Nike Strategic Management Report

NIKE

STRATEGIC MANAGEMENT REPORT

(Intercity, 2014)

Amelia Matcham Fashion Management 2017/2018: Year 3 29025206 Strategic Issues in Fashion - ARTD3045 Word Count:7,670

1.

Contents Introduction Executive Summary Company Overview History and Timeline Management Structure Macro Analysis Key Geographies Company Analysis New Strategies Sustainable Innovation Technology Competence SWOT Evaluation Financials Product Appraisal Competitor Analysis Consumer Profiling Strategic Proposal Key Insights Focus Gen Z Implementation Risk Analysis Risk Potential Risk Management Conclusions Conclusion Appendices Bibliography

4 6 12 14 16 18 20 30 32 34 38 42 44 46 48 60 66 68 70 72 80

(Senior, 2017)

2.

3.

Executive Summary

High Price

Businesses are facing an accelerated pace of change, as digitisation, market disruption, and rapidly changing consumer expectations are shaping the way they must operate (Harvard, 2015). Companies with a strong sense of purpose are able to transform and innovate better, which is why Nike remains a dominant in the market, because as a ‘prioritiser’ (see Appendix A), it has a clearly articulated intention to serve consumers with high-quality sportswear. Not only this, but the company is continually investing in motivating its employees and aligning its supplier base with a more sustainable strategy.

Examining and assessing how Nike is functioning within the market will reveal how the brand can adapt its strategic plan in line with risk management. A proposal for growth will be suggested to increase market share and engagement rates for teenage females; therefore not all of Nike’s products and possible consumers have been explored in depth. Sportswear is male dominated, so appealing to girls from a young age is key for Nike, to retain their loyalty as they develop into women with greater spending power, and offer the brand a multitude of opportunities for growth.

Lifestyle

Technology

Low Price (Fig. 1)

4.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Table 1 Brand Positioning Map (Adapted from Posner, 2011, p. 53)

5.

In 1964, Phil Knight and Bill Bowerman founded Blue Ribbon Sports (BRS), originating from a concept to import low-cost athletic shoes from Japan, and sell them in America (Frisch, 2009).

Adidas were known to make the best shoes, but Knight wanted to compete by selling them for less.

Bowerman, a renowned track coach, promoted Onitsuka’s Tiger shoes to college athletes, as did Jeff Johnson, who became the first full-time employee for the company.

New and innovative materials were used to create the Tiger Marathon, switching from leather to nylon and changing the athletic market forever.

In 1969, BRS reached revenue of $400,000, and by 1970 was earning over $1 million.

As sales continued to rise, operating costs soared, and Onitsuka struggled to stay on schedule with shipping. In 1971, Knight and Bowerman realised owning and marketing their own brand, had more potential for success (Nike, 2017g).

6.

Introduction

Company Overview

Company Analysis

The brand began to develop into an apparel business, as t-shirts promoting the shoes were given away with every purchase, leading to the first retail store opening in Santa Monica, California, in 1966 (Frisch, 2009).

Bowerman believed that to be a good athlete, you needed good shoes. He strived to make the designs lighter and better performing than others on the market, and in 1968 developed the Cortez, manufactured by Onitsuka just in time for the Summer Olympics in Mexico City.

(Fig. 2)

On Bowerman: “He challenged accepted notions of traction, cushioning, biomechanics and even of anatomy itself” (Nike, 2015a).

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

On June 18, 1971, the Nike name and ‘Swoosh’ design were first used in commerce. By 1972, the first full-line of Nike footwear was released (Nike, 2017g).

The 1972 Olympic Trials for Track and Field were held in Oregon.

This was significant to Nike for two reasons, Steve Prefontaine, an emerging star, became one of the first public faces for the brand, and numerous other athletes were seen sporting the shoes (Frisch, 2009). This was also the year Nike entered its first foreign market, Canada.

JUST DO IT.

History “It spoke of sports. It invited dreams. It was a call to action, a refusal to hear excuses, and a license to be eccentric, courageous and exceptional. It was Nike.” (Nike, 2017k) Despite losing its main Japanese supply line in 1973, Knight was confident he could build the Nike brand through endorsement. Training for Prefontaine was paid for, and all he had to do was wear the Nike kit (Frisch, 2009).

In 1974, Bowerman refined a new concept based on traction, and developed the iconic Waffle Trainer, that appealed to both elite athletes and everyday runners (Nike, 2015a).

1979 saw the introduction of the cushioning system known as Nike Air (Frisch, 2009).

In 1980, after gaining 50% of the US market share, surpassing Adidas, Nike went public (Bain and Banjo, 2015).

Nike offered Michael Jordan a fiveyear contract in 1984 worth $2.5 million (Bain and Banjo, 2015; Frisch, 2009). By 1985, Nike released the first Air Jordan’s, which went on to become one of the most iconic and successful sneaker lines ever.

In 1988, Nike introduced their first ‘Just Do It’ advert, which was quick to become both universal and intensely personal (Nike, 2017k).

Throughout the 80’s and 90’s, Nike shoes were the top-selling global athletic footwear, except for in 87, when it fell behind to Reebok. Reebok profited from the aerobic trend, which made it clear female sportspeople represented an audience that needed greater attention (Frisch, 2009). It was instead big name endorsements that were responsible for much of Nike’s growth and popularity.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

7.

1990 and the first Nikestore opened in Portland. These giant showrooms often holding most of the Nike trainer collection continued to open across the country (Nazario and Roach, 2015; Frisch, 2009).

The Reuse-A-Shoe programme launched in 1993, aiming to benefit the community and environment (Nazario and Roach, 2015).

By the late 90’s, Nike was the dominant player of the sports industry, exposing the brand to multiple controversies, as its branding came under fire, employees were made redundant and operating costs were reduced by almost $200 million (Frisch, 2009). Multiple scandals brought to light how Nike factories paid workers minimal wages, hired employees as young as 14, and used dangerous chemicals without sufficient measures in place for safety.

Knight announced in 1998 that company policies would change to ensure employees were of the right age, treated fairly and that quality standards would be tightened.

In 2002, Nike bought surf apparel company Hurley international, and in 2003 acquired Converse for $305 million (Nazario and Roach, 2015). These brands both benefitted from the disposal of Umbro and Cole Haan (Euromonitor, 2017a).

In 2004, Knight stepped down as CEO of the company, and hired William Perez, who was shortly replaced by Mark Parker (Bain and Banjo, 2015).

In 2005, Nike became the first retailer to release the names and locations of its factories in a move to make their supply chain more transparent.

Adidas purchased Reebok in 2006; meaning Nike’s two main competitors had become a singular, stronger force (Frisch, 2009).

By 2010, Nike employed around 34,000 people, and looked to expand into emerging markets such as Russia, but this development was greatly hindered by the global economic downturn.

In 2012, Flyknit technology was introduced.

The HyperAdapt 1.0 was announced in 2016, to be released the following year exclusively through the SNKRS app and in various Niketown locations (Nike, 2016).

(Fig. 3)

8.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

9.

Nike: Now Headquarters in Beaverton, Oregon, U.S.A Sportswear Market Valued at $282.3 billion Holds around 17.2% of the Global Market FY 2017 Revenue: $34.4 million 72.4% from Developed Markets 27.6% from Emerging Markets Manufacturing in 42 Countries 566 Factories Top 3 Manufacturing Breakdown: Vietnam, 46%; China, 27%; Indonesia, 21% Only 8% of factories based in the U.S., with six significant distribution centres 17 Global high-volume distribution centres Over one million working in factories 384 Stores in the U.S. 758 Stores outside of the U.S. 20,000 Wholesale Partners and External Retail Accounts 110,000 External retail locations 74,000 Employees Worldwide (Euromonitor, 2017a: Green, 2017; Nike Inc., 2017)

(Nike, 2017l)

10.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

MISSION

BRING INSPIRATION AND INNOVATION TO EVERY ATHLETE* IN THE WORLD *IF YOU HAVE A BODY, YOU ARE AN ATHLETE.

(Nike, 2015d)

11.

Management Structure Key Company Individuals

Chairman Emeritus: Phil Knight (Joined 1968) CEO: Mark Parker (Joined in 1979) President, NIKE brand: Trevor Edwards (Joined 1992) Chief Financial Officer: Andy Champion (Joined 2007) Chief Administrative Officer and General Counsel: Hilary Krane (Joined 2010) Global Human Resources: Monique Matheson (Joined 1998) Global Sports Marketing: John Slusher (Joined 1998) President of Categories and Product: Michael Spillane (Joined 2007) Chief Operating Officer: Eric Sprunk (Joined 1993) President of Geographies and Integrated Marketplace: Elliott Hill (Joined 1988) Chief Digital Officer: Adam Sussman (Joined 2014) President of Nike Direct to Consumer: Heidi O’Neill (Joined 1998) Chief Sustainability Officer: Hannah Jones (Joined 1998)

Nike depends on key personnel, with most individuals in management working within the company for over ten years (Nike Inc., 2017).

The loss of these significant employees could be detrimental, so sufficient recruitment is needed to execute the strategic initiatives in place.

Nike uses a collaborative matrix structure, whereby staff often report to two managers, in theory increasing the speed of decision making, facilitating innovation, and enhancing responsiveness to the external environment (Nike, 2017h; Henry, 2011). This structure is difficult to effectively implement, as there is no clear line of accountability or single point of command, but it allows Nike to successfully react to dynamic and uncertain market changes (UniversityOfMinnesota, 2017).

Communication across departments is also increased in these circumstances, with project managers focusing tasks towards consumer demands, like the desire for more experiential offerings with Nike+.

Comparatively, Adidas uses a more hierarchical structure, provoking conflicts across departments, and resulting in lower agility as not everybody is empowered (Thomasson, 2014). Nevertheless, the new generation of executives hired over recent years has contributed to Adidas’s revival, with the likes of Paul Gaudio overseeing all aspects of the brand image, from advertising to store design. This creative lead is now based in America as opposed to with the CEO in Germany (Waters, 2017).

(Nike, 2017h)

12.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

(Nike, 2012)

13.

Macro Analysis Steeple Analysis (See Appendix B) (Adapted from Posner, 2011, pp. 65-69)

Social

• Health and wellness trends • Demanding and unpredictable consumers • Increasing industry pace • Rise in the prominence of personalisation and tailored experiences • Shift of profitable markets

Megatrends - Experience Economy•Shifting Markets

Technological • Digitisation transforming the supply chain • Consumers accepting and adapting to increasing use of technology • Presence and competition from online players such as Amazon and ASOS • Artificial intelligence being used to interpret large amounts of data • Negative consumer attitudes towards ineffective technology

•Healthy Living•Shopping Reinvented•Ethical Living• The Connected Consumer

Environmental (IBM, 2017)

• Using sustainability as a benefit as opposed to a disadvantage • Closing the loop • Environmental factors influencing consumer purchasing decisions • Importance of company and industry transparency

Economical

Political

• Instability from terrorism, trade restrictions and election results • Threat of U.S. policy proposals making reshoring seem increasingly viable • Benefit of having a strong message and political stance

• Volatility in the global economy becoming the norm • Fluctuating and unstable currencies and exchange rates • Increasing dominance of Eastern markets in terms of sales • Harsh economic climate resulting in ceasing business operations (Wikimedia, 2007) • Trend towards discount retailing • Exposure to legal threats lowering consumer expectations relating to business procedures, products and employees • Lack of control over licensing • Counterfeit production

Legal

Ethical

(Nike, 2015e)

• Prevalence of conscious consumption • Decreased ability to regulate external contractor standards • Subject to local government laws • Balancing the Triple Bottom Line

(EarlyDiscoveries, 2017) (Burns and Bryant, 2002; Euromonitor, 2017a; Fernie and Grant, 2015; Green, 2017; Kent and Omar, 2003; Kunz and Garner, 2007; McKinsey&Company, 2017; 2016; Nike 2017a; Nike Inc., 2017; Mohiuddin, 2017; Wolf, 2017)

(Wikia, 2016) (McKinsey&Company, 2017)

14.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

15.

12 Key Cities

London

New York

Paris Barcelona

Los Angeles

Berlin Milan

Seoul Beijing Tokyo Shanghai

Mexico City In the initial stages of 2017, Nike worked towards six geographies, but this was recently simplified to four in an effort to move closer to consumers, through creating local business at a global scale (Nike, 2017i). The change intends to improve efficiency, as all major cities and countries are supported by the new geographic structure, consisting of North America; Europe, the Middle East and Africa; Asia Pacific and Latin America; and Greater China. Progress will be driven through the key cities, which are expected to account for over 80% of Nike’s projected growth through to 2020. Vital consumers reside in these key cities where trends are made, and Nike wants to use

these areas to test and trial new designs, determining which have the staying power to be distributed and filtered into regional markets as they are more widely adopted (Danzinger, 2017).

City-based strategies are key to expansion, with newly influential and wealthy markets starting to revolutionise trends (McKinsey&Company, 2016). Whilst Nike is expanding into new markets, the 2018 tipping point where sales shift to the East and South will mark the importance of a presence in areas like India, Thailand and Vietnam, all of which are currently lead by Adidas in terms of sportswear (McKinsey&Company, 2017).

(Pinterest, 2017a)

16.

17.

Triple Double Strategy

2x 2x 2x

To increase innovation, Nike is reducing its styles by 25%, and alternatively offering a deeper selection of the key franchises (Nike, 2017i). It has been suggested that the company needs to keep its supply lower than demand in order to revive its business within the U.S., by striking the right balance between scarcity and scale to protect its relationship with consumers (Garcia, 2017b). Nike is also aiming to accelerate the rate of innovation, proven by the recent cushioning revolution, with the launches of ZoomX, Air VaporMax and Nike React.

Nike is Editing to Amplify

Adidas has also put design at the centre of its business in order to compete, building creative teams for each function and aligning them more directly with financial processes (Waters, 2017). The Ultra Boost remains one of the brands most innovative and profitable shoes.

INNOVATION SPEED

DIRECT CONNECTION TO CONSUMERS

Adidas is trying to increase its offering in order to grow, particularly by investing into open source collaboration (Kansara and Morency, 2017). The brand has recently made product access into more of an experience, through the likes of exclusive drops, gumball machines and raffles, breaking away from the mentality of a big corporation by using product previously been kept within private archives. This leaves consumers with both product and a palpable sense of the brands momentum and energy (Dunne, 2017).

To double direct connections, a new team has been put in place to unite the Nike website, stores and digital products, in an effort to improve the membership experience on a global scale. The change in management and leadership will streamline and speed up strategic execution, and is also expected to result in a 2% reduction of the company’s global workforce (Nike, 2017i).

To double speed, Nike is aiming towards cutting its production times in half, starting with the ‘Express Lane’, which creates, updates and fulfils products in response to consumer demand. This process is currently only being used on footwear lines in North America, Western Europe, and China, and is not running as precisely as it could be. Similarly, Adidas has built a ‘speedfactory’ facility, where new manufacturing processes like robotic cutting, digital knitting and 3D printing are being deployed to hasten the reactivity to trends (Kansara and Morency, 2017).

(Nike Inc., 2016)

(Intercity, 2013)

18.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

19.

Sustainability After incidents such as the Rana Plaza collapse, sustainable practices have emerged as a significant industry trend, although awareness initially surfaced in the sixties (Henninger et al., 2016). Ethical fashion is associated with elements ranging from fair working conditions to organic and environmentally friendly materials, but despite increasing importance, consumer awareness remains low.

To create a sustainable business model is complex in the current market, as to stay competitive, companies are pressured to lower prices and cut corners to deliver to the demanding consumer. Climate change is also a global issue requiring global solutions, so adjustment must be industrywide (Nike, 2017j).

Nike was once synonymous with slave wages, forced overtime and arbitrary abuse of employees, as it was surrounded by scandals broadcasting how it used sweatshops, hired children, and exposed workers to high levels of chemicals (Abnett, 2016). Nike realised that sustainability could be an innovation, not just a risk, and set about major strategic shifts, committing to transparency in 2005 by publicly disclosing its list of suppliers, data most companies would view as a highly competitive advantage. Sustainability has since become a game changer for Nike, as they drive towards investment in disruptive innovation and transition towards a circular business model (Nike, 2017j). Their two most sustainable product advancements are Nike Grind and FlyKnit technology, but they are continually investing around a greener future, as environmental concerns impact the athletes they serve (Nike, 2017b; Nike Inc., 2016).

Ambition: Double business, with half the impact (Nike Inc., 2016).

(Larson, 2014)

20.

Introduction

(Nike, 2017c) Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

21.

Strategic Aims 1. Nike is dedicated to eliminating waste through improved product design and manufacturing technologies, and has diverted 92% of footwear waste from landfill and incineration (Nike, 2017d). They implemented a two-fold energy strategy focusing on efficiency measures and renewable resources, and since launching the Energy and Carbon programme in 2008, it takes them only half the energy and emissions to make a pair of shoes.

Nike continually explores new chemistries, whilst setting standards for their use in manufacturing, and is focusing on understanding, reducing and improving their water use.

However, their biggest impact is from materials, and they are trying to get smarter by using recycled polyester and Better Cotton in a closed system.

Nike has three strategic aims in order to help achieve their ambitions (Nike, 2017c). They aspire to: (Nike, 2017d)

2. Nike is changing the way they work, who they work with and what they expect of their partners (Nike, 2017e). Every factory must comply with the codeof-conduct and be evaluated for their sustainability performance, however this can be difficult for Nike to govern, which is why they are pushing for a single code-of-conduct across the industry, in addition to standardised protocols and transparency levels.

Nike’s manufacturing map for example, discloses the name, location and demographic information about the workforce at their factories. Moreover, new technologies are implemented by employees who have been engaged with pilot programmes, connecting them to healthcare, education and finance networks.

(Royal, 2016)

1. Minimise Environmental Impact: using carbon as a leading indicator to assess sustainability, and focusing on energy, chemistry, water and waste within their supply chain to understand their impacts and identify strategies to use less, use better and use again.

(Nike, 2016a)

3. Nike’s mission to bring inspiration and innovation applies not only to athletes and consumers, but also encourages employees and communities to reach their full potential (Nike, 2017f). Nike inspires workers by offering development programmes and resources to support them, proving how the company invests in talent to gain valuable and loyal personnel.

Not only this, but Nike is committed to getting kids active, working with schools and facilitating them to improve participation in physical activity.

2. Transform Manufacturing: delivering performance products with contract factories that invest in placing highly skilled, engaged and valued workers at the centre.

3. Unleash Human Potential: driven to encourage everyone to reach their full potential, whether it is on the track, field or court, at work or at home.

(Nike, 2017f)

22.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

23.

THE WORLD HAS LIMITS, ATHLETES SEEK TO DEFY LIMITS (Nike, 2017c).

2020 Targets: • Deliver products with maximum performance, minimum impact • Increase use of sustainable materials • Reach 100% renewable energy in owned or operated facilities whilst encouraging broader adoption • Eliminate waste to landfill or incineration from manufacturing • Innovate and adopt new approaches to water use • Ensure contract factory workers share in productivity gains • Source 100% from factories that meet the definition of sustainable • Establish partnerships supporting factory workers both in and outside of the workplace • Invest income to positively impact communities • Attract talent to diversify and drive the future of the industry (Nike, 2017d; 2017e; 2017f)

(Nike Inc., 2016)

24.

25.

Product Innovation (Nike, 2016b)

The Reuse-A-Shoe programme recycles old athletic shoes and pre-consumer waste into Nike Grind, inspired by a vision to create a ‘closed loop’ system, ultimately assembling shoes in a way that allows them to be readily recycled.

If consumers do not have access to the scheme, there is little option for alternative beyond donation or disposal.

Nike Grind includes three types of raw materials; rubber from the outsole, foam from the midsole, and fabric from the upper.

Since the programme started, 28 million pairs of shoes have been collected, with more than 1.5 million pairs each year along with thousands of tonnes of waste.

Whilst Nike still encourages consumers to donate shoes with further wear, they take pairs that would otherwise end up in landfill and transform them into materials for new athletic tracks or products.

Consumers must either take their shoes to Nike stores, Nike Grind is now used or send them directly to the in 71% of Nike footwear and apparel. recycling facilities in Memphis, Tennessee or Meerhout, Belgium. Nike does not fund this service, and does not accept sandals, flip-flops and dress shoes.

(Nike, 2017b; Nike:GetHelp, 2017; NikeGrind, 2016)

26.

FlyKnit technology focuses on both performance and design, and is precisionengineered down to every stitch in order to turn “limited resources into infinite possibilities” (Nike, 2017b; 2017j).

The process prevents masses of excess material from ever reaching landfill, with 60% less waste on average compared to traditional techniques. The outcome is the lightest, strongest and most adaptive footwear created by the brand.

In terms of consumers, they may not purchase sustainably due to lack of knowledge. It has been indicated that people define sustainable fashion in terms of sourcing and production processes, whilst ignoring social aspects such as fair wages and working conditions (Henninger et al., 2016). They also believe that it comes at a higher price due to materials, however this information is often assumed as opposed to gained through experience, as consumers are willing to purchase but do not follow through. According to Freud’s Theory of Motivation (see Appendix C), consumers’ Superego may

Introduction

Company Overview

Company Analysis

be influenced by sustainability, as these morals and values are rising in society and operate at a conscious level (Evans et al., 2009). This is a social conscience and often conflicts with the Id, which may drive consumers to purchase cheaper and more aesthetically pleasing items.

Ultimately the Ego is transitioning, trying to curb consumers to purchase and invest in sustainable products, although it does not currently seem like a realistic way to satisfy their impulses.

In addition to this, brands are accused of ‘greenwashing’ by misleading customers of the green credentials their products offer. This makes people suspicious and leads to a loss of trust, meaning longterm relationships are harder to establish (Henninger et al., 2016).

Nike is doing little to promote its environmental efforts to consumers, who still associate the brand with previous backlash. The outsourcing and overseas production network that the brand is renowned for also affects its credibility, as this fosters a larger carbon footprint

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

27.

than producing locally, despite often being seen as the only way to sustain a business. Further to this, a majority of environmental and social impacts, as well as opportunities, occur in operations that Nike does not directly control but influences (Nike Inc., 2016). Consumers are not incentivised to purchase Nike’s sustainable offering, nor is there any reward for contributing to the Reuse-AShoe programme.

Sustainable marketing calls for socially and environmentally responsible actions that meet the present needs of the business and consumer, whilst also preserving or enhancing the ability of future generations to meet their needs (Kotler and Armstrong, 2017). Nike used to operate through a marketing concept, however when they faced controversy, they recognised they had to align with a more sustainable marketing concept, although they still haven’t reached this status.

Resource scarcity, fluctuations in the prices of raw materials, and disruptions to the supply chain are all concerns for Nike, however continued investment into sustainability can amend this, and benefit the brand and consumers both present and future (Nike Inc., 2016).

and consumers, through collaborations with Better Work and Parley for the Oceans, and limited edition releases only attainable by earning through commitment to taking action.

The open source element of the strategy is perhaps key to the brands sustainable recognition, as they connect with creators, communities, consumers and partners in an effort to push boundaries (Blaustein, 2015). They are publicising their efforts because they are actively solving existing problems, and reaching as many individuals within the cycle as they do so.

Despite trying to improve its environmental and ethical practices, Nike does not rank on Corporate Knights Global 100 for Sustainability, whereas competitors such as Adidas, H&M, Apple and Kering do (Abnett, 2016). Adidas does more to promote its green initiatives to their consumers and has an incredibly holistic approach to sustainability, focusing on both product and people with a strategy called ‘Sport needs a space’ (Adidas, 2017; Hassani, 2017). The company has 2020 targets and aims to change both the mind-set of the industry (Matcham, 2017a)

28.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendixes & Bibliography

29.

Technology Competence Nike uses technology to create a buzz in numerous ways, from enhancing their manufacturing processes to increasing their product innovation.

Since 2015, Nike has endeavoured to introduce greater automation into the supply-chain, working and investing into companies like Flex and Grabit. Flex has become one of Nike’s most important factories, due to innovations like lasercutting and automated gluing (BisselLinsk, 2017). These processes can drive down costs and lead to greater profit margins, whilst rapidly delivering new designs priced at a premium. By moving manufacturing closer to key markets, consumer demand can also be swiftly satisfied. However, Nike has been a pioneer in outsourcing production to the developing world, previously subjecting the brand to critical allegations, but these countries are now fearing robots will deprive them of a chance at industrialisation, as Nike may cut production in areas such as Asia, exposing them to accusations of abandoning their massive workforce.

Further to evolving their manufacturing processes, Nike is renowned for product innovation. FlyKnit and Nike Grind are just a few of the advances Nike is trialling in an effort to close the loop. Not only this but technology allows the brand to charge at a premium for its designs, such as with the HyperAdapt 1.0, which tightens automatically for the perfect fit, priced at over £600 (Euromonitor, 2017a).

The brand also recently opened a new design studio, offering shoppers customdesigned sneakers in 90 minutes, using technology to heighten experiencebased retailing by providing interaction (Bowman, 2017). Nike has furthermore partnered with the NBA to create connected jerseys that give access to exclusive footage, gear and game tickets. These reflect how consumers are becoming more comfortable with the concept of wearable tech, and regular product launches such as these underpin the brand’s position within the market.

A Nike App offers users exclusive access to everything Nike, allowing them to shop directly on the app and view behind-the-scenes content

Nike Training Club acts as a Personal Trainer for users at all levels, with over 160 free workouts to follow

2017a). With multiple apps to its name as well, it has become a force to be reckoned with in terms of outreach, as they target different consumers, all with unique offerings.

The Nike+ Run Club is designed as a running partner, offering GPS tracking and customised coaching plans. The app also supports the Apple Watch

SNEAKRS gives users instant access to the latest launches and drops. In addition to this, people can read about the inspiration, benefits and heritage behind the shoes

Nike

Adidas

Under Armour

Lululemon

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NikeConnect links to the exclusive experience offered by the NBA Connected Jersey, offering the next level of access beyond the product

Nike+ Fuel is a simple, smart and fun way to get active. The app turns activity engagement into NikeFuel

MAKING is a tool to inspire designers and creators to choose better materials in order to lessen the environmental impact their products have

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Grabit comparably provides Nike with upper-assembling machines that work twenty-times the pace of humans, with these more efficient methods of manufacturing creating better jobs for displaced employees (Brustein, 2017).

Despite being too costly in the past, robots have now become a necessity to respond to the mounting pressure from the market, with these urban warehouses allowing brands to be more vertical and localised.

Social media is then used to maintain consumer awareness of the brand development, and Nike excels in this area, often being cited as one of the ‘most Instagrammed’ brands (Euromonitor,

(iTunes, 2017)

Table 2 Social Media Interaction

30.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

31.

Strengths

Weaknesses

• Stronghold over the U.S. market • Famous for innovation, invested particularly into footwear • Renowned for the production of highquality goods • Growing Direct-To-Consumer (DTC) strategies for increased control over brand equity • Ownership of Converse and Hurley

(Biever, 2014)

• Reliance on third-party retailers • Small, independent physical retail presence • Massive marketing spend equivalent to nearly 10% of revenue • Manufacturing and selling globally, exposing the brand to the volatile economy • Substantial investment into prominent stores

(Cohesity, 2017)

Opportunities

Threats

• Finding continual ways to add value and innovate • Regulation of external retailing, which main competitor Adidas has far more control of • Stagnation of developed markets • Increased competition from both new and existing players

• Increased revenue for ladies sector • Potential to leverage technology partnerships • Use of Artificial Intelligence (AI) to develop consumer relationships • Presence in emerging markets • Closing the loop

(Nadyn, 2017)

32.

Introduction

Table 3 SWOT Analysis (See Appendix D) (Adapted from Easey, 2009, pp. 241-243) (Euromonitor, 2017a; McKinsey&Company, 2017; Nike Inc., 2017)

(Matcham, 2017b)

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

33.

65.3%

65.5%

64.1%

62.4% 61.6%

31.5%

31.2% 30.2% 29.8%

6.9%

30.0%

6.4% 5.7% 4.9% 4.5%

2013 $25,313

$27,799

$30,601

$32,376

$34,350

2013

2014

2015

2016

2017

2014

Footwear

2015

2016

Apparel

2017

Equipment

Revenue Split

Revenue in Millions

The selected financials demonstrate steady growth for Nike, with footwear increasing, apparel fluctuating, and equipment decreasing in profitability. Over 65% of Nike sales come from footwear, comparatively to Adidas’s at 53% (Euromonitor, 2017a).

More diversity could be key to strengthening Nike’s longterm positioning as opposed to a reliance on footwear,

34.

despite this entity being the brands initial unique selling proposition. These variable apparel and equipment sales could be due to increased competition and changing consumer perceptions, as having branded Nike footwear may be considered as the most important part of an outfit, whilst the rest can be interchanged with alternative brands.

(YanYan, 2010)

2015

2016

North America

Western Europe

Central & Greater Eastern China Europe

2017

Japan

Emerging Markets

Revenue Split across Geographies

35.

Financials

Nike continues to deliver growth and expanding profitability, despite the volatile economic climate and fluctuations in foreign currency, providing shareholder value by: (Nike Inc., 2017)

Option to personalise products Educated

Quality conscious Adventurous Exclusive and affordable

Reliable

Essence

Brand Values

Nike is constantly making incremental changes in order to respond to market fluctuations, however as the external environment becomes increasingly unpredictable, businesses are challenged to continually innovate (Johnson et al., 2008). Nike will be exposed to a stage of strategic drift (see Appendix E) if it fails meet the needs of the demanding consumer. If their rate of change does not have enough impact, competitors will continue to gain valuable market share and preference towards the Nike name will be lost.

Investment into sustainability

High price points justified by innovative product

Brand Personality

• Delivering innovative, premium products that can command higher prices whilst maintaining a balanced price-to-value ratio for consumers • Reducing product costs through focus on manufacturing efficiency, product design and innovation • Investing in new technologies to make the supply chain more competitive through automation, reduced waste, and increased customisation • Driving growth through DTC business that offers higher gross margins, led by digital commerce

Brand in Action

Data also shows how Nike’s efforts to improve its DTC strategies are effective, as this segment grew by 16% from 2016, compared to Wholesale at only 2%.

Despite continued DTC investment, Nike still heavily relies on third-party retailers and has a far smaller retail presence than competitors, putting its brand equity at risk (Euromonitor, 2017a). Nike also has to compete with the multi-brand retailers selling its products (Nike Inc., 2017). Whilst all brand geographies delivered higher revenues, growth was prominent in both Greater China and Japan, representing shifting markets and highlighting how Nike needs to invest into these emerging areas. Nike’s FY18 first quarter results show growth through international geographies and Nike Direct, offset by an expected decline in the North American market. The company’s slowest quarterly sales growth for seven years can be attributed to increasing competition, particularly from Adidas, and a decrease in the prominence of the athleisure trend (Reuters, 2017).

High quality Athletic

Inspiring athletes

Innovative sportswear that enables everyone to perform like an athlete

Innovative

Fitness and activity

New technological styles for the innovative consumer

Confident

Exciting

Energetic

Successful Competitive

Endorsement and association to athletes at the top of their game

Increasing global presence

Focusing on the pursuit of excellence throughout the supply chain

(Nike, 2017m)

Table 4 Brand Onion (Adapted from Posner, 2011, p.147)

(Davidson, 2017)

36.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

37.

Product Appraisal Table 5 Fashionability Diamond (Adapted from Posner, 2011, p. 16)

Premium

Core

Basic (Fig. 4)

Consumers know that Nike offers high quality, innovative sportswear, and although not initially considered fashionable, the brand has had to adapt its designs, as they are worn not only for functionality, but to display a healthy lifestyle outside of sports participation (Euromonitor, 2017a). The brand charges higher price points for a majority of products, due to technology like DriFit and NIKEiD, although most of this is focused towards men’s footwear. This has resulted in the decline of apparel and equipment sales, as well as exposing an opportunity for investment into female products.

Nike currently has nearly 750 men’s shoes on its website, with most offered in multiple colours or with the ability

38.

Introduction

Company Overview

Company Analysis

to customise. According to the Boston Matrix (1977 cited in Henry, 2011), footwear is therefore Nike’s star product.

In comparison, the accessories and equipment sector of the business are in the dog category, as these sales generate a decreasing percentage of Nike’s income each year. Womenswear can be categorised as a question mark, as this offers high market growth and is an area where Nike can be performing better.

Despite being cash absorbing, it is a range the brand should build upon. This model however is unrepresentative of product life cycles, as equipment was once a profitable stream of revenue for Nike, and is still an attractive market to be investing in despite slower growth. Nike’s huge product assortment can be overwhelming online, but stores can only represent a narrow selection of the product available (Easey, 2009). Fashionability

Potential

30-Day Free returns

Online size guide

Prestige of Nike brand

Sustainability

2

1

Quality

Innovation

Packaged in a orange shoebox

Branded with the Nike logo

Core Innovative footwear for sporting activity

Suitable for sport

Manufactured with technologically advanced processes

Nike+ membership giving access to free delivery, exclusive events and early product access

Virtual personal shopper

Association to elite athletes

High quality

Price aligning with the value

Customisation with NIKEid

Price

3

Online chat assistant

Click-and-collect

Actual

Comfortable and well-fitting

5

4

Total

Student discount

Same-day or one-hour delivery

Try-beforeyou-buy

Personal training through various apps

Completely sustainable manufacturing

Loyalty discount Range Depth

Range Width

Nike Adidas Table 6 Under Armour Multi-Attribute Perceptual Map (Adapted from Jackson and Shaw, 2009, p.81)

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Exciting and relevant collaborations

Introduction

Company Overview

Engagement in multiple sports

Customisable in a more signature way

Table 7 Total Product Concept (Adapted from Posner, 2011, p.37)

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

39.

Comparison

Nike Dri-Fit Knit

Adidas Primeknit Wool Tee

Under Armour Threadborne Seamless T-Shirt

lululemon Swiftly Tech Short Sleeve Crew

• £59.95 • XS, S, M, L, XL • Seamless design, lightweight, breathable, smooth, slim-fit, Dri-FIT technology, reflective detail • 60% Polyester, 40% Nylon • Machine Wash • Imported • Rated 4.6/5 • Free Standard Delivery with Nike+ Standard Delivery - £5 Next Day Delivery - £4 Free Delivery on spends over £50 Free Returns (30 Days) Click-and-Collect • Student Discount - 10%

• £59.95 • XS, S , M, L, XL • Primeknit Wool for intuitive temperature management and odour resistance, nearseamless construction, reflective detail, fitted • 39% Wool, 35% Polyester, 26% Nylon • Machine Wash • Rated 4.3/5 • Free Delivery on spends over £50 Standard Delivery - £3.95 Express 1-day - £12.95 Free Returns (100 Days) Customised Orders Delivered Free Order Tracker Click-and-Collect • Student Discount - 15%

• £55 • S, M, L • Loose, Threadborned Seamless design, breathable, nearly-seamless, engineered mesh ventilation • Polyester, Elastane • Imported • Rated 4.6/5 • Free Standard Shipping Free Returns (30 Days) Order Tracker • Student Discount - 10%

• £58 • XXS, XS, S, M, L, XL • Silver Scent Technology to inhibit odour, seamless construction, body skimming fit, four way stretch fabric • Machine Wash • Imported • No Reviews • Free Standard Delivery Express 2-Day Delivery - £16 Free Returns (30 Days) • No Student Discount

Table 8 Like-for-like comparison (Adapted from Posner, 2011, pp. 79-80)

(Fig. 5)

40.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

41.

Competitor Analysis

Table 9 Porter’s Five Forces (Adapted from Posner, 2011, pp. 70-73)

Appendices & Bibliography

nti al

Pot e

t es stitu sub f o at

f buyers

Conclusions

Th re

Risk Analysis

ro we Po

Sporting leagues and events

Nike is constantly threatened by products that can act as a substitute for their own, however what consumers are buying into from Nike is the brand, innovation and quality.

The same type of product and even service can usually be found at alternative brands however despite being cheaper, they will not always be as superior as Nike.

th

s

Strategic Proposal

Public figures

Prominent athletes, coaches and teams

in

Power of supp lie r

Company Analysis

Social media interaction

itio n

y

Company Overview

Identification to:

Compet

tr us

42.

Introduction

Edges

(Nike Inc., 2017)

o

ew fn

r a n ts ent

d in

Nike also has to consider more indirect competitors such as Starbucks and Netflix, who are Consumer connection competing for the attention, to the brand and products, developed disposable income and time through: of consumers (Garcia, 2017a).

Amazon is the preferred online shopping channel for the younger Customer audience, with 49% using it service as their favoured site, and it is shaping the market after Marketing benefitting from the economies of scale, leaner supply chains and big data

New entrants are initially unlikely to impact Nike’s dominant presence within the sportswear market, however global connectedness and technology are allowing brands to grow at an accelerated rate without having a strong physical existence in any particular country. Under Armour grew significantly over the past few years, but has since levelled to flatter rates of growth, and instead it is established brands diversifying into sportswear that cause most potential threat.

e

Nike recently noted Adidas, ASICS, Li analytics, Nike in comparison holds only Ning, Lululemon, Puma, Under Armour 6% (Euromonitor, 2017a; Reagan, 2017). and V.F. Corporation as competitors, Amazon’s expansion into active-wear is but global competition is intensifying as becoming prevalent on its website, with fast and high-fashion players are trying internal brands attempting to fill a gap to capitalise on the sportswear market in product offering, rather than relying (Nike Inc., 2017). Pricing promotions and on the likes of Nike for merchandise high-street chains like H&M have lowered (Rupp, 2017). Amazon is closing in on consumer expectations about what they competitors by using similar suppliers to should have to spend on sporting goods, reduce differences in terms of quality. despite Nike’s higher price point being justified by innovation (Euromonitor, New product innovation 2017b). Adidas is Nike’s principal Quality and competitor, recently gaining market share development Price that Nike has lost, with the release of justification Adidas Originals NMD reflecting a moment Performance of success (Kansara and Morency, 2017).

Reliability Footwear has become the ultimate status symbol, with only a quarter Effective sourcing Product of American’s using sneakers for and distribution, attributes with attractive such as: sports use; Adidas realised that merchandising they needed to increase desirability both in-store and online of the brand through aesthetic and lifestyle features. They achieved this through new strategic tactics such as Competitive speed, key cities and open sourcing.

Nike has to compete with the likes of Adidas, Under Armour and Puma, but must also consider a wider range of threats coming from high-street retailers such as Topshop and H&M, who now offer their own sportswear ranges. Netflix and Amazon are indirect competitors, who strive for a share of millennials disposable income and attention.

Due to the large number of competitors, the power of Nike is reduced, as consumers are turning to alternative offerings.

Suppliers pricing depends on how many competitors they have, how unique their offering is, and how much it would cost a company to switch to another supplier. Nike relies on over 550 factories to manufacture its goods, but recently cut down on its supplier list in an effort to make longer lasting relationships with its remaining ones. In addition, Nike is seeking to invest into developing goods more locally to the market.

Nike’s current suppliers are also beginning to manufacture product for their biggest competitors.

Amazon for example, is believed to be using the same suppliers for its ownbrand sporting lines.

Nike has the ability to purchase products from suppliers at a competitive price, because they are leaders within the sportswear market and have high volume orders. The brand also manufactures at a wide range of factories, so each needs to meet Nike’s demands in order to remain part of the chain.

Fast-fashion has lowered the price consumers expect to pay for goods, and they now have the ability to drive prices down, which affects the whole supply chain.

Nike has predominant market share in major regions, but it is often cheaper for consumers to switch to high-street competitors that are trying to take a share of the athletic market. Nike offers innovative product, but has a price tag to match.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

43.

Consumer Profile Demographic

Demographic • Age: 20 to 45 • Gender: Male • Average Income: $20 to $60 million, with a predominant income from endorsement • Marital Status: Married or in a serious relationship • Family Size: Small • Education: Lack of formal education, but strong commitment to sports • Career Level: Professional/Elite • Generation: X/Y

Geographic • Region: Predominantly U.S. but continually expanding globally • City Size: Metropolitan • Area: Central • Climate: Mixed • Accessibility: Easy access to product, often get deliveries due to sponsorship

• Age: 30 to 50 • Gender: Female • Average Income: $100,000 to $249,000 annually, considered high earners • Marital Status: Married • Family Size: Small, with younger children • Education: Well-educated • Career Level: Professional, but prioritises family over work • Occupation: Brand manager, doctor, lawyer, financial manager • Generation: Y

Geographic • Region: UK • City Size: Small City • Area: Rural • Climate: Cool • Accessibility: Access to product through external retailers and online channels

Psychographic and Behavioural

Psychographic and Behavioural

• Personality: Sociable, fun, openminded • Interests: Cooking, seeing friends, staying healthy, organic food, spending time with family, shopping • Self-Image: Practical, utilitarian • Reason for buying from Nike: Quality, comfort, brand name • Sports participation: Couple of times a week in exercise classes such as yoga and aqua aerobics • Social Class: Grade B/C • VALS: Achievers

• Personality: Open-minded, affluent, competitive, individualised • Reason for associating to Nike: Get to develop products for their particular sport, sponsorship, quality, innovation • Purchasing Motives: Product designed for particular function, quality, technologically advanced • Sports participation: Daily • Social Class: Grade A • VALS: Innovators

Usage and Benefit Variables

Usage and Benefit Variables • Average visit time: Have product sent directly to them • Relative Spend: Do not have to buy product due to sponsorship, but will spend thousands at alternative outlets • Price Consciousness: Affluent spending approach • Benefit sought from product: Designed for specific function, endurance, quality, performance • Brand Loyalty: High, due to paid association • Adoption Level: Innovator, often has access to trend before the wider market

44.

• Average visit time: Around an hour • Relative Spend: £50-£100 • Price Consciousness: Can or will spend the money on products should they need that are of quality • Benefit sought from product: Performance, comfort • Brand Loyalty: Average, knows they can get quality product from Nike, but is not worried about brand status • Adoption Level: Majority

(Ptwschool, 2017) (Pinterest 2014)

(Matcham, 2017c)

Sports participation remains steady, with health-conscious consumers on the rise. Additionally, the existing consumer has become accustomed to comfort, a trait they are not willing to compromise on, along with performance and style (Euromonitor, 2017a). Nike reaches a massive audience, attracting the young through innovative and attractive designs made available through exclusive drops and personalised apps, and reaching an older market with reliable, high quality products. No single customer accounted for more than 10% of Nike sales in 2017, proving how diverse the consumer base is.

Users vary from being sporty or even top athletes, to everyday wearers, fashionable consumers and even the price conscious.

The profiles demonstrate just a couple of Nike customer’s, from the elite male athlete, to a middle-aged female, but despite reaching such a wide market, it is clear Nike’s product offering is still male dominated. Moving forward, companies need to include competitive strategies that focus on consumer engagement,

Introduction

Company Overview

Company Analysis

as this can allow them to gain insight into preferences and demand, whilst building lasting relationships. Most Nike consumers are between innovators and the early majority, making them more open to new trends and technologies, however this puts pressure on the brand to deliver to constantly rising consumer expectations (Easey, 2009).

Adidas targets a similar audience, although it could be argued they sway more towards a younger demographic.

Both brands respectively have aimed to become leaders in certain sporting fields; Nike for example is dominant in terms of basketball and Adidas is geared towards soccer. Nevertheless, Adidas has had a recent resurgence because of its ability to connect to consumers with design and style, signifying a shift away from loyalty to the ‘Swoosh’ and athlete endorsement, as fashionable sportswear has become more prevalent. Adidas also caters more equally to females, with a well-balanced product offering, supported particularly by Reebok.

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

45.

Key Insights Strategic change concerns how an organisation interacts with its external environment, creating new and innovative ways of conducting business, whilst considering the long-term direction and scope that there is to improve (Henry, 2011). Overall, Nike has made incremental changes to respond to macro-factors, but certain sectors of the business are becoming unaligned with the market, causing the brand to lose some of its share.

The volatility of both the global economic and political environment is drastically affecting businesses, with Nike particularly conflicted by trade agreements and fluctuating currencies.

However, it is the unpredictable consumer and increasing competition causing most threat to Nike, particularly in the teen market where the brand is losing its purpose. Personalisation is becoming more of a necessity, from customised products and curated recommendations, to communication and storytelling that uniquely connects to individuals (McKinsey&Company, 2017). Gen Z share almost everything online in an attempt to make a personal brand, and in turn seek to find companies that align with their own values authentically. They want more unconventional and signature items, of higher quality and at better prices, whilst also being able to engage in a relationship with the brand.

is currently leading in more dynamic markets, and these are all areas that could offer huge returns on investment if they are approached correctly.

Nike has digitisation throughout its supply chain and is already renowned for its innovation, but they can still leverage their use of technology beyond this.

Despite building a couple of ‘Express Lanes’, these systems are yet to be implemented on a wider scale and are not running as effectively as they could be, limited only to the manufacture of footwear. Broader external changes are making reshoring progressively viable, as moving manufacturing locally to each market with automated production is less labour-intensive, wasteful, and supported by lower transportation costs (Waters, 2017). AI should also be a vital part of Nike’s strategy moving forward, and is already shaking up the industry by turning large and diverse sets of data into more enriched information (McKinsey&Company, 2017). Amazon’s colossal product offering for example, can make it difficult for consumer’s to choose products, but AI can improve this by offering relevant and timely customisations in an unobtrusive way.

Mission

Return favourability to the Nike name amongst young female consumers, by associating with desirable ambassadors, creating targeted product, and developing a personalised relationship with each individual.

Further to this Nike’s core geographical market is facing stagnating sales, as emerging markets are taking over. Adidas (Vans, 2012)

46.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

47.

Digita Natives 48.

Demographic • Age: 12 to 21 (Born between mid 1990’s and mid 2000’s) • Gender: Female • Average Income: Earned through freelance work, part-time jobs or an earned allowance (less than $20 per week) • Marital Status: Single • Family Size: Varies • Education: Advanced college degrees • Career Level: Moving towards professional, aspiring to be business owners • Generation: Z Geographic • Region: Predominantly U.S. but continually expanding globally • City Size: Metropolitan • Area: Central • Climate: Mixed • Accessibility: Close proximity to store and easy access to online platforms Psychographic and Behavioural • Personality: Progressive, open-minded, conservative approach to spending, self-reliant, individualised, environmentally conscious • Reason for buying from Nike: Comfort, quality, value • Interests: Volunteering, home-cooked foods, online gaming, entertainment with friends, family • Self-image: Practical, realistic, utilitarian • Purchasing motives: Quality, value, availability, participation and engagement • Influenced by: Growth of technology, friends and family, product reviews, speed of communication • Sports Participation: Weekly • Social class: Grade A to Grade D • VALS: Nike is an innovator as a brand, but consumers link closer to achievers and experiencers, as they have high resources, and strive to reach goals and experience extraordinary things Usage and Benefit Variables • Average visit time: Less than 30 minutes • Relative spend: £40 -£100 • Price consciousness: Conservative approach to spending, but are willing to pay as long as the price is justified and they know what they are getting • Benefit sought from product: Quality, performance and environmental consciousness • Brand loyalty: Low as they believe product is more important than who made them • Adoption level: Early Adopters and Majority • Shopping frequency: Every couple of months (IBM, 2017; Pickard, 2017; Peterson, 2014; Evans et al., 2009) (Gargi, 2016)

49.

Focus: Gen Z

17% Shop and Browse

Nike is losing dominance in the teen market, with the ‘Swoosh’ being replaced by the Adidas Superstar as the most popular sneaker in the U.S. (Bowman, 2017). In addition to this, street-wear brands like Vans and Supreme have gained popularity, demonstrating a drift away from the appeal of sporting attire.

Nike needs to reconsider how it engages with Gen Z, as according to some reports, it will make up almost 40% of the consumer base by 2020 (Pickard, 2017).

Gen Z are digital natives, unfamiliar of a life without Internet access and ‘always on’, despite exhibiting attitudes, beliefs, and behaviours that combine the tech world with elements of past generations (CentreForGenerationalKinetics, 2017; Shay, 2017). They no longer live in a bubble, but instead in a world where music, art, design, fashion and sport have merged together through mobile screens, as the boundaries between online and offline are nearly indistinguishable (Kansara and Morency, 2017; IBM, 2017). They spend hour’s multitasking across at least five screens daily, using mobile devices to socialise with friends and family. With answers to questions just clicks away, they are more self-reliant and empowered to be smarter shoppers. The average attention span is only eight seconds long, and this could half because of adaptation to a fast-paced world, so brands need to connect through short, visual messages, with options available to access more information (Pickard, 2017).

50.

Introduction

Company Overview

Company Analysis

Although digitally over-connected, Gen Z are longing for an engaging physical store, as this is their preferred shopping channel (Levitt, 2016). They want a clean space, friendly and knowledgeable staff, and a positive purchasing experience.

Further to this, Gen Z is more absorbed by environmental and social issues, seeking and valuing individuals, brands and organisations that are actively tackling these problems (Stott, 2017).

Gen Z is working and saving earlier than might be expected, aspiring for jobs that are fun and flexible, whilst earning and spending similarly to Millennials who are ten years older (CentreForGenerationalKinetics, 2017).

This shows that they can connect effort to the outcome of making money and using it as they wish, despite worrying about the economy more than anything else, with one in five saying debt should be avoided at all costs (Peterson, 2014). They gain financial information through parents as opposed to online, possibly reflecting frustration or lack of preparation towards personal finance, and indicating who they trust at their current life stage. They believe the skills needed to succeed are communication and problem solving, but feel they need to improve in these areas as well as public speaking, despite growing up using technology like Facetime.

Strategic Proposal

28%

58%

Learn New Things

Play Games

73% Text and Chat

59%

36%

Access Entertainment

Do Schoolwork

What do Gen Z use devices for?

(IBM, 2017)

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

51.

81%

Willing to change brands due to product quality

Gen Z•20firster s•Founders•Ce ntennials•Bridg ers•Pivotals•Pl urals•iGenerati on•Homelander

74%

Spend their free time online

80%

Try to buy product with a positive social or environmental impact

48%

85%

Often or always get input from friends and family before purchase

Watched a video in the past week to learn a new skill

60%

72%

Want to have an impact on the world

Want to start a business someday

46%

Won’t use apps that are

Research online before buying instore

60% hard to navigate, slow to load, unresponsive and prone to errors

(CentreForGenerationalKinetics, 2017; IBM, 2017; Levitt, 2017; Pickard, 2017; Shay, 2017)

(maximilianmair, 2014)

52.

53.

Focus: Gen Z

Before making a purchase, Gen Z often get input from friends and family, challenging perceptions they would be most influenced by online ratings, reviews and other user-generated content (CentreForGenerationalKinetics, 2017).

(Chen, 2017)

54.

They trust major brands the least, so Nike needs to continue improving its transparency and contributing to external social and environmental causes in order to connect (Pickard, 2017). Nike previously relied on the referent power of celebrity endorsements and professional athletes for sales, but teenagers embrace real life and prefer getting brand information from genuine customers and online influencers such as bloggers (Evans et al., 2009).

Gen Z boys prefer to buy products, whereas girls favour spending more on experiences like eating out with friends, going to the movies, and attending concerts (CentreForGenerationalKinetics, 2017). This implies companies should be considering gender-specific ways to market, particularly within sportswear, as it is typically seen as a male dominated sector, with less than 44% of women feeling as though they

were well-represented by sports brands (Lee-Coughlin, 2017; Stewart and Connelly, 2017). Lululemon has succeeded because of this, primarily targeting healthy women by selling a lifestyle as opposed to a product, and offering a sense of community (Thangavelu, 2015). Nike however has recently stepped up to compete by launching their new Pant Studio into 5,000 stores, with designs curated for different types of workouts (Chatzidakis, 2017; Thomas, 2017). This comes after Nike opened its first women’s only store in Europe in 2015, following openings in California and China (Nike, 2015b).

These spaces offer bespoke services such as pant hemming, walking analysis and bra fitting, as well as operating as a fitness hub and community.

Female traits such as emotional intelligence, empathy, vulnerability and intuition are set to become the future drivers of business (Follows and Buchanan, 2017)

It is also difficult for women to acquire limited edition items, as they tend to be offered in male sizes and limited colour-ways (Deschamps, 2017).

Nike’s HyperAdapt 1.0 for example are considered unisex, but are not available in women’s sizing. Puma comparatively has released the Fenty Creeper, which is a women’s only shoe. Brands need to recognise that women are becoming empowered, and companies like she. lace are on a mission to emphasise this through sneakers.

Table 10 Perceptual Map (Adapted from Posner, 2011, p. 53) Introduction

Company Overview

Company Analysis

Pricing

Figures suggest that Gen Z are looking towards engaging in conversation with brands to develop relationships, as they are willing to participate in campaign games and product reviews (Shay, 2017). In return, brands must offer increasingly personalised and interactive experiences that constantly reflect the latest digital advances. Nike could do this by incorporating IBM Watson technology into their digital channels, with an expert personal shopper that gives tailored responses, whilst simultaneously learning about consumer needs and preferences to refine their shopping experience. To further this collaborative engagement, teens are willing to sign up to loyalty cards in exchange for deals, and despite an uptick in cyber breaches, they trust retailers to keep their information safe (Levitt, 2016). With this considered, they are still hesitant to share health and wellness, location, personal and payment information (IBM, 2017, see Appendix F).

This could be attributed to growing up with constant news coverage of turbulent global events such as the recession and terrorism, shaping their view on the importance of privacy and security.

(Jones, 2015)

Usage Strategic Proposal

(Fig. 6) Risk Analysis

Conclusions

Appendices & Bibliography

55.

Focus: Gen Z 74%

Spend time online

How do Gen Z spend time outside of school and work?

(IBM, 2017)

44%

Watch TV and movies

44%

Hang out with friends

75%

Mobile/Smartphone

44%

Spend time with family

29%

45%

25%

Participate in religious activities Participate in organised group activities

56.

Strategic Proposal

Risk Analysis

Conclusions

Tablet

8%

Games Console

Learn new things

Volunteer

Company Analysis

10%

Participate in extracirricular activities

22%

Company Overview

Desktop Computer

Exercise or keep fit

23%

Introduction

30%

Read books, magazines, newspapers

23%

(Morzine, 2017)

Laptop

Try to earn extra money

Appendices & Bibliography

8% 7%

3%

Interactive/Smart TV

What are Gen Z’s most frequently used devices?

(IBM, 2017)

1%

Wearable Devices

6%

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

57.

Snapshot 2018

#MeToo Sport England created ‘This Girl Can’ to get women of all ages participating in physical activity, and has been championed for depicting a more realistic ethos than previous sporting campaigns (Stewart and Connelly, 2017). The industry has defaulted to using superstar athletes, but the movement set out to depict how this could intimidate as opposed to inspire women.

Social media has given users the opportunity to express opinions in wider conversation. #MeToo inspired millions of females to share their stories concerning sexual abuse online (Sini, 2017).

Gen Z is 47% ethnic minorities in America, making it the most diverse in history. Further to this, it is gender-neutral and borderless in its mind-set (Follows and Buchanan, 2017).

2015

During adolescence, female involvement in sport drops off more markedly than their male peers; with girls peaking for mental health disorders and boys affected more by behavioural issues (Hagell, 2016).

Global spending is expected to be in excess of $18 trillion amongst women by next year (King, 2017). Women impact and drive nearly 80% of all consumer purchases, so it is vital to engage with them effectively, and important to consider them not just by stereotypes, but also as individuals.

2017 (Matcham, 2017d)

58.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Nike is endeavouring to turn its ladies segment into an $11 billion business by 2020, supported by strong investment into female-centric marketing like #betterforit, which has boosted participation even in regions where women don’t typically exercise (Stewart and Connelly, 2017).

Nike teamed with up-andcoming female artists to launch their Pant Studio (Chatzidakis, 2017).

2017

Nike’s Pro Hijab helped legitimise the wearing of the garment in both sport and (Fig. 7) public spaces (The Conversation, 2017).

2015 59.

Strategic Proposal girl. by Nike is a movement to recapture the teenage female audience. Despite Nike increasingly investing towards womenswear, the sector still offers huge potential, and girl. will aim to solidify Nike’s presence and encourage Gen Z that the brand is still ‘cool’ in such a competitive market. It is important to focus on these consumers in an effort to ensure their loyalty stays with the brand from their teenage years to later in life, as they will go on to become consumers for the main womenswear segment of the brand.

The movement will begin with an app, uniting multiple consumer interests on one platform, as this generation is familiar with various concepts and content being accessible together, allowing them to move seamlessly between physical and digital worlds (IBM, 2017). The app will allow Nike to gain insights on consumers through data, and provide a customised offering of products and services in return. Gen Z is hesitant about sharing information (see Appendix F), so Nike needs to ensure it is clear what and how data is being used. The incentive for consumers allowing access to their information will come primarily from the benefit of being able to track athletic performance and connect with individuals in their area that have similar sporting interests. The ability to link with friends is vital for this market, and gaining the opinion of peers will be facilitated easily through the app (Euromonitor, 2017b). Access to exclusive and tailored content will also attract consumers, who crave elite products and services.

girl.

The app will allow users to: • Connect and communicate with friends, in addition to individuals with similar sporting interests in their area, determined by geolocation technology. This is similar to the Nike+ community but more targeted towards young female consumers.

• Buy Nike products developed for them as a unique target market. Certain capsule collections and exclusive collaborations will also be made available to consumers solely through the app, with shock drops they can instantly purchase through the app or at the nearest retail store (Nike, 2017i).

• Track individual progress and participation in sporting activities. This is an optional element, as not all of Gen Z feels comfortable with sharing their health and wellness information.

• Read articles and posts relevant to their selected interests such as female empowerment, sustainability, music and film.

• Have access to an expert personal shopper through the use of IBM Watson and AI technology.

(Wallup, 2016)

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Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

61.

girl.

After the initial development of an app, there will be multiple opportunities and areas for Nike to invest into. Product innovation is central to Nike, but previous styles are not hitting this key demographic as much as they used to, particularly in the Jordan’s category (Bowman, 2017).

Nike has recently partnered with the likes of Riccardo Tisci, Louis Vuitton and Olivier Rousteing, however these collaborations have not been as impactful as Adidas’s, as it has been argued Nike has not put enough focus and energy into them (Morency, 2017). Adidas has had incredibly successful partnerships with musicians as opposed to sports stars, with Pharrell and Kanye West elevating the brand through genuine collaboration as opposed to just an endorsement (Kansara and Morency, 2017). Nike refused to pay West royalties, as he was not an athlete, and now as part of their open source strategy, Adidas has overturned commonly accepted rules and traditions surrounding branding by becoming less protective of their DNA, to collaborate in a very liberal and willing way.

girl.

Nike already has ambassadors, but in terms of girl., Nike needs to reconsider who it should be endorsing and partnering with outside of sporting figures, to effectively engage young females.

Choosing the wrong ambassadors can undermine the brands authenticity (McKinsey&Company, 2017).

Nike has taken a step in this direction with ‘The Ten: Icons Reconstructed by Virgil Abloh’ (Morency, 2017). Abloh hails from a streetwear background, and the collection challenged the designer to look at Nike’s history and tell a story by highlighting detail and innovation within key models. Abloh was also inspired by the way youths interact with product, and believed this interaction introduced them to a wider conversation surrounding how products are pieced together.

(Fig. 8)

62.

(Nike, 2017n) Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

63.

girl. Ambassadors At age 17, Willow Smith is an intriguing artist of her generation and can relate and engage with the target consumer, particularly through the likes of Instagram, where she has over 2.5million followers (Lang, 2017). She has recently been named one of the world’s most influential teens, as she tries to use her social media platforms to not simply be famous, but connect with individuals who strive towards that and elevate their consciousness. In her work she also makes reference towards men and women being equal, and could strengthen the message girl. by Nike is aiming to portray because of this. Whilst Smith’s styling can align to the movement away from pure sportswear, her current attachment to Chanel may be a barrier to her becoming a girl. ambassador.

(Smith, 2017)

Emily Oberg, 23, has a following of nearly 250k on Instagram, with an impressive engagement rate of around 6.5%, which in terms of streetwear makes her an incredibly prominent female on the platform (Dhillon, 2017). Oberg has recently taken over as creative lead at lifestyle brand KITH, and also has her own brand under ‘Sporty and Rich’ (Danforth, 2017). Her collection of work and passion for sneakers makes her an interesting figure to consider for girl., despite being slightly older than the generation being targeted.

For KITH, her direction has been to cater to the streetwear girl, but also fashion girls who are newly getting into streetwear despite not wearing it for long, which would be easy to associate with the initial focus of the girl. movement (Chen, 2017).

(Oberg, 2016)

From a different perspective, Nike may consider a more sustainable role model, as Gen Z has a preference towards environmentally conscious brands. Eco-influencers can reach younger audiences through shareable online content and creative videos, and Elizabeth Farrell does this by removing the stigma surrounding environmentalism to make it more accessible to the digital age (Stott, 2017). Farrell constructs visual imagery surrounding the topic and opens a dialogue with an audience that may not otherwise be aware of these issues. These activists are increasingly having an impact on today’s global culture, and could help elevate Nike’s sustainable positioning.

64.

Just Do It. girl.

(HelloFashion, 2016)

(Farrell, 2015)

65.

Risk Assessment Nike seeks to actively influence its competitive surroundings, and with girl., would be aiming to set the pace for serving young females.

According to Ansoff’s Matrix (1965, cited in Henry, 2011), girl. will offer growth through product development, a strategy necessary for organisations faced by shorter product lifecycles. It can be expensive and carry risk of failure, with no guarantee consumers will engage and support the new product/service, so should the movement not drive enough sales and increase loyalty, investment would not be justified. Nevertheless, girl. may also attract new users through diversification, broadening Nike’s scope of consumers by altering the existing product offering.

Key costing areas would be app development and specifically designed product ranges, particularly ones formed in collaboration with girl. ambassadors. Whilst creating an app is costly, Nike would essentially be replicating similar systems used in its other applications, like SNEAKRS and Nike+. The element of AI would need increased financing, as Nike is yet to demonstrate substantial use of this, but potential return could have a pivotal impact. Along with the app failing to effectively operate, it may have a negative effect on the mental health of consumers, which contradicts with both the vision Nike abides by, and the intended purpose of the movement. Although girl. aims to encourage engagement, it may cause issues in terms of illnesses such as depression due to operating partially as a social space. During adolescence, girls hit a peak in terms of various mental issues, causing a remarkable drop in sports participation (Hagell, 2016).

Despite the app being designed as a discussion platform for issues like puberty, its benefit cannot be guaranteed.

Table 11 Stress Test against Macro-Environment (Adapted from Brodeur et al., 2010, p.6)

In relation to product, Nike has access to innovative manufacturing processes, however capital would be needed to develop product designed specifically for the young female.

This may mean increased employment of personnel dedicated to this section of the business, and extra funding towards the recruitment of ambassadors like those suggested. Product development is vital, as this is where Adidas have succeeded in connecting to consumers.

Aligning with Nike’s new strategy, girl. will be trialled in the 12 key cities, as this is where innovative youths reside, and the remaining audience reference as they aspire to be amongst them (Kansara and Morency, 2017). With global connectedness growing, using an app and digital methods will make new markets accessible without establishing a significant physical presence (McKinsey&Company, 2017).

Depending on the success of the scheme, there is potential for future investment into Nike Spaces, where the brand could develop particular areas within cities to improve sporting engagement, by offering individuals a safe space to gather. Young people from lower socio-economic and vulnerable backgrounds participate considerably below average, so Nike Spaces could benefit them dramatically (Hagell, 2016). Not only this, but Nike can build a similar movement for other consumers who are underrepresented, like older generations or the disabled.

High

• New entrants, particularly local brands in emerging markets, are highly likely to impact Nike, however at this stage, Nike has such a dominant global presence that the impact they would have is questionable. Lululemon has primarily targeted females, but Nike has the ability to use resources in order to compete.

• Changing consumer preferences have an incredibly high impact, particularly as this is why Nike is beginning to lose out on the teenager consumer in the current market. As teens are moving away from their love of sportswear towards street goods, girl. will try and return the ‘cool’ to the brand, but could ultimately be ineffective.

• Fluctuation in currency is constant in the volatile economic climate, and this has an impact on Nike as they trade globally. The strong dollar has had an adverse effect in relation to trading, particularly in Europe, with weaker currencies like the British Pound challenging sales.

• Instability in global politics is a huge threat to Nike due to changes in trade agreements such as NAFTA and Brexit.

By introducing a new set of product for the young female, Nike’s exposure to taxes and tariffs for exchanging goods will increase.

Likelihood

Low

• Terrorist attacks cause uncertainty amongst populations.

Consumers can be discouraged from visiting shopping destinations, which is negative in terms of retail footfall, however consumers are increasingly accessing product online. The girl. movement will be affected by this in terms of engagement in sport, however consumers can still use the app in safe environments.

• Climate change is happening gradually, and Gen Z is becoming more environmentally conscious. Whilst Nike is aiming to improve its efforts, should the girl. campaign not have strong enough links to sustainability it will not succeed, damaging the brand image and investment put into the concept.

• At the moment, it is unlikely labour costs in developing countries will raise enough to harm Nike, who predominantly manufactures in these markets. If they were to increase, it would harm Nike’s margins and profits dramatically. Nevertheless, Nike is investing in technology and robots to make the supply chain more effective anyway, and despite this process being costly, it is far more productive than humans.

• Counterfeit production is beyond the control of Nike, but this harms the brand image and consumer preferences towards the company. If girl. product lines were to be illegally replicated, it would lower the impact of the movement, as product may not live up to expectation.

Low

High

Impact

(Pinterest, 2017b)

66.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

67.

Risk Appetite Capacity

Table 12 Assessing Risk Appetite (Adapted from Deloitte, 2014, pp.6-8)

Acceptable range for risk

Upper Limit Upper Trigger

Lower Trigger

Lower Limit

Nike

Adidas

In order to grow, a number of different strategies can be utilised in accordance to the level of risk companies are prepared to countenance, their resources and capabilities, and their management expertise. Nike is currently operating at a high level of risk in order to stay relevant, however there is still potential to expand without reaching the limit. Nike is performing well due to its collaboration with Abloh, its apps such as SNEAKRS, and its innovative product, however Adidas is competing with equally exciting

Lululemon

partnerships and archived product access for consumers (Dunne, 2017).

In contrast, Lululemon is relying on its existing lifestyle structure, rarely pushing boundaries to remain significant in the market, functioning at a lower risk level.

elevated association to teenage girls may be damaging to the brand, lowering the preference of Nike amongst other consumers, and failing to attract the intended audience, particularly on a global scale. Sponsorship and endorsement of figures that aren’t athletes conflicts with Nike’s strong purpose and weakens the brand identity, although previous refusal to do this resulted in the loss of a profitable representative that Adidas gained.

the market and offer greater incentives to use the app beyond those given, such as discounts and loyalty schemes. There should be no reason for employees or shareholders to greatly resist the change, but the model can also apply to them if necessary.

Success of girl. can be measured by tracking regular app users and revenue from the new product ranges, although it will be difficult to trace whether sports participation improves. Should there be great resistance to the proposed change, Nike can consider numerous methods to help consumers overcome this. According to Kotter and Scheslinger’s (2008, cited in AQA, 2017, see Appendix G) model, Nike could allow teenagers to participate in the design process for the new collection, and educate them as to how they can use the app’s personalised features to their full potential. These processes can be both time-consuming and costly, but if the consumer is more involved, they will be more committed to the change.

Alternatively, Nike could negotiate with

Constantly increasing risk is needed for Nike, predominantly dictated by competition, but also due to external factors influencing consumer preferences.

Despite implementation of the movement being fairly low risk, it is possible that (Davidson, 2017)

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Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

69.

Conclusion Nike is a global sportswear giant, and its dominance, whilst decreasing, is unlikely to be dramatically overturned or challenged by competitors. The brand is making sufficient incremental changes in order to stay competitive, and is continually pushing towards its risk capacity limit, thinking about its strategic management and longterm positioning in the process.

A sector of the business going through strategic drift is that of teenage goods and services, particularly amongst females, and the girl. movement is aiming to rectify this, returning preference through a tailored app and product offering. The key features such as AI, social interaction and fusion of amenities will appeal to teens, with access united in a single place connecting them to people and items of interest. Whilst it is risky in terms of uptake, there are various strategies Nike can execute in order to help guarantee the investment is successful.

(Nike, 2015f)

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Introduction

Company Overview

Company Analysis

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Risk Analysis

Conclusions

Appendices & Bibliography

71.

Social

Healthy living is still having a profound effect on apparel, as sportswear is worn both for functionality and communicating an active lifestyle, and Nike has been well positioned to benefit from this trend (Euromonitor, 2017a). However, companies need to remain agile, flexible and responsive to industry and consumer changes, allowing them to react to numerous megatrends influencing fashion.

Consumer purchasing behaviour has become sophisticated, demanding and unpredictable, and this can be attributed to the new pace within the industry, accelerating as a result of technological developments (McKinsey&Company, 2016).

Consumers now expect not only personalised products, but also customised services and experiences, offered at lower prices and accessible almost instantly.

Nike is developing to become more responsive to consumers, who are interested in personal and transformative experiences.

The Nike Makers Experience for example, was created with the intention to bring to life the collaborative design process that Nike offers its athletes (Nike, 2017a).

Technological

Technology has transformed the retail industry, with digitisation becoming key to supply-chain efficiency, lower procurement costs, and enhanced sourcing opportunities (McKinsey&Company, 2016). The modern shopper’s comfort with digital channels has changed the purchasing journey, which is now a complex excursion over both online and offline touch-points (McKinsey&Company, 2017). One of the biggest benefits technology is currently offering brands however, is consumer data and artificial intelligence, enabling companies to have an expanding global reach.

Nike finally partnered with Amazon in 2017, highlighting their dedication to align with consumer purchasing habits (Euromonitor, 2017a). They have also changed their strategies to further leverage consumer data, but should they fail to provide effective, reliable and user-friendly digital platforms, it will place them at a disadvantage (Nike Inc., 2017). Nike also uses technology for product design and innovation, production, forecasting, ordering, manufacturing, transportation, sales and distribution, as well as reporting on financials and other business activities.

Environmental

Companies have been changing their core operations, from shortening the length of the fashion cycle, to integrating sustainable innovation throughout their supply chains (McKinsey&Company, 2017; 2016). Sustainability has become a predominant driver in consumer purchasing decisions, particularly in emerging markets, where 65% of consumers seek out eco-fashion. It has become an area of potential differentiation, creative inspiration and dominance for businesses.

Nike was one of the first companies within the industry to become more transparent by publishing their list of suppliers, and recently unveiled its European Logistics campus, which was founded to respond to sustainability challenges.

Economical

Volatility is now normal, as the sense of uncertainty within the global economy continues to escalate, particularly due to the unsettled Chinese stock market, Brexit and Trump’s presidency (McKinsey&Company, 2016). Unstable currencies and fluctuations in foreign exchange rates globally are affecting Nike, as weakening currencies relative to the U.S. dollar are harming foreign sales and earnings (Nike Inc., 2017). Manufacturers are also affected, as their ability to purchase raw materials depends on the availability and price for commodities used in products and the supply chain, which impacts costs, gross margins and profitability for Nike, who may be subject to delays or non-delivery of shipments. Likewise, Nike’s external retailers are exposed to the harsh economic climate, experiencing severe financial difficulty, and in some cases, ceasing operations. An increasing trend towards discount retailing is also shrinking margins and lessening brand value, as consumers have grown to expect products at lower prices (McKinsey&Company, 2016).

Political

Appendix B - Steeple Analysis (Adapted from Posner, 2011, pp. 65-69)

In a recent report, Nike noted that political instability, terrorism, trade restrictions, increases in import duties, safeguard measures, and quotas, all increased the risk of international trade, with these uncertain global conditions amassing protectionist actions around the world (Nike Inc., 2017). Current U.S. policy proposals, including potential tariffs on imported goods, will negatively affect American corporations like Nike, who predominantly produce outside of the U.S., however technology could make re-shoring more commercially viable (McKinsey&Company, 2017).

Nike was a strong advocate for the Trans-Pacific Partnership, which Trump has already withdrawn from, and the uncertainty surrounding NAFTA and other trade policies particularly linking to China, is forcing companies to rethink their supply chains (Green, 2017). Brands with clear and coherent strategies and value propositions are set to benefit most, and in the era of Trump, Nike’s progressiveness and message is an undeniable asset (Wolf, 2017; McKinsey&Company, 2016). Nike has empowered athletes and individuals to make a strong political statement, an area where Under Armour has failed.

Legal

Appendix A How do businesses view their purpose? (Adapted from Harvard, 2015, p.3) Nike can be considered a ‘prioritiser’, because their purpose is clearly articulated; they serve the mass market with sportswear. This is clearly understood within the wider environment, as the brand continues to show growth.

Governments enforce laws and regulations, including fair competition, consumer protection and employment practices, which constrain or provide new opportunities for businesses, particularly those that operate on a global scale (Kent and Omar, 2003; Burns and Bryant, 2002).

Nike is exposed to multiple legal threats, from everything relating to business procedures, products and employees, as well as compliance risks stemming from the nature of international operations (Nike Inc., 2017). Nike currently licenses certain aspects of their property rights, such as trademarks or copyright materials, to third parties. Licensees may be unsuccessful in managing finances, marketing, and selling product, resulting in reduced royalties and a shift in consumer confidence, as licensees fail to properly represent the brand values, a problem that also comes from counterfeit production.

Ethical

Appendices

Ethics are codes of morals applied to decisions regarding conduct shaped by family, religion, education, the Internet and other media (Kunz and Garner, 2007). Consumers are reassessing their priorities, opting for conscious consumption, whereby they consider the brand footprint in a move towards a more ethical economy (Mohiuddin, 2017). Nike apparel and footwear is predominantly produced by third party contractors outside of the U.S., with Vietnam, China, and Indonesia, working as some of the top suppliers (Euromonitor, 2017a). Nike cannot strictly control the standards of these contractors, who often source material locally and are responsible for employing, training and retaining adequate personnel (Nike Inc., 2017). They are also subject to wage rates regulated by their native governments. Elkington’s Triple Bottom Line (1994, cited in Fernie and Grant, 2015), focuses on balancing elements of sustainability and ethics, and Nike have had to reconsider their internal strategies to harmonise their levels of profit, with people and the planet.

Laggards: Purpose not well understood or communicated

Prioritisers: Purpose clearly articulated and understood

13% 39% 48%

Developers: Purpose understood by some areas better than others

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Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

73.

Considers purchasing sustainably as it is morally correct Subconscious

Ego

Unconscious

Id

Transitioning in favour of sustainability, but currently satisfying impulses through more available and accessible means

Ignores sustainability by opting for more immediate gratification that is cheaper and more attractive

74.

Introduction

Company Overview

Company Analysis

The Ego responds to actual situations by subconsciously mediating between the two opposing motivations. It finds a way to realistically fulfil impulses, which for consumers is currently not sustainable options, as they are viewed as too expensive and unappealing. However, the Ego is transitioning, increasingly encouraging consumers to invest sustainably.

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Strengths

Superego

The Id operates at an unconscious level and is controlled by more impulsive desires, as it looks for immediate, hedonistic gratification.

It has a short-term perspective and satisfies pleasure without thinking of wider implications. In terms of sustainability, this is why consumers may purchase cheaper, more aesthetically pleasing items, as they can as they can acquire them without considering the broader negative impacts.

Weaknesses

Conscious

• Nike has an established stronghold over North America, the leading global sportswear market, and is continuing to expand into emerging regions (Euromonitor, 2017a). Being based is the U.S. also allows Nike to benefit from being at the centre of most athletic trends.

• Nike’s creativity and innovation are particularly invested within footwear, which supports its higher price positioning and flow of new product. Performance apparel and footwear are set to be the most dynamic categories within sportswear over the coming years, generating 48% of total value growth (Euromonitor, 2017a).

• Nike was one of the first companies to introduce a wearable device with its Fuel Band fitness tracker (Euromonitor, 2017a).

Despite ceasing production, Nike partnered with Apple to produce the Apple Watch Nike+. Although this will not generate dominant profits, it allows the brand to remain innovative, and associated with the production of high-quality goods.

• Nike’s Direct-To-Consumer (DTC) sales grew from 26 to 28% in FY2017, and this strategic direction is key moving forward as it improves margins, and allows for control over brand presentation, markdowns and customer data (McKinsey&Company, 2017; Euromonitor, 2017a).

• Nike owns Converse and Hurley, but these both have a different focus that doesn’t detract from the central Nike name, like Reebok may do with Adidas (Euromonitor, 2017a).

• Nike still relies on third-party retailers and has a far smaller retail presence than competitors (Euromonitor, 2017a). The priority to increase DTC relations, particularly through e-commerce, is also conflicted by figures suggesting that 85% of sportswear sales in 2016 were retail-based.

• Nike’s marketing spend is valued at a staggering $3.3 billion, equivalent to about 10% of revenue, with a large proportion spent on brand endorsement (Euromonitor, 2017a). Nike aims to attract teams and athletes at the top of their game to link the brand to the idea of success, but this also means the brand has to deal with scandals, such as with Sharapova. This however is balanced with activity at grass roots level, such as the Nike Run Club.

• A majority of Nike product is manufactured and sold outside of the U.S., resulting in the purchase and sale in various currencies, increasing the brand’s exposure to fluctuations in global exchange rates (Nike Inc., 2017).

• Certain stores have been designed and built to serve as high-profile venues to promote brand awareness and marketing activities. Because of their unique design elements, locations and size, these stores require substantially more investment than other outlets (Nike Inc., 2017).

Opportunities

A consumer’s Superego will be affected by sustainability as it becomes more prevalent, because the Superego operates at a conscious level that considers morals and values important within society. Whilst it will make consumers contemplate purchasing sustainably as an option due to social conscience, it conflicts with the Id.

Appendix D - SWOT Analysis (Adapted from Easey, 2009, pp. 241-243)

• Men’s footwear is Nike’s primary segment, generating 35% of sales in 2016, and this will continue to drive the success of the brand as it is where most innovation lies (Euromonitor, 2017a). Womenswear accounted for only 8% of revenue, but is increasingly important for investment, offering great opportunity for the brand, as global apparel sales are much higher for this category.

• There is potential for Nike to leverage its technology beyond its partnership with Apple, to explore the idea of wearable technology within garments, allowing it to set the pace for the industry (Euromonitor, 2017a).

• AI is also an area Nike can excel in, using consumer data more effectively than competitors. AI can turn large amounts of data into enriched information, allowing companies to provide relevant and useful recommendations, in turn improving retention rates and driving revenue growth (McKinsey&Company, 2017).

• 48% of Nike’s revenue comes from the U.S., and despite securing a strong position in China, there is still great prospects in emerging markets, especially as these are due to take over the West in terms of sales (Euromonitor, 2017a).

• Nike can move closer to a closed-loop future by continuing to invest in disruptive technologies. As sustainability becomes an increasing priority for consumers, Nike will benefit from encouraging better standards within the industry and furthering customer awareness.

Threats

Appendix C - Freudian Theory of Motivation (Adapted from Evans et al., 2009, pp. 15-17)

• Nike will be challenged to keep up with the constant product innovation that the brand is renowned for, as finding new ways to add value will become increasingly difficult, with production costs rising and lead times getting shorter, particularly as the brand moves more into the world of fashion and aims to stock key cities regularly (Euromonitor, 2017a).

• Adidas has a more effective retail strategy, with Nike struggling to regulate the retailing of its products, limiting control over pricing and consumer experience (Euromonitor, 2017a). This is concerning in China, where Nike is positioned as more of a luxury brand, but the booming middle class and increased sports participation should benefit them.

• Nike’s core market is a developed country, and it is currently facing stagnating sales. Economic growth is shifting from mature regions in the West, to emerging markets in the South and East, and Nike may need to consider more market specific products and retail strategies to dominate these new areas (McKinsey&Company, 2017).

• One of Nike’s biggest threats continues to be competitors. Adidas is currently gaining market share, and newer entrants like Under Armour are developing significantly over a short period of time (Euromonitor, 2017a). Not only this, but Nike has to consider how consumers spend their disposable income in a wider manner, from eating out, to video streaming services.

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

75.

Appendix E - Strategic Drift Model (Proposed by Johnson and Scholes, AQA, 2017)

Appendix F - Gen Z and their personal information (IBM, 2017) Purchase History 62% Contact Details 42% Online History 28% Photos and Videos

What information are Gen Z comfortable sharing with their favourite brands?

(IBM, 2017) Nike is a dominant market player, reacting incrementally to changes in the macro environment and adapting their strategies to remain successful. When concerning the teenage audience, Nike is beginning to fall out of preference and into a stage of strategic drift, as their designs are not necessarily as suitable or as appealing as competitors.

According to the model proposed by Johnson and Scholes (AQA, 2017), Nike is at risk of entering a phase of Flux, where they struggle to figure out how to attract the loyalty of Generation Z, and this will result in either a transformational change that wins over the market, or alternatively results in its demise.

28%

Location 27% Health and Wellness Information

27%

Personal Life Information

21%

Payment Information 18%

61% Offer secure storage and protection of personal data

43% Provide clear terms and conditions in how to use personal information

39% Explain clearly what data is collected and how it will be used

31% Offer incentives in return for access to personal information

30% Allow to change their mind if they decide to stop sharing information

26% Be honest about recovery solutions to a security breach

21% Not use personal data to spy on them

14%

What can brands do to make Gen Z feel better about sharing personal information?

(IBM, 2017)

Provide the ability to check information any time using any device

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Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

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Appendix F - ... Continued

Appendix G - Model of Overcoming Resistance to Change (Proposed by Kotter and Scheslinger, AQA,

Gen Z are hesitant about sharing various information with brands, as they have grown to mistrust them due to deceptive marketing and cyber breaches. Around 62% are willing to share their purchase history, but only 18% are comfortable with sharing payment details.

In order to gain the loyalty of these consumers, Nike must consistently remain transparent, keeping the consumer aware of what is happening throughout the value chain. In terms of girl., it is important to consider these statistics when engaging with the audience, because while access to data is pivotal, it is also dangerous. The app will operate in a way that allows consumers to clearly control what is being shared and remain aware of how this information is being used. The numerous incentives mentioned, like exclusive product and connectivity to people with corresponding interests, should encourage users to make their personal information accessible, and the use of AI will interpret this data to give personalised and unobtrusive suggestions.

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Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

2017)

There is a risk that girl. and the changes it is proposing will be resisted by consumers. The model by Kotter and Scheslinger (AQA, 2017) helps to suggest ways that Nike could overcome this. Educating consumers of the benefits that the movement will bring them such as tailored products and connectivity to friends should encourage them to accept the change, along with letting them be part of the creative process through participation.

If these fail, Nike could also manipulate consumers by offering them incentives such as loyalty schemes and discounts. The model can also be applied to shareholders and employees that may resist the change, although this is unlikely as it would have little negative impact on them as it aims to increase profits.

79.

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Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

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Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

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Company Analysis

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Risk Analysis

Conclusions

Appendices & Bibliography

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Company Analysis

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Appendices & Bibliography

83.

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Company Analysis

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Risk Analysis

Conclusions

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• Facebook. (2017). Facebook Logo. [Online]. [Accessed 19 November 2017]. Available from: https://www.facebook.com • FinancialTribune. (2016). Instagram Logo. [Online]. [Accessed 19 November 2017]. Available from: https://financialtribune.com/ articles/economy-sci-tech/52075/instagram-testing-live-video • Netflix. (2016). Netflix Logo. [Online]. [Accessed 19 November 2017]. Available from: https://media.netflix.com/en/company-blog/ downloads-make-it-even-easier-to-watch-netflix-on-the-go • OsXDaily. (2010). Apple Logo. [Online]. [Accessed 19 November 2017]. Available from: http://osxdaily.com/2010/10/15/carve-anapple-logo-pumpkin/ • Popper, B. (2017). YouTube Logo. [Online]. [Accessed 19 November 2017]. Available from: https://www.theverge. com/2017/8/29/16216868/new-youtube-logo-redesign-font-color-app-design • SeekLogo. (2017). Spotify Logo. [Online]. [Accessed 29 November 2017]. Available from: https://seeklogo.com/vectorlogo/268248/spotify# • TimesOfIndia. (2017). Snapchat Logo. [Online]. [Accessed 19 November 2017]. Available from: https://timesofindia.indiatimes. com/topic/Snapchat • Whatsapp. (2015). Whatsapp Logo. [Online]. [Accessed 19 November 2017]. Available from: https://www.whatsappbrand.com • Wikimedia. (2017). Samsung Logo. [Online]. [Accessed 19 November 2017]. Available from: https://commons.wikimedia.org/wiki/ File:Samsung_Logo.svg • 1000Logos. (2017). Starbucks Logo. [Online]. [Accessed 19 November 2017]. Available from: http://1000logos.net/starbucks-logo/ Fig. 7 • Chatzidakis, A. (2017). Nicole Chui for Nike. [Online]. [Accessed 6 November 2017]. Available from: http://www.thedebrief.co.uk/ style/fashion/nike-pant-studio-artists-female-20171168629 • Harrison, F. (2018). Black at the Golden Globes. [Online]. [Accessed 9 January 2018]. Available from: https://www.nbcnews.com/ slideshow/women-black-n835621 • McCarthy, J. (2016). I Jiggle. [Online]. [Accessed 9 January 2018]. Available from: http://www.thedrum.com/news/2016/01/12/ girl-can-sport-england-s-campaign-influences-28m-women-be-more-active • Morby, A. (2017). Nike Pro Hijab. [Online]. [Accessed 9 January 2018]. Available from: https://www.dezeen.com/2017/03/08/nikepro-hijab-design-female-muslim-athletes-sportswear-fashion/ • Nike. (2015f). Better For It. [Online]. [Accessed 29 December 2017]. Available from: https://news.nike.com/news/nike-powerswomen-to-be-betterforit Fig. 8 • AnoLuck. (2015). Willow Smith Nike. [Online]. [Accessed 29 November 2017]. Available from: http://anoluck.com/archives/39785 • Bishop, K. (2017). Can safe space apps support users mental health. [Online]. [Accessed 29 November 2017]. Available from: https://www.lsnglobal.com/opinion/article/21861/can-safe-space-apps-support-users-mental-health • Oursky. (No Date). iPhone outline. [Online]. [Accessed 29 November 2017]. Available from: https://mockuphone.com/ iphone7plusrosegold • Nike. (2017). Air Max Jewel. [Online]. [Accessed 29 November 2017]. Available from: https://store.nike.com/gb/en_gb/pd/air-maxjewell-se-shoe/pid-11997292/pgid-12179838 • Nike. (2017). FlyKnit Free Run Racer. [Online]. [Accessed 29 November 2017]. Available from: https://store.nike.com/gb/en_gb/pd/ free-rn-flyknit-2017-running-shoe/pid-11825392/pgid-12328988?ref=https%253A%252F%252Fwww.google.co.uk%252F • Nike. (2017). Air FlyKnit. [Online]. [Accessed 29 November 2017]. Available from: https://store.nike.com/gb/en_gb/pd/air-force-1flyknit-low-shoe/pid-11590107/pgid-12357576?ref=https%253A%252F%252Fwww.google.co.uk%252F

Introduction

Company Overview

Company Analysis

Strategic Proposal

Risk Analysis

Conclusions

Appendices & Bibliography

85.