Nike Inc: International Marketing Research Papers Example
Nike Inc.: International Marketing
Nike is an International Sportswear that is based in the United States, and that is the largest supplier of athletic footwear in the world. Nike dominates the world’s sportswear market and has continued exhibiting growth throughout the years. Nike also produces various sports equipment as well as both men and women accessories. It is often the brand for choice for many athletes across the globe. The company that was initially started in 1964, has slowly built itself to become a brilliant example of global market operations. The company has managed to adapt to dynamic global conditions, and this has made it remain a global powerhouse when many other apparel companies have fallen. Nike has enormously benefited from globalization, and the effect and consequences of this element on the company are very clear.
Factors that led Nike to Internationalize
Nike was initially based exclusively in the United States. The first international Nike store was opened in Taiwan in 1975 (Donaghu & Barff, 1990). The opening of the first international store in Taiwan would pave a way for the opening of very many other Nike outlets and subsidiaries through the world. In a very short period, the company would go on to become a full international brand (Douglas et al., 2001). However, before looking and exploring Nike’s status as a global and international sportswear brand, it would be wise to look at the factors that stimulated the internationalization of Nike. Many companies view internationalization as a risky affair and therefore prefer to conduct their operations in one region or country. This view often impedes the potential and growth of these companies and many, therefore, never fully realize their potential. In Nike’s case, there was some factors that encouraged or led to the internationalization of the company.
One of the factors that led to the internationalization of Nike was the realization that the manufacture of footwear is a very labor intensive activity. The process of manufacturing footwear involves among other activities cutting, shaping, stitching and packing a huge number of components that eventually make a distinctive shoe brand or type (Donaghu & Barff, 1990). Ultimately, Nike realized that for it to sustain a sufficient productivity level, it would need to invest in a significant amount of labor (Spar & Burns, 2002). As it was a relatively small and medium company at the time, labor was obviously quite expensive especially in a highly advanced country like the United States where many prefer white collar jobs instead of the blue collar jobs. The strategic committee of Nike realized that the international arena provided a platform through which cheap labor that is used in the production of sports foot wear could be obtained (Spar & Burns, 2002). If the company opened operations in countries where the cost of labor was cheap and where this labor was readily available, it would not only be able to maintain a steady productivity level, but it would also be able to increase its returns or profits because of savings in labor costs as well as the new international market which was showing signs of being very receptive to Nike’s products (Doole & Lowe, 2012). Therefore, one of the primary factors that led Nike to become an international company and to open operations even in foreign nations was to tap cheap and abundant labor in this international arena (Ghauri & Cateora, 2010). Nike started to test the waters by opening its international office in Taiwan. The opening of the first international office in Taiwan would later on pave way for the full globalization and internationalization of the company that would catapult it to the status of one of the world’s premier sportswear brands.
Apart from being labor intensive, the manufacturer of sportswear involves the use of very many raw materials and components. The manufacture of distinctive footwear involves the artistic combination of various raw materials and elements. The major raw materials that are used in the manufacture of footwear include synthetic and natural rubber, plastic and vinyl compounds, nylon, foam cushioning materials canvas and leather. These materials can sometimes prove to be very expensive, and they may not be necessarily available in one region. When Nike commenced its operations, it found that it was increasingly becoming difficult to acquire these raw materials and sustainable prices. Acquiring these materials primarily in the United States and then making decent profits from the finished product was proving to be a difficult task with significantly minimal returns. At this instance, Nike realized that there are various countries across the world, where these primary raw materials could be acquired at cheap prices (Stonehouse & Minocha, 2008). The only thing, that lacked, was the technology to develop them, and this technology was readily available in the United States (Doole & Lowe, 2012). Therefore, it would be relatively cheap for Nike to initiate production and manufacturing centers in these countries where raw materials were readily available and then export the technology needed to exploit these materials and come up with high quality footwear products (Greenberg & Knight, 2004).Therefore, one of the factors that prompted Nike to go global was the availability of cheap raw materials required in the production of footwear in foreign nations (Doole & Lowe, 2012).
Another obvious reason or factor that led to the internationalization of Nike was to take advantage of the growing sports and athletic market (Strike et al., 2006). Sports became highly developed and gained a lot of popularity throughout the 20th Century (Andreff, 2004). This was accompanied by the need for highly customized sportswear accessories, tools, and equipment. Nike wanted to tap into the growing market for sportswear. To reach its full potential, it needed to expand its activities, including production and sales beyond the United States market and into foreign nations. This is what prompted Nike to open its first international office in Taiwan that was later followed by the opening of many other offices and production centers across the globe (Donaghu & Barff, 1990). Therefore, Nike became an international company that priced and sold it distinctive products in all corners of the world. Ultimately, its vision to tap into the growing sportswear market was hugely successful because as it has been mentioned earlier, it enjoys a significant share of this international market and is indeed one of the premier sportswear brands in the world (Douglas et al., 2001).
Competitive Advantages of Being Globalized
A company, that is globalized obviously, has significant advantages when compared to companies that are localized in one region. The major advantage is, of course, a larger marker, but there are many other advantages apart from this that result from globalization. Nike has managed to become a fully globalized company. Because it outsources production and manufacturing to different countries across the world, it is considered as a multinational company. It is not a global retailer that manufactures products in one area such as the United States and then sells them globally. There are many advantages of being a multinational when compared to being a global retailer.
As mentioned, one of the advantages of being globalized in an increased market. Globalization reduces the boundaries between markets and ensures that the goods produced by a given company can reach virtually any corner of the world (Calori et al., 2000). This becomes easier when the company in question has offices and production centers across the global divide. Globalization means that a company can open production centers across many countries where resources such as raw materials and labor are cheaply and readily available (Garcia, 2003).
In fact, one of the primary reasons for globalization include the harmonization of raw materials and labor acquirement and the opening of market boundaries (Lemak and Arunthanes, 1997). Nike has become a global company in its search to gain a larger market, reduce production costs and ultimately become an appealing brand to many.
Globalization has obviously had a huge impact on Nike as a sportswear manufacturer. Currently, the company is one of the most profitable in its industry domain (Locke, 2003). The maximization of profits is the key goal and objective of many companies, and Nike has been able to achieve this goal. The outsourcing of production and other operations have seen the company maximize profits and increase costs saving meaning that the profits accrued from sales outweigh production costs by an enormous margin (Calori et al., 2000). This is once again attributable to globalization.
Globalization has enabled it to transcend the conventional markets and reach an audience that would have previously been considered unreachable (Alashban et al., 2002). It is not a surprise to come across Nike’s products in the most hidden corners of the world. This has resulted from the massive brand building that comes with globalization.
Internationalization Life Cycle
The internalization of Nike and its products can be described in the distinctive stages Nike commenced its operations in 1965 and at this time, its vision was to become a leading manufacturer of sportswear in the United States. This makes up the first stage of the internationalization life cycle which majorly refers to the initial location of the company and its products. The beginning of the internationalization life cycle begins with a situation whereby a given company in this case, Nike starts offering a distinctive brand of products to its local market. This new product is offered to consumers who can access or afford the product. This leads to a significant demand of the product. The developing company then proceeds to produce in large numbers in order to meet the demand and also stays in close relations with customers in that particular market. In a country such as the United States, there is a greater access to financial tools and capital aids, as well as technological innovation, and the growth of the company and its products is, therefore, very first. This is what happened in Nike’s case. The company started producing for the local market. The product was very well received and before long; there was significantly a high demand for the product (Cullen & Parboteeah, 2009).
The second part of the internationalization life cycle is when the products of the company after having become successful in the home nation starts receiving calls from the international market. After the success of Nike’s Sportswear products, it started receiving demands from the international market. This obviously prompted the company to start thinking about becoming international. In addition, there was also the opportunity to increase profits as well as the opportunity for reduced production costs due to the availability of cheap labor in foreign nations as well as readily available resources. The company started by first attempting to become a global retailer whereby it exported already manufactured goods to foreign nations and sold them. After some time however, the company realized that it would be more profitable and economical to outsource production and this led to the lowering of labor costs, the opening of the gates to economies of scale, as well as a reduction in the international trade obstacle, costs (Cullen & Parboteeah, 2009).
The third and final stage of the international life cycle is standardization. After production has been outsourced and taken to different countries where opportunities and resources are more favorable, the company decides to standardize its products with the aim of reducing costs. This is exactly what Nike has done by standardizing its products across the world. Rather than attempting to develop more technology, Nike sought to standardize its products and only improve them through various innovations. The company was able to exploit fully the economies of scale and differences between various production locations were significantly reduced.
Attitude of Buyers to the Product’s Country of Origin
The United States has always been regarded as a highly advanced country. It has been known as a country that has enough capability and resources to produce satisfactory products that meet customer wishes and needs. Therefore, products manufactured from the United States are usually received very favorably even by the international market because of their wide belief that they are of the highest quality.
When Nike first went international, there was a great demand and appreciation of its products; Buyers had a very positive attitude about the United States which was the original country of production (Goldman, 1998). As mentioned, a product produced in the United States was believed to be of high standard and this would explain why Nike’s products were warmly received in the international arena (Freeling et al., 1997). As a country, the United States was and is still loved by many countries across the world especially when it comes to products and technology.
Because of the already existing positive attitude about the original country of product, the international marketing strategy of the company has been pretty straightforward since the customers are already receptive of the products. This means that the company has mainly focused on maintaining its current portion of the market and customers who are already receptive of Nike’s products and who have become loyal customers (Calori et al., 2001). There are some situations whereby some companies, who are attempting to go global, are faced with the challenge of diluting the negative attitude that buyers may have about the country of origin (Segal-Horn, 1996). In this case, the main issue of the buyers may not be with the products but with the country itself. However, this was not a problem for Nike and therefore, its international marketing strategy does not have the component of trying to dilute this negative attitude but is rather focused on sustaining the positive attitude about the United States and its products that is already positive in many nations.
Globalization and Outsourcing
As it has already been shown, one of the primary internationalization strategies of Nike is the outsourcing of production. In fact, a large portion of Nike’ overall products are not produced in the United States but are rather produced in foreign nations where resources and opportunities are vastly available and cheap (Locke, 2003). Labor, acquirement of raw materials and manufacturing may prove to be an expensive venture when the three elements are obtained or conducted exclusively in the United States. However, as it has already been explained, Nike has outsourced a majority of its labor and manufacturing process to foreign nations (Andreff, 2009). In fact, it is not surprising to find that some of the products being sold in Nike’s home country (the United States) have actually been manufactured in foreign nations. Nike’s strategy is not surprising given that due to globalization, many companies are choosing to outsource some of their main operations and elements such as labor and manufacturing to foreign nations because of the availability of better opportunities as well as well as the possibility of cost reductions (Andreff, 2009). Nike’ strategy is to outsource even more of its functions as it continues growing and opening even more branches across the world.
It is clear that Nike’s international strategy has had humongous success and this is one of the primary reasons why the company has been able to gain and sustain a significant share of the global sportswear market. Since it opened its first international branch in Taiwan, Nike has engaged in an extensive internationalization campaign that has seen it start operations in more than 190 countries across the globe. One of the major components of its international strategy is the outsourcing of labor and manufacturing to foreign nations where there exists better opportunities and resources. Nike has directly benefitted from globalization, and this trend is likely to continue even in the future if its sticks with is current international strategy.
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