When I think of innovation, I think of one thing, Nike. There is no denying that Nike is an innovative and world leading company in both design and creativity for sports apparel. Nike has served as the number one sports apparel company since the mid to late 80s and has continued to shock the world with each new product design. The creative team of designers, developers, and marketers has come up with winning product campaigns, time after time. To Nike it was always about the mind of the athlete, the body of the athlete, and helping the athlete be the best that they could be. Nike was an athletic driven company that wanted to help athletes all over the world improve and reach new limits every day.
It is hard to imagine a world without Nike. It is not surprising to me to know that Nike was founded by athletes for athletes. The original founders were Bill Bowerman and Phil Knight. Both were track runners. According to Inc.com, Phil Knight essentially created the market for running shoes. But people would often ask how did he do it? Well, he made athletes believe, to be a serious athlete you have to have the right equipment, his and Nike’s. After getting the athletes on board, he turned his product into the “it” thing to have and convinced the remaining non-athletes to buy into the company.
Knight was the young track star, coached under Bowerman and while at the University of Oregon, ran a 4:13 mile (Inc.com). Track was in both founders blood. They were committed to designing the most innovative track shoes to push the limits of their passion-filled sport. Even today as a basketball athlete I know that almost every single athlete has to own a pair of running shoes to train outside of their sport, Nike just capitalized on that market like no one else, in my opinion, had.
Sources of Innovation
A great product comes from passion. Bowerman and Knight had a shared passion for running and innovation. They understood the mind of an athlete, the body of an athlete, and the passion an athlete can have. They also understood that the world of athletics is constantly evolving as research becomes available and knew they needed to stay up to date with the latest trends and research to fit in to the athletic world. They believed in doing research in house and studying real athletes. The pair wanted to understand what athletes want in a product for their sport, so they turned to applied research. Nike developed their own research lab known as the Nike Sports Research Lab (NSRL) to which few outsiders are allowed in (Newcomb). Inside the lab they do personal interviews with athletes to understand the mind of today’s athlete, as well as, physical tests to understand motion and feel and the reactions of athletes (Cushioning Explained: Nike Lunarlon). I believe that it is important to understand your market before you try and create for that market. In my opinion after conducting my research, Nike is one of the best companies at doing applied research. The research lab is probably one of the coolest things I have ever studied and now have a better understanding for Nike’s passion for its consumers.
Running shoes were the company’s first product. They were designed for athletes with runners in mind. In order to create the Nike Lunarlon, and design the best product the company could develop, they performed a series of tests to understand how the body would react to the samples and made changes. They studied different pressure points in the foot; in order to, displace the pressure running can place on particular areas of the foot. I believe that the dominant light weight design lead to the creation of a signature product that developed into an empire. Bowerman and Knight did not set off wanting to create an empire; they saw an opportunity to help athletes with their passion and took it. This in my mind is extremely important; you rarely find success in things you are not passionate about. To find your calling, you must be driven by passion.
The Nike Inc. strategy was to create products for athletes designed with the athletes (consumer) in mind. The company took risks when risks were not always popular in businesses. They designed with passion and detail in mind, rather than dollar signs in front of their eyes. I believe that that mentality drove their success. Athletes want to feel like the products they are using are designed with them in mind, not something that was mass produced with little thought. Nike products allow users to feel like way.
Nike’s strategy did not just end as customers would hope it would. Nike had a main goal to produce their goods cheaply since the process of production required fairly little skill, Nike was able to acquire a large unskilled labor force in Asia to aid in the manufacturing process (Nike- Managing). The design and modeling/pattern making phases could take place in house by the team assemble at Nike. Followed by molding of soles, cutting materials, lasting, stitiching, finishing, inspection, and packaging could all be done cheaply with the help of unskilled labor. Nike then placed staff members at their contract factories. These workers were in charge of reporting back between Headquarters and the Research and Development team and the factories. See Problems for more information about the unskilled labor at Nike.
Porter’s Five Forces
Degree of Existing Rivalry – When getting down to the specifics of the Nike running shoe, Nike is the industry’s leader in the athletic footwear market. Companies like Under Armour, New Balance, Adidas, and Reebok all hold a smaller share of the athletic footwear market. I believe that with the current competitors of Nike, no one with the exception of Under Armour, can compete with Nike in the sport specific athletic shoe market. In my opinion, athletes come to Nike to get a shoe designed for their sporting needs and then find additional products at the store. I understand that there will always be competition within industries, but for me and I believe that most runners will agree, Nike will always be the leader in running shoes.
Threat of Potential Entrants – The running shoe has been around longer than Nike has but the company was the one (in my opinion) to modernize the athletic shoe market. To change the way things had been done in the past and customize shoes on a sport by sport basis. The Nike Empire was built for its customers and stood by the idea that athletics are constantly evolving and athletes need a company to grow with their desires and needs. Their buyer loyalty towards the signature swoosh helps create an entry barrier for potential entrants. Fun fact, Nike only paid $35 to have the signature swoosh designed (Gunderson). With the big five (Nike, Under Armour, Reebok, Adidas, and New Balance) in shoe manufacturers holding a majority of the market shares; potential entrants are hesitant to attempt to enter into the athletic footwear market.
Bargaining Power of Suppliers – Nike is a company built on good relationships and products that have a lasting quality to meet the needs of all athletes regardless of sport, fitness level, or competition strength. Shoes in general are built out of basic materials, including rubber and leather; suppliers have little bargaining power over prices, as these are manufactured into something else and the warehouse.
Bargaining Power of Buyers – Brand loyalty is a staple of Nike’s company. Customers choose to buy from Nike based on what they grew up with. It is often innate for Nike loyalists to go to purchase a Nike shoe over that of its competitors. These loyalists dictate a lot of things and can alter Nike’s success if they are not happy. Nike has to think twice before discontinuing or changing popular products. Nike loyalist grow accustom to certain things and when things are altered it can either work in Nike’s favor or be a negative (shoppers may choose to go to a rival and purchase their like merchandise and cause a loss for Nike. Buyers also have the power to dictate price. Nike offers a high quality and moderately priced good to the masses. In terms of Nike running shoes, their prices on Eastbay.com, averaged typically between $80 and $100. This is in comparison to Under Armour which ran from approximately $100 to $120. I will never not be brand loyal to Nike but I know and recognize that there are other brands out there for sale. I was having problems with my feet last year and was told I should try a pair of New Balance running shoes because they are better for people with extremely high arches like I have. I bought them but I have only worn them once because I am convinced they hurt my feet. I know deep down they do not but because they are not Nike there has to be something wrong with them. For me however, I do not know if I will ever be able to fully accept another brand, at least when it comes to my athletic shoes.
Threat of Substitutes – Nike is a globally recognized brand for athletic shoes. Athletes from all over the world will be sporting Nike shoes during the Olympic track and field competitions. In most athletic competitions (on-land) it is recognized that one must where shoes. One threat of substitute could be going without shoes, I recognize that there will always be the latest research going on that says that running barefoot is better for this or that. However, dry-land athletes, I believe, will want to protect their feet and will always need shoes. Nike’s design will continue to change the sport of running for the better, creating a lighter design that will help athletes dig deeper and reach for their dreams.
Introducing the World to Nike
The original idea for Nike came from a research paper that Knight wrote at Stanford. But the timing of Nike could not have been better. The first New York City marathon was planned in 1970, this started a national running culture. As Nike emerged to the world in 1971, the new runners of the world needed a shoe that was going to power their run. Runners began turning to Nike for their shoes because it was a company for athletes created by athletes. Runners could relate to a company that was created by runners because they felt the design would be running focused and they were right. The 1972 and 1976 Olympics were the press that Nike needed to continue its new found success (Gunderson). Nike started out so many years ago as a shoe manufacturer and I believe that despite their continued expansion they have continued to return to their first product, running shoes.
The running shoe was not a new piece of technology. Running has been around since (hypothetically) the beginning of time. Nike was the company that put running back on the map. Their continued innovation and drive to produce a better product for athletes made the company a popular favorite of many athletes; whether they were professionals, Olympians, everyday citizens just starting out, young or old, Nike drove the phrase, “if you have a body, you are an athlete”. As the times changed, and as athletics developed into a cultural phenomenon, Nike had to evolve to make their athletes better.
In 1979, Air Technology was implemented into the Tailwind running shoe. The new technology was the first of its kind. The original technology was created in an insert form according to the article Cushioning Explained: Nike Air. The technology was then transformed into a patented process by Frank Rudy which placed dense gas-filled plastic membranes inside the sole of the running shoe to provide a cushiony light feeling to athletes (History of Nike). It was an “air revolution” in the world of sports. This was a large step towards athletic training and running becoming more comfortable for the athletes. The air technology was placed in multiple models of Nike’s shoes and continued to advance the way athletes trained. As the technology evolved it became lighter and provided more cushioning adding additional comfort. The innovative Air technology allowed for smoother transitions and quicker responsiveness. I believe that Nike’s dominant design powered their work and increased sales driving them to the top of the industry. People want the latest and most innovative and that is what Nike promised them.
Who is Involved?
Nike is home to many different types of workers. One can start with the designers. The team has created product after product that challenged the way people think about sports. The factory workers are the shoe manufacturers. Unfortunately most of these workers are paid below the cost of living and are working extensive hours (see Problems for more information). Then there is the marketing team who has run successful campaigns that have become known all over the world. Biomedical engineers can be involved in the process because in some cases Nike’s running shoes are designed for a health benefit and based on movement. These engineers are helpful in understanding motion and the way the body functions. Electrical engineers are involved in some Nike running shoes. They have helped create the Nike + system in which a tracker is inserted into your shoe and registers data on your iPod. Nike contracts hundreds of shops around the world to manufacture its products. Nike is always on the hunt for mechanical engineers, software engineers, and program management engineers. There also other areas of engineer that are less assumed including Quality Assurance, Manufacturing, and Development Engineers (Career Areas). There are countless other engineer types but at Nike they fall under the Shoe Engineer category. A lot of people make the team run successfully at Nike. Through my research I was able to find out even more people are involved in making Nike the company everyone sees.
Nike has received a lot of complaints from consumers due to their labor conditions. Nike is a company that outsources their production to countries such as China and Vietnam, which continue today to be the major countries Nike shoes are made. Nike also does not own its own factories, it simply pays the price that they set, controls what materials are used, and gives out the design. The controversial statement Nike used to use was that they were simply the “buyer”. This has lead to the anti-sweatshop movement and now Nike is forced to take responsibility for their workers who manufacturer their profitable products (Nike FAQs). The workers in the factories in Southeast Asia receive minimal wages and work large amounts of overtime. Workers continue to organize labor strikes that Nike often leaves out of company briefs. After doing my research, I can conclude that there is a lot to Nike that people do not understand because all we are exposed to is the athletic powerhouse. Although I can see that Nike did raise their standards for working conditions and increased their minimum wage, I can accept that Nike has a long way to go. For a company that can afford to have everything, they can afford to pay a living wage to the companies factory workers.
Nike is not just a company that is based around running shoes anymore, or even shoes for that matter. However, when you look at their core values, despite their success, they are still a company whose core competencies lie in innovation and creativity, for athletic sneakers. Knight was quoted speaking to Inc.com “I hope nobody ever starts thinking this company is some kind of institution. We’re still just a bunch of guys selling sneakers.”
Career Areas. (n.d.). NIKE, Inc. . Retrieved July 17, 2012, from http://nikeinc.com/pages/career-areas
Cushioning Explained: Nike Air. (n.d.). Striperpedia. Retrieved July 16, 2012, from http://www.footlocker.com/striperpedia/article/5000743/Cushioning%20explained%3A%20Nike%20Air
Cushioning Explained: Nike Lunarlon. (n.d.). Striperpedia. Retrieved July 16, 2012, from http://www.footlocker.com/striperpedia/article/5000742/Cushioning%20explained%3A%20Nike%20Lunarlon
Gunderson, A. (n.d.). Great Leaders Series: Phil Knight, Co-founder of Nike . Small Business Ideas and Resources for Entrepreneurs. Retrieved July 16, 2012, from http://www.inc.com/30years/articles/phil-knight.html
History of Nike . (n.d.). KicksOnFire – Sneaker News & Release Dates. Retrieved July 16, 2012, from http://www.kicksonfire.com/history-of-nike/
Newcomb, T. (n.d.). A Look Inside the Nike Sports Research Lab – Popular Mechanics. Popular Mechanics. Retrieved July 16, 2012, from http://www.popularmechanics.com/outdoors/sports/technology/a-look-inside-the-nike-sports-research-lab
Nike FAQs. (n.d.). Global Exchange . Retrieved July 17, 2012, from http://www.globalexchange.org/sweatfrree/Nike/FAQ
Nike – Managing a Non-Market Environment. (1998, May 1).Goodworks International. Retrieved July 17, 2012, from gsbapps.stanford.edu/cases/documents
Women’s Running Shoes. (n.d.). Eastbay. Retrieved July 16, 2012, from http://www.eastbay.com/