MARKETING STRATEGIES OF NIKE
INC IN CHINA
Nike is the largest seller of sportswear in the world
with more than 200 subsidiaries across the world. China is one of the major
fastest growing markets in the world and the most popular markets for foreign
entrants. Nike had chosen China as one of the long-term most low-cost
suppliers. Nike started its production in 1981 in China. Since then, Nike is
one of the leading sports brand. China has to offer is labor capability to make
quality goods for Nike. In addition to that, China was also chosen because the
domestic market size.
China acknowledges that it is more important to focus on
its national priorities, such as supporting innovation, setting up outsourcing
industries and developing poorer regions. Moreover, China is also seen a
growing interest in professional sports, increased appreciation for fitness and
wellbeing and move towards athleisure as a fashion trend. As it is, China
succeeds in opening itself up to the world. Nike Inc was one of the successful
foreign companies which established themselves in the region and showed
significant rise in revenue and continuing to do so.
2. Economic factors:
Sportswear has been increasingly popular in
by a booming economy and rising disposable incomes. Over the last seven years,
the market has grown at a compounded annual rate of nearly 30% (Trefis, 2014).
Nike also showed a promising potential in the Chinese
sportswear market since 1981 when it first started production in China. The
figure bellow reveals Nike’s revenues from Greater China from 2009 to 2017.
Nike’s revenue in Greater China from 2009 to 2017, by segment (in million U.S. dollars)
Figure5: Nike’s revenue in Greater China from 2009 to 2017, by
segment (in million U.S. dollars). Reprinted from Statista. Retrieved from
Despite the rise and fall in the revenue in China over
the span of years, Nike is of course keen to keep up the pace in China. The
region is constantly fueled by high level of sport participation. The Shanghai
marathon for example was run by 38,000 athletes, with more than four times the
number wanted to participate. With digital market rising very rapidly, around
420 million Chinese citizens use the internet for online shopping. Apart from
the online marketing, Nike has established around 6000 stores in the region allowing
them to expand and have a positive impact. Let alone that China has most number
of Nike’s workers this is 175,960. This can be their competitive advantage
because the production rate of China is very high compare to other country.
3. Technological factors:
Nike Inc uses the latest
technology to innovate in so many different ways. From the designing of
products to interacting with customers, technology provides value to
organizations just like Nike. In addition to being one of the companies that
are testing the world’s first 3D printer designed for large-scale
manufacturing. Nike’s patents have nearly doubled since 2009 according to
Forbes. The company also gets the opportunity to use valuable
information based metrics thanks to technological advances, allowing them to optimize
targeting and production and maximize revenue (Bush, 2016).
The Chinese market represents a fertile land for Nike
as it is leading ahead of its competitors. However, there is still an intense
competition facing Nike, either from local brands such as Li Ning, Anta Sports,
China Dongxiang and Peak Sports or international brand such as Adidas, Reebok,
Asics, and New Balance. Nonetheless, Nike is well positioned at the top in
China. Analysts say that Nike, Adidas and New Balance, which command
higher prices than local brands, are viewed by Chinese consumers more as
fashion labels than sportswear (Hancock, 2017).
Market share of sportswear brands in China, 2016 (%)
Figure 6. Market share of sportswear brands in China,
2016 (%). Reprinted from Euromonitor, In Financial Times., Retrieved December
17, 2017, from https://www.ft.com/content/ea7ca9ac-040f-11e7-ace0-1ce02ef0def9
The prime target
of Nike Inc. is on athletes. They are the main consumers of Nike products. A
lot of its success has to do with practicality and efficiency of its items. Currently,
China’s government is implementing a wide range of reforms to support the sports
industry. Basketball has a tremendous effect on the sports market. Apart
from that, the Chinese
government plans to use sports to advance all sectors in the country, including
industry, state, and society.
focuses on teenagers of all socioeconomic classes and for those who don’t look
athletic and fashionable. They catch the attention of the athletic and outgoing
Nike strengths in the Chinese
market are various. The company is dominating the country’s sportswear market
with its solid brand. Moreover, Nike has no factories; rather it uses contract
factories to get the work done which makes it quite a lean company. It also
focuses on research and development which allows it to keep its products
updated with the latest innovations.
It is very challenging for a huge company such as Nike to
control the quality of millions of its products. However, Nike has involved in severe
quality scandals in China.
In a Chinese television,
Nike was accused for misleading information on limited sales of one model of
basketball shoes. Nike promoted the shoes as having air cushions in the heel,
which was not quite true. Nike admitted
a mistake in its description and deleted it from its website, and offered
customers full refunds, according to CCTV report (as cited in Leng, 2017)
It was not the only time Nike has been involved in a scandal
in China. According to Leng (2017): ” In 2012, the Beijing administration for
industry and commerce fined the sportswear brand 4.87 million yuan for selling
Hyperdunk 2011′, a basketball shoe that contained a single air cushion as
opposed to the double cushion promoted in its advertising materials”.
already has a presence in many emerging markets, it is believed that there is
still significant growth potential there. Rapidly growing economies like in China,
has the potential to drive future earnings growth of the company. As stated by McNew (2015):
” China was mentioned 49 times in Nike’s 2015
10-K for the fiscal year ended May 31. It’s no surprise, since the country was
its highest-growth region during the year…”
Moreover, the rise of China’s sports economy is very big
opportunity for sportswear companies such as Nike. As stated in Forbes by
Tuchman (2017): “It is estimated that more than 18% of athletically-engaged
Chinese people play basketball”.
exploding of the Chinese middle class is also considered as an opportunity for
international companies. That is to say more demand for goods. According to The
Economist Intelligence Unit report (2016): “By 2030, then, China will have many
of the characteristics of a middle-class society, according to our baseline projections.
Around three-quarters of the population could be defined as middle-income”
The sportswear market is very competitive in China. And rivals are
developing aggressive strategies to create high quality products and to minimize
Nike’s market share. Nike also admitted that it has been confronting
labor-related problems in China. According to Nike’s report, as cited in Nike
Faces Labor Problems in China,: “As China continues to develop we see progress
and best practices emerging. But like our partners in any other country, the
factories we contract with in China continue to face challenges as well.”
STRATEGIES OF NIKE INC. IN CHINA
Nike Inc. incorporates several innovative
strategies. Apart from the usual 4 P’s (Price, Product, Place, Promotion), there
are few strategies which can enable exploiting competitive advantage through
different goal-means combinations:
Multinational strategy allows international companies that have
taken up this strategy to achieve their strategic goals by focusing on national
differences. By adopting multinational strategy, Nike can achieve its strategic
goals by emphasizing on local environment and the culture of the market. As it
is, Nike is concentrating on the environment of the local markets which allow national
units to operate independently as they are doing in China for instance.
Famous athletes’ endorsements, is a strategy used by most of the world’s
biggest companies for the enormous impact it has on consumers. “In China,
sports celebrities have significant influence amongst the Chinese population,
especially with the young demographic, which consists 80% of China’s sport
market” (Philip, 2012).
The strategies above respectively possess
unique assumptions about how to build up global competitive advantage. Moreover,
Nike has used the Price Leadership Strategy and Value based pricing. This is
when a company sets its price based on the value the consumer places on the
product. This is why customer willing to pay high prices regardless of the
product’s actual value. Nike already had the strong brand recognition among the
people in China.
Nike has one of its remarkable product
creation center in Italy, where the designs are perfected at its best. Nike
Inc. ensures that these learning strategies are shared with their manufacturing
partners/units in Asia (China, Vietnam, India, etc.) which has led to its
phenomenal success in the game and raised the bar of delivering the best
products in the athletic industry.
For example, Liu Xiang, an Olympic Gold
medalist and World Champion. His 2004 Olympic gold medal was the first in a
men’s track and field event for China. His athletic gear was sponsored by Nike.
By this, they got a huge recognition among the people in China. Simple nut yet
effective strategy to create influence over its target group.
As the excess inventory of Nike in China,
they can cooperate with other parties such as their suppliers, distributor and
competitors to enhance their global competitive advantages in the increasingly
complex global environment. This is called strategic alliances. This also can
solve high discounting rate for Nike as their inventory level is stable, do not
need to discount to reduce inventory.
Last but not the least, facing immense
competition and failing to rise above others is always going to be one of the
greatest shortcomings that a company would face, which in this case, Nike has
to start standing out from its biggest competitors such as Li Ning and Adidas.
At the current state, Nike only has a marginal lead over the two companies.
However, the Chinese
market has shown good signs for the future. The rise of China’s population
to reach around 1.45 billion in 2030, and the
growing of the middle class are in favor of Nike. China has also seen a growing
popularity of sports especially basketball and football.