Nike is the star of $ 35 billion footwear industry. Nike is a very much market oriented company and they are also trying to keep themselves up to date with the market and technology. From the beginning Nike was focusing more on the marketing instead on the business and customers but from the last five years things have changed at Nike. Now they are also devoting much of their attention to the routine business activities such as latest information system, logistics and supply chain management and cutting edge sneaker designs. Now Nike is also focusing on its financial and managerial disciplines which were neglected in the past.
Nike has revamped its computer systems to improve its supply chain and to get the right number of sneakers at right places in the right time. The old system often used to leave the retailers awaiting delivery of star shoes or struggling to get rid of duds. Nike spent $500 million to develop a new computer system which has already started to pay back and gross margins are now at 42.9 % which were 39.9 % five years ago.
Nike used to spend huge amounts on signing the star players for the endorsement of its products. The extent of negligence can be seen from the example that the Nike was without a financial officer till 1999. But now the trend has started to change and management has realized that they also have to give equal importance to its creative process and business side.
Nike is also working on the improvement of technology to keep pace in the techno-battle. Nike free, a shoe made by Nike make the runners feel as they are barefoot. After the decrease in the sale of high price sneakers in the U.S, Nike has launched some low price sneakers which include Total 90 and shox technology shoes, which are becoming top sellers.
Nike has now implemented a matrix organization structure to exercise the breakdown of authority from upper level to lower level and from region to product. So that now they are better able to focus on their target markets and customers.
It's all because of these strategies that Nike is number 1 sneaker brand in U.S and for the first time Nike's share of soccer shoe market in Europe reached 35 % above the 31% of Adidas.
Q2: Discuss the Nike's new product portfolio and strategic brand management strategies. Indicate any recommended changes.
BCG matrix is used by Nike to identify the performance of its product portfolio. Nike's company portfolio include Hurley International which was bought for $95 million in 2002, Cole Haan which was bought for $80 million in 1988, Bauer was purchased for $409 million in 1995 and Converse bought for $305 million in 2003.
Air Jordan is the star for Nike. It has shown high growth and high market share and is the best selling brand for Nike. Monsterfly and Air Zoom are the Cash Cows for Nike. Total 90 is star for the Nike which has a high growth as well as high market share especially in Europe. Nike Free is upcoming brand for Nike which makes runners feel as they are running barefoot. Shox technology is another shoe from Nike which is becoming top seller and is Star for Nike.
Nike used to give less attention to its brands (Cole Haan etc.) before but now the things have changed. Nike could not add any major brands to its company portfolio after acquiring the Cole Hann in 1988 because Nike was used to be most important thing for the company and other company brands were used to be considered secondary. But now Nike is giving attention to other brands as well and has acquired Hurley International, Bauer and Converse. Now these brands are given more authority by Nike Managers to operate more independently from Nike as compared from the past. Due to this strategy the group sales of Nike grew 51%.