NIKE+strategies - strategic management PDF

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NIKE : Nike’s differentiation and leadership strategy : Nike’s cost leadership generic strategy sustains competitive advantage based on costs. In this generic strategy, the company minimizes production costs to maximize profitability or reduce selling prices. In the late 1990s, Nike reduced costs and the selling prices of its athletic shoes and other products. This generic competitive strategy helped the company regain its competitiveness, especially against Adidas. Also, Nike’s differentiation generic strategy provides unique products. For example, the company integrates cutting-edge designs for its shoes. The combined cost leadership and differentiation generic strategies boost Nike’s performance in the global industry. A strategic objective based on the cost leadership generic strategy is to grow the company’s competitive advantage through new technologies to reduce production costs. A financial objective based on the differentiation generic strategy is to maximize Nike’s profit margins, such as on new sports shoes. Nike implemented this intensive strategy in its early years, such as when it introduced apparel and sports equipment to its product mix. Initially, the Nike brand was on athletic shoes only. Diversification can support Nike’s generic competitive strategy of differentiation through new businesses that supply materials for product innovation in the athletic shoes, apparel and equipment business. A strategic financial objective based on this intensive growth strategy is to improve Nike’s financial risk by entering other industries. Nike decided to focus on investing in their R&D department: they focus on individual benefits such as newest technology of producing clothes that let the skin breathe, footwear specific structure allowing to avoid or reduce injury and get the maximum comfort, new electronic devices helping people to stay healthy and active. As a result Nike's products have become very loved not only by a standart buyer but also by professional athletes. Their Leader R&D strategy has helped them a lot in achieving their differentiation proposing a product of quality for an affordable price. The advanced R&D strategy has been started by Nike a while ago, in the end of 1970s when they introduced a new air cushioning system for their footwear. Since then developing this project and creating new ones Nike has strenghtened its position of the leader in R&D in rhe sportswear industry

Nike has a moderate cost leadership strategy within its industry. There are a few different choices in the marketplace for buyers to obtain athletic shoes, apparel and the like, however Nike's products are distinct for a variety of reasons that enable them to derive economic profit from other means than simply controlling costs. With that said, the hypercompetitiveness of the few rivals Nike has means that they do have to do their best at minimizing said costs as to maximize their market share and margins. Nike has significant economies of scale. As the world's largest producer of athletic textiles and equipment, Nike dwarfs the competition. A caveat to their manufacturing processes, Nike outsources all of these processes to many Asian countries that does three things, (1) keeps Nike as a company very lean, (2) provides a cheap labor source, and (3) if a manufacturer/supplier increases costs, Nike can simply relocate to a cheaper option further driving down their marginal costs. Other companies without Nike's clout can't match this ability. Also considering the worldwide demand that Nike has, the distance to market from suppliers is negligible and not a source of a diseconomy of scale. Nike definitely has low cost access to factors of production. The enormity of Nike in respect to their suppliers gives them a huge advantage in production negotiations. Due to their high volumes for products, the cut-throat low cost nature of selecting a manufacturer, and coupled with the fact that Nike's suppliers depend so heavily on them for their own success that they have little to no bargaining room toward raising prices, allows Nike to continuously enjoy low costs of production.

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