Nike

This mixing and mashing feels like New York, a city that’s constantly being built on top of itself, layering and molting with different cultures and eras butting up against each other and showing the idea of fast, movement and rapidness, portraying the sleek aesthetics of the brand.

In this regard, every floor features some level of enhanced service or personalized experience; meaning there are no ‘dead zones.’ As soon as one walks in one is immersed into the Nike world, being disconnected to the outside world. Each floor is dedicated to a specific category allowing the customer to easily embrace the experience. The front area of the store resembles a basketball court, with white flooring which has Nike messages and slogans, for example, the “Just Do It” and it has the Air Force 1s propped on a set of bleachers. It has a separate section devoted to the colour white — Tees, lightweight nylon jackets, and shorts are displayed on white rods.

There is also the use of the football as an accessory to add to the design paying tribute to basketball which has its tagline “Just Do It” all over the store. A gallery of t-shirt is placed in a circular revolver like a concert stage which has digital led advertisement on top of it, and white light eliminating the white t-shirts from the bottom. It also has custom a booth for customers to personalize their t-shirts and shoes with print. Nike By NYC is the studio where you can laser engrave and print unique NYC symbols on Nike gear. Customization is front and center as Nike is also working with local artists to produce prints that can be customized on shirts and other apparel. In addition, there is also a separate booth for personalized jerseys which are done using threads by the designer herself. Furthermore, there are also 5 basketball game booths where customers can engage in some fun and play.

Designed to deliver personalized services through trial spaces and customization, visitors can try out new products in real sports settings with tech-enhanced features. There is a fitness lounge inspired fitting rooms and instant personalization studios that set the in-store shopping experience apart from the online experience. The store also has the Nike+ Basketball Trial Zone is nearly half a court on the 5th floor with 23-foot ceilings and this floor houses Nike’s vast Jordan brand and basketball collection. Here Jordan imitators and aspiring up-and-comers can shoot hoops, test basketball shoes and do custom drills. The store’s Nike+ Running Trial Zone, located on the first floor for women and on the third floor for men, allows everyone from marathon runners to wannabes to test out shoes on a treadmill — opting for a virtual run in Central Park or along the West Side Highway.

The second floor features the largest dual-gender footwear wall in any Nike store worldwide, pning 54 feet and including more than 200 styles. The third floor Nike+ Soccer Trial Zone is a 400-square-foot space with a synthetic turf field floor for testing soccer shoes. Kids and adults can test out Nike soccer cleats and receive one-on-one guidance from in-store certified trial athletes on product features and benefits. And the Lounge is a women’s boutique within the store meant for services like bra fittings and pant hemming. The dressing rooms themselves are double the size of a standard dressing room at a Nike store, enabling stretching and lunging. One can also adjust the lighting in the rooms with a touch on a nearby panel — modes include ‘Night Run’ and ‘Yoga Studio.’ The recently released Apple Watch Nike+ is sold on the third floor and has its own separate department in the store.

Sean Madden, senior director of service and experiences for Nike’s direct-to-consumer division, mentions that the tech inside the store isn’t the main event. “These are enhanced features designed to augment the shopping experience and make it more distinctive and unique for each customer.” The Kinect sensors capture body movements and display that data on the screen in front of you impressing and making the customer feel a little giddy, as one might just be more inclined to buy the product, which is the whole aim of any retail store.

Providing best products, services and experiences under one roof. Nike Soho offers some of the hottest products – from brand-defining innovation to Nike Soho exclusives to Nike and Jordan Brand restocks including: LeBron collaboration with designer John Elliott, Air Force 1 Low NYC HS, iconic Jordan silhouettes, and local designer collaboration tees. The store also has a special display of the last pair of the Nike Mag shoe that will be auctioned on Saturday, November 12th to benefit the Michael J. Fox Foundation. The Nike Mag is on display alongside a pair of Nikes Hyper Adapt 1.0, which will go on sale in early December. For the first time, consumers can also see the collection of Nike’s 12 Soles Collection, a tribute to Nike’s deep roots in basketball with a nod to the future. The first drop of the collection will be available at Nike Soho in early December.

So much has been written and said about how retail is dead in an age where e-commerce supposedly reigns supreme. Whilst there is no doubt that the landscape has shifted considerably over recent years, Nike’s new flagship program is showing that it’s not so much that retail is dead and buried, but rather that it’s towards energizing the in-store experience that retailers should turn their focus if they want to keep shoppers coming through the front doors.

Nike’s new store offers experiences that consumers simply can’t get online, such as testing out new products in real sports play before buying. But, most importantly, the store also serves to bolster Nike’s digital strategy. Fully connected and integrated with the Nike app, even if customers walk out without making a purchase, their data is stored and accessible, and the path to future purchases – be they made at the same store, a different one, via the app or on the Nike.com website – has been decidedly lubricated. It is more than a store — it is a personal sports experience.

Question 1 a) In the late 1990s Nike found itself in a serious situation with its manufacturing approach in Asia. -Select and apply one of Porter’s models of strategy to explain why Nike were manufacturing in Asia? Michael Porter, leading author on company strategy and competitive advantage, has developed several generic strategies which, according to Porter, are the driving force behind any given company’s success. These strategies comprise of Cost Leadership, Differentiation and Focus.

It is Porter’s view that any company that positions itself in at least one of these categories or striving to achieve one of these strategies should be able to attain and maintain competitive advantage, ceteris paribus. Nike Inc. has enjoyed a great deal of success in the Global Sports and Clothing Industry. One may even go as far to say it is the “cream of the crop” or “a cut above the rest”. One may also wonder if any of Porter’s strategies can be applied to explain or justify Nike’s competitive advantage.

The Strategy of Cost Leadership is most applicable to Nike. It is also safe to say that this strategy was the deciding factor behind its’ manufacturing operations in Asia. Nike has no factories. It does not tie up cash in buildings and machinery. The evolving design and style of its products does not warrant this type of investment. Instead, it outsources labour. Nike has manufactured wherever it can produce high quality products at the lowest possible price.

This makes a very lean organization and paves the way for the achievement of ultimate cost effectiveness. If prices rise, and products can be made elsewhere at a cheaper rate, to the same or better specification, Nike will move production. Porter’s cost leadership strategy concentrates on aiming to become the lowest cost producer in the industry through economies of scale. The cost leader aims to drive costs down while it targets a broad market, so sufficient sales can cover costs. Figure 1. is a representation of Porter’s matrix which has been applied to the Nike Inc. By manufacturing in Asia, Nike was able to capitalize, not only on the availability of cheap labor, but also the availability of a wide range of materials required for production. The abundance of raw materials would mean large quantities of high quality purchased at wholesale prices. This enabled Nike to have tremendous purchasing power in Asia due to the high value of the US dollar. Nike also benefited from the relatively low tariffs associated with leather olded footwear. Nike would have never enjoyed these luxuries if its manufacturing was conducted in its homeland Another factor to consider is the size of the labor force. Nike, through contracts, indirectly employed thousands around the world. This would ultimately result in the manufacturing of massive quantities in quick time. The higher the product turnover, the higher the returns. All these ingredients are paramount and will inevitably yield a cost leader, a. k. a. , Nike Inc.

Nike is good:

A factory called Samyang in Vietnam (a factory under Nike contract) seems to be keeping satisfactory working levels within the building. It employs 5,200 people, most of them being women. The factory is made up of six big buildings with well-kept surroundings. Inside, there are fans keeping the workers cool, fire extinguishers about in the case of an emergency, and workers can easily access goggles, masks and gloves if they need them.

Workers get double the local average of $54 per month and an annual bonus of at least one month’s salary. Other factories get a lot less – in rural areas, factories pay $35 per month, in suburbs they pay $40 per month, and in cities, $45 per month. In state-owned factories (factories owned by the government), workers get a surprisingly low $15 per month!

All this money they are getting has allowed most of them (three quarters) to buy a television, many to have a motorbike, some to have phones, etc. Not only does this improve their life, but it also allows other businesses such as petrol stations, electronic repair shops, etc. to function properly and make money too. This is called the multiplier effect.

Nike has made changes to improve health and safety. In 1998, it replaced the very hazardous petroleum-based solvents with less harmful water-based ones. In 1999, an expert in the field went to verify Nike had actually done this at the Tae Kwang Vina factory in Vietnam. The investigator found that Nike had indeed replaced the compound and had also installed local exhaust ventilation systems. They also discovered that Nike had trained certain staff personnel aspects of health and safety.

Nike is bad:

Nike does not own the factories their clothes are manufactured in. This means they can leave at any time, leaving thousands of workers unemployed and fighting for their life while they find another job. For example, on February 22nd 2008, the BJ&J factory in the Dominic Republic announced that it was going to slowly fire workers and close. The factory, owned by Korean company called Yupoong, was making Nike caps at the time.

In the Tae Kwang Vina factory mentioned earlier, some health and safety issues remained. Some sections of the factory were still exposed to hazardous chemicals, and to high heat and noise levels. In 1997, it was found that workers in a different factory were being exposed to 100 times the legal limit of Toluene, a toxic gas.

Nike gets its clothes made in countries with free trade zones where it is illegal or extremely difficult for workers to organise into trade unions. It is practically impossible for workers to get better conditions (such as better pay, improved health and safety, etc.) when they cannot get together and form a united group to approach their boss.

However, this said, some factory workers have done it before and achieved what they were protesting for. The Ching Luh Nike factory has 21,000 employees, and in June 2008, after going on strike for 2 days, they managed to get Nike to increase their wages by $6 a month.

Some people think that the minimum wage in countries is enough to survive because the cost of living in that particular country is lower too. The chart below proves this to be wrong with three primary countries that Nike manufactures in.

Nike doesn’t pay lots to its workers. In many countries, they live way under the predicted living wage. The table shows the average wage of all the factories in that country, and the living wage in each. The data presented is only an average. Some factory workers earn only $1.60 a day, where the price of three meals a day is $2.00.

I have been asked by “Nike” to generate a report which includes a full market analysis and a set of strategic recommendations to help secure their short, medium and long term future. Nike itself is a huge organisation and has various sectors within its organisation. In the report I am going to focus on the UK footwear market sector. In this report I will firstly explain a brief history of Nike and how it was formed and how it has developed into the extremely successful brand we know today.

I will explain the products range they currently have and identify the markets from within which Nike function. I am then going to look at the footwear market sector as a whole and try to assess the current situation of the market and the future predictions of the market by looking at both the micro and macro factors affecting the sector. Using this I can try to explain how this may affect Nike in particular which will help me discover what I believe may be the best strategic recommendations Nike can realistically develop and implement.

I will apply a SWOT analysis to Nike to try to discover the attractiveness of the options they have in relation to changing strategic objectives in the short, medium and long term. I will assess the extent to which Nike can use its strengths to allow them to exploit opportunities and counter threats and the potential that may pose a threat to its marketing position. Using all my information gathered I will then try to explain what I believe is the key strategic objectives Nike should try to implement to make them a more competitive organisation.

Nike was founded in 1964 by Bill Bowerman and Bill Hayward as Blue Ribbon Sports (BRS). The company’s famous Swoosh and Nike brand name was created in 1971 and has been a recognized brand ever since. “Nike’s operations are divided into three product lines: footwear, apparel and equipment” (Market Line). Nike compete in all three of these markets but because I am focusing my report on the footwear sector I have looked further into this particular product line. Nike produce footwear for men, women and children.

Their product range of footwear is extensive and can be categorized into these following sub categories “running, cross-training, basketball, soccer, sport-inspired urban, tennis, golf, baseball, football, bicycling, volleyball, wrestling, cheerleading, aquatic activities, hiking, outdoor activities and other athletic and recreational” (Market Line). Nike also have wholly owned subsidiaries that also compete in the footwear market sector under different brand names such as converse, Chuck Taylor, All Star, One Star, Jack Purcell, Cole Haan, G Series and Bragano.

Nike is considered the market leader in the footwear industry and “During the fiscal year 2007, the footwear division recorded revenues of $8,514 million, an increase of 6. 9% over 2006. ” (Market Line). This shows the huge profitability of the footwear industry and the potential for future growth. The footwear sector of the Nike organisation is the most profitable and so it is vital Nike continue to innovate and grow to stay the leading competitor.

To fully understand the footwear market we need to look at the current situation of the market and the future predictions and forecasts of what may happen in the medium and long term. I have decided to focus on the UK sector so I can look in more depth into the market and the economy. To help me understand the market, I am going to look at the micro and macro elements in the UK that may affect Nike. The macro environment “consists of broad environmental issues that may affect business performance.

These are political/legal, economic, social/cultural and technological forces” (Jobber). For this reason I will be performing a PEST analysis which will help me identify the macro economic elements that may affect Nike. A micro environment can be described as “the actors in the firm’s immediate environment that affect its capabilities to operate effectively in its chosen markets. The key actors are customers, distributors, suppliers and competitors” (Jobber).

Nike Position Paper In our prevalent society today, there is an intricate debate between boycotting and supporting many different transnational corporations such as Nike, Inc. It has been inferred that Nike breaches multiple human rights acts and workplace violations. Dissidently, Nike’s total net income is 273. 4 billion dollars and their annual revenue adds up to approximately 19 billion dollars. This concludes that global citizens are more than voluntary to purchase their merchandise and endorse their business.

Nike is involved in several environmental projects such as building athletic courts out of recycled shoes and their “air pockets” in numerous models of sport sneakers use nitrogen instead of SF6, which is a greenhouse gas. Nike also has “green” events associated with The Green Project of Long Island in New York State. Nike manufactures in over 30 countries and sells in over 160, with about 36,000 employees’ total. They also have rights to Hurley International and Nike invests in professional athletes to promote their goods.

Nike has dynamic and monumental marketing skills that influence our generation conspicuously. In correlation, multinational business’ pay acceptable wages to workers because they have an innumerable amount of expenses unseen by most people. Corporations have significant distribution and tariff expenses bringing their products to market. Furthermore, transnationals’ pay acceptable wages given that profit margins are not as great as people may assume. Competition between producers is so fierce that profits for 214 companies in 1999 were limited to an average of 8. 3%.

A wage premium is also applied where wages are 40% to 100% greater than the average rate in many developing countries. It has been fathomed that Nike violates labor laws. But, anti-globalization people often distort the truth on this topic, as in the case of the fake German documentary film against Ikea. It has also been acquiesced that corporations exploit their workers. It is valid that employees’ work long hours, but a New York Times article indicated that the workers do this willingly because this allows them to make more money than they might be able to earn otherwise.

Mass business’ such as Nike, constitute investment and the increased export income improves a country’s equilibrium of payment, introduces otherwise unavailable goods and services that are essential for diversifying production, and stimulates local entrepreneurship by subcontracting to local industries and enhancing competition. “You don’t win silver, you lose gold,” is a famous Nike quote that has much controversy behind it, as do many business affairs pertaining to this iconic corporation.

While workers in Indonesia are being paid around 21,000 dollars a year for a myriad amount of hours of hard labor in one day, one of Nike’s promotional athletes, NBA player Kobe Bryant, is being paid over 500,000 dollars a week to bounce a ball around. Workers are told to sign a contract which removes all their rights, they are typically fired by the age of 35, and Safety & Health Administration has found more than 1000 plus violations.

Irrevocably, there are two definitive positions of transnational corporations. They have an agglomeration of flaws, but none that can be condemned irremediable. You hear a different opinion from each worker, each newspaper and each monopoly spokesperson. To ostracize such a beneficial asset to our economy would be asinine. People are kept off the streets, with paying jobs, and are making a contribution to society one shoe at a time.

Through classifying different aspects of the market, Nike’s specific target market for their insole massaging technology is identified via geographic, demographic, psychographic, and behavioral segmentation. In terms of geographic segmentation, Nike’s insole massaging technology shall be made available through a large-scale product promotion and accessibility in different countries, focusing different flagship and retail stores amongst mall that would easily cater to the various members of communities — within districts, municipalities, cities, and states.

For the purpose of target marketing, Nike Inc. can first focus on promoting and marketing the said product in Europe, North America, Australia, and selected nations throughout Asia and Africa. It would be very logical to target and eventually reach various nations, especially those with strong sporting orientation as a culture and people because Nike’s insole massaging technology indeed has an immediate product use and benefit that would be of real significance to competing athletes, sports enthusiasts, and avid athletic shoes users.

However, with attempts to advance the insole technology unto different countries and cultures, Nike Inc. must truly consider choosing the most realistically economical and profitably promising scenarios in which its product will be marketed and sold. For instance, Nike Inc. could focus on promoting the product in suburban, urban and rural areas, and districts among nations, and it could just dismiss the idea of getting the product promoted and marketed into remote areas among countries. In terms of demographic segmentation, one of the vital factors to be considered is age, as the product’s target market will be ranging from 18 – 30.

These are the ages to consider for this is when athletes’ skills and abilities in sport training and competitiveness are significantly harnessed as these athletes further on into the prime with the assistance to be offered by Nike’s insole technology. Moreover, as World of Sports Sciences stress, “The physical peak for most humans, in most sports, is between 25 and 35 years of age; during this peak period, the well-conditioned athlete can create a confluence of muscular strength, peak cardiovascular and oxygen transport, speed and reaction time”(World of Sports Science, 2008, n. p. ).

With regard to gender, both male and female athletes including sport foot wear users shall be targeted for the said product but would justly be contoured and manufactured for gender differences in between. With regard to social class, since Nike’s products are known for its supreme quality in exchange for a rather costly price strategy. Thus, it would be only reasonable to target those consumers who belong to the upper middle class— translating to capable purchasing power, especially in terms of disposable income.

With regard to educational attainment and occupation, upper middle class students, educated, and undergraduates, in both high school and college levels (can be extended to graduate degree holders and young professionals) will be a fine choice for marketing the said product. Other factors such as religion and race can be given less stress and emphasis, since essentially the insole technology can be used regardless of these.

Nike is an organization working towards developing products that help athletes of every level of ability reach their potential. In its mission statement, Nike expresses that it wants to bring inspiration and innovation to every athlete in the world. Nike is a formal organization with a clear beginning and a specific goal which is to develop products that athlete reach their potential. A formal organization has been defined by Schein as the planned coordination of the activities of a number of people for the achievement of some common, explicit purpose or goal, through division of labor and function, and through a hierarchy of authority and responsibility.

The business Nike used to be heavily engaged in is footwear products but it grew and diversifies from a footwear distributor to a global marketer of athletic footwear, apparel and equipment. Along the way, Nike has established a strong Brand Portfolio with several wholly-owned subsidiaries including Cole Haan, Converse Inc., Hurley International LLC, NIKE Golf, and Umbro Ltd. Nike is a very competitive organisation, Phil Knight (Founder and CEO) is often quoted as saying that ‘Business is war without bullets.’ Nike has a healthy dislike of its competitors. With rivals such as Adidas, Reebok, Puma, and others, competing to be the number one sports brand in the world, Nike is operating in an extremely competitive environment.

The Nike environment is a two-way, matrix organization, where team members often report into two areas such as geography and a global function. In the Nike brand, teams work across footwear, apparel, and equipment product engines. Being a prospector, Nike is continuously searching for new products and markets to exploit. As Nike is a formal organization, it has adopted a matrix structure for its organization.

Nike adopted the matrix structure because it operates in two areas; the geographical environment and global functions in six geographies-North America, Western Europe, Eastern/Central Europe, China, Japan, and emerging markets. In every continent, the functions vary differently (eg. footwear sizes for Asian market are different from the US market) as such the global function is taken into consideration.

From the Nike Matrix structure in Figure 1.1, employees have two managers-functional department manager and a respective team manager. It breaks the unity of command concept, the understanding that low-level employees should have only one superior to whom they should report to. Instead of the unity of command concept, the matrix structure has a dual chain of command-the concept that low-level employees have to report to several superiors. For example, an employee in global function from the team product apparel has to report to the functional manager in global function as well as to the team manager.

The strength of a matrix structure is it facilitates the laboursaving distribution of specialists as the specialists are shared among the different departments in the organization. It also helps to create specialists because employees who keep doing the same job day in day out for a long period of time will be skilled in the particular job. For example, from the Nike Matrix structure in Figure 1.1, a particular specialist in the research and development department can offer his specialization to the product apparel department. Another advantage is, it fosters participation within the different departments, for example in the Nike matrix structure, employees work for two bosses, and a lot of consultation is needed within the two departments as such, the unequivocal and recurrent contact concerning diverse specialties in the matrix structure can add up to enhance interaction and additional elasticity.

The movement of information on a particular project will be controlled and secured. There will be supplementary openings for staff advancement in the matrix structure; employees will get the chance for promotion. Furthermore, the matrix structure reduces the propensities of departmental members to become so focus on their own goals that the organisation’s overall goals are being overlooked. It helps the teams in Nike organisation to focus on the organisation’s goals instead of the respective team goals.

The major weakness of a matrix structure is it compromises the unity of command concept by having a dual chain of command where employees have to report to more than one superior, causing difficulties of coordination, creating role conflicts and uncertainty under imprecise expectations. It can also cause stress to the employee. For example, from the Nike Matrix structure in Figure 1.1, an employee in the product apparel department who neglected his duties in his original department (Apparel Department) was probed by his team manager, and the employee can accuse the functional manager (Geographic Division) of giving him other duties to perform that clashes with his original duties given by the team manager, this, in turn, can generate tension between the two managers or the employee gets confused so as to which duties he must prioritize.

This can also cause the employees to skive during working hours and become irresponsible as they know they can blame it on either their team manager or functional manager. Confusion and power imbalance will arise. Problems of the extent of authority that the team managers have over employees from other departments and whether the team managers will get the support of other functional managers will surface. Overlapped managerial responsibilities will cause both functional and team managers to avoid responsibilities over an incident.

The matrix structure will also bring out the ‘more talk than action’. Employees may have to attend more meetings which can hinder their duties as they have to attend separate meetings held by the functional and team managers and productive time is wasted. That is why my proposed structure for Nike will be to use the Divisional structure. The division will be created according to the type of products. Using divisional structure, creates smaller, manageable parts of an organization and develops a business-level strategy to compete.