Nike Business Strategy
Nike is the global leader in the sports shoes and apparel sector. The company has established itself as the dominant player in the sports shoes sector. Its focus on creating innovative products and excellent marketing have helped the company grow its customer base and expand market share successfully. Nike is a unique brand in several regards and rather than remaining a sports shoes and apparel brand, it has turned itself into a fashion label and the envy of other brands. Its global growth is a result of its focus on product quality, innovation, manufacturing, supply chain and several more factors.
The company enjoys strong customer loyalty and has created a strong brand image. Nike is also at the forefront of innovation in the sports shoes and apparel industry. It creates innovative products which serve the needs of its consumers worldwide in a superior manner. Innovation is one of the core reasons Nike has found strong growth and high customer loyalty in most corners of the world. Its largest market is the United States. However, Nike products are popular in many other corners of the world also.
In this post, we will analyse the business strategy of Nike and how it has differentiated itself from the others and managed to remain in a dominant position in its industry sector. We will deal with the primary focus areas of its business strategy that have helped it achieve higher success globally.
Product Quality:
One of the most critical pillars of Nike’s business strategy is its focus on product quality. Quality is among the most critical drivers of brand image, demand and sales in the sports shoes and apparel industry. The better the quality of the products, the higher the demand, popularity and customer loyalty a brand enjoys in the sports shoes and apparel sector.
Nike has been investing in good quality raw materials to develop high quality products. Product quality is one of the key reasons that Nike products are as attractive and popular. To maintain the quality of products it makes and sells, the company has partnered several tier 1 and tier 2 suppliers for sourcing good quality raw materials.
Its external manufacturing partners produce shoes and apparel according to the company’s specification. However, the company has rigorous quality control processes in place to ensure only the best quality products reach its customers. Improving product quality continuously is also a key focus on Nike’s innovation strategy.
Sustainable innovation:
Nike is also focusing strongly on sustainability. It is creating technologies that can make its products more sustainable. It is developing recyclable and more sustainable raw materials for the development of Nike products. Nike customers around the world are health conscious consumers but they are also environmentally aware consumers. Focusing on sustainable innovation helps Nike develop products that are more popular among the environmentally aware modern consumers.
Nike is using recycled materials like recycled nylon, cotton and polyester in the development of its products. It has also developed some special raw materials that have lower environmental impact like Nike Flyknit and Nike Flyleather.
Nike Flyknit is a lightweight fabric precision-engineered with an average of 60% less waste than in traditional footwear upper manufacturing. Each shoe upper made from Flyknit contains 6–7 plastic bottles.
Nike Flyleather looks, feels and smells like natural leather, made by binding at least 50% recycled leather fibres with synthetic fibres using a water-powered process. This creates less waste and a lower impact on climate change compared to full-grain leather.
Apart from Nike Flyknit and Nike Flyleather, Nike is also using recycled polyester, sustainable cotton, recycled Nylon for the production of shoes which has helped the company reduce its carbon footprint and wastage.
Outsourced supply chain:-
Nike has outsourced its manufacturing and supply chain operations to external suppliers most of which are based in Asian markets like Vietnam and Indonesia. In this way, the company is able to focus on other operational areas including the development of new technologies and designing products that cater to changing consumer demands and preferences.
Worldwide, consumer preferences have changed a lot and Nike is focusing on creating products that match the consumers’ choice. Its suppliers play an important role in the success of Nike and the execution of its business strategy.
While the company saves on operational expenses by outsourcing its production and supply chain, the suppliers develop products according to specifications by Nike which means superior quality and design of products. The company has developed new and innovative technologies and raw materials for use in production and is creating innovative products.
In this regard, the partnership between the company and its suppliers plays an important role in helping the company successfully fulfill customer demand globally. Nike has outsourced its supplier and manufacturing operations but that does not mean it does not maintain rigorous quality control of the manufacturing process. All external suppliers are required to meet the quality requirements set by the company.
Nike worked with 15 contract manufacturers in the year 2023 for producing footwear, many of which own several factories. These contract manufacturers together operate 123 factories in 11 countries. However, Nike footwear was produced mainly by the contract manufacturers located in Vietnam, Indonesia and China which together produced around 95% of the total Nike brand footwear in 2023.
The company also worked with 55 contract manufacturers for the production of apparel in 2023 which together operate 291 factories. Its largest percentage of apparel was produced in Vietnam, China and Cambodia. Apart from these, Nike worked with 146 strategic tier 2 suppliers that supplied the raw material for making its footwear and apparel.
Technology as a strategic priority:
Nike was among the first in the sports shoes and apparel sector to identify the role of technology in terms of differentiation and strengthening its competitive edge. The company has been investing in several advanced technologies to strengthen its technological capabilities including e-commerce capabilities.
It was also among the first to adopt cloud technology and use AWS resources to serve its customers better. Nike made technology a strategic priority and worked in the direction of developing inhouse capabilities rather than depending on vendor provided software that did not really fit its needs.
Back in 2019, the company had started using AWS resources heavily to develop its own digital solutions for its business.
It developed its own technological capabilities to manage and analyze very large clusters of data. Nike had recognized it quite early that the company needed to accelerate its digital journey and strengthen its consumer connection through individually tailored content.
The company also launched many new digital platforms including the SNKRS app and the NIKePlus app. It has been leveraging AWS resources to provide personalized apps and a responsive shopping experience to its customers. Nike also leveraged the power of Elastisearch to power the search on its online platform1.
Nike’s transition to a digital first experience for its customers has proved successful and helped the company strengthen its edge in this area. The company has benefitted from its strategic focus on technology and successfully experienced revenue and market growth.
Innovative marketing:
Marketing is one of the most critical factors that has driven the global success of Nike. It is a unique sports shoes brand with a strong brand image and enjoys higher popularity and customer loyalty. While it has successfully leveraged the power of celebrity marketing, partnering with leading athletes and sports personalities, the company has also adopted its own unique and innovative concept in marketing.
Nike’s marketing campaigns and methods have focused on touching customer’ hearts. It has heavily relied on video marketing and run several video campaigns for marketing of its brand and products. However, a key factor that has enabled the success of Nike’s marketing methods and campaigns is consistency. Regardless of the channel used, the message and tone are always consistent.
Nike is now using mainly digital channels for marketing and building customer loyalty including its own apps and websites as well as social media and online advertising. The company invests a huge sum each year in demand creation or the promotion of its products to drive higher sales. In fiscal 2023, Nike spent $4.06 billion on marketing.
Nike’s partnership with sports personalities for the marketing of its brand and products is also well known. The company has sponsored several of the leading players from various sports including basketball, tennis, soccer and so on. These partnerships have proved highly profitable for the brand and its business. Among these athletes, some of the leading names include Lebron James, Michael Jordan, Cristiano Ronaldo and Serena Williams as well as Tiger Woods and Rafael Nadal.
Nike’s Swoosh logo and its Just Do It advertising campaign have also established it as a unique brand in the world of marketing. The company is lauded worldwide as one of the best marketers in the entire industry.
Smart distribution strategy:
Rather than completely relying on external wholesalers and retailers, Nike focused on strengthening its own connection with the consumers by developing its own sales and distribution channels. The main reason that the company decided to sell through its own sales and distribution channels was its focus on customer experience.
Both marketing and distribution play a critical role in terms of customer experience. While the company also sells through external resellers and distributors, it also achieves a significant part of its sales through its own direct to consumer sales channels. Another key reason is that Nike does not want the Nike experience to be diluted. so, it also stopped selling through other ecommerce platforms including Amazon.
Now, Nike uses a two pronged strategy for the distribution of its products which includes Nike branded stores and its ecommerce sales channels2. In 2023, Nike had 369 stores operational in the US including Converse stores. The company also had eight significant distribution centers operational in the US. The United States is the most significant market for Nike products. It alone accounted for 43% of the total revenue of the company in 2023.
Apart from that, the number of Nike stores operational outside the United States in 2023 was 663. The company sells its products in overseas markets through a mix of company owned retail stores, resellers and wholesalers as well as digital commerce channels. Nike and Converse owned digital channels serve customers in more than 40 countries worldwide.
In this way, Nike has adopted a smart distribution strategy, which has helped it get closer to customers in various markets. Rather than relying completely on third party sellers in the online and offline environments, the company has developed its own sales and distribution channels and continues to strengthen its distribution network.
A few last words:
Nike is an innovative sports shoes and apparel brand that has enjoyed strong growth in recent years driven mainly by its focus on innovation and building customer loyalty by proving a superior customer experience. While its focus on quality and innovation are key factors that have been driving its success worldwide, its marketing and distribution as well as supply chain management strategies have also played a key role in the success of the company.
The company has chosen to strengthen its customer connection and has been among the first in the sports shoes and apparel sector to invest heavily in technology. It has helped the brand project the image of an innovative brand that develops products to improve performance and also delivers a superior customer experience.
Its high popularity despite the premium prices of its products shows that the company has achieved strong brand equity. In the future, technology will prove to be the real differentiator for sports shoe companies and Nike’s early investment in this area might bring even superior results for it. The battle for market share has been intensifying in the sports shoes sector. However, Nike has established itself as the dominant player and enjoys a strong edge over the other players in various areas including marketing and technology. The direct to consumer strategy of Nike has also helped the company secure its position and gain higher customer loyalty.