Essay On Grand Strategy Plan For Nike
Formation of marketing strategy has a major place in the complex of marketing activities. The planning and organization of other activities in marketing and, ultimately, the success of the enterprise in the market depends on the choice of strategy. It is easy enough to adjust tactical actions, but the change of incorrect chosen strategy is accompanied by significant financial and other losses. This imposes a special responsibility on the manager’s-strategist and imposes special requirements for his theoretical and methodological literacy, analytical and practical skills. Therefore, the choice of the company for preparing grand strategy plan is Nike Inc. because it is the best known seller of athletic shoes, setting the standards that others try to follow. It is an American multinational corporation, which name and athletic shoes are recognizable to people around the world. There are more than more than 700 shops around the world. Nike does not rely on market research and preliminary testing, which often reduce the impact on the perception of and rely on experimental advertising. Nike’s vision is to practice the emotions of winning and crushing the competition. As regards mission Nike is going “to be the number one athletic company in the world”.
However, the company needs to make a restructure in order to increase products’ competitiveness in the market due to the fact that competition in the sports wear industry is extremely high as well as to improve financial indicators.
The strategy of concentrated growth is one of the four main types of strategies aimed at the development of the company. Product development strategy (or innovation) is a type of this strategy. Applying the strategy of innovation, the company acts on established markets with a new product or to improve the old. Nike’s has not only shown innovation on sportswear, but also in accessories, by catering to sports range from cricket to volleyball, football, bicycling, wrestling, tennis etc. The methods Nike can use are an update and expansion of the product range; increase the functions and properties of the product (new user-friendly design, increased safety in use, etc.) and improvement of the quality of the goods.
Nike keeps traditional and non-traditional supply channels in more than 120 countries aiming its key market regions: United States, Europe, Asia Pacific, including Indonesia, China, Taiwan, India, Thailand, Vietnam, Pakistan, Philippines, and Malaysia and the Americas (not including the United States). It headquarters in Oregon, the USA. There are more than 700 shops around the world (Nike factory stores, Nike stores, NikeTowns, Cole Haan stores, and internet-based Web sites to sell its sports and leisure products.) and the number of offices situated in 45 countries outside the United States. In order the company could apply this strategy it should open new subsidiaries in other countries, which require sufficient investments. However, it is recommended for those markets, where there are low competition level, developing or new market and increased demand on the goods.
Nike over the years has been working on their sustainability, collaboration and sharing of knowledge. Without this the companies would not be able to replicate their efforts or re-invent and re-create their image in the market. Nike continues to seek new ways of development to create even more advanced sporting goods, and has a creative approach to direct communication with customers. Due to this finding such technologies as Nike Free, Nike + and Nike Sphere appeared. The company has always kept pace with technological advances – from the very first pair of shoes with curly soles that are made by Bill Bowerman with the help of his wife’s waffle iron, and up to the revolutionary technologies, such as Nike Pegasus and Nike Air. Nike has always tried to go beyond accepted. Nike produces designs for every category of population despite its sex and race: for men, women and children. The most famous selling products are running, basketball, children’s, cross-training and women’s shoes.
Innovation is essential for every organization as it helps in enhancing them in the economy and gets them a better position in the market. Innovation is a never-ending process in the organization without which one can lead to stagnation and extinction. The changes occurring in the business environment are inevitable and its best to adapt the organization with those happening changes. Nike has various companies being operating under them like “Nike Air, “Nike Shox,” and “Nike+iPod” that constantly remind us of the innovation coming up in the athletic apparel industry. Its innovative culture is known to have taken them to one of the best athletic sports brands in the world. Nike has brought about innovation not only in athletic sportswear, but also in the field of accessories and sports equipments before any of its competitors. The experienced research and development team of Nike has always come up with innovative ideas of product range. The site nikeid.com offers its customers with the facility of customizing their shoe by stating their choice of color and design.
Horizontal acquisition occurs among companies of the same industry. This will result in some savings, such as reduced overlapping positions, production capacity will be used better and excess can be sold, etc. Thus, the efficiency of the combined company will be higher than the total performance of companies before the acquisition was. The savings will increase the company’s profits, and, most importantly for shareholders – to increase shareholder value. Nike has bought a number of apparel and footwear firms starting from its appearance in the market. In 1988 it made the first purchase of the fashionable footwear corporation Cole Haan. In 1994 the same happened to Bauer Hockey. Having paid USD309 Mio in 2003 for Converse, makers of the Chuck Taylor All-Stars line of sneakers, the company became its owner. In 2004, Nike bought Starter and in 2008 – Umbro, known as the manufacturers of the England national football team’s kit.
Vertical merger occurs if companies of one industry decided to cooperate, but they specialize in different processes. In case of merger the company will be vertically integrated with a complete cycle of production and sales of products. As a result, the effectiveness of the new company will grow – sales and production are now controlled by one company, so now there will be no disruption in the sale and supply. And it ensures the success of the new company and its stock price will only increase. 2002 is the important period in its development due to the purchase of surf apparel company Hurley International from founder Bob Hurley.
Concentric diversification is a strategy for the development of production, aimed at improving the economic efficiency of enterprises at the expense of replenishing its nomenclature number of new products. Concentric diversification provides novelty and impetus to the development of even such a business, all indicators that point to the straight road to bankruptcy. The choice of a particular product as a target for expanding the range carried out based on the specifics of the current production. The product range at Nike needs to be improved to overcome the weakness of diversification.
Conglomerate diversification is the replenishment of product range that have neither to do with the technology used, nor the existing products of the company. This type doesn’t suit the company’s activity because requires total reorganization of its activity in all segments, namely financial, marketing, HR, etc. These measures will only increase total expenses, while the restructuring process requires decreasing them, for example, through horizontal acquisition and divestiture in case of unprofitable business.
Turnaround strategy means to renovate, modify or change a loss-making corporation into a profit-making corporation. However, Nike is not loss-making company and such strategy is not recommended to be applied.
If an organization’s operation is considerably under the risk, insolvency of that business or the resources can facilitate the rest of the business go back to success or supply the resources that allow the business owners to follow additional prospects. With the intention of refocusing on its crucial business positions, Nike started divesting of a number of its subsidiaries in the 2000s. in 2007 it sold Starter and next year it got rid of Bauer Hockey. Concerning Umbro, it was sold in 2012, and Cole Haan was sold in 2013. As of 2013, the company has only two vital subsidiaries: Converse Inc. and Hurley International.
Liquidation strategy is a limiting case of reduction strategies and implemented when the company cannot conduct further business. Today it is difficult to imagine that at one time the whole Nike Company was placed in the trunk of a car of its founder Phil Knight. It is unlikely that if someone would venture to suggest that in a few years this eccentric merchant sports shoes turned into the owner of one of the most successful corporations in the world.
Bankruptcy is the inevitable phenomenon of any modern market that uses insolvency as a marketing tool for the redistribution of capital and reflects the objective processes of economic restructuring. Nike doesn’t need to use this strategy because it won’t increase products’ competitiveness in the market and improve financial indicators.
Nike focuses on various joint projects with other companies, in particular the developed Apple exclusively for Nike control player iPod, integrated into the base range of sneakers “Nike+”. This is the result of interaction with other sectors (one of the sides of the national diamond M. Porter). In addition, Nike’s 2004 acquisition of the athletic apparel and footwear brand “Starter” also affects Nike’s strategy in terms of corporate responsibility.
Strategic Alliance is a partnership between the companies in which the resources, capabilities and core competencies of firms coming together to achieve the best results. High-growth firms particularly actively rely on strategic alliances to expand its technical and operational resources. As a result, they save time and increase productivity jump, because they do not have to create new competencies from scratch. Nike could try some alliance, but on its conditions in order to maintain brand loyalty and reputation. But Nike could face the failure of strategic alliance due to the departure from the strategic goals, unrealistic expectations, business and geographic overlays, insufficient mood for success, failure to understand and adapt to a new style of management and lack of trust.
Consortia, Keiretsus, and Chaebols
Consortia are defined as large interlocking relationships between businesses of an industry. In Japan such consortia are known as keiretsus, in South Korea as chaebols. Concern is created to perform certain functions or tasks that can be solved only by joint industrial and financial capacities of several companies. These companies have a common interest and conclude a mutually beneficial agreement on cooperation. As part of the group a common centralized system of control is formed. Nike doesn’t have enough financial resources to create concern. It could try to attract investors, but it is not recommended to use this strategy because it will have limited autonomy.
The effectiveness of the restructuring depends on many different factors, namely the timeliness of its implementation; the correct choice of the ways and methods of restructuring; the existence or possibility of recruitment and training the necessary personnel; financial preparedness for restructuring, etc. The number and quality of these factors are unique to each type of restructuring and primarily depends on its magnitude. Based on the grand strategy plan it is necessary to state that Nike competes with a lot of athletic and leisure companies in the world. It faces aggressive rivalry in product offerings, technologies, marketing expenditures, pricing, costs of production, and customer services. Therefore, its business strategy should be based on the new product development and diversification process. Applying differentiation business strategy considers company’s reputation as innovator in sports. Good competitive properties are also the best technical and environmental characteristics, medical indications. Its organizational structure is functional, which provides with the following advantages, namely encouraging business and professional expertise, reducing duplication of effort and consumption of material resources in the functional areas, better coordination in the functional areas. However, there is a dark side to the reputation of Nike. As it is known, this brand shoes are made in third world countries. This is where there are unpleasant situations: the brand is blamed for extremely low wages ($40 per month) and the use of child labor. The company, of course, struggles with it, but not very successfully. Not so long ago the production of Nike in China faced a problem with toxic substances. Leadership tries to control these situations, but this requires huge investments.
Being quite innovative, it should develop its cooperation with different technological companies. For example, regarding the cooperation with Apple, Nike team thrilled with the opportunities that open up in front of them at the expense of such a partnership. Nike + app is present in all new iPhones, which came on the market. Nike is the sponsor of many athletes and sports teams around the world. In particular, its partners are football clubs such as the “Manchester United”, “Arsenal”, “Juventus”, “Barcelona”, “Inter”, and others. However, Nike is likely to refuse further cooperation with “Manchester United” on the expiry of the current contract. Nike supplies it the famous red shirts since 2002, the current agreement expires in 2015, and representatives of the American company are not willing to prolong the contract due to lack of business sense.
In order to maintain its competitive advantages an American manufacturer uses achievements of the advertising business. Nike has turned its logo (the image of Nike’s wing, the Greek goddess of victory) in the most famous trademark of the planet. This brand is so well known that company’s name is not mentioned in the advertisement. The company can try to explore new opportunities by entering the fashion industry. In addition, Nike needs to think and come up with alternatives that would reduce its packaging waste. Its alternative needs to be such that not only reduces the waste and also reduces the weight and cost of shipping.
Bessant, J. and Tidd, J. (2007). Innovation and Entrepreneurship. John Wiley & Sons, Chichester.
Brassington, F. and Pettitt, S. (2006). Principles of Marketing, 4th Edition, Pearson: Harlow, Essex.
Nike Inc. (2014). Nike, Inc. Annual Report 2014 on Form 10-K. Retrieved from http://investors.nike.com/files/doc_financials/2014/docs/nike-2014-form-10K.pdf
Nike Inc. (2015). About Nike. Retrieved from http://about.nike.com/
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