Nike Business Model
Nike Business Model is based on producing and selling athletic and
sports products, including footwear, clothing, equipment – and also
some services. Everything under one if the most famous brands in the
world. Let’s take a closer look at how and why Nike company has
become so relevant in the business world.
Customer Segments of Nike
Nike markets to anyone who wants to buy athletic and sports apparel,
footwear, and equipment. Geographically speaking, Nike’s market is
divided into four main divisions, also in order of revenue:
1. North America
2. EMEA (Europe, Middle East, and Africa)
3. Greater China
4. APLA (the Asia Pacific and Latin America)
Value Proposition of Nike
Nike offers products to inspire anyone to become an athlete. Their
products heavily rely on the quality, innovation, and status of the
brand. This is the foundation of the brand and it is exactly what the
customers seek when they buy a Nike’s. Nike offers a great variety of
items, for many different sports and activities.
But, indeed, what matters for the audience is acquiring a product that
has been heavily studied and developed from the best raw materials
and technology available. Also, they want to carry the successful
reputation the brand states, since athletes as Michael Jordan, Tiger
Woods, and Cristiano Ronaldo speak for the company.
Channels of Nike
Nike uses many different channels for marketing. Its main channel is
the brick-and-mortar stores, especially the Nike-branded ones. The
company has an extensive sales network, with 1,152 physical stores
throughout the world (numbers of 2019). Nike also has an e-commerce
platform, which serves more than 45 countries.
Besides that, Nike employs other channels, such as social media, digital,
print and TV advertising, brand events, and heavy sponsorship of
athletes and teams. Therefore, its marketing expenses usually reach
over $3.5 billion a year ($3,753 million in 2019).
Customer Relationships of Nike
The relationship with the customers is practically restricted to self-
service. The customer will check the product in a store (online or
offline), buy and use it. There will be some interaction with a
salesperson when needed. Moreover, there is a FAQ session on the
website and customer support via phone, e-mail, or live chat.
Nike also has Nike ID which is a personalization service that brings Nike
products closer to customers’ desires.
Revenue Streams of Nike
The revenue streams of the company are the sales of its products:
footwear, apparel, equipment, and accessories. The total revenue
reached $ 39,117 million, in 2019.
Key Resources of Nike
Physical structures: five distribution centres in Memphis and others in
California;
Human resources: Nike Explore Tea Sports Research Lab, with more than 40
researchers that work on innovations;
Intellectual property: third-largest design patent portfolio in the United
States.
Key Activities of Nike
The main key activity of the company is designing and developing the
products. In order to achieve that, other activities are involved, such as
research (about materials, technologies, and trends/behavior) and
negotiation with the suppliers. Additionally, marketing, sales, and
advertising are essential for this business model.
Key Partners of Nike
As Nike relies on outsourced contractors to manufacture its articles,
these manufacturers are surely its most important key partners. They
are more than 145 footwear factories and over 400 apparel factories,
mostly outside the USA.
Besides that, other partners include some universities and institutions
in North America, Europe, and Asia for sports and scientific researches.
Cost Structure of Nike
The largest expenses for Nike are the costs of sales (mostly inventory
and warehousing), that account for more than $21 billion per year.
Additionally, around $3 billion is for marketing, including advertising
and promotion costs, sponsorship, media, brand events, and retail
brand presentation. Other general and administrative expenses cost
over $500 million a year.
How does Nike make money?
Nike is the largest footwear and apparel seller in the world, this its
revenue is generated mainly over these sales. Although its footwear
items are designed especially for athletic purposes, with massive
investment in innovation and high-quality products, most of them are
usually worn on a daily basis, for leisure times.
Nike also sells sports equipment and accessories, such as balls,
eyewear, bags, gloves, digital devices, and more, as well as recreational
articles for many physical and outdoor activities. The company targets
men, women, young athletes, and kids – in order of revenue.
And Nike’s product subdivides into six categories: Running, Basketball,
Jordan Brand, Soccer, Training, and Sportswear (lifestyle products),
being Running, Jordan, and Sportswear its strongest ones in revenue.
Final thoughts
Nike’s business model success rests on the sum of innovation and
marketing. The company faces some strong players in the market –
such as Adidas or Under Armour. That’s why the brand maintains its
focus on research and development. Its future plans, for instance, are
to increase the use of sustainable material, a strategy to grow
popularity and engage the audience.
