January 10th, 2018
Sources of Competitive Advantage for Nike
Nike’s sources of competitive advantage include a strong brand that enhances awareness of its products thus creating a robust market position, technical competencies allowing it to remain innovative in its products (e.g. providing popular designs), low-cost manufacturing base that boosts the entity’s income and a strong distribution channel. The strength of Nike’s brand is ensured by the global recognition of the swoosh sign that it uses and the brand communication using famous sporting personalities over the years. The Interbrand ranking of the top 100 brands for instance places Nike’s brand at position 25, with a value of $ 13,706, such a value being a 4 percentage increase from its previous valuation. Other competitors such as Adidas and Puma do not make it to the list of the 100 most valuable brands. According to Interbrand, Nike’s brand strength arises from a clear and consistent heritage, that are evident from the brand name, slogan and brand positioning, which has enabled it to succeed even without an increase in spending on endorsements, promotions and advertising (1). Such strength of Nike’s brand is for instance evident with its largely unaltered performance even with its negative association with Tiger Woods after the latter’s scandal (Interbrand 1). However, Nike trails Adidas with respect to engagement in the social media, which could significantly alter its future prospects (Interbrand 1).
Nike’s competitive advantage is also ensured by technical competencies that allow it to provide innovative products to its customers. The entity for instance employs core staff in areas such as engineering, industrial design, exercise physiology and biomechanics to ensure that its products are of high quality (Datamonitor 6). Additionally, the entity has a strong research and development team comprising athletes, trainers and equipment managers who help in improving functionality of the entity’s products (Datamonitor 6). By using athletes and other sports personalities to test its products, the entity is able to introduce products that meet its customer’s needs (Datamonitor 6).
A low-cost manufacturing base also helps the entity to make savings that it can invest in improving other facets of its business. The entity procures most of its products from third-party contractors located in low-wage countries such as China, Indonesia and Thailand (Datamonitor 6). Such low-cost production enables the entity to provide its products at a market competitive rate. However, use of labour force in such countries has been a source of adverse effects to the entity’s image due to claims of malpractices in its labour approaches in such regions (Boje and Khan 11-12; Doorey 591-592)
Nike’s wide distribution network also offers a source of competitive advantage. Its distributorships are located strategically with 19 sales offices in the U.S that solicit for sales (Datamonitor 6). The entity also has independent sales representatives who it uses to promote its specialty products. Additionally, the entity uses direct-to-customer approach to sell its products to customers over the Internet thus increasing its market reach. Such internet-based customer operations are facilitated by strong information technology systems that facilitate communications with its customers and distributors in various geographical locations (Edgar Online 17).
go to part five here.