Core Competencies Are Capabilities Marketing Essay

The nationally respected University of Oregon track coach, Bill Bower man and track athlete Phil Knight founded Nike in 1964. Originally called Blue Ribbon Sports, the two initially distributed shoes from the Japanese shoe manufacture, Netsuke Tiger to athletes throughout the state of Oregon. Phil Knight often sold shoes from the trunk of his car after track and sporting events. Their main inspiration for venturing into the athletic shoe business was to provide athletes with better quality shoes. Blue Ribbon Sports quickly ended its relationship with Onitsuka Tiger and officially became Nike, Inc. in 1978. The company took its name after the Greek goddess of victory and developed the world renowned Nike “swoosh” logo along with a new innovative athletic shoe design.

Within just two years Nike became public in 1980, controlling 50% market share of the US athletic shoe market. Today, Nike is the world’s largest athletic footwear and apparel supplier. The company employs more than 30,000 people globally. The Nike World Headquarters, located near Beaverton Oregon, is home to more than 6,000 employees. The company’s innovative designs, development and marketing strategies of high quality footwear, apparel, accessory, and equipment are all factor of Nike’s continuing success. For the fiscal year ending May 31, 2008, Nike reported record revenues of $18.6 billion.

Core Competencies

Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals. Core competencies emerge over time through an organizational process of learning how to position different resources and capabilities to a company’s advantage. Nike’s core competencies exist in their effective marketing strategies and their innovative product design. These two elements provide much value and benefits to Nike’s consumers, are not easy for competitions to imitate, and can be leveraged widely to most of their products and markets.

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Although Nike does not manufacture any of its own shoes, the company is still today’s leader in selling athletic shoes and apparel. Nike’s marketing strategy is an important component of the company’s success. Nike is located as a premium-brand, selling well-designed and costly products. Nike lures clients with a marketing strategy centring on their brand image: a distinctive logo (the Swoosh ) and the advertising slogan “Just Do It”. Nike promotes its products by support agreements with celebrity athletes, professional teams and college athletic teams, original advertisements, and expert athlete endorsements.

The company’s innovative and creative product design are what truly set Nike apart from their competitors. Focusing one of its corporate values on technology and innovation, Nike has pioneered four shoe-cushioning systems that reduce shock, distribute pressure, protect from impact and offer comfort. These technological developments include: Nike Air, Nike Air Max, Nike Air Zoom, and Nike Shox. It is these innovations that improve performance and bring comfort to Nike consumers.

Nike has also created an online website that is ideal for customization. The NIKE ID Web site provides a fun and easy way for users to customize and buy footwear and athletic gear. The site transforms the visitor into a designer, allowing them to apply their choice of designs, colours and materials to a broad range of shoes, bags, and equipment. Nike ID was the first of its kind when it was launched in 2000 Nike again, revolutionized the way the world looked at sneakers and how consumers buy them.

By focusing on their core competencies, Nike has remained the world’s leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment with revenue in excess of $18.6 billion in 2008.

SWOT Analysis:

Strengths:

A main strength of Nike is the unbelievable brand awareness. The “swoosh” is the symbol of Nike and says Nike in all languages. Nike is the Best shoemaker in the world and largest marketer of athletic footwear holding a 37% market share globally. Nike has over 22,000 retail stores in 160 countries. In addition to its wide range of core athletic shoes and apparel marketed under the flagship Nike brand, the company also sells footwear under the Converse, Chuck Taylor, All Star, and Jack Purcell brands through wholly owned subsidiary Converse Inc. and sells under the brands Starter, Shaq, and Asphalt in the discount retailer channel through another subsidiary, Exeter Brands Group LLC. The firm also sells Nike and Bauer brand athletic equipment; Hurley surfing, skateboarding, and snowboarding apparel and footwear; and Cole Haan brand dress and casual footwear. (Answers.com, 2008)

Nike predicts 2009 revenue to be up by 17% to $5.4 billion, which means Nike, would have 28 consecutive quarters of year over year growth. One of the reasons for this success is that Nike has contracts and is attached with literally every important sports icon in the world. Just this last year the Nike brand was featured in the top basketball, golf, and tennis stages in the world. Not to mention the impact the Beijing games had on the Nike brand. All the Chinese stores set records for sales. 8 out of 10 players on both the men and women’s basketball teams wore Nike shoes. In major global sports, soccer and basketball, Nike leads in both. (Nike, Inc., 2008)

Weakness:

The Nike organization prides itself on innovation. They are constantly updating and inventing new products for the market. However, even though this strategy works it may be risky putting all your “eggs in one basket.” The real question is what strategy does Nike have when the consumer doesn’t care about innovation? This is not major weakness of the company, but it should be taken into consideration when analyzing.

There’s no question that Nike has been on a sort of chopping block when it comes to organizations like Corp Watch, etc. Although none of the allegations may be true, it is a sure weakness of the company that they let these allegations be considered. If you are corporation as large as Nike and use the resources they have, mainly the outsourcing of work, I am surprised that Nike did not take into account what issues might arise from doing so. Ideally Nike should not be involved in unethical practices, but if they are they need to be able to hide it, or else that is a major weakness to the company.

The retail sector Nike sells to is very price sensitive. Nike does have its own retailer in Nike Town and the outlet stores. However, most of its income is derived from selling into retailers. Retailers tend to offer a very similar experience to the consumer and it is difficult to tell how one retailer is different from the other. The result is that margins tend to get squeezed as retailers try to pass some of the low price competition pressure onto Nike. (Marketing Teacher, 2008)

Opportunity:

The opportunity of Nike grows with every sports star that rises using the brand and every family that grows financially and capable of buying their products. The major opportunity in this day is China and its massive economic growth rate. Being the global company it is Nike has noticed, and revenues in China have increased 50%. Not only China, but Russia and Brazil grew 40% and 30% over the last year.

In the new era of knowing your carbon footprint Nike has the opportunity to show that even though they are a billion dollar organization, they do care about the environment. There is the opportunity for Nike to produce athletic wear from manufacturing waste and extend eco-friendly projects like the ‘Reuse-A-Shoe Program’ aimed at further recycling. (Business Teacher, 2008)

Threats:

Nike faces an interesting time with the meltdown of the US economy and possible world recession. Recession proof comes to my mind, because numbers for Nike haven’t declined. It appears that consumers will buy their Nike shoes no matter what the financial situation is. However, it is still a major threat. It is too big to ignore, not only for Nike, but for any company selling retail products. Even with the large market share Nike has, competition is always a threat. Fila, Addidas, and New Balance are still around and are the major competitors to Nike and their customers. A final threat Nike faces is the issue of Nike’s questionable labor conditions/issues/practices. Do they or do they not employ small children and pay them pennies per hour? The question remains and Nike will argue that they are doing everything within their “guidelines” but cases like these can severely tarnish or break a company. In the past these issues haven’t seemed to bother too many people, but Nike should be aware of this issue (and I’m sure they are) as it could come back at anytime. In fact, if you Google the word ‘Nike’ the final webpage on the front page of Google is a website to boycott Nike. I will argue Nike can consider this to be a threat.

Social economic responsibility for suppliers:

Many American companies are not just limiting these social economic responsibilities to the limits of their company amenities alone; they are expanding these principles towards their business partners too. Suppliers are also expected to follow similar rules and one company that shown this approach was Starbucks Company. The company used to establishment its coffee from a number of third world countries such as Guatemala and Kenya. However, there were reports that coffee farmers in Guatemala used under age labour for their products. As soon as this information reached Starbucks, they stopped sourcing textile from those producers. The company described that social economic responsibility among their suppliers is essential to the success of their business.

Social economic duty can also be highlighted in a negative approach such as was the case with the Nike developed company. This company realized that large portions of their products were being assembled by under age children. This spoilt the company’s name and also meant that the company recorded vast losses in that regard.

The Peter and Jennifer Buffett and Nike Foundation, co-chairs of the Novo Foundation, said today a modern partnership to invest in “the girl effect”: the capability of teenager girls in developing nations to bring excellent economic and social change to their communities, families and countries.

In insolvent communities, lack of income makes girls out of school and into early wedding, childbirth, and HIV disease at rates radically upper than boys. The effects are permanent for girls, and disturbing to communities caught in intergenerational cycles of scarcity. However when girls gets a different path – educated, supported and empowered – everybody benefits.

“Investing in the girl cause offers the potential for fantastic economic force, which guides to more constancy, more chance for economic growth and less poverty,” Peter Buffett said. “Just one part of the girl affect – the raise in family earnings associated with an additional year of a girl’s learning – nets more than a 40-fold return according to conservative estimates. The intergenerational benefits, though, go far away from this to impact a variety of problems together with reducing fertility rates and better health and nutrition for the next age group. That’s a return on savings we can’t disregard.”

The Nike Foundation’s effort has been structure the case for global asset in girls throughout its exclusive portfolio that funds fresh approaches, makes funding channels, nurtures models for scale and duplication, creates girls a main concern of institutions and shows the girl outcome. The Nike Foundation controls the Nike brand’s make for innovation and optimistic change, and its aptitude to enthuse both. The Novo foundation seeks out to foster an alteration in worldwide society from a culture of dominance and exploitation to collaboration and partnership. The Novo foundation gets resources, a commitment to the empowerment of girls and women, and a distinctive capability to catalyze further savings in this attempt.

“Educating a young woman is just the start. To make it work, a young woman wants a secure atmosphere, her personality protected with basic things like a birth certificate, and talents that allow her to take part in the formal economy. With these, a teenager girl in the developing globe is a force for change,” Jennifer Buffett supposed. “She will assist steady her family unit, give to a healthier society and create a stronger economy. But without these she doesn’t stand up a possibility and neither does her future family unit.”

The results of these various activities have begun to produce some significant changes among Nike suppliers. For example, as a result of its various inspections, audits and internal research, Nike has been able to virtually eliminate the use of petroleum based chemicals in its footwear production. This is something even the company’s critics acknowledge.

Nike has taken the proposal in organizing an industry-wide organic cotton group and is making major strides in improving working conditions among its various suppliers. Of course, not all of Nike’s critics are convinced. Many continue to complain about poor wages and working conditions at Nike’s supplier in Vietnam, China and Indonesia. Others argue that Nike’s initiatives are simply not enough and that the Company could do much more in the areas of wages, working conditions, human rights, and local socio-economic development. Yet the continuing controversy over Nike and its various activities are not in any way particular to Nike. Rather, they are reflective of much broader debates about the meaning of corporate citizenship and the process of globalization.

Challenges:

Our greatest challenge in 2000 will be to maintain the functioning and economic initiatives we worked so hard to apply in 1998 and 1999. We must maintain our register levels low enough that will allow us to adapt to rapidly changing market trends. Financially, we must remain conservative in our cost structure. Cuts to operating expenses of almost $200 million this past year demonstrated that we are in a position to be nimble in light of our industry-dominating size. With the gradual economic recovery in the Asia Pacific region, we can capitalize on customers who are financially stronger. Our sponsorship of the 2000 Olympic Games in Sydney, Australia and the 2002 World Cup in Japan and Korea will be the start of many opportunities to bring sports events into the majority for local and global markets. With added contact, we are challenged to take action to a market demand for fashionable athletic footwear and apparel. In this quest, we will be successful if we keep quality and concert at the middle of our business.

The Internet is a rapidly changing medium. As the first company in our industry to offer e-commerce capabilities, we must proceed with caution and stealth in order to select an enduring strategy that will balance our existing allocation channels.

Value Chain:

Nike’s supply chain gives a clear view of the degree of the global environment of the company. Nike’s head office is in America; however, nearly all of its production takes place external of the United States.

Nike’s supply chain upstream starts with the equipments used in the making of its products. Many of this equipment used in manufacturing are accessible in the locations which the manufacturing takes place, but several specialised equipments have to be imported to the urbanized company.

Models Used In Analysis:

PESTLE

This will judge environmental influences on the firm, both in the past and with upcoming strategic plans.

Political:

Striking harbour workers

Political conflicts in the producing countries

Terror campaign in the home country

Economic:

Economic slowdown

Decrease in customer confidence

difficulties of entrance to the European Union

Contract production

Socio-cultural:

Brand name aware customers

CSR(Corporate social Responsibility)

Change in purchasing behaviour in younger generation

Age group Y prefers other kinds of footwear

Raise in the woman split of the marketplace

Technological:

Haste of transform of product

Design capability

Speediness of News coverage

Environmental:

Sustainability philosophy

Re use a shoe

Weather impact

Legal:

Intimidate action by juvenile workforce

Poor employment documentation

Trade agreements

CSR

Contract Production and illegal use of product (intellectual property)

Supply Chain:

Like every huge IT responsibility, the group liable for the performance of Nike Supply Chain (NSC) started with a set of specific, stated aims:

Ornamental Nike’s talent to respond to changing circumstances;

Reducing inventory and capital savings risk;

Getting better facility to meet customer/consumer needs;

Getting better process, information and product quality; and

Given that an capable global supply chain with local functioning

Porter’s 5 Forces:

This is used to recognize the basis of competition, and how to increase benefit over them.

Potential Entrants:

Other sportswear producers growing their portfolio

Cheap duplicates from the Far East

Buyers:

The consumers of sports footwear have changed in the past decade.

There has been an raise in females buying the shoes,

Age group Y has a diverse tastes and purchasing ways.

Substitutes:

When necessary for professional use there are no substitute goods, but as a fashion item there are a lot of other goods that could be purchased.

Suppliers:

Using production amenities in the Far East has provided Nike economies of scale. Even though there are now troubles take place from these factories, they are switching to creating there own goods, labour and political conflict causes delays in manufacturing and transportation of the goods.

Competitive Rivalry:

Reebok, offering more range of shoe, introducing support by sports celebrities, sponsoring sporting leagues

Adidas have improved from the problems that beset them, and have a high-quality product mix, covering a broad range of sports.

BCG Matrix:

Nike is recognized in its markets, gaining from economies of scale.

This situates them in the Cash Cows type on the Matrix.

Cash cows market growth has slowed and the merchandise hold a reasonably stable market share.

Understanding Socio-Economic of Apparel and Overtime of the Nike Company:

Our investigation explains that, amongst the variables we have straight manage over, requesting factories to produce too many styles is one of the highest contributors to industrial unit eventually in Nike. We have chance to reduce this force by falling the number of Nike’s clothing styles and partnering with the industrial unit to develop efficiencies through lean manufacture. Our company plans to decrease the number of styles in each of Nike’s types, and aligning styles internationally wherever possible, should also help to decrease this pressure. In addition, in FY10 we will systematically gather the root causes of overtime recognized, analyze and enlarge awareness and responsibility upstream where decision making often activates downstream impact: overtime. Armed with this understanding, we are beginning to methodically address root causes and calculate reductions in too much overtime in contracted factories. We are also supplementing this effort with learning program to improve upstream root analysis and understanding around the drivers of too much overtime.

While style explosion is one of the main drivers of overtime, we have found that there are many other contributors including ability miscalculations in sourcing, long approval methods in merchandising, last-minute alters in colours and fabrics in product development, and poor forecasting as well as alters in buying patterns in operations. These things result in a wide range of impacts on how employees spend their time.

We expect that trends, including the global economic slump and reduced clothing orders, will likely decrease the total number of overtime hours reported in the short term. While we feel we can create a positive impact on extreme overtime with both of the efforts explained above, we also consider it will remain a tough issue across our industry.

We do not have particular information on Nike-caused extreme overtime; however, we have analyzed all incidents of excessive overtime reported by contracted factories from FY06 through FY09. This analysis reveals that about 20 percent of factories had incidents of excessive overtime and 4 percent recorded incidents where eventually exceeded 72 hours per week. Reported incidents grew year on year, particularly in clothing.

Recommendations:

     I offer exact ways in which these recommendations might be successfully implemented.

     1. Recommendation: NIKE should continue its efforts to support and apply the supplies of the Apparel Industry Partnership which resulted in the first major agreement – across trade lines – to set voluntary, global principles and goals for international labour practices.

     While it was probably measured an imperfect result, mainly by the parties who participated in it, the Apparel Industry Partnership represents a significant teamwork among the apparel industry and the NGOs on a significant global matter. It is our strong recommendation that NIKE continue to play a leadership role in this imperative effort.

     2. Recommendation: NIKE should take more insistent steps to explain and enforce the Code of Conduct.

     I am aware of some of the labours already underway to increase both awareness and enforcement of the Code Of Conduct, but NIKE can do more.

3. Recommendation: NIKE should take pro-active steps to support the development of “worker representatives” in the factories who can successfully embody the workers’ individual and cumulative interests.

     A common trouble in some factories is that the “worker representatives” are full-time employees and do not have time to appreciate problems and communicate grievances to the factory supervision. NIKE should take specific steps to insure that in each factory which produces its goods there are qualified people who have the time and ability to forge relationships with the workers and can be the workers’ voice and advocate with factory management.

     It makes little sense to have a detailed procedure for a worker to air a criticism if the worker is not aware of the procedure and/or does not know how to utilize it. Effective worker version is needed.

     4. Recommendation: NIKE should insist that the factories which produce its products create and enforce a better complaint system within the industrial unit that allows a worker to report a protest or abuse without the fear of justice or reprisal.

     A worker in any factory should have a way to register a complaint that can be seriously considered by factory management. That same worker – if he or she fails to get satisfaction from factory management and/or fears personal revenge – should have some practical and confidential way to communicate with NIKE.

     5. Recommendation: NIKE should expand its interview and relationship with the human rights neighbourhood and the labour groups within the countries where they produce goods and with their international counterparts.

Implementation of Recommendations:

     NIKE’s promise was to seriously judge the suggestions that we put forward in this report. To the extent NIKE accepts any, most or even all of our recommendations; I would urge them to put forward a public schedule for implementing those suggestions.

Conclusion:

Nike, Inc. is a company rooted in competition. From equipping athletes with the supreme sports equipment in the world to constantly improving our own financial performance, Nike dominates its competitors. Phil Knight and Bill Bower man probably could not have imagined in 1962 to what degree their $500 investments would yield in 2000. They did know that product quality and improvement would help athletes to achieve greater goals. Nike still operates on this philosophy today. It is one that has helped athletes and stakeholders alike to realize athletic and economic greatness. Despite a changing marketplace for athletic footwear, we will continue to enlarge our product lines and promotion reaches to become a superior global brand.

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