The Sportswear Company: Nike
1.1 Aims and objectives
In this report, organizational structure of a particular organization is analyzed. The purpose of the report is application of concepts learnt on business organizations. These concepts include quality strategy, marketing, organization types, marketing management and competitive advantage.
1.2 Company history
The organization under consideration is Nike. Nike, Inc. is a company originally known as Blue Ribbon Sports. It is a public corporation that specializes in manufacture and supply of sportswear. The company’s headquarters are in Washington County near Beaverton (Goldman and Papson, 1998). Nike operates in the clothing and sports equipment industry, manufacturing and selling of sports equipment, sports shoes and accessories. Other than manufacturing sportswear and sports equipment, Nike sponsors high athletes as well as sports teams globally. It also operates Nike towns and retail stores.
The founders of Nike are Philip Knight, track athlete of University of Oregon and Bill Bowerman, Philip’s Coach. They founded the company in 1964 under the name Blue Ribbon Sports. Initially the company imported products from Onitsuka Tiger (Japanese shoe makers). The company gained profits quickly and in 1967, the first retail store launched its own footwear. Nike was the first shoe sold to the public bearing the Swoosh design (Goldman and Papson, 1998). The name Nike is Greek word for goddess of victory. Nike, Inc. became the company’s official name in 1978. Profits continued to increase for the company and by 1980; it had gotten a 50% market share in the athletic shoe market in the U.S. In December of 1980, Nike, Inc. went public. In 1988, Dan Weiden (co-founder) came up with a slogan for an ad campaign. The “just do it” slogan became famous and was chosen as a top five ad slogan of the twentieth century. The company expanded its product line throughout the 1980’s including more sports and regions globally.
2.0 Organizational structure
2.1 Type of business organization
A corporation is a legal entity created under state laws and that establish the entity as separate hence having privileges and liabilities of its own (Palmiter, 2009). Corporations are of different forms with the majority found in the business industry. Nike, Inc. is a profit corporation that was incorporated in Oregon. It is therefore governed by corporate laws which differ from state to state. Being a corporation on the United States, Nike can own, acquire ad dispose property that bear its name for instance equipment, buildings and land. By exercising this right, Nike has acquired several subsidiaries over time including Umbro, Converse Inc and Cole Haan.
2.2 Trade sector
Nike, Inc trades in the Public sector and it managed to join the public sector by maintaining a steady profit gain until 1980 when its market shares reached 50% in the athletic shoe market. It was in December of that same year when it went public. This growth can be largely contributed to a print ad that was used from the late 1970’s. The ‘word-of-foot’ advertising proved an efficient marketing strategy that improved Nike’s sales by a large margin.
2.3 Structural style
The matrix Structure is used by Nike. The functional and divisional Structures are combined to form this Matrix Structure. They are Accounting, Design and development, Human Resource, production and marketing and sale. These departments interact together well enough. In this structure each brand has its department with decision making being independent of the CEO’s approval (Ind, 2007). Project teams or sub departments handle small tasks within the department. The employees are expected to report to the department or product manager. Each production team in Nike consists of scheduling, technical, quantity and quality staffs and a team leader.
3.0 Marketing management
3.1 7Ps in Nike
Marketing management is a discipline in business that focuses on the enforcement of marketing techniques and the management of marketing resources and activities of a company. A strategy that has gained popularity over time in the application of marketing techniques is the 7p’s and 4p’s strategy. These Ps are product, place, price, promotion, people, physical evidence and process (Hansen et al, 2009). Product marketing often only requires 4ps whereas service marketing recommends the 7ps. Nike is very specific when it comes to introduction of a new product. Considering the company’s goal is to manufacture and offer innovative products, much time is spent in identifying the consumer’s demand and creating a product that will be acceptable to the consumer (Ind, 2007). The main product is apparels and athletic footwear. Other products offered are eyewear, sport balls, bats, skates and other sports equipment. The product categories of the company that are most famous are basketball, running, outdoor activities, soccer and athletics.
Place is another strategy requiring the company to first identifying a recommendable setting where headquarters, a factory or retail store can be built. Nike has retail stores and its products are sold in departments store all over the world. In the United States retailers are over 20,000. Customer services, production sites and operational sites for the company are distributed all over the world.
Prices vary depending on the product. Nike has a pricing structure that gives it a competitive advantage over other shoe sellers. For instance a comfortable pair of shoes would range from80 to140 dollars. This is a price most consumers would term as fair.
Nike promotes its brand through electronic media. Also sponsorship to athletes and sports teams is another way of promoting itself. A good example is the famous football Brazilian player, Ronaldo. Design and labeling is another promotion channel that Nike has utilized.
The other 3p’s would be seen at work in Nike’s service departments. The customer perceives a lot about a company by interacting with the employees. Employee recruitment is an important activity in Nike where certain qualifications have to be met for certain positions. Employee training is also practiced where certain courses are taught. Physical evidence is the element which leads the consumer to conclude or make certain judgment about the organization. Nike’s website is one such evidence where information on the company is organized clearly and sub-divided into appropriate sections. This leads the customer to believe the company has an organized and reliable operational system. The last strategy is process. For the product or service to be delivered, certain processes are undertaken starting with obtaining raw materials to the eventual distribution. Nike has departments each concentrating on a particular step in the process for effective manufacture and delivery of products.
4.1 Quality strategy
Nike’s major quality strategy is innovation. In order to produce quality products, the marketing team investigates products from other companies in the market, concentrate on the product dominating the market and improve on it (Sloane, 2009). Alternatively, the company produces new products that will compete with the existing products. Consumers are always curious when a new product is released. They desire to establish whether the new product is better, than existing ones. It is also fashionable to wear the latest sportswear hence a new product is attractive to the consumer. Nike has a wide variety of products each unique to its market. This ensures most customer needs are met. People of different ages, size and sport preference are considered hence more customers.
Product, marketing and people are key marketing aspects that Nike utilizes. The marketing strategy that Nike uses to lure customers is branding. Creating advertising slogans and a distinct logo make the company unique. The marketing mix used ensures quality products are manufactured (Ind, 2007). The target market is active individuals that enjoy sporting goods of high quality. Quality production is hence an important factor to be considered. Marketing strategy analysis ensures the individual objectives of the company are met.
The aspect of people focuses on employees. Nike has a human resources department that ensures recruitment, selection and development of its employees is achieved satisfactorily. When skillful and qualified employees are employed, they are bound to produce results. Employee training programs practiced by Nike educate the employees on consumer needs hence the employees will work towards producing quality products that meet these requirements.
Nike’s production facilities are located near raw materials. This strategic placing ensures availability of raw materials at all times. The wide range of sports products manufactured by Nike is specific to target consumers in the market. Nike’s products are not limited to age and gender but rather they are diversified and available for every individual.
5.0 Competitive advantage
Nike’s biggest competitors are Reebok and Adidas. However, Nike has a competitive advantage over these two. Nike has an impressive market share and continues to dominate athletic footwear market in U.S. in market share. In 1998, Nike had a 30.4% market share compared to Adidas’ 15.5% and Reebok’s 11.2%.
Another advantage Nike has is being the first in its market to embrace E-commerce. In 1999, the company launched an ecommerce site presenting various styles of shoes for purchase. Later on in the same year, it launched another site, NIKEiD, enabling consumers to design main elements of the shoes they buy. This mass customization of footwear was a new program that had not been attempted before.
The company’s name and its swooshing trademark represent brands vastly recognizable in the world. They have appeared in countless places including stadium banners, players’ shirts, stadium walls and hats. To enlarge the brand, celebrity endorsements, quality products and aggressive advertising campaigns have been used.
Research focusing on development of new products is a strong point for Nike. This form of research is not costly and is less risky because it is short term. In this way the projects that are successful can bring in profits while those that fail do not endure big losses. Innovation is largely practiced although at times protective or catch-up approaches are used (Slack and Paren, 2005). Innovation is a long term initiative that works better than improving on existing products. Defensive strategies substitute innovation in times when the risk is large or a catch—up strategy which advocates for mimicking the approach that is favoring the other companies.
Nike’s corporate responsibility policy observes the providence of a comfortable working environment for their employees. This policy aims to care for the company’s family, team mates, consumers’ ad service providers. Some initiatives reflected in the policy include independent monitoring of company factories and rising of age limit to 18 years for employees in the factory. This policy indicates the commitment of the company to consumer’s concerns and also employees concerns. This gives Nike a big advantage over its competitors.
Nike’s little use of debt financing in its operations sets it apart from its competitors. The 15.36% debt to total assets ratio compared to the 40.69% industry average is an indication of this strength. Also, the company has a high liquid position therefore being in a position to increase their debt financing should additional costs in operations crop up.
Nike has utilized an efficient organizational strategy to get to its current position. The founders of the company are smart individuals who used sales and marketing strategies to enter and compete in the footwear market. Nike’s growth from small footwear to the public corporation is very impressive. The Matrix structure used ensures each product is managed by a particular team. The team managers are allowed to make decisions without necessarily conferring with the C.E.O. this ensures quick execution of activities since the chain of authority is lessened saving on time and energy. The seven P’s have contributed to the company’s effective marketing. Innovation is another strategy that has separated Nike from other competitors giving it a competitive advantage (Ind, 2007). Nike has numerous advantages over its competitors due to its E-commerce marketing branding, research and social responsibility.
6.2 Nike’s trading in the last five years
In the last five years Nike has been using long-term debt. Its percentages in volumes of sales are not so high hence stockholders are protected. The action sports market has been fast growing hence more profits. The $19.2 billion sales recorded in 2009 were impressive and the company went on to set a $27 billion target which is more than 40% increase (Cheng, 2010). Appointment of a new president, Apple’s linkage, repurchase program of share and the fall in reported net profit in 2005/2006 affected the performance of its stock. Since then it has not experienced such a drop in its stock performance but rather shown steady improvement.
6.3 Overcoming the current economic climate
Nike plans to overcome the current economic climate by investing more in foreign markets due to the slow growth of the local market. It also plans to focus on women sportswear more therefore targeting the women population.
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