Marketing Strategies

Nike implemented a number of marketing strategies to sell its products. One of the most important consideration is its marketing mix, better known as the 4Ps.

Nike is a global sports shoe giant company. It is the largest seller of athletic footwear in the world, holding

the lion share of 33% of the global market. The company has production facilities in Asia, sales facilities in

almost 200 countries, and customer service and other operational units worldwide.

The marketing mix or the 4 Ps of Marketing are Product, Price, Place (distribution) and Promotion. Nike's

4Ps are the following:

1. Product

Nike offers a wide range of shoe, apparel and equipment products, all of which are currently its top-selling

product categories. Nike started selling sports apparel, athletic bags and accessory items in 1979. Their

brand Cole Haan carries a line of dress and casual footwear and accessories for men, women and children.

They also market head gear under the brand name Sports Specialties, through Nike Team Sports, Inc. They

sell small amounts of plastic products to other manufacturers through Nike IHM, Inc. Bauer Nike Hockey Inc.

manufactures and distributes ice skates, skate blades, in-roller skates, protective gear, hockey sticks and

hockey jerseys and accessories.

2. Price

Nike’s pricing is designed to be competitive to the other fashion shoe retailers. The pricing is based on the

basis of premium segment as target customers. Nike as a brand commands high premiums. Nike’s pricing

strategy makes use of vertical integration in pricing wherein they own participants at differing channel levels

or take part in more than one channel level operations. This can control costs and influence product pricing.

3. Place

Nike shoes are carried by multi-brand stores and the exclusive Nike stores across the globe. Nike sells its

product to about 20,000 retail accounts in the U.S. and in almost 200 countries around the world. In the

international markets, Nike sells its products through independent distributors, licensees and subsidiaries.

Independent distributors need not adapt to local pressures because the 4Ps of marketing are managed by

distributors.

4. Promotion

Promotion is largely dependent on finding accessible store locations. It also avails of targeted advertising in

the newspaper and creating strategic alliances. Nike has a number of famous athletes that serve as brand

ambassadors such as the Brazilian Soccer Team (especially Ronaldino, Renaldo, and Roberto Carlos),

Lebron James and Jermane O’Neal for basketball, Lance Armstrong for cycling, and Tiger Woods for Golf.

Nike also sponsors events such as Hoop It Up and The Golden West Invitational. Nike’s brand images, the

Nike name and the trademark swoosh, make it one of the most recognizable brands in the world. Nike’s

brand power is one reason for its high revenues. Nike’s quality products, loyal customer base and its great

marketing techniques all contribute to make the shoe empire a huge success.

The copyright of the article Audit on Nike's Marketing Strategies in Consumer Goods Manufacturers is owned by Gwendolyn Cuizon. Permission to republish Audit on Nike's Marketing Strategies in print or online must be granted by the author in writing.

Product strategiesWhen an organisation introduces a product into a market they must ask themselves a number of questions.

1. Who is the product aimed at?2. What benefit will they expect?3. How do they plan to position the product within the market?4. What differential advantage will the product offer over their competitors?

We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying ‘Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer’ (P.Tailor 7/00)

Philip Kotler in Principles of Marketing devised a very interesting concept of benefit building with a product

For a more detailed analysis please refer to Principles of Marketing by P.Kotler.

 

Kotler suggested that a product should be viewed in three levels.

Level 1: Core Product. What is the core benefit your product offers?. Customers who purchase a camera are buying more then just a camera they are purchasing memories.

Level 2 Actual Product: All cameras capture memories. The aim is to ensure that your potential customers purchase your one. The strategy at this level involves organisations branding, adding features and benefits to ensure that their product offers a differential advantage from their competitors.

Level 3: Augmented product: What additional non-tangible benefits can you offer? Competition at this level is based around after sales service, warranties, delivery and so on. John Lewis a retail departmental store offers free five year guarantee on purchases of their Television sets, this gives their `customers the additional benefit of peace of mind over the five years should their purchase develop a fault.

Product DecisionsWhen placing a product within a market many factors and decisions have to be taken into consideration. These include:

Product design – Will the design be the selling point for the organisation as we have seen with the iMAC,  the new VW Beetle or the Dyson vacuum cleaner.

Product quality: Quality has to consistent with other elements of the marketing mix. A premium based pricing strategy has to reflect the quality a product offers.

 

               

                                                

Product features: What features will you add that may increase the benefit offered to your target market? Will the organisation use a discriminatory pricing policy for offering these additional benefits?

Branding: One of the most important decisions a marketing manager can make is about branding. The value of brands in today’s environment is phenomenal. Brands have the power of instant sales, they convey a message of confidence, quality and reliability to their target market.

Brands have to be managed well, as some brands can be cash cows for organisations. In many organisations they are represented by brand managers, who have hugh resources to ensure their success within the market.

A brand is a tool which is used by an organisation to differentiate itself from competitors. Ask yourself what is the value of a pair of Nike trainers without the brand or the logo? How does your perception change?

Increasingly brand managers are becoming annoyed by ‘copycat’ strategies being employed by supermarket food retail stores particular within the UK . Coca-Cola threatened legal action against UK retailer Sainsbury after introducing their Classic Cola, which displayed similar designs and fonts on their cans. 

Internet branding is now becoming an essential part of the branding strategy game. Generic names like Bank.com and Business.com have been sold for £m’s. ( Recently within the UK banking industry we have seen the introduction of Internet banks such as cahoot.com and marbles.com the task by brand managers is to make sure that consumers understand that these brands are banks!

Nike, originally known as Blue Ribbon Sports, was founded by University of Oregon

track athlete Philip Knight and his coach Bill Bowerman in January 1964. The company

initially operated as a distributor for Japanese shoe maker Onitsuka Tiger, making most

sales at track meets out of Knight's automobile. [4]

The company's profits grew quickly, and in 1966, BRS opened its first retail store,

located on Pico Boulevard in Santa Monica, California. By 1971, the relationship

between BRS and Onitsuka Tiger was nearing an end. BRS prepared to launch its own

line of footwear, which would bear the newly designed Swoosh.[5]

The first shoe to carry this design that was sold to the public was a soccer shoe named

"Nike", which was released in the summer of 1971. In February 1972, BRS introduced its

first line of Nike shoes, with the name Nike derived from the Greek goddess of victory.

In 1978, BRS, Inc. officially renamed itself to Nike, Inc. Beginning with Ilie Nastase, the

first professional athlete to sign with BRS/Nike, the sponsorship of athletes became a key

marketing tool for the rapidly growing company.

The company's first self-designed product was based on Bowerman's "waffle" design.

After the University of Oregon resurfaced the track at Hayward Field, Bowerman began

experimenting with different potential outsoles that would grip the new urethane track

more effectively. His efforts were rewarded one Sunday morning when he poured liquid

urethane into his wife's waffle iron. Bowerman developed and refined the so-called

'waffle' sole which would evolve into the now-iconic Waffle Trainer in 1974.

By 1980, Nike had reached a 50% market share in the United States athletic shoe market,

and the company went public in December of that year. [6] Its growth was due largely to

'word-of-foot' advertising (to quote a Nike print ad from the late 1970s), rather than

television ads. Nike's first national television commercials ran in October 1982 during the

broadcast of the New York Marathon. The ads were created by Portland-based

advertising agency Wieden+Kennedy, which had formed several months earlier in April

1982.

Together, Nike and Wieden+Kennedy have created many indelible print and television

ads and the agency continues to be Nike's primary today. It was agency co-founder Dan

Wieden who coined the now-famous slogan "Just Do It" for a 1988 Nike ad campaign,

which was chosen by Advertising Age as one of the top five ad slogans of the 20th

century, and the campaign has been enshrined in the Smithsonian Institution. [7] San

Franciscan Walt Stack was featured in Nike's first "Just Do It" advertisement that debuted

on July 1, 1988.[8]

Throughout the 1980s, Nike expanded its product line to include many other sports and

regions throughout the world.[9]

Acquisitions As of November 2008, Nike, Inc. owns four key subsidiaries: Cole Haan, Hurley

International, Converse Inc. and Umbro. Nike's first acquisition was the upscale footwear company Cole Haan in 1988. In February 2002, Nike bought surf apparel company Hurley International from

founder Bob Hurley.[10]

In July 2003, Nike paid US$305 million to acquire Converse Inc., makers of the iconic Chuck Taylor All Stars.[11]

On March 3, 2008, Nike acquired sports apparel supplier Umbro, known as the manufacturers of the England national football team's kits, in a deal said to be worth £285 million (about US$600 million).[12]

Other subsidiaries previously owned and subsequently sold by Nike include Bauer Hockey and Starter.[13]

A Nike brand athletic shoe

A pair of Nike Air Jordan I shoes

Nike produces a wide range of sports equipment. Their first products were track running shoes. They currently also make shoes, jerseys, shorts, baselayers etc. for a wide range of sports including track & field, baseball, ice hockey, tennis, Association football, lacrosse, basketball and cricket. Nike Air Max is a line of shoes first released by Nike, Inc. in 1987. The most recent additions to their line are the Nike 6.0, Nike NYX, and Nike SB shoes, designed for skateboarding. Nike has recently introduced cricket shoes, called Air Zoom Yorker, designed to be 30% lighter than their competitors'.[14] In 2008, Nike introduced the Air Jordan XX3, a high performance basketball shoe designed with the environment in mind.

Nike sells an assortment of products, including shoes and apparel for sports activities like association football [15] , basketball, running, combat sports, tennis, American football, athletics, golf and cross training for men, women, and children. Nike also sells shoes for outdoor activities such as tennis, golf, skateboarding, association football, baseball, American football, cycling, volleyball, wrestling, cheerleading, aquatic activities, auto racing and other athletic and recreational uses. Nike is well known and popular in youth culture, chav culture and hip hop culture as they supply urban fashion clothing. Nike recently teamed up with Apple Inc. to produce the Nike+ product which monitors a runner's performance via a radio device in the shoe which links to the iPod nano. While the product generates useful statistics, it has been criticized by researchers who were able to identify users' RFID devices from 60 feet (18 m) away using small, concealable intelligence motes in a wireless sensor network.[16][17]

In 2004, they launched the SPARQ Training Program/Division.

Some of Nike's newest shoes contain Flywire and Lunarlite Foam. These are materials used to reduce the weight of many types of shoes.[18]

In the video game Gran Turismo 4 there is a car by Nike called the NikeOne 2022, designed by Phil Frank.

Manufacturing

Nike has contracted with more than 700 shops around the world and has offices located

in 45 countries outside the United States.[21] Most of the factories are located in Asia,

including Indonesia, China, Taiwan, India, Thailand, Vietnam, Pakistan, Philippines,and

Malaysia.[22] Nike is hesitant to disclose information about the contract companies it

works with. However, due to harsh criticism from some organizations like CorpWatch,

Nike has disclosed information about its contract factories in its Corporate Governance

Report.

Human rights concernsNike has been criticized for contracting with factories in countries such as China,

Vietnam, Indonesia and Mexico. Vietnam Labour Watch, an activist group, has

documented that factories contracted by Nike have violated minimum wage and overtime

laws in Vietnam as late as 1996, although Nike claims that this practice has been halted.[23] The company has been subject to much critical coverage of the often poor working

conditions and exploitation of cheap overseas labor employed in the free trade zones

where their goods are typically manufactured. Sources of this criticism include Naomi

Klein's book No Logo and Michael Moore's documentaries.

Nike has been criticized about ads which referred to empowering women in the U.S.

while engaging in practices in East Asian factories which some felt disempowered

women.[24]

During the 1990s, Nike faced criticism for use of child labor in Cambodia and Pakistan in

factories it contracted to manufacture soccer balls. Although Nike took action to curb or

at least reduce the practice of child labor, they continue to contract their production to

companies that operate in areas where inadequate regulation and monitoring make it hard

to ensure that child labor is not being used.[25]

In 2001 a BBC documentary uncovered occurrences of child labor and poor working

conditions in a Cambodian factory used by Nike.[26] In the documentary, six girls were

focused on, all of whom worked seven days a week, often 16 hours a day.

Campaigns have been taken up by many colleges and universities, especially anti-

globalisation groups as well as several anti-sweatshop groups such as the United Students

Against Sweatshops.[27] Despite these campaigns, however, Nike's annual revenues have

increased from $6.4 billion in 1996 to nearly $17 billion in 2007, according to the

company's annual reports.

A July 2008 investigation by Australian Channel 7 News found a large number of cases

involving forced labour in one of the biggest Nike apparel factories. The factory located

in Malaysia was filmed by an undercover crew who found instances of squalid living

conditions and forced labour. Nike have since stated that they will take corrective action

to ensure the continued abuse does not occur.[28]

Following Liu Xiang's withdrawal from the 2008 Olympics, Nike admitted seeking help

from

Nike's marketing strategy is an important component of the company's success. Nike is

positioned as a premium-brand, selling well-designed and expensive products. Nike lures

customers with a marketing strategy centering around a brand image which is attained by

distinctive logo and the advertising slogan: "Just do it".[35] Nike promotes its products by

sponsorship agreements with celebrity athletes, professional teams and college athletic

teams. However, Nike's marketing mix contains many elements besides promotion. These

are summarised below.

AdvertisingFrom 1972 to 1982, Nike relied almost exclusively on print advertising in highly vertical

publications including Track and Field News. Most of the early advertising was focused

on a new shoe release, essentially outlining the benefits of the running, basketball or

tennis shoe. In 1976, the company hired its first outside ad agency, John Brown and

Partners, who created what many consider Nike's first 'brand advertising' in 1977. A print

ad with the tagline "There is no finish line" featured a lone runner on a rural road and

became an instant classic. The success of this simple ad inspired Nike to create a poster

version that launched the company's poster business.

In 1982, Nike aired its first national television ads, created by newly formed ad agency

Wieden+Kennedy, during the New York Marathon. This would mark the beginning of a

remarkably successful partnership between Nike and W+K that remains intact today. The

Cannes Advertising Festival has named Nike its 'advertiser of the year' on two separate

occasions, the first and only company to receive that honor twice (1994, 2003).[36]

Nike also has earned the Emmy Award for best commercial twice since the award was

first created in the 1990s. The first was for "The Morning After," a satirical look at what a

runner might face on the morning of January 1, 2000 if every dire prediction about Y2K

came to fruition.[37] The second Emmy for advertising earned by Nike was for a 2002 spot

called "Move," which featured a series of famous and everyday athletes in a stream of

athletic pursuits. [38]

In addition to garnering awards, Nike advertising has generated its fair share of

controversy:

Kasky v. NikeConsumer activist Marc Kasky filed a lawsuit in California in 2002 regarding newspaper

advertisements and several letters Nike distributed in response to criticisms of labor

conditions in its factories. Kasky claimed that the company made representations that

constituted false advertising. Nike responded that the false advertising laws did not cover

the company's expression of its views on a public issue, and that these were entitled to

First Amendment protection. The local court agreed with Nike's lawyers, but the

California Supreme Court overturned this ruling, claiming that the corporation's

communications were commercial speech and therefore subject to false advertising laws.

The United States Supreme Court agreed to review the case (Nike v. Kasky) but sent the

case back to trial court without issuing a substantive ruling on the constitutional issues.

The parties subsequently settled out of court before any finding on the accuracy of Nike's

statements, leaving the California Supreme Court's denial of Nike's immunity claim as

precedent. The case drew a great deal of attention from groups concerned with civil

liberties, as well as anti-sweatshop activists.

Beatles songNike was the focus of criticism for its use of the Beatles song "Revolution" in a 1987

commercial, against the wishes of Apple Records, the Beatles' recording company. Nike

paid $250,000 to Capitol Records Inc., which held the North American licensing rights to

the Beatles' recordings, for the right to use the Beatles' rendition for a year.

Apple sued Nike Inc., Capitol Records Inc., EMI Records Inc. and Wieden+Kennedy

advertising agency for $15 million.[39] Capitol-EMI countered by saying the lawsuit was

'groundless' because Capitol had licensed the use of "Revolution" with the "active support

and encouragement of Yoko Ono Lennon, a shareholder and director of Apple."

According to a November 9, 1989 article in the Los Angeles Daily News, "a tangle of

lawsuits between the Beatles and their American and British record companies has been

settled." One condition of the out-of-court settlement was that terms of the agreement

would be kept secret. The settlement was reached among the three parties involved:

George Harrison, Paul McCartney, Ringo Starr; Yoko Ono; and Apple, EMI and Capitol

Records. A spokesman for Yoko Ono noted, "It's such a confusing myriad of issues that

even people who have been close to the principals have a difficult time grasping it.

Attorneys on both sides of the Atlantic have probably put their children through college

on this."

Nike discontinued airing ads featuring "Revolution" in March 1988. Yoko Ono later gave

permission to Nike to use John Lennon's "Instant Karma" in another ad.

Minor Threat adIn late June 2005, Nike received criticism from Ian MacKaye, owner of Dischord

Records, guitarist/vocalist for Fugazi & The Evens, and front-man of defunct punk band

Minor Threat, for appropriating imagery and text from Minor Threat's 1981 self-titled

album's cover art in a flyer promoting Nike Skateboarding's 2005 East Coast demo tour.

On June 27, Nike Skateboarding's website issued an apology to Dischord, Minor Threat,

and fans of both and announced that they tried to remove and dispose of all flyers. They

state that the people who designed it were skateboarders and Minor Threat fans

themselves who created the ad out of respect and appreciation for the band.[40] The

dispute was eventually settled out of court between Nike & Minor Threat. The exact

details of the settlement have never been disclosed.

Horror adIn this ad, a parody of horror films, Olympic runner Suzy Favor-Hamilton is running a

bath in a remote wilderness cabin when a chainsaw-wielding masked killer appears.

Hamilton is obviously in much better shape than the would-be killer and, thanks to her

Nike gear, sprints away. The final shot shows the killer out of breath, limping away and

ends with the tagline, "Why Sport?" which is quickly answered with "You'll live longer."

First aired during the opening ceremony of the 2000 Summer Olympics (Friday), the ad

titled "Horror" generated roughly 200 complaints (according to NBC) that caused the

network to pull the ad by Sunday. ESPN followed suit, but the ad continued to air with

little or no controversy on several other networks, including FOX, WB, UPN and

Comedy Central.

Protesters argued that the ad made light of violence against women, while others claimed

it was just too scary to watch, especially for children who enjoy watching the Olympics.

Nike spokespeople retorted it was meant to be humorous, and to satirize the typical

horror flick where a helpless woman was destined to be slashed. Hamilton herself stated

the ad was inspirational, since it is the woman who defeats the man.

Chinese-themed adIn 2004, an ad about LeBron James beating cartoon martial arts masters and slaying a

Chinese dragon in martial arts offended Chinese authorities, who called the ad

blasphemous and insulting to national dignity and the dragon. The ad was later banned in

China. In early 2007 the ad was re-instated in China for unknown reasons.[41]

PrettyIn the run up to the 2006 U.S. Open, Nike began running Pretty, a television

advertisement featuring Maria Sharapova. The ad was a popular and critical success, and

went on to win several of the industry's top awards, including two Cannes Gold Lions.

Place

Niketown at Oxford Street, LondonNike sells its product to more than 25,000 retailers in the U.S. (including Nike's own

outlets and "Niketown" stores) and in approximately 160 countries in the world. The

company also has a program called NIKEiD at nikeid.com, which allows customers to

customize designs of some styles of Nike shoes and deliver them directly from

manufacturer to the consumer. Nike sells its products in international markets through

independent distributors, licensees, and subsidiaries.

SponsorshipMain article: Nike sponsorshipsNike pays top athletes in many different sports to use their products and

promote/advertise their technology and design.

Nike's first professional athlete endorser was Romanian tennis player Ilie Năstase, and

the company's first track endorser was distance running legend Steve Prefontaine.

Prefontaine was the prized pupil of the company's co-founder Bill Bowerman while he

coached at the University of Oregon. Today, the Steve Prefontaine Building is named in

his honor at Nike's corporate headquarters.

Besides Prefontaine, Nike has sponsored many other successful track & field athletes

over the years such as Carl Lewis, Jackie Joyner-Kersee and Sebastian Coe. However, it

was the signing of basketball player Michael Jordan in 1984, with his subsequent

promotion of Nike over the course of his storied career with Spike Lee as Mars

Blackmon, that proved to be one of the biggest boosts to Nike's publicity and sales.

During the past 20 years especially, Nike has been one of the major clothing/footwear

sponsors for leading tennis players. Some of the more successful tennis players currently

or formerly sponsored by Nike include: James Blake, Jim Courier, Roger Federer,

Lleyton Hewitt, Juan Martín del Potro, Andre Agassi, Rafael Nadal, Pete Sampras,

Marion Bartoli, Lindsay Davenport, Daniela Hantuchová, Mary Pierce, Maria Sharapova,

Serena Williams.

Nike is also the official kit sponsor for the Indian cricket team for 5 years, from 2006 till

end of 2010. Nike beat Adidas and Puma by bidding highest (US$43 Million total).

Nike also sponsors some of the leading clubs in world football, such as Manchester

United, Arsenal, FC Barcelona, Inter Milan, Juventus, Shakhtar, Porto, Steaua, Borussia

Dortmund, Red Star, Aston Villa, Celtic and PSV Eindhoven. Nike will also sponsor

Dundee United from summer 2009.

Nike sponsors several of the world's top golf players, including Tiger Woods, Trevor

Immelman and Paul Casey.

Nike also sponsors various minor events including Hoop It Up (high school basketball)

and The Golden West Invitational (high school track and field). Nike uses web sites as a

promotional tool to cover these events. Nike also has several websites for individual

sports, including nikebasketball.com, nikefootball.com, and nikerunning.com.

References

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Inspiring Athletes and Building Relationships ← “Wait, That’s My Face!”: Identity Theft, Social Networking   Style Notes on Naming: Don’t Make It   Personal → Cows and Dogs in a Bear Market: Applying the BCG Matrix to Marketing

6 July 2008 · 7 Commentsby Freddy J. Nager, Founder & Fusion Director, Atomic Tango LLC

Mmm, head cheese.

The stock market these days is looking about as appetizing as a plate of warmed-over

head cheese. At the same time, the real estate market is making the head cheese look

good. So as a result, many businesses are cutting their expenses, particularly in

marketing.

Yes, as a devoted reader of this blog, you know they’re making a mistake… With the

competition scampering and cowering like Dick Cheney during a terrorist attack, now

would be a strategically killer time to invest in a full-on marketing offensive.

But, alas, you have no choice. Most of your cash is going to gas-up your SUV, and the

car dealership guys break into hysterics whenever you ask about trading it in.

So a cutting we go — but where? Do you use your handful of ad dollars to hype your best

selling products? Or do you try to rescue products that just aren’t moving?

This question crossed my mind the other day when I saw a big, expensive ad in the L.A.

Times offering a great deal on a Hummer. Considering that consumers are now clamoring

for small cars, is GM being smart or have they completely lost it? Of course, you know

I’ve got an opinion, but let’s have some fun and apply a little methodology…

One framework you can use here is the classic Boston Consulting Group Matrix, which

has been taught to flocks of MBA students everywhere for over 30 years, but you get to

learn it here free. (Is this blog a bargain or what?) The BCG matrix uses the criteria of

market growth rate and market share to analyze product portfolios and allocate financial

resources. It consists of a 2×2 matrix with four categories apparently named by a 3-year-

old:

1. Question Marks: products with low share of a high-growth market2. Stars: products with high share of a high-growth market3. Cash Cows: products with high share of a low-growth market4. Dogs: products with low share of a low-growth market

BCG Matrix

Theoretically, most products pass through all four stages as they mature, starting out as

question marks and ending up as dogs. Some products can also sit right on a border

between categories. (Note: I use “products” here, but you can also use the matrix to

analyze brands or entire businesses.)

Now, if you’ve got time on your hands and really want to impress your boss, you can

treat the crossbars of the matrix as an X axis and a Y axis, with your products relatively

positioned within each box. However, doing so could lead to a marathon discussion over

whether a product should be positioned a little bit higher or lower and possibly to the

right a bit… in other words, the dreaded paralysis by analysis. So unless you’re getting

paid by the hour, I recommend sticking to a simple 2×2 matrix.

Once you put all of your company’s products into their respective categories, you then

consider these rules:

1. Stars: invest your marketing dollars in these since they could become dominant market leaders

2. Cash Cows: milk these to provide the cash to invest in your stars and a few question marks

3. Question Marks: invest in the most promising of these as well — but only a few

4. Dogs: cut the leash and let these go to the highest bidder for some much needed cash

To illustrate, imagine that you’re Coca-Cola. Your portfolio might look something like

this:

Question Mark: your energy drink brand (Full Throttle) Star: your bottled water (Dasani) Cash Cow: your namesake soft drink (Coca-Cola) Dog: your sweetened juice drink (Hi-C)

As Coca-Cola’s CMO, you would use income from Coke to invest primarily in Dasani

and Full Throttle, while looking to sell off Hi-C to some private equity fund with too

much cash on its hands.

But before you rush off and start reallocating your dinero, consider these caveats…

Caveat #1: Markets change with the economy and other conditions — sometimes

very quickly. What if consumers make a massive shift from bottled water to tap water, as

many municipal governments are doing? Dasani is doomed. Or what if Tiki Bar TV uses

Hi-C as a drink mixer, making it a hip and trendy drink amongst geeks overnight? Your

dog is now a star…

Caveat #2: One company’s dog is another company’s cash cow (or better). Some

investors have struck gold by buying another company’s dogs. In 2003, Nike bought

troubled Converse for only $305 million (less than what the movie “Iron Man” earned in

two months). Nike then marketed Converse through retailers (such as Target) where it

would not allow its own brand to be sold. In 2007, Converse earned $550 million. With

Nike’s resources and marketing ingenuity, this old dog learned a few tricks.

What matters most is what makes sense for your business. For example, some companies

might prefer to have cows over stars, because cows require less advertising and

innovation. They’re also less risky. So don’t just rely on the BCG Matrix alone to make

your decision — it’s just a start. Keep an eye on market trends, and consult a marketing

expert about what you might be able do with the product.

Back to GM. As we all know, SUV’s were stars just a couple of years ago, while small

cars were dogs; now, because of evil gas prices, SUV’s are barking while small cars are

shining. So by advertising the Hummer, GM put their money into a dog. According to the

BCG Matrix, that’s not the best possible use of their limited resources. But of course,

without bad decisions, GM wouldn’t be GM now, would it?

← “Wait, That’s My Face!”: Identity Theft, Social Networking   Style Notes on Naming: Don’t Make It   Personal → Cows and Dogs in a Bear Market: Applying the BCG Matrix to Marketing

6 July 2008 · 7 Commentsby Freddy J. Nager, Founder & Fusion Director, Atomic Tango LLC

Mmm, head cheese.

The stock market these days is looking about as appetizing as a plate of warmed-over

head cheese. At the same time, the real estate market is making the head cheese look

good. So as a result, many businesses are cutting their expenses, particularly in

marketing.

Yes, as a devoted reader of this blog, you know they’re making a mistake… With the

competition scampering and cowering like Dick Cheney during a terrorist attack, now

would be a strategically killer time to invest in a full-on marketing offensive.

But, alas, you have no choice. Most of your cash is going to gas-up your SUV, and the

car dealership guys break into hysterics whenever you ask about trading it in.

So a cutting we go — but where? Do you use your handful of ad dollars to hype your best

selling products? Or do you try to rescue products that just aren’t moving?

This question crossed my mind the other day when I saw a big, expensive ad in the L.A.

Times offering a great deal on a Hummer. Considering that consumers are now clamoring

for small cars, is GM being smart or have they completely lost it? Of course, you know

I’ve got an opinion, but let’s have some fun and apply a little methodology…

One framework you can use here is the classic Boston Consulting Group Matrix, which

has been taught to flocks of MBA students everywhere for over 30 years, but you get to

learn it here free. (Is this blog a bargain or what?) The BCG matrix uses the criteria of

market growth rate and market share to analyze product portfolios and allocate financial

resources. It consists of a 2×2 matrix with four categories apparently named by a 3-year-

old:

1. Question Marks: products with low share of a high-growth market2. Stars: products with high share of a high-growth market3. Cash Cows: products with high share of a low-growth market4. Dogs: products with low share of a low-growth market

BCG Matrix

Theoretically, most products pass through all four stages as they mature, starting out as

question marks and ending up as dogs. Some products can also sit right on a border

between categories. (Note: I use “products” here, but you can also use the matrix to

analyze brands or entire businesses.)

Now, if you’ve got time on your hands and really want to impress your boss, you can

treat the crossbars of the matrix as an X axis and a Y axis, with your products relatively

positioned within each box. However, doing so could lead to a marathon discussion over

whether a product should be positioned a little bit higher or lower and possibly to the

right a bit… in other words, the dreaded paralysis by analysis. So unless you’re getting

paid by the hour, I recommend sticking to a simple 2×2 matrix.

Once you put all of your company’s products into their respective categories, you then

consider these rules:

1. Stars: invest your marketing dollars in these since they could become dominant market leaders

2. Cash Cows: milk these to provide the cash to invest in your stars and a few question marks

3. Question Marks: invest in the most promising of these as well — but only a few4. Dogs: cut the leash and let these go to the highest bidder for some much needed

cash

To illustrate, imagine that you’re Coca-Cola. Your portfolio might look something like

this:

Question Mark: your energy drink brand (Full Throttle) Star: your bottled water (Dasani) Cash Cow: your namesake soft drink (Coca-Cola) Dog: your sweetened juice drink (Hi-C)

As Coca-Cola’s CMO, you would use income from Coke to invest primarily in Dasani

and Full Throttle, while looking to sell off Hi-C to some private equity fund with too

much cash on its hands.

But before you rush off and start reallocating your dinero, consider these caveats…

Caveat #1: Markets change with the economy and other conditions — sometimes

very quickly. What if consumers make a massive shift from bottled water to tap water, as

many municipal governments are doing? Dasani is doomed. Or what if Tiki Bar TV uses

Hi-C as a drink mixer, making it a hip and trendy drink amongst geeks overnight? Your

dog is now a star…

Caveat #2: One company’s dog is another company’s cash cow (or better). Some

investors have struck gold by buying another company’s dogs. In 2003, Nike bought

troubled Converse for only $305 million (less than what the movie “Iron Man” earned in

two months). Nike then marketed Converse through retailers (such as Target) where it

would not allow its own brand to be sold. In 2007, Converse earned $550 million. With

Nike’s resources and marketing ingenuity, this old dog learned a few tricks.

What matters most is what makes sense for your business. For example, some companies

might prefer to have cows over stars, because cows require less advertising and

innovation. They’re also less risky. So don’t just rely on the BCG Matrix alone to make

your decision — it’s just a start. Keep an eye on market trends, and consult a marketing

expert about what you might be able do with the product.

Back to GM. As we all know, SUV’s were stars just a couple of years ago, while small

cars were dogs; now, because of evil gas prices, SUV’s are barking while small cars are

shining. So by advertising the Hummer, GM put their money into a dog. According to the

BCG Matrix, that’s not the best possible use of their limited resources. But of course,

without bad decisions, GM wouldn’t be GM now, would it?

Analyse their strategic choices with their options- why they made the choices that they

did and recommendations. Has their strategic focus changed?

Look for critical success factors, matches and mismatches. Identify any key areas that

have affected Nike.

Look at tools of analysis e.g. swot analysis, pestle, value chain, porter’s 5 forces,

shareholder matrix, resource view, 4 p’s, BCG matrix.etc and others to come to your

answer.

Introduction Nike operates within the sports footwear and apparel market. Originally designing and

producing running shoes, their portfolio has broadened to include a wide range of sports

and leisure wear. This is all endorsed by top sporting personalities.

This environment is fairly stable although terrorism and Sars has affected consumer

confidence and supply networks.

Mission StatementIn its mission statement Nike expresses that it requires doing business in a responsible

way, leading to sustainable financial growth. With the advances in technology, HR

practices, the well informed and trained work force, there is very little left to differentiate

organisations. Being seen to go further than the minimum required on social issues can

attract and retain customers. This green cleansing attracts attention to the organisation;

they are viewed as caring and social responsible (Mullins, L. 2005).

A report, on the business practices of Nike through its supply chain accused the

organisation of being involved in poor working conditions, violations of labour rights,

low wages and harassment of its workforce. Nike takes these reports seriously. On the

basis of the research findings the company has intensified the monitoring of its suppliers

(Hummels, H and Timmer, D.2004)

Past options To build its business with all of its partners based on trust,

teamwork, honesty and mutual respect; this is expected to be

returned, expecting business partners to operate on the same

principles.

Rationale Nike does not want to only do what is required by law, but also

do what is expected of a leader

Future Options Review and monitor closer the actions of business partners

Rationale To prevent bad publicity, which can damage the organisation

Critical

Success Factor

To demonstrate to consumers the high value within the

organisation to CSR.

Change of

Focus

Theorist Hummels, H and Timmer, D.2004 agreed that these reports were

needed, Although Mullin, L. 2005 stated that it could be just

green washing

Nikes FunctionPast options the company focus on design and development

Rationale This reduces long term debt has the benefit of not tying capital

up in plant and equipment

Future Options

Rationale

Critical

Success Factor

Reduced size of premises therefore reduced costs. Vital to have

innovative employees. Products are viewed as innovative

Change of

Focus

Theorist Johnson, G & Scholes J 2004 agreed that this was a cost

effective method of production

Production Within several of these countries there have been problems with production,

distribution and political problems. With the change in relationship between the USA and

Vietnam and China, these are new production venues that Nike could explore.

Past options Produce goods in the Far east

Rationale Keeps costs down

Future Options Vietnam and China

Rationale New trade agreements, present sites are switching manufacturing

to electrical goods

Critical

Success Factor

Maintaining current standards, closer working relationships,

retaining customer loyalty by guaranteed standard of product

Change of

Focus

A shift to a more managed production

Theorist All organisation need to watch changes in political and

economical factors in their outsourcing. Johnson, G & Scholes J

2004,

Shareholder matrix Surrounding all organisations are stakeholders, all with varied levels of authority, power

and interest towards the organisation Mendelow (1991) considered a matrix that classifies

the level of power and interest a stakeholder has in an organisation. Although once each

group of stakeholders is recognised, it cannot be assumed that their level of interest will

remain the same (Mendelow (1991) cited in Scholes, K. & Johnson, J 1997:198). Jones

(1995) argue that the stakeholder framework is practical for considering business and

society issues, because it identifies the sources of a corporation’s social obligations and

its set of stakeholders (Jones (1995) cited in Rowley, T. 1998:28).

Therefore by Nike concentrating on their stakeholders it has placed Corporate Social

responsibility high on their agenda. The organisation has to demonstrate transparency in

all actions and reporting. This can cause conflict with the shareholders. Common in

stakeholder theory is compromises on both sides that can obviously haze over

differences; this primary characteristic is accepted as contra-distinctiveness from the

shareholder value. This was discussed by Friedman, (1993) that the ultimate purpose of a

company should be serving the interests of its shareholders (Friedman, (1993)

Value chainNike’s supply chain provides a clear view of the extent of the global nature of the

company. Nike’s headquarters are in America; however, virtually all of its production

takes place outside of the United States.

Nike’s supply chain upstream begins with the materials used in the production of its

products. Many of these materials used in production are available in the locations which

the manufacturing takes place, but some specialised materials have to be imported to the

manufacturing company.

Past options Outsourcing of all production

Rationale Reduced costs

Future Options Outsource with stronger control

Rationale Speed up reporting of any problems in production, the supply

chain, the greater the distance the slower the reporting of

problems

Critical

Success Factor

Reduce problems associated with distance, i.e. quality,

consistency and value

Change of

Focus

Although still outsourcing, they would gain more control over

production.

Theorist Johnson, G & Scholes J 2004, agreed that Nike can be too far

from the site of production

Past options Target USA

Rationale Demand and growth for footwear in the US was rapid.

Future Options Future option is to enter EU markets

Rationale To expand into growing markets as US is near saturation.

Critical

Success Factor

organic growth as well as by acquisition, also brand name,

goodwill- therefore there is a match is CSF to succeed

Change of

Focus

Maybe have to target marketing in a different way

Theorist When markets are reaching saturation, new markets need to be

identified to prevent decline in sales. Johnson, G & Scholes J

2004,

Distribution and RetailersNike has a strong network of retailers in 200 coutries world wide through distributors,

licensees and sudsiduaries. Within the USA there are 18000 stores that retail nike

products. These are well established channels.

Nike made itself heavily dependant on one retailer Footlocker, representing 10% of their

revenue. When Footlocker reduced their purchasing form Nike, it created a reduction in

turnover in the short term. Organisations that are over dependant on one retailer are open

to cash flow problems, if the retailer switches suppliers, reduces purchasing or ceases

trading (Johnson, G & Scholes J 2004).

Past options Although they have numerous retailers, they were heavily

dependant on one out let chain

Rationale To sell top of the range products

Future Options To negotiate partnerships deals that allow for the choice of

product for the retailer

Rationale To prevent sudden withdrawal of products

Critical

Success Factor

Customer being able to rely on source of product. If withdrawn

they may find an alternative product

Change of

Focus

Closer working partnerships

Theorist Organisations that are over dependant on one retailer are open to

cash flow problems, if the retailer switches suppliers, reduces

purchasing or ceases trading. Johnson, G & Scholes J 2004

Nike has a futures, but can also ship overnight when needed. Although the futures

method is currently working for Nike,

Past options Futures ordering system

Rationale a 6 month lead time for product orders, always knowing what is

needed in production

Future Options

Rationale

Critical

Success Factor

This is responsive to the market trends, but can also help retailers

plan stock.

Change of

Focus

Theorist Any change or threats within the markets could leave them

overstocked (Groucutt, J. et al 2004)

Sales In addition, consumer sales outside of the United States exceeded sales in the United

States in 2003 with only 43% of the company’s sales coming from the US In Europe

there are difficulties in entering the market, the single currency and the trade rules make

entry difficult for large organisations.

Past options Target the US

Rationale Growing market, but is now reaching saturation

Future Options Target new markets, including e-commerce

Rationale To avoid a reduction in sales

Critical

Success Factor

Entry to the markets, by advertising and targeting the audience.

Ensuring accurate and quick picking of the customers order

Change of

Focus

Shift to global marketing, selling world wide from the web

targeting Generation Y.

Theorist By tailoring marketing to the customer needs Nike has been

successful in the past and continues to be today (Johnson, G &

Scholes J 2004)

Nike BrandingPast options global brand

Rationale Consumers are willing to pay a premium price for; as they imply

credibility, high quality and up-to-date global trend.

Future Options When companies are bought trade under their name

Rationale Moving into a new market with a brand that is already global

you can reduce cost of introductory and follow-up marketing

programs.

Critical

Success Factor

Ensures customer loyalty and to widen portfolio

Change of

Focus

Concentrating on core products as Nike, allowing growth in new

diverse markets

Theorist significant scales of economy are achieved Aaker 2000, this is in

terms of brand development, packaging and manufacturing

MarketingSports personalities have endorsed the Nike product, although with numerous different

sports and countries targeted this has been costly. The amount each personality has

received is considered high. This forces the competitors to market their products in the

same way. Trends within the industry have increased the number of female consumers.

With advertising Nike has targeted segments of the market, this costly. Nike should

review their advertising policies (Groucutt, J. et al 2004).

Past options Sports personalities have endorsed the Nike product, although

with numerous different sports and countries targeted

Rationale To target all types of sport by choosing personalities which are at

the top of their sports.

Future Options To chose personalities that appeal to a wider audience

Rationale To reduce advertising costs

Critical

Success Factor

Change of

Focus

Theorist Groucutt, J. et al 2004

4psThe athletic shoe industry is highly competitive as well as a demanding market where

fierce competition, price conscience consumers, and constant changing market trends and

fads have all been attributing factors in how a manufacturer responds.

Highly focused brand includes Nike, Adidas, and Reebok, they target a precise market.

However, there is evidence that a brand will widen its target market as it reaches a greater

level of maturity. In the case of Nike, for example, there was a move into new sports

areas away from the running heritage. Nike’s target audience has moved from more

masculine towards female and Generation Y.

Price is related to Product, through the characteristics of the brand, it’s packaging and

overall image. People are buying into an ideal, not just the item. Consumers believe that

there is a link between quality of a product and the price. Consumers question what they

are getting for their money. Brand Management, customer awareness and loyalty, is

directly linked to the price, therefore maintenance of the relationship between brand

images; quality and price have to be consistent (Johnson, G & Scholes J 2004).

Models used in Analysis

Swot analysisThis analysis will summarise key issues from the business environment and the strategic

capacity of Nike. This can be used to judge future strategic options.

Strengths o Product Rangeo Capacity for innovationo Distribution expertiseo Single Brando Stars endorsement o Contract manufacturingo Large portfolio of products

Weaknesses o Single Brando Too many stars endorsement o Contract manufacturingo Spread portfolio of productso Reliant on retailerso Reduction of target market

Opportunities o New Marketso E commerceo Research and developmento Increase product lineo Product diversificationo Change target marketo New manufacturing countries

Threats o Competitiono Fashion Trendso Contract manufacturing and copying of product (intellectual property)o Consumer lifestyle changeso Competitiono Bad press associated with Nikeo Outlets cancelling orderso Sars

PestleThis will consider environmental influences on the organisation, both in the past and with

future strategic plans.

Political

o Striking dock workerso Political unrest in the production countrieso Terrorism in the home country

Economic o Slow down in the economyo Reduction in consumer confidenceo Barriers of entry to the EUo Contract manufacturing

Socio-culturalo Brand conscious consumerso Change in buying habits in younger peopleo Generation Y prefers other types of footwearo Increase in the female share of the marketo Corporate social responsibility

Technological o Speed of change of producto Design Abilityo Speed of News reporting

Environmental o Re use a shoeo Sustainability philosophyo Climate impact

Legal o Threaten action by underage workforceo Poor employment recordo Corporate social responsibility o Contract manufacturing and copying of product (intellectual property)o Trade agreements

Supply ChainLike every large IT undertaking, the team responsible for the implementation of Nike

Supply Chain (NSC) began with a set of specific, stated goals:

Enhancing Nike’s ability to respond to changing conditions; Reducing inventory and capital investment risk; Improving service to meet customer/consumer needs; Improving process, information and product quality; and Providing an efficient global supply chain with local implementation

Porter’s 5 forcesThis model is used to identify the sources of competition, and how to gain advantage over

them.

Potential Entrants

o Other sportswear manufacturers expanding their portfolioo Cheap copies from the Far East

Buyers o The buyers of sports footwear have changed in the past decade. o There has been and increase in women purchasing the shoes, o Generation Y has a different tastes and purchasing methods.

Substitutes o When required for professional use there is no substitute goods, but as a

fashion item there are many other goods that could be purchased. Suppliers

o Using production facilities in the Far East has give Nike economies of scale. Although there are now problems arising from these factories, they are switching to making there own goods, labour and political unrest causes delays in manufacturing and shipping of the goods,

Competitive Rivalry o Reebok, offering more choice of shoe, introducing endorsement by sports

personalities, sponsoring sporting leagueso Adidas have recovered from the problems that plagued them, and have a

good product mix, covering a wide range of