Nike’s Generic Strategy (Porter’s Model)

Nike Inc. uses a combination strategy for its competitive advantage. This type of strategy
includes two or more of the generic strategies from Porter’s model. The following are the
generic competitive strategies implemented in Nike’s combination strategy:
1. Cost Leadership Strategy
2. Differentiation Strategy

Cost Leadership Strategy

Nike’s cost leadership

generic strategy sustains
competitive advantage
based on
costs. In this generic
strategy, the company
minimizes production
costs to
maximize profitability or
reduce selling prices. In
the late 1990s, Nike
reduced
costs and the selling prices
of its athletic shoes and
other products. This
generic
competitive strategy
helped the company
regain its competitiveness,
especially
against Adidas.
Nike’s cost leadership
generic strategy sustains
competitive advantage
based on
costs. In this generic
strategy, the company
minimizes production
costs to
maximize profitability or
reduce selling prices. In
the late 1990s, Nike
reduced
costs and the selling prices
of its athletic shoes and
other products. This
generic
competitive strategy
helped the company
regain its competitiveness,
especially
against Adidas.
Nike’s cost leadership
generic strategy sustains
competitive advantage
based on
costs. In this generic
strategy, the company
minimizes production
costs to
maximize profitability or
reduce selling prices. In
the late 1990s, Nike
reduced
costs and the selling prices
of its athletic shoes and
other products. This
generic
competitive strategy
helped the company
regain its competitiveness,
especially
against Adidas.
Nike’s cost leadership
generic strategy sustains
competitive advantage
based on
costs. In this generic
strategy, the company
minimizes production
costs to
maximize profitability or
reduce selling prices. In
the late 1990s, Nike
reduced
costs and the selling prices
of its athletic shoes and
other products. This
generic
competitive strategy
helped the company
regain its competitiveness,
especially
against Adidas.
Nike’s cost leadership
generic strategy sustains
competitive advantage
based on
costs. In this generic
strategy, the company
minimizes production
costs to
maximize profitability or
reduce selling prices. In
the late 1990s, Nike
reduced
costs and the selling prices
of its athletic shoes and
other products. This
generic
competitive strategy
helped the company
regain its competitiveness,
especially
against Adidas.
Nike’s cost leadership
generic strategy sustains
competitive advantage
based on
costs. In this generic
strategy, the company
minimizes production
costs to
maximize profitability or
reduce selling prices. In
the late 1990s, Nike
reduced
costs and the selling prices
of its athletic shoes and
other products. This
generic
competitive strategy
helped the company
regain its competitiveness,
especially
against Adidas.
Nike’s cost leadership generic strategy sustains competitive advantage based on costs. Nike
has a broader network than their competitors that enable them to cancel the alliance with any
organization that fails to meet their standards. Due to the advanced technology goods are
produced at a lower cost with superior quality granting them the supremacy over other
copycats who cannot strive to meet the standards of the Nike.
Some of the cost leadership strategies employed by the company include:
1 Economies of scale
As the world’s leading producer of sports equipment and textiles, the firm has managed to
take advantage of economies of scale.
This results from its ability to purchase in bulk, which is critical in securing huge discounts.
As well, due to its giant size, it is able to control the prices of the raw materials.  
 
2 Outsourcing
Outsourcing is at the center of Nike’s business model.
This strategy has managed to give the firm an edge against its major competitors.
Particularly, it enables it to greatly reduce its production costs.  
Note that Nike outsources its processes from Asian countries which enables it to: 1) remain
lean, 2) secure cheap source of labor, and 3) be flexible in case of product price changes.
This is an important business strategy of Nike.
This is because it enables the firm to easily relocate its operations to cheaper locations as an
effort to drive their marginal costs down.
 
3 Effective negotiation with suppliers
Nike’s enormity to its suppliers gives the firm an advantage in negotiations.
It purchases products in high volumes and selects manufacturers based on lowest cost
considerations.  
Further, its suppliers are extremely dependent on the firm. All this enables Nike to enjoy low
production costs.      

Nike has significant

economies of scale. As
the world's largest
producer of
athletic textiles and
equipment, Nike dwarfs
the competition. A caveat
to their
manufacturing processes,
Nike outsources all of
these processes to many
Asian
countries that does three
things, (1) keeps Nike as a
company very lean, (2)
provides a cheap labor
source, and (3) if a
manufacturer/supplier
increases costs,
Nike can simply relocate
to a cheaper option further
driving down their
marginal
costs. Other companies
without Nike's clout can't
match this ability. Also
considering the worldwide
demand that Nike has, the
distance to market from
suppliers is negligible and
not a source of a
diseconomy of scale.
Nike has significant
economies of scale. As
the world's largest
producer of
athletic textiles and
equipment, Nike dwarfs
the competition. A caveat
to their
manufacturing processes,
Nike outsources all of
these processes to many
Asian
countries that does three
things, (1) keeps Nike as a
company very lean, (2)
provides a cheap labor
source, and (3) if a
manufacturer/supplier
increases costs,
Nike can simply relocate
to a cheaper option further
driving down their
marginal
costs. Other companies
without Nike's clout can't
match this ability. Also
considering the worldwide
demand that Nike has, the
distance to market from
suppliers is negligible and
not a source of a
diseconomy of scale.
Nike has significant economies of scale. As the worlds largest producer of athletic textiles
and equipment, Nike dwarfs the competition. A caveat to their manufacturing processes, Nike
outsources all of these processes to many Asian countries that doles three things, 1) keeps
Nike as a company very lean 2) provides a cheap labor source 3) if a manufacturer/supplier
increases costs Nike can simply relocate to a cheaper option further driving down their
marginal costs. Other companies without Nike’s clout can’t match this ability. Also
considering the worldwide demand that Nike has, the distance to market from suppliers is
negligible and not a source of diseconomy of scale.
Nike definitely has low cost access to factors of production. the enormity of Nike in respect
to the suppliers gives them huge advantage in production negotiations. Due to their high
volumes for products, the cut-throat low cost nature of selecting a manufacturer nad coupled
with thye fact that Nikes suppliers depend so heavily on them for their owm success that they
have little to no bargaining room toward raising prices, allow Nike to continuously enjoy low
costs of production.
In the late 1990s, Nike marked down expenses and the selling costs of its athletic shoes and
different items. This conventional serious technique helped the organization recover its
intensity, particularly against Adidas.
Nike puts a huge emphasis on low costs and high reliability from their supply chain. An
article from December 2014 shows, “By the end of fiscal year 2013, between 70% and 76%
of its apparel and 85% of its footwear products were manufactured on lean lines. This
delivered additional savings of $0.15 per unit through better labor productivity and lower
waste” (Soni). Nike is continuing to improve their supply chain and costs. Earlier this year
they announced a plan to reduce manufacturing waste by up to 50% (Swanson).

Differentiation Strategy
The product differentiation attributes that Nike pays great attention to are the uncanny
product features and the timing of introducing their products to market. Creating new
technologies in material and designs that are continually updated to reflect consumer
preferences create a niche that others try to copy but never can sustain Nike's pace. Plus Nike
always seems to be ahead of the curve in introducing their newest products just as the market
begins to crave them. New products like the recently released Flyknit shoes that blend a new
knitted pattern of yarn and fabric into a lightweight, breathable running shoe just as soon as
summer starts creeping into the public's psyche is a good example.
Another big part of Nike's product differentiation strategy is its relationships with its
customers. Being the worldwide leader of athletic textiles for the better part of half century
has given Nike a sort of "high ground" in the market. Customers feel that Nike's reputation in
athletics is somewhat superior over all others and by default pick their products more often
than not just because of this. Also Nike is well known for their great marketing techniques
with many of the world's most well known athletes serving as spokes models, witty ads and
commercials, and the "Just Do It" slogan that is synonymous with the brand. Additionally,
Nike reaches out to the consumers with product customization offerings to further offer a
different product experience as well; i.e. the NikeID brands of clothing, equipment and
footwear that allow customers to modify the colors, materials and even monogram their
products however they see fit.
Not to be overlooked, Nike engages in many linkages with other firms and has a diverse
product mix. The Nike brand is seen around the world through the linkages they have with
most every sport on the planet. The Nike Swoosh is on everything from NCAA college
footballs to Olympic sports uniforms pushing the brand out there into every sport's athletes'
or wannabe athletes' brains. Nike even cross links with non-athletic companies to implement
new avenues for their consumer, for instance with the Nike+ run tracking software made in
conjunction with Apple's iPod and iPhone. As one can imagine, more often than not Nike
will not only be on one "part" of those performing athletes, but more likely that person will
be outfitted in a complete Nike product mix from head to toe. Consumers will find that they
like one product from Nike, say shoes, and then see another offering, like sunglasses, and
automatically correlate the former's high performance to the latter rather than pursue an
unknown brand.
Nike's recently released Nike Free Gym+ women's shoes that mimic being barefoot for
exercise classes such as yoga and the Nike Hypercool 2.0 line of sweat wicking performance
clothing to cool athletes as they perform). These advantages set Nike's products apart and
drive customers to them.

Nike’s business level strategies could be explained as prospectors.

The main contents of prospectors are innovation, develop new products and seek new
opportunities to grow (Robbins et al, 1997).
This is because that “innovation is at the heart of Nike, Inc. ‘s business growth strategy”
(Nikebiz, 2012). It is the major factor that contributes to NIKE’s commercial success of its
products.
Miles and snow’s adaptive strategies Nike constantly invested money in its Research and
Development department to create new technologies for producing the products. More
specific, Nike has hired a huge specialist team which including exercise physiology,
engineering, biomechanics and other fields that related with sports products innovation.
Also, Nike has cooperated with a wild range of athletics, coaches, orthopedists, podiatrists
and trainers to develop and test the new products (Nike, 2011). For instance, Nike’s
representative innovations are the Nike air, Nike zoom air, Nike air max, Nike Free and Nike
sole. These technologies as can be seen as the core technologies that Nike using for its shoe
products. Besides, Nike not only focuses on its product innovation, but also focuses on its
internal process redesign (Daft, 2009).
Thus, Nike’s business level innovation strategy could be explained as the prospectors of the
Miles and Snow’s adaptive strategies framework.
The company's innovation debut was in 1979 when it introduced air cushioning technology.
The shoes featured gas-filled plastic membranes that could be inserted into the sole for
comfort during running. Invented in the mid 1970s by a NASA engineer, it kept up the
revenue of Nike for long. But in mid 1980s the revenue started dipping mainly because the
management did not take note of the aerobics boom. Nike's competitors had by then
developed their business in this segment.

In a bid to regain its edge, Nike, in 1987, launched a new product called Air Max. The shoes
had two interdependent bags with compressed air inside. This helped in absorbing shocks
during running and jumping. The bags can be seen by the athletes (users) through a 'special
window' in the heel or toe shoe. Nike also customised the product to suit individual needs by
inserting bags of different size depending on the height and pressure exerted by users. This
made it easy for a person involved in a particular sport to choose his/her shoes.
Shoes + Technology:
In due course, even the hi-tech Air Max technology was found to be inadequate to entice
customers. And it was time for something that would differentiate Nike in the long run. It had
to be at once very distant from the core business and also very appealing. The focus was on
digital gadgets. It had less to do with shoes and more to do with athletes. Nike's sales
philosophy - if you have a body, you are an athlete - had enticed everybody who wanted to
think of himself/herself as an athlete or wanted to get more athletic. Fast forward to May 20,
2006. On this day, Nike introduced its first mass produced gadget, Nike + iPod Sports Kit, in
the US market. It was a tool to measure the distance and speed of a run or a walk.
Nike + Sportband Kit, was released in April 2008. It no longer needed an iPod and could be
connected to the computer directly to download the results. All the next products were an
enhancement of this concept. The chip in the shoes was integrated with the iPhone, enhancing
the possibility to view, manage and share the tracking results through iTunes.
A Nike + Sportwatch was also introduced in combination with the chip. In September 2010,
Nike introduced a running app to be used in the latest iPhones. The app used the phone's
accelerometer and so there was no need of a chip in the shoe.

The GO FlyEase
a sneaker that does not require the use of hands to put on or take off.
Nike Air Zoom BB NXT
With the Nike Air Zoom BB NXT, we wanted to create a basketball shoe with optimal
energy return. Through intensive tests at our Nike Sports Research Lab, we collected data and
feedback from athletes to achieve our goals.
The shoe’s three leading performance-driven benefits are outstanding energy return,
optimized cushioning and strength. Specific innovations include:

 Exposed Nike React foam under the heel provides a soft, responsive sensation
 A thin plate positioned above the foam provides torsional rigidity
 Two Air Zoom units positioned under the ball of the foot continually absorb an
athlete’s energy and provide great responsiveness
 The upper is a lightweight mesh with a tactile, textured print that provides support and
durability where athletes need it
 A plush foam tongue and padded collar with a notch to support the Achilles
tendon provides a comfortable fit
Servis compay

Cost leadership Strategy:

Direct inject technology: Servis has a main strength which makes the Servis superior than
other footwear's that is Direct Inject technology. Direct inject technology is a technology by
which company makes the shoes as a single piece, there is no any kind of stitches etc in these
shoes, and this technology is in the Gujrat factory not anywhere else. Service Industries
Limited has two production facilities covering more than 80 acres – each equipped with state
of the art double density direct injected polyurethane plants.

Servis units are vertically integrated covering all functions from cutting, closing to lasting
and shoe finishing. We have automatic cutters, 6 DESMA machines (30 station) and 5 Gusbi
machines. Production lines are equipped with conveyor systems following lean production
philosophy. Our engineering teams take pride in the fact that they form a layer of competitive
advantage for the company by lowering the product cost through production management. In
addition to the regular production engineering initiatives, we have PRET (Process re-
engineering teams) instituted who work closely with the material research and development
teams to keep rising raw material costs in control.

Are in regular contact with leading machinery vendors in Europe to keep abreast with latest
technological challenges.

Regularly visit machinery trade fairs in Europe to identify technological gaps.

Consist of highly skilled labor with lowest turnout in the Pakistan footwear industry.

Are trained for mass production as well as specialized products – separate units are in place
for each.

Servis Shoe

Defender:
Servis is Focused on achiving cost effiency through focusing on its cost leadership strategies.

Service Sales Corporation has its 258 retail outlets in whole of the country for selling
activities of service group on industries and every person has complete knowledge about
his/her duties and responsibilities. Therefore we can say that servis group of industries has
strong organization setup which is key element of its success so now servis entire focus is on
increasing its market share and sustaining its retained position. For this purpose servis has
launched a number of a number of brands in its portfolio

Don Carlos

Cheeta

Soul

CALZA

Liza

Skooz

Toz

Servis also has used direct inject technology to cut down its cost and have accuired vertical
integration

The supply Chain focuses on the efficient execution of warehouse operations to achieve
minimum order processing lead time, efficient replenishment of articles & assortments with
an emphasis on driving down operating costs while increasing service levels SOURCING
DEPARTMENT Responsible for taking the buying decisions. The products are acquired
through various sources including our factories in Gujrat & Muridke. This department is also
responsible for vendor development as well. The sourcing department is also responsible for
negotiating and fixing pricing issues related to different articles.