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Brand Managment: Nike; Building A Global Brand Case Analysis

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submitted as a partial fulfilment of the requirements of strategic brand management class, summer 2011

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Brand Managment: Nike; Building A Global Brand Case Analysis

  1. 1. BRAND MANAGMENT Nike: Building a Global Brand Case analysis Ahmed Coucha 800090353 6/29/2011 Dr. Ibrahim Hegazy
  2. 2. 2 How would you characterize Nike’s brand image and sources of brand equity in the U.S? Nike’s Brand image in the US: Brand image is the impression in the consumers' mind of a brand's total personality (real and imaginary qualities and shortcomings). It is set of feelings, emotions and experiences that are linked to the brand. While brand personality is the image the company wants to convey through the different brand architecture (logo, name, Marketing mix, and communicated messages) and they have control over, the brand image is the subjective mental picture of the brand. It is developed over time through advertising campaigns with a consistent theme, and is authenticated through the consumers' direct experience. Because it is a subjective perceived position, brand image can deviate from the brand identity due to different perceptions, unexpected events, and different interpretation of communicated messages. The ultimate goal of any company is to lessen the gap between the perceived and the required brand image through actively getting feedback from the market and responding to any trends. Nike brand image that the company initially was building is a pure American icon, high performance, innovative aggressive brand, associated with high notch athletes, achievers and winners; mainly serious males. Nike is perceived as a high performance brand, since their inception Nike considered performance as top priority, they designed shoes that are durable, lightweight for runners. They used leather in their fabrics because it is more durable than garment yet less fashionable. From the early day, Nike has learnt the consumers’ need by listening to the need of athletes, sharing their true passion for running. They designed their shoes to give athletes the best performance. In doing so, Nike has created a reputation as a provider of high quality running shoes designed especially for athlete. The innovative product strategy they adopted emphasized their innovative image in the minds of consumers. They introduced a lot of innovative products in the sport market starting from the Marathon shoe debuted in 1965, moving on to the innovative new cushioning technology that was used with running shoes for the first time in the 70’s, followed by the introduction of the “Air” technology in basketball shoes in 1988, and lately the alpha line high tech products.
  3. 3. 3 They used brand associated with achievers through getting the endorsement of high notch athletes in the US. Actually this was the cornerstone step in building their brand image in the US. They conveyed through these association Nike as a masculine, serious, high performance, winning brand linked with professional level of competition. They played on making Nike a pure American Icon that portrays the American spirit of competition, superiority and even Arrogance. Nike’s image was totally different from other US local competitors like Rebook who personified their brand as fun, soft, fashionable brand through associating with non competition sports like the aerobics that is famous among females more than males. The sources of Nike brand equity in US arises from the Aaker model form the following: First of all Nike has a well established and strong brand identity with a well recognized and distinguished brand name and brand log , the swoosh, which facilitate the differentiation of its products from competitors. The brand name is simple and easily memorized by customers. 97% global awareness and recognition for Nike brand and logo contribute substantially to the brand image and brand equity. The core of building the brand equity for Nike brand equity is brand association. Nike is associating its brand with famous athletic celebrities that have similar personality as the brand; they are achievers, winners, determinant, and accomplishment oriented, nontraditional (out of the box). Like the legendary Michel Jordan the basket ball player, McEnroe the famous tennis player, Michel Johnson the famous American sprinter. Nike is capitalizing on the idolized view of American for their athletic heroes, specially the youth the main target of NIKE. This association projects the personality of the celebrity on the brand. The most famous example for brand association ever was the collaboration between Nike and Jordan, the association that personified Nike as a superior, achiever, successful and amazing top performing brand, By time this personification became permanent even when Jordan was not there turning consumer response to Nike brand from conditional (stimulated by the presence of Jordan) to permanent unconditional one. Also they associated with top sport events in the states by sponsoring the basketball American league. This brand association again conveyed an image of Nike as a
  4. 4. 4 serious, high performance, American brand capitalizing on the nature of basketball as a tough game that is most popular in the states. From the other side this association, in addition to the personification of the brand, it increased the brand awareness. Nike communicated this association through their TV ads that was a hit at their time in the states like the Jordan air ad that caught fire and increased their sales dramatically. In addition, one of the most important sources of Nike brand equity is the high perceived quality of the brand not only among athletes but also between the public. Although most of their market was the public that used their shoes just for walking around yet Nike was committed to design their shoes according to the high standards of professional competition. They listened to athletes and designed shoes that satisfy their needs for high performance and durability. Seeing a winning athlete wearing a Nike shoes in a professional competition authenticated the quality perception in the minds of the customers about the Nike brand. Also they didn’t follow the trends of other shoe maker like Rebook who used garments in the fabrication of their shoes instead of leather because it is more fashionable although it is less durable, Nike didn’t do so and they sticked to using leather fulfilling their commitment to quality. Another important pillar in Nike brand equity is their brand credibility as a brand which was established over the years through their commitment to delivering what they promise. A clear example for this is in the 80’s when Aerobics games were rising and the trend in the shoe design was shifting toward more fashionable, less durable line, by that time Nike decide to pursuit fulfilling its brand promise to deliver high performance and high quality. They shifted to sponsoring basketball the toughest and the highest on performance scale sport in the US. Another block in Nike brand equity is the good relationship with its consumers. A relationship that started with the beginning of the company when Knight used to speak to athletes using their language and listen to their feedback. He used to meet with them in tracks in high school and in colleges. This strategy created a lot of attachment of athletes to the brand, some sort of brand loyalty. When the company expanded they used a “Finger on the pulse strategy” where Nike have some of its employees hitting the street finding out what is in the minds of their consumers and following their needs and tracking their brand perception.
  5. 5. 5 How might Nike’s effort to become a global corporation affect its sources of equity and brand image in the U.S, Europe and Asia? Nike and the USA market: As mentioned earlier the sources of brand equity of Nike are Brand association with famous American athletes, Sponsorship programs for major sports events in the US, their massive and aggressive “provoking and unique” IMC that creates high brand awareness through TV ads and advertizing campaigns, and finally the perceived quality of the product in addition to a good CRM program. When the company started back in the 1960, its elements of brand equity emerged and were customized according to the American culture at that time. So we can see the impact of the new American values and norms on how they are managing their brand image and sources of equity. Regarding the brand image we find that Nike brand stands for core values of superior performance, accomplishment and achievements, Innovation and it has a strong masculine and serious personality. These values were dominating the American culture by that time in the 60’s and early 70’s when the American nation has just finished the 2nd world war coming from it as a superpower, followed by their successful space conquering in 1965 when Nil Armstrong first landed on the moon beating the soviets in their mutual space race. These superman values were deeply rooted in each American in all fields of life including sports. Nike brands stood for these values. Nike stressed on these superman values and built on it through its different equity sources. They associated with famous American iconic athletes like Michal Jordan and McEnroe who personifies Nike’s core value of achievement, performance and innovation. They sponsored the American basketball league, which is the most famous sport in USA and it is very professional as a way to convey the message that Nike brand as the American basket ball both show highest level performance, seriousness, success, aggressiveness …ect.
  6. 6. 6 Even in their Advertizing campaigns, they were innovative they were the first sports brand to communicate with their customers through TV Ads, they were untraditional , challenging and aggressive in their advertizing strategy, using unusual tag lines like” you don’t win silver , you lose gold” in the 1992 Olympics and “Play hard, Die old”. Nike and the European market: This Aggressive approach in brand management was Ok when Nike was targeting the American market. When they decided to expand globally starting in Europe they tried to implement the same strategy and to convey the same image of their brand but they didn’t succeed due to the cultural differences between the states and Europe. Nike’s brand image was perceived negatively as a fashionable aggressive and arrogant brand rather a performance innovative one. Moreover, Because of the differences between European countries Nike wasn’t able to find the legendary Athletic hero who can be their ambassador in Europe. They were faced with a multicultural market that is totally different from the American one. Also Europeans are more traditional, they don’t have the same idolized view of athletic heroes as American, their view of competitive sport is different they don’t have the same sport mania as their counterparts in America. Also Nike found that European prefer different types of sports; soccer, field and track games and not Basketball which was associated with Nike brand. Above all that Europeans had their own brands that they are highly attached to. Also being more traditional, Europeans; the aggressive provoking communication of Nike was not accepted by many Europeans to the extent that some local European TV channels refused to air the Nike vs. Evil TV ad. Moreover the overwhelming presence of the Nike’s logo, the swoosh, as an American symbol, was very irritating to Europeans. In addition the different marketing and distribution strategy in the European content diluted the brand identity of Nike, each local distributor used his own way for distributing and displaying of the Nike products in addition to applying his own strategy in advertizing. All this led Nike to lose its main edge in the European content at the beginning; they were perceived as a fashion-oriented and not performance oriented, irrelevant to the European market, aggressive American brand. Nike had to work on its credibility as a high performance shoe and to show their relevance to the European market. They had to adopt a glocalized strategy in building their global brand equity. They
  7. 7. 7 keep and communicate the main essence of the brand but through using more adapted localized tools and channels. They kept the essence of the brand in terms of a consistent brand name and brand logo as a part of the global myth effect. They focused on the main core values of their brand as part of their global positioning which is the performance and innovation. They retrieved about 90% control over their brand distribution and marketing and advertising activities in Europe in order to maintain the same global image and brand positioning. They communicated the same tag line worldwide with different executions according to each region. In order to increase their relevance to Europe they associated their brand to famous European soccer players like Eric cantona and Roberto Mandeni while keeping the same criteria for celebrity selection with personality matching Nike brand personality. In addition they sponsored local soccer teams like Paris saint Germain and Borussia Dortmund. This local execution for their global branding strategy increased the credibility and authenticity of the brand and boosted a positive brand image across Europe. They customized their advertizing strategy to cope with the European diversity using campaigns that highlights country similarities rather than countries differences; the pan European approach. In addition they lowered the aggressive tone used in their advertizing and reverted to a more kinder, and gentle marketing approach using globally accepted and appealing celebrities like Jordan , tiger wood, Brazilian soccer star Romario to project a more global and international image on their brand. Moreover, In order to increase their global appeal they engaged in sponsoring big global events like the Barcelona Olympics 1992, and the world cup. Also they sponsored the Brazilian soccer team and they took an approach of sponsoring national football teams from different regions to enforce their global image and to distract from being perceived as an American icon.
  8. 8. 8 Moreover they started to decrease their provoking and aggressive corporate philosophy that was featured in their expensive and provoking sponsorship and endorsement contracts in addition to the overwhelming abundance of their swoosh over their products everywhere which was known as the “Swooshification of the world” which accumulated negative connotations about their brand. Nike started actions to downplay their swoosh through limiting their logo to certain products meanwhile they invented new brands like the Air Jordan and All Conditions Gear and the Nike alpha products to calm down the swooshification effect. As part of their global image they show more commitment to global social issues. These global social responsibilities started initially as a reaction to the public oppositions to the company labor practices in Asia. They changed their corporate labor policy aiming to be the industry leader in employee relations, they modified the working conditions and raised the compensation packages for labor in Nike’s Asian factories, applying new global labor standards, complying with OSHA indoor air quality levels. Moreover they went further in their CSR direction by creating a Corporate Responsibility Division that consolidated the labor, environmental and community action groups with a stated mission “ to lead in corporate citizenship through program that reflect caring for the world family of Nike, our teammates, our customers and those who provide service to Nike”. They became a charter member of the fair labor association. Furthermore, Nike, as part of communicating these CSR actions and to gain credibility of customers all over the world, they initiated a measure that enables publics to get access to information about their labor practice and their audits reports: the ” Transparency 101” initiative. Nike and the Asian market Nike Asian expansion came after their European expansion starting by targeting the Japanese market in the 1992. Learning from their European expansion lesson Nike glocalized its brand management strategy to suit the Asian market from the beginning. Nike abandoned the brash attitude for its first marketing offerings designed specifically for china. The ads, from which the corps of elite American athletes usually deployed by Nike as global ambassadors of their product was primarily absent, celebrated local athletes as heroes. They concentrated on demonstrating a softer image of Nike, abandoning the aggressive approach they used to implement earlier.
  9. 9. 9 Learning from the European lesson they controlled their marketing and distribution operations in Asia by opening facilities in Vietnam and upgrading existing ones in Japan, Korea and Australia as well as constructing a lot of Nike only stores in Asia to control the display style of Nike shoes. Moreover, as a part of their global corporate social responsibility initiative, when the economic crisis hit the Asian market collapsing Nike sales in Asia, instead of withdrawing from the market they launched an initiative marketing campaign under the slogan”It’s my turn” showing their commitment to Asia, also they debugged a new affordable series of Nike products for the Asian consumer “play series 100” Also they constructed playgrounds, called the play zones for use by youth. This proactive approach boosted the global image of the brand and increased the customer loyalty to the brand that eventually started to payback in the late 1999 with a third quarter earnings increase of 70%. As part of enhancing their global image and to show their commitment to Asia in addition to increasing their brand awareness, they are planning to sponsor the 2002 world cup in Korea and Japan and the 2000 Olympics in Sydney. Are sponsorships and endorsements vital to Nike’s business? For instance, what effect would Nike becoming an official sponsor for the Olympics have on the company’s relationship with consumers? Sponsorships and endorsements are very vital to Nike business. In fact celebrity endorsements are corner stone in Nike’s global brand equity. Nike has built a strong brand image along the years through successful brand associations with legendary athletic heroes (American and non Americans). On top of these iconic collaborations are the association between Nike and Jordan that persisted for about 18 (1984-1999) years and resulted in the development of a new sub brand , the Air Jordan line of sport shoes which generated about 9.5 billion $ for Nikei. Another iconic sponsorship was that made between Nike and the Ace golf player Tiger Woods which erected Nike brand in the golf arena. Also The historic sponsorship for the USA dream team in the Barcelona Olympics which introduced the brand Nike to the world and increased its awareness globally , and the sponsorship of the Brazil football team, the champions of
  10. 10. 10 the world cup 1994, which increase Nike brand awareness and leveraged its brand credibility to soccer fans in the world. The benefits of these celebrity endorsements and sponsorship programs exceeded the monetary benefits of increasing revenues; actually it conveys the brand personality and shapes the brand image in the mind of the consumer. Endorsement is a channel of brand communication in which a celebrity acts as the brand’s spokesperson authenticating the brand’s claim and position by extending his/her personality, popularity, stature in the society or expertise in the field to the brand; in other words personifying the brand. Also celebrity endorsement is a way for the company to differentiate from competitors. The successful brand association strategy of Nike is based on three main pillars, the attractiveness of the celebrity, the credibility of the celebrity and the personality match between the celebrity and the brand. For a successful endorsement nike ensured that the endorser is attractive to the target audience in certain aspect physical appearance, intellectual capabilities, athletic competence and/or lifestyle. This attractiveness enhances the memory of the brand. As a sports shoe and Apparel Company, their main target customers were the youth so in their choice of celebrity they choose young energetic players in different sports like Jordon (the legendary basketball player), Johnson (the famous American sprinter),Ronaldinho ( the Brazilian soccer magician). On the other hand when they wanted to enter the golf arena with its Nike golf line, they selected tiger wood to be their ambassador and when they targeted females they used the Worlds two best female tennis stars: Maria Sharapova and Serena Williams as their ambassadors. Meanwhile Nike selected endorsers who have a high credibility level among the target audience this credibility which increases the acceptance of the consumer for the endorsed product. Finally Nike ensured the existence of a significant match between the brand and the celebrity in terms of identity, personality, positioning in the market and vs. competitors and life style so that the endorsements are able to strongly influence the thought processes of consumers and create a positive perception of the brand.
  11. 11. 11 A point of strength in Nike endorsement strategy is their Consistency and long-term commitment. They maintained long term collaboration between the Nike as a brand and their endorsement which can be seen in the 18 years endorsement contract with Jordan and the long term sponsorship for the Brazilian soccer team that started in the early 90’s and is sustained till now. This consistent and long term relationship established a strong and solid personality and identity for Nike along the years. Also Nike kept on monitoring the behavior, conduct and public image of the endorser continuously to minimize any potential negative publicity. When they sensed the negative response of parents to the attitude of their nike endorser, Charles Barkley, Nike made him to state that he is not a role model in a famous Nike commercial "I am not a role model" Another important aspect in the effective endorsement strategy of Nike is their selection of unique celebrities which effectively differentiated them from competitors and in the same time they make sure that this celebrity will not sign for any of their competing companies. An important aspect that Nike understood is that endorsement is not a target in itself but it is part of building the brand and also it can’t replace the comprehensive brand building processes. They worked on building their brand image through the other attributes like; brand awareness, brand loyalty, perceived quality and they authenticated this image with endorsement. In all their celebrity endorsements Nike wanted to convey an image of a successful brand, high performance, achieving and innovative brand. As part of their glocalization strategy they did brand association with celebrities on two tier, a global tier associating with globally well recognized celebrities like Micheal Jordan, Michel shomakher, Tiger woods and a local one associating with local figures that convey the same personality with a more local appeal like Eric cantona, Sergei bubka and Noureddine Morceli. Celebrity endorsement when done in an appropriate way it benefits the brand but on the other side, by associating the brand to a celebrity the company is taking the risk of attaching itself to a person who, like any human beings, have his mistakes that can be reflected on the brand. Also it is difficult to find an endorser who enjoys global acceptance; always there will be people who dislike him. Other forms of brand associations are sponsoring big events, like the Olympics. The benefits of associating with such global events are to increase the global brand
  12. 12. 12 awareness; the brand is seen by a large number of people around the globe. Besides, such collaborations move Nike from being a local American brand to become a global brand. Moreover sponsoring the Olympics games widen the brand scope as Nike become associated with different sports rather than basketball and field and track games which were their main association heritage in the states; this allows the brand to target different and new segments of customers. The problem Nike encountered in its global move was the negative perception about their brand, Nike brand was perceived as a tough, hard, aggressive, professional, American brand. By sponsoring the Olympics, in addition to increasing their brand awareness, they managed to change their brand image benefiting from the reflection of the Olympics games’ personality- that stands for a faire, clean, smooth, respectful, traditions, and global values- on their brand, improving Nike’s global image. Why did Nike become a target for critics of globalization? Do you think Nike’s response to allegations of unfair global labor practices was appropriate? Reasons for global criticism: When a company expands globally, its operation increases dramatically witnessing a pronounced rise in its operation costs. The company in such phase is usually focusing on controlling its operating costs through outsourcing and subcontracting its operation to cheap labor countries such as china, Indonesia….etc. and they usually don’t consider the working conditions in such countries, all what the care for is the cost. Nike was not an exception; it subcontracted factories in china, Vietnam, Indonesia…ect. Simultaneous with this expansion, it is normal that more light is being spotted on Nike’s operation and it becomes a target for global criticism. This expansion subjected Nike to bigger number of nongovernmental social and environmental agencies and audit that review its operation in different countries especially in the third world countries in countries such as china, India, Mexico and Vietnam. which leads to the exposure of Nike to global criticism. Accordingly Nike’s operation in Vietnam have been criticized by Ernst and Young’s for violating the minimum wage and overtime laws in Vietnam as late as 1996, although Nike claims that this practice has been halted. The company has been further subject to much criticism for the poor working conditions with poor ventilation and exposure to dangerous levels of carcinogens.
  13. 13. 13 Also the company was accused for the use of child labor and the poor treatment of its overseas employees in factories used by Nike in Pakistan and Cambodia Nike’s Response: Nike managers initially refused to accept any responsibility for the various labors, environmental and health problems found at their suppliers’ plants claiming that these workers are not Nike employees, and that Nike had no responsibility towards them. But these hands off approach didn’t withstand the growing attack by human rights and worker rights groups. Nike found itself obliged to take corrective measures to ensure that these unfair labour and human practices don’t occur again. An action Nike took to improve its global brand image which emerges from its globalization strategy. “Sustainability is key to Nike’s growth and innovation,” said Mark Parker, NIKE, Inc’s, President and CEO. “Making our business more sustainable benefits our consumers who expect products and experiences with low environmental impact, contract factory workers who will gain from more sustainable manufacturing and our employees and shareholders who will be rewarded by a company that is prepared for the future.” In the beginning Nike response was focusing on a risk management, philanthropic and compliance actions. They were reactive just responding to the market by some nonintegrated CSR initiatives. By time, Nike’s reactive behavior shifted to a more proactive one implementing and integrating a lot of its CSR initiatives in the core business strategy of the company focusing on innovation, collaboration, transparency and advocacy to prepare the company to thrive in a sustainable economy. By 1998, Nike formulated a new global labor standards that included lowering the minimum age of footwear factory workers to 18 and all other workers (in apparel, equipment) to 16. It has also insisted that all footwear suppliers adopt US Occupational Safety and Health Administration (OSHA) standards for indoor air quality. Also Nike created a Code of Conduct for its suppliers that required them to observe some basic labor and environmental/health standards. Potential suppliers for Nike were obligated to sign this Code of Conduct and post it within their factories. In response to the growing criticisms, Nike created several new departments (e.g., Labor Practices (1996), Nike Environmental Action Team (NEAT) (1993)) which, by June 2000, were organized under the Corporate Responsibility and Compliance Department.
  14. 14. 14 Nike has pushed its suppliers to obey standards through increased monitoring and inspection efforts. The company is currently developing a grading system for all of its suppliers, which it will use to determine future orders and thus create a strong incentive among its suppliers to improve working conditions. Nike has been active in founding and/or supporting an array of different international and non-profit organizations, all aimed at improving standards for workers in various developing countries, Nike is actively involved in the United Nations Global Compact. Also they became a charter member of the Fair Labor association, Nike’s corporate citizenship initiatives can be summarized in the following points In spite of all these initiatives, the negative brand image of Nike continued to propagate among activists claiming that these measures are only a camouflage, still Nike is outsourcing its operation to countries with low labor cost and a lot of child labor cases, also it is claimed that the audit reports are fake and unrealistic ones as the audited site become aware of the time of the inspection before it comes. So Nike found that it is not enough to implement these CSR initiatives but it is required to communicate it to the community and enforce its authenticity. So Nike initiated measures to provide the public with access to information about its labor practices and the results of the audits report, a project known as “Transparency 101”. The first step was an agreement to disclose the results of all factory audits to the public by posting them on the Nike’s website. Also the company sent 16 undergraduates to a total 32 factories worldwide. The company than made a full-text copies of every report available on the internet. Also Nike issued each year a corporate responsibility (CR) report and makes it available on its website for people to review its sustainability efforts. The results of these Nike initiatives that it sustained its position as the top sports brand and the 56th brand across the universe proving that their initiatives did work and alleviated the negative impact of the ethical issues they confronted in Asia. ii i The Jordan Effect The world's greatest basketball player is also one of its great brands. What is his impact on the economy ii BrandZ Top 100 Most Valuable Global Brands 2011

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