Monday, February 28, 2011

Nike Business Level Strategy

To distinguish its brand and increase customer loyalty, Nike uses differentiation business level strategy. It offers high quality goods and acceptable price. Nike is perceived as something “fancy”, in terms of sport goods manufacturer.
The company segments its products in different ways. First of all, it manufactures sports goods and accessories for three different Demographics: men, women and children. Each segment is carefully examined in terms of physical capabilities, sociological needs, and design preference. Along with business level strategy it should be mentioned that Nike uses strong diversification (Corporate level strategy) to support its product differentiation. These products create value and increase customer satisfaction: Apparel, accessories, such as Nike watches or gym bags, as well as performance equipment, including sport balls, timepieces, eyewear, skates, bats, gloves etc. Nike produces goods for every type of major sports: running, basketball, tennis, golf, soccer, baseball, football, bicycling, volleyball, wrestling, cheerleading, aquatic activities, hiking, fencing etc. Such wide variety of goods is an attempt of Nike to increase “Affiliation” dimension. Nike constantly looks what could be added to current product range to increase customer satisfaction and strengthen the links between company and client.
Major advantage of manufacturing a number of product lines is the reduction of risk. In such multiproduct portfolio, if one product is not successful, there are numerous others to compensate this risk. Besides just offering differentiated goods, Nike also adds value with the opportunity for customization.
NIKE designs most of its footwear for athletic use; however, in order to diversify its products, a large percentage of their products come from sales of footwear, apparel, and accessories for casual and leisure purposes. It targets the clients who can afford higher price compared to the products which are positioned using cost-leadership strategy. Major reason to pay higher price is the brand itself, and all perceived benefits that are firmly connected with having Nike.
Besides the two segmentations described above, NIKE also has agreements for licensees to produce and sell NIKE brand items aside from athletic footwear and apparel. In part, this product differentiation is accomplished through strategic management planning by having the company sell NIKE brand timepieces, children’s clothing, school supplies, electronic media devices, and other items. Using such strategy Nike increases firm’s access and connection to customers – the “reach” dimension.
According to Nike Annual Report, company will maintain high quality and acceptable price as major strategy for growth. “We have shared information on the company’s growth strategy, including our aim to achieve revenue of $23 billion by FY11. This strategy is the context for our corporate responsibility efforts. We aim to achieve this growth by delivering premium products, growing in our geographic regions and elevating the retail experience”.

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