Nike\'s Business Strategy in Rikert and Christensen\'s

Nike's Business Strategy in Rikert and Christensen's "Nike (A)"

In the 1970s Nike developed a strategy that broadened its base from specialized athletic footwear to popular consumer-based fashion footwear. By the 1980s Nike foot apparel had dominated the market, appearing on the feet of everyone from American youths to Olympic runners. Nike's strategy was to combine serious technology with the popular taste for casual wear and comfort. As David C. Rikert and C. Roland Christensen report, "Running was never the lifeblood of running shoe sales. Comfort was" (Rikert, Christensen 1990:3). This paper will analyze Nike's strategy and show why it has been successful.

The Nike Strategy

Nike's 1970s strategic rise from 1960s obscurity was based on the fact that a new market was opening in American culture. The new market had precise parameters: "comfort and appearance formed the basis of the 'ath-leisure' segment of the market" (Rikert, Christensen 1990:3) and Nike produced a product that appealed to consumers who wanted to be sporty, casual, comfortable, and fashionable all at once. Nike sneakers met the demand -- and even helped "to stimulate" it (Rikert, Christensen 1990:1) by paying for visibility. Nike's self-promotion in the new market arena of fashionable leisure and sport footwear helped fuel the company straight to the top. Nike, in other words, developed brand loyalty by catching on to a changing tide in cultural style and then paying "athletes and organizers of sporting events" to wear its product (Rikert, Christensen 1990:4). Nike's strategy was to appeal to a mass-market by hiring the best advertising money could buy: the very athletes themselves like whom millions of Americans wanted to be.

Nike was also able to appeal to submarkets within the branded athletic footwear industry. By 1982 Nike had scored a majority of shares in the racquet and running shoe market as well as a significant portion of the basketball shoe market. Nike's competitors, Adidas and Puma, had left the door open for another major developer -- Adidas by being heavy-handed with dealers and distributors, and Puma by simply failing to "keep up with the expansion of the U.S. market" (Rikert, Christensen 1990:5). New Balance, developed by professional runner Jim Davis, produced a premium shoe at a premium price in 1982, illustrating the company's emphasis on "performance and function," but at such an exorbitant rate New Balance could not appeal to mass-market middle-income families to whom Nike appealed. New Balance also failed to secure the ath-leisure apparel market, instead choosing "to supply only authentic performance clothing" (Rikert, Christensen 1990:7). Nike, on the other hand, "sold a full line that included both performance and ath-leisure items" (Rikert, Christensen 1990:7). Again, Nike was positioning itself to appeal to a broad base whose changing cultural trend was supported by the ath-leisure manufacturer.

The Beginning Strategy

Nike's visionary Phil Knight (a runner himself) had wanted to create a product that was high in quality and low in price and that could compete with Adidas (a German-based company). He saw no sense in using German equipment. Rather, he looked to Asia: "I thought it might be possible to take over the market with low-priced but high-quality and smartly merchandised imports from Japan, as had already happened with cameras and other optical equipment" (Knight qtd. In Rikert, Christensen 1990:8). Knight responded to the change in manufacturing practices and saw potential for building a company to rival the dominating Adidas.

That company was called Blue Ribbon Sports (BRS), and it had its first go in the footwear market when Knight made a deal with Tiger shoes in Japan to import the Tiger brand. The business strategy in these early days was to elevate the shoe through design (Knight's partner Bill Bowerman designed "the first midsole, which Tiger agreed to incorporate in several of its models") and to get athletes to wear the shoes by "getting out to the tracks, to the locker rooms, showing the coaches and athletes our shoes, putting on clinics" (Rikert, Christensen 1990:8-9). In other words, Knight was comparable to a traveling salesman. But he and his team were successful salesmen, and when Tiger threatened to break their deal unless BRS hand over 51% of its shares, Knight and his team decided to take their business strategy to the next level.

Reaching that level depended on finding another Asian source to finance, manufacture, and export the shoes that BRS would then sell. Knight's employee Jeff Johnson came up with the name of the shoe Nike, and a small fee bought the now iconic swoosh design of a graphic design student. Knight then found "Japan's sixth-largest trading company," Nissho-Iwai (Rikert, Christensen 1990:9). Knight supplied Nissho the design and Nissho provided the shoes. Those shoes were then taken to the 1972 Olympic trials and that event served as a catalyst for Nike's spring to the top of the market: "The company proudly noted that 'four of the first seven finishers' in the marathon event at the trials (actually, numbers 4, 5, 6, and 7) wore the NIKEs" (Rikert, Christensen 1990:9). The Nike brand was begun -- and the company had placed the proper spin on its product (and used product placement effectively) to secure for itself a share in the athletic footwear market.

Not only was Nike now primed to work its way into an already established market, but a new market was also now emerging. Nike thus began to develop a product line that could meet the needs of this new market and the new demand for ath-leisure wear, whether in leisure shoes, leisure apparel, shoes for amateur joggers and non-athletes, for specialized sports like soccer, basketball, football and tennis or simply for racing. Nike products offered comfort, style, and technology -- like motion control, cushioning, and variable width lacing.

The Winning Strategy

Nike's marketing strategy was a kind of "word-of-foot" (Rikert, Christensen 1990:12) rather than word-of-mouth policy. Nikes appeared on the feet of visible professional athletes -- and these appearances did more to make Nike a household brand than anything else. When the Dallas Cowboys appeared on television wearing Nike shoes, millions of viewers now had a new brand to buy in emulation of their sports heroes. The 3% of its revenues that Nike used to promote itself went into forging "contracts with professional players and coaches, agreements with amateur athletes and teams, sponsorship of numerous prominent sporting events, and the underwriting of a world-class track club" (Rikert, Christensen 1990:13). Nike made itself known by placing itself at the heart of the professional sports world. When the millions of amateurs and fans who followed professional sports saw that Nike was the brand their favorite athletes were wearing, then they too sought to purchase Nikes. Nike was first and foremost a sport-centric company. It appealed to athletes and coaches by offering them money to wear their shoes, and in that way the shoes appealed to consumers who sought to emulate their sports heroes.

But Nike also wanted to make it known that when it came to the best in sportswear technology, it was head and shoulders above the rest. That is why Nike spent $5.7 million in financing the "technological revolution in running shoes" in 1982 (Rikert, Christensen 1990:15). By appearing everywhere, Nike had fostered skepticism. It now wanted to prove that it deserved to be worn by the best athletes in America. By keeping manufacturing in Asia, Nike was able to afford to make technological advancements in the shoes it produced, leaving the other companies behind.