Essay: The Business of Fashion on the Example of Nike and Adidas Companies

2021-06-26 15:14:05
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George Washington University
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Remaining competitive in the fashion industry is not easy, and therefore businesses find out ways to outdo their competitors and achieve a competitive advantage (Park & Kincade 2010, P.187). In this paper, the two fashion companies under comparison are Nike and Adidas shoe distributors. The research question is the strategies used by Nike and Adidas footwear businesses to gain a competitive advantage.

Nike Inc. came into the footwear industry in 1962, and Bill Bowerman and Phil Knight founded it with $1,000 capital as a partnership and named it Blue Ribbon Sports. The goal of the founders was to distribute high quality but low-cost Japanese athletic shoes to the American consumers with the aim of breaking the Germanys domination in the local industry (Stapleton 202, P.102). Nike maintains both the traditional and non-traditional channels of distribution of its products to over a hundred countries with its primary market regions as the United States, Asia Pacific, Europe and the Americans (Park & Kincade 2010, P.183). In 1972, BRS and Tiger broke their relationship, and BRS named itself Nike Inc.

Nike grew in popularity that in 1979 they owned 50% of the United States running market. In 1980, Nike had a total of 2,700 employees and sold two million of its shares on New York Stock Exchange. Nike expanded the product line and included the apparel for a diversity of sports (Locke 2003, P.40). The sales revenues raised to two billion dollars and the number of employees as 5,300 worldwide. In 1991, the income were three billion dollars, and growth continued throughout 1990s as the marketing efforts focused major sporting events such as the World Cup. By the end of 1990s, the goal of Nike was to be a truly global brand (Mahdi et al 2015, P.169).

Nike is the first supplier of athletic footwear and apparel in the world (Locke 2003, P.40). In 2016, the sales for Nikes brand were 13% worth $7.3 billion. Its sales had a double-growth in each of the geographic segments. A report by the PRNewswire indicated that Nike leads in the global footwear industry with Adidas coming second and Asics third. Nike has a market share of 90% in basketball footwear in the United States (Stapleton 202, P.102). The company leads in the footwear market in North America with a market share of 60%. The performance of this brand in the world shows its strength and ability to grow and seize share from the rising number of competitors.

Adidas sportswear company ranks number two in the world behind Nike. Adolf Dassler established the company in Germany in 1924. The design for the Adidas brand is the passion for excellence in sports and the innovative design that helps the athletes to perform to their best ability (Mahdi et al 2015, P.169). The focus of Dassler was on track and field disciplines.

Today, Adidas is a worldwide company as well as one of the largest brands in sports in the world. The product portfolio for Adidas is vast, ranging from sports footwear to clothing, bags, eyewear, watches, and other sports equipment. Adidas company employs more than 46,000 workers worldwide and consists of about 170 subsidiaries like TaylorMade- Adidas Golf, Reebok, CCM-Hockey, and Rockport. By the third quarter of 2014, the revenue for Adidas was 4.118 billion. Currently, Adidas enjoys a rapid growth of any product domestically with a 6% market share and a $500 million revenue. Nike shields Adidas from publicity.

Adidas is adjusting its manufacturing strategy from the vertical operation to an outsourcing focus. Adidas does not a code of conduct thus the company considered the worst in the industry. With the acquisition of Reebok, Adidas now boasts a forty percent of the US sports footwear market ((IBIS 2010, p.2). With the increased existence in the US, Adidas gains assault on territories, basketball, that no other company could venture except Nike.

Nike and Adidas use private contractors as low-wage suppliers in Indonesia, Thailand, and China. Therefore, the two companies have significant power in the industry. In the case of Nike, they do not produce their sneakers. Instead, they use the private servicers in Vietnam. Customers in the footwear industry switch between the two brands their reasons being a better price, new style, and higher quality. Although consumer loyalty to a brand makes them buy it again and again (KINETICS 2015 p.1).

Nike follows several strategies for it to become the leading athletic footwear designer in the world. One of these strategies is a continuous focus on innovation along with the emphasis on the research and development. The company, therefore, can produce the best footwear, apparel, and athletic equipment that eliminate injury, maximize comfort, enhance athletic performance, and user enjoyment (Dermesropia et al., 2004, P.13). According to Nike company, the heart of its business growth strategy is innovation, and it uses creativity to be a more stable company, keep up with competition as well as the customer demand (nikeandunderarmour 2015 P.1).

Another strategy employed by Nike is the premium pricing strategy, the best cost provider strategy. Here it targets clients with some intimacy to the product that creates loyalty. Nike then takes this advantage to associate the product price with their customers, knowing that consumers will be willing to pay any price for a product that bearing Nikes logo (sales-management 2007 P.6). Nike also concentrates on a broad differentiation strategy by producing the products in three ways. The first on is targeting on three customer segments: children, men, and women. Secondly, Nike differentiates a variety of apparels (gym bags, shoes, skates, and gloves) and accessories. The third way is that Nike has licensees that allow it manufacture and sell the Nike brand products such as electronic media devices, school supplies, and timepieces apart from the products (Dermesropia et al. 2004, P.14).

Nike adopts the market segmentation strategy that helps it to advertise its products through entering into sponsorship agreements with professional teams, celebrity athletes, and college athletic teams (nikeandunderarmour 2015 P.1). Additionally, Nike hires famous basketball players, golf superstars, and leading football scorers in an aim to emphasize the campaign for its products (biz journals 2015, P.2). The other strategy for Nike is Closed-Loop Business Model whose aim is to achieve zero waste through complete reusing, composting and recycling of materials thus its environmentally friendly (Nikebiz 2009, P.1).

Adidas focuses more on the differentiation strategy. Adidass corporate strategy level basis on innovation to produce new products, processes, and services to deal with competition. The multi-brand portfolio used by the group gives them a better competitive advantage (AG Strategy n.d., P.1). Adidas concentrations their investments in the top marketing and distribution channels by critically evaluating the buying behaviors of the consumers to secure a prime shelf space. Adidas also embarks on e-commerce to become more efficient, attract and retain more customers by making purchasing readily available for them.

They have a carefully communicated supply chain thus customizing their products. The Adidas organizational culture necessitates the employees to be innovative and produce goods that customers like using the latest technology. Adidas (2004, a) reports that through the use of modern technology, Adidas provides products that enhance the performance of the players. They were able to update the running shoes with the ClimaCool footwear technology that guides and drives the feet of athletes through each stride.

The comparison of the strategies by the two companies is as in the table below.

Nike Adidas

Focuses on domestic market

Shifts focus to soccer for global recognition

Started athlete sponsorship

Has new designs of shoes for customer attraction

Customizes their products

Uses oversea factories in manufacturing

Outsources most of its shoes Focus is on European market

Dominates the world market in soccer

Sponsors the sports teams and professional athletes to challenge Nike

Tries to cut the production cost and time

Applies low labor to cut costs

Expands market to apparel and sports equipment

Outsources but designing and development is in Germany

A strategy helps a business realize its capabilities as well as identify and address the weaknesses, mitigate business risks, understand the trends impacting on their operations and how to respond to them for sustained success. Adidas challenges the world footwear leader, Nike. Adidas strategies aim at reducing the cost and time of production, expanding the market share, and enhancing the product attractiveness. Nike uses design innovation along with marketing. I can recommend that the two companies broaden the variety of goods, increase the ways of marketing communication, and collaborate with Apple to incorporate modern technology. Proper control and management of labor issues are important as well. In the case of Nike, mergers and acquisitions will help expand the business hence global growth.



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