Nike Business Model Investigation

BUSINESS MODEL INVESTIGATION GORGY, Anne HO, Christoph KACZMARCZYK, Kama

Groups give us a sense of social identity: a sense of belonging to the social world.

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INTRODUCTION INSIGHT CHOICE CONTEXT ANALYSIS RESOLUTION CONCLUSION Theme • Focus

Anne • Christoph • Kama

Hasbro • Nike • Result

Background

Key Partners • Key Activities • Value Proposition • Customer Relationships • Customer Segments • Key Resources • Channels • Cost Structure • Revenue Stream

Business Model Canvas

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INTRODUCT

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Approach In order to begin, our team felt that to fully understand the project and the meaning of the theme our task was to define and understand what identity and culture mean and start research with that framework in mind.

TION

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THEME

Identity + Culture

IDENTITY

CULTURE

For our purposes we defined identity as a realm of oneself - all attributes relevant to self, self recognition of self-perception and how others perceive you, what makes you-you

In logic: identity may be introduced as a primitive expression, or defined via the identity of indiscernibles. Conception and expression.

Our sense of self within the realm of groups and associations we identify with.

Prominent characteristics that represent ideals in which one resonates with.

Artefacts of human legacy that allow oneself to identify with them.

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KEY INSIGHTS We felt that it was critical to approach the concept with the broadest lens possible.

This would allow us to analyze the context while staying within the discovered ideologies, and have a defined scope for filtering the companies and organization.

As a result, we combined the words and determined how the two fit within each other.

We identified the theme as the following: (1) established on the relationship between one’s self-perception and groups they associate with based on the concepts of value within society (2) networks enabling people to associate with certain qualities and facets they are fostering and offering.

(3) platforms creating value through tapping on our personal and universal sense of being by delivering experiences that add to our identities within cultures.

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FOCUS

Discovery

PREMISE Having the foundation and framework for what we wanted to look for and achieve in this project we were able to move forward with the research.

We are seeking to analyze and examine human cognition and affiliations within certain organizations and/or institutions. By looking at the premise of wants and needs of both the general public, within our own projects, and the current market, we selected a company that, in our opinion, fits the frame and exemplifies our insights closest to the core of an individual.

Therefore, we have taken on the task to investigate a company’s brand culture and business model to draw conclusions on how: (1) to reflect people’s desires and communicate value, (2) understand key businesses on the market and their operational techniques, (3) and widen the scope of understanding strategies.

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“It was critical to approach the concept with the broadest lens possible (...) to analyze the context (...) and have a defined scope.�

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INSIGHT

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Partition The team worked seperately on this chapter in order to complete the personal approach to the topic. It resulted with some in-depth insights about the groundwork done so far but also a new dimension for understanding the thesis project.

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Metamorphosis Anne Gorgy

Identity and culture could be considered two important facets of both the society and the individual, in which they shape and influence one another, evolving and transforming how we behave and interact. My thesis is about our hyper sharing behaviour that developed its own culture in the physical and virtual world, and consequently affecting how we engage with the various platforms and metamorphosing the self into different identities, accordingly. Thus, it becomes of great significance to analyze and understand how brands construct a

business model that reflects their identity and brand culture, which impacts their business transactions and activity.

And through such model, companies can trigger change and catalyze an atmosphere that shapes behaviours and bring about new ones that are meaningful and of an added value.

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Conditioning Christoph Ho

Storytelling has always been an effective tool to attract consumers. By setting the framework in which products and services exist, individuals are often more inclined to participate and support a brand culture they identify with. My thesis project looks to develop physical and cognitive skills, within the mobile-technology age in the younger generation. It focuses on the shift in behaviour, culture, its impact on young children; how they view themselves and interact with the world they live in.

The value of inspiring children to selflearn and take education into their own hands is the realm in which we have

explored in this analysis. It is imperative to produce a result in which both parent and child are able to identify with, while supporting their cultural views.

Applying the theory gained, I hope to reshape and build upon the relationship between skills and individuality. Doing so, it build a community of young minds that recognize their capabilities, reshaping behaviour among children.

By enticing greater self-motivation and proactivity to accomplish tasks aimed to challenge. It will build self-confidence in identity, impacting cultural change in values among the younger generation.

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Play ethos

Kama Kaczmarczyk

Identity and culture are both very broad topics. It feels really safe to say that my thesis is touching on both of these areas.

My general focus of my meta project is on playing, (un)learning, and education for grown-ups. Our theme definition describes that people carry certain qualities and values with themselves. I believe this overlaps with my motivation : adding on these qualities to one’s selfperception and what builds a personality.

I want to explore how certain experiences and activities let people grow in the sense of being and feeling.

I find it is important to make clear that I am interested in people as beings that need to have a strong ethos (culture) in their lives. I think it can be done through what nowadays tends to be forgotten and neglected : playing. People need to realize how important it is to keep child’s identity within self.

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“(...) metamorphosing the self into different identities ... supporting cultural views ...can be done through playing�

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CHOICE

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Discovery Our filtration process was guided through choosing a brand that has its own significant identity that it is recognized for and unique corporate culture, while at the same time it expands across multiple cultures across the world, influencing people’s lives and behaviour through their products and services. The company had to also relate in a way or another to our thesis topics and what could inspire the way we proceed and evolve in our personal thesis project.

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WHY

Framework Strata

VENTURE Based on the definitions of identity and culture we created, the team did a broad research on the companies and organizations currently meeting the criteria. This involved whether we

address companies’ internal culture and brand identity, or how they tap into the different cultures and personal and collective identities across the globe, or both combined.

We filtered all the information through the framework based on each theses focus/ mission opposed to the key insights gained from the discovery part.

The spectrum of the companies ended up being very broad: from toy companies (LEGO, American Girl, Hasbro), to transport/automotive services and products (Porter Airlines, Tesla, Harley Davidson) to more or less exclusive sports apparel (Nike, Lululemon), to opensourced online databases (YouTube, Trendwatching).

The team decided to turn towards two companies that challenged the notion of the premises in our projects the best and also fit under the categories of the report’s objective.

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THESIS

YouTube Tesla

IDENTITY Trendwatching

Harley Davidson

CULTURE

Nike Hasbro Lego

Lululemon

American Girl

Porter Airlines

THESIS

THESIS

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PRIMO Nike

CONTEXT Nike, Inc. based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities.

Wholly-owned Nike subsidiaries include Converse Inc., which designs, markets and distributes athletic lifestyle footwear, apparel and accessories and Hurley International LLC, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories.

Nike keeps reacting to the aggravating competitive situation on the market bursting with rivals offering similar values. It carries for the nevertheless various readiness of many customers expectations. Expanding its’ segments and innovating levels within products and services, it tries to disrupt and innovate current benefits available from competitors.

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SECUNDO Hasbro

CONTEXT Hasbro is a company that started in the school supplies business and evolved into toy manufacturing with the ability to permeate into cultures and communities across the world. Their games and toys both target adults and kids. Hasbro brings the joys of play to children who wouldn’t experience it otherwise, and empowers youth through service.

The company’s strategy is based upon building on what they do best through re-imagining, re-inventing, and re-igniting their portfolio of brands, and delivering innovation through new brand

toy and game product innovation, digital gaming, entertainment, and lifestyle licensing.

Hasbro takes the responsibility to provide quality and safety through their products and services. Therefore, through their business model, they are able to reflect their own brand culture, while touching on their customer’s identities and life through the power of play. Those play-interactions have the ability to make way for exploration, roleplay, experimentation, and exchange of knowledge.

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ULTIMO

Reasoning

SELECTION Since the focus of this report is identity + culture, it is important to indicate that for our purposes here, we picked a brand that is not just a company, logo and visual qualities. We treated the word brand similarly to the way it is used by Marty Neumeier: as a “gut feeling” related to the consumer’s “trust” in an organization offering specific features to acquire by one.

Identifying core values of both brands and comparing them allowed us to distinguish values that are of higherquality, have broader context, and

deeper meaning. In our opinion, Nike exemplifies our objectives and observations the best. It is a choice that lies on the quantitative and qualitative research done by the team which will be continued in the next chapters. It also comes from our own definition and understanding of culture and identity (discussed in Chapter 1) that this company acquires, promotes, and successfully implements into its merchandise and strategy.

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CONTEXT

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Foundation In order to begin, our team felt that to fully understand the project and the meaning of the theme our task was to define and understand what identity and culture mean and start research with that framework in mind.

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RESEARCH

Foreword : Nike

APPROACH We divided research components into sectors to make it easier to break down the work needed to be done. Seeking to complete the business model canvas and fully understand Nike case, each of us applied methodologies of research and analysis to get a deep insight into the examined field.

The research included case studies, outsourced articles, statistics and databases discussing the following, but not limited to, aspects of Nike business model system: the numbers in revenue stream and corporate structure, the divisions of the purchased goods and services, scanning case studies around key activities Nike has been and is executing.

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ANALYSIS

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Canvas Once the field had been understood and the company identified with its’ core values, the team then proceeded with analyzing each building block of business model canvas to produce more detailed and compelling approach and horizon of Nike.

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KEY PARTNERS Nike being a huge worldwide company has many partners all around the globe.

Since they design and manufacture personal goods in many diverse and broad categories like apparel, tech packed accessories, equipment, and wearables, its spectrum of partners also reaches the whole globe.

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Nike Inc.’s global supply chain spans nearly 50 countries and more than 800 contracted factories, with hundreds of textile manufacturers supplying the factories making Nike products. Nike’s website also features an interactive map showcasing all factories around the globe it has partnership with. As part of Nike, Inc.’s goal to reduce its environmental footprint, the company just recently announced two efforts aimed at furthering that commitment: Institute of Technology (MIT) Climate CoLab to bring innovation in materials to the forefront of the climate conversation, and a commitment to reach 100 percent renewable energy in company-owned-and-operated facilities by 2025.

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Some of the key partners in Nike’s history include companies like Apple (delivering the app), EVERLAST (creating fitness flooring from partially upcycled Nike shoes), EA Games (video gaming department and apparel design), FootLocker (retail experience). To allow more runners to connect their favorite devices and fitness equipment and to enjoy all of the benefits of being a Nike+ community member, Nike partnered with Garmin, TomTom, Wahoo Fitness and Netpulse. Bringing new and distinct ways to leverage GPS watches, heart rate monitors and connected gym equipment to make every run count, this cooperation is a global attempt to connect every aspect of life with the current technologies.

Since it is selling to customers a certain lifestyle and identity attributes, it also partners with people and organizations that currently represent them. Nike Ambassadors - celebrities or athletes chosen annually - represent the brand throughout a list of ventures being commercials for shoes and sport attire, promoting Nike’s apps for the iPhone: Nike Training Club and Nike Running.

One of the most notable collaborators include LeBron James, Michael Jordan, Cristiano Ronaldo, Maria Sharapova.

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It keeps updating their partnership stream to be constantly improving its’ sustainable side. It provides Nike with a better supply chain with innovative tools. Seeking to approach certain demographics, it works with a range of organizations globally to give more kids a chance to get involved in youth sports (e.g. Marathon Kids (read more in customer relationships).

To make sure Nike also impacts local communities it cooperates with ventures, and organizations that are specifically

focusing on this limited region (e.g. partnership with Oregon Community Foundation - an innovative approach to grant-making that directly impacts communities in the metropolitan Portland region and in SW Washington). One of the biggest and most important partnerships Nike is involved in is under the name of LAUNCH - an open innovation platform that was founded

by NASA, NIKE, The U.S. Agency for International Development (USAID) and The U.S. Department of State to identify and foster breakthrough ideas for a more sustainable world.

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To keep its’ stores, especially flagship ones’, unique and with a big emphasis on the aesthetics, Nike also partners with artists and designers to create one-of-a-kind pieces of art such as murals, interactive panels, and storefront exhibitions that engage clients e.g. store in Seoul, Korea features a mural by Korean artist Yoon Hyup, who reinterpreted the Mercurial and Air Jordan footwear series. Some of the collections are also designed through collaborations with artists.

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For instance, Peter Boome, a Northwest Coast artist and member of the Upper Skagit tribe, assisted in developing the graphics (left) inspired by Northwest Coastal Art presented in the Holiday 2014 N7 (N7 - collection targeting Native Partnering with Berlin-based designer Johanna Schneider (above), Nike focused on fulfilling its’ design ethos of innovating for the female body in motion through new aesthetic.

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KEY ACTIVITIES Nike’s strategy is to inspire and deeply connect with consumers in their stores and online.

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Some in-store services include Nike+ Run Analysis for men and women, bra fitting, pant hemming and personal shopping. e.g. the women-only store in Shanghai features on-site group fitness sessions along with opportunities for consumers to trial the latest in training and running footwear and apparel. Specialized services, weekly programming and tailored events are designed to inspire and enable the community of active women in and around the central business district of Shanghai.

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Nike provides volunteer hours each month for Nike Community Ambassadors — store athletes who have completed training to deliver sports programming for kids – to give back within their community. Nike also rewards employee volunteer hours with money directed to the nonprofit of the employee’s choice.

Nike delivers proven scientific insights that help drive performance innovations across the Nike brand. It owns Nike Labs operated by people from many scientific disciplines including biomechanics, physiology, biomedical engineering, mechanical engineering, physics, math, kinesiology and systems science. Combined, the team brings more than 250 years of sport research experience to NIKE, Inc.

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The sustainability side is one of the most important ones in the key activities spectrum.

The focus is on materials innovation, to energy efficiency in its supply chain, to the commitment of pursuing renewable energy. Nike accomplishes it through different partnerships, operations, constant research and more. Nike even created an app called MAKING. It’s a predictive app that helps designers and product creators make better decisions about their materials choices. Nike recently updated the app to highlight the climate-related impact of materials

choices alongside chemistry, waste and water. Nike does not disregard any of the components having key value in sustainability and impacts its’ operations where it can influence the greatest change which includev all of the above plus energy/climate, labor, community).

NIKE’s passion for innovation and driving positive global change is complimented and activated through the Company’s proven ability to rapidly commercialize technologies and business models across a global value chain.

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Certain geography and local community is also on Nike’s list. Nike owns Community Stores that build and empower a healthy local community through the unifying power of sport and to serve as a catalyst for positive change in each area a store is located. Based on the location some of the stores feature photographies of the city, store-art that is done by local artists and more. Local elements are incorporated into the stores. Certain region’s community interests also shapes Nike contribution like stores that target only one sports category e.g. in Brazil there’s a store selling only soccer equipment and apparel as people highly anticipate and foster interest in

this type of sport. Geography in Nike’s corporate system of activities is not only about its’ commodities and experience.

It’s also about the community itself and how it can impact and empower the people living in this area. For instance, NikeGO is Nike’s signature U.S. community affairs initiative aimed at kids to be more physically active. To celebrate the grand opening of a store in Texas, NikeGO awarded a $5,000 cash and product grant to the Boys and Girls Club – Arlington Branch which was part of NikeGO.

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Part of Nike’s approach and program stems from their focus of being ‘driving the change’. Nike seeks the future where people will be highly engaged into physical activity. To address the growing epidemic of physical inactivity Nike created a range of programs targeting different age groups to encourage them into daily movement. With their global programs, it is especially trying to impact the future of this planet: the kids. One of its frameworks, Designed to Move, is a plan for action supported by public, private and civil sector organizations.

Maintaining this branch is done through such subsidiary like Nike Let’s Move!

Active Schools or Nike Talent Search:

Most Wanted (formerly The Chance) (both furtherly discussed in section D) Nike also assembled an Access to Sport team to address the issue of youth and kid’s activity. Nike’s direct contribution in this case includes professional development and training for school champions, as well as branding and communication support.

Such ‘Driving the change’ factor is also achieved through Nike Foundation, with the launch in 2008 ‘The Girl Effect’.

The theory that is fostered through it is to invest in a girl and unleash a powerful ripple effect of positive change. The Nike Foundation has invested exclusively in girls ever since and focuses its expansion within this group. The idea is to reach global scope through the many branches Nike is maintaining to be involved in.

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VALUE PROPOSITION Nike co-founder Bill Bowerman’s statement, “If you have a body you are an athlete.” It keeps following this notion with the value it offers. Company’s focus was always on customer’s satisfaction.

Nike has been successfully providing a lifestyle revenue for many years. Leading in lifestyle division, being both identity and culture, Nike is operating on many levels of ‘value’ working towards satisfaction of a broad spectrum of customers. The amount of partnerships and activities that are within the main focus of this company is a value itself offered to clients. The services and products carried and owned target many different groups and are to be acquired throughout daily life, whether it is specific (training, running, soccer) or general (lifestyle line).

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Supporting and inspiring fitness activities, everything that Nike manufactures- and every way that Nike markets its brand - delivers on its value proposition in spectacular fashion. Positioned as the most fashionable in the industry and endorsed by top athletes and sport stars, Nike continues to offer the highest quality and best designs in the sports industry (some of them done with partnerships with other designers, not always and necessarily involved in fashion industry).

The constant improvement and seeking for new technologies is part of their focus on the aesthetics and quality of the products. Cutting edge technology is one of the key concepts that is emphasized with a launch of any new product line. Offering new innovations within textiles segment, garment, gear etc., the customers are reassured of the best value of these items on the current market. All of these foster the best possible performance for the athletes.

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Nike offers new experiences. Through collaborations and outsourcing it brings newest technologies and creative parties for first hand experience. Storefront merchandise is being incorporated with such advancements as kinetic gear. This way customers are invited to participate in Nike culture without even entering the store. it also brings attention to any person passing by the store. Through playing and interacting people are introduced to participate in Nike culture and be part of of it. Customers are also invited to engage in activities being offered in-store. Trying out the newest shoes on the treadmill gives an opportunity to test the product which make the clients sure about the purchase through a real life scenario. To feel special Nike also gives its customers the feeling of uniqueness with opportunity to design own shoes. Nike iD is a service allowing customize their own clothing.

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Nike leverages the power of their employees, brands, consumers and partners to support organizations and collaborations that create positive longterm changes and expand access to sport. The employees are challenged to get moving and raise physical activity levels in the workplace. Nike has a longterm commitment to help solve this urgent, global epidemic of loss of physical activity.

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Nike offers feeling of excellence and motivation. Through a wide range accessories and gear such as wearable devices customers can track their run and challenge themselves or friends. Wearable devices such as Nike Fuelband takes care of the feedback of the performance. The clients get their workout feedback and are conscious about their health based on the gathered data. This way also offers self improvement. Seeing better results motivates to keeping up with the workout. To maintain the interest Nike also launched Nike Running and Training Club (NRC & NTC) in several cities including Toronto; free workouts for everyone are offered throughout the whole year.

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CUSTOMER RELATIONSHIPS Lorem Ipsum

By Nike’s launch of a new business division called Nike Digital Sport (NDS), they have been able to collect and store data relevant to customer needs and trends, by developing new technologies and devices that tracks customers’ personal performance. NDS functions as a platform connecting Nike with its customer base, in which customers openly talk and communicate about their needs with Nike. Through its revolutionary online store Nike iD that was launched around 2005, customers were also given the opportunity to design shoes that fit their own personal brand.

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Nike+ is a social networking service developed by Nike, which focuses on building social relationships and networks between people and communities. There is also the Nike+ running app enabling customers to share their experiences through social media like Facebook and Twitter. Nike Fuel also enables customers through the use of Nike+ devices to record their progress. These devices are designed to keep customers updated with Nike’s latest brand trends and insights, while giving them the ability to communicate with Nike.

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Nike communicates with its customers through its in-store personal selling, in which personnel are trained to provide assistance to customers in knowing more about Nike’s products. In addition to that, personnel offer customers help in choosing the right Nike product for them. This in turn enhances the buying experience and empowering customer through taking informed decision while buying. Customers are sometimes offered special deals and coupons as a form of promotion to show them benefits and motivate new customers.

In 2006, Nike partnered with Google to create joga.com, which is a social networking site for soccer fans.

The members have the ability to blog, download videos, organize pickup games, and create fan communities around their favourite teams or players.

The program was primarily launched for and during the World Cup. It also launched Ballers Network in 2008, enabling basketball players to arrange street games.

Nike spreads its communication channels over social media platforms like Facebook, Twitter, and Pinterest.

Its Facebook page is daily updated with videos and images, as well as product related posts. Nike also leverages on Twitter, by utilizing the platform to respond to daily queries, stock information, and product details through nike.com feed. Nike’s Support feed also resolves product questions and technical needs, and it also answers around 100 questions per day.

Through a research on demographics of average Pinterest user profiles, its account is only established for Nike women. Nike has created 10 boards that feature only its products.

Nike is also present on Google+ but with no significant activity.

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Nike Training Club App is a free downloadable app on iOS that allows users to choose between four options of getting lean, getting strong, getting toned or getting focused. It then features a list of various workouts based on the level of training the user chooses. It also connects to iTunes, so that users can choose their playlist that goes along with their workout for motivation. It also features exercise demonstrations and keep you on track with your exercise goals. Thus, users get to have their own handheld personal trainer.

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Furthermore, Nike takes responsibility in creating positive social change around the world through bringing inspiration in communities, and helping kids become more active, happier, healthier and more successful. They contribute to making kids more involved with youth sports through partnerships with Marathon Kids in a goal-driven running program, a collaboration with New York City Department of Youth & Community Development to support city wide basketball league, working with community organizations and football clubs in Europe to help kids overcome barriers in physical, intellectual, and economic barriers to physical activity and motivating them to be more active.

Nike also partners with Special Olympics to host events and provide employee volunteer to bring more access to sports.

Nike’s official website features all of Nike’s new products, recent news, latest technologies, and customer service.

It allows customers to navigate the website through the different categories and enables online shopping and product customization. It also features videos on sports, sporting events, and celebrity athletes. It further involves a database with all customer comments.

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Nike takes part in collaborating with experts, partners, and school leaders to get kids moving before, during, and after school. Nike partnered in Brazil with Instituto Bola Pra Frente to integrate physical activity with school curriculums to help kids learn and grow through new and innovative ways. Nike also partners with the Ministry of Education in China on a football physical education program, by opening school doors to kids after school hours so that they can have a safe environment to participate in sports. In Russia, Nike worked with Children’s Sport Foundation to promote active schools and create a generation of active kids. The Turkish Olympic Committee and Nike’s Active Kids project focuses on creating memorable experiences and fun in sport for elementary school students promoting a healthy lifestyle and sports benefits.

Let’s Move! Active Schools! further brings free resources to parents, teachers, and administrators, to enable communities incorporate physical activities in schools.

The Girl Effect is a foundation established

by Nike for its belief in the power of human potential, in which they invest and support adolescent girls to help end poverty for themselves and the world.

Designed to move is a framework developed through partnership with more than 90 expert organizations to help end and prevent the cycle of physical inactivity that have affected our recent children’s generation. Hurley also teamed up with Waves for Water to help around 5 million people gain access to clean water by distributing portable water filtration systems.

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Nike has created various funds as well for helping communities. The Nike Community Impact Fund partners with Oregon Community Foundation to grant making directly impacting communities.

Grants are also offered for organizations promoting physical activity for youth and projects addressing youth and family issues. The Nike School Innovation Fund aims to encourage excellence through innovation in education, to increase the number of students graduating and preparing others to succeed in high school and beyond.

It aims to help students achieve their potential by engaging with them, supporting teachers, and partnering with school leaders. Converse which is a subsidiary of Nike, aims to empower communities to unleash their creative spirits through art, music, and skating to inspire youth to be their true athletic selves.

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CUSTOMER SEGMENTS Customer segmentation refers to dividing up a company’s customer base into groups that are similar to one another in specific features or categories. It primarily helps companies market and communicate their products and services more effectively when it is targeted to smaller and more specific groups. Discovering what each finds more valuable lets’ businesses get a better understanding of their customers’ preferences and accurately tailor their propositions.

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Through deep analysis of Nike’s scope and deep scan of its’ product lines and subsidiaries, it became clear that the customer segment has to be organized through different lenses and approaches.

It thus allows Nike to leverage on key customer insights and preference by providing relevant solutions, while efficiently allocating resources.

The following segments are going to be discussed: (1) demographics, (2) psychographics, (3) behavioural, (4) glocalization.

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DEMOGRAPHICS

Based on customer demographics, which is dividing customer segments based on age, gender, income and occupation.

Nike mainly targets consumers between the age of 18-40 years of age, with an aim to provide teens under the age of 20 with athletic apparel for primarily soccer and football. Uniquely enough, Nike has a very general targeted demographic, in which all socioeconomic groups are accounted. However, Nike has positioned its products and technology at a higher end, making them more expensive than other brands in the same field and therefore purchased relatively more by the middle and high class.

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Nike targets both men and women, however, women have been recently a main target for Nike, which in turn is growing than their men’s line. Therefore, Nike is specifically tailoring products that are meant to fit women’s needs and empower them in various sport categories such as running, walking, yoga, cardio and fitness, and dance.

That being said, Nike seeks to develop athletic potential through its products and services, making its high performance athletic gear mostly targeted at professional athletes. The brand have always featured and sponsored highly successful and influential athletes like Michael Jordan, Serena Williams, and Tiger Woods. Those athletes are meant to promote the brand’s footwear, apparel, and sports accessories. Nike is also keen on targeting and sponsoring young athletes especially in the fields of basketball, soccer, and running, in which they are

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PSYCHOGRAPHICS

For the psychographics, which addresses personalities and lifestyles, Nike’s major and principal customers are inspirational, motivational, and sports centric caring about efficiency and performance. They are people who are actively engaged in sports. On the other hand, Nike also targets teens and individuals who have the desire to look fashionable and athletic at the same time. Nike also touches on the idea of belonging to a group and being a part of something bigger.

BEHAVIOURAL

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GLOCALIZATION

According to geographics, Nike allocates most of its market towards the United States, since North American sales still accounts for 2.5 times more than Western Europe. However, Nike has their stores spread across the globe from North and South America, to Europe, Asia and Oceania, and Africa and the Middle East, in which it is present in almost 190 countries. An above average growth in revenue have been recently observed in Western Europe and Greater China.

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KEY RESOURCES Nike’s size has allowed it to expand across many countries making it one of the most globally recognized brands.

With its diverse range of product, and its large market presence, Nike draws upon resources all over the world to continue its operations for the consumer landscape.

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PHYSICAL With over a million workers in 679 factories, in 43 different countries, Nike has a high output chain that supplies the many demands of the market. The majority of factories are located overseas, on the East, where they contract factories to manufacture their apparel and footwear. Though Nike does not source materials directly from distributors, they specify material guidelines to the manufacturers prior to production. Ethical laws are put into place, and Nike is very diligent in the organizations they contract work to.

In addition, distribution centres and warehouses are common in areas such as China. As sustainability is a key factor, many of these warehouses are equipped with technology such as voice picking processes. From there, the Nike merchandise is freighted to smaller-scale distribution centers in localized regions, such as Memphis in the United States. After that, they are transported by truck, or air freight, to individual retail stores. These processes are overseen by Nike corporate offices, with the main headquarters located in Beaverton, Oregon.

INTELLECTUAL Nike has continued to heavily invest in patents every year to reserve the the rights of selling new technology. With over 300 patents acquired in 2013, and over 500 acquired the year later, Nike has become a hub of innovation for the athletic sector. Although patents do not ensure the product will move onto the assembly line, it provides security over their intellectual property if the opportunity were to appear. As well, Nike has been collecting data and statistics on their products; the ones that sell are refined and produced again, while the ones that don’t do well are pulled from shelves. This is the same method that was used to target their groups of women, young athletes and runners. Today, they analyze corporate data to seek opportunities within their lifestyle brand to expand and determine their next move.

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HUMAN With 62 thousand employees and counting, Nike allocates teams and divisions to carry out processes on every level of the corporate ladder.

When hired, the employees are registered into corporate education programs to familiarize them with the company, and ultimately integrate them into the Nike culture. By creating team-centred atmospheres to see tasks through, they are able to keep the focus on the betterment of Nike’s brand. As well, the employee benefits of working for Nike include, but are not limited to, flexible work hours, discounts and perks, and high morale. In addition, Nike has a ton of athletic facilities that are mainly used for product testing, but are available for employees to use as well.

FINANCIAL Capital used to carry out everyday operations can be derived from the profit in revenue generated every fiscal year. As Nike is publicly traded, equity investors provide a large portion of funds; doing so is an indication that the larger market agrees with what and how Nike is doing business.

Additionally, corporate loans are often taken out and paid back in short periods of time - premium interest rates hold corporations accountable to generate enough profit to pay back the loan. By doing so, Nike is able to invest in its future through supporting initiatives that aid in the betterment of communities, to ultimately drive sales.

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CHANNELS

Nike has used various marketing tactics to get consumers into the conversation of the athletic brand. Methods such as celebrity sponsorships, advertisements and publicized initiatives, such as investing in safer factory environments, highlight the key values of the company.

They have expanded Nike products into many areas in the consumer model, and have built brand familiarity because of it.

AWARENESS Though Nike still advertises through television commercials they, for the most part, have strayed away from traditional forms of advertising. Instead, they focus on marketing to consumers in the digital realm.

Using social media, such as Facebook, Twitter, Instagram and even their own Nike+ network, they introduce a number of services and products, as well as their brand to the consumer market. They have also used YouTube as a way to market to users by creating visually stunning advertisements, inspiring pro-activity that matches their tagline “Just Do It.�

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PURCHASE

EVALUATION Nike’s website holds a wealth of information on the activities the company engages in. From their list of manufacturers to their sustainability reports, transparency is one of the key areas success for them. By making this data available to consumers all over the globe, it builds trust between the masses and the organization. As well, it educates users and informs them of the ethical practices put into place, attracting the support of the public.

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DELIVERY Deliver value. Merchandise sales, whether online or in store, contribute to the value that a customer receives when purchasing goods. By taking the first step, Nike provides of glimpse of its community to the people that aren’t yet part of it.

The use of Nike products can empower users to push themselves harder and to test the capabilities of their strength.

PURCHASE In flagship stores, Nike’s employees are trained to provide the best customer experience and service for any questions a customer may have. They are knowledgeable in the different types of products they carry, and can redirect consumers to options that better suit their individual needs. Through this, it creates a memorable in store Nike experience that consumers will want to have again.

As well, the expanse of Nike’s third-party retailers allows for their products to be embedded within certain demographics.

For example, as The Hudson’s Bay Company is a lifestyle store, Nike is able to incorporate their apparel into the retail landscape, generating interest from those that may be outside their main focus of women, young athletes, and runners.

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By providing consumers with a mindset that adds to the global culture of Nike, it adds astronomical value to the product. It begins to build self-worth within the user, and becomes a symbol that marks them as members of the Nike community.

AFTER SALES Post purchase support. Since the introduction of Nike+, many users loyal to the brand have joined the online community to compare statistics with each other. Nike realized that the purchase of a Nike product isn’t the end of the marketing cycle, but the beginning when they can offer a consumer a wide variety of products and services tailored to their individuals needs. They created a service that provided visual data on the metrics of an individual, to challenge and monitor progress. By giving consumers a service to control and manage their physical activity, it increases brand loyalty within the Nike+ community, which makes repeat purchases from them more likely than other brands.

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COST STRUCTURE The current task for them is to find solutions to increase revenue without compromising their long-term principles for short-term gains.

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Just like any company of this size, Nike looks to expand its profit margin in the coming years. By making adjustments within the business model, Nike hopes to raise its profits by 0.4% per year. They hope to achieve this by focusing on pricing premium-goods higher, increasing retail sales, and controlling operating costs through the use of innovative technology. They are currently looking to increase the ratio of retail sales as they generally have higher margins; it would bring positive impact the their gross margin. As Nike has acquired many patents throughout the year and continually to do so, rising in 14% per annum, they plan to use it to their advantage to increase pricing power. By investing in patents as points for innovation, they are able to expand existing lines, and push the emergence of new ones

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Maximizing profits is generally the intent of many large corporations, however, Nike recognizes and values the efforts of its manufacturing operations; they treat it as a fixed cost when optimizing efficiency within the corporation. It is their “greatest responsibility as a global company is to play a role in bringing about positive, systemic change for workers within our supply chain and in the industry.� Looking at their size and scale, Nike has consistently refined their processes to minimize detrimental effects in the workforce, and the environment.

They have a high code of requirement for manufacturers they contract, and share

it with the public to keep their brand transparency and allow others to understand how they operate and how they can adopt, refine or build on their model. This code dictates values such as voluntary labour, the hiring of legal age workers, fair compensation, healthy work environments and reasonable hours, as well as, meeting regulatory requirements when disposing waste.

Furthermore, Nike puts money back into manufacturers to invest in initiatives that help increase safety standards, reduce waste, conserve energy, and increase water use efficiency through the NIKE Water Program.

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As well, Nike operates large teams in their research and development departments.

The sales and operations planning team presents business cases to regional management teams on a bi-weekly basis to make sure all areas of success have been met. By doing in depth research of the market and discovering needs of society, Nike is able to select specific opportunities to solve, and ensure a profitable outcome. Doing so saves time and money in internal processes, supplier consolidation and sourcing. In addition, Nike has a policy for wholesale customers. To reduce massive overstock flow and increase energy efficiency, orders from wholesalers are planned six months in advance. This allows Nike to place orders from the manufacture for a specified amount.

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REVENUE STREAMS It’s no question that Nike dominates their industry. Though they have narrowed down their focus to three main target groups, they still managed to generate approximately $28 billion in annual sales.

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Nike has been able to successfully use these three groups - women, young athletes, and runners - as the foundation for their value propositions. In particular, Nike’s sponsorships of local sports leagues and clubs have allowed them to build brand familiarity and loyalty among the younger generation. Through this, it has showed their ability to give back to the community, making them a household name, and an easy choice when sourcing athletic apparel. As well, those interested in global sports, such as basketball or football, have experienced Nike advertisements during sporting events. The makeup of advertisements feed on the psychological needs of humans, promising them that if they use a certain product, they will achieve a higher status - just like the individuals depicted in the commercial.

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ASSET SALES With the amount of money they invest in store window display, and the brand Nike has built in the media, it enables them to have a strong presence in the consumer market. Potential patrons already have a preconceived idea of the company, one that Nike has fabricated, so when consumers actively seek their products, they have already decided to exercise their purchasing power. Because of the high customization in Nike’s products, it gives consumers the conception that the Nike product will enhance their workout, effectively improving personal results; Nike’s footwear is sold at a premium as its four categories (lightweight, comfort, traction, high-speed) feeds into the buyer’s desire for improved performance.

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Through marketing techniques and the corporate transparency they have built in the public eye, it reassures customers that they are supporting a responsible organization - one that is ethically and morally correct in the way they carry out business. As Nike offers a range of products, they typically design for both fixed and dynamic pricing. By doing so, it ensures that Nike reaches the entirety of the consumer market, no matter what an individual’s financial standing is. Premium products, such as the footwear mentioned before, generally have a fixed price, while their regular product can vary in price based on the time of year, or third-party retailer. NikeTOWNs, the largest store in the company, features six or seven Nike brand categories, providing the very best products and services, those categories have to offer; by offering a premium customer experience, it gives NIKE higher pricing capability on the products offered.

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LICENSING To maintain momentum in the economy and continue providing consumers with what they want, Nike has been filing numerous patents a year to protect their future releases. Rising at an average of 14% per annum, Nike has had 135 patents approved this year alone. This method allows Nike to experiment their products within different contexts to continue driving innovation. On the other hand, if a competitor develops a product that infringes on their patent, Nike is able to sell it as an asset, or charge a licensing fee.

Currently, Nike has over 900 thirdparty retailers worldwide that carry their merchandise. As they are very selective in the types of brick and mortar stores that represent their company, they have an extensive application process, and have ceased all applications to online retailers.

Nike has noticed that consumers would rather purchase products in a retail setting - online sales accounted for only 15% of revenue in 2014 - and therefore, decided to allocate all its efforts into creating more store experiences that are unparalleled.

As a large portion of their third-party retailers are sports stores such as SportsChek, FootLocker, and Champs, they saw that they were able to generate approximately 78% of worldwide sales.

The amount received in royalties is undisclosed, however, it is a fact that Nike’s third-party retailers are a large source of revenue.

Partnerships with athletes, such as Michael Jordan, are able to increase Nike’s sales per annum; their footwear revenue increased by 12%, in 2014 footwear revenue increased by 12% due to a new sneaker release from their Jordan brand subsidiary.

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80

RESOLUTION

N

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BMC All the work done in the previous chapter has been evaluated by the team and organized in a cohesive way to fill the business model canvas framework.

80 82

KEY PARTNERS

KEY ACTIVITIES

VALUE PROPOSITIO

Contract Manufacturers

Sustainability Campaigns

Nike+ Run Analysis

“If you have a b athlete”

Materials Innovation

Community Empowerment

Customizable, fa apparel inspiring

Nike GO Initiatives

Ethical Practices

Distribution Centres Collaborators (MIT, Apple, Everlast, FootLocker, Garmin, TomTom, Wahoo Fitness, NetPulse) Local Communities and Foundations

KEY RESOURCES

Artists, Celebrities, Public Figures

Contract Manufacturers

Consumer Analytics

Warehouses

Employees

LAUNCH (NASA, Nike, The U.S. Agency for International Development)

Innovations in M and Textiles

Feedback on Ph

Ethical practices client satisfactio

Initiatives to sup global change

Freight Carriers Corporate Loans Real Estate

Equity Investors

Patents

Profit in Revenue

COST STRUCTURE Real Estate Fees

Factory Manufacturing

Campaign & Initiatives

Research and Development

Merchandise Distribution

User Testing

Patent Acquisition

Refining Business Strategy

Data Analysis

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ON

body you are an

ashionable g fitness

Materials

CUSTOMER RELATIONSHIPS

CUSTOMER SEGMENTS

Nike Digital Sport

Region Specific Markets

Online Support (Facebook)

Campaigns

In-Store Support

Nike+ Online Community

Media Transparency

Target Age Groups Social Classes Sex/Gender Lifestyle

hysical Activity

s boost on

pport long-term

CHANNELS

Professional/Casual

Television Commercials

Third-Party Retailers

Social Media

Online Portal

Storytelling in Merchandise

Nike Mobile Applications

Retail Employees

YouTube Advertisements

Innovators Strivers Experiencers Eco-conscious

REVENUE STREAMS Apparel

Footwear

Partnerships

Equipment

Patent Sale/Licensing

Online Retails Sales

Accessories

Brand Licensing

Retailer Orders & Fees

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CONCLUSIO

ON

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Afterword We went through several stages of identifying what the project is about and what our theme means for us both as a group and individual. We identified companies that met the criteria and picked one that fits the best. We then studied its’ business model segments with a meticulous and broad research that resulted with a deep understanding we eventually applied to fill in business model canvas.

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IN SUMMARY

THEME People typically make conscious choices to identify themselves with a certain culture which shares common features and the features they want to inhabit. These allow the person to grow as an identity and be actively involved with others who may share similar identitiy. Identity belongs to the concept of individual’s self perception and awareness.

Brands and companies respond to those criteria and sell their culture to people: to make them feel better, empowered, part of a bigger community.

People’s desire to get better and enhance their current identities can motivate others to do it as well, impersonating the same qualities. Therefore maximizing the value of certain groups (customer segments) is the key value proposition ti spread and represent the embodied culture.

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NIKE We have analyzed the business model of Nike and how it fits under the theme of identity and culture. Nike can be regarded as a pioneer in establishing brand presence in the consumer market.

By seamlessly embedding ideals in their products, Nike has been able to stimulate the masses into forming a culture around their athletic apparel.

As they have catered to the many demographic groups in the consumer market, Nike merchandise has taken on social value among those immersed in the culture.

By sporting the Nike swoosh logo, not only does it define the type of individual you are, or aspire to be, but also the overall dialogue of social phenomena groups that one may be involved in.