In today’s rapidly changing global economy, companies face many challenges on their way to success. In this essay, we delve into the Nike’s competitive strategy to navigate the dynamic business landscape. By examining Nike’s efforts to leverage innovation, digital transformation, and supply chain management, the analysis sheds light on the company’s pursuit of a competitive edge. Discover the impact of globalization, evolving consumer preferences, and market trends on Nike’s competitive advantage. And, more importantly, what makes Nike so different from its competitors?
Nike Shoe Company
Nike inclusive is a company that basically indulges in the designing, developing, and international marketing of quality apparel, equipment, footwear, and accessory products. The company started trading actively in sportswear back in the year 1999. The footwear is precisely designed and manufactured for athletic use. A large portion of Nike’s products is however used for leisure and casual purposes. Nike inclusive operates its own subsidiaries for manufacturing and the distribution of sports apparel. The main competitors of this company are Adidas, Reebok among others.
Market Structure of the Shoe Industry
Nike operates in a very competitive industry. Indeed competition is stiff and companies have been contending for sales. The companies spend a lot of money on advertisements in order to market their products to the ever-growing population. It has been noted that in the past years, the shoe industry’s growth has declined drastically although there are predictions that the growth rate in the industry might rise. According to Porter (2005), there is usually a seasonal trend in the shoe industry more so on sports shoes hence increasing the rivalry among companies.
Competitive Advantage of Nike Pricing Strategy
The selling price adopted by a company for its products directly affects the profitability and eventually the viability of the company. This area usually receives a lot of attention from Nike’s management. To ensure the viability of the company products in the market and rise above its competitors, Nike uses the following pricing strategies, (Thompson, and Strickland, 2001).
Setting rather than managing prices. The brand manager adopts a reactive approach in making pricing decisions rather than a proactive approach. This means that the setting of prices at Nike inclusive depends on the prices adopted by competitors and the sales figures that Nike has.
Avoidance of customer value when pricing. It is not always accurate to predict the value that a customer has towards a given product. It is also not possible to quantify the value that the products give to customers. For this reason, Nike avoids the use of customer value when making pricing decisions. Although consumers may not buy a product whose price is higher than the satisfaction derived from the product, they will at all times purchase a product that has a price lower than its perceived satisfaction. By avoiding this approach, Nike keeps off underpricing its products in order to maintain brand equity and customer loyalty, (Porter, 1985).
Establishing customer value for products. the brand managers at Nike inclusive rigorously engage in attempts to know the value that customers have for their brands. This is undertaken by carrying out detailed interviews with the customers on Nike’s brands. The company is usually able to have a clearer understanding of what the customer really needs. The precise information obtained is used by brand managers to establish a basis for the pricing decisions in the company. Such information is reliable in developing an effective pricing strategy that is proactive. (McGahan, 2004).
Nike Competitive Environment, Products, and Distinctive Capabilities
Nike being an integrated company solely focuses on the production of shoes. It normally designs shoes according to its customers’ demand and preferences and later distributes them to the market. Nike Company is usually dedicated in order to restore the environment thereby, in turn, increases their business value and those of their stakeholders. (Grant, 2005).
The company current market and distributes their products to more than 20,000 retailers in US alone and to more than 110 countries across the world. Independent contractors are solely responsible for manufacturing the company’s products according to the tastes and preferences of their customers. Currently, the company usually earns between $8.8 and $9.6 billion as far as their revenues are concerned per year. Most of the shoes that are designed by Nike Company are particularly used by athletes as they normally specialize in casual and leisure shoes. The company is also involved in selling sports accessories such as women-branded Cole Haan, sports balls, and children’s casual wear. Finally, the company is also involved in manufacturing plastic products among other products.
Adidas and Reebok are currently the main competitors of Nike Company although there are some other minor companies. Nike has been involved in monitoring all the changes that have been revolving around thereby contributing to change in the economy. There has been a movement from the use of standardized goods to niche commodities. In line with this as part of its corporate strategy, Nike has chosen to be flexible with the market trends. This is the main source of its successful competitive advantage. In addition, to rise above its competitors the company has highly differentiated its products. Specifically, Nike started off as an athletic shoe company but today, its product line is inclusive of equipment, clothing, and accessories.
Nike Company is well known for having valuable human capital. Their workers are usually motivated in their work at all levels in the organization. The company has a sound financial statement as well as its balance sheet shows the company has been making a good trend in business over the years. The organization has the advantage of having indescribable assets such as organizational culture and corporate brand hence the reason why their products are popular in the market. The company’s research and development department has played a significant role in ensuring there are new innovative and creative products.
Flexible Strategy as a Main Nike Competitive Advantage
Nike is keen on the changing global economy and has been seeking a competitive advantage over its rivals. Several changes have taken place in the shoe industry and this has been greatly beneficial to the industry. These changes are; (Hunger, and Wheelen, 2003).
- Rapid growth in footwear production.
- Manufacturers today must have flexible designs and high output.
- There is a massive increase in shoe designs increasing competition and volatility in the market.
- High innovation and quality designs are a must for success.
- Producers have to be protective of their information and manufacturing technology.
One of the main reasons for the success in seeking a competitive advantage in the changing global economy is flexibility. Nike has at all times remained flexible in the changing market by subcontracting to international countries that have a low cost of labor, (Grant, 2005). Secondly, Nike highly focuses on differentiating its products. Rather than dealing in one line of a product, the company has diversified and differentiated the products it offers to the market. For instance, Nike started out as an athletic shoe but today, it produces and sells a variety of products ranging from equipment, clothing all the way to even offering accessories. This differentiation has enabled Nike to successfully:
- Obtain and gain loyalty from buyers to its brand.
- Register an increase in sales.
- Command a fine price for all the company products.
Conclusion
I can conclude as far as SWOT Analysis is concerned that regarding Nike’s future in the changing global economy. The company should take the initiative of investing more resources in order to ensure the company’s image does not decline. According to my views, the company can achieve this by ensuring there is improvement in their product designs according to their customer’s tastes and preferences. For this case, the company ought to capitalize on vigorous advisement in order to promote their products to the ever-growing population. The company should take advantage of internet promotion tools in order to advertise their products since it’s of the utmost importance for Nike in the changing global economy.
References
Grant, R.M. (2005): Contemporary Strategy Analysis, Blackwell Publishing Ltd., Oxford (U.K.).
Hunger, J. and Wheelen, T (2003): Essentials of Strategic Management. New Jersey: Pearson Education Inc.
McGahan, A.: How Industries Evolve – Principles for Achieving and Sustaining Superior Performance. Harvard Business School Press, Boston, 2004.
Porter, M.E. (1985): Competitive Advantage, The Free Press, New York.
Thompson, A. and Strickland, J (2001): Crafting and Implementing Strategy. Irwin McGraw-Hill. Web.