Just Do It?

Nike. Just Do It? Or "I Can"? These slogans form part of one of the most significant business success stories of the past four decades. Nike, Inc, had revenues of $9.6 billion in the fiscal year ended 31 May 1998, a long way from its beginnings in 1962 when a Stanford Business School student called Phil Knight wrote a market research paper about breaking Germany’s domination of the U.S. athletic shoe industry with affordable, high-tech imports from Japan. Growth was rapid. By 1969 Knight was working full-time in the business, which had 20 employees and close to $300,000 annual revenue, in 1971 the "swoosh" logo was designed (by a student who was paid $35 for the job!) and in 1974 Nike’s "waffle" trainer was America’s best selling training shoe. Factories in Taiwan and Korea were added to the Japanese sources in 1977, and in 1979 Nike had nearly 50 per cent of the US running shoe market, and runners using Nike held every record from 800 to 10,000 meters. In that year the apparel line was introduced, and only three years later it was turning over $70 million in its own right. Revenues for the company as a whole rose and fell in the mid-80s, but strategic initiatives such as obtaining Michael Jordan’s endorsement, continuous technical developments, and the "Just Do It" campaign helped ensure the continued success and growth of the firm.

Although Nike says about itself that "it all comes down to this: helping athletes perform", there is of course much more to the business than that. Celebrity endorsements and innovative communications campaigns have been major contributors to its success. It spends a lot of time and effort on being a good corporate citizen – see the numerous examples on its web site, www.nike.com and its corporate information web site, www.nikebiz.com.

However, Nike has received some strong negative publicity recently over its employment practices in South-East Asia. Web sites such as the Boycott Nike Home Page (www.saigon.com/nike) report poor working conditions in Nike plants in some of the poorest countries in the world, including Vietnam. Physical abuse of workers who failed to meet targets, public humiliation of supervisors, and very low pay are some of the complaints levelled against Nike’s factories. (Nike does not manufacture in the USA, citing high labour costs.) Community Aid Abroad in Australia has a comprehensive web site , titled "Just Stop It", (http://www.caa.org.au/campaigns/nike/) with a comprehensive coverage of allegations of bad practice by Nike made over the last few years. Nonetheless, Nike’s COO, Thomas Clarke, claims that "Nike has created 500,000 highly desired, good paying jobs in 32 countries including, Vietnam and Indonesia. Every job vacancy attracts hundreds of people seeking a job in a Nike contract factory."

SHARING THE NEWS WITH A GROUP!

Set up syndicates to represent the groups engaged in the Nike controversy. Syndicates might represent the following parties:

• Nike itself
• The Vietnamese economic development agency
• Community Aid Abroad
• Reebok or Adidas (both companies also manufacture in south-east Asia)
• The union representing workers at a Nike contract factory in Vietnam
• A group of workers made redundant in America when Nike moved their manufacturing offshore. Some of these might be Vietnam War veterans.
• Nike’s public relations consultants.

Conduct negotiations with the aim of resolving the dispute to the satisfaction of all parties.

TALKING IT OVER AND THINKING IT THROUGH!

1. Ask classmates to list the brand of shoes they are wearing, if known. Next, have them explain to the class which features of the shoes they favour most. Why did they choose to buy that particular pair of shoes, and why did they choose to wear those shoes today? Do they talk in terms of the imagery of the brand, as communicated by marketers, or physical, price or other elements of the marketing mix when making their comments? Which is more important, the tangible elements of the shoes or the intangible?
2. Select up to nine classmates and conduct a focus group to establish the image of various brands of sporting shoes. If you are distance education students and have access to a conference board, then use the 'live chat' facility to conduct an electronic focus group. Is there segmentation according to various benefits sought such as cushioning, or flexibility? What reasons do they suggest?
3. Are sporting shoes physical products or services? Or are they a mixture? If so, what elements of the offering are physical products and which are services?
4. Discuss Nike’s statement that "it all comes down to this – helping athletes perform". To what extent is Nike’s success due to the performance benefits of its merchandise, and how much is due to the image of Nike, generated by celebrity endorsements and innovative communication campaigns?

THINKING ABOUT THE FUTURE!

Nike recently announced the loss of 450 jobs in the United States , and revenues for the fourth quarter of fiscal 1998 were down 3%. Worldwide future orders for footwear and apparel for delivery between June and November 1998 were 13% lower than at the same time last year. (Although the total was still $4.2 billion). Asia Pacific orders were down 52%, USA orders were down 11%. The judgment Nike management must make is to what extent this decline is due to general economic uncertainty, and to what extent it is to do with problems with Nike’s image, or even a trend away from high-tech athletic footwear towards other styles of shoes, given that the vast majority of Nike wearers are not world-class athletes – they cannot be, given the large market share that Nike has. Which areas should Nike management give most attention to?

DIGGING DEEPER!

Students might be asked to consider the position of the Vietnamese or Indonesian businesses that perform the subcontracted manufacturing work for Nike. Clearly their survival depends on continued orders from Nike headquarters. In what way can they attempt to secure their future? On one side they have labour watch organisations investigating their employment practices, on another side they have a large pool of labour that is ready and willing to work, and in the next few years even cheaper sources of labour are likely to appear from countries such as Cambodia or some African states. What public relations activities should they undertake to respond to the concerns of the labour watch organisations? What changes should they make to their employment practices?

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Pertinent Web Sites:

Check the following sites for information on Nike products, and those organisations criticising Nike's business practices:

http://www.nike.com/  Nike

http://www.nikebiz.com/  Nike's corporate affairs pages

http://www.caa.org.au/campaigns/nike/index.html  Anti-Nike Campaign

www.saigon.com/nike Boycott Nike Home Page

LEARNING MORE ABOUT THE KEY CONCEPTS

Advertising

Any paid form of non-personal presentation and promotion of ideas, goods and services by an identified sponsor, often meeting long-term 'indirect' objectives related to brand awareness and image.

Benefit segmentation

Dividing the market into groups according to the different benefits that consumers seek from the product.

Brand

A name, term, sign, symbol or design, or a combination of these, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

Brand extension

A new or modified product launched under an already successful brand name.

Brand image

The set of beliefs consumers hold about a particular brand.

Brand mark

That part of a brand that can be recognised but that is not utterable, such as a symbol, design or distinctive colouring or lettering. Examples are the Nike swoosh, Shell service station's shell symbol, the Australian Broadcasting Corporation logo and the red K on the Kodak film box.

Brand name

That part of a brand that can be vocalised-the utterable, such as Avon, Ford Taurus, Drive, Poppy, Revlon, Visa and McDonald's.

Brand equity

The value of a brand, based on the extent to which it is has high brand loyalty, name awareness, perceived quality, strong brand associations and other assets, such as patents, trademarks and channel relationships.

Demographic segmentation

Dividing the market into groups based on demographic variables such as age, sex, family size, family life cycle, income, occupation, education, religion and nationality.

Events

Events such as sporting events are non-personal communication channels. Such events may be entertaining and in any event carry messages without personal contact or feedback.

Geographical segmentation

Dividing a market into different geographical units such as nations, states, regions, counties, cities or neighbourhoods.

Global firm

A firm that, by operating in more than one country, gains R&D, production, marketing and financial advantages that are not available purely to purely domestic competitors.

Global industry

An industry in which the strategic positions of competitors in given geographic or national markets are affected by their overall global positions.

Global strategy levers

Those factors which enable an organisation to achieve the benefits of becoming fully global. They include: participation in global markets; globally standardised products; global advertising and promotion and global location of activities. These levers can contribute towards cost reduction, improved quality, enhanced customer preference and competitive advantage.

Globalisation

Technological convergence is one factor that is enabling companies to expand their geographical market coverage, purchasing and manufacturing, resulting in a more complex marketing environment for both marketing organisations and consumers.

Market positioning

Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers; formulating competitive positioning for a product and a detailed marketing mix.

Market targeting

Evaluating each market segment's attractiveness and selecting one or more segments to enter.

Market segment

A group of consumers who respond in a similar way to a given set of marketing stimuli.

Market segmentation

Dividing a market into direct groups of buyers who might require separate products or marketing mixes; the process of classifying customers into groups with different needs, characteristics or behaviour.

Product concept

A detailed version of the new product idea stated in meaningful consumer terms.

Promotion mix

A marketing organisation's total marketing communications program. It consists of a blend of advertising, personal selling, direct marketing, sales promotion and public relations (including publicity).

Publicity

Favourable publicity may be a component in a public relations program to convey a responsible corporate image, counter unfavourable rumours, stories or events or to announce the release of a new or revised product offering.

Service ('pure' service)

Any activity or benefit that one party can offer to another that is essentially intangible, perishable, inseparable and does not result in the ownership of anything.

Three levels of product

Core product

the problem-solving services or core benefits that consumers are really buying when they obtain a product.

Actual product

a product's parts, styling, features, brand name, packaging and other attributes that combine to deliver core product benefits.

Augmented product

additional consumer services and benefits built around the core and actual products.

Marketing communications process

Marketing communication typically involves a sender and a receiver, as well as major communication tools (message and media). Four communications functions are also brought into the picture when discussing the marketing communications process: encoding, decoding, response and feedback.

Sponsorship

Advertisers sponsor or financially support such as sporting identities as part of their advertising programs.

Trademark

Anything that distinguishes one's product or service and including: visual devices, sounds, smells and three-dimensional shapes provided they can be represented in writing.

- Colin Jevons