Nike's Colin Kaepernick Ad Campaign

Nike
Executive Summary
Nike’s decision to tap into “woke culture” and turn the out of work former NFL quarter Colin Kaepernick into a brand ambassador has been a controversial one since the sportswear company launched its Colin ad campaign in 2018. This paper discusses the strategic issue underlying Nike’s controversial campaign and shows how it was intended to leverage “woke culture” and gain competitive advantage in an industry that had largely stayed quiet on socio-political issues. This paper provides an external analysis, internal analysis, and financial analysis before addressing the strategic issue. Alternatives are also discussed along with a recommendation and an implementation plan. Before beginning, background information on Nike is provided here below.
Company Vision/Mission
Nike’s Vision is to “to bring inspiration and innovation to every athlete in the world.” Its mission is to create “groundbreaking sport innovations, by making our products more sustainably, by building a creative and diverse global team and by making a positive impact in communities where we live and work” (About Nike, 2020).
Company Goals
The goals of Nike are to focus on innovation, sustainability, and form strategic partnerships that will enhance the brand and lead to brand loyalty among consumers (Nusser, Mahle & Pätzmann, 2015).
Company Policies/Values
Core values at Nike are: performance, authenticity, innovation and sustainability. Creating iconic brand campaigns aligns with these values (Storey, 2019).
Corporate and Competitive Strategies
Nike’s competitive strategies focus on product differentiation, market niche, and building customer loyalty. Its corporate strategy focuses on diversification, international appeal, and developing partnerships.
External Analysis
Industry/Competition—Five Forces
Current Rivalry Opportunities
· Online sales represent a great growth area, as the shift to e-commerce has caused brick and mortar retail shops to fold in recent years. Nike has an opportunity to leverage its brand equity to draw e-commerce consumers to its website for online sales.
Current Rivalry Threats
· Supply chains may be disrupted by Covid-19, and rivals that can leverage supply chains in other parts of the world will benefit while Nike suffers from supply chains being crippled in Asia.
Potential Entrants Opportunities
· Nike’s brand is dominant across all sports and its partnerships with professional athletes make it difficult for new entrants to break into the market. The Big Baller Brand of Lonzo Ball is an example of how difficult it is for new entrants.
Potential Entrants Threats
· Upstarts like Under Armor and New Balance have partnered with star players like Steph Curry and Kawhi Leonard. This takes some of the shine off Nike’s dominance. If more stars turn to other brands, Nike could lose its control of the market.
Bargaining Power of Buyer Opportunities
· Numerous brands are available, thus brand appeal through star power, image and partnerships has the biggest impact on buyers. Buyers have a handful of brands to choose from.
Bargaining Power of Buyer Threats
· The Internet has allowed buyers to have more information about products than ever before. Influencers on social media have a big impact on who makes purchases according to Freberg, Graham, McGaughey and Freberg (2011).
Bargaining Power of Supplier Opportunities
· Suppliers can make shoes but the power is in the brand and only major competitors like Nike and Adidas are true brand players at the international level
Bargaining Power of Supplier Threats
· The suppliers in Asia are major inputs in the industry and if Asian markets collapse from Covid-19 as is currently happening, major players in the market will be hurt. Suppliers from other parts of the world will have leverage in this situation.
Substitute Products Opportunities
· The industry is always growing in multiple directions and opportunities for substitute products grow as sports and exercise culture grows.
Substitute Products Threats
· There is no substitute for quality, as the recent debacle of Big Baller Brand has shown. Athletes want footwear that is high quality and they will not accept substitutes.
General External Environment
Economic Opportunities
· The economy appears to be growing under the Trump administration, which means consumers have more disposable income to spend on designer products like Nike gear.
Economic Threats
· A market recession is forecasted and the effects of Covid-19 spreading like wildfire in Asia could seriously disrupt the global market and cause a downturn in the global economy (Bartash, 2020). This will lead to job losses and to a collapse in disposable income for designer products like Nike gear.
Demographic Opportunities
· As the population of the US becomes increasingly diverse, it represents an opportunity for the brand to appeal to more minorities. Developing brand campaigns that showcase minorities may facilitate this action.
Demographic Threats
· Making stark socio-cultural shifts in brand development could disrupt consumer bases within the majority population, especially if there is a political bent to ad campaigns. White populations still account for a major percentage of sales—however, as Neikirk (2019) points out, Nike knows its loyalist consumers and the demographic is in Nike’s favor.
Sociocultural Opportunities
· More diverse, minority-driven markets, which means by shifting to a minority-driven ad campaign Nike could shore up a new generation of loyal consumers.
Sociocultural Threats
· The socio-political image of Nike’s brand has been tarnished among white conservatives, who follow Trump and have boycotted Nike. However, as this is only a minority percentage of the population (approximately 20%), Nike’s move is not a threat here.
Political-Legal Opportunities
· Nike may benefit from the surge in minority-supported Bernie Sanders against the conservative Trump movement. However, Bernie is anti-corporation, so Nike may have problems here.
Political-Legal Threats
· If Nike is pressured by either Trump or a Sanders administration to change its business strategies, including how it uses supply chains, the company may face considerable headwinds going forward.
Technological Opportunities
· Robotics in productions could be a major opportunity.
· E-commerce could represent a further opportunity.
Technological Threats
· Proprietary information on design is more commonly dispersed among companies now and there is less advantage among any one brand especially as there are many stars with contracts among different major brands.
Internal Analysis
Strategic Manager’s Strengths
· Philip Knight has been guiding Nike since the beginning. As co-founder and Chairman Emeritus, he still has a strong role in directing the company. President and CEO John Donahoe has experience helming eBay and PayPal and brings e-commerce experience to the company at a time when that experience is really needed.
Strategic Manager’s Weaknesses
· None. The company’s managers are among the best in the business.
Corporate Structure Strengths
· The company has multiple divisions that handle its various product divisions based on sport and product type—from footwear to sports gear.
Corporate Structure Weaknesses
· The company has not organized itself with a view to an e-commerce method of selling yet, and this is a weakness as commerce is shifting to online consumption.
Corporate Culture Strengths
· Nike’s culture embraces sustainability, diversity, and inclusivity, all of which are important in today’s diverse culture.
Corporate Culture Weaknesses
· Nike’s focus on progressive values may alienate traditional, conservative workers and possibly consumers and communities.
Production-Operations Strengths
· Nike gets great value out of its Asian-based supply chain.
Production-Operation Weaknesses
· Because its supply chain is based in Asia, Nike’s operations could be imperiled if China’s Covid-19 outbreak is not contained.
Marketing Strengths
· Nike is able to maximize leverage on cultural trends and identify opportunities to create appealing ad campaigns based on issues that matter to targeted consumers.
Marketing Weaknesses
· Nike’s ad campaigns are directional and appeal to targeted consumers, making others to feel marginalized.
R&D Strengths
· Nike spends billions on research and development each year in order to stay at the top of the industry in terms of innovation.
R&D Weaknesses
· Instead of spending billions more on share buybacks--$15 billion currently—Nike could be investing that money into R&D (Oyedele, 2018).
Human Resource Management Strengths
· Nike offers great health, educational, dental and leave benefits for employees, giving them excellent incentives to come aboard.
Human Resource Management Weaknesses
· Nike’s production staff is foreign-based and this presents a bad look for progressive values.
Information Systems Strengths
· Employees have access to virtual stations, to email, phone communication and other technological resources. Its analytics department is one of the best in the industry.
Information Systems Weaknesses
· Nike could benefit from using more Big Data gathered from social media to measure its brand influence and appeal.
Financial Analysis
Nike’s NBA sponsorship has put it on the path of financial success and the company is likely to continue to grow its business. However, as Delventhal (2019) shows, the company’s sales are not expanding in the US. Sales from overseas are also in trouble due to a potential recession in Asian markets. Nike’s market cap has declined in recent months but the firm is still an industry leader.
Strategic Issue
Narrow Target Market
Nike has long led the US market in footwear and apparel but with the US market becoming more competitive and star athletes signing deals with other brands, Nike has looked abroad to expand its growth. However, in the US it has also turned to minorities, which are the increasing demographic, and appealed to them through its Colin Kaepernick ad campaign. The problem with this is that minorities do not have as much disposable income as the white population and if conservative whites are insulted by the Kaepernick campaign, it could lead to fewer sales, as Q1 2019 showed, suggesting blowback to the campaign.
Strategic Alternatives
First Alternative
Nike should seek a politically neutral tone when developing its ad campaigns and focus on sports heroics rather than political theater like that which Kaepernick performs. Kaepernick is known more for kneeling during the National Anthem than for doing anything significant on the field. Nike has always benefitted from highlighting stars like Michael Jordan and LeBron James. Moving to “woke culture” could damage its brand with fans who like Nike for athletic heroics images.
Second Alternative
Nike could produce ads that target the white culture of America as well and depict athletic heroes who white consumers can identify with. This would allow Nike to please both the minority population and the white population. Alienating consumers is not a good look for any company, especially one concerned with growth prospects as is Nike in today’s risky economy.
Recommendations
Nike should abandon its “woke culture” ad campaign and get back to its original core values of highlighting heroics on the field. Consumers like Nike because it represents the best in people in sports. It is not a brand that has traditionally been associated with activism or politics. Choosing sides in a political controversy has cost Nike loyal consumers and many have taken to social media to voice their displeasure with the brand—some even burning their Nike gear and posting the videos of this anger online. This is bad negative attention for the company and hurts its brand.
Cutting ties with Kaepernick would not hurt Nike. It would help the company to save face with the majority of consumers and it would allow Nike to turn the page and move on from its woke culture experiment. The saying among consumers now is “go woke, go broke,” and many consumers are boycotting corporations like Disney that seek to promote progressive values that they do not appreciate.
Nike also could benefit from bringing production back to America. This is something the Trump administration has been vocal about and making shoes in America would bolster its image among majority populations.
Implementation
Changes in Organizational Culture
Nike’s organizational culture has embrace progressivism in recent years but by bringing back a focus on more traditional values, it could enhance its brand image among workers, communities and consumers and restore its value in the eyes of consumers who were affronted by its latest ad campaign strategy.
Changes in Organizational Structure
Nike’s organizational structure relies too heavily on foreign-based labor. Offshoring labor has decimated communities here in the US as they have lost jobs to overseas. Nike could be a Made in America company, which would boost its image and allow it to maintain operations as the virus outbreak in Asia is likely to worsen as the year goes on. By bringing production back to America, Nike will engineer a win-win scenario. It will show that it is an American company and that it embraces American values. It will also be able to reduce the risk of exposure to Asian supply chains.
Nike should also develop a strategy for expanding its brand in other parts of the world by doing culture-based research using Hofstede’s model of cultural dimensions and making inroads with power brokers in other regions, such as the Middle East, Europe, and Latin America.
References
About Nike. (2020). Retrieved from https://about.nike.com/
Bartash, J. (2020). Apple’s Covid-19 warning. Retrieved from https://www.marketwatch.com/story/how-much-will-covid-19-hurt-the-us-economy-its-anyones-guess-right-now-2020-02-12
Delventhal, S. (2019). Nike facing challenging dynamics. Retrieved from https://www.investopedia.com/news/nike-facing-challenging-dynamics-goldman-sachs/
Freberg, K., Graham, K., McGaughey, K., & Freberg, L. A. (2011). Who are the social media influencers? A study of public perceptions of personality. Public Relations Review, 37(1), 90-92.
Neikirk, T. (2019). Nike sales are again way up. Retrieved from https://hillreporter.com/nike-sales-are-again-way-up-following-conservative-boycott-40033
Nusser, S., Mahle, I., & Pätzmann, J. U. (2015). How Social Commerce Communication can support Brand Loyalty: An Analysis of Nike‘s Efforts in Facebook Community Management. Markenbrand, (4/2015), 48-57.
Oyedele, A. (2018). Nike surges. Retrieved from https://markets.businessinsider.com/news/stocks/nike-earnings-q4-2018-2018-6-1027328545
Storey, G. (2019). Nike and the importance of meaningful brand values. Retrieved from https://polpeo.com/nike-and-the-importance-of-meaningful-brand-values/