1. What business model and strategies is Nike pursuing?

In the case scenario it has been provided that Nikes amazing growth came from its business model which has always been based on two functional strategies : a) Creation of state of the athletic shoes b) Publicizing the quality of the shoes through dramatic guerilla style marketing Since Nike was competing in such an industry which was mature in business life cycle and naturally, there was immense competition to attract and retain the customer in order to increase profitability. However, Nike did not play price wars in that competition since it would reduce profitability for industry and the players in it. Nike, to combat, the competitors followed nonprice competition strategy in order to maintain and increase its market share and profitability. Product development (improving product design): Generally, the state of the art refers to the highest level of development which is somewhat related to product develoment. Because product development means the creation of improved products. Here,Nike focused more on product quality to differentiate in the industry. Nike followed this strategy to maintain and increase its relative competitive position in the expanding market and as a result, its market share soared in 1998. In the same year, when Nike confronted a sudden decline in sales, it came up with its new line of shoes for soccer market and perfected their design over time which really turned out to be profitable step. Developing the product became again crucial for Nike which reflected with the advertising message that soccer shoes are sleeker and fit the foot more snugly. As a result, they made profit out of it. So, Nike put efforts on product design for each market segment it is serving including the acquired ones whether it be the althletic shoe, dress shoe, athletic apparel etc. Still it is focusing more on develping new and improved products in new segments so that it can maintain and increase its upward trend in ROIC. Market penetration ( expanding market share): Since Nike concentrated more on expanding market share in its existing product markets and also promoted its shoes through heavy marketing, it can be assumed that Nike pursued market penetration strategy. It cam into several contracts with many popular athletic celebrities just to influence customers brand choice and create a brand name reputation for Nike and its products. In 1987 it increased its marketing budget by six time from $8 million to $48 million and in 2003; it signed a basketball star through $90 million endorsement contract. As a result, of this huge marketing campain, it started enjoying a rise in its market share as well as profit until is Air Jordan lost marketability. Nike also used heavy marketing when it launched total 90 III shoes in 2004 for million of soccer player throughout the world. In this situation, Nike protrayed its shoes as a part of the soccer lifestyle saying that are sleeker and fit the foot more snugly.

Market development (looking for new segments) : In 1998 when sales started to fall, Nike to raise its sales again tried to develop its market. In earlier years, it ignored sports like golf, soccer, rollerblading and so on and focused more on making the shoes for the track and basketball markets to build its market share in these areas. Later it started to serve the other segments in athletic industry with new design and competencies. Consequently, Nike had won the biggest share of the soccer market from Addidas when Nike launched soccer shoes and perfected the design over time. Nike was seeking for more market segments to serve. When it came into several acquisition it got some opportunities to use its design and marketing competencies. It had acquired Converse, the maker of retro-style sneakers, Hurley international, official starter and some other companies. These ventures for Nike turned out to be profitable and added to the some other companies. These ventures for Nike turned out to be profitable and added to the profitability sourve of Nike. Nikes most courageous acquisition was taking over Cole Haan, the dress shoesmaker in the 1980s. Because, it was alittle different segment for Nike and it was still in search of some other possible acquisitions. Moreover, Nike had also decided to enter the athletic apparel market to use its skill and by 2004, sales were over $1 billion. Acquisition ( horizontal Merger) : By the time, Nike already achieved superior competency in design and marketing, to take advantage of it, it decided to enter new market segments. As a result, Nike went through several acquisitions and introduced with new market segments. The acquired firms has extended or complimentary product lines. These acquisitions allowed Nike to enjoy increased market share and an upward trend in profitability which was certainly desired by Nike. There were sneakers maker, skateboards maker, dress shoemaker and athletic apparel maker in the list of acquisition.

2. How has Nikes Nike did not play solely in the industry for increasing profitability. There were some other strong players fighting for the same piece of cake. However, Nikes business model and strategy brought about a lot of change in the industry competition. In earlier years, Nike was serving track and basketball market segments in the athletic footwear and apparel industries. Later, it joined in some more segments through expanding its product lines in soccer, skareboards, dress shoes and athletic apparels. Nike also took over some companies in these segments just to make profit out of it. Change in the nature of industry competition Focused product development : One important thing is that Nike confronted lower sales in 1998 when its Air Jordans basketball shoes faced decreased sales and at that time it was hard for Nike to introduce new designs. It sent a signal to the market that customer demand primarily is based on design, not the aggresive marketing strategy. Because at that time, Nike had used a dramatic marketing campaign showing that its products were superior and

fashionabel. To add value to this product, celebrities were sponsored and promoted for the products at a huge expense. It initially worked out but later sales fell due to design shortage. After that Nike revised its business model aiming at some other segments and got back in the track.

Decreased competitiors by acquisition : Nikes unique business model affected the industry competition in such a way that it entered into different market segements in different times. As a result, competition intensified and market share had to be shared among the players. Whem it entered intor soccer market, it took away the biggest share of market from Adidas, a giant player in the industry. When it started taking over other companies, it sent a signal to the cmpetition that players are decreasing but a gigantic one is coming up with more strength and resources invested in the venture. The notable point is that industry was expanding in terms of customer base or revenue. However, competitors found it profitable to liquidate business and this competitiors decreased in exhange woth increased competition. Because Nikes competitive actions were much stronger. Increased marketing campaign : another thing is that Nike, besides entering different segments, improved product design and marketing tactic. With the increased competition, it was quite imposible for any player to stay in business without doing anything. Since the customer base Nike improved, it was mandatory for all including Nike to introduce and improve new products to attract customer. Huge expenditure in marketing campaign was also became an important tool. Because producing does not earn profit rather selling earn profit. So marketing campaign has got something to do with sales and profitability. All the competitiors realized that customer have to be reached whatever the level of uniqueness in product they possess. Growth / declining industry : The ultimate goal of Nike was to make profitability higher through increased market share. Its ROIC has soared form 14% in 2000 to 24% in 2006, and it made over $1 billion profit. Althrough it is enjoying huge profit, it still is looking for other possible acquistion. It is constantly finding ways to invest its capital in new products where it could continue its trend of profitability. This continuous invesment of Nike in athletic footwear and apparel indusry indicated that industry is better off and thus Nike can make such amount of profit. But the companies those were operating and at a certain point, sold out to Nike reflected risky future. As a result, competition could turn to unfair since some more competitors might be wiped out from industry. 3. The athletic footwear industry is a challenging and saturated market. Intense competition fashion trends, and price conscious consumers have slowed groth in this industry. Manufactures are combating sluggish sales with radical new styles, along with offering more styles at lower price points.

Emergence of new strategies: Dynamisnm: Nikes success story suggest that a companys business model cannot remain static. It show how managers of a succesful business model still need to continually formulate and implement new business-level strategies to sustain their firms competitive advantage as the industry environment changes.

Reaching the target market : Companies are looking for new ways to boost sales by capitalizing on direct internet sales to consumers. Many companiews are also increasing profitability by transferring production to cheaper offshore facilities. This segment has reached a point of maturity in the domestic market and can look forward to only modest sales growth for the long term. However, sales are improving slightly, especially in the areas of running shoes, cross-trainers and basketball shoes. Therefore, companies with strong brands will increasingly turn to international market for growth.

New means of marketing: The sport apparel companies are modifying thir business model because they feel they can get a bigger bang for buck by shifting spending away from traditional media and moving more money into social media. For athletes, they moght go to zero on athletes who can demonstrate a high ROI as measured by the number of Facebook fans and Twitter followers they have. For teams, Nike is concentrating on those that exhibit the most activation and engagement with the most number of core fans via social media.

Change in Focal Point : Nike has been competing in the industry in such a way that competitors realized that they have to create demand for product through marketing and advertising, our presence in sport and our relationshop with althletes (sports marketing). To be successful as like as Nike, The world of sport must be successfully promoted. To build their business, they have to fuel and respond to consumer interest around the world and continually appeal to changing demographic and new market in a deeply competitive indusry.

Superiority in these following areas is Nikes strength which might be readily followed by competitors, although they have these but of limited efficiency.

Patens & Branding One of the exclusive licenses that distinguishes Nike from the rest of its competitors is the patented Air technology that the company uses to sell footwear. Although some NIKE AIR patens have expired, Nike still holds a number of subsequesnt NIKE AIR patents, and patents that cover specific features in carious athletic and leisure shoes that will not expire for several years. In addition, the company places a significant emphasis on its Research and Development, Production and Marketing, and Design departements to maintain its competitive edge. Nike enjoys the popularity of its brand name, which is recognized all around the world. Beside the brand name, the company also has a trademark for the Shoosh Design logo that identifies NIKE Inc.

Differentiation Product differentiation is healthy in the footwear industry and allows the company to increase its profits through the sale of different products. Another advantage of manufacturing a number of product lines is the reduction of risk in that if one product fails there are nunerous other products to compensate for this loss. Companies in the apparel and footwear industry that concentrate on manufacturing a single product are at a great disadvantage since their revenues depend exclusively on the sales of only one type of product, therefore, increasing the potential default risk.