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Session: May 2018

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Table of contents

Research question

2. Introduction

2.2 Background information

3. Methodology
3.1 Method 1
3.2 Method 2

4. Analysis
5. Evaluation
6. Conclusion

7. Bibliography

8. Appendix
Research Question: To what extent can Nike’s success be attributed to its 3 P’s of marketing(Price, Promotion and Product)?

Introduction:

In this extended essay I will answer the question as to what extent can Nike’s success be attributed to its 3 P’s of marketing, Price, Promotion and Product. In a short time Nike, has gone from an “underdog” business to a market leader. Nike, Inc.(Greek goddess of victory) is a major publicly traded sportswear and equipment supplier based in the United States, it was founded in 1964 as Blue Ribbon Sports and officially became Nike in 1971. Nike is not only successful in the footwear market but also in the apparel market. It accounted with the revenue of $29.6 billion USD in 2018. The company, is traded as NKE on the New York Stock Exchange (NYSE), has acquired several footwear and apparel companies over its history such as Cole Haan, Bauer Hockey, Converse, Hurley International, Starter and Umbro. The Nike swoosh is one of the most recognized logos, as well as one of the most reputable athletic sponsors in the world.

I will be looking at Nike predominantly in the context of the marketing mix and under that the Price, Promotion and Product, topic of the business management syllabus. While doing the early research for this essay it became clear that Nike’s marketing strategies form a large part of its image and are talked often in the Apparel industry. Nike’s footwear are a major sources of its profits and success – the marketing of them is also very important, but the products themselves form the core of this success.Footwear accounted for 61% of the company’s revenues in 2016. For this reason I will be focussing more on the marketing of Nike’s products.

Methodology:

Most of the theory used in the essay comes from Unit 4 of the Business Management syllabus: Marketing, and under that the 3 p’s of Marketing(Product,Price and Promotion).

To examine the effectiveness of Nike’s 3 p’s of marketing, the topic was first researched from secondary sources such as case studies, magazine articles , newspaper articles and blog posts (if the source was known to be reliable). It would be difficult to obtain primary research sufficient enough for this research paper.A wide understanding of Nike was necessary to answer the research question: In order to describe the 3 p’s of Marketing, I needed to know of other factors that could contribute to Nike’s success. These sources gave an overall impression and understanding of Nike, which could then be put in a relevant Business ; Management context. By analyzing these factors of Nike’s success and comparing them to another apparel company (Adidas), their importance and effectiveness to Nike can then be deduced.

Limitations of research:

• Newspapers can often be bias as their main interest is to maximise sales. Although I am not suggesting that figures and facts published are incorrect, often newspapers have been known to distort and skew stories in the past.

• Any reports validity must be considered because organisations can only test samples. It is near impossible to monitor the whole of Europe’s download usage.

Models and business tools:
I will be looking at the product portfolio of Nike and for that I will be using the BCG matrix,(Boston Matrix is a method of analysing the product portfolio of a business in terms of market share and market growth). I will use the SWOT analysis to examine how the promotion strategies of Nike is leading to its growth. The use of Pestle analysis will help me to see whether the pricing strategy is working or not.

Analysis:

In today’s competitive environment, Nike has been able to differentiate itself, compared to competitors, and has become the global leader in the athletic footwear/apparel industry. The absolute key to Nike’s success has been its excellent marketing strategies that allow the company to sell a massive quantity of its highly innovative products. Nike has become a transcendent super-brand, because it understands that products are made in factories, but brands are built “in the mind and bought by the consumer” (Kazi, 2011). The Nike swoosh is widely considered the most iconic logo in the business world and revolutionized the way that the corporation has been able to market its products.

BCG matrix on Nike’s Marketing of products atartegy.

Problem Child:
Question marks/Problem child are new lines of business with a low market share in an expanding market that the corporation believes can be grown into stars. To make question marks into stars, corporations must make significant cash outlays; this requires profit from their other lines of business. This commitment of resources is, of course, not without risk because question marks can become dogs. Question marks use growth strategies to get to profitability fast. Nike has decided to market a tailored line of sporting apparel to compete more directly with under amours high performance sweat resistant line of fitting clothing. Nike needs to closely monitor sales of these products to determine whether it has a star or a dog on its hand.
Stars:
Stars are emerging business with a rapidly growing market share.Corporations typically plow profits back into the stars products, in the hope that a star will eventually gain enough market shares to become a cash cow. Stars often use growth strategies. Nike developed a star by hiring Tiger Woods to represent its new line of golf clubs. Nikes golf line has since done very well, finding a direct link between Tiger’s wins ; increased sales volume. The Nike+technology used to monitor a runner’s distance & calories burned hasbeen a pleasant star by Nike expects the market for Nike+ to grow rapidly.
Cash Cows:
Cash cows generate lot of revenue. They may exhibit low growth,but they have high market share e.g. Air Jordan sneakers. Cash cows typically use stability strategies.
Dogs:
Dogs give low return in a low growth market, & to add insult to injury, they have low market share – nothing is going right with a dogs. Therefore, corporations often divest or liquidate their dogs at some point when they determine the dogs is a hopeless case; for e.g. the World Wrestling Federation folded the XFL in 2001. Dogs require turnaround & retrenchment strategies. The business portfolio analysis helps corporate level managers figure out how to allocate cash & other resource among the organization’s business lines (as well as which corporate strategies to use). Managers use profits from cash cows to fund question marks ; sometimes stars. Any cash from dogs is also given to question marks ; stars, as well as any resources from their sale.

Nike is the company with the most revenue and the highest profit. Nike is therefore considered as star in the BCG Matrix. Even though Adidas and Puma have a similar percentage of profit, Adidas still has considerably more revenue than Puma.

Swot analysis of the promotional activities of nike:

Strengths:
The company’s advertisements present highly popular personalities, such as professional athletes. The target customers see that their favorite celebrities use the company’s products. As a result, the customers are motivated to mimic the behavior of these celebrities.
Nike also uses direct marketing to promote new products to the target market by utilizing salespeople to approach sports organizations in colleges to establish stronger relations and motivate them to buy its products.
Nike ads have been great at connecting with customers and most of its video ads have an inspirational theme. Its Unlimited You ad released some ten months ago was about breaking the limits. The ad spoke about defying your limits to realize your potential. Life is not about finding your limits. It is about realizing that you have none. These ads that Nike creates are like short stories that are full of energy and inspiration. It has uploaded 276 videos on Youtube that advertise its products and brand.
Nike FuelBand and the Nike+SportWatch GPS, Nike has been able to track its core customers and has learned that they spend an increasing amount of time on the Internet. This resulted in Nike launching online, digital ad campaigns on various social online communities/outlets. The Nike+ series of new innovative products records customers’ behaviors and patterns, as well as creating a platform for customers to really connect with Nike. By going digital, Nike is now able to directly communicate with its past and future customers, which allows it to understand what its target market wants out of a product.
Nike has used below the line promotion (promotion that is not a directly paid-for means of communication but based on short-term incentives to purchase, e.g. sales promotion techniques)in their marketing strategy, Roger Federer is contracted to Nike to wear their footwear and clothing. Nike designed a personalised jacket for Federer emblazoned with a crest of four tennis racquets, symbolising the four Wimbledon Championships he had previously won.
Nike also have it’s online store called Nikeid.com where you can customize your running shoes at your own taste what’s great about this feature is that if by any chance the bubble from your air max pops they could replace it, it’s like having a guarantee on your sneakers., over here customer satisfaction comes in place
Nike has used sales promotion which is a form of below the line promotion, Nike’s aim to use sales promotion is to achieve short term sales increases and repeat purchase by customers. This has lead increase in sales, Nike’s global revenue amounted to about 34.35 billion U.S. dollars.
Global presence:As of May 31, 2017, the company operated 1,142 stores globally, including 384 stores in the US and 758 stores internationally.

Weaknesses:
Ads on internet will require internet,

Opportunities:
Growth:

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