Product & Brand Management

NIKE - Building a Global Brand

ankit [Pick the date]

Q1. How would you characterize Nikes brand image and sources of brand equity in the U.S? Nikes Brand image in the US: Brand image is the impression in the consumers' mind of a brand's total personality (real and imaginary qualities and shortcomings). It is set of feelings, emotions and experiences that are linked to the brand. While brand personality is the image the company wants to convey through the different brand architecture (logo, name, Marketing mix, and communicated messages) and they have control over, the brand image is the subjective mental picture of the brand. It is developed over time through advertising campaigns with a consistent theme, and is authenticated through the consumers' direct experience. Because it is a subjective perceived position, brand image can deviate from the brand identity due to different perceptions, unexpected events, and different interpretation of communicated messages. The ultimate goal of any company is to lessen the gap between the perceived and the required brand image through actively getting feedback from the market and responding to any trends. Nike brand image that the company initially was building is a pure American icon, high performance, innovative aggressive brand, associated with high notch athletes, achievers and winners; mainly serious males. Nike is perceived as a high performance brand, since their inception Nike considered performance as top priority, they designed shoes that are durable, lightweight for runners. They used leather in their fabrics because it is more durable than garment yet less fashionable. From the early day, Nike has learnt the consumers need by listening to the need of athletes, sharing their true passion for running. They designed their shoes to give athletes the best performance. In doing so, Nike has created a reputation as a provider of high quality running shoes designed especially for athlete. The innovative product strategy they adopted emphasized their innovative image in the minds of consumers. They introduced a lot of innovative products in the sport market starting from the Marathon shoe debuted in 1965, moving on to the innovative new cushioning technology that was used with running shoes for the first time in the 70s, followed by the introduction of the Air technology in basketball shoes in 1988, and lately the alpha line high tech products. They used brand associated with achievers through getting the endorsement of high notch athletes in the US. Actually this was the cornerstone step in building their brand image in the US. They conveyed through these association Nike as a masculine, serious, high performance, winning brand linked with professional level of competition. They played on making Nike a pure American Icon that portrays the American spirit of competition, superiority and even Arrogance. Nikes image was totally different from other US local competitors like Rebook who personified their brand as fun, soft, fashionable brand through associating with non competition sports like the aerobics that is famous among females more than males. The sources of Nike brand equity in US arises from the Aaker model form the following: First of all Nike has a well established and strong brand identity with a well recognized and distinguished brand name and brand log , the swoosh, which facilitate the differentiation of its products from competitors. The brand name is simple and easily memorized by customers. 97% global awareness and recognition for Nike brand and logo contribute substantially to the brand image and brand equity. The core of building the brand equity for Nike brand equity is brand association. Nike is associating its brand with famous athletic celebrities that have similar personality as the brand; they are achievers, winners, determinant, and accomplishment oriented, nontraditional (out of the box). Like the legendary Michel Jordan the basket ball player, McEnroe the famous tennis player, Michel Johnson the famous American sprinter. Nike is capitalizing on the idolized view of American for their athletic heroes, specially the youth the main target of NIKE. This association projects the personality of the celebrity on the brand. The most famous example for brand association ever was the collaboration between Nike and Jordan, the association that personified Nike as a superior, achiever, successful and amazing top

performing brand, By time this personification became permanent even when Jordan was not there turning consumer response to Nike brand from conditional (stimulated by the presence of Jordan) to permanent unconditional one.

Q2. How might Nikes effort to become a global corporation affect its sources of equity and brand image in the U.S, Europe and Asia? Nike and the USA market: As mentioned earlier the sources of brand equity of Nike are Brand association with famous American athletes, Sponsorship programs for major sports events in the US, their massive and aggressive provoking and unique IMC that creates high brand awareness through TV ads and advertizing campaigns, and finally the perceived quality of the product in addition to a good CRM program. When the company started back in the 1960, its elements of brand equity emerged and were customized according to the American culture at that time. So we can see the impact of the new American values and norms on how they are managing their brand image and sources of equity. Regarding the brand image we find that Nike brand stands for core values of superior performance, accomplishment and achievements, Innovation and it has a strong masculine and serious personality. These values were dominating the American culture by that time in the 60s and early 70s when the American nation has just finished the 2nd world war coming from it as a superpower, followed by their successful space conquering in 1965 when Nil Armstrong first landed on the moon beating the soviets in their mutual space race. These superman values were deeply rooted in each American in all fields of life including sports. Nike brands stood for these values. Nike stressed on these superman values and built on it through its different equity sources. They associated with famous American iconic athletes like Michal Jordan and McEnroe who personifies Nikes core value of achievement, performance and innovation. They sponsored the American basketball league, which is the most famous sport in USA and it is very professional as a way to convey the message that Nike brand as the American basket ball both show highest level performance, seriousness, success, aggressiveness etc. Even in their Advertizing campaigns, they were innovative they were the first sports brand to communicate with their customers through TV Ads, they were untraditional , challenging and aggressive in their advertizing strategy, using unusual tag lines like you dont win silver , you lose gold in the 1992 Olympics and Play hard, Die old. Nike and the European market: This Aggressive approach in brand management was Ok when Nike was targeting the American market. When they decided to expand globally starting in Europe they tried to implement the same strategy and to convey the same image of their brand but they didnt succeed due to the cultural differences between the states and Europe. Nikes brand image was perceived negatively as a fashionable aggressive and arrogant brand rather a performance innovative one.

Moreover, Because of the differences between European countries Nike wasnt able to find the legendary Athletic hero who can be their ambassador in Europe. They were faced with a multicultural market that is totally different from the American one. Also Europeans are more traditional, they dont have the same idolized view of athletic heroes as American, their view of competitive sport is different they dont have the same sport mania as their counterparts in America. Also Nike found that European prefer different types of sports; soccer, field and track games and not Basketball which was associated with Nike brand. Above all that Europeans had their own brands that they are highly attached to. Also being more traditional, Europeans; the aggressive provoking communication of Nike was not accepted by many Europeans to the extent that some local European TV channels refused to air the Nike vs. Evil TV ad. Moreover the overwhelming presence of the Nikes logo, the swoosh, as an American symbol, was very irritating to Europeans. In addition the different marketing and distribution strategy in the European content diluted the brand identity of Nike, each local distributor used his own way for distributing and displaying of the Nike products in addition to applying his own strategy in advertizing. All this led Nike to lose its main edge in the European content at the beginning; they were perceived as a fashion-oriented and not performance oriented, irrelevant to the European market, aggressive American brand. Nike had to work on its credibility as a high performance shoe and to show their relevance to the European market. They had to adopt a glocalized strategy in building their global brand equity. They keep and communicate the main essence of the brand but through using more adapted localized tools and channels. They kept the essence of the brand in terms of a consistent brand name and brand logo as a part of the global myth effect. They focused on the main core values of their brand as part of their global positioning which is the performance and innovation. They retrieved about 90% control over their brand distribution and marketing and advertising activities in Europe in order to maintain the same global image and brand positioning. They communicated the same tag line worldwide with different executions according to each region. In order to increase their relevance to Europe they associated their brand to famous European soccer players like Eric cantona and Roberto Mandeni while keeping the same criteria for celebrity selection with personality matching Nike brand personality. In addition they sponsored local soccer teams like Paris saint Germain and Borussia Dortmund. This local execution for their global branding strategy increased the credibility and authenticity of the brand and boosted a positive brand image across Europe. They customized their advertizing strategy to cope with the European diversity using campaigns that highlights country similarities rather than countries differences; the pan European approach. In addition they lowered the aggressive tone used in their advertizing and reverted to a more kinder, and gentle marketing approach using globally accepted and appealing celebrities like Jordan , tiger wood, Brazilian soccer star Romario to project a more global and international image on their brand. Moreover, In order to increase their global appeal they engaged in sponsoring big global events like the Barcelona Olympics 1992, and the world cup. Also they sponsored the Brazilian soccer team and they

took an approach of sponsoring national football teams from different regions to enforce their global image and to distract from being perceived as an American icon. Moreover they started to decrease their provoking and aggressive corporate philosophy that was featured in their expensive and provoking sponsorship and endorsement contracts in addition to the overwhelming abundance of their swoosh over their products everywhere which was known as the Swooshification of the world which accumulated negative connotations about their brand. Nike started actions to downplay their swoosh through limiting their logo to certain products meanwhile they invented new brands like the Air Jordan and All Conditions Gear and the Nike alpha products to calm down the swooshification effect. As part of their global image they show more commitment to global social issues. These global social responsibilities started initially as a reaction to the public oppositions to the company labor practices in Asia. They changed their corporate labor policy aiming to be the industry leader in employee relations, they modified the working conditions and raised the compensation packages for labor in Nikes Asian factories, applying new global labor standards, complying with OSHA indoor air quality levels. Moreover they went further in their CSR direction by creating a Corporate Responsibility Division that consolidated the labor, environmental and community action groups with a stated mission to lead in corporate citizenship through program that reflect caring for the world family of Nike, our teammates, our customers and those who provide service to Nike. They became a charter member of the fair labor association. Furthermore, Nike, as part of communicating these CSR actions and to gain credibility of customers all over the world, they initiated a measure that enables publics to get access to information about their labor practice and their audits reports: the Transparency 101 initiative. Nike and the Asian market Nike Asian expansion came after their European expansion starting by targeting the Japanese market in the 1992. Learning from their European expansion lesson Nike glocalized its brand management strategy to suit the Asian market from the beginning. Nike abandoned the brash attitude for its first marketing offerings designed specifically for china. The ads, from which the corps of elite American athletes usually deployed by Nike as global ambassadors of their product was primarily absent, celebrated local athletes as heroes. They concentrated on demonstrating a softer image of Nike, abandoning the aggressive approach they used to implement earlier.

Q3. Are sponsorships and endorsements vital to Nikes business? For instance, what effect would Nike becoming an official sponsor for the Olympics have on the companys relationship with consumers?
Sponsorships and endorsements are very vital to Nike business. In fact celebrity endorsements are corner stone in Nikes global brand equity. Nike has built a strong brand image along the years through successful brand associations with legendary athletic heroes (American and non Americans). On top of these iconic collaborations are the association between Nike and Jordan that persisted for about 18 (1984-1999) years and resulted in the development of a new sub brand , the Air Jordan line of sport shoes which generated about 9.5 billion $ for Nikei. Another iconic sponsorship was that made between Nike and the Ace golf player Tiger Woods which erected Nike brand in the golf arena. Also The historic sponsorship for the USA dream team in the Barcelona Olympics which introduced the brand Nike to the world and increased its awareness globally, and the sponsorship of the Brazil football team, the champions of the world cup 1994, which increase Nike brand awareness and leveraged its brand credibility to soccer fans in the world. The benefits of these celebrity endorsements and sponsorship programs exceeded the monetary benefits of increasing revenues; actually it conveys the brand personality and shapes the brand image in the mind of the consumer. Endorsement is a channel of brand communication in which a celebrity acts as the brands spokesperson authenticating the brands claim and position by extending his/her personality, popularity, stature in the society or expertise in the field to the brand; in other words personifying the brand. Also celebrity endorsement is a way for the company to differentiate from competitors. The successful brand association strategy of Nike is based on three main pillars, the attractiveness of the celebrity, the credibility of the celebrity and the personality match between the celebrity and the brand. For a successful endorsement nike ensured that the endorser is attractive to the target audience in certain aspect physical appearance, intellectual capabilities, athletic competence and/or lifestyle. This attractiveness enhances the memory of the brand. As a sports shoe and Apparel Company, their main target customers were the youth so in their choice of celebrity they choose young energetic players in different sports like Jordon (the legendary basketball player), Johnson (the famous American sprinter),Ronaldinho ( the Brazilian soccer magician). On the other hand when they wanted to enter the golf arena with its Nike golf line, they selected tiger wood to be their ambassador and when they targeted females they used the Worlds two best female tennis stars: Maria Sharapova and Serena Williams as their ambassadors. Meanwhile Nike selected endorsers who have a high credibility level among the target audience this credibility which increases the acceptance of the consumer for the endorsed product. Finally Nike ensured the existence of a significant match between the brand and the celebrity in terms of identity, personality, positioning in the market and vs. competitors and life style so that the endorsements are able to strongly influence the thought processes of consumers and create a positive perception of the brand. A point of strength in Nike endorsement strategy is their Consistency and long-term commitment. They maintained long term collaboration between the Nike as a brand and their endorsement which can be seen in the 18 years endorsement contract with Jordan and the long term sponsorship for the Brazilian soccer

team that started in the early 90s and is sustained till now. This consistent and long term relationship established a strong and solid personality and identity for Nike along the years. Also Nike kept on monitoring the behavior, conduct and public image of the endorser continuously to minimize any potential negative publicity. When they sensed the negative response of parents to the attitude of their nike endorser, Charles Barkley, Nike made him to state that he is not a role model in a famous Nike commercial "I am not a role model" Another important aspect in the effective endorsement strategy of Nike is their selection of unique celebrities which effectively differentiated them from competitors and in the same time they make sure that this celebrity will not sign for any of their competing companies. An important aspect that Nike understood is that endorsement is not a target in itself but it is part of building the brand and also it cant replace the comprehensive brand building processes. They worked on building their brand image through the other attributes like; brand awareness, brand loyalty, perceived quality and they authenticated this image with endorsement. In all their celebrity endorsements Nike wanted to convey an image of a successful brand, high performance, achieving and innovative brand. As part of their glocalization strategy they did brand association with celebrities on two tier, a global tier associating with globally well recognized celebrities like Micheal Jordan, Michel shomakher, Tiger woods and a local one associating with local figures that convey the same personality with a more local appeal like Eric cantona, Sergei bubka and Noureddine Morceli. Celebrity endorsement when done in an appropriate way it benefits the brand but on the other side, by associating the brand to a celebrity the company is taking the risk of attaching itself to a person who, like any human beings, have his mistakes that can be reflected on the brand. Also it is difficult to find an endorser who enjoys global acceptance; always there will be people who dislike him. Other forms of brand associations are sponsoring big events, like the Olympics. The benefits of associating with such global events are to increase the global brand awareness; the brand is seen by a large number of people around the globe. Besides, such collaborations move Nike from being a local American brand to become a global brand. Moreover sponsoring the Olympics games widen the brand scope as Nike become associated with different sports rather than basketball and field and track games which were their main association heritage in the states; this allows the brand to target different and new segments of customers. The problem Nike encountered in its global move was the negative perception about their brand, Nike brand was perceived as a tough, hard, aggressive, professional, American brand. By sponsoring the Olympics, in addition to increasing their brand awareness, they managed to change their brand image benefiting from the reflection of the Olympics games personality- that stands for a faire, clean, smooth, respectful, traditions, and global values- on their brand, improving Nikes global image.

Q4. Why did Nike become a target for critics of globalization? Do you think Nikes response to allegations of unfair global labor practices was appropriate? Reasons for global criticism: When a company expands globally, its operation increases dramatically witnessing a pronounced rise in its operation costs. The company in such phase is usually focusing on controlling its operating costs through outsourcing and subcontracting its operation to cheap labor countries such as china, Indonesia.etc. and they usually dont consider the working conditions in such countries, all what the care for is the cost. Nike was not an exception; it subcontracted factories in china, Vietnam, Indonesiaect. Simultaneous with this expansion, it is normal that more light is being spotted on Nikes operation and it becomes a target for global criticism. This expansion subjected Nike to bigger number of nongovernmental social and environmental agencies and audit that review its operation in different countries especially in the third world countries in countries such as china, India, Mexico and Vietnam. which leads to the exposure of Nike to global criticism. Accordingly Nikes operation in Vietnam have been criticized by Ernst and Youngs for violating the minimum wage and overtime laws in Vietnam as late as 1996, although Nike claims that this practice has been halted. The company has been further subject to much criticism for the poor working conditions with poor ventilation and exposure to dangerous levels of carcinogens. Also the company was accused for the use of child labor and the poor treatment of its overseas employees in factories used by Nike in Pakistan and Cambodia Nikes Response: Nike managers initially refused to accept any responsibility for the various labors, environmental and health problems found at their suppliers plants claiming that these workers are not Nike employees, and that Nike had no responsibility towards them. But these hands off approach didnt withstand the growing attack by human rights and worker rights groups. Nike found itself obliged to take corrective measures to ensure that these unfair labour and human practices dont occur again. An action Nike took to improve its global brand image which emerges from its globalization strategy. Sustainability is key to Nikes growth and innovation, said Mark Parker, NIKE, Incs, President and CEO. Making our business more sustainable benefits our consumers who expect products and experiences with low environmental impact, contract factory workers who will gain from more sustainable manufacturing and our employees and shareholders who will be rewarded by a company that is prepared for the future. In the beginning Nike response was focusing on a risk management, philanthropic and compliance actions. They were reactive just responding to the market by some nonintegrated CSR initiatives. By time, Nikes reactive behavior shifted to a more proactive one implementing and integrating a lot of its CSR initiatives in the core business strategy of the company focusing on innovation, collaboration, transparency and advocacy to prepare the company to thrive in a sustainable economy.

By 1998, Nike formulated a new global labor standards that included lowering the minimum age of footwear factory workers to 18 and all other workers (in apparel, equipment) to 16. It has also insisted that all footwear suppliers adopt US Occupational Safety and Health Administration (OSHA) standards for indoor air quality. Also Nike created a Code of Conduct for its suppliers that required them to observe some basic labor and environmental/health standards. Potential suppliers for Nike were obligated to sign this Code of Conduct and post it within their factories. In response to the growing criticisms, Nike created several new departments (e.g., Labor Practices (1996), Nike Environmental Action Team (NEAT) (1993)) which, by June 2000, were organized under the Corporate Responsibility and Compliance Department. Q5.Evaluate Nikes acquisitions and the brands now under its control. Do these acquisitions make sense for Nike? What if any, brands should Nike try to acquire next? Nike had numerous collaborations. Some these were as follows Current Nike Mergers Converse Cole Haan Hurley International LLC NIKE Golf Umbro Ltd Exeter Brands Group LLC Nike Bauer Hockey Alliances 2003 Nike Grind 2006 Nike + iPod 2006 Center of Excellence 2008 House of Hoops 2009 BICEP When we see overall scenario it has been beneficial for Nike. Moreover, Yes, these acquisitions make sense for Nike because it had many goals behind these acquisitions which could be accomplished by this strategies.

Some of these strategies are Brand diversity Its commitment was to diversify in demonstrated through strategic initiatives aimed at providing training and awareness to employees, hiring people of diverse backgrounds at all levels in the organization and establishing guidelines for increasing dollars spent with minority suppliers. Diversity is not only Diversity of ethnic background and gender, but also age, sexual orientation and work and life experience Ways providing additional avenues for growth Any firm would be gaining & adding sources for revenues. It also would be competitive advantage for firm. Segmenting this business by customer With a well-established brand, one can spread the respect you've earned to a related new product, service or location and more easily win acceptance of the newcomer. For instance, when a winery with a good reputation starts up regional winery tours, then adds foreign ones, each business introduction benefits from the positive perceptions already in place. This was one of reason of Nike next move. Opportunity to address the low end through distribution at retailers Although one must invest money to create a brand, once it's created you can maintain it without having to tell the whole story about the brand every time you market it. For instance, a jingle people in your area have heard a zillion times continues to promote the company when it's played without any words. This benefit can be passed to consumer by means of low end customers. Nike should try to acquire the Chinese brand for lining, if it is possible. Making your company into a brand usually means that you can get more money for the company when you decide to sell it. A Coca-Cola executive once said that if all the company's facilities and inventory vanished all around the world, he could walk into any bank and take out a loan based only on the right to the Coca-Cola name and formula.

Q6. How is Fashion to Nike? Are they a performance apparel company or a fashion company?

What is more important for Nike when they enter new market like China? Fashion or Performance

Nikes challenged to respond to a market demand for fashionable athletic footwear and apparel. Fashion is an integral part of their production. In 2001 the company opened the first Nike Goddess store to sell fashionable sportswear for women only.

Fashion is more important for Nike along with performancewhen they enter a new market like China because someanalyst believe that the new middle class in China hasbegan to follow western culture. FUNCTION AND FASHION
With added exposure, Nike is challenged to respond to a market demand for fashionable athletic footwear and apparel. In this quest, it will succeed if we keep quality and performance at the core of their business. One of the largest and best-known sellers of sportswear in the world, Nike began as a maker of athletic shoes, and then branched out into shoes and clothes for athletes and those who wanted to dress like athletes. However, since the late 1970s fitness has been in fashion, and it is almost as fashionable to dress like an athlete as it is to be one. Nike took advantage of this trend with a series of clever, innovative ads for their products. Nike advertisements did not focus on their products; in many ads the products were not pictured. Instead, they showed the attitude and lifestyle of the athlete, overcoming obstacles, trying hard to win. Slogans like "Just Do It" drew in customers who might not be athletic but wanted to be strong, attractive, and successful like the Nike athletes. Nike spokespeople have often been energetic athletes with big personalities, such as basketball's Michael Jordan, tennis's John McEnroe, and figure skating's Tonya Harding. In 1979 Nike began to market athletic clothing as well as shoes. Along without fitting hundreds of teams worldwide, the Nike swoosh was now seen on the street clothes of millions of individuals. Nike continued to work with fashion designers and bought innovative shoe design companies such as Cole-Haan Shoes, in order to keep its clothing and shoes on the cutting edge of style. In 2001 the company opened the first Nike Goddess store to sell fashionable sportswear for women only. Fashion is more important for Nike along with performance when they enter a new market like China because some analyst believe that the new middle class in China has began to follow western culture and has brought several aspects of American culture toots marketing efforts in china. Q7. Should Nike do anything different to defend its position now that Adidas and Reebok have joined forces.

Reebok Reebok, in terms of their products, is not entirely different from Nike. Reebok is involved in the design and marketing of both athletic and non-athletic footwear and apparel, as well as other various fitness projects. Reeboks market share is a distant third in the footwear industry at 11.2% (compared to 30.4% and 15.5% for Nike and Adidas respectively). Reeboks financial position has been gradually slipping for a number of years. This is evident in their declining stock price, which has fallen by over 80 percent in the last four years. Reeboks financial woes are illustrated in their declining net sales. Reeboks net sales declined 9% during the first three-quarters of fiscal year 1999. During that same period, net income declined 17%. Taking these and other factors into account leaves Reeboks current financial position, as a whole, looking bleak. Adidas Besides the difficulties with its marketing intermediaries, Nike faced formidable competition in Europe. Adidas, the German shoe company, dominated the European sports market. Together with Puma, a spin-off of Adidas, the two companies controlled over 75% of Europes athletic shoe and

apparel market. For decades, the two companies had developed the grassroots allegiance of local sports teams; in particular, soccer, track and field, tennis, and rugby. They both had endorsements contracts with top Europe an athletes in each of these sports and sponsored many local teams in cities and towns across Europe. Adidas, in particular, was respected for the quality of its shoes and had earned the reputation as the European performance brand Adidas and Reebok joined hands to give competition to the world's No.1 brand Nike in branded sportswear market but Reebok is likely to retain its brand. In Indian and south Asian market, Reebok and Adidas would be available as separate brands After this deal between German brand Adidas and Reebok, a new company is likely to be formed which will have a combined annual sale of some $11.1 billion where Nike's annual sales are $14 billion worldwide. In the market Adidas is popular among soccer, track and field fans and Reebok appeals to fans of sneakers, athletic football, base ball and basketball. Adidas and Reebok deal is done to face Nike's competition in world market. Even though after the merger of Adidas and Reebok have given tough time to Nike but still Nike is above them in the competition, Nikes strength above competition lies in its ability to differentiate and its popular brand image. So in order to defend its position Nike should preserve and maintain its brand equity both domestically and abroad. Gain a more positive global image, especially regarding labor laws Better management of their fashion shoe sector. Gain a stronger presence in China. Think about latest trends and style and introduce fashionable shoe to attract new generation. Devote vast resources on R&D of its product & act as innovator To defend Nikes position it should do following - Targeting some of its promotions to female consumers - Service differentiation - Apparel and equipment customization - Product Differentiation - Unique shoe technology and innovation - Distinctive Competency - Marketing (Consumer Loyalty) - Think about latest trends and style and introduce fashionable shoe - Low price range - Nike should go after Asian country markets with reasonable price because demand is elastics here. - Be more socially responsive to show concern for the society