Social Strategy of Nike

The paper summarizes the case study of the social strategy at Nike by Harvard Business Review. The paper would be providing an analysis of the factors affecting the performance of Nike and the business strategies of the company on several grounds. Among the factors taken into consideration, the paper would discuss the macro-environment through the PESTEL approach. In addition to it, the study would consider the industrial environment using the porters five forces, the organizational analysis, SWOT analysis, and would try to provide certain recommendations based on the research. The paper would be crucial in understanding the working of Nike as a brand and could provide a justification of the steps it took in its future course of action.

Introduction

Nike is the maker of running shoes and started small in 1972 by Phil Knight, and Bill Bowerman, the Oregon University runner, and the track coach respectively. Initially known as the Blue Ribbon Sports, the company found success in running shoes, and later moved on to lead innovations in the sports gear segment over the years. The company made massive progress as a shoe-making company and was the pioneer in introducing many marketing techniques that were unique and effective in establishing the brand.

The study discussed in this paper speaks of the social strategy that Nike undertook in 2012. It analyses the events in the past that build up the social strategy of Nike, and the actions recommended for the company to improve their marketing efforts from 2012 onwards.

It has been found in the studies that Nike was the first company to start their marketing using the social media. The company launched its official website in 1998, and another site dedicated to soccer in 2000. The company began exploring the methods to connect to the consumers in a better way and partnered with a media group called Gawker. Nike also started to explore the options of leveraging the video website YouTube to improve consumer improvement. The company also launched a blog in 2004, and began working with MySpace in 2005 to acquire 50,000 ‘friends successfully.’ The popularity of the Nike on the internet skyrocketed with the ‘Touch of Gold’ video, which was shared through YouTube, and features as the first ‘viral’ video for the company.

Nike continued its experimentations with the social networks and the technological innovations over the next couple of years, and reached the zenith of digital advertising before the 2010 World Cup by introducing a campaign called ‘Write for Future.’ The campaign encourages the fans and common people to encourage the players to realize their potential and become a better footballer.

However, all of these investments increased the overall marketing budget of Nike. Depending on the analysis of the social strategy of Nike, the study presents a few recommendations that the company could undertake to streamline their marketing budget and improve their social interaction at the same time.

Macro-environment

Nike was ahead of the competition when they started adopting a unique and innovative approach towards engaging customers. The company was not affected much due to any political, environmental, or legal issues and enjoyed a favorable economic status since its inception, and engaged in a robust social and cultural interaction with the customer. The technological adaptation and inclusion of proactive thinking made the marketing initiatives to achieve its purpose, though, at the later stages, the marketing budget become quite troublesome to handle. The company had even to give up TV and print ads to strengthen their social media presence and was successful in generating massive response through the social platforms.

Industry Environment

Threats of new entrants

New companies are coming up in the business in the same segment as Nike’s can pose significant competition to its market share. However, the threat to Nike can be safely assumed to be low to moderate given few considerations in place, a significant reason being; an overnight brand cannot have the same perception in customers’ minds as compared to Nike’s. It has taken years to build up its current image and chances are less for an entry-level brand to compete with the company at a national or international level.

Supplier Power

Supplier power for any business is related to procurement of raw materials. The principal materials used in the development of Nike’s products are made locally available where their manufacturing units are present. However, there is a moderate risk while locally procuring products in terms of disruption of availability of raw materials or inability to find alternate suppliers in case of a disruption.

Buyer Power

Buyer power is directly proportional to Nike’s business performance and revenue generation and has the ability to make or break the brand in the long run. The company makes it a point to keep up with changing customer demands to keep up with the latest market trends. A lot of their success depends on their vision to understand changing customer requirement and evolving their products accordingly.

Substitutes

The various factors for substitute products that can affect Nike’s business are mentioned below:

• Availability

• Performance compared to Price

• Switching Costs

Though there are quite a few substitute products available in the market, it has been found that customers have a lower likelihood of considering substitutes when comparing the performance of Nike’s products to the substitutes available in the market.

Industry Rivalry

Nike is one of world’s most popular Sports and Fitness activities’ products company. Industry rivalry is one of the key aspects in deciding Nike’s share in the market. They compete at an international level with major athletic and leisure shoe companies, athletic and leisure apparel companies, sports equipment companies, and other large companies with varied lines of athletic and leisure shoes, apparel, and equipment. These competitors include Adidas, Puma, Reebok, Under Armour to name a few.

Organization Analysis

Strategy

Nike’s core business consists of designing and development of a range of high-quality sports and fitness footwear, apparel and equipment. The policy of the company, in the end, is to evaluate and evolve in its current line of business while increasing its revenues and growth in its market share.

Financial Performance

Nike has broken down its revenue its revenues into segments or buckets based on geographical locations. The primary measure to have an idea of its financial performance is to calculate the interest before earnings and tax, mostly referred to as EBIT in financial jargon and is equivalent to net income before interest expense, net and income taxes in the gross income statements. A look at the company’s financial statements shows that in almost all the segments the company had performed better in FY 2012 as compared to FY 2010 and 2011 apart from Japan, which was still emerging out of the crisis created during the earthquakes and tsunami in March 2011.

Internal Current Performance

As of May 31st, 2012, the company has around 44,000 employees working worldwide. As per the report, the management has a very healthy relationship with its employees. There have been no cases of disruption in company operations due to labor disagreements. They are considered the key personnel in determining the success of the company and management considers their services to be of highest importance. The company has given the rights to its employees to buy stocks at a discounted price under the “Employee Stock Purchase Plans” and also grants restricted stock units to its valued employees as awards.

Internal Long-Term Development

A major of the company’s success depends on its abilities to identify and visualize the changing market and customer requirements. If they fail to act and deliver as per the customer’s changing needs, it would hit their business and hinder their market growth. The company has dedicated employees who work tirelessly in the research and development of products in line with the needs of the customers.

SWOT Analysis

Nike has depended on several strengths to grow its business and maintain its standards as a brand. The primary strength of Nike is the adaptation of technology and inclusion of social strategies, which provides them with the platform to interact with their customers. However, in doing so, the company exposes its biggest weakness too, i.e., growing overboard with the marketing budget, or taking too many risky initiatives. Despite the big spends, Nike has the potential to turn around by cutting down on its marketing cost, for which steps are already taken, and the interaction with the customers provides them with a clear insight on their requirements. In spite of that, the threats from Nike’s competitors, similar products at a competitive price from other manufacturers, and maintaining the quality standards remains the major threat to the company.

Recommendation

According to the analysis of the case study, it has been observed that Nike has been quite adaptive of the latest trends, and puts forward the intention of customer interaction at the top of their business USP. Nike also is quite keen to introduce innovations quite readily and act as a pioneer in the application of the modern technology without increasing the production cost substantially. However, sometimes these adaptive approach and marketing costs go quite high for the company, which affects the profit margin by some margin.

Therefore, it would be prudent for the company to keep a check on their expenditure and investments in a few areas of interest while maintaining the rate of technological adaptation for better results in the future. Moreover, as customer interaction is an efficient yardstick for measuring the performance of the brand, the company should continue to maintain their social strategy targeted towards effective communication through social platforms.

Conclusions

The paper concludes with a brief analysis of Nike and studies the factors responsible for the various steps undertaken by the company to sustain its business and the challenges it faced in doing so. The study also speaks about the future course of action that is recommended for sustainable growth and introduction of innovations in a controlled manner so that the company can maintain the pace of the growth it wants to achieve, without facing much hindrance due to adverse situations.

References

Form 10-K. (n.d.). Retrieved from https://www.sec.gov/Archives/edgar/data/320187/000119312512312306/d341264d10k.htm

Ives, N. (2004, June 07). Nike Tries a New Medium For Advertising: The Blog. Retrieved from http://www.nytimes.com/2004/06/07/business/media/07gawk.html?ex=1402027200&en=c11f37e8aa8cd5a&ei=5007&partner=USERLAND, accessed April 2012

Burgelman, R. A. (n.d.). Complex strategic integration at Nike: Strategy process and strategy-as-practice combined. Handbook of Middle Management Strategy Process Research, 197-242. doi:10.4337/9781783473250.00018