Nike in General, Nike Has

Nike In general, Nike has adopted a broad differentiation strategy. The company has both breadth and depth of target markets, but within each market seeks to be a premium provider of athletic gear. The company is marketing-intensive, focused on high profile athletes and blanket advertising coverage. The company is also oriented towards diversification as a core strategy, both in terms of the sports it promotes and in terms of its supply chain and its geographical footprint. Nike's current strategy has changed little from its historic strategy.

The company remains focused on top athlete endorsements as the cornerstone of its appeal. The company is promoted by Kobe Bryant and LeBron James (basketball), Cristiano Ronaldo and Wayne Rooney (soccer), Derek Jeter and Alex Rodriguez (baseball), Lance Armstrong (cycling), Rafael Nadal and Roger Federer (tennis) and dozens of other major names. The company also sponsors club and national teams in a wide range of sports as well. These sponsorships serve two purposes. The first is to gain a greater level of exposure for the brand.

The Nike "swoosh" symbol is widely recognized, so even its presence on an athlete's or team's apparel serves to increase brand exposure. The other purpose is to gain a positive association. Consumers admire top athletes, so the association of the Nike brand with top athletes and clubs helps to create positive associations between the Nike brand and those athletes and clubs. In addition, Nike products are heavily promoted. This heavy promotion also serves to increase brand awareness and to retain positive associations with the Nike brand.

The company spent $6.3 billion on selling expenses in fiscal 2010, according to the company's 10-K. As a percentage of sales, this is 33.2%. In the past two years, this figure was 32% and 31.9% respectively, indicating that Nike is increasing its reliance on heavy promotion to build revenues. The athletic apparel business is highly competitive, so such investments are required in order to maintain consumer interest in the company's products.

In addition, Nike competes in a wide range of categories and needs to invest in both sponsorships and promotions in each category in order to compete. The broad-based competitive position of Nike is another key element to the company's current strategy. Nike offers a wide range of athletic apparel, competing in most sporting and recreational athletic categories. This saturation approach is intended to leave little room for smaller competitors to emerge and is intended to support the company's image as a complete provide of athletic apparel. Nike also competes globally.

The company has sales offices in 52 countries according to the 2010 Form 10-K. This gives the company a diversified customer base, with no single customer accounting for more than 10% of the firm's sales. This acts as a hedge in business swings both regionally and with respect to major customers. The company's sales are split between North America (35.2%), Europe (20.4%), Greater China (9.1%), Emerging Markets (10.7%), Central and Eastern Europe (6%), Japan (4.6%) and "other businesses" (13.3%), the latter including for example its Cole Haan clothing line.

This diversification has allowed Nike to enjoy strong performance even with the economic downturn, as increased sales in emerging markets almost completely offset sales declines in Western markets. Nike hopes to increase its degree of geographic diversification in the future in order to better insulate itself from regional economic difficulties. In its supply chain, Nike typically utilizes third-party producers. These producers are typically dependent on Nike for volume. The company's supply chain is focused on three countries primarily, those being Vietnam, China and Indonesia, which account for 94% of Nike's production.

Production is also diversified, with the largest factory accounting for only 5% of total footwear production. The use of low cost provider countries is essential in footwear especially, as that product is labor-intensive. This allows Nike to expend significant amounts of money on marketing expenses, which is the single most significant part of the company's value chain. Nike has also undertaken a significant effort to boost its image.

The company had in past come under fire for some of the labor practices at its suppliers, and suffered reputation damage as a result. Since that point, Nike has initiated.