Nike's Strategic Alliances
As mentioned in earlier posts, Nike has had some very profitable and some not so profitable strategic alliances. Noted in our text this week, there are major upsides to alliances, mergers and acquisitions as well as major downfalls. In my opinion, my larger companies at one time or another have most likely or will more than likely experience both sides of the coin.
For Nike, as I've already discussed some of the acquisitions and divestment (Cole Haan and Umbro), I'd like to chat more about the more successful alliances Nike has built. I consider all of the athlete endorsements quite major portion of their business, and I would call those strategic alliances that are very successful. It would seem incredible beneficial to both parties.
Let's take Michael Jordan for example, because why wouldn't we take the biggest and best as an example??! Back in the day, Jordan was an exceptional basketball player. Nike had a vision to develop, manufacture and sell a line of basketball kicks. Enter, a very successful alliance. For Jordan, it was a chance (I imagine) to keep his legacy alive, earn a dollar or two after his body gave up on the court. For Nike, it was an awesome image to affix to shoes, apparel and equipment. Who wouldn't want to be like Mike??
Some of the potential pitfalls of course are still there, and it's always risky to form a partnership, especially over the years. In my example, this has been a very profitable long term successful alliance. Something could have or could go wrong with either Nike's manufacturing/distribution/promotion side, and of course something could go wrong for Michael Jordan causing a negative backlash (think Michael Vick...horrible).
There are always risks, everything in business is somewhat of a gamble whether it's all on your own or creating alliances, mergers or acquiring new business. That's somewhat the thrill of it and part of the game.
Tuesday, November 17, 2015
Saturday, November 14, 2015
Week 12 - Implementing Corporate Diversification
Implementing Corporate Diversification
As in my previous week's blog, I mentioned the core strength of Nike's implementation of diversified strategies. This week, I will dive deeper into why and how they might go about achieving successful corporate strategies. I believe there to be many internal core competencies Nike capitalizes on to ensure their year over year success.
Nike partakes many of our chapters lessons and applies them with gusto. For example, Nike's hierarchy is a matrix organization that impresses upon leadership at all levels. They start by separating the business units by category such as Running, Women's Training, Golf, etc. Each category has a general manager with goals and accountability. These managers also work cooperatively across many category activity leaders that handle public relations, brand communications, events, etc. The activity leaders also work across multiple categories supporting the various "sports" from a "global" perspective. They are able to be consistent across the company in any decision making this way.
Another aspect that Nike takes seriously to ensure their vision of diversification strategies take hold is by impressing a sense of bond. It is one company working through individual sports for the greater good of the company as a whole. They encourage, plan and host bonding days throughout the organization worldwide. Bringing together employees from all levels and categories and business functions to collaborate and truly brings the brand alive.
Finally, another important activity Nike implemented to ensure all employees were a part of the team was the issuance of bonuses, at every single level of the organization. Some companies only bonus certain levels of management, excluding lower levels of employees. Nike pays all employees based on their band/tier percentage as well as company and individual performance. They believe everyone plays a role and without full efforts from all, where would they be? I believe this also gives everyone skin in the game, as they say. Peer to peer encouragement is a pretty valuable tool to ensure everyone is pulling their share.
As in my previous week's blog, I mentioned the core strength of Nike's implementation of diversified strategies. This week, I will dive deeper into why and how they might go about achieving successful corporate strategies. I believe there to be many internal core competencies Nike capitalizes on to ensure their year over year success.
Nike partakes many of our chapters lessons and applies them with gusto. For example, Nike's hierarchy is a matrix organization that impresses upon leadership at all levels. They start by separating the business units by category such as Running, Women's Training, Golf, etc. Each category has a general manager with goals and accountability. These managers also work cooperatively across many category activity leaders that handle public relations, brand communications, events, etc. The activity leaders also work across multiple categories supporting the various "sports" from a "global" perspective. They are able to be consistent across the company in any decision making this way.
Another aspect that Nike takes seriously to ensure their vision of diversification strategies take hold is by impressing a sense of bond. It is one company working through individual sports for the greater good of the company as a whole. They encourage, plan and host bonding days throughout the organization worldwide. Bringing together employees from all levels and categories and business functions to collaborate and truly brings the brand alive.
Finally, another important activity Nike implemented to ensure all employees were a part of the team was the issuance of bonuses, at every single level of the organization. Some companies only bonus certain levels of management, excluding lower levels of employees. Nike pays all employees based on their band/tier percentage as well as company and individual performance. They believe everyone plays a role and without full efforts from all, where would they be? I believe this also gives everyone skin in the game, as they say. Peer to peer encouragement is a pretty valuable tool to ensure everyone is pulling their share.
Friday, November 13, 2015
Week 11 - Diversification Strategies
Nike's Diversification Strategy
Hands down, when you look at Nike from a total perspective they have a related corporate diversification strategy. Over the years, Nike has invested or divested in company's that share the marketplace and/or are complimentary to their product lines.
Hurley Intl and Converse are two great examples of a great fit from a related diversification strategy standpoint. Hurley accesses the same athletic culture of consumers as Nike core categories, but with a focus on surf and water sports. This similar, but different consumer allows Nike to utilize similar factory and distribution channels as other categories of business. Also, on the Converse side of business, Nike is able to realize like-type consumers via a different product from their competitive basketball and fashion lines.
Some of the more recent divestitures include Cole Haan and Umbro, which began as a diversification strategy and possibly a complimentary business opportunity. Unfortunately, my guess is the manufacturing and distribution of Cole Haan line of business is just too different from Nike's core business. I'm inclined to believe the consumer differences and additional costs associated with a line of business costs the company more than it was able to bring in. In the press release,
Hands down, when you look at Nike from a total perspective they have a related corporate diversification strategy. Over the years, Nike has invested or divested in company's that share the marketplace and/or are complimentary to their product lines.
Hurley Intl and Converse are two great examples of a great fit from a related diversification strategy standpoint. Hurley accesses the same athletic culture of consumers as Nike core categories, but with a focus on surf and water sports. This similar, but different consumer allows Nike to utilize similar factory and distribution channels as other categories of business. Also, on the Converse side of business, Nike is able to realize like-type consumers via a different product from their competitive basketball and fashion lines.
Some of the more recent divestitures include Cole Haan and Umbro, which began as a diversification strategy and possibly a complimentary business opportunity. Unfortunately, my guess is the manufacturing and distribution of Cole Haan line of business is just too different from Nike's core business. I'm inclined to believe the consumer differences and additional costs associated with a line of business costs the company more than it was able to bring in. In the press release,
“The decision to divest of Cole Haan allows us to sharpen our focus on opportunities with the highest potential for strong returns, and to make sure the brands within the Nike portfolio are the most complementary to the Nike Brand,” Mark Parker, the chief executive of Nike, said in a statement.
Nike's ability to seek strategies that diversify and expand their reach, as well as recognize relatively quickly when there is a miss in strategy, is a core strength in their leadership abilities. I look forward to watching where, or rather how, they leap up to their $50B in Sales by 2020 plan.
References
http://dealbook.nytimes.com/2012/11/16/nike-to-sell-cole-haan-to-apax-partners-for-570-million/?_r=0
Monday, October 26, 2015
Week 10 - Vertical Integration Strategies
Nike's vertical integration strategy is on the surface, non existent. However, in my opinion, I see that Nike has vertically integrated various parts of it's business. As stated in my discussion last week for class, I do not believe there's a "one-size-fits-all" strategy when it comes down to what makes a firm or industry more efficient.
To me it would seem it truly depends on what the business is about, where it is in it's age/stage, what the 1 year, 2 year, 5 year goals look like to determine the best approach. Further, it could be appropriate to have certain areas of a business with different strategies...some vertical some not. I think that's the key...
I see Nike as taking this multiple approach strategy to their business model. They have vertically integrated their supply chain operations, and IT solutions but they have left the manufacturing for the most part not integrated. Nike still relies on contracted factories overseas as well as shipping and air of their freight. They do not own those factories or ships/planes/trucks. It would seem this makes the most sense for Nike's overall strategy to get their end product to the consumer in the most economical and efficient way.
It is pretty fascinating to think that back in the day when they first started, it was basically building a shoe from a waffle maker and selling out of a trunk! What a complex, well oiled machine they have built in a relatively short time period.
Week 9 - Tacit Collusion: Cooperation to Reduce Competition
The definition on our text tells us that tacit collusion exists when firms coordinate their production and pricing strategies indirectly by observing the output and pricing decisions of other firms. One great example of how Nike plays this game is by their factory schedule. Many of the factories Nike uses, are also used by other competing brands such as Adidas. Interestingly enough, the products have enough similarities in the construct and shipping destinations that allow for multiple brands use the same factory partners.
Starting back in 2005, Nike began assessing how they could leverage collaboration of factories across several brands. Not only looking for a better way to manage factory relations, but also to create industry-wide efficiency for buyers and suppliers.
It will be challenging for Nike to be challenged with price cuts from competitors as Nike pretty well sets the price in the market for athletic footwear and apparel. They hold the greatest amount of share in the industry and most follow their lead.
Now, from a cheating standpoint, I cannot say I've heard or read anything that would suggest the various brands collaborating on factories and production schedules has come to light. Plus, it would stand to reason that it really is in the best interest of those top firms to utilize factories especially if they are taking the same strategy of not investing in brand-owned and operated factories to produce their various lines of business. To increase profits across all brands, it would seem to benefit all by coordinating.
References
Barney, Jay B. (2014-01-17). Gaining and Sustaining Competitive Advantage (4th Edition) (Page 246). Prentice Hall. Kindle Edition.
http://www.nikebiz.com/crreport/content/workers-and-factories/3-10-1-our-approach.php?cat=brand-collaboration
Starting back in 2005, Nike began assessing how they could leverage collaboration of factories across several brands. Not only looking for a better way to manage factory relations, but also to create industry-wide efficiency for buyers and suppliers.
It will be challenging for Nike to be challenged with price cuts from competitors as Nike pretty well sets the price in the market for athletic footwear and apparel. They hold the greatest amount of share in the industry and most follow their lead.
Now, from a cheating standpoint, I cannot say I've heard or read anything that would suggest the various brands collaborating on factories and production schedules has come to light. Plus, it would stand to reason that it really is in the best interest of those top firms to utilize factories especially if they are taking the same strategy of not investing in brand-owned and operated factories to produce their various lines of business. To increase profits across all brands, it would seem to benefit all by coordinating.
References
Barney, Jay B. (2014-01-17). Gaining and Sustaining Competitive Advantage (4th Edition) (Page 246). Prentice Hall. Kindle Edition.
http://www.nikebiz.com/crreport/content/workers-and-factories/3-10-1-our-approach.php?cat=brand-collaboration
Friday, October 23, 2015
Week 8 - Flexibility: Real Options Analysis Under Risk and Uncertainty
Options. Options. And MORE Options. Nike is abound with options.
One of the smartest, in my opinion, routes Nike has taken with regards to options is the availability of choices in each segment of business. Although they are known as starting out at a running company, they have quickly (relatively speaking) become a supplier of all athletic products ranging from Women's Training, Soccer, Football, etc. One of the reasons Nike has been able to be successful with the multitude of products and lines is really in part due to the organizational structure they live and breath by. It's a matrix organization that creates synergies and leverages the company-wide assets.
Nike's ability to quickly change, react to a market pressure across all of the lines of business is also another unique challenge. In order for all lines of business to be profitable, Nike is challenged to ensure they can quickly make a modification to ensure they are offering what their consumers want. And, by the way, one of Nike's co-founder's, Bill Bowerman, stated many years ago, "If you have a body, you are an athlete". A statement of this magnitude requires great flexibility to quickly change directions if need be at a given time. If you think about the various seasons and the athletic or sporting activities associated, there's quite a bit to keep on track and remain new and innovative.
Overall, it would seem Nike has sustained a competitive advantage by being so flexible with their product lines and offerings. By taking advantage and capitalizing on that strength, Nike is able to continue being the leader in the athletic apparel, footwear and equipment industry. The environment they foster within the company is one of team work, key learning's, and constant drive to offer new and exciting products.
One of the smartest, in my opinion, routes Nike has taken with regards to options is the availability of choices in each segment of business. Although they are known as starting out at a running company, they have quickly (relatively speaking) become a supplier of all athletic products ranging from Women's Training, Soccer, Football, etc. One of the reasons Nike has been able to be successful with the multitude of products and lines is really in part due to the organizational structure they live and breath by. It's a matrix organization that creates synergies and leverages the company-wide assets.
Nike's ability to quickly change, react to a market pressure across all of the lines of business is also another unique challenge. In order for all lines of business to be profitable, Nike is challenged to ensure they can quickly make a modification to ensure they are offering what their consumers want. And, by the way, one of Nike's co-founder's, Bill Bowerman, stated many years ago, "If you have a body, you are an athlete". A statement of this magnitude requires great flexibility to quickly change directions if need be at a given time. If you think about the various seasons and the athletic or sporting activities associated, there's quite a bit to keep on track and remain new and innovative.
Overall, it would seem Nike has sustained a competitive advantage by being so flexible with their product lines and offerings. By taking advantage and capitalizing on that strength, Nike is able to continue being the leader in the athletic apparel, footwear and equipment industry. The environment they foster within the company is one of team work, key learning's, and constant drive to offer new and exciting products.
Sunday, October 11, 2015
Week 7 - Differentiation Strategies
According to our latest chapter text, we have learned that implementing a product differentiation strategy is not as easy as one might think. On first thought, one might think pick a product, make it different, slap a higher price tag on it and bam! you have product differentiation. Well, turns out it is more complicated than that, and guess what else? Nike has really cracked the nut on that....
First, yes of course Nike has easily (or presumably) replicated products. Shoes, apparel and equipment can be made, and is made even in some of the very same factories, across several companies. Very light soccer shoes, for example, are made both by Nike and Adidas. Both have certain features that are of specific and unique to different football players. However, that said, Nike has more than just a lightweight soccer boot, they have a special technology called Flywire built into their boot. This is just an example of how slight differences in technologies can sway what or which type of cleat a soccer player might choose based solely on their own preferences.
What makes Nike even more unique is how they've cracked the code on how to manage through implementing a differentiation strategy. As noted, there are some natural rubs in the organization when implementing or utilizing this type of strategy.
Beginning with coordination of teams, Nike does this exceedingly well. There is a definite sense of individual idea creation and category success, but always an underlying sense of team success is utmost importance. Next, there is some sense of chaos and at the end of the day, some groups (finance/accounting) might wonder how that just all happened, there is a major sense of collaboration pulling it all together.
Another aspect that Nike has down pat is respecting the past, but always looking at the future. I've never experienced such a great value or presence of where it all started, but where it needed to go. Employees take pride in their employee number, which the lower the number the longer the employee.
Nike is a great example to many of our texts call-out's to potential pitfalls from an organizational structure. In my opinion, Nike is a great case study on how to go about setting up for success across those potential issues.
First, yes of course Nike has easily (or presumably) replicated products. Shoes, apparel and equipment can be made, and is made even in some of the very same factories, across several companies. Very light soccer shoes, for example, are made both by Nike and Adidas. Both have certain features that are of specific and unique to different football players. However, that said, Nike has more than just a lightweight soccer boot, they have a special technology called Flywire built into their boot. This is just an example of how slight differences in technologies can sway what or which type of cleat a soccer player might choose based solely on their own preferences.
What makes Nike even more unique is how they've cracked the code on how to manage through implementing a differentiation strategy. As noted, there are some natural rubs in the organization when implementing or utilizing this type of strategy.
Beginning with coordination of teams, Nike does this exceedingly well. There is a definite sense of individual idea creation and category success, but always an underlying sense of team success is utmost importance. Next, there is some sense of chaos and at the end of the day, some groups (finance/accounting) might wonder how that just all happened, there is a major sense of collaboration pulling it all together.
Another aspect that Nike has down pat is respecting the past, but always looking at the future. I've never experienced such a great value or presence of where it all started, but where it needed to go. Employees take pride in their employee number, which the lower the number the longer the employee.
Nike is a great example to many of our texts call-out's to potential pitfalls from an organizational structure. In my opinion, Nike is a great case study on how to go about setting up for success across those potential issues.
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