Nike Sprints ahead of the competition

Yet has a long Way to Run

A- How would you describe the buying behavior of consumers with respect to athletic footwear:

Buying Behavior is the decision processes and acts of people involved in buying and using products.

Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to analyze buying behavior for:

– Buyer’s reactions to a firms marketing strategy has a great impact on the firm’s success.

– The marketing concept stresses that a firm should create a Marketing Mix that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy.

– Marketers can better predict how consumers will respond to marketing strategies.

Types of consumer buying behavior are determined by:

. Level of Involvement in purchase decision.

. Importance and intensity of interest in a product in a particular situation.

Buyers level of involvement determines why he/she is motivated to seek information about a certain product and brand but virtually ignores others.

The decision processes and acts of individuals involved in buying and using products are based on two determinants: interpersonal influences and personal influences.

As per this Nike case we are treating, we can conclude that consumer behavior proved to be more influenced by the ‘product-focused campaigns’ lead by competitors than Nike’s ‘mood and athletes campaigns’, in fact, Nike lost a significant market share in the advantage of competitors Reebok and Adidas.

Therefore, this non-product focused concept did not stimulate the consumer needs that showed more concern to product rather than brand.

Moreover, Nike’s products are considered to have higher prices relative to their competitors. According to Nike, the prices are realistic given the nature of the products they offer to consumers, but at times, consumers may not agree. This presents a weakness to mitigate the problems in their high price lines.

B- What is the management decision problem facing Nike as it attempts to retain its leadership position?

Three main decisions should be taken to retain leadership position:

1- Product-focus ads despite Moods and Atmosphere.

Nike’s management decision was to shift from the ‘mood and atmosphere’ strategy to the ‘product-focused strategy’. But what is the problem? Why are organizations so difficult to alter? Why don’t people ‘just do it,’ to echo the Nike ad? The problem is not actually the change itself. Practically, the main problem remains in what is called the transition process that we’ll describe in the following part.

2- The Price

Nike’s products are considered to have higher prices relative to their competitors. According to Nike, the prices are realistic given the nature of the products they offer to consumers, but at times, consumers may not agree. This presents a weakness to mitigate the problems in their high price lines.

3- All over the world – expanding business

Another decision has been taken by the management in order to maintain leadership was to expand business – for a closer market view, Nike opted to move toward potential markets and focus on the most popular sport activity in each of these markets.

C- Describe the marketing research problem facing Nike given the management decision problem you have identified.

1- Product-focus ads despite Moods and Atmosphere.

As we described in the above chapter, moving from one strategy to another should go thru a ‘transition process’.

The transition process

Redesigning or modifying business process can be an interesting and intellectually satisfying occupation. It demands a psychological adjustment to be accomplished before the change can be accommodated. Change theorists refer to this phase as ‘transition’

It is a three-step process and getting people through it takes time.

Here are its three steps:

Step 1: Saying goodbye

Giving up something that has worked for you, perhaps something that has served you very well, is always difficult.

Step 2: Shifting into neutral

Supposing your people ‘buy’ the need for change and have enough confidence in you as leader to get off first base. They now enter a second difficult phase of the transition the neutral zone. This is an in-between state full of uncertainty and confusion…

Step 3: Moving forward

Even when people let go of the old ways and have accepted an ending, this third phase demands that they begin to behave in a new way and this can put them at risk.

2-The Price

Nike seeks to have a competitive position at all price points to build strengths at each of these levels. Nike potential in the lower price points and plans to meet the needs of all markets.

Nike is placing a renewed emphasis on emerging technology and innovation towards the development of new products, specifically the Nike Alpha Project, a revolutionary new line of athletic shoes, that are less expensive…

Despite the fact that in the past we may have overlooked the mid- to lower-price-point products, presenting another weakness with room for improvement, they are dedicating their time and money to better develop their competitive position at all price points to build strengths at each of these levels. They see much potential in the lower price points and plan to meet the needs of those markets.

3- All over the world – expanding business

Nike’s facilities are located throughout Asia and South America. The locations are geographically dispersed which works well in their mission to be a truly global company. The production facilities are located close to raw materials and cheap labor sources. They have been strategically placed in their locations for just this purpose.

In general, the facilities are located further from most customers, resulting in higher distribution costs. However, the cost savings due to the placement of our production facilities allows for cheaper production of Nike products despite the higher costs of transporting our products. As Nike continues to expand in the global economy and increase its market throughout the world, these dispersed facilities will prove to be beneficial.

Nike’s facilities abroad have attracted bad publicity in recent years. Though their facilities comply with local labor standards, generally, they have not met U.S. standards. Nike wants to be a leader and set a responsible corporate example for other businesses to follow. As part of Nike’s new labor initiative, they several steps to maintain this image…

D- Develop two suitable research questions and formulate two hypotheses for each.

How to remain leaders in a very competitive multinational footwear industry?

a) International market research:

Nike did a statistical research concerning the sales inside and outside the U.S. It turned out that two third of Nike’s sales are in the U.S. and one third consists of international sales. This clarifies the idea that Nike should give more attention to its International market and stimulate more potential customers worldwide.

The key point in increasing international sales is to work on the international market and to stimulate more potential customers worldwide.

The better way to increase sales is by managing all distribution channels in the key markets (China, Germany, Japan etc…) with a direct follow up in other countries.

The distribution channel is a major issue when running a new marketing strategy that’s why Nike has to control countries, where the management is not directly administrated by them. Nike must send representatives to train the staff and give them all the support to properly run their business and achieve their goal using a multi-domestic strategy (international strategy, global strategy and transnational one). It will allow firms to achieve maximum local responsiveness, by extensively customizing their product offering and marketing strategy to match different national situation.

b) Niche Market:

When Nike wants to increase the sales in a new market it has to study the whole market of this country especially their attitude and behavior (their way of thinking, their ethics and values).

In different countries people have different preferences specially concerning sports. That’s why, to focus on a popular sport and try to reach its audience is very important for the Marketing strategies and selection of products.

For example, in Lebanon they must focus more on basketball than on other sports because it is the most popular game. In addition Nike has to focus more on the soccer and women’s sport where Nike competitors gain a big part of the local and multinational market.

It is highly recommended to have a new advertising campaign in addition to a series of below the line advertising like sponsorship, and events…

I think that both hypotheses can be effective IF applied.

Will the change in Nike’s Marketing strategy affect consumers buying decision?

a) Focus on customer satisfaction:

When Nike decides to shift its strategy many factors have to be taken into consideration:

For example, the “just do it “campaign focused on “image transfer” (it was transferring the image of Nike by association), while the “I can”(its new campaign) focuses more on product innovation and product usage. In addition they want to stress on athletes and their needs. Moreover, one of the key factors that affect customer’s needs and wants is the product diversity in terms of getting new product lines like the fashion, athletic, fashion, track and field, indoor…

b) New prospects (Target market):

The buying decision of consumers is affected by the message and image they receive either from the media or the net …so in the new strategy the consumers see the product because it shows the product usage and shape. In my opinion the new strategies will be effective in stimulating the needs of potential customers and getting more multinational market share.

I think that both hypotheses can be effective IF applied.

E) How can the internet be used to help Nike in conducting business research, and in marketing its products

Nike Corporation throughout the past few years has realized exactly how crucial Information Technology is. They use Information Technology to design, develop and market footwear, apparel, equipment, and accessory products worldwide.

The company has realized that “Information Technology can profoundly transform the economics of innovation, segmentation and differentiation for most businesses”

Nike use’s Information Technology like the Internet to enable a global reach and gain a competitive advantage over its competitors.

The Internet a source of Information Technology has also allowed Nike to give its customers the options of mass customization, personalization, and allowed Nike to move into a disintermediated supply chain along with its traditional supply chain. The mass customization project has experienced a great response from customers. The Nike iD program allows customers to create a unique sneaker that the can choose a color scheme, and personalize. “Nike iD offers more than 43 models of footwear for personalization”

To remain competitive, Nike entered the e-commerce world and, as usual, decided to remain one step ahead of its competitors with the innovative and interactive Nike iD project. Despite the increased cost of making customized goods as opposed to mass-produced goods, Nike hopes this program will build customer loyalty.

Within the last ten years internet marketing has become more and more relevant to companies and their products. Nike has taken advantage of the internet as one of its marketing techniques. Nike is teaming up with Rediff.com in India to promote their products the website offers Yahoo!, Amazon.com and America Online to consumers in India and also sells books, CDs, among other items.

Nike’s made different web pages for the many types of different athletes. Every page that they make, for example nikegolf.com, nikebasketball.com, and nikefootball.com, not only have that particular sport’s products and gear, but it has video clips of the famous athletes that Nike has to represent that individual sport, interactive games of that sport, previews of new commercials that might be coming out soon or that are already out, and downloads such as wallpapers, screen savers, and clips. This gives Nike an advantage on other competitors. It is can be a hassle to go to a web site and have to search for a specific product, for example cleats, and have all the different types of cleats come up. There are so many different types of cleats that you would still have to sort though all the shoes that came up in your search. Nike cut that hassle out with their individual sports web pages. Not only is it easier for the customer but they can market for that particular sport and know that the customer will moat likely appreciate it rather that get frustrated with it, which happens a lot with browsing the web.

Nike’s three recommendations involve online surveys, a loyal customer program, and more efficient supply chain management. First, through IT, surveys can be distributed and filled out by customers who purchase Nike sneakers online. The information gathered by these surveys can assist Nike in management and production by gaining the opinions and preferences of its customers.

Second, by electronically managing customer’s purchases of Nike sneakers online, your company can create brand loyalty by rewarding customers after a specified number of purchases.

Finally, by using IT to update your supply chain to a multi-company chain, Nike will work more efficiently and continue to dominate the athletic footwear industry.