Brand Audit for Nike
Overview
Originally Blue Ribbon Sports, Nike grew from a distributor of shoes designed and manufactured by Onitsuka Tiger, a Japanese company, to the largest seller of athletic, apparel, footwear, equipment, and accessories globally (Flynn, 2015, p. 4). The initial strategic focus of the company was production and distribution. The company's primary activities were the design and sale of its products, with most of the manufacturing being outsourced to Japan. The second evolution of the company's strategic focus was product innovation. Even before the founding of the company, its two founders were already innovating athletic footwear to enhance quality and performance (Park & Kincade, 2010, p.183). Product innovation became an integral aspect of the company's strategic approach in its medial years. This evolution saw the company introduce technological advancements in its products to outperform competitors, such as Puma and Adidas. This new focus heralded a new evolution into a marketing company through notable reinvigoration of its brand image through the "Just do it" slogan and endorsement by Michael Jordan (Park & Kincade, 2010, p.183). Through this evolution, Nike has become a flexible company that relies on several strategic priorities. This report explores the internal and external environment of Nike with a view of identifying strategic issues for enhanced brand performance and recommended actions.
External Brand Audit
Macro-environment
Several factors influence the macro-environment in which a firm operates. The PESTLE tool is effective for the analysis of these factors and the macro environment they create (Sammut-Bonnici and Galea, 2015).
a. Political Factors
Nike has shielded itself from the influence of political power by maintaining a supply chain that is diversified globally. The political stability of the United States, the brand's core market, allows its 36 domestic factories to operate stably. However, the company has manufacturing sites in other countries, such as China, Thailand, Vietnam, and Indonesia. Consequently, the company is protected from politically-instigated trade wars, such as the most recent one between China and the United States when the former president threatened a 10% tariff increase on Chinese goods. Had the tariff increase been effected, the overall effect on Nike would have been minimal because only a paltry 10% of the products from Chinese manufacturing sites are sold in the United States (Uta, 2020).
b. Economic Factors
The last two global economic crises have affected the brand significantly. The 2008 crisis occasioned a 12% decline in sales owing to the reduced purchasing power of the customers in the tough economic times. However, the company restructured significantly through a 5% reduction of the human resources and other cost-cutting measures. The recent crisis occasioned by the coronavirus pandemic has also affected global revenues significantly, with a reported 38% decline in the fourth quarter of 2020. However, the brand's investment in e-commerce saw a 30% increase in its digital sales and 25 million new members subscribing to the brand's digital platforms (Uta, 2020).
c. Social Factors
Nike has shown awareness and understanding of the social trends and an ability to either position themselves to benefit from them or exploit them. The sneakerhead culture in the United States and football culture in Europe are two examples of Nike's understanding of social trends. Fans of different sports identify with various sports personalities in the individual sports. Nike has identified and engages the leading and most marketable sports personalities in different sports as their brand ambassadors, a move that has reassured the dominance of the brand in its market while also creating new revenue-generating avenues, such as the resale of soccer boots and sneakers (Uta, 2020).
d. Technological Factors
Technology plays a significant role in Nike's operations. Its e-commerce platforms were influential during the coronavirus pandemic period when following the closures of businesses, Nike could no longer rely on its brick-and-mortar stores. The increase in digital sales and new membership are a testament to the influence of technology on Nike's operational environment. The company has invested in other proprietary technologies to offer a competitive advantage, such as Nike Fit, Lunarlite foam cushioning, and Nike Flywire support system, among others (Uta, 2020).
e. Legal Factors
Companies pursuing an innovation strategy often register patents to protect their innovations. The most influential legal factors for Nike relate to patent infringement. Nike has had court cases with Adidas, one of its most fervent competitors, for patent infringement. Nike recently sued Sketchers, another important competitor, for patent infringements (Uta, 2020).
f. Environmental Factors
The most important environmental factors for Nike are environmental consciousness, especially as it relates to carbon emissions and climate change. Many companies have realized the influence of their environmental conservation efforts on their brand image (Schmuck et al., 2018; Havila, 2019; Moise et al., 2019). Nike is transforming its operati9ns to enhance environmental conservation. Part of the transformation involves the transition towards the use of renewable energy (Uta, 2020).
Customer Analysis
The brand's products are premium in nature and attract a high price. The brand's products are targeted at customers who prefer premium products and do not mind the high price tag that the products fetch. A cohort of this target group comprises athletes in different sports. These customers are willing to pay for a quality product that enables them to perform well in their respective sports. Evidently, Nike has a large product line for sneakers and boots for basketball and soccer, respectively. The innovative technologies that Nike incorporates into these products attract the athletes because they enhance performance. Nike also targets casual consumers who lead an active lifestyle and would want quality footwear that is as classy as it is performance-enhancing. (Oberoi, 2020).
Competitor Analysis
Nike has several competitors in both the industry and niche markets. However, its biggest rival has been Adidas, from the perspective of market share and market capitalization (Paul, 2020). With regards to the product range, Adidas has a larger product portfolio, with 2,625 products compared to Nike's 643. However, Nike's price range is between $1596 and $36500 compared to Adidas' at $899 and $29999 (Paul, 2020). At $136.69 billion, Nike's market capitalization is significantly larger than Adidas' at $45.21 billion (Paul, 2020).
Internal Brand Audit
Financial audit
The brand's net worth is estimated at $131.54 billion, with a brand value of $34.8 billion (Churlinov, 2020). Figure 1 shows that the company has performed consistently well in terms of revenue general since the 2008 financial crisis. The company has generated more revenue in the subsequent year compared to the previous year. However, the net income of the company has not been as consistent during the same period (Churlinov, 2020).
Source: (Churlinov, 2020).
Brand Strategy
The most important element of the brand's strategy is sponsored partnerships. The brand pursues sponsored partnerships with the most marketable and popular athletes in different sports categories (Churlinov, 2020). One of the most notable sponsored partnerships is with Michael Jordan, one of the most recognizable basketball personalities and athletes (Uta, 2020). Television ads also feature in the brand's strategy. The brand exploits this mass communication channel to communicate its brand. The brand's television ads have fared well, with the brand earning an Emmy Award in the category of best commercial on two occasions (Churlinov, 2020). The brand's social media presence and activities are also an integral part of its strategy. A report by Brandwatch showed that Nike has an average of 62,608,204 images on social media annually, a value that is significantly ahead of other best performing sports apparel brands in this category, such as Puma, Adidas, and Under Armour (Brandwatch, 2018).
Visual identity
The brand's logo is the leading element of its visual identity, the logo is a swoosh. Below the low is the brand's famous tagline, "Just do it" (Churlinov, 2020). These elements of the brand's identity are among the most recognizable globally. The historical colors of the brand identity have been red and white. The red color was predominantly on the logo, while white was the palate on which the logo was superimposed. The red color communicates energy, passion, and joy, while white communicated purity, nobility, and charm (Churlinov, 2020). The brand's colors have changed in the recent past to black and white. The brand font has remained unchanged, with the font being a modification of the Futura Family Font (Churlinov, 2020).
Brand Tactics Review
Nike's brand tactics align with the company's mission of inspiring athletes globally (Churlinov, 2020). The sponsorship partnerships allow the athletes to generate income for championing the brand. In addition, its innovative focus helps empower athletes to maximize their performance, an outcome that contributes to the brand's image and quality. Nike also pursues diverse strategies to exploit the power and influence of different communication channels. Even though its sponsored partnerships are arguably the most lucrative, other tactics, such as television ads and social media marketing, contribute to the visibility of the brand significantly.
SWOT and key strategic challenges summary
The following is the SWOT analysis of Nike:
|
Strengths · Brand visibility and awareness · Large customer base domestically and globally · Marketing expertise |
Weaknesses · High bargaining power of retailers · Overreliance on the domestic and North American market · Long-term liabilities |
|
Opportunity · Emerging markets · Eliminating large retailers as middlemen · Ecommerce |
Threats · Competitive pressure for existing sports apparel brands · Economic uncertainties · Counterfeiting |
Strategic and Tactical Recommendations for Improving Brand Performance
The following are the strategic and tactical recommendations of the company to enhance its brand performance.
- The company should diversify into new and emerging markets in order to reduce its over-reliance on the domestic market. Some of these markets include China, Brazil, and India (Business Strategy Hub, 2020). Statistics show that the United States market contributed 41% of the company's sales in 2020 (Business Strategy Hub, 2020). An overreliance on this market could leave the company at risk, especially with mounting competitive pressures. Exploiting the new and emerging markets would help diversify the company's market.
- Eliminating the intermediaries is also recommended to address their significant bargaining power and the influence of this power on the company's financial performance. In addition, eliminating the retailers and wholesalers would allow the company to control product positioning, thereby enhancing its performance (Business Strategy Hub, 2020).
- It is also recommended for the company to pursue e-commerce more fervently. Throughout its history, Nike has relied on its physical stores and retailers and wholesalers to distribute its products. However, the coronavirus pandemic invalidated many of these distribution channels through government responses towards containment. The company's e-commerce platforms were its only avenue to continue selling. The fact that online sales contributed 35% of the company's sales revenue communicates the importance of this channel (Business Strategy Hub, 2020).
References
Brandwatch (2018). The 2018 Brand Visibility Report, Brandwatch. Available at: https://www.brandwatch.com/reports/2018-brand-visibility-report/view/ (Accessed: 20 February 2021).
Business Strategy Hub (2020). Nike SWOT 2021 | SWOT Analysis of Nike, Business Strategy Hub. Available at: https://bstrategyhub.com/swot-analysis-of-nike-nike-swot-analysis/ (Accessed: 20 February 2021).
Churlinov, C. (2020). Brand Profile: Nike, Inc., Digital Brand Blueprint. Available at: https://digitalbrandblueprint.com/brand-profile-nike-inc/ (Accessed: 20 February 2021).
Flynn, P. (2015) Nike Marketing Strategy: A Company to Imitate. University at Albany, State University of New York. Available at: https://scholarsarchive.library.albany.edu/honorscollege_accounting/14 (Accessed: 19 February 2021).
Havila, V. (2019) Improving Brand Equity with Environmental Sustainability work-a qualitative study in Sweden Athanasios Mademlis Seth Werneborg. Uppsala University. Available at: https://www.diva-portal.org/smash/get/diva2:1328053/FULLTEXT01.pdf (Accessed: 30 November 2020).
Moise, M. S. et al. (2019) 'Influence of environmental practices on brand equity, satisfaction and word of mouth,' Journal of Brand Management. Palgrave Macmillan Ltd., 26(6), pp. 646–657. DOI: 10.1057/s41262-019-00160-y.
Oberoi, M. (2020) Everything you need to know about the target markets of sneaker giant Nike, Market Realist. Available at: https://marketrealist.com/2019/10/nikes-target-markets-everything-you-need-to-know/ (Accessed: 19 February 2021).
Park, H. and Kincade, D. H. (2010) 'Historical analysis of apparel marketer's strategies: Evidence from a Nike case,' Journal of Global Fashion Marketing. Routledge, 1(3), pp. 182–193. DOI: 10.1080/20932685.2010.10593070.
Paul, T. (2020) Nike vs. Adidas: Competitive Analysis with Data Visualizations, Datahut. Available at: https://blog.datahut.co/competitive-analysis-nike-vs-adidas/ (Accessed: 20 February 2021).
Sammut-Bonnici, T. and Galea, D. (2015) 'PEST analysis,' in Wiley Encyclopedia of Management. Hoboken: John Wiley & Sons, Ltd, pp. 1–1. DOI: 10.1002/9781118785317.weom120113.
Schmuck, D. et al. (2018) 'The Effects of Environmental Brand Attributes and Nature Imagery in Green Advertising,' Environmental Communication. Routledge, 12(3), pp. 414–429. DOI: 10.1080/17524032.2017.1308401.
Uta, J.-C. (2020) Business resources a PESTEL analysis of Nike, Brand Minds. Available at: https://brandminds.live/business-resources-a-pestel-analysis-of-nike/ (Accessed: 19 February 2021).
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