Nike’s Distribution Strategy for their Products

The following report has been prepared by the researcher to determine the factors and the aspects that have led Nike to achieve huge success. The report has aimed to find out the exact statistics that determines the success factors. The researcher has found it easier to formulate the project because of the selection of Nike (a global brand). The researcher has provided different information related to the company to make the report compact in nature. The discussion of the marketing tactics, sales and distribution, administrative policies of the mentioned company have been helpful for the readers to gather a clear understanding of the success factors more easily.

Nike Inc. is an American MNC engaged in the designing, manufacturing, development and sale of footwear, accessories, sportswear and equipment across the globe (www.nike.com). The company is headquartered in Beaverton, Oregon in USA and is the world’s largest supplier of athletic shoes and sportswear apparels. It was founded in the year 1964 by Bill Bowerman and Phil Knight. According to recent reports the company has annual revenue of US$ 30 billion and an income of around US$ 3 billion.

The period during the 1960’s saw a dominance of canvas sneakers in the US Sports shoemaker market.  The main demand was from the athletes and the professional basketball players who depended on sneakers heavily. However the period after the 1970’s saw the creation of a new market (Shishoo, 2015). The common people began to buy the sneakers and other sports shoes just because of the comfort they offered and the casual style they bought with them. As the market took a new step Nike rose to the occasion and was quick to capitalize on the new trend. The company unveiled Moon Shoes especially for the athletes in the year 1972. In the year 1976 the company created its first ad logo with the brand name “Nike”.  However the most popular ad logo was still to come. In the year 1988 the company got its first slogan, “Just Do It”, which is perhaps the most popular used till date. Throughout the 1980’s the company extended itbusiness lines regionally as well as internationally and soon became the largest sports shoe makers of the globe (Trautmann & Enkel, 2014).

The managers of Nike Inc. created a pyramid structure to describe or segment the market accordingly. The top levels of the pyramid consisted of the serious athletes to whom owning the shoes was a necessity that they could ill afford to avoid. The lower tiers of the pyramid include the people who prefer to buy the goods just because of casual use. The management of the company however focused totally on the uppermost tier of the pyramid. Most of the activities fell on the promotional rubric that involved getting the Nike shoes on the feet of the visible athletes and to make the name of the brand associated with the sports (Sesselmann, 2015). The company spends 3% of its revenues that accounted to $ 20 billion on promotion. This included signing professional contracts with players, coaches, teams, sponsorship of new sporting events and many more such promotional activities. Another popular marketing strategy of the company is the styling of a particular product and providing a purpose to the product. This is used to sponsor a particular range of products which meets particular expectations of a particular segment in the market. 
 

Nike’s Partnerships with Major Retail Giants

Innovation has always been the focus point in Nike’s business. Innovation of latest products applying the state of the art technologies has been helpful for the organization to curve out its own success. The company has its own innovation center in Exeter, which was also the first of its kind among the numerous other centers across the world. The company invented the most advanced technology in shoes named Air Sole (Pollard, Chuo & Lee, 2016). The technology helped the consumers of the particular shoes to feel more comfortable while walking or running. The particular shoe was introduced in the market in the year 1979 and saw a huge sales figure. The Nike sports research lab is where athletes, scientists, engineers and designers converge to develop the key performance indicators that drive the company to success. Some of the main features oof these labs are;

1.Physiology-The lab has some specially designed environmental chambers were athletes can enjoy exactly the same environment where they might compete. These help the scientists to analyze the exact needs of the players and help them to design the products accordingly.

2.Biomechanics-This is one of the most important areas of study of scientists appointed by the company. The scientists of the mentioned company can measure the movement of the body with a sports science visualization tool thus helping the designers to provide key data regarding the products.

3.Motion Capture Lab-The newly updated Motion Capture Lab provides a perfect alternative top the way the scientists of Nike deals with the study of the body in motion. The lab is equipped with high speed video cameras to collect videos at a speed of more than 30,000 hertz. This helps to efficiently analyze the performance of a shoe or a sports gear.

 

                                                                                                                Figure 1- Nikes Sales Mix

Source- (Amatulli, Guido & Nataraajan, 2015)

The mentioned company distributes its products through three major channels namely;

1. Selling the finished products to wholesalers in the US and international markets
2. By direct to consumer sales which includes in line and factory retail outlets
3. Selling the products of the company to Global Brand Divisions

Apart from the above mentioned strategies the company has also tried to enter into partnerships with major retail giants in different countries to sell their products from the large stores (Mahdi et al. 2015). However the management of the company has decided to shift its focus from the traditional methods of selling and concentrate on direct selling to consumers from its wide range of flagship stores in different markets around the world.

There are three main reasons behind the financial success of Nike, they are;

1. Pricing Power-The management of Nike believes that gross margin has benefited from delivering initiative, unique products that attract high prices while maintaining the balance between the price and value proposition for the consumers.
2. Manufacturing Efficiencies- The reduction in the cost of manufacturing has benefitted the company as it has helped them to lower the prices of the quality products and make them affordable for the people (Yu et al. 2014).
3. Growing Direct to Consumer Sales-As said earlier the company has been concentrating its business more on direct to consumer sales from its wide range of stores across the markets where they operate. This has been helpful for them as the management can have a clear feedback from the customers regarding the type of products, the quality of products or any specific needs of the customers. This helps them to provide the best quality of products to the customers within an affordable price.

Conclusions 

The report has provided a transparent detail about the different success factors that has led Nike to curve the success story. A thorough analysis of the report along with the scope that the report offers will help the readers to get into the inner core of the different aspects of marketing and thus will help them to formulate a new report in the future with more detailed descriptions. Though the report is a well constructed one, the absence of some key elements like administrative control and financial statements could have made the report more compact in nature 

References

Amatulli, C., Guido, G., & Nataraajan, R. (2015). Luxury purchasing among older consumers: exploring inferences about cognitive Age, status, and style motivations. Journal of Business Research, 68(9), 1945-1952.

Anon, (2018). [online] Available at: https://www.nike.com [Accessed 5 Jan. 2018].

Mahdi, A., Abbas, M., Mazar, T. I., & George, S. (2015). A comparative analysis of strategies and business models of Nike, Inc. and Adidas Group with special reference to competitive advantage in the context of a dynamic and competitive environment. International Journal of Business Management and Economic Research, 6(3), 167-177.

Pollard, D., Chuo, S., & Lee, B. (2016). Strategies for mass customization. Journal of Business & Economics Research (Online), 14(3), 101.

Sesselmann, J. (2015). Empowering brands with customer integration: classification, benefits and success factors. Springer.

Shishoo, R. (2015). Introduction to textiles in sport. In Textiles for Sportswear (pp. 3-16).

Trautmann, K., & Enkel, E. (2014). Success factors for strategic communication of corporate innovativeness for financial analysts. International Journal of Innovation Management, 18(01), 1450006.

Yu, S. T., Chang, P. L., & Chou, Y. C. (2014, July). The initial study of industrial competitiveness in accordance with the indicator of the accreditation of environmental management: The case of shoes industry. In Management of Engineering & Technology (PICMET), 2014 Portland International Conference on (pp. 1667-1673). IEEE.