Nike's Current Strategy For China example essay topic

Nike's Plan for China Nike and Expansion in China Nike is already a global power house, however the potential to increase sales in China was the topic of the most recent annual investor meeting. One may question Nike's preoccupation with China. After all, Nike China is dominant. They are currently the number one brand with the number one market share while competitors Reebok and Adidas are in 4th and 5th places respectively.

They have tripled revenue in the last two years. With 2000 points of sale, 400 stores in the top three cities (Beijing, Shanghai, Guangzhou) and 50 cities with 3 or more stores, Nike is primed to begin pushing into the second tier cities. Let's examine "why China? " Socially, China presents a portrait of change. The attitudes and preferences of today's generation of 'twenty-something' consumers diverges markedly from those of their parents' generation. In fact, in the economically churning coastal cities, this gap is as wide as ever and growing, leading to comparisons between China today and the 1960's in Europe and the United States.

Nike sees a large and growing market for its products in China. China has: o 20% of the world's population. o 50 million middle class households. o 430 million youth under the age of 20 (5 X the number of youth in the US). o 50 million middle class households -- which will grow to 150 million in next 10 years. o 65% of its youth involved in sports. o A consumer market that embraces brands -- particularly Western brands. o 300 million people expected to move from rural areas to the cities in the next 10 years. With this information in mind, Nike has created a strategic marketing plan to strengthen their position in the China market. The Global supply chain is in place, now they just need a strategy. But, before Nike can execute their well laid plans, they must first do a little damage control.

In 2004, Nike advertisements featuring basketball star LeBron James slaying a Chinese dragon and a kung fu master were banned in China and met with a flurry of criticism. The TV commercial offended government regulators because it showed an American sports icon defeating the dragon, a symbol of Chinese culture, and the martial arts master, a symbol of national pride. Nike clearly disrespected the Chinese culture, and was forced to pull the ads and apologize. Nike spokeswoman Shelley Peng said the ads, while upsetting to older consumers, were also popular with teens. ' It was not Nike's intent to show disrespect to the Chinese culture,' Peng said in a prepared statement, which stressed that the ads were meant to inspire youth to overcome obstacles, as LeBron does when he slays the kung fu master and the green fire-spewing dragons, as well as other video game style villains. Nike's "pushing the envelope" type advertising did not translate in this case.

Nike's retail strategy includes selling through retailers and retail outlets with 10 customers generating 60% of revenues. Foreign companies can now apply for direct retail licenses -- but Nike has no plans to set-up retail shops at this time. Nike's overall China strategy o Building brand awareness. o Developing new and Innovative products specific to the Chinese market. o Selling same products in China that sell in the West. o Helping youths express themselves. o Stressing core categories - basketball, soccer, women, sport culture. o Marketing both local (Chinese Olympic champ) and foreign (LeBron James) athletes. o Positioning for Beijing Olympics in 2008 -- sponsoring Chinese sports federations. o Sponsoring sports fields. o Donating products to charity. Nike will provide US$275,000 over three years to help fund a joint micro-enterprise program run by the China Foundation for Poverty Alleviation (CFP A) and Mercy Corps serving rural communities in Fujian province. o Partnership with Special Olympics in China strengthen its advantage with the establishment of partnership with China's Olympic squads Nike's big event will be the 2008 Olympiad.

Nike has found its place on the Olympic marketing podium in its sponsorship of the CSA, the 21st of China's 28 Olympic squads sponsored by Nike. Other squads include tennis, track-and-field, and basketball. CSA will equip China's swimming team with 'Swift Swim,' a revolutionary sports innovation applied to greatly enhance a swimmer's body movement through water. Nike has promoted its relationship with gold medalist Liu Xiang, the first Chinese to win a sprint event in the Olympics. He became a sports icon and was identified with Nike in its advertising. With the Olympics several years away, Nike's current strategy for China exceeds the usual one year plan.

Over the next three years, the sneaker companies will jockey for position in the China market. The recent merger of Adidas and Reebok threatens Nike's strangle hold on the China Market. However, Nike's estimates suggest it will maintain its lead in China after the merger. Nike said it has 30 percent of the Chinese athletic market, trailed by Adidas's 19 percent.

The inclusion of Reebok will catapult Adidas's share to 27 percent. How is Nike's strategy working? A survey asked Chinese which brands were the coolest. The results came in: Nike 52%; Adidas 38%; Reebok 15%; Li-Ning 13%; and New Balance 10%.

Bibliography

Nike China (NKE) growing fast (4 Q 05 conf call) The China Stock Blog Brands in Transition: Making it Work in China 2005/04/12 by Christopher Millward, Beijing This Month Nike China (NKE) growing fast (4 Q 05 conf call) The China Stock Blog 2005 Business Report & Independent Online, web Business Report & Independent Online, web China (NKE) growing fast (4 Q 05 conf call) The China Stock BlogCSRwire, web This Month, featured in Business Beijing, July 2005 China Daily Online.
Adidas, Reebok vie against Nike for China market (Bloomberg) 2005-08-09 10: 31 JUNE 29, 2005 -- Nike Investor Day Recap.