1. Nike’s Core Competency: The Risky Business of Fairy Tales
Jason Cumiford
Tran Pham
Daniel Hockaday
Morgan McGrath
Pam Barrington

2. Agenda “Hype” videos Background “Scandal” video Diagnosis
Analysis (AFI)
Analysis (VRIO)
Analysis (SWOT)
Case questions
Recommendations
Managerial implication
Case update
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3. “Hype” Videos 3
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4. Case Background 1964: Founded by Bill Bowerman and Phil Knight
Blue Ribbon Sports
1971: There is no finish line
1979: 50% market share
The 1990’s and 2000’s 4
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5. “Scandal” Video 5
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6. Diagnosis Idea of “creating heroes”
Mythicizing the everyman can be a slippery slope
Nike has to sidestep the backlash
Tipping point- Too many “eggs in one basket”
Fragile nature of mythicizing the everyman
Nike has focused on sponsoring many sport superstars and was able to endorse a variety of athletes in a wide range of sports.
This closely held sponsorship led to the idea of “creating heroes.”
Many of the athletes that Nike sponsored were athletes that had defeated the odds of failure- from defeating cancer to coming from a disadvantaged backgrounds.
When Nike’s heroes are unmasked as cheaters, criminals, frauds the company has to attempt to sidestep the backlash and the affect it could have on the brand
Nike has placed too many eggs in the heroes basket which could eventually reach the tipping point of being associated with too many fallen heroes. 6
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7. Analysis | AFI Analyze Formulate Implement
Limited component innovation= Competitive
parity
Formulate
Competitive advantage by altering marketing
approach
Shift current endorsement strategy to “Hero
Creation”
Implement
Michael Jordan Endorsement of 1984 7
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8. Analysis | VRIO Valuable Rare Costly to Imitate
Value from expanded customer base→ Casual fans now interested in products
Rare
Underdog stories not easy to replicate.
Costly to Imitate
Several multi-million dollar campaigns to achieve Nike’s brand equity.
Organized to take advantage
Existing advantage as leader in industry allows Nike to take advantage. 8
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9. Analysis | SWOT 9 BMBA 523 Spring 2016 SWOT Analysis Helpful Harmful
Internal
Strengths:
-Established as number one footwear seller in the world.
-High brand equity based on current competency.
-Major foothold in basketball and football with licensing contracts
Weaknesses:
-Contracts terminated with Pistorius and Armstrong.
-Lack of drastic component innovation.
External
Opportunities:
-Viral Marketing
-Amateur Sports
-Team endorsement
Threats:
-Reebok and Adidas catching up in component innovation.
-Potential future scandals involving endorsed athletes. 9
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10. Case Questions Creating Core Competencies Nike’s Approach Meaning
How is it done?
VRIO attributes
Nike’s Approach
Strength → Weakness
Tipping point 10
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11. Case Questions Recommendations for Phil Knight and Nike
Reframing the idea of Heroes
Competitor Recommendations
Create Heroes at a younger age
Product focus
Exploit Nike failures 11
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12. Class Activity 9
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13. Recommendations Guiding policies Guiding Policy #1
Re-position towards product innovation
Re-define the definition of what it means to be a hero
Guiding Policy #1
Increase R&D
Acquisition
Strategic partnerships
Re-focused marketing campaign
Companies are wise to create two (2) guiding policies.
Allows for generation of ideas
Ensure all concerns are visited
Allows for the developing of a better path towards sustainable change
We believe that NIke should consider two guiding policies
Re-positioning of the brand towards product innovation
The re-definition of what it means to be a hero
Guiding policy #1 is as close to a complete and total reposition of a product as one can achieve; accomplishing this through four (4) coherent actions.
First, increase R&D by % of net revenues each year; roughly $ $65.46 Million based on the 2015 net income of $3.273B. This aim is for nike to create the next big thing.
Second, Nike can acquire small emerging companies. THis would enable Nike to theoretically speed up the process of developing a superior running sole, better moisture wicking shirt/short combo, or a lighter gold club.
Third, focusing on strategic partnerships with entities such as the NFL (further this already partnership), NHL, and alpine skiing to name a few. This would allow Nike to help in developing new, safer technology; instilling renewed confidence by some, and helping to invent the next big thing.
Finally, an action that may seem significant, but should not be overlooked is to re-focus their marketing efforts in this direction. Creative, coherent, yet still ethically based marketing ensures the message is packaged, sent, received, and opened in a manner that maintains the brand identity, brand image connection.
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14. Recommendations Guiding policy #2
Social Media Research Cell
Partnership creation/expansion
Outreach programs
Test gear distribution
Renewed advertising campaign
Guiding policy to adopt moving forward
Guiding policy #2 is a slight alteration in the current course being charted by Nike. Re-defining what it means to be a hero will allow Nike to continue to set itself apart from its competition. In order to accomplish this slight pivot there are four distinct steps:
Create a “Social Media Research Cell”.
Focus on schools who excel both academically and athletically, those who are from very rural areas that have little exposure but a rich history is a smart move.
Also focusing on the mom and dad who push the stroller through the park on a Saturday morning is a wise move. This attracts more individuals who will identify with these people, and make them feel more connected.
Devoting .05% ($16.365M) of yearly of net revenue would be sufficient in building this cell. The Social Media Research cell will aid in many distinct arenas, college recruiting; school and district awareness; higher sport participation; among others.
Partnership creation.
Reaching out to schools, city parks and recreations departments, and smaller rural universities will no doubt enable nike to push the new definition of what it means to be a hero
Holding camps for younger kids, seminars for adults in cities, counties, and states throughout the world who are looking to gain knowledge and develop themselves further.
Utilization of sponsored athletes and trainers would provide the connection with the Nike brand, and this could be done for about $63.46M, or roughly 2% of yearly net revenue.
Creating outreach programs (aside from camps and seminars) provide the final piece of the puzzle
While the focus of this is at the Junior High/Middle School level at the adolescent/child level, and the everyday mom and dad at the adult level, it can and should be implemented at all levels.
Contribution of .5% of yearly net revenues or $16.365M should be sufficient in beginning this effort.
Test gear distribution
Distribute this type of gear through local school districts, camps, and seminars.
Everyday moms, and dads could also help nike incrementally develop its product further.
Renewed advertising campaign
All of the above actions can be rolled into an advertising campaign
Utilization of the rural, far and away schools, and the lesser known everyday mom and dad in their campaigns; better linking their brand identity and brand image.
air these ads through local channel's/programming, and a dedicated youtube channel.
Nike can also work towards creating an excellence award titled, “the Everyman Award in Excellence” or some other catchy name.
This action will take approximately 2% of yearly net revenue or $65.46M.
While guiding policy one may seem as the more logical choice moving forward, Nike would be wise to stick with the path that brought it to the top; the “creation of heroes”.
Proper positioning is arguably one of the best competitive advantages a company can have.
Nike has almost doubled the nearest competitor, Adidas $25B to $15B, respectively.
The small, but significant pivot will not only allow them to redefine what it means to be a hero, but begin to give back to communities in a way that almost no other competitor has.
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15. Managerial Implications
Find the “sweet spot”
Figure out what the competition ISN’T doing
Will the strategy your company picks have any tipping points?
Every strategic adjustment provides new lessons learned to be able to shape effective managerial decision-making. Nike was able to succeed through finding the “sweet spot” in the market.
As Collins and Rusktad described in their HBR article - The sweet spot consists of competitors offerings, customers needs, and company's capabilities;
where a company can meet the customer's needs in a way that rivals cannot (Collins and Rukstad, 2008).
For future managerial decision-making it is important that managers look to see if what they are pursuing has any tipping points, or if they missing a potential market.
It is also important to look to see what the competition isn’t doing. In this case, Nike was able to find a unique position in the market based off of what competition was not doing at the time the brand entered the market. 15
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16. Case Update
Still #1 in industry; 5% revenue growth to 8.4 billion dollars in Q1 2016
Contracts voided for scandals: Ray Rice 09/2014 and Manny Pacquiao 02/2016.
Amateur athletes such as Mary Cain featured in commercial campaigns.
Several commercials highlighting heroic qualities in average people. 16
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17. Case Update 17
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18. 18
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