Nike Brand equity Essay Example

an active industry such as Nike, it can be challenging to sustain a competitive advantage.

Nike positioned itself in an industry where are virtually no substitute products. Runners, walkers, basketball players, football players, and virtually every person that moves by foot needs footwear. Since people are beginning to become more concerned with their health, active lifestyles are becoming more common.

Strong rivalry still exists between Nike, Adidas and Reebok, but the competitive environment does not present a threat to the industry's feasibility. Within the value chain in the footwear industry, there are only certain areas where profits can be extracted. Nike is keenly aware that this fact, therefore contract out portions of the business that they do not want to be as intimately involved. According to Bigelow (1997) Nike took on the new trend aggressively and imposed a management strategy that targeted on building its brand name, differentiation of its product, intense marketing and creating new markets and exploiting its potential. (Miller 2002 311-31)

Market position

Nike is an industry leader in developing innovative new products. One of the powers of Nike Corporation is its brand name recognition, because Nike has been around so long, the brand is ? recognized and respected both internationally and locally.

Nike has effectively marketed their products and in addition understands the importance of ? quality product. They are continually improving their shoes through new technologies that are developed by their research teams. Nike's important sustainable competitive advantage is their intangible assets, such as brand image and organizational culture. Everybody knows that Nike Corporation is ? competitive company.

Strength of Nike is their brand

loyalty, Nike has consistently produced quality products that appeal to its consumers, and Nike carries a wide arrangement of products with ? large amount of options for personal preference.

Strong international presence is an advantage for Nike Corporation, in the U.S sales continue to slack off or the economy continues to worsen, they have their international investment that consistently turns into a profit. Nike is the number one footwear manufacturer in terms of international rivalry in the market; with the distribution centres. Research and growth organization of Nike is one of the company strength, which has the ability to keep the company's pipeline full in pioneering new products.

The companies also have manufacturing contracts with manufacturers in countries that do not have as many requirements for conditions of work environment and others that increase costs. Also because of the process is labour concentrated, the manufacturing takes place where labour is cheap. Nike is trying to increase their international presence. On-line store is an important factor in the presence of Nike Corporation; the company believes it is vital to run on-line operation. (Peters 2005 3-6)

Nike despite popular belief the very good thing about them is that the company is aware of their social responsibility, and donated million of cash and products to different charitable organizations. In addition to their contributions they have also developed ? labour practices department, which pays close attention to ? labour practice of third world countries in which it produces.

Even though they are charitable organization they have not forgotten to be environmentally aware, with the introduction of ? environmental concern showing consumers that they have a heart. Because of

the Nike growth they are an advantageous position in the market. This can also be attributed to their market share leadership, wide product selection, and stronger name recognition. (Peters 2005 3-6)

Brand loyalty

Brand faithfulness is the major success of any company and Nike has managed faithfulness with the customers now for ? long. There are some factors which played important role for Nike brand loyalty are:

The Social Factors -The age structure of population affects the lifestyle of sports.

There would be higher chances of ? purchasing trainer shoes in the market, if the age groups were younger. The catchments area of class and income-structure as trainers are relatively expensive to purchase. Sports have become a widespread interest for the pursuit of physical health development. It is why ? mass market for training shoes products to serve the new-found past-time after World War One.

It has become ? global consumer product even they were perceived as a youth fashion item worn by film stars and famous athletics. The low wage labour is also a social issue in Vietnam. The Technological Factors - This forms the physical environment as ? availability of equipments affects the business organization. Their products and technologies must be up-to-date in order to research new innovative marketing strategy.

The design of ? training shoe is acknowledge being crucial to its commercial success. The shoe's style and technology are most likely to influence purchasers. For example, Nike's 1977 introduction of its Air sole, which contained pockets of pressurized inert gas, established an industry benchmark. They have "Design to Fit soles" for ? every individual foot.

They make

money with digital technology taking advantage of new technologies and their potential to cut costs (Moore's Law). (Carr 1998 10)

Economic Factors - Analyzing their pricing strategy for ? lower class population, the number of potential manufacturing countries and cost of labour, purchasing quantities, information about customer demand, competitors, competitor strategies, shopping patterns and the economic environment has help Nike to analyze today's world. The training shoe manufacturing has shifted their financial investment from South Korea and Taiwan, now considered to be higher-cost production locations, to lower-cost ones such as Indonesia, Thailand and China. The trend has been for trainer companies to continue to use the same Korean and Taiwanese manufacturers, who have set up and manage production plants in the new geographic locations. They are also able to profit from beneficial trade and tariff agreements, wherever they exist.

(Bigelow 2006 87-90)

Political Factors - Such as capitalism and democracy of the state influence their organization. For example, the labour in third world countries causes ? criticism against Nike. But since they have been exposed, Nike has been trying to fix this horrible problem they created. They have been sending people to upgrade the standards and have had routine checks on their plants all over the globe for ? crack down on child labour. A short time ago, the CEO of Nike, Phil Knight, was quoted as saying, "Nike has zero tolerance for under-age labour.

" So, it is good to know they are at least trying to clean up the mess they have made. Recently, Nike has been making an attempt to help the environment. They have done many things like building an

environmentally safe factory in Europe and used their own sustainable manufacturing system. This system "strives to use ? minimum amount of resources, at 100% efficiency with zero waste.

" Also Nike created the Air to Earth Program. It is ? program that is designed to make learning about the environment safe and entertaining for children. They have also taken into considerations of the regulations and legislation for future likely developments. The inter-relations and interdependency activities of the environment affected the Nike organizations.

Their business affects the economic, technology, political and social factors (STEP) which these four factors affect their businesses as well. For Nike to make ? profit, they must maintain high margins whilst expanding sales. These can only be done with a more selective distribution system that maintains margin.  (Carr 1998 10)

Brand awareness

Buyers in the athletic footwear industry enjoy a great deal of power. Consumers have shown again and again that they will simply wait until prices reach ? level they feel is reasonable before making a purchase.

Nearly 40% of all shoe purchases are made through discount stores. Also, consumers are able to make informed decisions about a purchase through utilization of Internet websites. The bargaining power of retailers is also ? problem for footwear manufacturers. In recent years, retailers have begun to hold fewer inventories, forcing manufacturers to pay for increased inventory levels on their end. Manufacturers must also make sure that retailers are selling the product in accordance with the desired image of the shoe. Nike has recently experienced a disagreement with their largest retailer Foot Locker due to pricing disagreements.

As ? result, Foot Locker significantly reduced

its high end purchases from Nike and Nike decided to shift their high end product sales elsewhere. (Mokhiber, Weissman, 1997, 9)

Brand association

Whilst looking at the different trends and styles of present day athletic footwear, we can further our research within the product and look at the different customer groups that our three companies focus their attention towards. We are primarily looking at the three different companies and the rules of style that may apply to a specific customer group for this product. In some cases, the customer group that they are focusing on may greatly impact the demand for the product because of different influences whether it is there income level, influence of childhood, or even there changing preference of ? specific product. Footwear is classified within many different categories, which makes the research of specific athletic footwear more difficult.

For example, we are focusing on the companies of Nike, Adidas, and Reebok, and all of these companies make numerous styles of shoe lines. They range from golf cleats to soccer cleats to cross-country shoes. So when trying to determine the main customer groups, each line of shoes is basically broken down within the group that the specific product is directed towards. So when looking at the different types of customer groups within the athletic footwear industry, some of the key customer demographic trend are broken up into different generations of tastes in style.

(Teremenko 2003 207-249)

The industry of footwear can be broken up into three main customer groups, which are the Baby Boomers, Generation X, and Generation Y. These customer groups do not have

much in common except for their love of shoes and the different tastes in the new fashion trends of footwear. These three generations are broken down as follows: Baby Boomers are from ages 35-53, Generation Y are consumers from 4-21, and Generation X is consumers from 22-32. As we develop ideas about the main customer groups within the footwear industry we can conclude that the Baby Boomers account for 31% of the population, which is equal to about 81 million consumers. Generation Y is the second largest group that accounts for 28% of the population which represents about 75 million consumers. The smallest customer group is Generation X, they comprise about 17% of the population, which equals about 46 million consumers.

collected information from many consumer surveys rates Nike high among the consumers of Generation Y and X. Nike has become more appealing among younger consumers and has shifted away from the Generation of the Baby Boomers. (Teremenko 2003 207-249)

Proprietary assets

In fiscal 2005, NIKE met their financial goals. The revenues grew 12% to 13.7

Billion, net income grew 28% to 1.2 billion and NIKE delivered diluted earnings per share of $4.

48, ? 28% increase versus fiscal 2004. The gross margin percentage increase 44.5%. The return on invested capital has improved and free cash flow from operations has increased. They continue to return cash to shareholders through dividends and share repurchases. Cash provided by operations was $1.

6 billion in 2005 compared to $1.5 billion in 2004. There has been an improvement in cash management of accounts receivables and timing of inventory receipts and vendor payments. (Teremenko 2003 207-249)