales, despite the stiff competition.
Promotion still exists at this stage to make more sales. The company may choose to educate its customers about the product it offers in the market, its advantages and disadvantages. Nike Company also utilized this stage in its early stages of growth. It advertised massively after sportswear becomes popular in the market. Nike went even further to explore foreign and international markets, where it successfully drew the attention of a large segment in Saudi Arabia. The company accrued a lot of profit during this time.
The next stage of the cycle is the maturity stage. At this stage, the company is big enough. Due to its popularity, it does not advertise anymore. Sales, therefore, tend to reduce at this stage. More suppliers of the same product arise in the market and hence the target company may suffer some stiff competition (Pyo 2015). Nike Company is almost heading to this stage. Its sales have been decreasing over time.
The last stage is the decline stage. This is the last stage of the product cycle. Here, the company maintains the sales of its products and benefits from the sales without any further effort. If the whole process tends to be heading to a loss, the company totally drops that product.
To conclude this project report, there are certain measures, which, when put in place, Nike company can make more profits. This conclusions and recommendations can be drawn from the concepts which have been discussed above. The following are some of the recommendations.
First of all, Nike Company should realize that it is heading towards the maturity stage of the product life cycle. It is therefore advisable to utilize the knowledge of expanding product lines and product variation. This will help to still maintain its sales despite this situation. For example, Nike can produce a variety of sports shoes, with different colors and modification such as glowing lights, to make the products seem unique.
Secondly, from its weakness on human capital as discussed above, the company should look for means to increase the minimum wage for its employees. This will motivate them to work harder and therefore bring more profits to the company. The company should also avoid employing casual workers, who are under 18 years. This will help to avoid conflicts with the government. It may also lessen the strength of some of the unfavorable government laws concerning business.
Finally, the company should make use of the available and different marketing strategies and knowledge about marketing. This is essential because it will help the company to maintain customer loyalty and still make profits all year round. All the marketing models discussed above are very crucial for the success of any business organization.
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