Nike's Business Strategy in Rikert and Christensen's Essay

Nike's Business Strategy in Rikert and Christensen's "Nike (A)"

In the 1970s Nike developed a strategy that broadened its base from specialized athletic footwear to popular consumer-based fashion footwear. By the 1980s Nike foot apparel had dominated the market, appearing on the feet of everyone from American youths to Olympic runners. Nike's strategy was to combine serious technology with the popular taste for casual wear and comfort. As David C. Rikert and C. Roland Christensen report, "Running was never the lifeblood of running shoe sales. Comfort was" (Rikert, Christensen 1990:3). This paper will analyze Nike's strategy and show why it has been successful.

The Nike Strategy

Nike's 1970s strategic rise from 1960s obscurity was based on the fact that a new market was opening in American culture. The new market had precise parameters: "comfort and appearance formed the basis of the 'ath-leisure' segment of the market" (Rikert, Christensen 1990:3) and Nike produced a product that appealed to consumers who wanted to be sporty, casual, comfortable, and fashionable all at once. Nike sneakers met the demand -- and even helped "to stimulate" it (Rikert, Christensen 1990:1) by paying for visibility. Nike's self-promotion in the new market arena of fashionable leisure and sport footwear helped fuel the company straight to the top. Nike, in other words, developed brand loyalty by catching on to a changing tide in cultural style and then paying "athletes and organizers of sporting events" to wear its product (Rikert, Christensen 1990:4). Nike's strategy was to appeal to a mass-market by hiring the best advertising money could buy: the very athletes themselves like whom millions of Americans wanted to be.

Nike was also able to appeal to submarkets within the branded athletic footwear industry. By 1982 Nike had scored a majority of shares in the racquet and running shoe market as well as a significant portion of the basketball shoe market. Nike's competitors, Adidas and Puma, had left the door open for another major developer -- Adidas by being heavy-handed with dealers and distributors, and Puma by simply failing to "keep up with the expansion of the U.S. market" (Rikert, Christensen 1990:5).New Balance, developed by professional runner Jim Davis, produced a premium shoe at a premium price in 1982, illustrating the company's emphasis on "performance and function," but at such an exorbitant rate New Balance could not appeal to mass-market middle-income families to whom Nike appealed. New Balance also failed to secure the ath-leisure apparel market, instead choosing "to supply only authentic performance clothing" (Rikert, Christensen 1990:7). Nike, on the other hand, "sold a full line that included both performance and ath-leisure items" (Rikert, Christensen 1990:7). Again, Nike was positioning itself to appeal to a broad base whose changing cultural trend was supported by the ath-leisure manufacturer.

The Beginning Strategy

Nike's visionary Phil Knight (a runner himself) had wanted to create a product that was high in quality and low in price and that could compete with Adidas (a German-based company). He saw no sense in using German equipment. Rather, he looked to Asia: "I thought it might be possible to take over the market with low-priced but high-quality and smartly merchandised imports from Japan, as had already happened with cameras and other optical equipment" (Knight qtd. In Rikert, Christensen 1990:8). Knight responded to the change in manufacturing practices and saw potential for building a company to rival the dominating Adidas.

That company was called Blue Ribbon Sports (BRS), and it had its first go in the footwear market when Knight made a deal with Tiger shoes in Japan to import the Tiger brand. The business strategy in these early days was to elevate the shoe through design (Knight's partner Bill Bowerman designed "the first midsole, which Tiger agreed to incorporate in several of its models") and to get athletes to wear the shoes by "getting out to the tracks, to the locker rooms, showing the coaches and athletes our shoes, putting on clinics" (Rikert, Christensen 1990:8-9). In other words, Knight was comparable to a traveling salesman. But he and his team were successful salesmen, and when Tiger threatened to break their deal unless BRS hand over 51% of its shares, Knight and his team decided to take their business strategy to the next.....