Brand Managment: Nike; Building A Global Brand Case Analysis

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BRAND MANAGMENT Nike: Building a Global Brand Case analysis Ahmed Coucha 800090353 6/29/2011 Dr. Ibrahim Hegazy

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

Transcript of Brand Managment: Nike; Building A Global Brand Case Analysis

Page 1: Brand Managment: Nike; Building A Global Brand Case Analysis

BRAND MANAGMENT

Nike: Building a Global Brand

Case analysis

Ahmed Coucha 800090353

6/29/2011

Dr. Ibrahim Hegazy

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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.

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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

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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.

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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.

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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

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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.

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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.

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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

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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.

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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

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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.

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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.

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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