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Brand Managment: Nike; Building A Global Brand Case Analysis

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 MANAGMENTNike: 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 theconsumers mind of a brands total personality (real and imaginary qualities andshortcomings). It is set of feelings, emotions and experiences that are linked to thebrand. While brand personality is the image the company wants to convey throughthe different brand architecture (logo, name, Marketing mix, and communicatedmessages) and they have control over, the brand image is the subjective mentalpicture of the brand. It is developed over time through advertising campaigns with aconsistent theme, and is authenticated through the consumers direct experience.Because it is a subjective perceived position, brand image can deviate from the brandidentity due to different perceptions, unexpected events, and different interpretationof communicated messages. The ultimate goal of any company is to lessen the gapbetween the perceived and the required brand image through actively gettingfeedback from the market and responding to any trends.Nike brand image that the company initially was building is a pure American icon, highperformance, 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 consideredperformance as top priority, they designed shoes that are durable, lightweight forrunners. They used leather in their fabrics because it is more durable than garmentyet less fashionable. From the early day, Nike has learnt the consumers’ need bylistening to the need of athletes, sharing their true passion for running. They designedtheir shoes to give athletes the best performance. In doing so, Nike has created areputation as a provider of high quality running shoes designed especially for athlete.The innovative product strategy they adopted emphasized their innovative image inthe minds of consumers. They introduced a lot of innovative products in the sportmarket starting from the Marathon shoe debuted in 1965, moving on to theinnovative new cushioning technology that was used with running shoes for the firsttime in the 70’s, followed by the introduction of the “Air” technology in basketballshoes in 1988, and lately the alpha line high tech products.
  3. 3. 3They used brand associated with achievers through getting the endorsement of highnotch athletes in the US. Actually this was the cornerstone step in building their brandimage in the US. They conveyed through these association Nike as a masculine,serious, high performance, winning brand linked with professional level ofcompetition. They played on making Nike a pure American Icon that portrays theAmerican spirit of competition, superiority and even Arrogance. Nike’s image wastotally different from other US local competitors like Rebook who personified theirbrand as fun, soft, fashionable brand through associating with non competition sportslike 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 wellrecognized and distinguished brand name and brand log , the swoosh, whichfacilitate the differentiation of its products from competitors. The brand name issimple 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 thefamous tennis player, Michel Johnson the famous American sprinter. Nike iscapitalizing on the idolized view of American for their athletic heroes, specially theyouth the main target of NIKE. This association projects the personality of thecelebrity on the brand. The most famous example for brand association ever was thecollaboration between Nike and Jordan, the association that personified Nike as asuperior, achiever, successful and amazing top performing brand, By time thispersonification became permanent even when Jordan was not there turningconsumer response to Nike brand from conditional (stimulated by the presence ofJordan) to permanent unconditional one.Also they associated with top sport events in the states by sponsoring the basketballAmerican league. This brand association again conveyed an image of Nike as a
  4. 4. 4serious, high performance, American brand capitalizing on the nature of basketball asa tough game that is most popular in the states.From the other side this association, in addition to the personification of the brand, itincreased the brand awareness. Nike communicated this association through their TVads that was a hit at their time in the states like the Jordan air ad that caught fire andincreased their sales dramatically.In addition, one of the most important sources of Nike brand equity is the highperceived 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 walkingaround yet Nike was committed to design their shoes according to the high standardsof professional competition. They listened to athletes and designed shoes that satisfytheir needs for high performance and durability. Seeing a winning athlete wearing aNike shoes in a professional competition authenticated the quality perception in theminds of the customers about the Nike brand. Also they didn’t follow the trends ofother shoe maker like Rebook who used garments in the fabrication of their shoesinstead of leather because it is more fashionable although it is less durable, Nikedidn’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 brandwhich was established over the years through their commitment to delivering whatthey promise. A clear example for this is in the 80’s when Aerobics games were risingand the trend in the shoe design was shifting toward more fashionable, less durableline, by that time Nike decide to pursuit fulfilling its brand promise to deliver highperformance and high quality. They shifted to sponsoring basketball the toughest andthe highest on performance scale sport in the US.Another block in Nike brand equity is the good relationship with its consumers. Arelationship that started with the beginning of the company when Knight used tospeak to athletes using their language and listen to their feedback. He used to meetwith them in tracks in high school and in colleges. This strategy created a lot ofattachment of athletes to the brand, some sort of brand loyalty. When the companyexpanded they used a “Finger on the pulse strategy” where Nike have some of itsemployees hitting the street finding out what is in the minds of their consumers andfollowing their needs and tracking their brand perception.
  5. 5. 5How might Nike’s effort to become a global corporationaffect 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 withfamous American athletes, Sponsorship programs for major sports events in the US,their massive and aggressive “provoking and unique” IMC that creates high brandawareness through TV ads and advertizing campaigns, and finally the perceivedquality of the product in addition to a good CRM program.When the company started back in the 1960, its elements of brand equity emergedand were customized according to the American culture at that time. So we can seethe impact of the new American values and norms on how they are managing theirbrand image and sources of equity.Regarding the brand image we find that Nike brand stands for core values of superiorperformance, accomplishment and achievements, Innovation and it has a strongmasculine and serious personality. These values were dominating the Americanculture by that time in the 60’s and early 70’s when the American nation has justfinished the 2nd world war coming from it as a superpower, followed by theirsuccessful space conquering in 1965 when Nil Armstrong first landed on the moonbeating the soviets in their mutual space race. These superman values were deeplyrooted in each American in all fields of life including sports. Nike brands stood forthese values.Nike stressed on these superman values and builton it through its different equity sources. Theyassociated with famous American iconic athleteslike Michal Jordan and McEnroe who personifiesNike’s core value of achievement, performanceand innovation.They sponsored the American basketball league,which is the most famous sport in USA and it isvery professional as a way to convey the messagethat Nike brand as the American basket ball both show highest level performance,seriousness, success, aggressiveness …ect.
  6. 6. 6Even in their Advertizing campaigns, they were innovative they were the first sportsbrand 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 theAmerican market. When they decided to expand globally starting in Europe they triedto implement the same strategy and to convey the same image of their brand butthey didn’t succeed due to the cultural differences between the states and Europe.Nike’s brand image was perceived negatively as a fashionable aggressive andarrogant brand rather a performance innovative one.Moreover, Because of the differences between European countries Nike wasn’t ableto find the legendary Athletic hero who can be their ambassador in Europe. They werefaced with a multicultural market that is totally different from the American one. AlsoEuropeans are more traditional, they don’t have the same idolized view of athleticheroes as American, their view of competitive sport is different they don’t have thesame sport mania as their counterparts in America. Also Nike found that Europeanprefer different types of sports; soccer, field and track games and not Basketballwhich was associated with Nike brand. Above all that Europeans had their own brandsthat they are highly attached to.Also being more traditional, Europeans; the aggressive provoking communication ofNike was not accepted by many Europeans to the extent that some local European TVchannels refused to air the Nike vs. Evil TV ad. Moreover the overwhelming presenceof the Nike’s logo, the swoosh, as an American symbol, was very irritating toEuropeans.In addition the different marketing and distribution strategy in the European contentdiluted the brand identity of Nike, each local distributor used his own way fordistributing and displaying of the Nike products in addition to applying his ownstrategy in advertizing.All this led Nike to lose its main edge in the European content at the beginning; theywere perceived as a fashion-oriented and not performance oriented, irrelevant tothe European market, aggressive American brand. Nike had to work on its credibilityas 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. 7keep and communicate the main essence of the brand but through using moreadapted localized tools and channels.They kept the essence of the brand in terms of a consistent brand name and brandlogo as a part of the global myth effect. They focused on the main core values of theirbrand as part of their global positioning which is the performance and innovation.They retrieved about 90% control over their brand distribution and marketing andadvertising activities in Europe in order to maintain the same global image and brandpositioning. They communicated the same tag line worldwide with differentexecutions according to each region. In order to increase their relevance to Europethey associated their brand to famous European soccer players like Eric cantona andRoberto 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 thancountries differences; the pan European approach.In addition they lowered the aggressive tone used in their advertizing and revertedto a more kinder, and gentle marketing approach using globally accepted andappealing celebrities like Jordan , tiger wood, Brazilian soccer star Romario to projecta more global and international image on their brand.Moreover, In order to increase their global appeal they engaged in sponsoring bigglobal events like the Barcelona Olympics 1992, and the world cup. Also theysponsored the Brazilian soccer team and they took an approach of sponsoringnational football teams from different regions to enforce their global image and todistract from being perceived as an American icon.
  8. 8. 8Moreover they started to decrease their provoking and aggressive corporatephilosophy that was featured in their expensive and provoking sponsorship andendorsement contracts in addition to the overwhelming abundance of their swooshover their products everywhere which was known as the “Swooshification of theworld” which accumulated negative connotations about their brand. Nike startedactions to downplay their swoosh through limiting their logo to certain productsmeanwhile they invented new brands like the Air Jordan and All Conditions Gear andthe 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 publicoppositions to the company labor practices in Asia. They changed their corporatelabor policy aiming to be the industry leader in employee relations, they modified theworking conditions and raised the compensation packages for labor in Nike’s Asianfactories, applying new global labor standards, complying with OSHA indoor air qualitylevels. Moreover they went further in their CSR direction by creating a CorporateResponsibility Division that consolidated the labor, environmental and communityaction groups with a stated mission “ to lead in corporate citizenship through programthat reflect caring for the world family of Nike, our teammates, our customers andthose who provide service to Nike”. They became a charter member of the fair laborassociation.Furthermore, Nike, as part of communicating these CSR actions and to gain credibilityof customers all over the world, they initiated a measure that enables publics to getaccess to information about their labor practice and their audits reports: the ”Transparency 101” initiative.Nike and the Asian marketNike Asian expansion came after their European expansion starting by targeting theJapanese market in the 1992. Learning from their European expansion lesson Nikeglocalized its brand management strategy to suit the Asian market from thebeginning. Nike abandoned the brash attitude for its first marketing offeringsdesigned specifically for china. The ads, from which the corps of elite Americanathletes usually deployed by Nike as global ambassadors of their product wasprimarily absent, celebrated local athletes as heroes. They concentrated ondemonstrating a softer image of Nike, abandoning the aggressive approach they usedto implement earlier.
  9. 9. 9Learning from the European lesson they controlled their marketing and distributionoperations in Asia by opening facilities in Vietnam and upgrading existing ones inJapan, Korea and Australia as well as constructing a lot of Nike only stores in Asia tocontrol 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 brandawareness, they are planning to sponsor the 2002 world cup in Korea and Japan andthe 2000 Olympics in Sydney.Are sponsorships and endorsements vital to Nike’sbusiness? For instance, what effect would Nike becomingan official sponsor for the Olympics have on thecompany’s relationship with consumers?Sponsorships and endorsements are very vital to Nike business. In fact celebrityendorsements are corner stone in Nike’s global brand equity. Nike has built a strongbrand image along the years through successful brand associations with legendaryathletic heroes (American and non Americans). On top of these iconic collaborationsare 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 ofsport shoes which generated about 9.5 billion $ for Nikei. Another iconic sponsorshipwas that made between Nike and the Ace golf player Tiger Woods which erected Nikebrand in the golf arena. Also The historic sponsorship for the USA dream team in theBarcelona Olympics which introduced the brand Nike to the world and increased itsawareness globally , and the sponsorship of the Brazil football team, the champions of
  10. 10. 10the world cup 1994, which increase Nike brand awareness and leveraged its brandcredibility to soccer fans in the world.The benefits of these celebrity endorsements and sponsorship programs exceededthe monetary benefits of increasing revenues; actually it conveys the brandpersonality and shapes the brand image in the mind of the consumer. Endorsementis a channel of brand communication in which a celebrity acts as the brand’sspokesperson authenticating the brand’s claim and position by extending his/herpersonality, popularity, stature in the society or expertise in the field to the brand; inother words personifying the brand. Also celebrity endorsement is a way for thecompany to differentiate from competitors.The successful brand association strategy of Nike is based on three main pillars, theattractiveness of thecelebrity, the credibilityof the celebrity and thepersonality matchbetween the celebrity andthe brand.For a successfulendorsement nike ensured that the endorser is attractive to the target audience incertain aspect physical appearance, intellectual capabilities, athletic competenceand/or lifestyle. This attractiveness enhances the memory of the brand. As a sportsshoe and Apparel Company, their main target customers were the youth so in theirchoice 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 thegolf arena with its Nike golf line, they selected tiger wood to be their ambassador andwhen they targeted females they used the Worlds two best female tennis stars: MariaSharapova and Serena Williams as their ambassadors.Meanwhile Nike selected endorsers who have a high credibility level among thetarget audience this credibility which increases the acceptance of the consumer forthe endorsed product. Finally Nike ensured the existence of a significant matchbetween the brand and the celebrity in terms of identity, personality, positioning inthe market and vs. competitors and life style so that the endorsements are able tostrongly influence the thought processes of consumers and create a positiveperception of the brand.
  11. 11. 11A point of strength in Nike endorsement strategy is their Consistency and long-termcommitment. They maintained long term collaboration between the Nike as a brandand their endorsement which can be seen in the 18 years endorsement contract withJordan and the long term sponsorship for the Brazilian soccer team that started in theearly 90’s and is sustained till now. This consistent and long term relationshipestablished a strong and solid personality and identity for Nike along the years.Also Nike kept on monitoring the behavior, conduct and public image of theendorser continuously to minimize any potential negative publicity. When theysensed 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 Nikecommercial "I am not a role model"Another important aspect in the effective endorsement strategy of Nike is theirselection of unique celebrities which effectively differentiated them fromcompetitors and in the same time they make sure that this celebrity will not sign forany of their competing companies.An important aspect that Nike understood is that endorsement is not a target in itselfbut it is part of building the brand and also it can’t replace the comprehensive brandbuilding processes. They worked on building their brand image through the otherattributes like; brand awareness, brand loyalty, perceived quality and theyauthenticated this image with endorsement.In all their celebrity endorsements Nike wanted to convey an image of a successfulbrand, high performance, achieving and innovative brand. As part of theirglocalization strategy they did brand association with celebrities on two tier, a globaltier associating with globally well recognized celebrities like Micheal Jordan, Michelshomakher, Tiger woods and a local one associating with local figures that convey thesame personality with a more local appeal like Eric cantona, Sergei bubka andNoureddine Morceli.Celebrity endorsement when done in an appropriate way it benefits the brand but onthe other side, by associating the brand to a celebrity the company is taking the risk ofattaching itself to a person who, like any human beings, have his mistakes that can bereflected on the brand. Also it is difficult to find an endorser who enjoys globalacceptance; always there will be people who dislike him.Other forms of brand associations are sponsoring big events, like the Olympics. Thebenefits of associating with such global events are to increase the global brand
  12. 12. 12awareness; 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 globalbrand. Moreover sponsoring the Olympics games widen the brand scope as Nikebecome associated with different sports rather than basketball and field and trackgames which were their main association heritage in the states; this allows the brandto target different and new segments of customers. The problem Nike encountered inits global move was the negative perception about their brand, Nike brand wasperceived as a tough, hard, aggressive, professional, American brand. By sponsoringthe Olympics, in addition to increasing their brand awareness, they managed tochange their brand image benefiting from the reflection of the Olympics games’personality- that stands for a faire, clean, smooth, respectful, traditions, and globalvalues- 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 unfairglobal labor practices was appropriate?Reasons for global criticism:When a company expands globally, its operation increases dramatically witnessing apronounced rise in its operation costs. The company in such phase is usually focusingon controlling its operating costs through outsourcing and subcontracting itsoperation to cheap labor countries such as china, Indonesia….etc. and they usuallydon’t consider the working conditions in such countries, all what the care for is thecost. 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 onNike’s operation and it becomes a target for global criticism. This expansion subjectedNike to bigger number of nongovernmental social and environmental agencies andaudit that review its operation in different countries especially in the third worldcountries in countries such as china, India, Mexico and Vietnam. which leads to theexposure of Nike to global criticism.Accordingly Nike’s operation in Vietnam have been criticized by Ernst and Young’s forviolating the minimum wage and overtime laws in Vietnam as late as 1996, althoughNike claims that this practice has been halted. The company has been further subjectto much criticism for the poor working conditions with poor ventilation and exposureto dangerous levels of carcinogens.
  13. 13. 13Also the company was accused for the use of child labor and the poor treatment of itsoverseas employees in factories used by Nike in Pakistan and CambodiaNike’s Response:Nike managers initially refused to accept any responsibility for the various labors,environmental and health problems found at their suppliers’ plants claiming thatthese workers are not Nike employees, and that Nike had no responsibility towardsthem. But these hands off approach didn’t withstand the growing attack by humanrights and worker rights groups.Nike found itself obliged to take corrective measures to ensure that these unfairlabour and human practices don’t occur again. An action Nike took to improve itsglobal brand image which emerges from its globalization strategy. “Sustainability iskey to Nike’s growth and innovation,” said Mark Parker, NIKE, Inc’s, President andCEO. “Making our business more sustainable benefits our consumers who expectproducts and experiences with low environmental impact, contract factory workerswho will gain from more sustainable manufacturing and our employees andshareholders 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 andcompliance actions. They were reactive just responding to the market by somenonintegrated CSR initiatives. By time, Nike’s reactive behavior shifted to a moreproactive one implementing and integrating a lot of its CSR initiatives in the corebusiness strategy of the company focusing on innovation, collaboration, transparencyand advocacy to prepare the company to thrive in a sustainable economy.By 1998, Nike formulated a new global labor standards that included lowering theminimum 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 USOccupational Safety and Health Administration (OSHA) standards for indoor airquality.Also Nike created a Code of Conduct for its suppliers that required them to observesome basic labor and environmental/health standards. Potential suppliers for Nikewere 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, byJune 2000, were organized under the Corporate Responsibility and ComplianceDepartment.
  14. 14. 14Nike has pushed its suppliers to obey standards through increased monitoring andinspection efforts. The company is currently developing a grading system for all of itssuppliers, which it will use to determine future orders and thus create a strongincentive among its suppliers to improve working conditions.Nike has been active in founding and/or supporting an array of different internationaland non-profit organizations, all aimed at improving standards for workers in variousdeveloping countries, Nike is actively involved in the United Nations Global Compact.Also they became a charter member of the Fair Labor association, Nike’s corporatecitizenship initiatives can be summarized in the following pointsIn spite of all these initiatives, the negative brand image of Nike continued topropagate among activists claiming that these measures are only a camouflage, stillNike is outsourcing its operation to countries with low labor cost and a lot of childlabor cases, also it is claimed that the audit reports are fake and unrealistic ones asthe audited site become aware of the time of the inspection before it comes. So Nikefound that it is not enough to implement these CSR initiatives but it is required tocommunicate it to the community and enforce its authenticity. So Nike initiatedmeasures to provide the public with access to information about its labor practicesand the results of the audits report, a project known as “Transparency 101”. The firststep was an agreement to disclose the results of all factory audits to the public byposting them on the Nike’s website. Also the company sent 16 undergraduates to atotal 32 factories worldwide. The company than made a full-text copies of everyreport 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 sustainabilityefforts.The results of these Nike initiatives that it sustained its position as the top sportsbrand and the 56th brand across the universe proving that their initiatives did workand alleviated the negative impact of the ethical issues they confronted in Asia. iii The Jordan Effect The worlds greatest basketball player is also one of its great brands. What is his impact on the economyii BrandZ Top 100 Most Valuable Global Brands 2011