Nike Sources of Competitive Advantage

What are the sources of Nike’s (sports shoe and apparel brand) competitive advantage?

 

INTRODUCTION:-

Nike is an international brand of athletic wear, including shoes and apparel as well as equipment. The brand is known mainly for its stylish and great quality products. The company is equally strong in terms of marketing. It has maintained a strong and unique brand image. As a brand, Nike is deeply connected with sports and strives to encourage sports fans throughout the world. The swoosh logo of Nike is easily recognisable among the crowd of brands worldwide. The company was incorporated in 1967 and is the largest seller of athletic footwear and apparel in the entire world. It offers products in six main categories – Running, NIKE Basketball, the Jordan Brand, Football (Soccer), Training and Sportswear.  Apart from Jordan, other subsidiary brands of Nike include Converse and Hurley. United States is the largest market of Nike accounting for more than 40% of its total sales in 2018. Nike has total 392 retail stores in United States.

Outside the U.S., Nike has 790 stores located in international markets. The brand has managed heavy focus on research and development to bring innovative products as well as footwear and apparel made from sustainable material to the market. It has outsourced most of its production. Around 124 footwear factories and 328 apparel factories manufacture Nike products (2018). Competition in the athletic wear industry has increased  a lot. However, Nike has got an edge over its competitors owing to several factors. Unique designs, great product quality, product and process innovation and marketing have helped it achieve strong competitive edge. Its financial performance has kept growing over years which is evident in how Nike’s revenue has grown over the past five years. Read about the several sources of competitive advantage of Nike in this article.

Brand Equity:

Brand equity is a major strength for any brand. Customer trust, customer experience as well as customer engagement are among the several factors that together affect band equity. Brands that have built high level of trust in the market and among their customers are ahead of their competitors. Nike is a leading brand of athletic wear because it has built high level brand equity. It is a customer oriented brand that knows its customers inside out. Moreover, it has focused on their taste and changing preferences. It spends a lot on research and innovation as well as marketing which enables it to bring the best designs to the market before its competitors do. This is also why the customers love Nike. It sells products that are excellent in terms of design and quality. Nike has formed a strong brand image. Whether it is about product quality, sustainability or supply chain, Nike has maintained strong focus on ethics, accountability and social responsibility. High brand equity has translated into stronger financial growth for the brand.

Innovation :-

Innovation can be a source of competitive advantage. Whether it is a technology brand, fashion or a sport brands, innovation offers new ways to tackle leading challenges. Moreover, product innovation has become important due to fast changing preferences of the customers. Nike’s strong focus on innovation is tied to its business strategy. It invests in research and development, to learn about customers’ taste and the fashion trends. Athleisure products have grown increasingly popular in the recent years. People are looking for stylish and durable products. It is why innovation is a core focus for Nike and its rivals like Adidas and Under Armour. However, compared to Under Armour, both Nike and Adidas are more aggressive for growth and expansion. The size of their investment in R&D is much larger. Investing in R&D has helped gain a large market share and the popularity of Nike products has also grown. However, its financial performance is also a testimony to the fact that investment in R&D will help you strengthen your brand.

Global presence :-

Nike is a global brand. It has more than 1,180 stores around the globe. While U.S., is its core market, its supply chain and distribution network is spread globally. It has 392 stores in US and 790 in the international market. Apart from that, the brand has outsourced most of its production to external suppliers. Around the world 124 footwear factories and 328 apparel factories supplied Nike in 2018. The main business of Nike is design, development and global marketing and sales of athletic footwear, apparel, equipment, accessories and services. NIKE is globally the largest brand of athletic footwear and apparel. It sells its products through NIKE-owned retail stores and through digital platforms (called “NIKE Direct” operations), to retail accounts and a mix of independent distributors, licensees and sales representatives in almost all countries of the world. Independent contractors manufacture virtually all of its products. Independent contractors from outside US produce nearly all footwear and apparel products for Nike. Its equipment products are produced in the United States as well as abroad.

Marketing :-

Marketing is also a major strength of Nike and offers it a unique advantage in the global athletic wear market. Nike is known globally for its unique marketing strategy and techniques. Apart from its Swoosh logo which can be identified easily from among the  crowd of brands, there are several things outstanding about its marketing. It uses a mix of traditional and modern methods and tools for marketing. Its retail and distribution network as well as its commerce channel also acts as a marketing channel. The brand engages its customer through inshore and online promotional. However, when it comes to marketing very few are as excellent as Nike. Especially, in terms of video marketing Nike likes to connect with its customers’ emotions. Its promotional videos are less about product promotions and meant more to strike an emotional connection. Nike believes in the spirit of sports and how it connects people worldwide. It engages and encourages sport lovers through promotional videos. However, apart from that it also spends on online and offline advertising. Other forms of promotions include media releases, events and sponsorships. In the world of fashion and athletic wear celebrity promotions including both sports and cinema celebrities has remained common. Nike also uses celebrity endorsements and sponsorships to connect with its audience. In fiscal 2018, it spent around 3.6 billion dollars on advertising and promotions. Nike is an excellent marketer. However, marketing is not solely for promotions or to retain customers. In case of Nike it is an important part of tis core business strategy which is to create a unique place in its customers’ hearts.

Customer base:-

Nike has the largest customer base of all the sports shoe and apparel brands. It is a global brand with a large supply chain, retail and distribution network. It is globally famous as a brand of stylish sports shoes and apparel. Marketing has played a major role in making Nike globally famous. However, it is also the style, quality and focus on product innovation that has helped Nike grow its global network. Nike’s popularity has resulted in a large and loyal customer base. However, competition is tough and Nike is employing new strategies to bring better products and retain its existing customers while also attracting new ones. Its industry leading position and large customer base is still a significant strength that sets it apart from the crowd as an outstanding brand.

Customer loyalty :-

Customer loyalty is difficult to gain in the 21st century because of several factors including competition and changing consumer preferences. However, customer oriented brands have still but string customer loyalty. Nike is a customer oriented brand and customer loyalty is a strong source of competitive advantage for it. The company has employed several methods to increase customer loyalty. Apart from investing in design and quality, the brand has also employed a great business strategy and focused on customer service. In the 21st century, customer preferences change fast. There is string competition. Nike focuses on research and innovation to bring new designs and styles that increase the popularity of its products. Simultaneously, it is also focusing on its pricing, retail and marketing strategy to bring the best products for its customers. Nike is an outstanding brand and enjoys highest popularity and customer loyalty in the athletic wear industry. This is a distinct competitive advantage which has kept Nike ahead of its rivals.

Product range :-

Nike has brought a large product range to the market. It offers products mainly in six categories which include Running, NIKE Basketball, the Jordan Brand, Football (Soccer), Training and Sportswear. A large product range helps it target a larger customer base. Its diverse product portfolio caters to diverse customer segments. Apart from Nike, the other subsidiary brands including Jordan, Converse and Hurley also target distinct customer segments and sports fans. A large and diverse range of popular products has created a unique advantage for Nike.

Supply chain & Manufacturing :-

Nike has managed a strong supply chain and manufacturing network which helps it to cater to popular brand with agility. Nike has outsourced nearly all of its production. However, proper management of the supply chain and manufacturing has enabled the brand to produce superior quality products while also keeping costs under control. 124 shoe factories and 328 apparel factories supplied Nike in 2018. In the United States, NIKE has seven significant distribution centers, five in Memphis, Tennessee, and two other distribution centers, one in Indianapolis, Indiana, and one in Dayton, Tennessee. A well synchronized manufacturing, distribution and retail network helps Nike to cater to demand better. Its well integrated network allows it to focus on innovation and bring high quality products to the market.

Sources:

Nike Annual Report 2018.

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.