Nikeshoes industries limited
BACKGROUND OF THE PROBLEM
Since the late 1980s, Business School marketing professor Itamar Simonson has looked for ways to understand how consumers make choices. Much of his work debunks the accepted theory that giving consumers what they want and making a profit are the most basic principles of marketing. Customers may not know what they want, and second-guessing them can be expensive, says the professor who teaches MBA and PhD marketing and consumer decision-making courses. In Simonson’s words, “The benefits and costs of fitting individual customer preference are more complex and less deterministic than has been assumed”.
That’s because “customer preferences are often ill-defined and susceptible to various influences, and in many cases, customers have poor insight into their preferences”. In one of his recent papers, Simonson tackles the issue of one-to-one marketing and mass customization. Supporters of these marketing approaches have suggested that learning what customers want and giving them exactly what they want will create customer loyalty and an insurmountable barrier to competition.
In an example taken to the extreme in the 2002 movie Minority Report, Tom Cruise’s character runs through a shopping mall past talking billboards that recognize him by name and urge him to buy products he had earlier expressed an interest in such as jeans and Ray-Bans, the ultimate in personalized advertising. But Simonson has this to say: The fact that consumer preferences are often fuzzy, unstable, and manipulatable is unlikely to change. So, the effectiveness of methods to give customers exactly what they want has been grossly exaggerated.
In studies, he has learned that even when customers have well-defined preferences and receive offers that fit those preferences; it is far from certain that the response to such offers will consistently be more favourable than those directed at larger market segments.
It’s all psychology. Consumers with well-defined preferences may be sceptical that a marketer could match expectations. Those who don’t know what they want may not ever see the fit with what the seller wants them to buy. So, individualized offers depend on customers preferences & how the offer was extended & and on trust. Effective individual marketing requires not only an understanding of individual preferences and matching offers to those preferences, but also a thorough familiarity with the various factors that impact customer’s responses. This is a tall order, one that some companies have been able to fill, at least to some extent. For example, Amazon keeps track of customer’s purchases and suggests other books they might like. Dell builds computers from mass-made parts to customers’ specifications. But Simonson argues some companies can take the concept too far, like the Custom Foot chain of shoe stores that took detailed measurements and specifications from each customer to design one-of-a-kind shoes. Custom Foot didn’t take into account that some customers were put off by the individualized attention, Simonson says, and felt obligated to buy the shoes because the store went to so much trouble. They often didn’t come back. So knowing only the customer preferences is not enough. It is required to understand other aspects of customer behaviour. Keeping this in mind, present study will find out and analyze consumer behaviour of Nike shoes.
About The Industry
Nike, the number one manufacturer of footwear and apparel, has become a household name on the same level as mogul companies McDonald’s, Coca-Cola and Budweiser. Nike was founded in 1964 by track coach and runner duo Bill Bowerman and Phillip Knight as Blue Ribbons Sports, later becoming Nike, Inc. in 1978. The name Nike was chosen in reference to the Greek Goddess of victory. Nike, the Greek goddess of victory, helped others succeed in times of war. NIKE, the world’s #1 shoemaker, does more dominating than assisting, to capture a hefty share of the athletic shoe market. It designs and sells shoes for a variety of sports, including baseball, cheerleading, golf, volleyball, hiking, tennis, and football. NIKE also sells Cole Haan dress and casual shoes, as well as athletic apparel and equipment. In addition, NIKE operates NIKETOWN shoe and sportswear stores, NIKE factory outlets, and NIKE Women shops.
Nike didn’t run TV ads until 1982. Previously, Nike concentrated on sponsorships and celebrity athletes’ endorsements – including both professional athletes and college teams. The first professional athlete endorser was Ilie Natase – a Romanian tennis player. The first track and field athlete to endorse the brand was Steve Prefontaine. Nike has signed top athletes in the sports of Football, Basketball, Soccer, Baseball, Cycling, Golf, Tennis, Skateboarding, Boxing, Track and Field and Formula 1 Racing. One of Nike’s best PR decisions was signing Michael Jordan as a celebrity endorser in 1984.
Nike’s steady competition in the 1980s was Reebok. To break any similarities they had to Reebok, Nike began promoting its shoes as fashion accessories. Reebok had cornered the younger, aerobics audience, so Nike started concentrating their ads around the person wearing the product rather than the product itself. In the 80s, Nike grew to hold 50% of the market share in the athletic shoe market.
In 1988, Nike employees met with advertising agency Wieden and Kennedy (formed in 1982). In the midst of the meeting, Dan Weiden turned to the Nike employees and said, “You Nike guys, you just do it.” And so the infamous Just Do It tagline was born.
Nike currently enjoys a 47% market share of the domestic footwear industry, with sales of $3.77 billion. NIKE sells its products in more than 180 countries, for over twenty-five years and there are over 500,000 people today directly engaged in the production of their products. They utilize an outsourcing strategy, using only subcontractors throughout the globe. Their majority of their output today is produced in factories in China, Indonesia, and Vietnam, but they also have factories in Italy, the Philippines, Taiwan, and South Korea. These factories are 100% owned by subcontractors, with the majority of their output consisting solely of Nike products. However, Nike does employ teams of four expatriates per each of the big three countries (China, Indonesia, Vietnam), that focus on both quality of product and quality of working conditions, visiting the factories weekly. They also developed their code of conduct in 1992 and have implemented it across the globe, as its goal is to set the standard for subcontractors to follow if they wish to do business with Nike. However, due to a manufacturing network of this magnitude, they have faced numerous violations involving factory conditions and human rights issues, which have been widely publicized.
Nike, Inc. is engaged in the design, development and worldwide marketing of footwear, apparel, equipment and accessory products. Nike’s athletic footwear products are designed for specific athletic use, although some of its products are worn for casual or leisure purposes.
The Company creates designs for men, women and children. Running, basketball, children’s, cross-training and women’s shoes are the Company’s top-selling product categories. Nike also markets shoes designed for outdoor activities, tennis, golf, soccer, baseball, football, bicycling, volleyball, wrestling, cheerleading, aquatic activities, hiking and other athletic and recreational uses. Nike sells active sports apparel that covers most of these categories, athletically inspired lifestyle apparel and others.
Nike’s mission is to bring inspiration and innovation to every athlete in the world, and the company says further that “If you have a body, you are an athlete. The firm’s overall vision includes providing a full range of high-quality, performance-oriented and technologically sophisticated athletic shoes and a variety of accessories targeting individuals of all ages, in all market segments.
Nike Air Max+2009
Nike’s patented Nike Air Max+2009 Light Architecture selectively alters maximum cushioning, maximum comfort & a premium ride. High-end technology combines with streamlined design in the Nike Air Max+ 2009 Running Shoe for a premium ride and fit built for speed. Ideal if you’re a runner with an underpronated to neutral gait, the Air Max+ 2009 boasts maximum comfort and cushioning from heel-strike to toe-off. The full-length articulated Max Air unit provides exceptional cushioning and allows for a smoother, more natural range of motion through every foot strike.
The Nike Air Max line has had a long and impressive history of constantly innovating and providing stylish ultra-functional sneakers in the process. The latest offering in the line is the Air Max+ 2009 Running Shoe, a sleek new model with some very nice touches like Flywire technology and a full 360 Air Max sole unit. The shoe also features a partially transparent upper that reveals the Flywire and a mesh under layer. The fellas will have grey/black/red and Silver/volt/black colour ways to sink their teeth into, while the ladies versions will come in grey/orange and grey/silver/liquid lime.
The Features of Nike Air Max+2009:
The State of the art Flywire
An ultra-strong and ultra-light Flywire provides both targeted support and a uniquely dynamic fit.
The Acclaimed Max Air
A full-length articulated Max Air unit provides maximum cushioning to give a smoother ride.
A Cushy Ride
Full-length Cushion combines plush cushioning with springy resilience for both comfort and protection.
Cutting Edge Engineering
Ensure better runs with the engineered heel collar that conforms to the shape of foot for a more comfortable fit and feel
Strategically placed lugs and a waffle-like outsole gives an optimal traction, durability and cushioning.
How Nike Air Works
Durable, Versatile, Revolutionary, Nike Air was the first air technology developed at Nike, and it changed the way of thinking about cushioning: encapsulated air to cushion the foot strike in athletic shoes. It remains the standard in impact protection more than 20 years after its debut.
How Nike+ Works
Nike+ is designed for athletes who like to run with music and who want to measure and monitor their progress toward their goals. To get instant workout feedback, you’ll need Nike+ ready shoes and either a Nike+ SportBand or an iPod® nano and Nike + iPod Sport Kit (which includes a sensor and iPod nano receiver).
When placed under the sockliner of the left Nike+ ready shoe, the sensor measures your pace, distance, time elapsed and calories burned. This information is transmitted wirelessly to the receiver for real-time audio feedback while you listen to your favorite workout music.
Nike is a language of sports, a universally understood lexicon of passion and competition. A lot has happened at Nike in the 30 years since they entered the industry, most of it good, some of it downright embarrassing. But through it all, Nike remain totally focused on creating performance opportunities for everyone who would benefit, and offering empowering messages for everyone who would listen.
What started with a handshake between two running geeks in sleepy Eugene, Oregon, are now the world’s most competitive sports and Fitness Company. The World Headquarters is in Beaverton, Oregon. The Pacific Northwest is Nike’s hometown, but like so many ambitious souls, Nike has expanded their horizons to every corner of the world. Nike employs around 23,000 people, and every one of them is significant to our mission of bringing inspiration and innovation to every athlete in the world. Along the way Nike joined up with some great partner companies that help extend our reach within and beyond sports.
Cole Haan offers casual luxury footwear and accessories out of New York City and Yarmouth, Maine. Bauer Nike Hockey, based in Montreal, Quebec, is the world’s leading manufacturer of hockey equipment and a wholly owned subsidiary of Nike, Inc. Nike partnered with Hurley International, a premium teen lifestyle brand founded by 20-year industry veteran Bob Hurley based in Costa Mesa, California.
In 2003, Nike completed the acquisition of Converse, the globally recognized footwear brand with nearly a century of sports heritage and home of the perennially popular Chuck Taylor All-Star and Jack Purcell footwear.
In August 2004, Nike created the Exeter Brands Group, a wholly owned subsidiary, dedicated to building athletic footwear and apparel brands for the value retail channel. This portfolio of brands includes the Official Starter Properties LLC and Official Starter LLC which are the sole owners and licensors of the Starter, Team Starter and Asphalt brand names as well as master licensee of the Shaq and Dunkman brands, a line of athletic apparel, footwear and accessory products for the value retail channel.
The Nike family is a fairly vast enterprise. Nike operates on six continents & Nikes suppliers, shippers, retailers and service providers employ close to 1 million people. The diversity inherent in such size is helping Nike evolve its role as a global company. They see a bigger picture today than when they have started, one that includes building sustainable business with sound labour practices. Nike retains the zeal of youth yet act on our responsibilities as a global corporate citizen.
“If you have a body, you are an athlete. And as long as there are athletes, there will be Nike”.
Bovine skin was by far the most preferred leather material, followed by goat/kid/lamb/sheep skin and crocodile skin.
Respondents overwhelmingly preferred the colour black and to a lesser extent, dark brown. For handbags/briefcases, popular colours included light brown, white and red. Consumer Segments with the Biggest Spending Power Male professionals, managers and executives are the segment with the biggest spending power for now and in the coming three years.
The Competitiveness of Hong Kong Brands/ Suppliers of Leather Consumer Goods. Most retailers consider Hong Kong brands to be either very competitive or quite competitive in both high-end and mid-range segments, but less competitive in the low-end segment. The competitiveness of Hong Kong brands mainly rests on their product style/design and quality, with most respondents picking those as the major reasons behind the attractiveness of Hong Kong brands in the high-end and mid-range segments respectively.
Apart from delivering a pair of comfortable sports shoes Nike also provides a number of value-added features with its products. The features that are a part of every Nike sports shoe are as follows.
High Performance Sports Shoes: Nike has patented the “Air” system and has made it into a regular feature in most of its models. Many models feature an air pocket in the shoe that reduces the weight of the shoe and reduces pressure on the heels. The overall design and compactness of the shoes have made it a favourite of many professional athletes around the world.
Comfort: Nike shoes are renowned all over the world for the comfort they provide. Well padded and cushioned, they provide a tremendous level of comfort to the wearer and reduce the strain to his feet while playing.
Lightweight: This attribute is in line with the two described above. A lightweight shoe provides greater mobility and eases the pressure on the feet of the wearer.
Durability: People purchasing a pair of shoes at such a high price often feel that they have made an investment. They would obviously want to see their shoes last a long time. To prove this point we draw the example of the authors of this marketing plan. All of us own a pair of Nike’s and have been wearing them for well over two years – a symbol of the durability of Nike shoes.
Style: Nike’s designs are considered to be the most stylish in the industry and beat all others as far as looks are concerned. Attractively packaged, it is a delight to bring a pair home. Add to this the “Swoosh” – the most recognizable symbol in sports and you have a product that would give the user a definite sense of pride.
Nike shoes also come with a guarantee card that enables the owner to return it in case of manufacturing defects. However, owing to the fact that the company implements strict quality control measures, coming across a defective pair in a store are a rarity. The most recent additions to their line are the Nike 6.0 and Nike SB shoes, designed for skateboarding. Nike has recently introduced cricket shoes, called Air Zoom Yorker, designed to be 30% lighter than their competitors’. Nike positions its products in such a way as to try to appeal to a “youthful….materialistic crowd”. It is positioned as a premium performance brand.
Research comprise defining and redefining problems, formulating hypothesis or suggested solutions, collecting, organizing and evaluating data, making deductions and reaching conclusions and at last carefully testing the conclusions to determine whether they fit the formulating Hypothesis.
In short, the search for Knowledge through Objective and Systematic method of finding solutions to a problem is Research.
· To study the tastes, preferences and buying behaviour of consumer in case of foot wear of Nike.
· To analyze buying behaviour of consumers.
· To recommend strategies to Nike to increase sales.
· SWOT analysis of the product sold.
· Comparative study with the competitors.
TYPE OF RESEARCH: –
Descriptive research includes Surveys and fact-finding enquiries of different kinds. The main characteristic of this method is that the researcher has no control over the variables; he can only report what has happened or what is happening.
There are two types of data.
Source of primary data for the present study is collected through questionnaire and answered by consumers of Nike shoes. The secondary data is collected from journals, books and through Internet search.
The data that is collected first hand by someone specifically for the purpose of facilitating the study is known as primary data. So in this research the data is collected from respondents through questionnaire.
For the company information I had used secondary data like brochures, web site of the company etc.
The Method used by me is Survey Method as the research done is Descriptive Research.
Selected instrument for Data Collection for Survey is Questionnaire.
QUESTIONNAIRE DESIGN FORMULATION
Under this method, list of questions pertaining to the survey are prepared for marketing staff of consumers of Nike shoes. Questionnaire has structured type questions as well as unstructured type questions. Structured objective type questions are prepared for the respondents with fixed response categories. Some of the questions are of multiple-choice type. The questions have more than one alternative.
Questionnaire: – A questionnaire consists of a set of questions presented to respondent for their answers. It can be Closed Ended or Open Ended
Open Ended: – Allows respondents to answer in their own words & are difficult to Interpret and Tabulate.
Close Ended: – Pre-specify all the possible answers & are easy to Interpret and Tabulate.
TYPES OF QUESTION INCLUDED:
DICHOTOMOUS QUESTIONS: –
Which has only two answers “Yes” or “No”?
MULTIPLE CHOICE QUESTIONS: –
Were respondent is offered more than two choices.
IMPORTANCE SCALES: –
A scale that rates the importance of some attribute.
RATING SCALE: –
A scale that rates some attribute from “highly satisfied ” to “highly unsatisfied” and “very inefficient” to “very efficient”.
SAMPLING UNIT: –
Who is to be surveyed? The marketing researcher must define the target population that will be sampled.
The sample Unit taken by me is to the General public of different age group, different gender and different profession.
Where the survey should be carried out?
I have covered entire residential area of Dubai city for the survey.
When the survey should be conducted?
I conducted my survey for 8weeks from 10th may to 10th July
SAMPLING FRAME: –
The source from which the sample is drawn
SAMPLING TECHNIQUE: –
How the respondent is chosen?
In the Project sampling is done on basis of Probability sampling. Among the probability sampling design the sampling design chosen is stratified random sampling. Because in this survey I had stratified the sample in different age group, different gender and different profession.
Consumers of shoes, 50 no:
STEPS FOLLOWED IN COMPLETING THE STUDY:
(ii) Internet sites containing information on Nike shoes & marketing are browsed.
(iii) Journal containing info
(iv) Sample survey was conducted
(v) Data was thoroughly checked for error.
DATA PROCESSING METHODOLOGY
· Once the primary data have been collected, they are edited – inspected, corrected and modified.
· Tabulation – bring similar data together and totalling them in meaningful categories.
Questionnaires are edited both in the field and later in home. Field editing took place just often the interview. Generally editing is required for open type of questions. Brief notes or symbols are frequently used during the interview to initially record the interviewer’s response since it was not desirable to interrupt the flow with lengthy note taking.
The responses are thoroughly checked at home for incorrect, inconsequential or contradictions categories are developed only often the replies has been reviewed. This review provided a feel for the pattern of answers and thus determine what categories best represent the answers. The collected data are placed in an order. Percentages of respondents answered similarly are calculated and placed in a table. Then this is interpreted. Interpretation changes the new information immerging from the analysis into information that is pertinent or relevant to the study.
CONCLUSION WAS DRAWN BASED ON THE SURVEY FINDINGS:
Finally recommendation was made to improve the sales strategy of Nike shoes to increase the sales volume.
THE BASIS OF SAMPLING: –
Consumers of Nike shoes are chosen randomly, so that unbiased, representative sample may be obtained.
LIMITATIONS OF RESEARCH
The geographical area was very much limited to residential area & so the results are not particularly reflection of the current behaviour.
BIASES AND NON-COOPERATION OF THE RESPONDENTS:
The collected data are placed into an order. Percentages of respondents answered similarly are calculated and placed in a table. Then this is interpreted.
This involved drawing conclusion from the gathered data. Interpretation changes the new information immerging from the analysis into information that is pertinent or relevant to the study.
Due to limited time period and constrained working hours for most of the respondents, the answers at times were vague enough to be ignored. Most of the people take their Nike Shoes in the period preceding March & so the response to initial contacts were not all encouraging and that has been the primary reason in the inability to quantify the results large enough so as to deduce any relevant outcomes.
NIKE INDUSTRIES LTD. – A COMPANY PROFILE
Nike India Ltd (BIL) is India‘s largest footwear company. Nike first established itself in India in 1931 and commenced manufacturing shoes in Batanagar in 1936. The company has its Headquarters in Kolkata and manufactures over 33 million pairs per year in five plants located in Batanagar (West Bengal), Faridabad (Haryana), Bangalore (Karnataka), Patna (Bihar), Hosur (Tamil Nadu). It secures its leather supply from two tanneries in Mokamehghat (Bihar) and Batanagar (West Bengal). It has a distribution network of over 1,500 retail stores and 27 wholesale depots provide excellent access to consumers and wholesale customers throughout India.
As on December 31, 2006, the Canadian parent had a 51 per cent stake while institutional holding was about 13 per cent.
Nike India has said that it’s Faridabad and Mokamehghat units are being taken over by Fashion Shoe Private Ltd and BDCL Enterprises Pvt Ltd, respectively. The company is also enabling the buy back provision in its Articles of association to enable buy back of shares.
The assets and liabilities of both the units will be transferred to these companies and shares will be offered in the agreed ratio to the existing shareholders of Nike India Ltd on a record date, which will be fixed by the Calcutta High Court.
While retail sales have increased both in value and volume, wholesale sales have declined due to restriction of supplies as a means to recover customers outstanding. General recession and sluggish market conditions in the industry also have had a direct impact on lower sales and profitability. Resistance of consumers to price rises in popular volume products as well as discounts to clear slow-moving stocks and under utilization of production capacity adversely affected the operational results. The lockout declared at the Peenya factory on October 1, 2008 due to serious industrial relation problems and non-compliance with the tripartite settlement has been withdrawn. The footwear manufactured in this factory, which was shifted to the company’s other factories and associated manufacturers, will now be gradually produced within the factory.
In Simonson’s words, “The benefits and costs of fitting individual customer preference are more complex and less deterministic than has been assumed”. That’s because customer preferences are often ill-defined and susceptible to various influences, and in many cases, customers have poor insight into their preferences. In one of his recent papers, Simonson tackles the issue of one-to-one marketing and mass customization. Supporters of these marketing approaches have suggested that learning what customers want and giving them exactly what they want will create customer loyalty and an insurmountable barrier to competition.
But Simonson has this to say: The fact that consumer preferences are often fuzzy, unstable, and manipulatable is unlikely to change. So, the effectiveness of methods to give customers exactly what they want has been grossly exaggerated. His take on the long-held assumption that individual marketing will supplant targeted marketing is “not so fast”. In studies, he has learned that even when customers have well-defined preferences and receive offers that fit those preferences; it is far from certain that the response to such offers will consistently be more favourable than those directed at larger market segments.
It’s all psychology. Consumers with well-defined preferences may be sceptical that a marketer could match expectations. Those who don’t know what they want may not ever see the fit with what the seller wants them to buy. So, individualized offers depend on customers’ preferences & how the offer was extended & and on trust. Effective individual marketing requires not only an understanding of individual preferences and matching offers to those preferences, but also a thorough familiarity with the various factors that impact customers’ responses, Simonson writes. This is a tall order, one that some companies have been able to fill, at least to some extent. For example, Amazon keeps track of customers’ purchases and suggests other books they might like. Dell builds computers from mass-made parts to customers’ specifications. But Simonson argues some companies can take the concept too far, like the Custom Foot chain of shoe stores that took detailed measurements and specifications from each customer to design one-of-a-kind shoes. Custom Foot didn’t take into account that some customers were put off by the individualized attention, Simonson says, and felt obligated to buy the shoes because the store went to so much trouble. They often didn’t come back. So knowing only the customer preferences is not enough. It is required to understand other aspects of customer behaviour. Keeping this in mind, present study will find out and analyze consumer behaviour of Nike shoes with reference to ladies segment.
The management says that it is not averse to outsourcing if it worked out cheaper. It is also open to the idea of importing shoes – mostly from China – if it works out cheaper.
Nike and Reebok India Company have announced an agreement to foray into retailing partnership for sale of Reebok and Rockport footwear in Nike outlets.
The partnership entails retailing a range of sports shoes for walking, running, tennis and training for personal fitness and sports.
An attractive valuation compared to its peers is the main trigger for the scrip. Besides, the company’s aggressive focus on retailing and revamping of business (a division into shoes and apparels) is also helping sentiment for the scrip. Plans are afoot to start selling apparel in India made by the joint venture North Star. There’s talk that the company is planning on a voluntary retirement scheme (VRS) to cut costs.
For the third quarter ended 30 September 2007, Nike India reduced its losses to Rs.5.68 crore on a 9.2% increase in net profit to Rs.154.27 crore. Despite reducing its losses for the quarter, Nike India has, over the last few quarters, been continuously recording weak performances as a result of an overall slowdown in the industry due to lower consumer spending. Increasing domestic competition, particularly from the unorganized sector, has also been eroding into the company’s market share.
The company is finding it difficult to maintain its market share in a highly price-sensitive Indian market, despite having strong brand recall. 97% of the company’s revenues are from the domestic market while the remainder is from exports. Nike India is the biggest player in the Indian shoe market.
Nike India’s major problems include its high cost of production and low emphasis on marketing. The company may be able to address the first problem through outsourcing products. Bata’s brand image has been restricted to that of a company that emphasizes on utilitarian products more than trendy ones. Customers feel the company is lacking in innovation. Hence, their preference has shifted to other local brands.
Nike India has a large marketing network with over 1,600 showrooms, 35 wholesale depots and eight retail distribution centres across the country.
Besides, there is a network of 500 exclusive wholesalers servicing 30,000 dealers all over the country. However, in spite of this and the license to sell other brands like Nike, Hush Puppies and Lotto, Nike has not been able to improve sales consistently. The recent rise i