Financial Analysis and Strategic Objectives Essay
Due to a widespread economic letdown, Nike was in constant struggle in terms of sales in the U. S. while it was internationally expanding in Europe. Eventually, Nike was compelled to sell licensing rights to local distributors in Europe. The company initialized such plans in order establish its market niche in Europe, while it generates the needed funds for its business operations in the U. S. Repercussions from this move were felt by Nike; the company’s marketing control and monitoring drowned in mediocrity due to the improper way of conveying the Nike message, which caused its products to gain obscurity rather than popularity.
Phil Knight didn’t have penchant for advertising, with this in mind advertising budget for the company was inferior and under funded. Grassroots efforts by Knight seemed futile for Nike to generate revenues on a higher end. Eventually, as Nike embraced the sport of basketball, massive advertising has followed in order to stabilize the business. Nike launched a massive advertising campaign for its already popular basketball footwear line. Nike allocated an advertising budget of $5 million to $10 million from 1987 to 1988. Unfortunately, European consumers barely perceived Nike as both an expensive as well as an aggressive American
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The situation alleviated due to the proliferation of middle market shoes and a unique set of distribution tactics. Revenue increased along with the advertising budget due to an efficient and apt system of distribution. Advertising increased from $10 million to $50 million in 1989 to 1992. For its European advertising, the company allocated a hefty $100 million (Porter et al. , 2002). Operational and Environmental Analysis Since it penetrated the European market in 1980, Nike did not experienced major environmental ramifications. Liberal business environment has been steady. European region is regulated with apt social laws.
Bull and bear markets have been relatively stable. The region adheres to a firm intellectual property protection and contract enforcement laws. Albeit the cultural differences and eclectic language, Nike has perceived Europe as a favorable market segment to conquer and market its products. A handful of European countries like Spain, Italy, France, and Germany all account for the glut of European athletic apparel and shoe sales. The company’s profit margin was hurt by the strong foreign exchange by the U. S. dollar against European currencies, due to currency inconsistencies and sporadic fluctuations.
Even though the U. S. market letdown hampered Nike’s global expansion, sales and revenues recovered in the U. S. as Nike was still bent on global dominance. In order to initiate growth and progress, Nike generated marketing strategies to entice local consumers in Europe to perceive Nike as an expensive and aggressive American brand. Nike produced sports apparel and equipment for consumers to be widely exposed to the brand per se. In 1993, Nike revamped its marketing strategy, and decided to give emphasis on its apparel sales. Consumers perceive athletic apparel as a complementary product to shoes.
With this in mind, Nike produced non-athletic apparel for consumers to be more familiar with brand. Nike transcended its brand familiarity of performance sports and athletic footwear. The sports market apparel has been good to Nike, and has been relatively successful. It accounts for more than 50% of revenues in Europe (Porter et al. , 2002). Organizational Goals and Strategic Objectives With its roots tracing back to track and field sports, Nike saw an opportunity to penetrate the market that covers such sport. It is the second most popular sport in Europe.
Although Nike find easy way to enticed and sign up American athletes to endorse their products and bolster their sales, Nike experienced a hard time in luring European athletes to promote their products and the brand itself. Nike, being the American brand that it is, has no relative familiarity in Europe, which compelled Nike to ally itself to Europe’s largest local distributor of athletic shoe and sports apparel. Nike’s bootstrap solution only distanced itself more from potential consumers. Nike had to retrieve licenses from its distributors in order to manage and monitor its brand in Europe (Porter et al.
, 2002). Athletic shoe consumers were segmented by industry analysts: Casual wearers and Weekend Warriors. The former used athletics shoes for casual and streetwear. On the other hand, the latter used their shoes for sports but were not professional athletes. The marketing athletic shoe positioned professional athletes at a meager of segment. The pyramid of influence model suggested that weekend warriors and casual wearers are Nike’s cash cows. In the late ’80’s, the aerobics fad recently emerged in Europe and the women’s athletic shoes market remains to be tapped.
Nike saw an opportunity to overwhelm Reebok’s aerobic lead in the U. S. market by generating a counter-attack penetrating the European aerobics market. Sales were drastic. Nike’s sales of athletic footwear in the U. S. catapulted to 400 million pairs worth of footwear. Europe sold 130 million. Undoubtedly, Nike’s global integration paid off with this marketing strategy (Porter et al. , 2002). European revenues have catapulted to $150 million in 1987. It was the 5% of the entirety of the European athletic shoe market. Nike ignited its sales more by focusing in massive advertising and apt product strategies.
Nike was confident to reacquire its licenses, which European distributors made a poor selling from. In 1992, it has regained control of 90% of its European distribution. Europeans revenues grew to an estimated $1. 1 billions, which was six times revenues acquired in 1987. The centralized distribution in Europe paid off for Nike. Furthermore, it has generated a strong brand image and familiarity by employing European-flavored endorsements for both Europeans athletes and consumers. Nike personalized its shoe line and apparel for each European country (Porter et al. , 2002).