Nikecasestudy

Flash Report 7 How to navigate successfully among cultures, target groups and trends A N i ke c a s e s t u d y

Executive summary Motivaction International and THT Consulting combined their expertise and in this flash report present a powerful tool for recognizing, mapping and using cultural differences to a company’s or organization’s advantage.

The Seven-Dimension Model of Culture by THT Consulting identifies basic culture differences and commonly occurring dilemmas among consumers. The Dilemma Reconciliation approach is applied to use the tensions and dilemmas to a company’s advantage by integrating the positives of each side in order to create new, innovative results.

Next to understanding cultural differences, it is imperative for multinationals to take a deep dive into the target groups’ values, lifestyle and communications profile. Motivaction International’s Glocalities values-based segmentation takes culturally-specific conditions – how consumers think and feel about key aspects in a given context – and translates these into a concrete and highly efficient communication strategy. Glocalities is unique in the sense that it not only looks at demographic and cultural characteristics, but it also examines people’s deeply rooted values and lifestyles to “map” and explain consumer behavior.

Combined, the Seven-Dimension Model of Culture and Glocalities values-based segmentation offer a powerful tool for recognizing, mapping and addressing cultural differences, values and lifestyles in order to resonate with consumers’ needs and wants in an optimal way. This is especially crucial for global brands, such as Nike, which address consumers from culturally diverse markets.

Currently valued at US$ 19 billion, Nike is a truly global brand. However, operating in different regions and cultures introduces new challenges.

In this case study, we demonstrate that Nike users are ambitious and status-driven individuals, who are much more geared than non-Nike users towards physical vitality, early adoption and being noticed. However, when examining each geographical region separately, the same target group exhibits different underlying values and attitudes.

These range from being tolerant in Europe to being proud of national identity in the USA, being competitive in Asia and being in favor of promoting business ethics in Latin America.

These insights can be used effectively to generate local top spins in Nike sales and brand performance and overcome regional challenges.

In short, successful business navigation in an international field of cultures, target groups and consumer trends requires a fact-based, multilayered and culturally-informed approach in order to align better with consumer preferences and demands. Glocalities offers a unique opportunity to do just that.

How to navigate successfully in an international field of cultures, target groups and consumer trends 2

About Glocalities The world is constantly changing. Technologies that grow exponentially and new media mean an increasingly faster distribution of knowledge and products. The challenges for multinational companies are currently greater than ever. It is crucial for organizations to have the best understanding possible of future developments. A necessary condition for success is knowledge of fundamental trends and how these can differ from each other locally and relate to each other worldwide.

In the context of the Glocalities project, Motivaction surveyed more than 48,000 respondents in 20 countries and 12 languages in December 2013 and January 2014. The study was conducted in the US, Canada, Mexico, Brazil, Australia, Japan, China, South Korea, India, Russia, Turkey, South Africa, Italy, Poland, Germany, France, Spain, Belgium, the Netherlands and the United Kingdom. This selection of countries contains 58% of the world population and represents 75% of the world economy.

With unique Glocalities knowledge of what drives people and gets them moving, Motivaction International offers a fact-based navigation system for the future.

From local distributor to global brand Nike is considered a truly global brand and not without reason. It reported over $27 billion in worldwide sales (fiscal year 2014) and it is present in nearly every geographical region. It is the global leader in athletic footwear, with 33.6% market share. Footwear is Nike’s largest product category. The category accounted for approximately 59% of sales in the first three quarters of fiscal year 2015, or $13.5 billion. The company features one of the most recognizable international logos – the “Swoosh” – and ranks #22 in Interbrand’s best global brands list of 2014. With plans to increase revenues to US$36 billion by 2017, ambitions are high for the world’s largest sports apparel company.

Nike was founded in January 1964 as Blue Ribbon Sports (BRS) by University of Oregon track athlete Philip Knight and his coach Bill Bowerman. The company was initially a distributor for the Japanese shoemaker Onitsuka Co. and their brand Tiger. By 1971, Knight and Bowerman were ready to make the leap from being a footwear distributor to designing and manufacturing their own athletic shoes. They dissolved their business relationship with Onitsuka Co. and went on to establish their own brand. They named their footwear line “Nike” (after the Greek goddess of victory) and selected a brand logo, the “Swoosh”.

The new Nike line of footwear debuted in 1972. In 1973 the company signed Steve Prefontaine as the first celebrity endorser of the Nike footwear line.

The launching of successful product innovations followed, such as the Nike Air technology. Nike had become the industry leader by the early 1980s. However, only a few years later Nike was surpassed by its competitors, as a result of miscalculating the aerobics boom that ensued.

Nonetheless, the recovery was swift and overwhelming. By adopting a “big athlete, big ad, big product” (i.e. Michael Jordan and Nike Air Max) formula and adding the “just do it” tagline, Nike quickly rose back to the position of industry leader. In the 1990s Nike further extended its (global) reach, by deepening its commitment to two global sports: football and golf.

By broadening its footwear and apparel product collections and signing individual players and national teams to endorse its products, Nike further boosted its global brand value. In 2014 the brand alone was valued at US$19 billion, making it the most valuable brand among sports businesses.

The new millennium signaled a change in Nike’s approach to marketing. In 2002 the “Secret Tournament” campaign was Nike’s first truly integrated, global marketing effort. Departing from the traditional “big athlete, big ad, big product” formula, Nike created a multi-faceted consumer experience in support of the World Cup. “Secret Tournament” incorporated advertising, the Internet, public relations, retail and consumer events to create excitement for Nike’s football products and athletes. Since then, this new integrated approach has become the cornerstone of Nike’s marketing and communications.

4 How to navigate successfully in an international field of cultures, target groups and consumer trends

Why this Flash Report?

Global brand, but local Challenges Basing marketing strategies on a worldwide integrated consumer-centric approach is not without its risks and requires a deep understanding of target consumers. When operating in a global market with a global brand positioning, three important considerations should be taken into account: ďƒź Does my brand appeal to similar consumer segments worldwide? Do I really have a global customer, or are my customers differentiated around the globe? ďƒź What are the most salient or distinguishing trends among my customers? ďƒź How do cultural differences affect my global brand positioning and how can I best address these?

In this flash report, Motivaction International and THT Consulting examine the opportunities and threats for Nike along these three considerations, based on extensive international and comparative research.

Methodology The Glocalities study was conducted through the online research panels of SSI, an agency that is specialized in international fieldwork. More than 48.000 people from 20 countries in 5 continents participated by filling out the online survey. The countries are Australia, Belgium, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Netherlands, Poland, Russia, South Africa, South Korea, Spain, Turkey, UK and the USA. In the Netherlands the fieldwork was conducted

by Motivaction International and in Belgium by Ivox. Quotas were set beforehand and the datasets were weighted according to census data. The survey samples are representative for the populations of 18 to 65 years old, with respect to age, gender, education and region.

The geographical regions in this analysis consist of the following countries: Europe: Belgium, France, Germany, Italy, Netherlands, Poland, Spain and UK North America: USA Latin America: Brazil and Mexico Asia: China, Japan and South Korea In these regions, the Glocalities database contains 16.420 respondents, among whom 4.837 Nike users.

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The case – Nike’s worldwide performance: Great successes but also regional challenges Nike already applies discrete strategies to individual segments, instead of relying on a one-size-fits-all strategy, a practice common to the sportswear market. Its “Where is the Next” advertising campaign in 2007 is characteristic: Nike took the concept of “nation” and added a local flavor to adapt it to Australia, China, Japan and South Korea (Kobayashi, 2011). This has generally proved to be a successful approach. The company’s strong performance in Q2 2015 was underscored by high growth in North America, Western Europe, and Greater China. High demand in running, basketball, and football categories continues to fuel the growth momentum for Nike. Despite favorable worldwide performance indices, regional barriers continue to pose a threat for Nike’s sustainable growth. China, in particular, is one of the largest markets for athletic footwear and apparel in the world and also one of the most challenging ones. In 2012, Nike had predicted that sales in China would double to reach US$4 billion in four years, which translates to a compounded revenue growth of 18%. However, sales in China fell for five straight quarters before returning to 4% growth in Q2 2014. The company’s store inventory levels were well beyond the demand for its products. This necessitated heavy discounts in order to clear the inventory, which affected the company’s top line. Even postdiscounting, the clear-out process was slow.

Poor performance was attributed to sluggish GDP growth and changing customer preferences.

Historically, Nike has led the Chinese sportswear market with a 12.1% market share, with Adidas a close second at 11.2%. However, Adidas appears to be gaining on Nike by positioning itself as a more youthful and fashionable brand. In recent years, Adidas’ message has shifted from a purely sports image to one geared towards fashion and lifestyle. Nike’s expansion into second and thirdtier cities in China will certainly help boost its sales in the long run. Nonetheless, the company is yet to devise a strategy that can render it a clear market leader in China, similarly to the U.S. and Europe.

Apparels is another important component of Nike’s product line. Nike derives approximately 69% of its apparel revenues from North America and Europe. However, Nike’s performance in apparel has been relatively weak in some overseas markets. Reported apparel sales declined in the emerging markets of Japan, and Central and Eastern Europe in Q4 2014, partly as a result of currency fluctuations and partly due to weaker demand. The latter factor was especially a concern in Japan.

Nike’s pricing power is more limited among consumers in apparel products, compared to footwear. In contrast, peer Lululemon Athletica (LULU), which is primarily an apparel firm, reported a 16% increase in total revenues to US$603 million in the quarter ending February 1, 2015. Prominent sports apparel VF Corporation (VFC) reported an 8.7% increase in revenues, reaching US$3.6 billion in Q4 2014. Japan’s number two sports apparel firm, Under Armour (UA), recorded the best performance in its peer group. Apparel revenues rose almost 30% yearover-year in Q4 2014 to reach US$708 million.

6 How to navigate successfully in an international field of cultures, target groups and consumer trends

Nike’s volatile position in China and its relatively weak performance in certain regional apparel markets illustrates the necessity of boosting its segmentation approach, to go beyond demographic and generic cultural criteria. Boosting Nike’s local appeal in the areas where it performs least well requires a deeper understanding of consumers in various markets and their core values. Each country is not a single market, but a domain where different sub-cultures and values segments coexist. The tools developed

by Motivaction International and THT Consulting take the synergic effects of uncovering values differences in a given context and link these to distinct cultural environments in order to fine-tune marketing strategies and optimize a company’s local relevance.

Sources: http://www.wsj.com/articles/SB100014241278873240348045783 45741263753994 http://marketrealist.com/2015/04/nike-sprints-ahead-footwearproducts-star-power/ http://www.trefis.com/stock/nke/articles/229536/marynikeschina-problem/2014-03-20 http://finance.yahoo.com/news/nike-sports-apparelperformance-myriad-140750477.html http://www.forbes.com/sites/greatspeculations/2014/12/22/nike -strong-europe-china-performance-drives-15-top-line-growth-inq2/ Kobayashi, K. (2011) Corporate Nationalism and Glocalization of Nike Advertizing in “Asia”: Production and Representation Practices of Cultural Intermediaries. Sociology of Sport Journal, 29: 42 – 61.

How to navigate successfully in an international field of cultures, target groups and consumer trends 7

Understanding and cultural differences

leveraging

Culture is about the meaning attributed to things, actions, and behaviors by a group of people. In some cultures, a car is simply a form of transportation. In other cultures, it is a sign of status and independence, or a means of creating a sense of belonging to a group which has also chosen to purchase the same model. Therefore, the motivation behind purchasing a car is different in different cultures, even though we talk about the same model.

Similarly, “Just do it� is a wonderful slogan, but what you do and how you do it is highly determined by culture. For example, speaking your mind is encouraged in the Netherlands as a sign of honesty, but despised in China as a symbol of rudeness.

The THT Seven-Dimension Model of Culture helps identify basic culture differences and commonly occurring dilemmas from tensions between the values from which they originate. Consider, for example, the dimension individualismcommunitarianism. This dimension is about the conflict between an individual’s desire and the interests of the group he belongs to. Another dimension, the internal-external dimension, concerns the meaning that people assign to their environment. The figure below illustrates all seven dimensions of culture.

Complementing this model, the Dilemma Reconciliation approach can be applied to synergize the two opposing views-extremes.

Instead of trying to weigh the pros and cons, this approach looks at integrating the positives of each side. It then reconciles the dilemma to create new, innovative results.

8 How to navigate successfully in an international field of cultures, target groups and consumer trends

One important dimension of the SevenDimension Model of Culture has to do with the degree of involvement in human relationships.

For example, do we engage others in specific areas of life and single levels of personality (low involvement), or are we diffused by simultaneously engaging in multiple areas of (daily) life and at several levels (high involvement). This dimension has a great impact on multinational corporations in terms of global advertising, product design, customer service etc. Consider, for example, Air France.

It launched a great high-involvement YouTube advertisement entitled: “Swimming pool in aircraft”. The advertisement creates a relaxing atmosphere, which implies that the in-flight comfort is comparable to a vacation. However, no hard facts are shown. This advertisement would be well-received by high involvementoriented consumers, for example in China, but less so by low involvement-oriented consumers, who focus mostly on hard facts.

Country scores on high versus low involvement 49%

the Netherlands

51% 52%

USA

48% 51%

Brazil

49% 59% China 41%

High involvement

Low involvement

Advertising works most effectively if it makes the best use of both opposing values. One way to connect both the high and low involvement orientations is finding “moments of truth” for the customer. The “moments” are specific issues that are judged by the customer as important, for example product costs, quality etc. The “truth” is the diffuse sense of what is important to the customer, for example the sense of fashion, freedom to move, tranquillity etc. Using hard facts to create a big vague picture is a way to apply the “moments of truth” thinking to global advertising.

By reconciling dilemmas in a culturallyinformed way, Nike can then not only “Just do it” but also has a fact-based strategy to do it RIGHT in each culture and grow faster. The 7 THT Consulting dimensions of culture were part of the Glocalities survey and can be applied for clients in a bespoke analysis.

How to navigate successfully in an international field of cultures, target groups and consumer trends 9

The Motivaction Glocalities model globally The Glocalities model is based on the premise that people’s behavior and opinions are shaped by value orientations that are deeply embedded within persons and society. Behaviors and opinions tend to be capricious and to change over time, but value orientations tend to be more stable during people’s lives and in societies. The Glocalities segmentation model consists of 5 distinctive values segments, which are based on cluster analysis (latent class analysis) of a set of selected values statements from the survey.

The five segments are plotted on two axes. The horizontal axis shows the extent to which people are open for change and innovation, while the vertical axis shows the extent to which people value freedom and independence.

Conservatives: family oriented people who value traditions, etiquette and an organized life.

Socializers: sociability seekers who love entertainment, freedom and family values.

Achievers: entrepreneurial networkers who focus on family and community life.

Challengers: competitive careerists, fascinated by money, taking risks and adventure.

Creatives: open-minded idealists who adhere to self-development and culture.

10 How to navigate successfully in an international field of cultures, target groups and consumer trends

Zooming into key valuesbased consumer segments with Glocalities.

The mission Nike’s mission statement is “to bring inspiration and innovation to every athlete in the world”. For Nike, everyone who has a body is an athlete, no matter what the physical condition. The company’s ambition is to make every athlete feel empowered to perform.

This, of course, requires a compatible mindset.

In order to test the extent to which Nike’s global positioning through its mission statement appeals to consumers worldwide, we employed the Glocalities segmentation model (see figure on the previous page). We conducted a profiling analysis, comparing Nike product users with non-users on a number of aspects. The overarching observation is that, on a global level, Nike consumers are significantly overrepresented in one particular consumer segment: the Achievers. The Nike slogan “Just do it” fits well with their outlook on life and influential position in society.

% Achievers within Nike consumers versus non-consumers (18-65 years) 31%

The Nike - Achievers fit Achievers seek a balance between belonging and traditionality on the one hand and social change on the other hand. However, change should happen, according to them, in a structured way and so they seek a certain degree of control in their lives. They are statusoriented networkers, who set ambitious goals and are willing to work hard to reach them. In this process, they do not hesitate to take up challenges that will bring them closer to success. Apart from this, they are often entrepreneurial and independent. Achievers believe in their own capacities. They get inspired by successful individuals and they dedicate their energy to innovate and make an impact in the world. What is a better fit to Nike´s mission than this?

In Latin America and Asia, where the Achievers segment makes up a large proportion of the total population, a deeper understanding of Achievers can help Nike to better connect with local consumers and to increase sales and profits. In other areas, such as Europe, the composition of values segments is radically different. This implies an overall different mind-set among consumers. Communication strategies should thus be tailored accordingly.

Consider, for example, the Netherlands, where Achievers make up only 4% of the population, whereas Creatives compose 31% of Dutch consumers.

29% 25% 19%

21% 15%

16% 11%

Latin America

Asia Nike consumers

USA Non-consumers

Europe

11 How to navigate successfully in an international field of cultures, target groups and consumer trends

Using glocalities consumer trends to refine targeted communications When we dive deeper into consumer trends among Nike users in the four geographical regions, the picture is differentiated. Nike users in Europe are characterized by their tolerance towards alternative ideas and living modes. In Asia, Nike users tend to be very competitive and success-driven. In the USA, Nike users are very proud of their American identity. Finally, in Latin America Nike users are very much in favor of business ethics, seeing it as the duty of business community to pursue social goals.

When positioning a brand, locally-specific consumer trends matter. This is especially the case for a company that spends 3 billion US$ a year in demand creation. As Nike itself claims: “we are not in the business of keeping media companies alive, we’re in the business of connecting with consumers”. By glocalizing Nike’s brand message to focus on the key consumer trends in a particular region, the company’s brand image within the desired target group can be improved, thereby generating local top spins and truly connecting with consumers from all relevant values segments. This will allow Nike to overcome the barriers that it is currently facing in certain markets and further improve and consolidate its position.

tolerance

national pride

competition

business ethics

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Global Nike consumer trends Socio-cultural trends are phenomena in society that separate and unite certain population segments and create dynamics in markets. Glocalities has a comprehensive list of socio-cultural trends, which can be applied to refine segment profiling analyses. Three typical trends distinguish Nike users from nonusers worldwide: vitality, early adoption and liking to be noticed. Nike consumers especially place emphasis on vitality – staying in shape and keeping their energy levels high – more often than non-consumers. This is obvious, given the nature of Nike’s products. The second distinguishing trend, early adoption, implies that Nike users desire to get new things as soon as they are launched. Nike users also like to be noticed, so they look for products which will distinguish them from the mass. Nike’s mission – bringing inspiration and innovation – is certainly to be found in the mindset of Nike consumers.

Liking to be noticed trend

Vitality trend

Early adoption trend

Vitality trend: I make an effort to stay in shape and keep my energy levels high ( % (strongly) agree) 69% 62%

58%

57% 43%

USA Nike consumers

45%

Asia

57% 49%

Europe

Latin America

Non-consumers

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Call to action!

Too many organizations unnecessarily get in the way of their own success by applying one-size-fits-all approaches. Even when they try to differentiate their strategies, mainstream demographics-based segmentation and generic cultural insights are not sufficient to address nuanced cultural differences between markets and values differences within markets. With unique values-based knowledge of what drives people and gets them moving, Motivaction International and THT Consulting enable organizations to realign with customers and navigate in an international field of target groups and trends.

You most likely recognize business dilemmas and challenges, such as the ones described in this report. Do not hesitate to contact Motivaction and THT Consulting to learn more about how they help companies navigate internationally by: 1.

Applying market segmentation to globalized consumer segments 2.

Understanding, predicting and acting on consumer trends 3.

Aligning with cultural differences to improve sales The Threat: by omitting the fact that different consumer trends and cultural traits within the same target group are salient in different regions, a company risks losing its grip on key consumer segments.

The Opportunity: Understanding cultural differences and their influence on local consumer demand improves the efficiency of marketing strategies and enhances business success in the age of globalization. Also, realizing that global consumer trends unfold in different ways in local cultures, thereby giving consumer values-based segments a local flavor, leads to more precise consumer targeting and brand positioning. This in turn allows future-proofing your organization and increasing profit with local top spins.

What drives people?

Glocalities enables organizations to realign with customers and navigate in an international field of target groups and trends. We offer a solid empirical base of high quality international research and breakthrough knowledge to help our clients achieve their goals in communicating, innovating, targeting and positioning.

Lifestyle Behaviour Opinions

Trends Fashion

Basic values

Interested in Glocalities?

This flash report only gives a glimpse of the data and knowledge that is available for multinationals. The full Glocalities dataset consists of hundreds of variables, throughout 20 countries in 5 continents. More than 50 global brands are included. In a tailor-made presentation or report, Motivaction can zoom into specific challenges, segments or countries and build a comprehensive profile of target groups and trends that are of interest to your organization.

For more information, please contact Martijn Lampert m.lampert@glocalities.com Text: Martijn Lampert, Panos Papadongonas, Hans Schoemaker Analysis: Hans Schoemaker, Panos Papadongonas Design: Wouter Vos, Bruno Klok Copyright: Motivaction International B.V. 2015, Amsterdam

Trompenaars Hampden-Turner Consulting THT Consulting provides training and consulting services to both public and private sectors (mainly Top 500 Fortune companies) in the areas of globalization, mergers and acquisitions, corporate identity and sustainability, as well as training and leadership development on leveraging diversity and developing cultural awareness and competence.

THT derives its strength from a unique combination of an extensive track record of rigorous research and intellectual capital captured in diagnostic tools and the world’s largest cross-cultural databases.

For more information: Trompenaars Hampden-Turner Consulting nl-fmtht-info@kpmg.nl Text: Shuiqin Liu

Most pictures in this free report are Nike advertisements.