Nike’s Global Women’s Fitness
Business: Driving Strategic Integration
Contents
Contents. 1
1. What
are the key issues in the case?. 2
2. Prior
to the Change the Game proposal for global women’s fitness, how would you
describe Nike’s strategy in the women’s market? What important lessons had been
learned through these efforts to help shape the Change the Game proposal?. 2
3. Describe
the new strategy for global women’s fitness proposed by the Change the Game
team. 3
4. What
were the greatest internal and external barriers facing the team in implementing
the new strategy? In what ways did they manage these challenges well? How are
consumers’ needs taken into consideration?. 3
5. What
are the advantages and potential disadvantages to Nike of shifting from a
product-driven to a consumer or category-driven business in the women’s
market? Across the company? What new skills/competencies does the new approach
require? What skills/competencies must the organization be careful not to
lose?. 4
6. How
will Nike’s latest reorganization potentially help the global women fitness
team moving forward?. 5
7. What
potential risks should the group seek to manage?. 6
8. What
are your recommendations how to create and sustain a competitive advantage in
the global women’s fitness?. 6
9. Risks
associated with recommendations. 6
10. Additional
questions that would enhance the comprehensiveness of the case analysis. 6
11. Case
summary that highlights key marketing principles as reflected in the learning
objectives and how they were applied to the case. 7
12. What
were the lessons learned from this case?. 7
13. Exhibits. 8
Exhibit 1: The Vision. 8
Exhibit 2: Organizational Capabilities Model 8
Exhibit 3: Diamond E+C Framework. 9
Exhibit 4: Blue Ocean Strategy. 9
1. What
are the key issues in the case?
The Nike faces several major issues
necessitating the Change the Game initiative:
Prior
to adopting a new strategy of integrating Women’s Fitness:
2. Prior
to the Change the Game proposal for global women’s fitness, how would you
describe Nike’s strategy in the women’s market? What important lessons had been
learned through these efforts to help shape the Change the Game proposal?
Prior to Women’s Fitness initiative, Nike
had an encompassing product- driven strategy focusing on male athletes,
organized around footwear, apparel and equipment and giving majority of company
focus as well as holding major market share in footwear. The drive for
innovation was contained within business units and cross-functional
collaboration was observed only for particular projects or special events.
Although Nike was operating via matrixed organizational structure, the
functional representatives were not communicating with business units,
therefore products were not based on a well-defined style/line strategy.
As the team has looked at the trends in
female market, it saw it as a great business opportunity, culminated with
creating global women’s footwear division in 2001, addressing the differences
of the women’s physique and style preferences. Creation of Nike Goddess retail
marketing project has been another milestone in women’s direction. This limited
chain of Nike stores with the 1-on-1 service philosophy (a la Starbucks for
women) has given the nudge to see how the collection could be brought to life
per customers’ demands. Thus, in 2003, when the Sport Lux collection sold out,
this event served as a final lesson confirming the formation of the new
strategy.
This break-through has alleviated the
pressure of justifying the need to encompass the women’s fitness market,
however the issues of developing product lines, broken down to various sports
categories, synchronizing the product life cycles to deliver the line at the
same time all around, sending the right message to the consumer posed a
challenge of strategically formulating the new change to the senior management
for launch approval.
3. Describe
the new strategy for global women’s fitness proposed by the Change the Game
team.
The Women’s Fitness strategy suggested the integrated women’s line,
encompassing all items (footwear, apparel and equipment) dedicated to initially
designated 5 types of sports, with the idea of expanding into more once the
strategy proves it success. This idea implied addressing the entire market broken down in six categories:
running, men’s training, basketball, soccer, women’s fitness and sportswear.
This strategy was a set out to be a
start of the “dialogue and an emotional connection with women”. Creating such
bond and communication pathway would lead to understanding the company
offerings by their female clientele, turning them from window shoppers into
loyalists. As indicated in the article, the vision that was presented (Exhibit
1) was a powerful strategic principle[1]:
4.
What were the greatest internal and external
barriers facing the team in implementing the new strategy? In what ways did
they manage these challenges well? How are consumers’ needs taken into
consideration?
Internal Barriers:
During the Women’s Fitness integration
– Frequent
staff rotation
– Multitasking
between 2 priorities
– No
guarantee of success
– Not
full back up of the senior management
– Creating
a dialogue with women: message and its delivery methods not yet clearly defined
– Lack
of HR: Emma Minto – the only full time associate assigned with strategic lead.
– Competing
Priorities – lack of resources. Most had to take on double roles
– No
additional financial compensation for adding on additional tasks affecting
staff motivation
– Various
degrees of centralization in Footwear and Apparel businesses, specifically in
product design and development
– No
firm backing by senior management, 51% favor showed a lot of reservations
Post Women’s Fitness strategy integration
Challenges:
– Category-driven
approach company-wide global integration
– Scheduling
operations across departments to meet unified deadline to deliver the
collection
– Breaking
the stereotypes of evolving one product instead of all-encompassing line of products
– Sustainability
of SCM: synchronized delivery to all the vendors (6000 doors at the same time)
– Investment
in integrating SCM wasn’t scalable, therefore only temporary
– No
integrated systems to capture the results of the Women’s Fitness Business
– Prioritization
of styles: 20% of styles sustains 95% of business
– The
change adaptation is slow
– Needed
to make “Believers” out of supporters and skeptics
External Barriers:
– Lack
of market data supporting women’s athletic habits to present in favor of
Women’s Fitness category.
– Undefined
competition (Old Navy vs Adidas) presented inability to process the trends and
aspirations of women in fitness department
– Estimation
of market growth potential was based on the trends, such as sports
participation rates or gym memberships
– Uneven
market opportunity split among footwear (25%), apparel (70%), equipment (5%)
representing difficulty forecasting of the collection success
– Various
global fitness trends and demands (consumer needs) necessitating different
approaches to collection priorities in terms of sport (Dance vs Cardio)
In what ways did they manage
these challenges well? How are consumers’ needs taken into consideration?
Company’s
mission addresses athletes, but defines athletes as each and every individual.
It had no longer dominated product markets and pushed forward with dominance in
sports and masculinity.
To
get to this integrated approach and overcome all the listed above challenges,
Women’s Fitness Team has prioritized the styles to be available for delivery to
selected retailers. It emphasized the women’s physique peculiarities (print
ads: Thunder Thighs, Shoulders, Butt) and build the feel of originality on
these. Nike spoke to women of all athletic degrees of involvement to provide
them with desired alternative and deliver female product. Being male focused
was starting to become a philosophy of the past as the company started to move
into all encompassing, category-driven mindset. Although they had sparse human
and physical resources, the team juggled between 2 jobs without extra
compensation, demonstrating full commitment. They have experimented with the
investments into the infrastructure to monitor sales and ROI as well as synchronizing
the deadlines across the business units. Overall, the company has made a
significant shift with outstanding results.
5.
What are the advantages and potential
disadvantages to Nike of shifting from a product-driven to a consumer or
category-driven business in the women’s market? Across the company? What new
skills/competencies does the new approach require? What skills/competencies
must the organization be careful not to lose?
Advantages:
Disadvantages:
The skills/competencies new approach required
In order to distinguish among different
skills and competencies the new approach of delivering integrated collection vs
differentiated products, the resource identification model was considered, see
Exhibit 2. The most evident skills and competencies are identified as
following:
Organizational skills:
Business Competencies:
The skills/competencies the
organization must be careful not to lose:
MVS
(Most valuable skills) as outlined in the organizational capabilities model
below and evidently utilized by Nike corporation to benefit during the
re-organization of its business are:
6.
How will Nike’s latest reorganization
potentially help the global women fitness team moving forward?
The
company will be able to tell a story with their product offering. It can, by
means of advertising, campaigns, events, and other marketing tools, engage
women in fitness, for various reasons (fashion, performance, self-image). From
the business perspective this means the company will not only capture the new
share of new market, but also take away market shares of the competitors.
Secondly, Nike will be able to offer integrated fitness appeal based on the
specifics of the country, not just follow the trends in particular product, but
capture the gyms, tracks, studios members to full capacity in different corners
of the world.
7.
What potential risks should the group seek to
manage?
Outlined
below are the risks and challenges associate with the reorganization of the
company and the addition of the Women’s Fitness Business
–
Fears of success in women’s business would erode men’s business, therefore
diluting the brand
–
Finding the right strategy to communicate to the most current and trends-based
needs of women
–
Frame the collection appealing to ALL athletes, that is to retain sports
enthusiasts seeking performance and address the casual fitness participants to
address the fashion aspect
–
Describe the collection approach to all the customers in 3 different tiers
–
Establish Dance Category until it reaches profitability to ease the pressure on
the less “sexy” supporting categories to allow their potential expansion
–
Manage the complex matrix organization allowing room for innovation and
creativity
–
Incentivize employees to deliver based on double-tasking to sustain enthusiasm
–
Watch out for the competitor counter moves in similar direction, or potentially
capturing unexploited category/capitalizing on men’s fitness thus taking the
market share away from Nike
8.
What are your recommendations how to create and
sustain a competitive advantage in the global women’s fitness?
In
order to give the recommendation how to create and sustain a competitive
advantage, Diamond-E (+c) framework should give the platform to oversee the
factors contributing and detracting from the sustainability of the competitive
advantage. Although the strategic principle has been addressed by the company
in its vision (see question2), the Diamond E+C framework gives a more
overarching presentation of the internal and external factors, see Exhibit 3.
Resulting
from the framework, the recommendations to sustain the competitive advantage
are the following:
9.
Risks associated with recommendations
Recommendation
Risk
Worldwide
Expansion
Is
there a World Athlete?
How
does Nike see Athletic Strategy worldwide, considering that sports and
athletics vary significantly all over the world? Is there a unified
direction? Would the company have benefitted better by retaining product
driven approach in emerging countries? Will there be a joint movement of
fitness expansion to support their categories?
Lifestyle
Fitness
Athletic
Brand vs Lifestyle? Where does Nike position itself when comes to
differentiating between athleticism and fashion? It appeals to women seeking
for self-expression in fitness, but what how does it message women seeking
performance support from a company, is there a brand dilution loss or an
alternative direction?
Woman’s
Empowerment
Does
the strategy threaten men’s performance market, following “Diet Coke
footprints”, risking diluting the brand
“losing some of the testosterone” or turning the company into women’s
brand in men’s perception
10.
Additional questions that would enhance the
comprehensiveness of the case analysis
11.
Case summary that highlights key marketing
principles as reflected in the learning objectives and how they were applied to
the case
12.
What were the lessons learned from this case?
13. Exhibits
Exhibit 1: The Vision
Vision presented to the senior management team at the end of
phase one – April 2004:
“To shift the focus of women’s fitness from a
brand-strokes series of initiatives to a sustainable, profitable
brand-enhancing portfolio of sports businesses that in combination make
Nike the aspirational brand of choice for her.”
Exhibit 2: Organizational Capabilities Model
Resource Identification
Implement
New Goals
What
are the most critical organizational capabilities required by the goals of
the new strategic proposal?
Dedicated Management team, financial incentives, integrating tracking
resources to validate profitability from the proposed initiative, integrated
timelines for all of the business units, motivation and collaboration across
business units, departments and cross- functions
Implement
New Value Propositions
What
are the most critical organizational capabilities required by the value
proposition of the new strategic proposal?
Appeal to the women, delivering fashion in
fitness wear, allowing for self-expression in variety of “sports”. Promoting
Dance category, gym wear and other supporting categories of women of all ages
all over the world.
Messaging, advertising, design of apparel,
footwear and equipment, communication across the departments
Implement
New Product-Market Focus
What
are the most critical organizational capabilities required by the product
market focus of the new strategic proposal?
Delivering integrated collection, in targeted
fitness categories in a timely, accessible manner, at major retailers,
on-line and all over. Supply Chain, Value Chain and integrated planning are
the most critical resources.
Implement
New Core Activities
What
are the most critical organizational capabilities required by the key
activities of the new strategic proposal?
Employee motivation, human resources, time,
deadlines coordination, financial investment into R&D and new sales
execution tools, software, ROI reporting programs
Close
Resource Gaps
What
are the most critical organizational capabilities required to close the
resource gaps identified in the resource analysis of the strategic proposal?
Data supporting advances in female fitness, support
(51%) of the executive management, financial resources availability to
sustain increased COGS, global presence and growing demand
Close
Performance Gaps
What
are the most critical organizational capabilities required to close the
management preferences gaps identified in the preferences analysis of the
strategic proposal?
Capable and talented management, enthusiasm of
the team to deliver the product in a new manner, sought out by the consumer,
communication within virtual team and autonomy to produce test collection to
gain more support from the executive team.
Exhibit 3: Diamond E+C Framework
Organization
Management Preferences
Resources
Customer
Strategy
Environment
–
Fragmented business lines (equipment, apparel, footwear) representing varying
market shares
–
Matrixed organizational structure
–
Executives rotating departments
–
Desire to optimize innovation and execution around primary products
–
Seeking for sustainable competitive advantage
–
Adaptation to global changes
–
Strive for leadership across footwear, apparel and equipment simultaneously
–
Virtual teams consisting of various dept. heads juggling 2 jobs
–
No compensation for extra tasks
–
Small designer team working on women’s shoes (3 vs 12 on men’s)
–
Nike Goddess stores – a success
–
Nike resonated with women more than any other sports brands
–
Growing spending among women
–
Different view of fitness from men’s
–
Desire to express HERself
–
Varying approaches to fitness as a lifestyle
–
Seeking out the Goddess line
–
Change the Game – several initiatives (5)
–
Focus on innovation
–
Exploring opportunities and new markets
–
Adapting to customer trends
–
Growing number of gyms ( Curves franchise opened every 4 minutes)
–
Growing participation in every fitness category
–
Growing shopping trends in fitness
Exhibit 4: Blue Ocean Strategy
Blue Ocean Strategy
Create uncontested market spaces:
Dance Category: “Nobody owned it” (p.9)
Make the competition irrelevant:
Creating the collection approach, something that other
athletic companies have not delved into, being still fragmented per product lines
Focus on non-customers:
Being strictly athletics oriented company, offering dance
collection would encompass those females that are in fitness not for sports
but for self-actualization, offering them clothes to look and feel good, not
simply performance efficiency
Create and capture new demand:
Dance market was new, nobody owned it, and it was abundant
with celebrity athletes to provide the competitive edge and captivate the
attention of those women who have not found themselves in the fitness world.
It would offer the comfortable, non-threatening/competitive place where a
woman could feel good and long for that, consequently contributing to the
creating and capturing of the demand by Nike.
Break the value-cost tradeoff (seek greater value to customers
AND low cost simultaneously):
Although the Dance category would be the break-through for
the company, the foundation for its development would be built of “slightly
less sexy stuff to pay the bills” (p.10).
Align the whole system of a firm’s
activities in pursuit of differentiation AND low cost:
Creating the Women’s Fitness
Strategy consisted of 3-tiered approach to market. Although Dance was the
tier one category providing “sharp point”, promising good revenues, tier two
was the financial platform for the time of the development of the new edge,
while tier 3 was the all-encompassing aspect that would close the circle of
addressing most of the fitness directions women’s category is broken down to.
This way, the team created the approach where it provides the competitive
edge, yet not overcompensates for it with the higher cost, making it
unattainable to the customers.
[1] HBR:
Transforming Corner-Office Strategy into Frontline Action – by Orit Gadiesh and
James L.Gilbert
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