Key Value Propositions

Nike’s key value propositions are focused on their customers. They have created a strong
base of loyal customers by providing superior products manufactured from the best quality
materials. They lay huge emphasis on constant innovation by leveraging latest technologies
to create items of finesse. While doing so they have made sure that their products are in
line with the current fashion and lifestyle trends. In order to identify with larger masses and
grab consumers’ attention, they partner with supreme athletes and sports stars.

The four main segments of Nike’s value proposition:

1. Accessibility: Nike has spread out to numerous locations globally, in both official
outlets and online stores. They offer a wide variety of products and have made them
available through various platforms, especially the athletic wear shoes, making sure
that the customers can easily reach out to them in their everyday life.
2. Customization: The company realizes the relevance and importance of customization
as perceived by the people. Through their services like ‘NikeID’ and ‘Nike By You’,
they allow customers to personalize and customize their items. The service is
available through online use and they have also set up physical studios in a few
countries.
3. Innovation: The company’s targeted buyers have shown interest in products with
latest innovations. This segment is willing to pay and has continually displayed its
willingness to keep buying the latest products. Hence, the company maintains the
‘Explore Team Sport Research Lab’ and ‘Nike Advanced Product Creation Center’.
4. Brand/Status: Over the years, Nike has partnered with numerous athletes and sports
teams. As a result, it has successfully established itself as a strong brand. The
partnerships have increased the brand’s equity as Nike realizes the benefit of
capitalizing the athlete’s positive public image. Moreover, the customers have an
impression that using the shoes that are worn/endorsed by athletes notably
improves their own performances.

Competitor Analysis

To get a better understanding of the competition in the industry and the forces at play, we
take help of the Porter’s five forces model.

1. Competitive Rivalry: Nike has a lot of competitors in the running shoes category of
the sportswear industry. Some of its biggest competitors are Adidas, Puma and
Under Armour. The level of competition has stayed strong as the industry has grown
saturated and the existing competitors are neck-to-neck for deeper market
penetration and take away the others’ market share. Due to the fierce nature of
rivalry, companies who dominate the market do so with strategic marketing, high
capital expenditure and strong brand identity. Even though the number of direct
competitors is low, in a slow growing industry like this, the level of competition is
strong.
2. Bargaining Power of Suppliers: Nike has a strong control over its suppliers. The
products are manufactured globally in over 42 countries. The number of suppliers is
 high and they are scattered throughout the world. Individually, they cannot exert
pressure on the company. Moreover, the brand audits them regularly for compliance
with the standards it has set. If the supplier is not in compliance with these
standards, the company can switch to another. In such a case, the supplier would be
at loss by losing a major source of revenue. Thus, the overall bargaining power of
suppliers is low.
3. Bargaining Power of Buyers: Apart from big names like Adidas, Puma, Reebok and
Under Armour, there are many other local and international brands that Nike has to
compete with. In such a case, the switching cost for a customer is very low. The
customers are price sensitive and tend to buy a relatively cheaper product. Nike has
been able to mitigate the risk of losing customers by focusing on performance and
design, hence being able to build good customer loyalty. These customers are
knowledgeable about the quality of shoes and are willing to buy high quality and
expensive shoes. Overall, the power of buyers is moderate.
4. Threats of Substitutes: A larger number of competitor brands manufacture similar or
matching products. There are other international and local brands as well that
provide low priced running shoes compared to Nike. This means that customers have
considerable alternatives to Nike’s products. The low switching costs further add to
the threat. This factor is moderated by the design and quality that Nike offers in its
products. Overall, the threat of substitution is moderate.
5. Threats of New Entrants: The market for running shoes has grown saturated. The
high cost of brand development makes it tough for new entrants to succeed against
competitors like Nike, Adidas, etc. Any new entrants’ ability to disrupt the industry
environment is further limited by the moderate cost of doing business. It’s difficult
for new companies to be recognized in a short period of time. Large companies can
attract more customers by offering discounted prices but new companies cannot
afford the loss by offering discounts. Therefore, the threat of a new entrant is low for
Nike.