MSM Assessment: Nike

MSM Assessment: Nike

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Introduction

Marketing plays a significant role in building a strong brand, and a loyal consumer base creating value for a company. It is thus important that forms conduct marketing management to gather the benefits. Nike uses a marketing mix strategy to enhance its growth and profitability in Saudi Arabia. The company offers a variety of products to cater to the needs of all its customers. Retailers, outlets, and online stores avail Nike’s products to consumers. Sales promotions, advertising, public relations, and personal selling are used in promoting the products. Nike uses a value-based strategy of pricing to boost its profits and sales. Nike like other companies experiences marketing environmental challenges in social, political, economic, legal, environmental, and technological environments. The companies have taken various measures to address the challenges. However, Nike is yet to be fully effective in addressing the challenges and with more attention, the company will enhance its growth in Saudi Arabia. Effective marketing management is essential in enhancing business growth.

Nike case study

Since it was established in 1962, Nike has been focusing on high-quality sportswear. In the US, the company managed to have a wider consumer base by designing innovative shoes for serious athletes. Through the use of a small number of athletes, Nike managed to influence other consumers into accepting and liking the products. In other countries such as South America, Asia, and Europe, Nike embraced soccer and started sponsoring various clubs to establish the brand (Kotler & Keller, 2016). This move helped the brand to be known worldwide for its quality and identification. Nike has then expanded to various countries across the world through a unique marketing mix useful in boosting the company’s revenues. In terms of promotion Nike has been using known athletes to promote their products. The company runs ads during the games. It also sponsors many teams worldwide. Use of athletic endorsements and technological innovations have helped Nike to reach a wider consumer base. Nike has identified other potential market where it is currently expanding (Kotler & Keller, 2016).

Nike’s Marketing Mix in Saudi Arabia

For profit growth and development, Nike relies on its marketing mix strategy. Marketing mix refers to a set of tactics and strategies used by organizations to execute their marketing plans with respect to the 4Ps, that is, product, place, promotion, and price. For Nike, the marketing mix focuses on the major issues in reference to the target markets across the world. The company’s focus is on apparel and equipment market and sports shoes. Through the marketing mix, Nike has been able to thrive in the Middle East especially in Saudi Arabia (Isoraite, 2016). The company relies on the 4Ps (Figure 1) to maintain a leading position in the Saudi Arabian market for athletic shoes, apparel, and equipment.

Figure 1: 4Ps Marketing Mix

Products

Changes in product mix have enabled Nike to experience a continued growth.  A product refers to a physical service or product that a business offers to a consumer who is willing to pay for it. In Saudi Arabia, the company offers a great variety of products from sports shoes, to accessories (Isoraite, 2016). Girls, boys, women, and men can all use Nike’s products. On shoes, Nike offers a great variety sports shoes for different games including athletics, football, tennis, and basketball among others. It also offers lifestyle shoes. In addition to shoes, the company offers sports apparel, accessory items, athletic bags, casual accessories, and footwear, and head gear (Ahmed, 2017). Other products include protective gear, skates, hockey sticks, and jerseys among others. The following graph shows the revenue generated by Nike in terms of different products.

Source: Kraugerud, P. (2017). Emerging Markets in Apparel and Footwear. Eurometer. https://blog.euromonitor.com/2017/10/emerging-markets-apparel-footwear.html

To capture the potential market, Nike introduced another product in Saudi Arabia which is the Pro Hijab for female athletes in the country. The Hijab comes in black, grey, and obsidian, its stretchy mesh polyester, and is made of a light weight. Previously, female athletes in the region have been struggling in finding headwear that would reduce distractions during the sports (Fareed, 2017). According to Arab News, through this innovation, Nike tapped into a market with high demand for the Pro Hijab. The product aimed at reaching female consumers in Saudi Arabia especially in these times that the traditional society is changing its views and appreciating the role and power of women even in sports (Fareed, 2017). By identifying significant challenges that women in Saudi Arabia are facing in sports, Nike developed the new product for the potential market to boost its revenues.

Pricing

Price is an important marketing element since it increases market share and profits. Price is a flexible element that can easily adapt to the changing environment. The quality of the offered products determines the product price. Nike focuses on providing products of high quality to their customers (Isoraite, 2016). For the high quality Nike charges higher prices. This is a key differentiator of the company from competitors. Nike uses its premium products to charge premium prices. While companies set prices depending on investments and market situation, Nike is different. Its prices are based on the estimated value. While companies are focussed on reducing prices and investing in heavy promotional activities, Nike focuses on raising its prices (Ahmed et al., 2016). The strength of the company as well as the innovation in its products allows it to sell its products at a higher price in Saudi Arabia.

By offering consumers premium products, the company optimises price value equation associated with higher prices.  In the country, the company uses a marketing model on the consumer value equation. The model involves an analysis of the amount of money consumers would be willing to pay for a particular product. The argument behind the model is that people are always willing to pay more for high quality products. The company targets consumers at niche who are financially capable of buying the product (Ahmed et al., 2016). Nike also recognizes the status symbol of the use of expensive products. Just as in other countries, Nike’s products are sold at a higher price in Saudi Arabia, considering that the company offers a high quality product, the target population has the financial capacity to buy the products, and the company seeks to maintain the status symbol (Isoraite, 2016).

Place

In Saudi Arabia, Nike avails its products to consumers through online and offline channels (Isoraite, 2016). The retail outlets and distribution channels avail the products. Independent distributors, subsidies, and licences also sell Nike products in the country. Nike signed an agreement that ensures its branded products are available at official outlets in Saudi Arabia. The agreement with retailer Sun and Sand Sports, the official distributor of Nike in most Middle East countries, is aimed at helping Nike to grow in the country (White, 2010). Nike has various outlets in Saudi Arabia where consumers can access the products including stores in Jeddah, Riyath, Makkah, and Damman among other places. Large towns across the nation have Nike’s outlets where consumers are served. 

Retailers play a key role in the distribution of Nike products. Some big retail discount stores in Saudi Arabia have also stocked Nike products and consumers can easily access them. Across the world, Nike has its consumers access their products online. In Saudi Arabia, consumers can buy Nike products whether shoes, clothing or accessories, from the comfort of the offices or homes by ordering them online. Through Nikeid, consumers can access Nike services online (Ahmed et al., 2016). This gives the company a greater control over the distribution of its products in the online world.

Promotion

Nike promotes its products in almost every environment across the world. The company uses a variety of methods for the promotion. Nike uses popular sports women and men to promote its products. For instance, in promoting the Pro Hijab for women in the Middle East, Nike uses Sarah Attar, a runner from Saudi Arabia (Boren & Payne, 2017). By using such popular personalities, Nike seeks to influence target consumers to watch the celebrities use the company’s products. This motivates thee potential customers into imitating these personalities. The marketing strategy of using ad figure is known as the marketing communication mix. It enables Nike to influence people in Saudi Arabia into buying its products. Nike uses adverts to promote the products. For instance, the company placed a commercial ad that featured Arab women exercising and in competition to attract potential consumers. The ad starts with women exercising in hijab while people stare at them (Boren & Payne, 2017). The ad touches on challenges women in Saudi Arabia in the Middle East in general are experiencing in attempts to engage in healthy and active lifestyles.

In physical stores, Nike places staffs who help customers in learning more about Nike’s products, known as personal selling. The sales staff assist customers to locate the proper products in promoting the company. The staffs are trained to persuade sales. The personal selling helps in building enhanced relationships with consumers. The personal selling occurs in most outlets in Saudi Arabia. Nike uses other promotion strategies such as social media, its websites, and other retailers’ websites. Direct marketing where salespersons approach target market segments (Handfield, 2016). The company approaches sports organizations, individuals, and other relevant authorities to promote the products. By engaging women athletes in Saudi Arabia, Nike was able to promote the pro hijab to the target audience. Additionally, Nike retailers and distributors use coupons and special offers to promote its products (Handfield, 2016). This motivate consumers essential in retaining them and in attracting new customers across the country driving demand.

Nike’s response to marketing environmental challenges in Saudi Arabia

External marketing conditions determine the growth of any company. The marketing environment in Saudi Arabia have effects on Nike’s growth. PESTLE analysis (Figure 2) helps in identifying external factors that affect the marketing function. These factors affect the marketing processes of Nike. Therefore, the company must address the factors to ensure that it dominates in the industry in Saud Arabia (Rastigi & Trivedi, 2016). This is important considering the aggressive nature of competitors such as Adidas.

Figure 2: PESTLE Analysis

Political

The political aspect of PESTLE analysis involves politics prevailing in the target market. When political temperatures are down, businesses tend to prosper. However, if a country is unstable politically, then businesses are usually threatened (Rastigi & Trivedi, 2016). In Saudi Arabia, the current political climate is stable making the operations of Nike easier. The government of Saudi Arabia has made policies that are attractive to foreign direct investment hence creating a favourable environment for Nike. However, some threats such as insecurity issues from terrorist organizations like Al Qaida, and Islamic State requires that all investors take precautions. The ongoing security issues also pose a threat to business in Saudi Arabia. Nike works in conjunction with the US department of commerce in reducing security threats in Saudi Arabia. The company also works with the government of Saudi Arabia for security measures (Ahmed et al., 2016). The Saudi Arabian government has also invested hugely in protecting its citizens as well as the investors such as Nike.

Economic factors

The economic state of a country determines the performance of a business in that country. Various economic factors affect the macro-environment business (Rastigi & Trivedi, 2016). Economic stability and the growth of developing markets have an impact on Nike’s performance in Saudi Arabia. Saudi Arabia being an oil-based economy making has a stable economic status. High oil prices have boosted economic growth in the country in addition to improved government revenues. However, Saudi Arabia experiences a lack of adequate access to economic opportunities (Symington, 2015). To avoid such challenges, Nike targets the financially stable population in Saudi Arabia to ensure that the sales are enhanced. Saudi Arabia also poses a challenge of the developing markets for Nike. The trend increases labor costs in the supply chain and in production facilities. To address this issue Nike has put strategies to ensure the costs are low.

Social

The society and culture in Saudi Arabia are dominated by Islam values. More than 90% of Saudi Arabian are Muslim. In addition to the maintenance of social stability, Saudi Arabians emphasize on adherence to Islamic values. This is part of the development plan for the country. The emphasis on adherence to these values has been a major challenge for many companies in the country especially oversees companies (Ahmed et al., 2016). The strict principles of Sharia in the justice system make it easy to control social problems in the country. The principles specify the punishments for each criminal activity. In case a physical punishment is prescribed, then it is carried out in public places (Ahmed, 2017). It is this law that creates a society that fails to support a significant upwards mobility for the citizens.

Such beliefs and values that limited Nike from selling some of its products considering that some populations like women have over a long time been prevented from taking part in sports. To address the challenge, Nike has embarked on developing products that are in line with the Saudi Arabian values such as the Pro Hijab (Ahmed, 2017). Nike also ensures that it observes the established values to avoid losing the market for competitors. Changes in consumer preference is another marketing challenge for Nike. In response, the company has focused on the changing lifestyles to satisfy the consumer needs (Ahmed et al., 2016). This has enabled Nike to retain and maintain customers in Saudi Arabia.

Technological

Technology continues to advance. To keep up with the challenge, Nike keeps changing in its operations. Competitors such as Adidas have invested in research and development becoming a threat to Nike. The move puts pressure on Nike to enhance its efforts in product development (Rastigi & Trivedi, 2016).  In response, Nike has effectively relied on the advancing technology to design, manufacture, and sell its products to the target segment. Nike has taken the environmental challenge as an opportunity by integrating the advanced technologies on the products (Ahmed et al., 2016).

By taking advantage of the rapid technological advancement, Nike has managed to manufacture high quality products giving it a competitive advantage over rivals (Rastigi & Trivedi, 2016). The company emphasizes greatly on technical innovations leading to products that are safe, comfortable, and products that enhance athletic performance. The move has enabled Nike to attract more consumers in the country (Symington, 2015). For example, an emerging markets consumer survey by Credit Suisse indicates that Nike gained significant share in the country between 2012 and 2015 based on the change in market share of spending intentions as shown in the figure below in comparison to competitors such as Adidas.

Source: Symington, S. (2015). You’ll Never Guess Which Country Can’t Get Enough of Nike (Hint: It’s Not the U.S.). The Motley Fool, LLC. https://www.fool.com/investing/general/2015/03/28/youll-never-guess-which-country-cant-get-enough-of.aspx

Environmental

Environmental issues have always raised concerns across the world. The mass production in Nike factories is harmful to the environment. Apart from polluting water directly, the production causes aerial pollution (Arab News, 2014).  Saudi Arabia is currently in the process of protecting the environment by going green. This poses a marketing challenge for Nike. In response Nike has adopted various strategies to create a better world. For instance the use of organic cotton helps in protecting the environment. Saudi Arabians are currently very conscious of the environment. The citizens have even gone ahead to blame the government for not taking enough measures to protect the environment. It is for this reason that Nike has gone ahead to going greener (Arab News, 2014). For instance Nike promotes environmental sustainability by making players kits from recycled polyester.

Apart from providing unrivalled performance benefits for players, the kits are purposed to lower environmental impacts. The kits are made from recycled bottles of water. While the socks are 78% recycled polyester, shirts are 96%, and shorts are 100% recycled polyester. Nike uses 18 recycled plastic bottles to make one kit. In the last four years, the company has used over 2 billion bottles to produce the kits (Arab News, 2014). This also reduces the consumption of energy by more than 30%. Nike has is succeeding in addressing the environmental challenges affecting its marketing in Saudi Arabia.

Legal

Legal factors in pestle analysis refer to government regulations that can affect marketing decisions. Organizations cannot make any marketing decisions without considering the laws of the land. Legal factors affect the production capacity of any organization, product design, promotion as well as pricing (Rastigi & Trivedi, 2016). Saudi Arabian government has established various laws that every investor must comply with to operate legally in the country failure to which one faces legal consequences.

To address such challenges, Nike complies with all the established laws in Saudi Arabia. For instance, the company is licensed to operate in the country, Nike is aware of the penalties that follow violation of the investment laws, and the company complies with all the regulations and directives in the country as well as international agreements that the country is a party (Rastigi & Trivedi, 2016). While Nike has faced some legal issues in relation to employment law, the company is dedicated to complying with the government regulations to prevent the legal factors from affecting the performance of the company giving rivals a competitive advantage.

Nike has not yet taken the leading role in the sportswear sector in Saudi Arabia. The company needs to invest more in the environmental marketing challenges in the country to explore all the growth opportunities presented by the region. It is however clear that the company has a greater potential in the country considering that its generally performing well in the emerging markets compared to other competitors as shown in the graph. The graph shows the companies performing well in developed markets (Rastigi & Trivedi, 2016). However, Nike seems to perform better in emerging markets showing its potential in Saudi Arabia as shown in the graph below. By identifying and addressing PESTLE factors affecting its marketing, Nike will be able to tap into the market potential and dominate the sector.

Source: Kraugerud, P. (2017). Emerging Markets in Apparel and Footwear. Eurometer. https://blog.euromonitor.com/2017/10/emerging-markets-apparel-footwear.html

Conclusion

It is clear that effective marketing management plays a significant towards the growth of any business. Investors should therefore focus on the function to boost the profits and promote their growth. Nike is one of the major brands in sportswear across the world. After a successful investment in the US, the company has moved to other countries with a purpose of enhancing its growth. Saudi Arabia is one of its emerging markets and so far the company has performed well. Nike uses a marketing mix strategy to enhance its growth and profitability in Saudi Arabia. The company offers a variety of products to cater to the needs of all its customers. Retailers, outlets, and online stores avail Nike’s products to consumers. Sales promotions, advertising, public relations, and personal selling are used in promoting the products. Nike uses a value-based strategy of pricing to boost its profits and sales. Nike is responding effectively to marketing environmental challenges although more attention will help in responding to the challenges fully leading to its growth.

References

Ahmed, R., Bhutto, A., Brohi, H. & Abbas, Z. (2016). Strategic Marketing Plan of Nike,         pp.1-225.

Ahmed, S. (March 8, 2017). Nike’s Pro Hijab: a great leap into modest sportswear, but they’re            not the first. The Guardian. Retrieved on July 28, 2018 from             https://www.theguardian.com/sport/blog/2017/mar/08/nike-performance-hijab-     female-muslim-athletes

Arab News (2014). Al-Hilal and Nike unveil first home kit in new partnership. Arab News.         Retrieved on July 28, 2018 from http://www.arabnews.com/news/sports/613406

Boren, C. & Payne, M. (2017). ‘We couldn’t be ignored’: Muslim weightlifter defends Nike’s    hijab launch. The Washington Post. Retrieved on July 28, 2018 from             https://www.washingtonpost.com/news/early-lead/wp/2017/03/07/nikes-new-pro-  hijab-line-will-help-muslim-women-compete-while-staying-        covered/?utm_term=.17e1578ddcfb

Fareed, A. (2017). Just do it, hijabi style: Nike unveils modest sportswear range. Arab News.       Retrieved on July 28, 2018 from http://www.arabnews.com/node/1064111/saudi-      arabia

Handfield, R. (2016). Nike’s Global E-Commerce Distribution Center in Leuven Belgium.        NC State University. Retrieved on July 28, 2018 from https://scm.ncsu.edu/scm-         articles/article/nikes-global-e-            commerce-distribution-center-in-leuven-belgium

Isoraite, M. (2016). Marketing Mix Theoretical Aspects. International Journal of Research-  Granthaalayah, Vol. 4, No. 6, pp. 25-37.

Kotler, P. and K. Keller (2016). Marketing excellence: Nike, In Kotler, P. and K. Keller          (2016) Marketing Management, 15th Global Edition, London: Pearson, pp. 52-54.

Kraugerud, P. (2017). Emerging Markets in Apparel and Footwear. Eurometer. Retrieved on        July 28, 2018 from https://blog.euromonitor.com/2017/10/emerging-markets-apparel-            footwear.html

Rastigi, N. & Trivedi, M. (2016). Pestle Technique – A Tool to Identify External Risks in         Construction Projects. International Research Journal of Engineering and    Technology (IRJET), Vol.3, No.1, pp.384-388.

Symington, S. (2015). You’ll Never Guess Which Country Can’t Get Enough of Nike (Hint:            It’s Not the U.S.). The Motley Fool, LLC. Retrieved on July 28, 2018 from            https://www.fool.com/investing/general/2015/03/28/youll-never-guess-which-   country-cant-get-enough-of.aspx

White, A. (2010). Nike seals distribution deal for Saudi Arabia. Arabian Business. Retrieved     on July 28, 2018 from            https://www.arabianbusiness.com/nike-seals-distribution-deal-            for-saudi-arabia-339011.html