Analysis of Nike and UK Market Strategy Project
Discuss whether or not the retail strategy is being executed effectively by the retailer. Provide research support for your argument. Identify why they did or should expand globally.
Nike effectively executes retail strategy. From analysis of research on the company’s strategy in the UK, the company operates same format retails stores across the UK. The retail stores are either operated as franchised retail outlets or company-owned retail outlets (Soni, 2014). In addition to the retail outlets the company also sells its products through ecommerce. In the recent past the company hired a new digital strategy manager (Giordan, 2016).
Nike expanded globally for a variety of reasons. Firstly, the company used the outsourcing strategy in its global expansion as a method of cutting on the cost of its products. Cost reduction enables Nike to compete effectively. Secondly, Nike expanded globally as a strategy for growth. It was through global expansion that Nike managed to become a leader the sportswear industry.
The company’s format transfer strategy is considered as the main mode of entry into the UK market. From the analysis of format transfer strategy as a market entry mode, the need to improve the firm’s competitive position was considered to be the main reason for the selection of the mode of entry (Martinez, Polo, & De Chernatony, 2008). This is because format transfer strategy gave the company more managerial control over the product and thus maintaining its competitive edge. The format transfer strategy was considered successful in Nike because Nike was able to exercise control in the products that it released to its consumers, which meant that it could customize its products based on changing customer tastes and preferences.
The second major mode of entry was through franchising and establishment of company owned retail outlets. Franchising stands out as one of the oldest market entry strategies (Agarwal & Ramaswami, n.d). The franchising model enables Nike to ride on the brand recognition of recognized sportswear sellers and hence quick and easy penetration. In some locations across the UK Nike used the direct entry approach of establishing retail outlets. Franchising was considered a success since Nike was able to expand at minimal costs and transfer some of its risks to the franchisees since the franchisees operate independently.
The other market entry mode is the sponsorship of accomplished athletes and teams both as a market strategy and as a market entry mode. Nike has sponsored United Kingdom’s athletes such as Tennis players and athletics players like Mo Farah. It has also sponsored football teams through kit wares, which include Manchester City and Chelsea. The sponsorship between Nike and Chelsea is worth £12 million in every year (Ogden, 2015). As a market entry mode, the sponsorship of athletes has helped the company to win contracts to supply sports kits to athletes and other players in the UK (Lu, Karpova & Fiore, 2011). This strategy is in wide application in the UK, especially with regard to Football that is popular in the UK. Notably, the strategy also helps the company in building its brand name as a premium sportswear supplier. This market entry mode is considered a success since some of the athletes that Nike supports are very popular and loved in the UK. For example, both Chelsea and Manchester City are successful cup winners in the Premier League. It helps to grow the brand of Nike in the United Kingdom market. Since Nike signed the sponsorship deal with Manchester City in 2012, the football club has ended up achieving massive success. For example, it qualified to the champions league, meaning the number of people who viewed Nike’s brand increased all over the United Kingdom and the world.
Acquisitions is another key market entry mode of Nike. In June 2008, Nike finished its acquisition of the Umbro. The acquisition was initially estimated to be worth $583 million (BBC, 2007). The terms of the acquisition were structured in such a way that Umbra’s shareholders were to be compensated 193.06p for every share that they held. The acquisition made Nike to fully own operations of this brand in the United Kingdom market. The managers of the company welcomed this move since they said it would enable it to increase its leadership position as the supplier of football kits to the football teams in the country (BBC, 2007). The strategy was considered successful since football is the most popular sport in the country and by building its brand as the chief kits supplier in the market, Nike is able to strengthen its brand. In addition, both Nike and Umbro are considered as brands that support football teams all over the world. By Nike acquiring Umbro, it is clear that the company chose an expansion strategy that was similar to its company’s goals and objectives. After the acquisition, reorganization and complete change of culture was not necessary since Umbro was aware concerning how Nike’s operations were conducted.
Direct exports is another market entry strategy adopted by the company. Nike has many direct export outlets in the United Kingdom where consumers can access its products. Some of these outlets include Antrim Nike Outlet located in Junction One International Outlet shopping and Ashford Nike Outlet located in London (Outletsheet.com, 2016). The strategy was considered as a success since Nike was able to transfer its expansion risks to the outlets established in United Kingdom since they are operated and managed separately from head office’s operations.
References
Agarwal, S., & Ramaswami, S. N. (n.d). Choice of foreign market entry mode: Impact of ownership, location and internalization factors. Journal of International business studies, 23(1), 1-27.
BBC. (2007). BBC NEWS | Business | Nike to buy Umbro in 285m deal. News.bbc.co.uk. Retrieved 29 August 2016, from http://news.bbc.co.uk/2/hi/business/7057577.stm
Giordan, D. (2016). Nike’s Digital Strategy: A User-Focused Model We Can All Learn From. Retrieved from http://digitalmarketingmagazine.co.uk/articles/nike-s-digital-strategy-a-user-focused-model-we-can-all-learn-from/3328
Lu, Y., Karpova, E. E., & Fiore, A. M. (2011). Factors influencing international fashion retailers' entry mode choice. Journal of Fashion Marketing and Management: An International Journal, 15(1), 58-75.
Outletsheet.com. (2016). Nike Outlet Near Me in UK, Store Locations and Opening Hours | Outlet Sheet. Outletsheet.com. Retrieved 29 August 2016, from https://www.outletsheet.com/uk/brand/nike-outlet.html
Soni, P. (2014). Traditionally Innovative: The History of NIKE. Retrieved from http://marketrealist.com/2014/12/traditionally-innovative-the-history-of-nike/
Ogden, M. (2015). Manchester City to open talks with Nike to improve on £12-million-year-a-year kit deal currently in place. Telegraph. Retrieved 30 August 2016, from http://www.telegraph.co.uk/sport/football/teams/manchester-city/11339387/Manchester-City-to-open-talks-with-Nike-to-improve-on-12-million-year-a-year-kit-deal-currently-in-place.html
