Business Simulation

Games
Assignment-3
Title:
Market Analysis
Framework for Nike Inc.

By-

Vikrant Walia

MBA-3rd Semester Evening-B

41180303917

1. Product Developer: Nike Inc.

 2. Product Name: Shoes

 About the company

NIKE

Nike, Inc. is an American multinational corporation that is engaged in the design, development,

manufacturing, and worldwide marketing and sales of footwear, apparel, equipment, accessories, and
services. The company is headquartered near Beaverton, Oregon, in the Portland metropolitan area. It
is the world's largest supplier of athletic shoes and apparel and a major manufacturer of sports
equipment, with revenue in excess of US$24.1 billion in its fiscal year 2012 (ending May 31, 2012).
As of 2012, it employed more than 44,000 people worldwide. In 2014 the brand alone was valued at
$19 billion, making it the most valuable brand among sports businesses. As of 2017, the Nike brand
is valued at $29.6 billion.

 Shoes Offered- Basic Variety

 Lifestyle Shoes

 Running Shoes

 Basketball Shoes
 Jordan Shoes

 Training Shoes

 Soccer Cleats
 Golf Shoes

 Tennis Shoes

 Skate Shoes

 Baseball Cleats

 Sneakers

 High Top Shoes

 Custom Shoes

Shoes- New Arrivals (Jordan, Vapor Max Series, Air Max Series, Zoom Series, Air Force
Series Converse Series)
1. Market Segmentation
a) On the Basis of Demographic Variables
Demographic segmentation is a factor used by Nike to target individuals according to their age, life-
cycle stage, gender, occupation, and generation. For the most part, Nike primarily targets those
consumers who are in between the ages of 15-40 years. The company targets both men and women
athletes equally, and is placing an increasing focus on the teenagers to build long-term brand
faithfulness. Nike addresses this segment by doing some marketing campaigns about young adults
who want to be like their athlete idols. For example, right before the 2014 World Cup Nike
developed a video starring important Nike sponsored soccer athletes with teenage soccer players.
Nike does not target consumers based on race, ethnicity, religion or social class. However, given the
high-price of the company’s products, it uses the good level of income and education as targeting
variables.

b) On the Basis of Geographic Variables

Nike uses geographic segmentation to market nations, regions, cities, and population density
differently. In the United States Nike focuses on American football and baseball and creates many
advertisements and marketing campaigns about football and baseball products using athletes who
are specific to those sports. However sports tend to vary by region, so it is unlikely to see American
football or baseball commercials in Europe. Instead, you are more likely to see Soccer in Europe,
where Nike uses soccer stars to market Nike’s products. Similarly, in India, you are more likely to
see cricket, and all the rugby players in England as well as Australia. Nike’s largest markets are
North America followed by Western Europe and China. In these geographies Nike’s marketing
efforts are largely focused on urban areas with high market densities.

c) On the Basis of Behavioural Variables

Targeting based on this attribute is the genius and main focus of Nike. While Nike occasionally
focuses on lauding particular product attributes, the company largely focuses on how their products
make consumers FEEL. The benefit expectations of the company’s products are clearly defined:
You are an athlete. Nike products make you feel athletic! In addition, with behavioural
segmentation, Nike seeks to build customer loyalty. By providing consumers with quality, choice
and innovation the company excels in this place.
d) On the Basis of Psychographic Variables
Nike also uses psychographic segmentation to target individuals with specific lifestyles and
personalities. To use this variable effectively Nike must target individuals who enjoy sports.
Whether it is playing, watching or simply talking about sports, these activities shape personalities
and lifestyles. Nike’s marketing efforts are targeted at creating a “feeling” that transcends the
product. Nike fosters an attitude, it develops a lifestyle. Events such as Nike: Run with Me, Sports
Improvement Clinics, Social Media contests and athletic and non-athletic endorsements go a long
way to create community and a feeling of “belonging” to the Nike family

2. Market Size Estimation

PRIMARY TARGET GROUP:
L
o Potential
c Monetar
a Market y Value
ti Number of Penetra Potential of the
o Customers tion Market Price Market
n (C) Rate (R) Size (Sp) (P) Sp€ Comments/ Assumptions
U € €
S 2275000 150.0 3,41,25,0 Nike focuses on those people of who are very much
6,50,00,000 35% 000% 0 0,000.00 oriented in baseball and somewhat in football too.
             
             
SECONDARY TARGET GROUP:
Mar Pot
ket enti
Pen al Potential
Number etra Mar Monetary
of tion ket Value of
Custome Rate Size the
Location rs (C) (R) (Sp) Price (P) Market Sp€ Comments/ Assumptions
Other areas 58
like Europe, 50
Middle East, 00
Asia Pacific 00 € Nike Focuses on those people of other areas
Regions 1950000 00 € 58,50,00,0 who are very much oriented in sports like
00 30% % 1,000.00 0,000.00 cricket, soccer, tennis, golf, baseball rugby etc.

3. Market Growth Rate

Market Size in Market Size in Market
Reference Year the Year of Growth
(Sy0) Interest (Sy1) Rate (%G) Comments/ Assumptions
It is expected to have a good increment in the Growth
Rate as a good series of variety in the footwear is being
21 25 19% launched by the company
4. Marketing Communication

  Marketing/ Communication Strategy

Target Age: 15-40 years ; Gender: Male and Female ; Income Level: High ; Level of
Audience customer knowledge and education: High
To attract new customers. To increase the profitability of the company, to
Goal of
produce quality and low cost shoes, to meet the needs of the target customers, to
Communication
make sustainable development of the shoes
To introduce the offers to almost each and every environment which is related to
Message
the targeted customers and that are known to them.
TV and Print Advertisements, Social Media Marketing, Point-of-Sale, Mobile
Communication
Marketing, Celebrity Endorsements, Corporate Engagements, Out-of- Home
Channels
Advertisements
Estimated
Budget 60% of Sales
Promotional
Tools Commercial Advertisements(Electronic, Print Media), Billboards
How we will Trend Analysis, Customer Analysis by doing Surveys, Ensuring the fulfilment of
measure results Marketing Objectives and goals

5. Goal Setting
In what way will your product or
service create value for the
customer (i.e., what is the goal of
your offering)?
Goal of the product The primary goal of the Nike shoes
is to bring continuous innovation
in the same and inspire the each
and every athlete present all over
the world. Further, the objective is
 to provide quality and low cost
shoes to the customers.

6. SWOT Analysis

SWOT Analysis
STRENGTHS WEAKNESSES

 Global brand and no.1 shoe maker.
 Joint venture with Apple’s IPod in
continued innovation.
 Strong distribution channels.
 Strong position over its minimal long
term debt
 Innovative shoe designs
 Custom shoes that enable the
consumer to design their own shoes
online.
 Diversified product line worldwide
 Strong marketing campaigns and
endorses different products
OPPORTUNITIES
 Can develop products such as sport’s
wear, sunglasses and jewellery
 Potentially to be developed
internationally
 Can support different market events
globally as (the Olympics, FIFA)
 May have expansion in larger brand
recognition in market
 Can have growing segmentation of
 Sales is highly dependent on the
footwear segment
 Minimal wage rate to the workers
 Poor conditions in work places
 Has higher price compared to its
competitors as Adidas
 January
THREATS
 Economic recession and fluctuations
in the currency can lead Nike to
losses
 Higher competition as competitors are
becoming more aggressive and
creating high quality products
 Sensitivity to price
 women Athletes’
 Can increase demand and introduce
fashion brand image in market

7. Porter’s Five Forces Model for Nike

There is a wide variety of external factors that determine the strengths or intensities of forces
impacting Nike Inc. However, based on this Five Forces Analysis, the following are the intensities of
these forces currently influencing Nike’s performance and industry environment in the athletic
footwear, equipment and apparel market:

1. Competitive rivalry or competition (Strong Force)

Competition determines how Nike Inc. maintains its share of the sports footwear market. This
element of the Five Forces Analysis shows how competition influences the industry environment and
the performance of individual firms. The following external factors create the strong force of
competitive rivalry in Nike’s case:

 Low market growth rate (strong force)

 High aggressiveness of firms (strong force)
 Moderate number of firms (moderate force)

The low market growth rate is partly due to firms’ high market penetration and market saturation.
This condition creates a strong force, as Nike and other companies compete for a market that grows
slowly. In relation, firms are highly aggressive in competing for bigger market shares. Also, there are
only a moderate number of firms that significantly impact Nike. Based on this element of the Five
Forces Analysis, the external factors that lead to strong competition requires Nike Inc. to focus on
market development and product development to ensure competitive advantage and a growing share
in the global athletic shoes, apparel and equipment market.
2. Bargaining power of buyers or customers (Moderate Force)

Nike’s customers directly affect business performance. This element of the Five Forces Analysis
shows how consumers determine business competitiveness and the industry environment. In Nike’s
case, the following external factors contribute to the moderate bargaining power of customers:

 Low switching costs (strong force)

 Moderate substitute availability (moderate force)
 Small size of individual buyers (weak force)

The low switching costs make it easy for customers to buy sports shoes other than those from Nike.
The moderate availability of substitutes also enables customers to buy other products instead of
always buying from Nike. However, the small size of individual customers minimizes their
individual forces on the company. These external factors lead to the moderate bargaining power of
customers. This element of the Five Forces Analysis shows that the force of customers is a major
consideration in Nike’s strategies for the athletic footwear, apparel and equipment market.

3. Bargaining power of suppliers (Weak Force)

Suppliers affect Nike’s business through the availability of raw materials. This element of the Five
Forces Analysis tackles suppliers’ influence on firms and the industry environment. In Nike’s case,
the following external factors create the weak bargaining power of suppliers:

 High overall supply (weak force)

 Large population of suppliers (weak force)
 Moderate size of individual suppliers (moderate force)

The high supply minimizes the effects of individual suppliers’ actions on Nike’s business. Similarly,
the large population of suppliers reduces the impact of individual suppliers’ demands on large
companies like Nike Inc. The moderate size of individual suppliers supports a moderate degree of
suppliers’ influence. Nonetheless, this element of the Five Forces Analysis shows that Nike
experiences only a weak force representing the bargaining power of suppliers. As such, suppliers are
 among the least significant concerns determining Nike’s strategies in the sports shoes, equipment and
apparel industry environment.

4. Threat of substitutes or substitution (Moderate Force)

Substitutes pose significant threat against Nike’s performance as a leading player in the global
athletic shoes market. This element of the Five Forces Analysis identifies the force of substitution on
the business and the industry environment. The following are the external factors that maintain the
moderate threat of substitution against Nike Inc.:

 Moderate availability of substitutes (moderate force)

 Moderate performance per price of substitutes (moderate force)
 Low switching costs (strong force)

The moderate availability of substitutes imposes a moderate force against Nike, as customers have
considerable alternatives to Nike’s products. In relation, customers have a moderate likelihood of
considering substitutes because of the moderate performance of substitutes compared to Nike’s
sports shoes, apparel and equipment. The low switching costs further add to that likelihood.
Nonetheless, this element of the Five Forces Analysis shows that substitutes exert only a moderate
force against Nike Inc.

5. Threat of new entrants or new entry (Weak Force)

New entrants or new firms can disrupt Nike’s industry environment. This element of the Five Forces
Analysis identifies the extent of new entrants’ influence on firms in the sports shoes, apparel and
equipment market. The following external factors contribute to the weak threat of new entrants
against Nike Inc.:

 High cost of brand development (weak force)

 High economies of scale (weak force)
 Moderate cost of doing business (moderate force)

The high cost of brand development makes it difficult for new entrants to succeed in competing
against large firms like Nike Inc. Also, the high economies of scale provide Nike with a competitive
edge against new entrants, considering the company’s global production and distribution network for
its athletic shoes, apparel and equipment. The moderate cost of doing business further limits new
entrants’ ability to disrupt the industry environment. Based on this element of the Five Forces
Analysis, the threat of new entry is a minor concern for Nike Inc.

8. Business Model Canvas

Key Partners Key Activities Value Provided Customer Customers
Relationships
Manufacturing R&D, Providing Quality Brand Loyalty is the Professional
Contractors, Retailers, Manufacturing Footwear for biggest factor. Athletes,
International Supply and Distribution, Running and Endorsing the General Young
Chain Partners, Star Demand playing other shoes through the Adults, Middle
Athletes Creation sports like star athletes like age as well as
basketball, cricket, Cristiano Ronaldo, old age people
soccer, golf, Tennis. Virat Kohli, Neymar those can be
Bringing etc. Organizing out- provided with
Continuous to-home good sneakers,
Innovation, advertising camps, indoor sports
Inspiring Young sponsoring in footwear
Adults corporate and range, joggers
 sports events. etc.
Key Resources Channels
(how they know
you and how you
deliver)
 Manufacturing Distributors, Retail
Plants, Patents, Stores, Licenses
Supply Chain,
Brand Image
Costs Revenue and Benefits

Costs of Sales: $10 Billion ; R&D: $1 Billion ;

Promotion and Advertising: $3.9 Billion
Selling and Administrative expenses: $4.9
Billion Sales: $ 36 Billion