NIKE: A VRIO ANALYSIS
Nike (NYSE: NKE) is a leading sports shoe and apparel brand. The company has built a strong global presence. It serves its customers through several sales channels including company-owned stores and online channels. Nike’s dominant market position in the sports shoe industry is based on several sources of competitive advantage. The company is also known for its great marketing techniques. Apart from excellent marketing, the brand is popular for its focus on quality and innovation. It is a customer-centric brand that has maintained a consistent focus on quality and product innovation. All of these factors have resulted in excellent sales and profits. While quality is the core strength of Nike, it has been successful by focusing on each aspect of the business including supply chain management and human resource management.
Here is a list of the resources and capabilities that have helped Nike gain an edge and become a leading brand. Learn about how these resources and capabilities have helped Nike gain and sustain its competitive advantage.
Brand Equity : –
Brand equity is an important competitive advantage. Strong brand equity is a result of a strong commitment to quality and customer experience. If Nike’s brand equity is strong, it means the brand has been successful at connecting with its customers and engaged them well. Strong brand equity comes from building trust and customer experience. If you manage customer experience well, the result will be higher engagement and loyalty. Brand equity depends upon what your customers think of you and how well designed your customer experience is. Nike has generally performed strongly in terms of customer experience. Apart from the other things, its focus on quality and innovation has resulted in high brand equity which helps generate higher sales and to build a larger customer base. Moreover, brand equity is a basic advantage that helps you sustain the other sources of advantage you have built. It also helps you create a differentiated and unique identity in the market.
Product quality :-
Product quality is also an important focus area for Nike. Any market-leading brand has become successful by consistently focusing upon quality and by bringing market-leading products and innovations for its customers. Product quality also leads to higher customer retention and higher trust among consumers. A consistent focus on great product quality helps a company achieve loyal customers. In the case of Nike, it allows the brand to charge higher prices and manage the competitive pressure as well. The sports shoe industry has continued to grow hyper-competitive. The rival brands are also investing in quality and marketing. However, Nike has brought a large range of products and by sustaining its quality level, it has also been successful at building high-level trust among its consumers. It is an important source of competitive advantage that has helped Nike continuously strengthen its position in the market.
Research and innovation :-
Research and innovation can also be a source of competitive advantage. Most of the market-leading brands in nearly every industry place a heavy focus on research and innovation so as to bring good quality products to the market. The growth of digital technology has brought higher competition to the market by offering Nike and its competitors, new channels for marketing and sales. Nike also invests a heavy sum in research and development each year to grow its product range and bring market-leading products. Consumer trends are changing fast and it is vital to understand these trends and remain ahead of the rivals. This is also why research and innovation get to become a source of competitive advantage for any brand.
Marketing is a critical source of advantage in the 21st century. Apart from driving sales, marketing also helps build a distinct image and differentiated identity in the industry. It helps you gain popularity and customer loyalty as well as stay connected with your customers. Customer engagement has become a critical factor in terms of brand recall as well as customer loyalty. Brands that fail to engage their customers well or provide a superior and unique customer experience will not be able to achieve success. Marketing helps you build a strong customer connection and establish yourself in the right image. It helps you sustain your leadership position in the market and your customer base. Apart from the other digital marketing channels, Nike uses social media for engaging its customers. It has a great video marketing strategy that it uses to promote new products and to reach out to its customers worldwide and engage them to gain higher loyalty.
The global presence of a brand is also a critical strength. The United States is the main market of Nike, but there are several more developed and developing markets, that are also leading sources of revenue for the brand. Nike has maintained a global sales and distribution network that enables it to reach its millions of customers without any difficulty. To strengthen its global presence, it has built strong relationships with its suppliers and distributors which enables Nike to source the best quality raw materials and serve its customers better.
Customer loyalty :-
Customer loyalty is important for every brand and each one strives to achieve it. Building customer services requires focusing on several aspects of business apart from product quality. You also need to focus on the effectiveness of your marketing strategy as well as customer engagement and overall customer experience. To win loyal customers requires a special focus on providing a superior customer experience. Nike uses digital channels to engage its customers. Other factors like product quality, pricing, marketing, and promotions also play an important role in building stronger customer loyalty.
Supply chain :-
Competition in the sports shoe industry has grown very high. To sustain its leadership position Nike needs a continuous supply of good quality raw materials. It sources its raw materials from suppliers around the world. The company has managed a large and international network of highly loyal suppliers. This offers Nike a consistent supply of good quality raw material so it can bring excellent products to the market for its customers. Supplier relationships are also an important priority for the brand. Nike invests in the empowerment of its suppliers to build long-lasting relationships. It also provides them the tools and training to serve customers better.
|Brand equity||Yes||Yes||yes||Yes||Competitive Advantage|
|Global Presence||Yes||No||No||Yes||Temporary Advantage|
|Customer loyalty||Yes||Yes||No||Yes||Temporary Advantage|
|Supply chain||Yes||Yes||No||Yes||Temporary Advantage|
|Premium Product quality||Yes||yes||Yes||Yes||Competitive Advantage|
|Research & Innovation||Yes||Yes||Yes||Yes||Competitive Advantage|
Sources: Nike Annual Report 2018.