Microeconomics Analysis
Nike Inc Operations
Nike Inc Company is an American based multinational corporation that deals with a wide range of sports-related products such as athlete wear, leisure footwear and other sporting equipment. The Company, despite being a giant in the footwear industry is facing stiff competition from rivals that include; Puma, Adidas, Anta, Under Armour, New Balance, Asics, Lululemon and V.F entities. The company position in the market is enhanced by its generic strategy that determines how the Company acquire and maintain a competitive strategy. The Company also facilitates practical internal approaches that are apparent in its emphasis on innovation and development.
In the generic approach, the Company has implemented a cost leadership strategy which applies porter model involving reducing the input and maximizes the output as a way of expanding the profit margin. The policy influences the selling price for their products that offers the Company with a competitive edge against main rival the Adidas Company. Different differentiation is the other concept of the Porter model that enables its products to be unique in the market. The combination of the two porters model concepts gives the entity a leading position in the global market. The strategy boosts the demand for its products as more customers are willing to purchase the products due to favourable selling price in the market.
Product development is one of the leading internal intensive approach applied by Nike company which involves offering new products as a way of diversifying their sales. The Company is aware of the business environment in the industry, thus need to develop additional products to sustain the demands in the market. The approach saves the Company substantial costs of activities such as advertisement as per the requirements in the competitive industry. The consensus is that new products command extended profit margin that can be used as a competitive strategy. For instance, the additional revenues can be used to influence more sales on average through methods such as discounts, after-sale services. Nike Company’s mission statement emphasizes on innovation by creation of new shoes designs and equipments to facilitate competitive advantage. The company management notes the importance of technology to enable accomplishment of mission statement by allocating adequate resources to acquiring the tools for innovation (Burgelman, 2017). The use of technology has provided the Company with leading market share due to technology created designs on their products.
Market penetration is a core area of focus for Nike Company by exploiting additional markets in other parts of the world. The company strategy is based on existing market gaps identified from the study of consumer behaviour made efficient through the use of technologies. The company technological use gives the management instant feedbacks to provide insights on the market. The level of competition in the industry is intense, compelling Nike to allocate adequate resources towards exploiting other markets not detected by rivals. The adoption of updated technology has been instrumental in identifying new markets and segments, such as in the Middle East and Africa. The main principle in entering new markets entails creating a positive customer experience to attract more while retaining existing ones (Liew, Budavari, Kang, Li, Wang, Ma, & Fremin, 2020). The Company considers taking care of each consumer interests separately to ensure that the experience with the entity aligns with the expectations. Customer attraction and retention turn to be an efficient tool in a competitive business environment that is achieved through matching the products with the needs of the customers.
Recommendations
However, despite its tremendous achievement, Nike should consider employing more strategies to minimize its dependency on the United States market for its revenues. Statistics reveal that in 2018 the Company recorded 42% of totals sales & revenues from the domestic market while 58% from outside US borders. The Company should allocate substantial amount of resources on its brand awareness in other parts of the world. The move is crucial to not only boosting its sales & revenues but also minimize the risks of factors such as unfavorable political and economic climate locally. Even, the Company a risk losing the advantage of significant economies of scale; thus, rivals can exploit it to its detrimental.
Burgelman, R. A. (2017). Complex strategic integration at Nike: Strategy process and strategy-as-practice combined. In Handbook of Middle Management Strategy Process Research. Edward Elgar Publishing.
Liew, J. K. S., Budavari, T., Kang, Z., Li, F., Wang, X., Ma, S., & Fremin, B. (2020). Pairs Trading Strategy with Geolocation Data—The Battle between Under Armour and Nike. The Journal of Financial Data Science, 2(1), 126-143.