Strategic Management - Nike Case Study 6u46i

(1) Knowledge of Nike beyond the Obvious Knowledge Definition Knowledge is a fluid mix of framed experience, values, contextual information and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organizations, it often becomes embedded not only in documents or repositories but also in organizational routines, processes, practices and norms. (R. Lynch (2009) Strategic Management 5th edition, pg.264) The knowledge of Nike was first built up upon the personal experience of its founders, Bill Bowerman and Philip Knight. Bill Bowerman was the track coach at the University of Oregon track team. Bill liked to experiment and he always created specially designed running shoes for Oregon’s damp and hard-to-grip tracks. While Bill was young he liked to race in lightweight metal spikes. But when the American companies stopped manufacturing that type of shoe, Bill decided to create his own special shoes for his top athletes on the track team. Nike in its early years was successful because of Bill Bowerman’s constant inventiveness to create shoes which where light. His shoes were lighter than the German manufacturer, Adidas at that time. (Greenberg K.E., Philip Knight and John Bowerman: building the Nike empire, pg.16-17) Nike first started out as Blue Ribbon Sports. It was the brainchild of Phil while he was studying for MBA at Stanford University, where he was told to write a business outline. “Write about something you know,” instructed his professor, Frank Shallenberger. “And something you like”. (Greenberg K.E., Philip Knight and John Bowerman: building the Nike empire, pg.19) And Phil wrote an outline to overcome the monopoly Adidas had on the American sneaker market at the time. While Phil was traveling around the world after graduating, he discovered that the labour cost in Japan was much lower than America. Phil took advantage of the low labour cost in Japan and its high technology shoes and started selling shoes from Onitsuka Tiger Co. (known as Asics today) under his company, Blue Ribbon Sports. 1

Phil together with his old coach, Bill Bowerman debut the shoes at Hayward Relays at the University of Oregon. Phil marketed Nike based on the general but ingenious knowledge of the society’s worship of heroes, obsession with status symbols and captured the zeitgeist of American pop culture. Nike used the top athletes in each field of sports to market its shoes (Krentzman J., Stanford magazine(1997,jan-feb) The Force Behind the Nike Empire), such as Tiger Woods, Michael Jordan, Maria Sharapova, Bo Jackson, Steve Prefontaine, Michael Irvin and Alberto Salazar(originalstyles.com, 12 Aug 2008, Spokesperson for Nike). This is proven by the fact that when Nike was having a downturn between 1983 and 1985 with profits falling more than 80 percent, the debut of Air Jordan which Michael Jordon wearing the shoes during matches despite being warned and threatened with fines by the NBA as they were too colourful, rescuing the company with more than $100 million in sales. With the experiences of international manufacture and gaining knowledge of overseas shoe manufacturers, gained over the years while partnering with Onitsuka Tiger, Nike was able to finally break away from its Japanese counterpart in 1972 (Krentzman J., Stanford Magazine (1997,jan-feb) The Force Behind the Nike Empire) to establish its very own brand. Bill Bowerman, has been building and deg shoes since the 1950s. When Nike decided to be independent and market its own brand of shoes, Bill put his years of experience of creating and deg shoes to complete use. In 1972, Bill first created the now iconic waffle soles. As Bill Bowerman and Phil Knight were runners themselves, they made use of the knowledge and personal experience that professionals and the salesmen would have a great deal of understanding between each other and employed sales person who had athletic backgrounds and were mostly runners during its early days. Nike sales person make it a point to be with their runners at track events. They were not just paid money to endorse Nike products. Nike built relationships with its athletes. This contributed greatly to Nike’s success of being able to attract top athletes and therefore, the company’s success (Greenberg K.E., Philip Knight and John Bowerman: building the Nike empire, pg.33).

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Not only do they understood who they were selling the shoes to, they have a clear target market; the young, cool and competitive teenagers. Their ‘swoosh’ logo and the brand message ‘Just do it!’ is well suited to its target market’s aggressiveness, competitiveness and pursue of individual success. (R. Lynch (2009) Strategic Management 5th edition, pg.269) Nike has also made it iconic ‘swoosh’ sign highly visible on all its products. To back up its brand name, Nike ensures stringent quality control for its technologically advanced products although they are manufactured out the US in developing countries where the labour is cheap. Because Nike’s efforts to provide cool and nicely designed highly quality products, Nike built up its image. The brand image and quality is directed and represented by the ‘swoosh’ sign, adding value to its iconic sign and the tagline ‘Just Do It!’. Also, in Nike’s very creative ments, which are a notch above others, the only indication that the ment is promoting Nike is by its ‘swoosh’ sign and its tagline ‘Just Do It!’. Therefore, by making its ‘swoosh’ sign highly visible everywhere, it becomes loaded with significances and uniqueness, making the market and its consumers, wanting to be a part of it. This increases the sales and its customer base, making Nike successful and making it unique from many other companies and brands in this field. (http://books.google.com.sg/books? id=KYP03bw1mVIC&pg=PA183&lpg=PA183&dq=what+made+nike+successful&s ource=bl&ots=2EUvZXAoxk&sig=F_G6MgWkq5P5pIRhWustAkC9U3E&hl=en&ei =-hTvSeOqGtONkAWNg5ShDw&sa=X&oi=book_result&ct=result&resnum=9) (22nd Apr 2009) (2) Other Resources Beyound Knowledge A very valuable resource that Nike had in early days was its people. During its early days, the people who started out Nike were very ionate about what they do; running. Especially Bill Bowerman, co-founder of Nike and former track coach of the USA Olympic track squad, who has contributed greatly to Nike’s success and its competitive advantage. Bill Bowerman’s perseverance in search of a better shoe, with concepts of lightweight, cushioning, and flexibility has contributed to Nike’s competitive ment. Because of his determination to always come up with a better shoe the next time, Bill founded the waffle soles; Bill was having waffles for

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breakfast one morning as he was thinking about sneaker soles, shortly after which he rushed into his workshop with the waffle iron and poured rubber into it which created the Nike’s famous waffle soles. (Strasser J.B. – Swoosh: The Unauthorized Story of Nike and the Men Who Played There. Pg128,129.) Another innovation of Bill’s that contributed to Nike’s competitive advantage is the Cortez Shoes, named after the explorer who conquered the Aztecs, which was the name of a line of Adidas shoes then. (Greenberg K.E., Philip Knight and John Bowerman: building the Nike empire, pg29,30) Bill originally created this product by cutting up two types of Tiger shoes and putting together the best parts of the two pairs. But Nike doesn’t stop there. It is constantly striving to get the perfect shoe each time. Nike has improved on its various lines of successful shoes to cater to the changing needs of its consumers as time goes on. This give Nike the competitive advantage in the market as it improves on its products to meet the different needs of customers and the people, who worked on building the Nike empire were ionate about what they do. They connected with the professionals and the product they sold as they were mostly runners themselves. (Strasser J.B. – Swoosh: The Unauthorized Story of Nike and the Men Who Played There. Pg 129.) Another very valuable person in Nike is J. B. Strasser, a former Nike advertising director, a ionate and loyal person who stayed with the Nike company even when Nike was experiencing extreme downturn after a decade of its establishment; Reebok was taking over Nike’s number 1 spot in the market with its stylishly designed aerobic shoes which were wildly popular with the American women, while Nike refused to break into the market as it believed that it was sports company and not some company selling fashion shoes. It was Strasser, who came up with the idea of Air Jordan, saving the company with more than $100mil in sales within a year. When Nike, known as Blue Ribbon Sports then, separated from Onitsuka Tiger, there was a legal battle over the rights of the Cortez Shoe, which was very popular. Strasser spent two years concentrating on the case, finally winning the rights to be the sole manufacturer of The Cortez Shoes. If he did not have the ion and loyalty to Nike and gave up, Nike would have lost the case, with Tiger reaping the profits of the Cortez. This is just one instance of the kind of ionate and loyal people that Nike has, which highly contributed to its success. 4

(Strasser J.B. – Swoosh: The Unauthorized Story of Nike and the Men Who Played There. Pg153, 154,467,468.) Nike, unlike its competitors does not have its own manufacturing plant. It out sources its manufacturing parts to low cost parts of the world. This allows the company not to be tied up in property and labour costs. Thus, instead of investing huge sums of money in factories and manufacturing workers, Nike directs the money towards research. This allows Nike to concentrate on its research and development field, producing highly innovative and technologically advanced products. Also, as Nike concentrate on only research and not factories and labour, its products are made at a low cost as the cost of its products depends on its cost price, involving labour cost and production cost. Therefore, another of Nike’s competitive advantage is its high quality products at an affordable price. (http://www.marketingteacher.com/SWOT/nike_swot.htm-14-04-09)

Nike uses resource-based competitive advantage to break through to related markets. It was expanding into other areas of sports such as sports apparel and sports equipments. For expansion into and to break through into the international market, i.e. it makes use of sponsorship in Brazil to expand in Latin America and its sponsorship of Arsenal Football club to expand its standing in Europe.( R. Lynch (2009) Strategic Management 5th edition, pg.270) Nike s its products using distinctive personals to sponsor its products. For For Nike’s Air Jordon ments, it features Micheal Jordon, who was the top US basketball star. The ments made use of Micheal’s athletic ability and popular image to promote Air Jordons while Reebok was forced to use Shaquille O’Neal for its response to Air Jordons, the Reebok Pump shoes. Although they were both major basketball stars, O’Neal was second to Micheal. This shows Nike’s competitive advantage compared to others, which was the use of top stars in its particular chosen field. Other such examples are the sponsorship of golf star Tiger Woods for the lucrative golf shoes and clothings and the whole Brazilian football team for football boots and other kits. ( R. Lynch (2009) Strategic Management 5th edition, pg.269) 5

(3) Emergent Purpose of Nike in Relation to its Knowledge Nike has gained experience and knowledge over the years, building up a successful company of sports wear that is sold in more than 50 countries worldwide. Because of the knowledge of the target market that Nike acquired over the years, Nike know how to attract customers and gain market share, such as its strategy of sponsoring the top athletes while its rival Reebok went to the extend of sponsoring the Olympics. Because of its extensive knowledge and understanding of the market and how to break through it, Nike was able to gain more coverage than Reebok minus the huge expenses. (http://www.marketingteacher.com/SWOT/nike_swot.htm) According to the 3rd point of emergent purpose key strategic principles, “Humanresource-based theories emphasise the importance of the people element in strategy development. They highlight the motivation, the politics and culture of organizations and the desires of individuals. They also suggest that strategy would benefit from an element of learning and experimentation that empowers individuals.” ( R. Lynch (2009) Strategic Management 5th edition, pg.61) which states the important role that employees play in the successful build up of a company, Nike also became successful because of the kind of employees that they had who were very dedicated to the company. Nike also hires the right people for the right place and because of their knowledge, as mentioned in question 2. Referring to the 4th point of emergent purpose key strategic principles, “Innovation and knowledge-based theories stress the value of radical new strategic thinking in order to move ahead of rivals. The sharing of knowledge through the internet may be an important part of such a process,”( R. Lynch (2009) Strategic Management 5th edition, pg.61) which states that a company’s ability to be successful and to be able to move ahead of its competitors is dependent on the innovation and knowledge-based theories of the company and its ability to come up with new strategies to constantly keep the company ahead of others, to upgrade itself always. Nike also has this ability, this strength point in the company for its success. As 6

mentioned above in question 2, Nike has the innovation which drives them to constantly improve its product and offers technologically advanced shoes and equipments ahead of its rivals. Nike also has made it a point to keep up the creativity and the uniqueness of its ments which are like none other in the market. All in all, Nike’s success can be contributed to two main factors; the people who first started out and defined the company, and the mentality that they had, which is the perseverance and the motivation, driven by the ion that they had in their chosen field to make Nike the best by constantly improving their strategies, innovations and technology to keep it ahead of other similar companies in the sportswear market. Nike would not have been this successful if not for Phil Knight and Bill Bowerman, who were ionate about running and wanted to produce the best shoes that is perfectly fit for running when they first started out. The first few key employees and sales persons were personal friends of Phil and Bill, either track teammates, students or school-days rivals. This makes Nike a very tight knitted group, who knew what they were selling, making the company a very personal business for them. So, they tried their very best to keep Nike at the top as it was not only a business but almost like a child to them. Reference List 1. R. Lynch (2009) Strategic Management 5th edition 2. Strasser J.B. – Swoosh: The Unauthorized Story of Nike and the Men Who Played There(1993) 3.

Greenberg K.E., Philip Knight and John Bowerman: building the Nike empire(1994)

4. Krentzman J., Stanford Magazine (1997,jan-feb) The Force Behind the Nike Empire 5. Hollister. G, Out of Now Where( The Inside Story of How Nike Marketed the Culture of Running) (2008) 6. www.originalstyles.com, 12 Aug 2008, Spokesperson for Nike 7. http://books.google.com.sg/books? id=KYP03bw1mVIC&pg=PA183&lpg=PA183&dq=what+made+nike+succes sful&source=bl&ots=2EUvZXAoxk&sig=F_G6MgWkq5P5pIRhWustAkC9U 7

3E&hl=en&ei=hTvSeOqGtONkAWNg5ShDw&sa=X&oi=book_result&ct=result&resnum=9 (22-04-2009) 8. http://www.marketingteacher.com/SWOT/nike_swot.htm-14-04-09 9. http://nikeshoes109.blogspot.com/2008/09/adidas-vsnike-shoes-withchallenge-of_03.html(21-04-09)

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