Follow the Product: Background

 Week Beginning: 09.02.2015

The Nike Air Max 87, also called Air Max I, were the first shoes from the Nike Air Max line, which launched in 1987. The Air Max I are one out of many sportswear products Nike, Inc. produces. The shoes were first designed by Tinker Hatfield in 1985, who also created the Nike Jordan. Nike, Inc. was founded in 1964 by Bill Bowerman and Phil Knight as Blue Ribbon Sports and officially became Nike, Inc. in 1971. The brand has its name from the Greek goddess of victory. In 2014 the brand was valued at $ 19 billion being the market leader among sport businesses.

The company’s slogan “JUST DO IT” is one of the best known taglines ever and one of the core components of Nike’s brand. The slogan was established at an advertising agency meeting, of Wieden+Kennedy agency, in 1988. The founder of the agency, Dan Wieden, credits the slogan to Gary Gilmore’s last words. The “Just Do It” campaign increased the market share of Nike from 1988 to 1998 of the North American domestic sport-shoe business from 18% to 43%.

Along the Slogan “Just Do It” the logo, known as the Swoosh, is a trademark for Nike, Inc. The Swoosh (Nike Tick) is one of the most recognized brand logos all over the world. The logo was created in 1971 by Carolyn Davidson. In 1972 the first running shoes by Nike bearing a Swoosh were introduced at the U.S. Track and Field Olympic Trials. Until 1995 the official logo of Nike showed a Swoosh and the name Nike in bold cap font letters. After that the company decided to use the Swoosh only as a brand corporate logo and continue to use it till today.

The Nike Air Max I are one of the most popular models from the Air Max series. For customers there are many buying motives for this product. One would be the quality of the product. Many customers know that if they buy Air Max 1 they will receive a quality product, like all of the shoes in the series. Especially the padding and the strength of the material are different than the competitors’ products. Secondly the weight of the product has to be considered. Air max are very useful for sports due to their light weight, which makes wearing them more comfortable. Adding to that is the flexibility of the product. Nike Air Max 87 can be worn for many sports and even in the free time, which could be their unique selling point.

Nike is the market leader in the sport footwear and apparel, with a worldwide market share of about 28%. In the United States Nikes market share is almost 60 % in the sport footwear market. Adidas would be the closest rival for Nike, Inc. with a worldwide market share of almost 20%. In the US however their market share is only about 10 %. Other companies like VF Corporation and Puma, which operate in the same market have a market share lower than 10%.

Nike Air Max 87 or in general Nikes are targeting to people with an active lifestyle, like OPALs (Old People with Active Lifestyle) or just any person interested in sports. Adding to that they are targeted to people, that do sports as their profession. Through time especially Air Max became popular as footwear for free time and leisure activities. Therefore Air Max 87 (in general Air Max), which are very popular with teenagers, are targeted to younger people with much free time and flexible lifestyle.

All in all Nike Air Max 1 is the most popular model among the Air Max 90. This links to Globalization of the CUEGIS, because Nike could not have such big success without being a multinational company which operates all over the world. Through globalization customers in different regions tend to have the same taste in clothing, which makes it much easier for Nike, Inc. to have success, as their target market tends to be the same in many countries. Adding to that this has a link to Change of the CUEGIS as the product, Air Max 87, changed over time. The company has many different models included in the Nike Air Max line. The different shoes also change over time and become improved. At the same time it links to Innovation, because at the time when Nike was established, having such fashionable sportswear seemed very innovative, especially when the first Air Max were launched. Although the Air Max exist very long for a shoe model, their sales do not seem to decline, which defiantly still puts them into the section of the cash cow. This is caused by the several extension strategies Nike, Inc. uses. The company extended the maturity for the Air Max 1 with redesigning and brand extension, which worked very well for them. They even might have extended the product life cycle with market development, as they introduced Air Max to non-athletic people. All in all Nike is forecasted to have more success in the future. 

 

 

Xbox One Price Drop

Week Beginning: 02.02.2015

Microsoft lowered the price for their latest console, the Xbox One. The original price was $399 and was reduced to $349, which is a $50 discount. The company explained that it was thrilled to have a “record-setting holiday”. On Xbox Wire, Microsoft announced that their most popular console is now available for the special price of $349. Adding to that they wanted to thank their customers for the excitement over their products and are happy to offer their fans the amazing games line-up, Xbox Live gaming community, and the continuing innovated products by the company which many customers seem to enjoy. Furthermore many people argue if the discount is for a limited time frame or if the prices will stay so. It was announced that the prices will be lowered from the 16^th of January 2015, but there was no final ending date announced. On the other hand people discuss that the temporary price drop was done to give momentum to their sales picked up from the holiday season. Although Microsoft has received a huge amount of publicity through this decision, the Xbox One sold with Kinect bundle remains at the same price for $499. Microsoft has had a better sale performance during the critical season for retailers. Figures show that the company has sold more games in November and December in the US than others. Further on fans logged in more hours playing the Xbox during this holiday than before, due to the strong game line up. Lastly Microsoft focused very much on the customers’ feedback they received since last year, which was very helpful for product development. All in all 2015 will be a great year for gamers, Microsoft and their Xbox.

Last week in Business Management we discussed Price of the Marketing Mix. This article refers very well to this topic as they are different Pricing Strategies to increase the sales of a company/product and make more profit. Microsoft is definitely using pricing strategies, because as they stated they need to have a “record-setting holiday”. One strategy that is used would be Skimming pricing, as the company set a high price at first and only  gradually reduced the price for this product. Looking at competitors this pricing strategy works, because the organization always seems to lower the prices for the Xbox One during the holiday season, from which they also benefitted in November and December (Black Friday/ Christmas). Adding to that Psychological Pricing is also done to some extend as the price for the console is always a 0.9 to make the customer think it is sold at a lower/cheaper price.

Furthermore this links to Strategy of the CUEGIS, because Microsoft is using a strategy (pricing strategy) to increase their sales and maybe even to become the market leader for gaming consoles. Although they are not yet the market leader their stategy resulted in great sucess for the company and made the sales increase immensly ever since. It also links to Change of the CUEGIS as it is change of price and therefore also a change for the company. By changing the price they are hoping that more gamers buy the Xbox One. Also now as Valentine’s day is coming up some people might think about buying their loved ones presents, which explains why they want to achieve a “record-setting holiday”.

 

Still Sweet on Coke and Pepsi?

Week Beginning: 26.01.2015

Bloomberg View recently posted an article about the competition between Coca Cola and Pepsi. At the time the soda-pop business is at its purest form. As the article stated it is sublime and ridiculous at once. 

First of all it is ridiculous, because it involves selling sugar water and second of all it is sublime, because the firms main responsibilities are branding and producing a secret syrup that someone else mixes with carbonated water and serves at restaurants or sells in supermarkets. However both companies’ capital expenditures are low and their profit margins are high. The article mentions that Coca Cola s operating margin topped 25 % for years and years, which is remarkable for a company that is selling something different than iPhones or drugs. Adding to that Pepsi’s overall margins is lower, due to the fact that they are also selling snacks and are not fully concentration on their most popular drink. Things became more complicated for Coca Cola and Pepsi as they acquired their biggest North American bottlers in 2009-2010. After this their operating margins fell, so they reacquired them again. However the biggest concern for the companies is, that people might stop drinking soda-pop, as customers realized that too much sugar will affect their health. This is clearly shown by the decreasing home market, North America. The organization, Euromonitor, says that the market is shrinking at 0.7 % through 2018. This was also caused through the publicity that the President of Coca Cola in North America got, as he said that he cut down his consumption of Coca Cola. Since then both companies have focused on cutting down their costs, by removing workforce. All in all Pepsi is a little bit a head of Coca Cola but their profits are basically the same for December 2014.

This article links to the topic, Branding, which we covered last week. As stated in the beginning one of Coca Cola’s and Pepsi’s biggest responsibilities is branding. An example for that would be that there are many companies out there, which produce more or less the same product, but Pepsi and Coca Cola seem to make the most profit out of it. This is happening, because of branding. A customer buys the product, because of the brand name, its image or other features. Adding to that this article also links to Change of the CUEGIS as it shows that the soda-pop market is not as popular anymore as it was in earlier decades, therefore both market leader companies have to adapt to that change. Furthermore it also links to Strategy of the CUEGIS, because if Coca Cola or Pepsi is making less profit, their production cost will increase again. Therefore Economies of Scale need to be considered and the firms need to use certain strategies to cut down their costs. The article also touches on Ethics as it involves selling sugar water to people for  reliativly high price, compared to other brands, which might sell a similar drink. The only reason why the price is different is because of the branding of the firm. Therfore it is questioned if similar products should have different prices due to branding. All in all the article shows that Coke and Pepsi are slowly moving to the decline stage and becoming dogs, although they might still be in the maturity stage.