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Topic Page Number

1.0 Origin of the Report 1

2.0 Introduction 3

3.0 Nike’s brand image and sources of brand equity 8

4.0 Nike’s Global Strategies and Environmental Practices 9

5.0 Nike’s celebrity endorsements and Sponsorship 11

6.0 Critics of globalization 14

7.0 Nike’s Mergers 19

8.0 Nike’s “Fashion” 20


9.0 Nike’s Competitors 21
10.0 Recommendations 26
Appendix 27-30

1.0 Origin of the Report

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Brand
A brand is the identity of a specific product, service, or business. A brand can take many
forms, including a name, sign, symbol, color combination or slogan. The word brand
began simply as a way to tell one person's cattle from another by means of a hot iron
stamp. A legally protected brand name is called a trademark. The word brand has
continued to evolve to encompass identity - it affects the personality of a product,
company or service.

Global brand

A global brand is one which is perceived to reflect the same set of values around the
world. Global brands transcend their origins and create strong enduring relationships with
consumers across countries and cultures. They are brands sold in international markets.
Examples of global brands include Nike, Coca-Cola, McDonald's, Marlboro, Levi's,
Shell, etc. These brands are used to sell the same product across multiple markets and
could be considered successful to the extent that the associated products are easily
recognizable by the diverse set of consumers.

Benefits of global branding

In addition to taking advantage of the outstanding growth opportunities, the following


drives the increasing interest in taking brands global:

• Economies of scale (production and distribution)


• Lower marketing costs
• Laying the groundwork for future extensions worldwide
• Maintaining consistent brand imagery
• Quicker identification and integration of innovations (discovered worldwide)
• Preempting international competitors from entering domestic markets or locking
you out of other geographic markets
• Increasing international media reach (especially with the explosion of the
Internet) is an enabler
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• Increases in international business and tourism are also enablers

Brand Equity
Is the added value endowed to products and services? This value may be reflected in how
consumers think, feel and act with respect to the brand, as well as the prices, market
share, and profitability that the brand commands for the firm. Brand equity is an
important intangible asset that has psychological and financial value to the firm.
Sources of brand equity
Customer based brand equity occurs when the consumer has a high level of awareness
and familiarity with brand and holds some strong, favorable, and unique brand
association in memory.
Brand elements
Are those trademarkable devices that serve to identify and differentiate the brand? Most
strong brands employ multiple brand elements. Nike has the distinctive “swoosh” logo,
the empowering “Just Do It” slogan, and the mythological “Nike” name. Brand elements
can be chosen to build as much brand equity as possible.

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BUILDING A GLOBAL BRAND

2.0 Introduction
The Nike Sporting Company is a massive, multi-billion dollar corporation. The Nike
Company has factories and outlets all over the world, starting with a new generation of
sport shoes, Nike have increasingly to change. Since the mid 1990's to present date; Nike
has begun the production of other products such as watches, clothing, bags, golfing gear
and even parting with other companies (Phillips) to produce new Nike electronic
products. Nike has expanded incredibly over the past 10 years including acquiring All
Star Converse, one of their biggest past rival companies.

Nike has been a leader of sports wear and designs for four decades, sponsoring athletes
like American record-holder Steve Prefontaine, who becomes the first major track athlete
to wear Nike shoes. The corporation was founded by Phil Knight and Bill Bowerman in
1971 and has expanded rapidly ever since, with a revenue of $13.7 billion. However,
Nike was caught up in a law case in 1998 where they were sued for the use of Sweat
shops with underage / under wage employees, Phil Knight formally commits Nike to
strict standards for manufacturing facilities used by Nike, including: minimum age; air
quality; mandatory education programs; expansion of microloan program; factory
monitoring; and enhanced transparency of Nike's corporate social responsibility practices.

Vision Statement
“To bring inspiration and innovation to every athlete* in the world”
(* “If you have a body, you are an athlete” Bill Bowerman, co-founder)
Decisions
• Primary: Focus on finding the most promising customers (kids and women)
and introduce more products or improve current ones to satisfy potential
increase in demand

• Alternative:

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– Keep expanding into current and future foreign markets by being
aggressive and the worldwide leader of the footwear industry

– Accelerate funding for numerous marketing campaigns in order to get


to specific markets or customer groups

– Focus on improving working conditions and human rights at


international manufacturer centers and at the same time increasing
their productivity

– Implement product diversification with company’s newest technologies


so resulting increased earnings could be reinvested into R&D plans.

Core Competencies
Core competencies are capabilities that serve as a source of competitive advantage for a
firm over its rivals. Core competencies emerge over time through an organizational
process of learning how to position different resources and capabilities to a company’s
advantage. Nike’s core competencies exist in their effective marketing strategies and their
innovative product design. These two elements provide much value and benefits to
Nike’s consumers, are not easy for competitions to imitate, and can be leveraged widely
to most of their products and markets.
Although Nike does not manufacture any of its own shoes, the company is still today’s
leader in selling athletic shoes and apparel. Nike's marketing strategy is an important
component of the company's success. Nike is positioned as a premium-brand, selling
well-designed and expensive products. Nike lures customers with a marketing strategy

centering on their brand image: a distinctive logo (the swoosh ) and the

advertising slogan "Just do it". Nike promotes its products by sponsorship agreements
with celebrity athletes, professional teams and college athletic teams, creative
advertisements, and professional athlete endorsements.

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By focusing on their core competencies, Nike has remained the world's leading supplier
of athletic shoes and apparel and a major manufacturer of sports equipment with revenue
in excess of $18.6 billion in 2008.

SWOT Analysis
Strengths
A main strength of Nike is the incredible brand awareness. The “swoosh” is the symbol
of Nike and says Nike in all languages. Nike is the #1 shoemaker in the world and largest
marketer of athletic footwear holding a 39% market share globally.

Nike has over 22,000 retail stores in 160 countries. In addition to its wide range of core
athletic shoes and apparel marketed under the flagship Nike brand, the company also sells
footwear under the Converse, Chuck Taylor, All Star, and Jack Purcell brands through
wholly owned subsidiary Converse Inc. and sells under the brands Starter, Shaq, and
Asphalt in the discount retailer channel through another subsidiary, Exeter Brands Group
LLC. The firm also sells Nike and Bauer brand athletic equipment; Hurley surfing,
skateboarding, and snowboarding apparel and footwear; and Cole Haan brand dress and
casual footwear.

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Nike predicts 2009 revenue to be up by 17% to $5.4 billion, which means Nike, would
have 28 consecutive quarters of year over year growth. One of the reasons for this
success is that Nike has contracts and is attached with literally every important sports
icon in the world. Just this last year the Nike brand was featured in the top basketball,
golf, and tennis stages in the world. Not to mention the impact the Beijing games had on
the Nike brand. All the Chinese stores set records for sales. 8 out of 10 players on both
the men and women’s basketball teams wore Nike shoes. In major global sports, soccer
and basketball, Nike leads in both.

Weakness
The Nike organization prides itself on innovation. They are constantly updating and
inventing new products for the market. However, even though this strategy works it may
be risky putting all your “eggs in one basket.” The real question is what strategy does
Nike have when the consumer doesn’t care about innovation? This is not major weakness
of the company, but it should be taken into consideration when analyzing.
The retail sector Nike sells to is very price sensitive. Nike does have its own retailer in
Nike Town and the outlet stores. However, most of its income is derived from selling into
retailers. Retailers tend to offer a very similar experience to the consumer and it is
difficult to tell how one retailer is different from the other. The result is that margins tend

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to get squeezed as retailers try to pass some of the low price competition pressure onto
Nike.
Opportunity
The opportunity of Nike grows with every sports star that rises using the brand and every
family that grows financially and capable of buying their products. The major
opportunity in this day is China and its massive economic growth rate. Being the global
company it is Nike has noticed, and revenues in China have increased 50%. Not only
China, but Russia and Brazil grew 40% and 30% over the last year.
In the new era of knowing your carbon footprint Nike has the opportunity to show that
even though they are a billion dollar organization, they do care about the environment.
There is the opportunity for Nike to produce athletic wear from manufacturing waste and
extend eco-friendly projects like the ‘Reuse-A-Shoe Program’ aimed at further recycling.

Threats
Nike faces an interesting time with the meltdown of the US economy and possible world
recession. Recession proof comes to my mind, because numbers for Nike haven’t
declined. It appears that consumers will buy their Nike shoes no matter what the financial
situation is. However, it is still a major threat. It is too big to ignore, not only for Nike,
but for any company selling retail products. Even with the large market share Nike has,
competition is always a threat. Fila, Addidas, and New Balance are still around and are
the major competitors to Nike and their customers. A final threat Nike faces is the issue
of Nike’s questionable labor conditions/issues/practices. Do they or do they not employ
small children and pay them pennies per hour? The question remains and Nike will argue
that they are doing everything within their “guidelines” but cases like these can severely
tarnish or break a company. In the past these issues haven’t seemed to bother too many
people, but Nike should be aware of this issue (and I’m sure they are) as it could come
back at anytime. In fact, if you Google the word ‘Nike’ the final webpage on the front
page of Google is a website to boycott Nike. I will argue Nike can consider this to be a
threat.

3.0 Nike’s brand image and sources of brand equity


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Nike image is that of power, dedication, hard work, and the desire to succeed. Nike has
been able to become a symbol of this simply by the displaying the spokesperson or
endorsers doing what they do best. Nike not only always has its athletes wearing all top
Nike gear but also has them sweating, working hard, or reflecting on past events. Nikes
customers are attracted to the footwear or apparel shown in the ads because they often are
made to point out the changes and improvements needed to improve ones game. Nike
products are being purchased by all types of consumers especially by young people who
admire.
The main source of Nike’s brand equity is the professional athletes and players of
international sports. Nike has always chosen upcoming stars as its brand ambassador.
Nike is a brand that usually signs top athletes of every sport from across the world to
lucrative deals so that the athletes can wear and represent Nike to its fullest. Nike,
unlike its competitors, wants to be seen more as a symbol of strength, dedication, hard
work, sweat, perseverance and the desire to succeed. Superb athletes and role models
have extreme power over teenagers and often influence them into purchasing products
not otherwise thought of. Nike has been able to sign numerous top notch athletes while
other companies just simply can¡¦t or haven¡¦t been able to. Instead of just selling
products like its competitors Nike is selling a feeling; an emotion.
Nike is –
 An aggressive and performance oriented brand.

 Has always given priority to performance and durability along with fashion.

 Uses various slogans in its advertising and marketing campaigns.

 Always provides higher quality with high price.

 The upper class has always been the major source of its sales.

4.0 Nike’s Global Strategies and Environmental Practices


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Nike is moving forward strong in the global market. They are prepared to be the leader in
soccer shoes and apparel by the next World Cup Championship in 2010 and they are
making deals and pushes that really demonstrate their competitive edge. Nike Inc.
managers said they will add 100 new company stores worldwide over the next three years
as part of a plan to reach $23 billion in sales by 2011 for the world's largest athletic shoe
and clothing manufacturer. This is not only a push to go more global but also part of their
current global strategy to make it more possible to customize and individualize Nike.
Their newest strategy is putting emphasis on individuality and appealing to each sport
and athlete in a way they have never done before. The current breakdown will be into 6
broad categories that will help define their biggest markets: soccer, basketball, running,
men's training, women's fitness, and sports culture. This change in both their structural
organization as well as opening of stores will be a big move. There is potential here for
growth but also the pros and cons need to be evaluated in order to better understand why
they are doing this. Although expansion is always seen as good, how could this possibly
be compromising to Nike themselves? Opening so many more stores could make it so
that Nike is competing with Nike. However, with the broadening of their 6 categories and
the awareness being arisen in many new countries this could actually be a great potential
for Nike and their brand. Getting their name out there, particularly to countries where
there is such a large population allows for Nike to make this extreme increase in stores
since
Its European marketing team attacked a single sport at a time to develop the brand in
Europe. The company contacted former athletes and partnered local athletic footwear and
apparel distributors for selling their products. The control of advertisement and
distribution in the European market lied with the distributors. Separate promotional
campaigns were conducted in different countries in Europe.
Not only is Nike always evaluating and re working their marketing strategy at home as
well as internationally, they are also pendent on where their next biggest potential will be.
As most in the business world know, Brazil, Russia, India and China BRIC are the
biggest emerging countries with potential for huge growth due to their up and coming
populations and markets. Taking these geographical aspects into consideration Nike has
determined Russia, India and China to be its main focuses due to high growth rates and
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the fact that they have determined China to be their future number two investor for
products.
Environmentally Nike is taking the right steps to prove their commitment to doing better
by the world and making their company more sustainable. Nike did not just recently get
on the “green” bandwagon of 2008 but has been working towards renovating and
innovating their products and lowering their pollution for many years. “This is what
we’ve been up to at Nike: challenging our assumptions, evolving our perspective,
building a new approach, considering how we can harness the power of our business to
influence social and environmental change and the power of that change to help our
business grow” Even though Nike received a bad rap for an incident in the 1990s and
most pair Nike with the word sweat shops, Nike is making distinctions and changes to
become a more global friendly and worldwide supported in all aspects. The fact that
looking at Nikes online website you can find information on their global footprint and
social impacts reflects that this company is dedicated to movement towards building
responsibility as a global company. “Understanding Nike’s global footprint and
prioritizing areas where we have the greatest environmental and social impact is essential
for building a robust business case for corporate responsibility and prioritizing our
efforts.”
Diversity and Inclusion
Due to the magnitude of Nike and their number of stores and manufacturing plants
throughout the world, they have taken the time to recognize the importance of each
individual and what they can contribute to the team. For this reason, Nike does not call its
employees, employees, yet, team members because each part of the team has something
to add to the business. They have also admitted that they have a very large array of
workers and this brings many diverse cultures and points of views together. “At Nike,
Diversity and Inclusion is what drives creativity and innovation. It takes every one of our
over 30,000 employees working at the top of their game for Nike to reach its highest
potential. And we know that outstanding teams are composed of diverse people,
backgrounds and skill sets.” This is a crucial factor in Nike’s diplomacy in their many
locations and globally. In identifying these differences they have set apart the
opportunities to better understand how their teams will work together and what adversity
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they may face because of this. In order to strive to reach this mission they have put into
action these strategies:
• Cultivate diversity and inclusion to develop world-class, high-performing teams
• Ignite change and inspire critical conversations around diversity, inclusion and
innovation
• Create venues and environments for open dialogue, diverse opinions and a
multitude of perspectives
All of which will in future venture apply and assist them in working more efficiently
and having more satisfied employees for longer periods of time.

5.0 Nike’s celebrity endorsements and Sponsorship

Even though to an observer it may seem that Nike’s success is totally based on Tiger
Wood’s association with the brand, nothing can be far from the truth. As a brand, Nike
has established a very strong brand identity and a brand personality over the years. What
Nike did was to use celebrity endorsement as one of the main channels of communicating
its brand to a highly focused set of customers. So, Nike’s association with Tiger Woods
was one of the parts of an entire branding process that Nike has been practicing
consistently. Contrary to this, most of the brands in Asia that have used celebrity
endorsements have used it as the main brand building tool. Before any brand signs on a
celebrity, they should consider three main aspects.

• Attractiveness of the celebrity: This principle states that an attractive endorser


will have a positive impact on the endorsement. The endorser should be attractive
to the target audience in certain aspects like physical appearance, intellectual
capabilities, athletic competence, and lifestyle. It has been proved that an endorser
that appears attractive as defined above has a grater chance of enhancing the
memory of the brand that he/she endorses.
• Credibility of the celebrity: This principle states that for any brand-celebrity
collaboration to be successful, the personal credibility of the celebrity is crucial.
Credibility is defined here as the celebrities’ perceived expertise and
trustworthiness. As celebrity endorsements act as an external cue that enable

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consumers to sift through the tremendous brand clutter in the market, the
credibility factor of the celebrity greatly influences the acceptance with
consumers.
• Meaning transfer between the celebrity and the brand: This principle states
that the success of the brand-celebrity collaboration heavily depends on the
compatibility between the brand and the celebrity in terms of identity, personality,
positioning in the market vis-à-vis competitors, and lifestyle. When a brand signs
on a celebrity, these are some of the compatibility factors that have to exist for the
brand to leverage the maximum from that collaboration.

Even though these three major principles must be adhered to by companies, practically it
might be difficult to find celebrities that satisfy all these three conditions. Depending on
the nature of the brand and the kind of product being used, companies can selectively
emphasize one factor over the other.
Endorsement is a channel of brand communication in which a celebrity acts as the
brand’s spokesperson and certifies the brand’s claim and position by extending his/her
personality, popularity, stature in the society or expertise in the field to the brand. In a
market with a very high proliferation of local, regional and international brands, celebrity
endorsement was thought to provide a distinct differentiation. But over the years, many
aspiring brands in Asia have jumped on to this celebrity endorsement bandwagon. Even
though endorsements have taken on a quasi-industry stature, there is hardly any hugely
successful collaboration as those of Nike’s.
With the gradual economic recovery in the Asia Pacific region, we can capitalize on
customers who are financially stronger. Sponsorship of the 2000 Olympic Games in
Sydney, Australia and the 2002 World Cup in Japan and Korea will be the start of many
opportunities to bring sports events into the mainstream for regional and global markets.
Some examples are our sponsorship of the 1999 Women's World Cup Soccer
Tournament and our sponsorship of the U.S. Speed skating team in the 2002 Winter
Olympics. The company has a few unique sponsorship deals with the Indian national
cricket team, the national soccer teams in Brazil and Portugal and soccer teams like
Manchester United.

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Nike becoming an official sponsor for the Olympics will have positive influence on the
consumers. Not only it will enhance Nikes brand image among the consumers, but the
brand awareness and brand equity will reach new heights. It will establish Nike as one of
the leading sportswear companies in the world.

Nike is also very well known for another aspect and that is its consistent use of celebrities
to endorse the brand. In fact one of the most successful collaborations between a brand
and a celebrity is that of Nike and Michael Jordan. So successful was the collaboration
that Nike and Jordan launched a new brand variant called the Air Jordan line of sport
shoes. Nike pulled off a very similar coup in the sports industry when it joined forces
with the ace golfer Tiger Woods to enter the golf category with its apparel, equipment
and accessories. Nike had no experience in golf before. Moreover, golf being a very elite
game, it was generally considered that a brand like Nike would not be very successful.
This might have probably been true had Nike chosen the traditional path to building its
equity in the golfing arena. But Nike chose to associate with the best golfer in the world
and have him endorse the brand. As is known today, Nike has emerged highly successful
in golf.

Why Nike Uses Endorsements & Sponsorships

One key tool Nike has used to drive its popularity growth is the use of celebrity endorsers
and well-placed sponsorships. Nike depends seriously on its endorsements and
sponsorships to market it-self. In accordance with Reuters, Adidas has the next major
budget for sponsorships among sports gear companies, yet spends about 25 percent less
on it than Nike does. A Reuters report estimated Nike spent $260 million on sponsorships
in 2008. Its 2009 number was in that ballpark, though the company did trim its budget
slightly.

Risks

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There is a risk while companies like Nike attach themselves to celebrities. While one of
its players creates a mistake either on the field or off, the company’s repute can take a hit
too. The issue came up in 2009 while Woods was involved in a significant personal
scandal. Other sponsors dropped the golfer but Nike chose to keep sponsor him.

6.0 Critics of globalization

Nike has been criticized for contracting with factories in countries such as China,
Vietnam, Indonesia and Mexico. Vietnam Labour Watch, an activist group, has
documented that factories contracted by Nike have violated minimum wage and overtime
laws in Vietnam as late as 1996, although Nike claims that this practice has been halted.
The company has been subject to much critical coverage of the often poor working
conditions and exploitation of cheap overseas labor employed in the free trade zones
where their goods are typically manufactured. Sources of this criticism include Naomi
Klein's book No Logo and Michael Moore's documentaries. Nike has been criticized
about ads which referred to empowering women in the U.S. while engaging in practices
in East Asian factories which some felt disempowered women. During the 1990s, Nike
faced criticism for use of child labor in Cambodia and Pakistan in factories it contracted
to manufacture soccer balls. Although Nike took action to curb or at least reduce the
practice of child labor, they continue to contract their production to companies that
operate in areas where inadequate regulation and monitoring make it hard to ensure that
child labor is not being used. In 2001 a BBC documentary uncovered occurrences of
child labor and poor working conditions in a Cambodian factory used by Nike. In the
documentary, six girls were focused on, all of whom worked seven days a week, often 16
hours a day. Campaigns have been taken up by many colleges and universities, especially
anti-globalization groups as well as several anti-sweatshop groups such as the United
Students Against Sweatshops. Despite these campaigns, however, Nike's annual revenues
have increased from US$6.4 billion in 1996 to nearly US$17 billion in 2007, according to
the company's annual reports. A July 2008 investigation by Australian Channel 7 News
found a large number of cases involving forced labor in one of the biggest Nike apparel
factories. The factory located in Malaysia was filmed by an undercover crew who found

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instances of squalid living conditions and forced labor. Nike has since stated that they
will take corrective action to ensure the continued abuse does not occur.

Nike also caused controversy during the 2008 Olympics in Beijing, China, when their
sponsored Chinese athlete, Liu Xiang, withdrew from the Olympic 110 metre hurdles,
leaving the track after a false start by another competitor. Lui claimed that he withdrew
due an ankle injury. However, an anonymous message was posted on the internet,
purportedly from a source close to Nike, claiming that the corporation had forced Liu to
withdraw as he was unlikely to win, thereby tarnishing their image. Nike responded by
announcing that "we have immediately asked relevant [Chinese] government departments
to investigate those that started the rumour".
Low Wages in Indonesia
Nike managers sought to ignore and/or deflect these criticisms, arguing that the
Indonesian factories were owned and operated by independent contractors, not by Nike.
Nike’s Vice President for Asia at the time claimed that Nike did not “know the first thing
about manufacturing. We are marketers and designers.” The company’s general manager
in Jakarta argued, “They are our subcontractors. It’s not within our scope to investigate.
But by the mid-1990s, Nike instructed its Indonesian contractors to stop applying for
exemptions to the legal minimum wage. Workers were forced to work 65 hours a week
and improperly compensated for overtime.
In April 1999, after the Indonesia government raised minimum wages to 231,000
rupiah/month (US$26), Nike announced that it would raise wages for workers employed
by its suppliers above the legal minimum wage, from between US$30-37.50 per month.
Child Labor in Pakistan
In June 1996, Life magazine published an article on child labor in Pakistan, which
included a photo of a 12 year old boy stitching a Nike soccer ball. This article and its
accompanying photo unleashed another wave of criticism against Nike and a call by
various consumer groups, trade unions, and NGOs to boycott Sialkot-produced soccer
balls. According to Maria Eitel, Vice President and Senior Advisor for Corporate
Responsibility at Nike, this represented a “critical event” for the company in terms of its

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understanding of globalization, international labor standards, and corporate
responsibility.

Today, Nike sources soccer balls only from Saga’s 12 stitching centers. Nike insists that
any of its contractors caught employing child workers must remove the child from the
factory, continue to pay the child’s wages, and pay for the child’s school fees until he/she
reaches legal working
age.
Health and Safety Problems in Vietnam
The report also claimed that chemical releases in the plant had caused numerous cases of
skin and heart diseases, and those respiratory ailments, due to excess dust, were rampant
in other areas of the factory. According to the report, personal protective equipment was
not provided at the factory and working conditions and work hours at the plant were in
violation of Nike’s code of conduct. News of this report, which appeared in the New
York Times and other leading
newspapers, ignited another wave of indignation over Nike’s relations with its suppliers.
Increasingly, labor and environmental problems at Nike’s suppliers’ factories were
becoming a major problem for Nike itself. These events made Nike a target for the anti-
globalization and
anti-sweatshop movements.

Nike’s Response: Learning to Become a Global Corporate Citizen

Nike managers refused to accept any responsibility for the various labor and
environmental/health problems found at their suppliers’ plants. Workers at these factories
were not Nike employees, and thus Nike had no responsibility towards them. By 1992,
this hands-off approach changed as Nike formulated a Code of Conduct for its suppliers
that required them to observe some basic labor and environmental/health standards.
Potential suppliers for Nike were obligated to sign this Code of Conduct and post it
within their factories. Critics have charged that Nike’s Code of Conduct is minimalist and
not fully enforced, claiming that posting the Code in
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factories where most employees are functionally illiterate and/or do not possess the
power to insist on its implementation is simply window dressing. Nonetheless, the
evolution of this document indicates that Nike is seeking to address several of the most
serious problems found in its suppliers’ plants. Nike has increased the minimum age of
footwear factory workers to 18 and all other workers (in apparel, equipment) to 16. It has
also insisted that all footwear suppliers adopt US Occupational Safety and Health
Administration (OSHA) standards for indoor air quality. In fact, a quick review of some
of Nike’s recent efforts in the area of labor and environmental/health standards shows
that the company is serious about doing the right thing.

New Staff and Training


In response to the growing criticisms, Nike created several new departments (e.g., Labor
Practices (1996), Nike Environmental Action Team (NEAT) (1993)) which, by June
2000, were organized under the Corporate Responsibility and Compliance Department.
Last year, in an effort to strengthen the links between production and compliance
decisions, the compliance department was moved into the apparel division. Today, Nike
has 85 people specifically dedicated to labor and environmental compliance, all located
in countries where Nike products are manufactured. These employees visit suppliers’
footwear factories on a daily basis. In apparel, given the much larger numbers of
suppliers, Nike managers conduct on-site inspections on a weekly or monthly basis,
depending upon the size of the firm. In addition to its corporate responsibility and
compliance managers, Nike has about 1000 production specialists working at/with its
various global suppliers. All Nike personnel responsible for either production or
compliance receive training in Nike’s Code of Conduct, Labor Practices, Cross Cultural
Awareness, and in the company’s Safety, Health, Attitudes of Management, People
Investment and Environment (SHAPE) program. The company is also developing a new
incentive system to evaluate and reward its managers for improvements in labor and
environmental standards among its supplier base.

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Increased Monitoring of Its Suppliers
Nike has pushed its suppliers to obey standards through increased monitoring and
inspection efforts. The company is currently developing a grading system for all of its
suppliers, which it will use to determine future orders and thus create a strong incentive
among its suppliers to improve working conditions.

Relations with International and Non-Profit Organizations


Nike has been active in founding and/or supporting an array of different international and
non-profit organizations, all aimed at improving standards for workers in various
developing countries. For example, Nike is actively involved in the United Nations
Global Compact.

Nike’s goal to be a responsible citizen of the corporate world, Nike has committed to
goals to better the problems as part of the aforementioned labor initiative:

o Increasing the minimum age of footwear factory workers to 18, and


minimum age for all other light-manufacturing workers (apparel,
accessories, equipment) to 16;
o Expanding education programs, including junior and high school
equivalency courses, for workers in all Nike footwear factories;
o Increasing support of its current micro-enterprise loan program to 1,000
families each in Vietnam, Indonesia, Pakistan, and Thailand.
o Comprehensive changes in its corporate labor policy.
o New ventilation systems have been installed
o 60-hour work week has been enforced.
o Has assured an average salary well above national salary average.
o Announced the implementation of new global labor standers.
o Created a corporate responsibility division.
o Become a charter member of the fair labor association.

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While establishing these policies is a step in the right direction for Nike, the difficult task
at hand will be the implementation of the aforementioned goals of the new labor initiative
to ensure the success of the program.

7.0 Nike’s Mergers

• Cole Haan, based in Maine, sells dress and casual footwear and accessories for
men and women under the brand names of Cole Haan, g Series, and Bragano.

• Nike Bauer Hockey, based in New Hampshire, manufactures and distributes


hockey ice skates, apparel and equipment, as well as equipment for in-line
skating, and street and roller hockey.

• Hurley International, based in California, designs and distributes a line of action


sports apparel for surfing, skateboarding and snowboarding, and youth lifestyle
apparel and footwear.

• Converse, based in Massachusetts, designs and distributes athletic and casual


footwear, apparel, and accessories.

Nike’s Alliances
• 2003 àNike Grind

• 2006 à Nike + iPod

• 2006 à Center of Excellence

• 2008 à House of Hoops

• 2009 à BICEP

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These acquisitions make sense for Nike because it had many goals behind these
acquisitions.
They were searching for –
• Brand diversity
• Ways providing additional avenues for growth
• Segmenting this business by customer
• Opportunity to address the low end through distribution at retailers.
Nike should try to acquire the Chinese brand ‘Li-Ning’ next if it is possible.

8.0 Nike’s “Fashion”

With added exposure, we are challenged to respond to a market demand for fashionable
athletic footwear and apparel. In this quest, we will succeed if we keep quality and
performance at the core of our business. One of the largest and best-known sellers of
sportswear in the world, Nike began as a maker of athletic shoes, and then branched out
into shoes and clothes for athletes and those who wanted to dress like athletes. However,
since the late 1970s fitness has been in fashion, and it is almost as fashionable to dress
like an athlete as it is to be one.
Nike took advantage of this trend with a series of clever, innovative ads for their
products. Nike advertisements did not focus on their products; in many ads the products
were not pictured. Instead, they showed the attitude and lifestyle of the athlete,
overcoming obstacles, trying hard to win. Slogans like "Just Do It" drew in customers
who might not be athletic but wanted to be strong, attractive, and successful like the Nike
athletes. Nike also chose a rebellious image for many of its products, which also appealed
to young professionals of the late 1970s and early 1980s. Nike spokespeople have often
been energetic athletes with big personalities, such as basketball's Michael Jordan
(1963–), tennis's John McEnroe (1959–), and figure skating's Tonya Harding (1970–). In
1979 Nike began to market athletic clothing as well as shoes. Along with outfitting
hundreds of teams worldwide, the Nike swoosh was now seen on the street clothes of

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millions of individuals. Nike continued to work with fashion designers and bought
innovative shoe design companies such as Cole-Haan Shoes, in order to keep its clothing
and shoes on the cutting edge of style. In the mid-1990s Nike opened Nike Town, a new
kind of superstore. Filled with special features such as basketball courts, video theaters,
aquariums, and sound effects of sports events and cheering crowds, Nike Town was
designed to make the customer feel a part of an exciting athletic lifestyle. By 2003 there
were thirteen Nike Towns in major cities around the world, and in 2001 the company
opened the first Nike Goddess store to sell fashionable sportswear for women only.
Fashion is more important for Nike along with performance when they enter a new
market like China because some analyst believe that the new middle class in China has
began to follow western culture and has brought several aspects of American culture to
its marketing efforts in china.

9.0 Nike’s Competitors

Reebok

Reebok, in terms of their products, is not entirely different from Nike. Reebok is involved
in the design and marketing of both athletic and non-athletic footwear and apparel, as
well as other various fitness projects. Reebok’s market share is a distant third in the
footwear industry at 11.2% (compared to 30.4% and 15.5% for Nike and Adidas
respectively). Reebok’s financial position has been gradually slipping for a number of
years. This is evident in their declining stock price, which has fallen by over 80 percent in
the last four years. Reebok’s financial woes are illustrated in their declining net sales.
Reebok’s net sales declined 9% during the first three-quarters of fiscal year 1999. During
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that same period, net income declined 17%. Taking these and other factors into account
leaves Reebok’s current financial position, as a whole, looking bleak.
Adidas
Besides the difficulties with its marketing intermediaries, Nike faced formidable
competition in Europe. Adidas, the German shoe company, dominated the European
sports market. Together with Puma, a spin-off of Adidas, the two companies controlled
over 75% of Europe’s athletic shoe and apparel market. For decades, the two companies
had developed the grassroots allegiance of local sports teams; in particular, soccer, track
and field, tennis, and rugby. They both had endorsements contracts with top European
athletes in each of these sports and sponsored many local teams in cities and towns across
Europe. Adidas, in particular, was respected for the quality of its shoes and had earned
the reputation as the European performance brand

Nike can protect their market share among female consumers within the industry by
targeting some of our promotions to female consumers. Nike’s sponsorship of the 1999
Women’s World Cup Soccer Tournament was a great example of how Nike is appealing
to female athletes.

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• Nike accounts for 36% of the U.S. market for athletic footwear
• Key competitor: Adidas-Reebok
• U.S. market share of 8.9% prior to Reebok merger
• merged with Reebok in 2005
• 46% of their total sales comes from footwear in 2008
• Nike’s strength above competition lies in its ability to differentiate and its popular
brand image

Differentiation
In terms of product differentiation, NIKE is also leading the market. The only competitor
nearly has an identical business is Adidas-Solomon. 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 numerous 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
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exclusively on the sales of only one type of product, therefore, increasing the potential
default risk.
• Nike is the industry leader in service and product differentiation

• Service differentiation

• Nike id 2001

• 109 customizable shoes

• ave price of Nike id Shox $120 vs regular Shox $120

• apparel and equipment customization

• Mi adidas 2009

• 17 customizable shoes

• ave price of Mi adidas Microbounce $140 vs Microbounce $100

• Adidas Mi Innovation Center Cube 2006

• Product Differentiation

• shoes designed specifically for a large variety of sports

• shoe technology and innovation

• Flywire technology and Lunar Foam Cushioning system

• Nike Frees and Nike Shox

• Nike Sports Research Lab

Distinctive Competency - Marketing (Consumer Loyalty)


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Despite the tough times Reebok has recently come upon, reasons for optimism remain.
Reebok has managed to hold the loyalty of a large portion of the industry’s female
consumers market. While Reebok’s spending on advertising has fluctuated, individual
product designs have come and gone, female consumers have, as a group, remained loyal
to Reebok and their products.

Reebok can use their distinctive competency to wound our company. If Reebok can
expand their appeal to incorporate female consumers who are not currently Reebok
customers, Reebok could expand their market share and take customers away from Nike
products.

Competitor’s Key Weakness – Marketing – (Advertising/Promotion)

The leading cause of Reebok’s recent tumbles stemmed from problems relating to poor
marketing. Reebok’s shortcoming in the area of marketing is their key weakness. While
other athletic shoe companies bombard the airwaves with commercials pushing their
product lines, Reebok remains out of sight and out of mind. While Reebok’s competitors
are known by familiar slogans like Nike's "Just Do It," Reebok’s, "Are You Feeling It,"
does not equate to their brand name in the eyes of most consumers.

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To defend its Nike’s position it should -
 Think about latest trends and style and introduce fashionable shoe to attract new
generation.

 Focus on high end market while increasing its market share into the middle and
low price range in an attempt to broaden Nike’s product spectrum.

 Devote vast resources on R&D of its product.

 Act as innovator.

 Customize and customaries their product more.

 Sponsor cricket teams and cricketer of country like India, England, Australia,
Bangladesh, Pakistan, Sri-Lanka, and other cricket playing nations to grab the
marker share in this sector.

 Reduce the price by restructuring their operation.

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 Asian countries such as China, India, and Japan are doing well in sports. Nike
should go after these country markets with reasonable price because demand is
elastics here.

 Spread their business over the world to fulfill their mission “to be the world
leading sports and fitness company”.

 Be more socially responsive to show concern for the society.

10.0 Recommendations
• Gain a more positive global image, especially regarding labor laws.

• Pull back the extreme spending on endorsements.

• Better management of their fashion shoe sector.

• Gain a stronger presence in China.

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Economic Performance: Revenues by Regions (2001–2003)

Manufacturing: Nationality of Contract Suppliers

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