International Strategy Of Nike In India Marketing Essay

Introduction

Nike, Inc. is a prima athletic wear and equipment provider based in the United States. The company is based in Beaverton, Oregon. It is the taking planetary supplier of athletic footwear and dress ( Sage, 2008 ) and a prima maker of athleticss equipment with gross in surplus of U.S. $ 18.6 billion U.S. dollars in its financial 2008 ( stoping May 31, 2008 ) . As of 2008, it employed over 30,000 people worldwide. The company was founded on 25 January 1964 as Blue Ribbon Sports by Bill Bowerman and Philip Knight, and officially became Nike, Inc. in 1978. Nike markets its merchandises under its ain trade name and Nike Golf, Nike Pro, Nike + , Air Jordan, Nike Skateboarding and subordinates like Cole Haan, Hurley International, Umbro and Converse. In add-on to fabricating athletic wear and equipment, the company operates shops under the Niketown name. Nike patrons many high profile jocks and athleticss squads around the universe with extremely recognized trade names “ Merely make it ” and the Swoosh logo.

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File: Nike ( degree Celsius ) .svg ( Nike, 2010 )

The company ab initio operated as a distributer for Nipponese shoe shaper Onitsuka Tiger ( Nikebiz, 2010 ) .

In 1980, Nike had reached a 50 % market portion in U.S. athletic shoe market and the company went public in December of that twelvemonth ( Nikebiz, 2010 ) .

“ Merely Make It ” is universe celebrated Nike hallmark. Throughout the 1980s, Nike expanded its merchandise line to include many other athleticss and parts throughout the universe.

This article aims to analyse the athletic footwear industry in India and happen a topographic point in it for Nike. The literature reappraisal includes an overview of schemes and theoretical accounts to assist better understand Nike move into the Indian market. The treatment and analysis subdivision will concentrate on Nike, in peculiar, and the challenges and competition confronting the corporation in the foreign market. Finally, the study concludes with recommendations on how and what Nike can make to better their public presentation in India.

Literature Review

Globalization describes an on-going procedure by which regional economic systems, societies and civilizations are integrated through a planetary web that includes communicating and commercialism. The term is sometimes used to mention specifically to economic globalisation: the integrating of national economic systems into the international economic system through trade, foreign direct investing, capital flows, migration and the spread of engineering ( Bhagwati, 2004 ) . However, globalisation is by and large recognized as driven by a combination of economic, technological, socio-cultural, political and biological factors ( Croucher, 2004 ) . The term may besides mention to the multinational motion of thoughts, linguistic communications, or of popular civilization through version.

The past two decennaries have witnessed the globalisation of markets and production. The globalisation of markets means that national markets are unifying into a immense market. The two factors underlying the tendency towards globalisation are: cut downing trade barriers and alterations in communicating, information and transit engineerings ( Hill, 2009 ) . Following the globalisation of production and markets in the last 10 old ages universe trade has grown quicker than universe end product, foreign direct investing has flown, imports have penetrated deeper into the universe ‘s industrialised states and increased competitory force per unit areas in industries. The benefits and costs of the new planetary economic system are being heatedly debated among business communities, economic experts and politicians. The treatment focuses on the impact of globalisation on employment, rewards, environment, working conditions and national sovereignty.

Entry Mode Strategy

When companies decide to come in foreign markets, there are several ways to make so. The hazards runing in foreign markets are frequently dependent on the degree of control a company has, together with the degree of capital outgos invested. The chief manners of entry are exporting, licensing, franchise, joint ventures and FDI ( Foreign Direct Investment ) .

Direct export concern involves transporting goods straight to a foreign market. A house using indirect export uses a channel or mediator, which in bend distribute the merchandise in foreign markets. From the point of position of a company, export hazard is minimum. This is so because no capital outgo or outgo of corporate finance in the new non-current assets has needfully taken topographic point. Therefore, the likeliness of isolated costs, or the general barriers to go out, is distant. By contrast, a house may hold less control when exporting to a foreign market, due to non control of the supply of goods in foreign markets.

A license understanding is an agreement whereby a licensor grants the right to intangible belongings to another entity for a specified period and in return get royalty ( Contractor, 1892 ) . Intangible belongings includes patents, innovations, expressions, procedures, designs, right of first publications and hallmarks. The chief advantage of licensing is that the concessioner bears the costs and hazards of opening a foreign market. The disadvantages include the hazard of losing the technological know-how to the licensee and the deficiency of rigorous control over licensees.

Franchising is similar to licensing, although it tends to affect longer term committednesss of licensing. The franchise is fundamentally a specialised signifier of licensing in which the franchisor insists that the franchisee complies with the rigorous regulations as to how it does concern. The franchisor besides by and large assists the franchisee to pull off the company for good. As with licensing, the franchiser normally receives a royalty payment, which amounts to a per centum of franchisee ‘s grosss. Whereas licensing is pursued chiefly by fabricating endeavors, franchising is chiefly used by service companies ( Tormenting and McQueen, 1981 ) .

A joint venture is a joint attempt between two or more concern entities in order to reciprocally profit from a given economic activity. Some states ( such as India and China ) require that all foreign investing must be through joint ventures. Compared to exports, more control is exercised ; nevertheless the degree of hazard is besides increased. Some companies have sought joint ventures in which they hold a bulk interest and therefore a tighter control ( Kogut, 1988 ) . Joint ventures have the advantage of sharing the costs and hazards of opening a foreign market and to get local cognition and political influence. The disadvantages include the hazard of losing control over engineering and the deficiency of rigorous control.

In direct investing, a company straight invests in the building of fixed / non-current assets in a foreign state, in order to fabricate a merchandise in the abroad market ( Hennart and Park, 1993 ) . It refers to the existent fabrication of a merchandise from abrasion. Direct investing has increased control and more hazard involved.

IR model

Companies runing internationally are confronting two forces: force per unit areas for planetary integrating and force per unit areas for local reactivity ( Daniels, et. Al. 2009 ) . In thier research, Doz and Prahalad ( 1984 ) explain that the economic, technological and competitory thrust planetary integrating, while the diverseness of client demands, distribution channels, media and trade barriers between states boost the response capacity.

Research shows that the greater the force per unit area for planetary integrating, the greater the demand to maximise efficiency through standardisation ( Daniels, et. Al 2009 ) . Customers accept standardized merchandises and this reduces costs for the house ( Daniels, et. Al 2009 ) . However, international companies are under force per unit area to accommodate their operations to local market conditions and demands of local clients and comply with policies mandated by the authoritiess of host states, which varies throughout the universe ( Daniels, et. Al. 2009 ) .

Integrating response theoretical account, shown in Figure 1, was ab initio developed by Prahalad and Doz in 1987 and later developed by Bartlett and Ghoshal, 1989. It shows the interaction between planetary integrating and local reactivity ( Daniels, et. Al. 2009 ) . The IR theoretical account has four schemes to steer international corporations to vie in foreign markets: the Global scheme, the International scheme, the multidomestic scheme and the multinational scheme.

01

Figure 1 IR theoretical account ( Hill 2009 )

The international scheme is adopted by companies when they want to come in into foreign markets. Second, a multidomestic company is “ locally antiphonal ” ( Daniels, et. H 2009, p.475 ) , leting each of its operations in foreign states to move independently. The subordinates are free to react to the penchants of local clients in the design, industry and selling of merchandises ( Daniels, et. Al. 2009 ) . A planetary scheme maximizes integrating and pushes a company to do a standardised merchandise for a planetary market. Finally, the multinational scheme differentiates the capablenesss and parts from state to state and let ‘s companies to larn from them, following an incorporate model of engineering, fiscal resources, originative thoughts, and people ( Daniels, et. Al. 2009 ) .

Case Analysis

Nike has hired more than 700 shops world-wide and has offices in located in 45 states outside the United States. Most mills are found in Asia, including Indonesia, China, Taiwan, India, Thailand, Vietnam, Pakistan, Philippines and Malaysia ( Nikebiz, 2010 ) . Nike ‘s entered India through a seven twelvemonth licencing understanding with Sierra Industrial Enterprises for their gross revenues, unlike Reebok, for illustration, which is a entirely owned subordinate of U.S. parent.A In 2004, alternatively of regenerating the franchise, Nike India became a subsidiary.A ” The Indian market is turning in footings of gross revenues, client spends and consciousness. Merely made sense for us to capitalise on these chances every bit shortly as possible, ” says Gangopadhyay.A

Nike India Ltd ( BIL ) is the largest footwear company in India.A Nike foremost established in India in 1931 for their merchandise manufacturing.A The company is headquartered in Calcutta and manufactures over 33 million braces per year.A It has a distribution web of more than 1,500 shops and 27 warehouse ‘s which provide first-class entree to consumers and sweeping clients throughout India.A

As on 31 December 2006, the parent in Canada had a 51 per cent portion, while institutional retention was about 13 percent.A While retail gross revenues have increased in value and volume, sweeping gross revenues have decreased due to the limitation of supplies as a agency to retrieve the outstanding customers.A The recession and slow market conditions in the industry have besides had a direct impact on retail gross revenues and profitability.A

In the words of Simonson, “ The benefits and costs of installing of each client penchant are more complex and less deterministic than is assumed.A That ‘s because client penchants are frequently unclear and susceptible to assorted influences, and in many instances, clients have hapless cognition of their penchants. “ A In one of his recent articles, Simonson tackles the issue of one-to-one selling and mass customization.A Supporters of these marketing methods have suggested that larning what clients want and give them precisely what they want will make client trueness and great barrier to competition.A

The disposal says it is non unwilling to outsource if it worked out cheaper.A It is besides unfastened to the thought of shoe imports – largely from China – if it is cheaper.A

Nike and Reebok India Company have announced an understanding for a partnership sing the retail sale of Reebok and Rockport places at Nike outlets.A The partnership involves a broad retail sale of athleticss places for walking, running, tennis and preparation for personal fittingness and athleticss runing from Rs 900-2,500.A

For the 3rd one-fourth ended 30 September 2007, Nike India reduced its losingss to Rs 5.68 million rupees ( Rs 8.51 million rupees ) in a 9.2 % addition in net net income to 154.27 millionA rupees rupees ( Rs 141.26 million rupees ) .A The company is fighting to maintain its market portion in the monetary value sensitive market in India, despite strong trade name recall.A 97 % of company grosss are on the domestic market while the staying exports.

Nike India ‘s major jobs include the high cost of production and small accent on marketing.A The company may be able to turn to the first job through outsourcing products.A

Nike India has besides been seeking to concentrate on the aggressive selling of their products.A Nike India has programs to put in sophisticated machinery to maintain its niche topographic point in manufacturing.A The company has made a fresh attack to its retail business.A

The direction of Nike India is doing considerable advancement in footings of bettering market incursion, focal point on constellation shops, distribution logistics, and better industrial dealingss and streamlining overhead.A Establishing new merchandises ever stood at centre phase of the operations of the company.A

At the same clip, with the gap of the economic system, more and more merchandises are imported from China.A Alternatively, like other Indian makers, including Nike may see relocating their production bases in China.A However, it is non so easy task.A

Nike India, 51 % subordinate of Toronto-based Nike Shoe Organization, remains the major participant in the Indian footwear market, although its portion in the footfall has been worsening over the years.A

Now, in an effort to find the visual aspect of all the merchandises and monetary values, Nike India has decided to reconstitute its 1,300-outlet strong concern division retail along specific sections of clients in the Bazaar, the household, A the metropolis and shops.A

Nike India Ltd ( BIL ) is India ‘s largest selling shoe company more than 60 braces of Mn per twelvemonth in India, USA, UK, Europe, Middle East and Far East.A BIL has a market portion of 60 % in leather merchandises and 70 % in sneakers.A

Until late, India dint truly understand the selling scheme of Nike.A Realising that India is a cricket brainsick state, Nike in December 2005 edge in preparation schools, such as the National Academy of the BCCI cricket.A Nike has become the official patron of the squad ‘s cricket squad in India. They have paid Rs 196 million rupees ( Rs 1.96 billion ) to the Board of Cricket Control in India for the privilege.A Nike is aiming youth in India.A Its besides paying attending to other popular games in India.A It was in a partnership with the All India football federation since March 2006.

SWOTA Analysis

Strengths

Nike is a really competitory organization.A Nike has a healthy disfavor of its competitors.A Nike has no factories.A It does non put capital in edifices and industry workers.A This makes it a really thin organization.A Nike is strong in research and development, as demonstrated by the development and scope of advanced products.A It produces high quality merchandises at the lowest monetary value possible.A If monetary values rise and the merchandises become cheaper so Nike move ‘s its production plant.A Nike is a planetary brand.A It is the figure one athleticss trade name in the universe. Its celebrated “ Swoosh ” logo is instantly recognizable.

Failings

The organisation has a diversified scope of athleticss products.A However, concern income is still really dependent on their engagement in the footwear market.A The retail sector is really monetary value sensitive.A Nike has its ain shop of Nike Town.A However, most of its gross comes from gross revenues at retailers.A Retailers tend to offer a really similar experience to the consumer.A So the borders tend to be squeezed as retail merchants try to go through some of the low force per unit area on monetary values in the competition from Nike.

Opportunities

Product development offers many chances for Nike.A Some argue that in youth civilization particularly, Nike is a manner brand.A This creates its ain chances, since merchandise could go stylish before it wears out. The company can besides be developed internationally, constructing on the strong planetary trade name recognition.A There are many markets that have the disposable income to pass on high value athleticss goods.A For illustration, emerging markets like China and India have a coevals of freshly rich consumers.A There are besides planetary selling events that can be used to back up the trade name, such as the World Cup ( football ) and the Olympic Games.A

Menaces

Nike is exposed to the international nature of trade.A As it buys and sells in different currencies, costs and borders are non stable for long periods of time.A Such exposure may intend that Nike could be fabricating and / or merchandising at a loss.A This is an issue that faces all planetary trade names. The market for athletic footwear and dress is extremely competitive.A Rivals are developing alternate trade names to take away market portion from Nike.A As discussed in the failings, the retail sector is going monetary value competitive.A Ultimately, it means consumers are shopping for a better deal.A Such sensitiveness to consumer monetary values is a possible external menace to Nike.

CompetitionA

The footwear industry in India is extremely disconnected and dominated by the informal sector.A The size of the industry is around Rs 75 billion and is turning at around 10 % annually.A Nike competes with local participants such as Liberty Shoes, Phoenix International, Mirza Tanners, Tata, Action, Lakhani Shoes Shoes and planetary participants like Adidas, Reebok and Nike.A Footwear gross revenues contribute over 96 % of gross revenues, whereas Accessories and vesture represent the remainder.

Nike took the right to go the official patron of the squad ‘s cricket squad in India for the following five old ages, crushing his challenger Reebok and Adidas, by paying Rs 196 million rupees ( Rs 1.96 billion ) to theA Cricket Control Board of India for the privilege.A The first “ Merely Make It ” ad in Cricket besides made an visual aspect during the Champions Trophy.A ” We look at what drives the passion for cricket in India. Our end is to link emotionally with our clients, ” said Sanjay Gangopadhyay, selling manager of Nike India.A The American athletic footwear and dress giant has had a presence in India for about a decennary, but is cognizant of where the “ international ” image ( Bilwalkar, 2006 ) .A All these old ages, market leading has eluded Nike in India.A This is the lone market where Reebok has a ( 40 per centum market portion ) , followed by Adidas ( 20 per centum ) .A Nike, 15 per cent portion is a distant 3rd ( Technopak Advisors, 2010 ) .A

“ This is a good move by Nike to advance merchandises to a serious degree and construct trade name consciousness through its committedness to the development of athletics in India, ” says Harminder Sahni, COO, Technopak advisors.A

Rivals like Reebok and Puma are looking to spread out the merchandise line of athleticss as a lifestyle trade name for 17-35 years.A While Reebok is looking to increase its adult females sole, while 70 per cent of the ware in Puma shops are in lifestyle and non related to the sport.A

“ We want immature people to go serious about athleticss that involvement them, ” says Gangopadhyay.A The proclamation of cricket, for illustration, is clearly aimed at this group.

Recommendations

Department shops are the first channel for gross revenues and selling of consumer goods of leather. Furthermore, the ornament of the shop and sample merchandises must be designed to make a strong first feeling. Seasonal promotional runs such as particular price reductions and proclamations can be put in topographic point. The new lines of aggregations can be made for festivals.

In add-on to promotional activities at promenades and section shops, price reductions and telecasting ads are considered effectual channels for publicity. It is advisable to pay attending to the affordability of clients in different metropoliss, while puting the pricing points for different merchandise classs.

Because of its turning buying power, lifting in-between category should be the end of the Sellerss of consumer goods of leather. It is besides utile to present appropriate designs that cater for the gustatory sensations of the in-between category.

Decision

The first aim of the Nike trade name in India would to construct its trade name repute, image and equity. It has to guarantee that its trade name name does non acquire tarnished due to the Human Right concerns and the Environmental issues. The secondary aim of the Nike trade name in India would guarantee that they match the market portion and gross revenues volumes of its rivals. A company, merchandise or trade name can hold a really good repute and image, but if non profitable, ist non carry throughing its intent. At the same clip, gross revenues figures and informations can be misdirecting. Therefore the market portion besides has to be paid attending to.

Nike despite being one of the most popular trade names in the universe has non truly caught on in India. We besides note that Nike is on par with Reebok. This once more does non reflect excessively good on the trade name, sing that Nike outsells Reebok everyplace in the universe.

Therefore, it is sensible to state that the evaluations of Nike in India could make with a encouragement. The best manner to accomplish this would be a serious trade name edifice. The trade name image must be improved and people should be cognizant of their presence. Therefore, the logic of pick for bettering trade name image and repute as a major corporate aim is really clear.

From Nike ‘s typical competency is in the country of selling, specialness in the country of consumer consciousness of the trade name and trade name power. Globally, the key to the typical competency rises over the competition. As a consequence, Nike ‘s market portion is figure one in the athletic footwear industry in most topographic points around the universe. Phrases like “ Merely Make It ” and symbols like the Nike “ Swoosh ” , brace with featuring icons to function as instant reminders of the Nike imperium. It is clip that this competition is leveraged in India.

Nike ‘s vision is to stay the industry leader. The company plans to go on to bring forth quality merchandises that have been provided in the past. Most significantly, Nike needs to run into of all time altering client demands through merchandise invention. In the yesteryear, the company has been utilizing merchandise distinction as a competitory scheme. While Nike ‘s repute dictates, accent will go on in this field. Nike has built its concern on supplying merchandises that rise above all others and this has led to the worldwide success today.

Nike is known for its technologically advanced and is the leader in this country. This allows Nike merchandises to foreground the remainder.

Nike is besides concentrating on doing a great attempt in monetary value leading. Nike merchandises in the yesteryear have concentrated on the upper terminal of the monetary value class. Nike is now concentrating on lower degrees of monetary values with quality merchandises. This will enable Nike to capture even greater per centum of market portion.

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