Nike's "thinks for your feet" marketing strategy for tech workers

NIKE

The nerd globetrotting elite

The NIKE Corporation website targets a new global movement in mind-body synergy through artificial intelligence, 'thinks for your feet.' In the last twenty years the multi-billion dollar corporation has mobilized its methodology in sales on the wings of a Greek goddess. Since 1988, when NIKE's 'Just Do It' slogan came on the scene, the company has been selling performance and style at a pace exceeding all competitors. The current analysis looks at the connectivity present within NIKE's 'thinks for your feet' as a semiotic marketing pitch intended to redirect the company's strategy toward a large segment of consumer footwear purchasers working in the technological sectors of the global economy, and especially those who otherwise do not use those products for sports -- or at least not the corporeal muscularity that was the brand's association one decade ago.

In 2009, NIKE underwent a brand reorganization initiative in response to a six (6) geography restructuring effort that led to the reduction of a management layer in emergent markets and North America, Western Europe, Eastern/Central Europe, Greater China, and Japan (Datamonitor, 2010). With the original scope of operations and marketing in four (4) regional segments, 1) U.S., 2) Asia Pacific, 3) Americas; and 4) the EMEA (Europe, Middle East and Africa) redesigned to increase core businesses and focus on stronger consumer allegiance to the brand, NIKE advanced its interests in growth areas such as the global sports equipment market.

Projections in this comprehensive segment are 2.1% with a market value of $76, 800 million by 2013. NIKE's total sales revenue for its fiscal year sustained its position as the leader in global sports equipment. To this end, its marketing activities, and including advertising and interactive multi-media shopping and major national market expansion outside North America will be priority.

The market is equally progressive in sales performance in the global footwear segment. NIKE, Inc. will respond to this phenomenon with a variety of strategies to capture an even greater portion of the market, which it currently attributes a significant 52.2% of its total revenues, through sales in its NIKETOWN stores, retailers, and virtual presence in its websites, nikestore.com and Nike.com. Financial statement for the Company in 2010 is cited in Table 1.

Table 1

Company Type

Public - NYSE: NKE

Headquarters

Fiscal Year-End

May

Financial Filings

SEC

2010 Sales (mil.)

$19,014.0

1-Year Sales Growth

(0.8%)

2010 Net Income (mil.)

$1,906.7

1-Year Net Income Growth

28.3%

Table 1. NIKE, Inc. Financial Statement (Hoovers, 2010).

Synonymous with the Brand's slogan, 'thinks for your feet,' NIKE, Inc. is strategizing capitalization on trends in sportswear as 'everyday' work wear, and as contributory force to innovation. Conductive rubber soles ensure safety in environments that require agility and futurist precision. NIKE, Inc. hopes to translate the force of its vision and investment in R+D through product development and marketing that speaks to a new generation of globetrotting elite, the new 'Nerdcore Rising.' Money talks, and NIKE, Inc. listens, from Microsoft employees, to tech geeks on the dance floor, the Company is positioned to take on 'ideas' in this growing market 'in a big way.'

At present, the sporting goods market in the United States is intensely competitive. The Corporation is faced with a downturn in spending in its national online consumer segment. A new strategy will be employed. Competitive landscape to NIKE, Inc. marketing prospectus references portfolio performance of the company in relation to the other top sportswear brands, Adidas, New Balance, and PUMA AG is illustrated in Table 2.

Table 2

KEY: Best of Group. Companies listed are Top Competitors. www.hoovers.com

Key Numbers

NIKE

adidas

New Balance1

PUMA AG

Annual Sales ($ mil.)

19,014.0

14,878.0

1,640.0

3,526.7

Employees

34,400

39,596

4,000

Market Cap ($ mil.)

41,159.2

32,900.7

3,453.0

Profitability

NIKE

adidas

New Balance1

PUMA AG

Industry2

Market3

Gross Profit Margin

46.51%

47.79%

50.86%

48.01%

28.77%

Pre-Tax Profit Margin

13.36%

7.07%

12.31%

9.68%

8.48%

Net Profit Margin

10.07%

5.03%

8.53%

6.75%

5.53%

Return on Equity

20.8%

12.9%

15.0%

16.6%

10.1%

Return on Assets

14.3%

5.7%

9.0%

9.7%

1.5%

Return on Invested Capital

19.6%

12.9%

15.0%

13.3%

4.4%

Valuation

NIKE

adidas

New Balance1

PUMA AG

Industry2

Market3

Price/Sales Ratio

2.19

0.88

1.35

1.49

3.57

Price/Earnings Ratio

21.74

17.42

15.80

22.12

26.18

Price/Book Ratio

4.26

7.31

2.36

3.26

6.92

Price/Cash Flow Ratio

15.92

8.10

16.84

13.02

22.12

Operations

NIKE

adidas

New Balance1

PUMA AG

Industry2

Market3

Days of Sales Outstanding

52.96

68.65

85.99

34.33

34.66

Inventory Turnover

4.6

3.1

2.8

3.8

8.1

Days Cost of Goods Sold in Inventory

79

96

45

Table 2. Competitive Landscape, NIKE Corporation, 2010 (Hoovers, 2010).

While entirely proscriptive, the remainder of this analysis looks at the potential of NIKE, Inc.'s tertiary, yet sports interested demographic in Australian market, and poses a major change to the direction of advertising as the Company attempts to take on Asia Pacific. As the major, English speaking gateway to the Pacific Rim market outside the U.S., Australia's parallel economic, legal and cultural mileu to the West Coast of North America will serve as a launch site for new media and a new image in globetrotting nerd concept.

NIKE CORPORATION

In spite of NIKE, Inc. lead market position, a modest decline in revenues for fiscal 2010 continued in response to global economic recovery, and U.S. market share reductions to the Company's consumer product segments. In a key position to recapture professional sports brand identification through NFL sponsorship in the forthcoming year, NIKE, Inc. is set to dominate through its strategic televised commercial advertising during games, as well as through banner advertising at the mega events and ticket sale sites online.

Merchandising of NIKE, Inc. product at all NFL at public venues and industry conventions will also boost sales. Mass consumer identification with NFL players, and their celebrity trademark support of the brand through spokesperson spots will inevitably reposition NIKE, Inc. As a true sports brand. Diversification in other professional sports, includes 13% of its sales from the corporation's subsidiary businesses, Cole Haan, Converse, Hurley, NIKE Golf, and Umbro. A balance in youth affiliated brands will enable NIKE, Inc. To continue its conglomerate presence, as Converse (retro apparel and shoes), Umbro and Hurley (skateboarding, snowboarding, and surfing sportswear and shoes) all outperformed at a 4% rate, while the 'affluent' brands NIKE Golf and Cole Haan slipped in sales (Hoovers, 2010).

This bodes well for NIKE, Inc. In consideration of the youth culture minded consumers which comprise the Australian market. In 2008, NIKE acquired UK-based global soccer brand Umbro for approximately $576 million. Soccer interest in the Australian market is intense, and the company is positioned for growth in emerging soccer markets near the sub-continent, such as Indonesia. Candor in advertising may assist to reposition NIKE Golf, and its conundrum over Tiger Woods, whom has been a trademark partner since the early 1990s. Marital infidelity aside, NIKE, Inc. once repositioning efforts abroad will certainly benefit from continuation of this partnership which costs the corporation millions in endorsements presently. After all, Down Under is known for ribald humor and mixing a 'quiet one' with golf. If America can take on the 'nerd economy' then it is very likely that Australia can take on Tiger.

NIKE MARKET, OZ

Six Sigma tools for assessment of market potential of NIKE's presence in the global market, such as the SWOT (Strengths, Weaknesses, Opportunities, Threats) of the Company's offers position offer depth to the media analysis. This is especially the case where desired expansion of NIKE's market in secondary, sports minded major national markets like Australia, that have a still have a high degree of untapped profitability. Advances in the Australian footwear and sportswear markets are first determined according to baseline analysis of the Corporation's global prospectus, seen in Table 3.

Table 3

STRENGTHS

Vertical integration

Diversified revenue streams

Wide product portfolio

WEAKNESSES

High pension liabilities

OPPORTUNITIES

Brand reorganization initiative

Market outlook of global sports equipment

Growth in footwear market

Table 3. SWOT Analysis, Nike Corp. (Datamonitor, 2010).

THREATS

Counterfeit goods

Declining online retail spending in the U.S.

Intense competition

Market rivalry

The footwear retail market is highly fragmented, but large retail groups hold a strong position in the market wielding bargaining power over suppliers. Rivalry is strongest between these large players.

Table 4. Executive Summary Australian Footwear Market, 2009. (Datamonitor, 2010).

Trend analysis is offered in Datamonitor's (2010) Industry Profile: Footwear in Australia, as illustrated in Australia's global segmentation: % of share by value in Graph 1.

Graph 1

Graph 1. Australia footwear market segmentation: % of share by value, 2009 (Datamonitor, 2010).

Market value of total sales for footwear in the Australian market is indicated in Chart 1.

Chart 1

Chart 1. Australia footwear market value: $ million, 2005-09 (Datamonitor, 2010).

Aggregate sales for the Australian footwear market for 2005-2009 are depicted in Graph 2.

Figure 2

Graph 2. Australia footwear market value: $millions, 2005-09 (Datamonitor, 2010).

Retail segmentation of the Australian footwear market is shown in Chart 2.

Chart 2

Chart 2. Australia footwear market segmentation: % of share by value, 2009 (Datamonitor, 2010).

MARKET STAKEHOLDER: Footlocker, Inc.

NIKE, Inc. main presence in Australia outside of its own retail operations and dedicated online shop, is in partnership with Foot Locker, Inc., a New York headquartered sports product retailer with strong market holding in Australia. The leader in NIKE sales, the Company is a global resource for brand name athletic shoes and apparel. Foot Locker, Inc. currently has 4000 specialty stores in more 20 countries across the globe, with most of its business in North America, Europe, Australia and New Zealand.

Foot Locker, Inc. is well recognized by globetrotting Australian consumer-citizens, and they find that they can trust the brand wherever they are. Synchronicity in price point and exposure to subsidiary retail operations Lady Foot Locker, Kids Foot Locker, Footaction, Champs Sports, and CCS creates a comprehensive consumer model where the entire family may shop by way of direct-to-customer or virtual outlets. Footlocker is a sponsor of the Australian Sporting Goods Association (Footlocker.au, 2010).

This coincides well with NIKE, Inc.'s launch in the sporting goods segment of the national retail market. In response to new strategic realignment of Foot Locker, Inc. with top brands such as NIKE, Inc., the retailer stands to benefit from a parallel plan of expansion by 2015 (Hoovers, 2010). Foot Locker is the number one seller of Nike products in the United States at present, with than a quarter of company earnings are derived from national markets outside of the U.S. Performance in external markets (i.e. Australia) represents the fastest growing option in current direct sales share (Hoovers, 2010).

Strategic changes to Foot Locker Inc.'s marketing prospectus where NIKE, Inc. products are involved, means that diversification in footwear and apparel offerings to a wider segment of its global customer base should reinforce the manufacturer's desire to coordinate an advertising and marketing strategy of mutual benefit in international brand proliferation. Acceleration of the Australian launch meets the criteria of Six Sigma approach, Porter's Five Forces shown in figure 1, and checklist in table 5.

Figure 1

Figure 1. Porter's Five Forces (The Marketers, 2010).

Table 5

1. Competitive rivalry in an industry is adjusted according to remaining 4 forces

2. Bargaining power of suppliers

3. Bargaining power of customers

4. Threat of new entrants

5. Threat of substitute products

Table 5. Porter's Five Forces Checklist (The Marketers, 2010).

According to the Porter's Five Forces approach, competitive interests between the supplier-retail Enterprise will have persistent impact on existing market interest as the two entities 'ramp up' operations in Australia. Some level of coordinated media effort within the two campaigns should be organized in respect to overlapping brand strategies and event planning. Collaborative efforts in direct retail and strengthened position in secondary source new entrants like Foot Locker, Inc. In the Australian national market might also create a relationship of mutual fiscal control, where increased import numbers of the brand will led to some cost absorption of tariffs.

Key success factors (KSF) to both NIKE, Inc. And Foot Locker Inc.'s global successes as leaders in athletic apparel and footwear sales involve a shared experience in customer loyalty; with longstanding brand recognition in established national markets. As discussed, niche marketing in association with high profile, professional sports figures as a value added statement of brand credibility will be reasserted in the U.S. context through the NFL. In Australia this may mean a similar effort in investment in sponsorship through professional association with cricket or soccer. Ultimately, NIKE, Inc. sells a dream, and Foot Locker, Inc. has always bought the guarantee in the manufacturer's ability to turn out consistency in product and merchandising marketability through savvy and fairly universal advertising statement that refreshes the image of the company as products reach the end of their cycle.

Continuing on this course in the Australian market will support product portfolio performance by catering to the varied athletic needs of NIKE, Inc.'s customers. This includes the psychological requirements which has made strategic planning in advertising exceedingly more sophisticated, as the Company's competitive edge may at times only be boosted at the margins of the Brand's identity, 'Thinks for your feet' is quite literally translated instantaneously to 'think on your feet' and NIKE, Inc. has the shoes to 'Just Do It.'