NIKE Company
Introduction
All athletes worldwide are motivated by “Just do it” trademark of NIKE to strive to become the best. Nike company is an international organization that is the main supplier for athletes and sports. In this paper, the main aim is to describe the Nike company’s analysis, its marketing strategies, and the history of Nike. The analysis comprises evaluating the conditions, the company price elasticity, the costs of Nike’s production, the overall market, future recommendations, and the recommendations that Nike requires to manage its production.
History and Overview
During the Blue Ribbon sports of 1964, Coach Bill Bowerman requested Phil Knight, a field athlete and track for the University of Oregon, to issue him with running shoes for modification with a great design. Phil adored the pair of shoes, and his teammate Davis wanted the pair of shoes for himself that made Davis win the Olympic Gold medal in 1960 for the 400-Meter dash. After graduation from the Institution of higher education, Phil joined for his masters’ course at Stanford University. He inscribed an article describing the transfer of production of running shoes from Germany to Japan because of Japan’s cheap labor (Meyer, 2019).
In 1962, after his graduation, Phil Knight went for a trip to test his idea that later resulted in a deal with business persons in Japan to trade popular shoe designs. Coach Bowerman supported Phil’s endeavor by splitting the Blue Ribbon sports company in 1964 despite the feeling that German shoes were the best (Meyer, 2019). After leaving Japan, Phil recognized that the ultimatum existed from the low-cost sneaker shoes he was selling from his car. Still, high-quality alternatives from Puma ad Adidas subjugated the market.
Later, Coach Bowerman recommended the design to a Tiger shoe company that fuelled conflict between the Japanese merchant and Blue Ribbon Sports. In 1974 they split after Tiger filed a lawsuit, in which the court judge told the companies to sell their version, which was the Tiger Corsair and Nike Cortez. The Blue Ribbon is nowadays the present Nike and Asics is the Tiger shoe company. One of Phil Knight’s employees, Jeff Jonson, proposed the name after having dreams about Greece’s goddess.
Phil Knight became a millionaire in 1980, after Nike’s steady growth with bonds worth $ 178 million. The company grew due to ad campaigns’ help, and one of the Ads remains to be a huge logo. The “Just do it” is an Ad that originates from the last lyrics of the American murderer Gray before dismissing the squad, “Let’s do it.” Nike firm continues to develop through endorsements signings of sportspersons like Lebron James and Tiger Woods. Nike has collaborated with basketball Legend Michael Jordan with a deal of $ 500,000 per year for customized shoes whenever he requested.
Supply and Demand Conditions
The Nike organization considers itself a corporation that grows through establishing new products in demand by its customers. The company strives to guarantee that customers have a great experience while buying Nike products online or the company’s store. Nike remains to be reliable with its customers with the demand for athletic gear and shoes with their capability to be innovative yearly. Over the past five years, the company has continued to grow its revenue, proving a constant growth supply-demand of the company products each year. Nike has exhibited implausible growth in sales throughout the past five years, with a price increase of 10%.
According to Forbes, Nick proves to be a still-growing company despite being the world’s largest sneaker maker. In North America, which is the largest market for Nike’s products, the company has a strong sales demand of 9%, led by Nike’s apparel and shoes. The sales in Europe are at 14%, with Nike gaining a significant market. In the last quarter, Nike revenue by 10% on gains across all regions to $9.4 billion. The swoosh trademark relentless currency rose to $8.9 by 14%. In a sign of full-price demand, Nike’s gross expanded by 1% to 43.8% due to Nike’s own undeviating to consumer sales, higher average selling prices, and online sales. The digital company sales surged a combination of 14% that is driven by mobile orders.
As fashion trends continue to rule the world, Nike Company’s trend is evident in its supply and demand upsurge. The firm pleas to all customers from casual attires to athletic clothes and shoes for fashion and athletics. The firm is consistently making improvements that are anticipating profits from its brand for outfitting their consumers. In the past five years, the company’s sales progress shows that customers purchased Nike’s merchandise despite their huge monetary status. The demand increase is evident, and it can be said if the consumers had an increased income, the demand for Nike’s products will add to more profits. Nike must realize how the demand is increasing for its product to provide enough supply.
The factors that Nike must evaluate are material cost, production cost, and price of products. The factors will influence how the company will resolve to price its products for auction to its customers. Hence, if Nike’s supply rises in price, it will upsurge supply, whereas Nike lessening the price will decrease supply. Nike having the factual supply chain will make a variance in the production and industry costs that will improve the margin and result in consumer superiority products at rational prices.
The company is refining its supply chain every time repeatedly. The firm has 744 third party industries in 43 nations, essentially in China, the United States of America, Vietnam, and Thailand. The presence of industries in multiple nations reduces the operating costs of production while producing eminence products to consumers. If Nike had decided to manufacture its merchandise in one country, for instance, in the U.S, the costs could have increased meaning, which could have increased the merchandise price, which in turn could have declined the demand.
Price Elasticity
The price elasticity measures the difference in the number of products demanded concerning the products’ price shift. Mathematically, the price elasticity is equivalent to the percentage variation in demand divided by the percentage variation in price (Kenton, 2020). Nike Company has opponents like Under Armour, Puma, and Adidas to vend athletic footwear and apparel. Despite competitors’ existence, Nike continues to have increased demand, making the company make gross earnings each year. The elements that prove whether Nike’s demand is inelastic or elastic are the passage of time, consumer budget, availability of substitutes, the market’s definition, and the luxuries versus necessities.
Fewer alternates for the exclusivity of the Nike Air Jordon line exists that can make its product line inelastic. Consumers continue to buy the latest Air Jordon, no matter the costs and time passed. Nike products are considered a necessity for the franchise because athletes demand the shoes for their sports. O’ Connell, argued that the U.S is the main market for Nike products, where Nike generated 41% of the overall revenue in 2019 (O’Conell, 2020).
The annual reports of the company prove Nike having an inelastic demand. The company knows the consumer and market tendencies, so increasing its price will not decrease the demand enough to deliberated an elastic demand. The firm offers all types of consumer athletic footwear and clothes. With the Air Jordon, line being splendid exclusive to the company. The firm can set the price as it fits with the Jordon style demand.
The link between the total revenue and the elastic demand is vital in knowing the position of the company’s annual returns. The total revenue and the firm’s price will continually move on with a steady trend because Nike is elastic demand. The rise in price will upsurge Nike products’ total income because it is growing steadily year after year. According to the meaning of inelastic demand, Nike is a dominant company with a shoe line that increases the footwear price over the years that contributes to higher profits each financial year.
Cost of Production
Between the financial years between 2014 and 2018, Nike Company witnessed an increase in the gold prices sold to consumers by 9.21%, 7.8%, 7.70%, and 5.03%. The company’s operating expenses increased gradually by 5.48%, 6.20%, and 7.94% during the periods. Nike’s cost of goods integrates the outlay of the prices of items purchased for resale, raw materials, and the chunks’ expenditures used to make products. Other expenses include supplies, labor costs, overhead costs, and shipping costs directly related to its production. All these bulk costs used in production by Nike are variable.
The company has fixed costs that comprise depreciation costs, salaries of the management, and insurance costs. The company minimizes its manufacturing overhead through the movement of $900 million units per year that saves the company a lot of cash. The company keeps its overhead costs down by the treatment of its factories by exhausting independent servicers. The annual budget enables the company to see the adjustments it needs to make in each new year. For instance, the firm can look at the mechanisms to lessen manufacturing losses and costs and ways to increase management salaries. Nike can project the trend in the costs of goods sold projected to increase yearly.
The Overall Market
The Nike Company heads the lead with 62 percent of the trademark share that is four times the combination of other brands. The footwear and apparel outperform the company’s business, and the products allow the company to grow steadily because the products lead the trade with $28 billion of the yearly sales made by the company (Gould et al., 2015). Because of being the principal maker of athletic footwear and wear, this company’s competitors are Converse, Puma, New Balance, Under Armor, Adidas, and Reebok.
The entry barriers enable the Nike company to safeguard its income with brand identity, loyal customer, and tax benefits. The company is well recognized in athletic footwear, clothes, advertising, and endorsement with new athletes. The company is a household brand worldwide, which brings many loyal customers that assist in barrier entry. Under Armour, the competitors of Nike do not have exact merchandise lines like the Jordon line. However, an exploitative competition exists by-product discrepancies in the company portray that. The massive range of product designs and colors or athletic wear are why many people own items with a Nike logo.
Recommendations
If Nike continues to grow its trends worldwide, the company will attain a continuous increase in earnings. The company will remain growing annually by its consumers increasing. Nick company understands its business model that has helped the company to grow year after year. The company understands it to remain at the top; it must keep up with upcoming athletes and consumer trends to generate revenue.
With the increase in technology, Nike must consider collaborating with new forthcoming athletes in colleges and high school, since these athletes are all about mobile phones, social media, and apps. Social media will enable the gain of extra customers in the newer generation.
The company continues to top ahead of its opponents each time after. The large incomes they have grossed over the decades prove the success of Nike. Review of the annual proceeds and losses, the income statements, and financial statements will enable the company to make changes as they continue their success.
REFERENCES
2019 Annual Report. (n.d.). Retrieved July 30, 2020, from https://investors.nike.com/investors/news-events-and-reports/?toggle=reports
Cheng, A. (2018, December 21). Nike, Already World’s Largest Sneaker Maker, Proves It’s Still A Growth Company.
Gould, Skye & Lutz, Ashley. (2015, May 22). See How Nike Dominates the Shoe Industry in one Chart.
Green, Dennis. (2017, January 29) Nike Turned into a Luxury Brand When No One was Looking.
Kenton, Will. Reviewed by Barnier Brain. (2020, February 28) Price Elasticity of Demand.
Meyer, J. (2019, August 15). History of Nike: Timeline and Facts.
O’Conell, Liam. (2020) Nike- Statistics and Facts.