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International Marketing: Nike Inc Add in library

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Question:

Describe about the Nike Inc, the world’s largest US multinational sports retailer company, based in Beaverton, Oregon, USA?
 
 

Answer:

Introduction:

Nike Inc is the world’s largest US multinational sports retailer company, based in Beaverton, Oregon, USA. The company has successfully made its presence by more than 930 retail stores across 190 countries all over the world. The company generally operates as an autonomous distributors and licensees. Majorly, Nike Inc. are spread their operation across six geographic segments: Western Europe, Central and Eastern Europe, North America, Japan, Greater China and Emerging Markets (Papadopoulos and Heslop 2014.). Now the company is all set to increase its sales ratio through new stores rollouts and continual digital enhancements and innovation.

This report will prepare for the board of directors of Nike Inc. for addressing internal and external factors impacting on the retail market of sports and the market recommendations. The primary focus of the report will discuss the internal and external business environments related to Nike and evaluate potential market for international market expansion. There are two options will be discussed for entering the international market including joint ventures or foreign direct investments. Discussing the suitable international marketing strategies, the report will recommend key areas of marketing mix that needs to be adapted or standardized by the chosen company.

Macro Analysis (PESTEL Analysis):

Nike Inc is a popular sport retail brand and recognized as the premium manufacturer of footwear, sports accessories, apparel for athletics and other equipments. In this section the external business environment of Nike will discuss the threats and future business opportunities in the macro or remote environment.

Political Factors:

The sport business of Nike has influenced by political factors (Czinkota and Ronkainen 2013).The company has been fortunate because the government of US has already enforced several policies which will foster its growth of the business (Nike.com 2016). Nike enjoys low rates of interest and steady exchange rates and competitive tax provisions which helps it immensely to advance its growth.  The government has already taken initiatives to make transparent global value chain business. However, Nike Inc faces critical political issue in nations such as Indonesia, Thailand and Vietnam. All countries are already suffered from political unrest. Furthermore, the trade protection policies in certain nation have also adverse effect on sales and services of Nike. Some of the political factors determine related to the Nike’s business which includes political stability in major of the global markets, increasing open policies for trade, and improving several national governments support for infrastructure.

Economic Factors:

Like majority of the consumer facing firms, Nike faced difficulties due to challenging trading conditions since the financial crises of 2008-2009 and contingent economic slowdown. This situation has applied in both the Asia Pacific region and Western markets. However, the company bears the accountability of being the prominent manufacturer of sports apparel and footwear and generated revenue by raising 5 percent to $7.8 billion up 13 percent in the year of 2015 (Nike.com 2016). Nike Inc is also believes in overseas economy. A weak Asian and Euro recession is going to be a biggest setback for the company. However, the global market would be able to help Nike in times of recession and its sales haven’t suffered much.  In short, the economic external environment is significant in determining the performance of Nike which include factors like developed market’s economic stability, Emerging growth of emergent markets,  and decelerated economy  of China

Nike Inc finds countries like the United States are moderately stable and it provides many opportunities (Czinkota and Ronkainen 2013). However, the company finds slow but stable growth in these countries. There are many high-growth developing countries, ensures rapid growth in the developing market, however escalating labor costs in the supply chain of the company and production facilities is indeed a matter of concern.

 

Socio-cultural Factors:

Due to growing preoccupation with health and fitness, Nike Inc has been constantly evaluating themselves in the emerging market. However, the company previously faced many issues regarding the rising demand from its CSR. On the other part of the global world, the company finds challenges such as constantly changing globalized framework, political consumerism which influences in the opportunities of the trans-national companies which are outsides regulatory powers of national governments (Nike.com 2016). However, there are several positive socio-cultural factors such as increasing wealth in the developing countries individually, intention of giving more emphasis on safety of the product, and emerging consciousness of sports and health-fitness.

Technological Factors:

This sport retail business is constantly transformed according to technologies available for business processes. However, more given efforts on R&D investments among others firms threaten Nike Inc as they build up more technologically advanced apparel, shoes, and equipments. Thus, rising obsolescence in the technological field also threatens the company by putting pressure to increase its product development efforts (Nike.com 2016). On the contrary, Nike finds several enthusiastic market opportunities by using mobile technologies for their products to capture consumers who frequently use such apps and mobile tools. In this context, various technological factors are found which significantly affects Nike Inc. Such factors include increased R&D efforts among other firms, fast technological obsolescence and demand of advanced technologies.

Environmental Factors:

Larger implications of environmental law create opportunities for Nike Inc (Nike.com 2016). These improve the sustainability of the business activities that can easily address climate change. There are various ecological or environmental factors are notable such as growing laws for environment, climate change and rising sustainability strategies among firms.

Legal Factors:

There are various legal considerations are significant in the retail sport manufacturers like Nike such as improving law implications across the developing countries , rising consumer laws in developing countries and larger application of health and safety regulations.

 

Micro Analysis (using Porter’s Value chain):         

How organization creates values – it is always a significant business consideration. The value that has created and captured by a firm is the profit margin. Porter’s value chain is important for discussing the internal business environment of Nike Inc. Using this technique, the report will identify how inputs of Nike are changed into the purchase of outputs by consumers.

(Source: Fearne, Garcia Martinez and Dent 2012)

Inbound logistics

There are various factors are included in the Nike’s inbound logistic such as Nike purchased their raw materials in bulk from the local market. Being famous as local logistics providers, the company has been engaged in importation of specialized materials and successfully maintained its inventory.

Operations:

The company is engaged in various operations such as outsourcing, manufacturing sports equipments, designing (R&D), technical innovation,

Outbound Logistics

The company is known for its strong control over worldwide distribution channel and J-I-T delivery system.

Marketing and Sales

High brand reputation and recognition have already been achieved worldwide by the company. For this reasons, the company has easily make strategies for value based pricing and price advantages. Sometimes, the company used aggressive marketing strategies as well.  

Service

The company cares for customers and their demands Nike has given more importance in after sales service and value added services.

Market Evaluation:

In this section, there are four countries are chosen to analyze the potential international markets. These four countries include Finland, Cyprus, Indonesia and Australia. By using 12C framework, the market potentiality will be evaluated through different perspective.

12C framework

Finland

Cyprus

Indonesia

Australia

Country

i) Finland has open market policies that supports dynamic investment and trade

ii) Over the past five years, the country has undergone slowdown and uncertainty.

i) Cyprus has moderately free market and economic policy of the nation are mainly focused on the fiscal discipline, structural reforms and privatization

i) Various reformation has been addressed the nation’s structural weaknesses and improve competitiveness

ii) Indonesia’s growth potential has become static due to inefficient legal and investment structure of the country

i) The country holds the largest mixed market economy with GDP of AUD$1.62 trillion as of 2015

ii) The nation’s economy is dominated by its service sector

Channels

Import-oriented distribution structure (traditional)

Retail channel of distribution pattern

Alternative middle man choices preferred

Import-oriented distribution structure (traditional)

Commitment

Non-corrupted transparent international market, limited government interference, regulatory efficiencies and huge labor market availability commits huge open market exposure

Scarcity of efficient skilled labor and hugely government interference discourages the business structural flexibility. Furthermore, the country faced the long term financial instability due to global recession

High availability  of skilled labor

Low business freedom and restricted labor freedom decreases the regulatory deficiencies and level of nation’s commitment

Being positioned as 12th largest national economy, Australia provides huge international market where skilled labors are available at the higher rates.

Currency

The foreign currency does not fluctuate much against the home currency of Finland. This is the reason the countries inflation rate is 1.2 percent (Chung, Lu Wang and Huang 2012). However, the country currency has undergone economic slowdown and uncertainty, but this has been improving day by day due to government generates equal exposure of foreign and domestic investors and financial system remains competitive.

Low inflation rate indicates low currency fluctuation but the financial system has experienced strains and uncertainty

High inflation rate (6.4 percent) ensures currency volatility and uncertainty of loss of the business

Australian dollar dips against the US currency and fell below 70 US cents. Furthermore, high inflation rate is threatening the economic conditions of the country and discourages FDI as well.

Communication

Preferred transparent communication maintains during the establishment of the international business

Mixed communication patterns have been followed

Mixed communication patterns have been followed

Transparent communication  and negotiation has been maintained between domestic and foreign country.

Capacity to pay

Due to have a huge monetary freedom and stable economic growth ensures higher capacity to pay

Low capacity to pay by domestic business participants

Moderate capacity

Mixed capacity

Contractual Obligation

Less

moderate

higher

less

Choices  (Media)

 Advertising

Personal selling

Advertising

Advertising

Consumption

High  demand for retail sport industry ensures huge consumption demand (Shank and Lyberger  2014)

Low consumption patterns

Low consumption

High consumption

Concentration (of markets)

Selling abroad by concentrating limited nationalities

Selling abroad by

concentrating limited nationalities with same cultural background

International business will concentrate demands of the different groups

International business will concentrate demands of the different groups due to availability of various cultural backgrounds

Caveats (legal applicability)

Low

High

Moderate

High

Culture/Consumer behavior

High preferences of sport apparels and accessories

Low preferences of sport apparels and accessories

Low preferences of sport apparels and accessories

Moderate preferences of sport apparels and accessories


(Source: Created by author)

Recommended Market

Based on the 12C framework, this has been observed that Finland has the highest business opportunity for the business of Nike Inc. Finland has already benefited open-market policies that support investment and international trade as well. By exploring international business, Nike Inc will get encouraging regulatory business environment which maintains high degree of sustainable competitiveness. The reason behind recommending this market is Finland’s efficient legal framework that strongly upholds the rule of laws and ensures the minimum tolerance for corruption. Furthermore, the recommended nation has the stable economic condition which largely encourages new market entry. However, businesses need to take a firm strategic decision about the suitable market entry strategy either joint venture or foreign direct investments to gain the overseas distribution into proposed market. On the other hand, large consumers or cultural background of Finland have shown their keen interest in fashionable sports apparels and accessories which are delivered by  sports retail companies like Nike Inc (Brohi et al. 2016). Thus Finland would be the most favorable place for the international business expansion of Nike.

 

Joint Venture or FDI as the market entry strategy

There are various market entry modes practiced by organizations including exporting, licensing, joint venture or direct investment. This section will investigate either joint venture or FDI- as the most suitable market entry strategy for Nike Inc to gain the overseas distribution into the market of Finland.

By the selection of Joint venture as the suitable market entry strategy, there are five common objectives would be accomplished by the chosen foreign business (Shah 2015). This includes successful market entry, reward/risk sharing, technology sharing; qualify for joint product development and meeting the regulatory requirements. However, several strategic issues could be faced by the proposed business due to various reason such as less proprietary knowledge, performance ambiguity, conflicts between culture, lack of parent firm support, conflicts over disoriented new investment and many others.

On the other hand, foreign direct investment is all about direct ownership of facilities in the recommended country like Finland. By this market entry mode, Nike would be involved in transfer of resources such as personnel, technology, capital and many more. Though the nation has huge labor market availability, this would be an added advantage for the international business like Nike. This indicates low requirement of the human capital during the establishment of Nike’s business in Finland. Here it is recommended to involve in direct market investment through the establishment of the new business enterprise. This market entry mode is the most suitable because it will give the company a high degree of control in their operations and the ability to better know the customers of Finland and competitive environment (Blery and Kakokefalos 2014). This would be perfect because Nike has a high level of resources and kwon for its high degree of commitment in other parts of the world (Moosa 2016). Therefore, FDI should be chosen by Nike as an appropriate market entry strategy to gain overseas distribution into the market of Finland.

 

Recommendation for key areas of the marketing mix:

Before entering into the foreign market, businesses need to decide the proposed market mix specifically the consideration of the factors like product, price, people and promotional strategies. To make the efforts more standardized, the following considerations must be followed:

Price: To capture the international market, Nike needs to fix their product’s price as reasonable. Low price would not be possible because the company has already achieved the brand reputation across the other nations. Though the retail sports market is less competitive in Finland, the company could use the Skimming pricing strategy while entering into the market of Finland. In that case, the firm will set an higher price and then slowly lowers the price to make the product available for the wider audiences.

Product: Nike’s products are already popular among sports lovers. Therefore, the company should maintain their brand image by delivering same quality product in different parts of the nation.

People: High profile consumers along with young sport lovers are the main targeted people for this new business establishment.

Promotion: Nike would promote their products by different advertising strategies such as website promotions, media promotions and so on.

In this way, the company can establish international market in different parts of the world and generate more revenues in the long run.

 

References:

Blery, E.K. and Kakokefalos, G., 2014. Marketing Footwear: A Case Study from Greece. Research in Business and Management, 1(1), pp.90-104.

Brohi, H., Khubchandani, R., Prithiani, J., Abbas, Z., Bhutto, A.H. and Chawla, S.K., 2016. Strategic Marketing Plan of Nike.

Chung, H.F., Lu Wang, C. and Huang, P.H., 2012. A contingency approach to international marketing strategy and decision-making structure among exporting firms. International Marketing Review, 29(1), pp.54-87.

Czinkota, M.R. and Ronkainen, I.A., 2013. International marketing. Cengage Learning.

Fearne, A., Garcia Martinez, M. and Dent, B., 2012. Dimensions of sustainable value chains: implications for value chain analysis. Supply Chain Management: An International Journal, 17(6), pp.575-581.

Gilligan, C. and Hird, M., 2012. International marketing: strategy and management (Vol. 17). Routledge.

Kapoor, A., 2014. Competition Mapping and Market Analysis for Sportswear. NIFt.

Moosa, I., 2016. Foreign direct investment: theory, evidence and practice. Springer.

Papadopoulos, N. and Heslop, L.A., 2014. Product-country images: Impact and role in international marketing. Routledge.

Priem, R.L. and Swink, M., 2012. A demand‐side perspective on supply chain management. Journal of Supply Chain Management, 48(2), pp.7-13.

Shah, K.U., 2015. Choice and control of international joint venture partners to improve corporate environmental performance. Journal of Cleaner Production, 89, pp.32-40.

Shani, D. and Chalasani, S., 2013. Exploiting niches using relationship marketing. Journal of Services Marketing.

Shank, M.D. and Lyberger, M.R., 2014. Sports marketing: A strategic perspective. Routledge.

Terpstra, V., Foley, J. and Sarathy, R., 2012. International marketing. Naper Press.

Verbeke, A., 2013. International business strategy. Cambridge University Press.

www.nike.com, (2016). [online] Available at: https://www.nike.com [Accessed 30 Jul. 2016].

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