Term Paper on "Strategies Implementation"

Term Paper 12 pages (3959 words) Sources: 20 Style: Harvard

[EXCERPT] . . . .

Nike Strategic Analysis

Nike's strategic direction when analyzed using the Ansoff Matrix and the Boston Consulting Groups' Growth/Share matrix strategic market planning frameworks illustrate the company's increasing reliance on branding, marketing, in-channel synchronization and execution, in addition to a stabilizing of their supply chains. It is the intent of this paper to analyze the implications for Nike's strategy based on the use of these two strategic planning concepts.

Ansoff Matrix as a Strategic Planning Tool

The Ansoff matrix is comprised for four quadrants, defining specific strategies for addressing opportunities in current and new markets, relying on current or new products as the basis of these market-based strategies. Figure 1 provides a graphical representation of the Ansoff matrix.

Figure 1: The Ansoff Matrix

Each of the quadrants included in the matrix are defined as follows:

Market penetration strategy - the strategies in this quadrant collectively defines a series market strategies based on the company's existing products where no product modifications are made. In the case of Nike, this quadrant represents their heavy investments in branding to maintain a high level of unaided awareness and product loyalty in their existing customer base, the continual fine-tuning of their supply chain which has in the past impacted their ability to fulfill customer demand globally, and the continued retail-driven sales strategy which includes financial and product incentives to maintain shelf-space in all major retailers. A market penetration strategy specifically focuses on retaining existing customers and making them more brand-loyal.

Market Development strategy - a strategy that requires companies to change their existing product lines to better align with the needs of new markets. Often companies will find unmet needs in related market segments, and expand their product strategies, re-define their pricing and promotional strategies, and seek to reach the new segment with slight modifications to their existing selling and distribution strategies. Nike has successfully used this strategy to move into the Golf segment for example. Another successful strategy that Nike has used in this quadrant is the NikeID program, where customers can create their own customized shoes directly on the Nike.com website. The integration of a build-to-order strategy in the shoe and apparel industry is one of the most complex mass customization strategies there are, and Nike is successful at this selling strategy mainly due to the lessons learned from their previous failures in the supply chain planning function. Those failures and the lessons learned, set the foundation for launching and sustaining the NikeID shoe customization program.

Product Development Strategy - as the name suggests this is a strategy that seeks to gain additional customers in the current markets served by developing subsequent generations of products. In the case of Nike and their core competency of the new product development and product launch processes, this quadrant has been one of the most active in the shoe and apparel manufacturers' strategies globally.

Product development strategies and their associated processes have emerged in several industries as the most compelling competitive differentiator between market makers and the many competitors populating larger market segments. Consider the cellular telephone and services industry, and the processes of new product development and product introductions including the pace of new services and telephones, and this point becomes clear. The greatest weakness that many companies need to overcome is scope creep as defined by Wheelwright and Clark. These researchers have found that complacent cultures within organizations foster a willingness to continually add in features, many of which are not anchored in unmet customer needs or research. The Ansoff matrix also fails to capture this dimension of many organizations as it relates to their complacency and therefore a willingness to let scope creep, or the addition of unneeded feature, begin to permeate development efforts.

For Nike, the ability to streamline the many new product development and product launch processes has often made the difference in their ability to maintain competitive leadership in key markets and retain dominance in key distribution channels.

Diversification Strategy - Ansoff defines this strategy as one where an organization creates entirely new products for a new, and often unknown customer bases. By far the riskiest strategy for an organization to undertake, diversification ultimately requires an organization to turn away resources from a known market to pursue an unknown one. This point is made clear given the lack of resources many organizations have today for their existing strategies, making diversification even the more risky when it ties up resources that could be used in known product and market strategies. Globalization however is forcing the issue of diversification into many organizations who must expand into foreign markets to stay on a competitive parity basis with both regional and global competitors. Minimizing the risk of global expansion through the use of Joint Ventures (JV), mergers and acquisitions (M&a), and business models that share the risks of entering new markets across two or more participating companies are increasingly commonplace. Ansoffs' matrix has been further analyzed by many theorists who have noted that the model, in its present state, does not allow for related vs. unrelated diversification strategy definition.

In the case of Nike, a related diversification strategy is the successful launch of women's athletic shows and apparel. Nike has been the only athletic footwear and apparel manufacturer to as go so far as to create an entirely separate marketing, sales, distribution and service strategy specifically for this market. Their approach to defining the NikeWomen store chain, definition of and execution of women-only websites and the development of fitness dance shoes and apparel shows how Nike has been able to take the new product development and product introduction processes honed to a high level of performance in core markets, and move them into entirely new segments. Nike is showing competitive strength in the ability to move into related segments, and relying on an expertise in core market sensing, market research, product development, product introduction, and channel strategies, quickly establish themselves as a viable competitor in the markets targeted.

Illustrating Nike's approach to a related diversification strategy is shown in the following table as created from a series of analyses of the company's filings with the Securities and Exchange Commission, in addition to an analysis of their Annual Reports. Figure 2 clearly shows a pattern of initially experimenting with mainstream clothing with the acquisition of Cole Haan, then moving quickly back into footwear, clothing and apparel that supports a more sports-oriented and driven marketing strategy. Figure 2, a sample history of Nike's acquisition strategy, is shown here:

Figure 2:

Patterns in the Nike Acquisition Strategies Show Related Diversification Focus

Analyzing Nike Makes Ansoff Matrix Limitations Clear

There are many limitations of the Ansoff matrix as they relate to Nike's current and future strategies. Of all the limitations however the foremost one is the lack of a clear definition of any company's core competitive strength. Juxtapose the Ansoff Matrix for example vs. The Determinants of Competitive Advantage as defined Dr. Micheal Porter as the human and intellectual productivity of a nation in the context of its comparative advantage. The Ansoff Matrix makes no mention of how competitive dynamics of a multinational corporation ultimately impact each nation the company chooses to participate, produce, compete and sell in. Porter's Five Forces Model has been widely criticized for the same shortcoming specifically with the example of how General Electric, upon entering a new nation or region, will drive up its global competitiveness by its ability to execute at a far higher level of effiency than local and regional competitors. The ability to codify processes and make them more applicable across broad geographic market opportunities and perfect the resulting launch processes necessary to successfully penetrate a market is what makes General Electric a global competitor. Yet in the end, General Electrics' ability to quickly penetrate and be successful in new geographic markets does not necessarily make the United States inherently more competitive; it in fact makes the local region more conversant in global business competitive strategies. In fact Porter has often been criticized for looking too much at high velocity, high change industries including high technology, apparel and retailing as the dynamics of these industries tend to support the Porter models' definition of competitiveness. In analyzing the limitations of the Ansoff Matrix as they relate to Nike, these lessons learned from an abbreviated critique of Dr. Micheal Porters' competitive models underscore the many limitations of the Ansoff Matrix as it relates to industries which have high inventory, selling, and new product development velocities or speeds of change. Here are the major limitations of the Ansoff Matrix as it relates specifically to a strategic assessment of Nike:

Lack of visibility regarding competitive dynamics - There is no method for defining the strength and direction of competitors in current or planned markets, and there is no indication of the relative attractiveness of markets or not based on this dynamic. The Ansoff Matrix is blind to this market dynamic completely.

Profitability by product area and potential for growth - Another major limitation of the Ansoff… READ MORE

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