Nike's Plan for China
Nike is already a global power house, however the potential to increase sales in China was the topic of the most recent annual investor meeting. One may question Nike’s preoccupation with China. After all, Nike China is dominant. They are currently the number one brand with the number one market share while competitors Reebok and Adidas are in 4th and 5th places respectively. They have tripled revenue in the last two years. With 2000 points of sale, 400 stores in the top three cities (Beijing, Shanghai, Guangzhou) and 50 cities with 3 or more stores, Nike is primed to begin pushing into the second tier cities. Let’s examine “why China? “ Socially, China presents a portrait of change. The attitudes and preferences of today's generation of "twenty-something" consumers diverges markedly from those of their parents' generation. In fact, in the economically churning coastal cities, this gap is as wide as ever and growing, leading to comparisons between China today and the 1960s in Europe and the United States. Nike sees a large and growing market for its products in China. China has:
• 20% of the world’s population.
• 50 million middle class households.
• 430 million youth under the age of 20 (5X the number of youth in the US).
• 50 million middle class households –- which will grow to 150 million in next 10 years.
• 65% of its youth involved in sports.
• A consumer market that embraces brands -- particularly Western brands.
• 300 million people expected to move from rural areas to the cities in the next 10 years.
With this information in mind, Nike has created a strategic marketing plan to strengthen their position in the China market. The Global supply chain is in place, now they just need a strategy. But, before Nike can execute their well laid plans, they must first do a little damage control.
In 2004, Nike advertisements featuring basketball star LeBron James slaying a Chinese dragon and a kung fu master were banned in China and met with a flurry of criticism. The TV commercial offended government regulators because it showed an American sports icon defeating the dragon, a symbol of Chinese culture, and the martial arts master, a symbol of national pride. Nike clearly disrespected the Chinese culture, and was forced to pull the ads and apologize. Nike spokeswoman Shelley Peng said th...
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...arket. However, Nike's estimates suggest it will maintain its lead in China after the merger. Nike said it has 30 percent of the Chinese athletic market, trailed by Adidas's 19 percent. The inclusion of Reebok will catapult Adidas's share to 27 percent.
How is Nike’s strategy working? A survey asked Chinese which brands were the coolest. The results came in: Nike 52%; Adidas 38%; Reebok 15%; Li-Ning 13%; and New Balance 10%.
Bibliography
Nike China (NKE) growing fast (4Q05 conf call) The China Stock Blog
Brands in Transition: Making it Work in China 2005/04/12 by Christopher Millward, Beijing This Month
Nike China (NKE) growing fast (4Q05 conf call) The China Stock Blog
2005 Business Report & Independent Online, www.busrep.co.za/index.php?fArticleId=2337753
2005 Business Report & Independent Online, www.busrep.co.za/index.php?fArticleId=2337753
Nike China (NKE) growing fast (4Q05 conf call) The China Stock Blog
CSRwire, http://www.csrwire.com/article.cgi/2411.html
Beijing This Month, featured in Business Beijing, July 2005
China Daily Online. Adidas, Reebok vie against Nike for China market(Bloomberg) 2005-08-09 10:31
JUNE 29, 2005 -- Nike Investor Day Recap
Since its creation, Nike has proven itself as a popular brand and it has created niches by selling products such as footwear, apparels and various types of sports equipment. This paper will attempt to trace the product development of Nike shoes from its origins in conception and design to the manufacturing and production process located in contract factories in developing countries to advertising and marketing of Nike as a cultural commodity and finally, the retailing of the footwear around the world.
Even though many believe customer is the greatest and customer should have the absolute power, in this case, Nike has absolute power over customer, where customer has low bargaining power. This can be proved by study many cases where Nike make their customer angry and claim that they will refuse to buy Nike product.
Nike has been under a great deal of pressure to correct the misdoings that have been done regarding production facilities in the East. As Nike is responsible for these plants, their reputation has been tainted with increasing public debate about ethical matters. While Nike still promotes itself as one of the industry leaders in corporate social responsibility, workers in Asia are still forced to work excessively long hours in substandard environments and are not paid enough to meet the basic needs for themselves or their families. They are faced to a life of poverty and are unfortunate subjects to harassment and violent threats if they make any attempt to form unions or tell journalists about labour abuses in their factories. Phil Knight’s speech regarding Nike’s steps to improving human rights in Asian countries was a step in the right direction for Nike, but it would have been much more effective had Nike fully followed through with these initiatives.
Sheng, Shirley Ye, and Ma Yan. "China Vs. the United States: Market Connections and Trade Relations." International Journal of China Marketing 2.1 (2011): 45-57. ProQuest. Web. 8 Dec. 2013.
Only a week earlier, on June 28, 2001, Nike had held an analysts' meeting to disclose its fiscal-year 2001 results.1 The meeting, however, had another purpose: Nike management wanted to communicate a strategy for revitalizing the company. Since 1997, its revenues had plateaued at around $9 billion, while net income had fallen from almost $800 million to $580 million (see Exhibit 1). Nike's market share in U.S. athletic shoes had fallen from 48%, in 1997, to 42% in 2000.2 In addition, recent supply-chain issues and the adverse effect of a strong dollar had negatively affected revenue.
Nike has always been a company that's been questioned ethically. People have heard about the stories of the sweatshops in Southeast Asia exploiting adolescent employees for unreasonably small amounts of money. This had blemished Nike’s reputation several years ago, but since then, it has strived to become a truly respectable company. Located on Nike's website you can find Phil Knight's credo about ethics. It is as follows:
Many global companies like Nike, Inc. are seen as role models both in the market place as well as in society in large. That is why they are expected to act responsibly in their dealings with humanity and the natural world. Nike benefits from the global sourcing opportunities, therefore areas such as production and logistics have been outsourced to partner companies in low-wage countries like China, Vietnam, Indonesia and Thailand. As a result the company is limited nowadays to its core competencies of Design and Marketing.
Phil Knight started his shoe company by selling shoes from the back of his car. As he became more successful in 1972 he branded the name Nike. In the 1980’s Nike Corporation quickly grew and established itself as a world leader in manufacturing and distributing athletic footwear and sports' attire. The Nike manufacturing model has followed is to outsource its manufacturing to developing nations in the Asia Pacific, Africa, South and Latin Americas; where labor is inexpensive. It quickly became known for its iconic “swoosh” and “Just do it” advertisements and products. Its highly successful advertising campaigns and brand developed its strong market share and consumer base. But, the road has not always been easy for Nike; in the late 1990’s they went through some challenging times when their brand become synonymous with slave wages and child labor abuses. During this period, Nike learned that it paramount that the company understands its stakeholders’ opinions and ensures their values are congruent with their stakeholders. Nike learned that their stakeholders were concerned with more than buying low cost products; their customers were also concerned with ethical and fair treatment of their workers. Because Nike was unwilling to face the ethical treatment of its employees, the company lost its loyal customers and damaged its reputation. Nike has bounced back since the late 1990’s and revived its reputation by focusing on its internal shortfalls and attacking its issues head on. Nike nearly collapsed from its missteps in the late 1990’s. They have learned from their mistakes and taken steps to quickly identify ethical issues before they become a crisis through ethics audits. This paper is based on the case study of Nike: From Sweatsh...
By learning from its defeat in Germany, Walmart has been able to make progress in its strategy to expand into the Chinese market, which also has a substantially foreign political and cultural environment. Along with its financial capability, advanced supply chain management capability, and information technology capability, Walmart adapted its business strategy to align itself with the local taste. For example, Walmart sources about 95% products locally and hires Chinese citizens to manage its stores. Due to the heavy pollution and poor safety management, Chinese customers are concerned about the quality of products made in China. Walmart developed private label brands priced 10%-40% cheaper than national brands which positively impacts Chinese customers by providing them with high quality products and low prices. (2015, Wal-Mart And China: A Story Of Missing Customer Trust) Currently, Walmart is the third largest retail chain in China, and plans to open 115 brick-and-mortar stores between 2015 and 2017. (2016, Wal-Mart talks Up China Commitment) Walmart also plans to push up its e-commerce business to leverage its huge global product network. But even then, to ensure its future growth in China, Walmart needs to continually monitor its multicultural
Nike’s Asian operations had previously continued to soar generating US$300 million in 1994 in revenues to a whopping US$1.2 billion in 1997. However based on the Asian economic crisis, this had adversely affected revenues, while regional layoffs were inevitable. Nike also performed well in the European market generating about US$2 billion in sales and a good growth momentum was expected, however, some parts of Europe were only slowly recovering from an economic downturn. In the Americas (Canada and the U.S.A.), Nike experienced a growth rate for several quarters. The U.S. alone generated approximately US$5 billion in sales. The Latin American market at this point was exposed to economic volatility; however Nike still saw them as a market with “great potential for the future”.
It will look at the role of promotions as a consumer product company, offer possible promotional objectives, and consider other promotional methods the Nike Corporation may wish to implement in its quest to remain the market leader.
Nike Inc. was founded in 1962 by Bill Bowerman and Phil Knight as a partnership under the name, Blue Ribbon Sports. Our modest goal then was to distribute low-cost, high-quality Japanese athletic shoes to American consumers in an attempt to break Germany's domination of the domestic industry. Today in 2000, Nike Inc. not only manufactures and distributes athletic shoes at every marketable price point to a global market, but over 40% of our sales come from athletic apparel, sports equipment, and subsidiary ventures. Nike maintains traditional and non-traditional distribution channels in more than 100 countries targeting its primary market regions: United States, Europe, Asia Pacific, and the Americas (not including the United States). We utilize over 20,000 retailers, Nike factory stores, Nike stores, NikeTowns, Cole Haan stores, and internet-based Web sites to sell our sports and leisure products. We dominate sales in the athletic footwear industry with a 33% global market share. Nike Inc. has been able to attain this premier position through "quality production, innovative products, and aggressive marketing." As a result, for the fiscal year end 1999, Nike's 20,700 employees generated almost $8.8 billion in revenue.
But what makes people buy the name brand Nike? They have great advertisement. I love to watch Nike commercials; they appeal to me as an athlete. The commercials show the inner fight in people, breaking records, becoming a stronger person, being the best you, and being the best athlete; you can be overcoming anything. I find their advertisement to be very inspiring and motivational. The Nike slogan ‘Just Do It’ plastered on so many products inspire others to get out and ‘Just Do It,' no hesitation. Nike tries to appeal to you to buy their products by placing their apparel on professional athletic. Everyone knows Lebron James he has many young athletes that look up to him and want to be just like him. What do they see Lebron James wearing? Nike apparel, for the kids that want to be just like him, they want what he has. So they want the Nike look. For me personally, I see Nike products and logos at just about all sporting events, which is a great strategy for the business.
This project concentrates on the Nike Sports shoe; Nike is one of most significant shoe manufacturing company worldwide. Sportswear manufactured by Nike is known for quality and is most liked brand of athletes. (Daniel, 2011)
Nevertheless, Nike is an extremely diverse company with outstanding organizational structure, impressive marketing strategy, and innovative products. The organizational structure of the Nike Corporation helped them become a leading innovator for the world with creative apparels and shoes. Their intelligent marketing strategies assist them in advertising their products to motive their customers and sell them. Their innovative product motivates customers with great performance footwear and quality designs to take on any obstacles. The Nike Corporation discovers various ways to improve their organizational structure to inspire the world.