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Universidad de las Américas Puebla

International Marketing- LMK 3014/NI-390


DR. Marcella Ibañez Adams

October 2nd, 2018

Company research: NIKE


Team 10:
Joseline Krystel Milla Novelo 150359
Maximiliano Bengoa Moreno 150488
Jose Fernando Salas Belmonte 153823
Index
1. History

2. Revenues, profits, numbers

3. Subsidiaries

4. Value Chain Organization

5. Global marketing Strategy

6. Global Market Participation

7. Marketing Mix Development

8. Concentration of Marketing Activities, Coordination of Marketing Activities, Integration of Competitive


Moves

9. Management orientation

10. Type of market to which the product is direct; cultural, economic level, social factors

11. Factors that influence the brand

12. Marketing blunders


1. History

NIKE, Inc. engages in the design, development, marketing, and sale of sports and lifestyle
footwear, apparel, and equipment, accessories and services. Its athletic footwear products are
designed primarily for specific athletic use, although a large percentage of the products are worn
for casual or leisure purposes.

The company has contracted with more than 700 shops around the world and has offices
located in 45 countries outside the United States. Most of the factories are located in Asia,
including Indonesia, China, Taiwan, India, Thailand, Vietnam, Pakistan, Philippines, and Malaysia.
Nike is hesitant to disclose information about the contract companies it works with. However,
due to harsh criticism from some organizations like CorpWatch, Nike has disclosed information
about its contract factories in its Corporate Governance Report

Nike was founded in 1964 under the name of Blue Ribbon Sports and initially operated
as a distributor for the Japanese shoemaker Onitsuka Tiger. It officially became Nike Inc. in
1971 as a sportswear and equipment supplier based in the United States. The company was
founded with just $1,200 in the bank. It was created by Bill Bowerman — a track-and-field
coach — and Phil Knight, a middle-distance runner from Portland who was enrolled in the
University of Oregon.

The company's headquarters are located near Beaverton, Oregon. Nike is the world's
leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment.
In 2016, the company employed over 70 thousand people worldwide.

2. Revenues, profits, numbers

Nike reported a net income of $1.14 billion in the quarter ended May 31, 2018, reflecting an
increase of 12.80% from $1.01 billion in the corresponding period of last year. The Company's
diluted net income per share also advanced 15% to $0.69 in Q4 FY18 from $0.60 in Q4 of the
fiscal year 2017; primarily due to a strong revenue growth, a gross margin expansion, a lower tax
rate, and a lower average share count, which were partially offset by higher selling and
administrative expenses. This exceeded analysts' consensus estimates by $0.05 per share.

For the year ended May 31, 2018, Nike generated total revenues of $36.40 billion, up
5.96% from $34.35 billion in the same period of last year. The Company's gross profit increased
4.21% to $15.96 billion on a y-o-y basis in fiscal year 2018. Nike reported a net income of $1.93
billion in fiscal year 2018, representing a decrease of 54.41% from $4.24 billion in fiscal year 2017
. The Company's diluted earnings per share (EPS) also fell 53.39% to $1.17 in fiscal year 2018 from
$2.51 in fiscal year 2017.

3. Subsidiaries

The Company's portfolio brands include the NIKE Brand, Jordan Brand, Hurley and Converse.
Today they have a diversified and complex global organization:

 They sell their products in 170 countries.


 They have more than 30,000 worldwide employees.
 They have a dozen brands that serve more than 30 major sports and consumer
lifestyles.
 They work with 600+ factory partners.
 They serve millions of consumers with thousands of products.
Since 2005, more than 50 percent of their revenue has come from outside the U.S. With
leadership positions in established markets like the U.S. and Western Europe and in emerging
markets like China and Brazil, they believe that they have tremendous and unique opportunities
to grow

4. Value chain organization

As is well known, Nike has been able to position itself as one of the leaders in the footwear
industry worldwide, opening new gaps not only in this sector that dominates with strength, but
also in sports clothing and equipment. This, among multiples factors that are mentioned trough
this report, is due to the excellent management of its value chain, because as we know, the
correct management of a supply chain can be the key factor for the success of a company.

Nike has a fairly large department of purchases that is responsible for the logistics and
management of its supply chain to contact materials and suppliers that meet their requirements.
Although they used to have a very broad supply chain this has changed over the last years, the
brand has been oriented towards a more sustainable approach and since 2012 has tried to reduce
its environmental impact, this by reducing the number of its suppliers, Nike has tried to preserve
those who, just as they do, are concerned about complying with same the standards of quality
and social responsibility.

Currently, the company has grown so much, that there are 567 factories distributed
throughout the world in 42 countries that are dedicated to manufacturing from shoes to sports
devices for the firm, along these 567 factories can be felt the commitment of companies for
complying with the quality and sustainability that characterize Nike, the products that come from
these factories are sent to different markets through regional offices and distribution centers to
retail stores.

This company has understood how to use a regional strategic distribution chain to be able
to cover the demand by area, without running out of products or customers having to wait
several days to obtain the product . This is an example of how good chain management reduces
costs, times and errors.

Nike has its head office in Oregon, U.S., which in turn is the office with the largest number
of employees of the brand, therefore it is the largest office. In addition to this, Nike has offices in
Latin America, China, Europe, Africa and the Middle East. As can be inferred, Nike is present
almost everywhere with a strong brand recognition that generates value that only very few
companies enjoy.

STAGES OF THE VALUE CHAIN

Nike looks at its impacts across its full value chain, but what does that actually mean? Its value
chain is deep and complex; it involves many stages, from raw material extraction to products’
end of life. The infographic below shows an overview of those different stages of the value chain,
the main processes within those tiers, and the relative carbon and water impacts of the tiers.
INSIGHTS FROM THE VALUE CHAIN FOOTPRINTING

 The value chain includes nine tiers — that’s more than most other industries — and thus is a
challenge to address comprehensively, especially in the tiers where the company have less
control or influence.
 A major hotspot of impact is consumer use, due to the washing and drying apparel. The nike’s
research indicates that Nike’s influence over consumer washing and drying practices is very
limited, with care labels having less leverage over consumers than convenience, habit or other
factors tied to detergent and washing machine used. they have therefore decided to focus our
efforts on the other tiers of the value chain where they have better opportunities to mitigate
impacts.
 Another major hotspot of impact lies in materials, from extraction to material manufacturing
to material finishing. The Nike’s approach to sustainable materials covers how we tackle this
part of our footprint.
5. Global Marketing Strategy

In addition to the great quality that the brand handles and cares throughout its supply chain, Nike
is recognized by its marketing strategy so interesting and heavily invested, this brand has spent
a lot of money in the marketing and promotion of its products and brand itself, much of its focus
on advertising is concentrated in the best known celebrities of the sport in different disciplines,
from soccer, swimming, tennis among others. Its main vehicles of communication today are social
networks, better known and used by people, such as Facebook, Instagram, Twitter and Snapchat.

The firm makes large investments in video marketing, which is strongly appreciated by
sports fans and followers of the brand. Its main sales channels are divided into two: physical and
online media. It has its own stores online and factory, has websites and is currently using a lot of
independent distributors, licensees and sales representatives who are not only celebrities, but
people with a large number of followers on social networks known as "influencers", to which
they are given products in exchange for promotion through their channels.

Much of this success relies in the fact that, Nike has concentrated not only on selling a brand, but
an inspiration for people. Its main marketing focus is "emotional branding". In which companies
rarely mention the product itself and instead they focus on creating in the consumer a particular
emotion that makes them feel identified with the product. Each ad of Nike is designed to make
us believe that we are capable of everything if we “just do it”.

All the factors mentioned above, aligned with a strong support in the technology available to
create higher quality products and constant innovation in design, and ways to be present in the
current consumer world, make Nike a phenomena worthy of admiration.

6. Global Market Participation

Nike has more than 26% of global market participation in athletic footwear and in the US
they have 21% of the market share. The total number of Nike retails stores worldwide is
1,182.

The timeline shows Nike's estimated global market share in athletic footwear from
2011 to 2024. Between 2011 and 2024, Nike's global market share in sports and sports
inspired footwear is predicted to increase from about 17 percent in 2011 to 34.44 percent
in 2024.

7. Marketing Mix Development

The marketing mix of a company is composed of all the efforts and activities to execute the
marketing plan successfully and is based on four very important points known as the 4P’s:
products, place, promotion and prices.

 Product mix: In this segment, all the products that are offered to the target market of the
company are accounted and categorized, by the study of the evolution of this element,
the growth of the company can be measured, because here is where the study of the
evolution, development and expansion of the different product lines in which the
company is engaged is carried out, currently Nike has the following product lines:
a. Footwear- Most important product line of the firm.
b. Sportswear
c. Sports equipment and accessories

 Place/Distribution mix: In this part of the marketing mix, is where all the places where the
products are sold, distributed and can be accessed by the customers are listed, in the case
of Nike, the number of stores and distribution points are quite high as it is a brand with a
global presence. Currently this company has the following distribution channels:

o Retail stores- Most important distribution channel of the firm


o Online stores
o Retail Outlets (Company owned)

 Promotional mix: This element is also known as the communications mix, and includes all
the means of communication that a company uses to interact with its target customers,
as we have mentioned before, the company invests a lot in this area, because it is the way
in which it reaches its consumers and generates value creation as well as the purchase of
products. Among the main media, Nike makes use of the following:
a. Advertising- Most important vehicle of promotion
b. Personal selling
c. Direct marketing
d. Sales promotions
e. Public relations

 Pricing mix: This element identifies the ideal prices that the company can implement to
maximize profits while attracting the desired portion of market share. Nike has the best
specialists to determine these variants with strategy, however, the company, like many
others, considers the current market conditions to establish a fair price range. Nike uses
these two strategies to set their prices:
o Value-based pricing strategy- Most important pricing ranging
o Premium pricing strategy
In using the value-based pricing strategy, Nike Inc. considers consumer perception about the
value of its products. In the context of the marketing mix, this value is used to determine the
maximum prices that consumers are willing to pay for the company’s sports shoes, apparel, and
equipment. In relation, the premium pricing strategy involves high prices, based on a premium
branding strategy that establishes Nike products as higher in quality and value than competing
products.

8. Concentration of Marketing Activities, Coordination of Marketing Activities, Integration of


Competitive Moves

Nike develops its marketing activities based on the market knowledge it has, which it has
known throughout its history. Among these activities are their plans for constant innovation
in their products, the branding that is a fundamental part of Nike’s strategies.

The brand is recognized in the market for its popular slogan which is “Just do it”, that
makes the consumer feel motivated to want a Nike product, because it handles
empowerment. Its main competitive movements are the reduction of the costs, which would
help people of different economic level could have the products of the brand, another
strategic movement is the market study which deals with what is current and what is
fashionable or the people requirements.

9. Management orientation

Nike recognizes the cultural differences of all the regions in which it is present, and is so focused
on satisfying the particular style of its clients that it has adopted a regiocentric type of
administration, in which it takes a group of regions and analyzes their common characteristics to
create its products, analyse the regional characteristics and take desitions according to these.
Nike also segments its operations on entire regions rather than specific countries. In this way it
manages to be sensitive to "local" trends without neglecting its principles that characterize it as
a brand and not incur costs that are too high due to the high personalization.
10. Type of market to which the product is direct; cultural, economic level, social factors.

Nike has a varied market, but the market is defined in two types for sports clients and for leisure
people, this second one is more focused on what is fashionable. The brand is used by both men
and women of all ages for both walking and sports, but the brand’s products are more suited to
a market of customers between 16 and 34 years, which are products of daily use.

Also, Nike sells a style of life that is very fashionable, a culture of sports, as it is reflected
in its philosophy “Just do it”. The brand has known how to manage its image so that the client
persuades it related to the sport and motivates them to do it, of any age and of any economic
level.

11. Factors that influence the brand

The main influence on the Nike brand is sport, and it is the first key factor in its entire trajectory
and its concept as a successful brand. Currently, Nike is considered an influencer brand due to it
is popularity with consumers and its way of promoting the brand through athletes and celebrities.

The brand is influenced by what is fashionable nowadays and innovate its products and
compete with its great rivals such as addidas and puma. All according to the client’s inclinations
about the product.

12. marketing blunders

Nike has managed to preserve its image of excellent quality of its products in the market, it is
recognized by consumers of all social classes and has always been able to keep its customers
happy. In recent years Nike has been criticized for its marketing campaigns for not being
attractive enough as in other years. However, Nike can’t leave aside the comparisons with its
rivals in the market, which are in the same industry and serve the same consumers.