The aim of this investigation is to find out how Nike has achieved it’s competitive advantage, and to research into the company, to gain my own conclusion, and opinion of what I expect their future to hold.
Competitive advantage is a distinctive feature about a business that makes it successful. It can be gained through: –
Innovation (The introduction of new ideas, which change or create a product)
Relationship with suppliers
Relationship with customers
To maintain competitive advantage it must be difficult for other firms to copy. The business must carefully identify the people who will buy the product, and make it more appealing to them.
Nike are a sports-clothing and footwear company, employing 22,000 people worldwide, from Nike World Headquarters in Oregon and Nike European Headquarters in Hilversum, The Netherlands, to nearly every region around the globe, including Asia Pacific, the Americas, and Europe, Middle East and Africa.
Nike sells footwear, apparel, and equipment for men, women and kids, for a variety of sports. They are famous for their quality, and science.
The company first started in 1962 by a man called Bill Bowerman.
Jeff Johnson (runner) joined Knight and Bowerman’s “Blue Ribbon” Sports Company as its first full-time employee. They sold shoes out of the back of his van at high school track meets in 1965.
In 1966 Johnson opened the company’s first retail outlet in a small building at
3107 Pico Blvd., Santa Monica, California. Jeff Johnson is credited with giving Nike its name, as it came about one night via a dream he had. Prefontaine, the first major track athlete to wear Nike product had significant influence on the design of Nike’s running shoes. His strong spirit and renowned competitive obsession left a permanent mark on the company.
Nike’s mission is “To bring inspiration and innovation to every athlete in the world.” Innovation is a particularly important part of Nike technology. Their mission has always been to provide a competitive edge, to help athletes perform better. “We climb inside the athletic mind. We feel every beat of the athletic heart. We flex, bend, twist and torque every inch of athletic sinew and muscle. It’s not easy, but it’s natural for us. We are athletes.”
Nike first achieved competitive advantage when they worked out the puzzle of modern science and sport. Before the owners were scientists, they were athletes, and still are. They know what it’s like to take part in a championship, to push their bodies beyond their limits again and again. They already knew what was needed, and then they discovered how to carry it out. The challenge was inventing a shirt to keep world-class marathoners cooler than if they wore no shirt at all. The solution was Nike Sphere Technology.
This came about when a 2000 global sporting event took place in Sydney, Australia. This involved running 26 miles, in the heat of the day, causing them to get hot. Very hot. They knew that the trick to keeping cool was getting air to move faster across the sweat on the skin. This maximises evaporation, which is the body’s most effective cooling process. The problem was, that most running shirts actually block the airflow needed to maximise evaporative cooling, thus the fabric becomes plastered to the body, blocking even more airflow, and overheating. This not only feels awful, but isn’t a pretty sight either! So, why not just take the shirt off? Nike realised that not everyone is comfortable taking off his or her shirt in public. Many events that take place outdoors in humid conditions don’t have the optional rule of a shirt, and that if a specific production process takes place; a material can be created, which actually keeps you cooler than if you wore no shirt at all.
This is the light bulb movement. Nike Sphere is short for Atmosphere. Nike created a shirt, which contained hundreds of tiny-engineered air spaces.
They constructed a three-dimensional fabric architecture that helped athletes regulate the air between the body and the garment. Their reputation then grew, and all athletes wanted to know about this new clothing idea.
(See appendix 1)
Therefore Nike has gained competitive advantage through innovation, of which Nike Sphere is an example.
Nike has done some restructuring to help gain competitive advantage. Nike Inc. is very good at adapting to the changing markets. They take every opportunity to change for the best. The focus of their company is to make legal and humane working conditions. They remain flexible, and have realised that they need to maintain the support of people to be successful. (Turn to Appendix 5, as this is an example of how Nike has responded quickly to criticism that they were selling trainers at $70, with a material cost of $9. This flexibility has helped them to maintain a good reputation). You also see this in the way they enter into a new area of sporting equipment, and have an almost immediate impact. This is due to their popular trademark, but a lot of their success is due to willingness to restructure. Nike has not been overly concerned with downsizing, yet they are more focused on innovation, growth and quality.
Nike has also come up with another innovative idea. This was the Nike Shox. Another name for this range was the Air Range. The created cushioning systems, which are used to reduce shock, protect from impact, distribute pressure and offer comfort. Nike has invested and achieved more in the figuring out how to do this than any other sports company.
(Turn to page 4 of the appendix for a document about this range)
Nike has maintained their relationship with the customer, by providing efficient, and friendly service. The have kept a positive reputation, by being seen to be helping the community in several places around the globe. (See Appendix 2). Nike is not only known for its sporting use, but its fashion qualities as well. Nike became a large fashion trend, which is still in place today.
Nike have also given themselves a good reputation, as being caring towards the environment.
This logo appears on select Nike product and service innovations. Examples range from footwear, apparel, and equipment to Nike’s Reuse-A-Shoe and Air To Earth programs.
Appearing on tags, in-store materials and in press releases, this logo means that that product is one of the group of six 100% PVC-Free footwear styles, or 100% certified organic cotton apparel.
If Nike wanted to gain a stronger competitive edge, I think that their prices could be lowered, giving them an even better reputation, as a low-priced, good-quality sports company. Even though this would be a good idea, Nike is doing well with their prices as they are. (Turn to Appendix 3 for an example of their prices, and 5 for a news article explaining the situation.)
The reason why Nike is able to keep their prices so low is because of branding. A brand is a name, term, symbol or design (or combination), which is intended to differentiate one company’s products or services from another. Nike has what is known as the “swoosh” as their recognised symbol. This is found on all of their product, and in all of their advertising campaigns.
The “swoosh” is one of the worlds most recognised symbols, and is normally accompanied by a slogan such as “Just do it” or “you can”. Nike has successfully achieved the art of advertising, with interesting, eye-catching, and memorable ads. One of which started with a man being touched on the shoulder, then he turns, and starts running around London. Everyone who saw him was running in the opposite direction, The camera then zooms in on the “swoosh” on his trainers, and the slogan appears on the screen saying “Tag”, which then changes to a picture of the swoosh and the word “play” written underneath.
Because Nike is such a well-known company, people will pay the extortionate prices, just to have the label on their clothes. Branding has helped Nike a great deal in gaining competitive advantage.
Nike has several competitors, such as Adidas, Puma, Ellesse, Fila, O’Neil, Reebok, Rip Curl, Kickers, Speedo and Umbro. In the year 2000 they held the highest market share for foot wear (see Appendix 6). Their total income seems to be considerably higher than some of their competitors. (See Appendix 7).
The future of Nike is unpredictable, but from the way they are continuing, I would predict that they will stay “at the top” for many years to come. Sports clothing will always be a necessity, and if Nike are able to keep up with the trends, and latest technologies, they will stay a favourable company. If they are able to continue with their excellent innovation, they are sure to be somewhere at the top. Sales are still increasing, so the future of Nike looks bright.
In conclusion, I would say that Nike is an excellent company both to work for, and to buy from. They are alert to fashion, have an art for technology, and have an eye for innovation. So long as a new company isn’t created, to achieve more competitive advantage, Nike should continue to do well. I think that if Nike were to improve, they could cut prices, although that is not necessary yet.