MiniCase 6 Nike\'s Core Competency: The Risky Business of Creating Heroes DURING
ID: 392825 • Letter: M
Question
MiniCase 6 Nike's Core Competency: The Risky Business of Creating Heroes DURING THE LAST DECADE, Nike's annual revenues doubled and by 2018 attained some $35 billion. With its globally recognized brand, Nike is the undisputed leader in the athletic shoe and apparel industry. Number-two adidas has some $22 billion in sales, while recent entrant Under Armour reports revenues of $5 billion. Nike is tremendously successful, holding close to a 60 percent market share in running shoes and nearly a 90 percent market share in basketball shoes and apparel. Yet one of its greatest strengths can also be seen as one of its greatest vulnerabilities Before we introduce that strength, it helps to know how Nike started Nike Co-founders: Bill Bowerman and Phil Knight The Beaverton, Oregon, company has come a long way from its humble beginnings. It was founded by University of Oregon track and field coach Bill Bowerman and middle-distance runner Phil Knight in 1964 and was first called Blue Ribbon Sports. In 1971, the company changed its name to Nike (Greek mythology's goddess of victory) with the now iconic "swoosh" designed by a Portland State University student BOWERMAN'S ROLE. Coach Bowerman was a true innovator because he constantly sought ways to give his athletes a competitive edge. He experimented with many factors affecting running performance, from different track surfaces to rehydration drinks. Bowerman's biggest focus, however, was on providing a better running shoe for his athletes. While sitting at the breakfast table one Sunday morning and absentmindedly looking at his waffle iron, Bowerman had an epiphany. He poured hot, liquid urethane into the waffle iron-ruining it in the process but coming up with the now famous waffle-type sole that not only provided better traction but was also lighter than traditional running shoes. IzO 12 10Explanation / Answer
1. The statement that Nike’s core competency is to create heroes means that the company has not based its core competency from its running shoes and sports apparels but from the fact that it creates heroes out of some popular athletes and athletes with good potential. In this strategy Nike identifies an athlete who is relatable to the masses and has the potential to become a future superstar. The athletes are then used in the company’s marketing campaigns and advertisements and are turned into sporting icons.
Yes it identifies as well as leverages the potential identified in a VRIO analysis. The athlete being picked is valuable as it is handpicked from a pool of good athletes. This puts Nike in a position that enables it to exploit the resource that is not available to its competition. The resource is rare as the rights of this athlete are solely with Nike. The idea of roping in an athlete is imitable but Nike has the unique ability to spot future superstars. Nike is well organized and in a position to sustain competitive advantage and dominate the market share.
2. Nike’s approach is highly dependent on the behavior, skills and performance of the athletes handpicked by them. The handpicked athletes are expected to behave in a manner that has been portrayed by Nike and when they behave on the contrary or are involved in some ethical disputes or are a part of a controversy then the brand image of Nike takes a hit. Yes this tipping point has already occurred with many of its sponsored athletes being involved in scandals and controversies. Examples are Tiger Woods, Lance Armstrong, Oscar Pistorius etc.
3. My recommendation for Nike is that they should reframe the hero that their campaigns are based on. Rather than looking to create famous personalities who are susceptible to controversies and scandals Nike should look at creating and finding everyday heroes. The company could like at people who have shown great strength, courage and determination to make a difference in other people’s life. They can pick a fireman who bravely rescued a woman from a burning building by risking his life, a policeman who single handedly busted a drug racket etc. The everyday heroes will be more relatable to the masses and will be able to stand the test of time.
4. Being a competitor I would exploit Nike’s vulnerability by starting to create heroes by identifying them quite early when the athletes are at a younger age. I will also exploit Nike’s past failures and use this to leverage my brand.
In terms of recommendations I would suggest Nike to create a guiding policy so as to be able to generate concrete ideas for its future. This will enable it to reposition its brand and re-define what a Nike hero is. The company should also focus more on product innovation and also emphasize the quality of their products in their campaigns.