Becoming: NIKE

The shoe that launched a billion-dollar company

“If you have market power like Nike, you can set terms that are much tougher because athletes value the endorsement of Nike – it means as much to them as it does to the company. They feed off each other.”

John Quelch, Professor of Marketing at Harvard University[i]

Nike is, by some distance, the largest sports and leisurewear firm in the world. Its 2018 revenue was in excess of US$36 billion and its roster of sports stars includes the biggest names in every sport, including Lebron James (basketball), Mike Trout (baseball), Patrick Kane (ice hockey) Roger Federer (tennis) and Kylian Mbappé (soccer).[ii]

Anyone who has read Phil Knight’s autobiography, Shoe Dog, will know that the road from selling handmade sneakers at track events to the largest sportswear manufacturer in the world is one full of pitfalls. Looking at that journey, there are several key takeaways that allowed Nike to overtake its rivals.

Nike grasped the value chain faster than its competitors

Global value chains have been one of the features of globalization over the past 30 years, but Phil Knight can be said to be a pioneer in the field for sportswear apparel. Knight’s autobiography, Shoe Dog, outlines how he wrote a paper in business school about the possibility of producing running shoes in Japan (then a cheap manufacturing base) rather than the US.[iii]

Nike – then operating under the name ‘Blue Ribbon Sports’ – began outsourcing the production of shoes to a Japanese manufacturer in 1963, taking advantage of its high-quality production at a fraction of the cost in the US. At that time, sportswear was a virtual duopoly between Adidas and Puma, both manufacturing in Germany.

In the years that followed, Nike moved from Japan to Taiwan and South Korea. From there, it moved to China, as Knight noted: “The same conditions that brought down Japan—fluctuating currency, rising labor costs, government instability—were beginning to coalesce in Taiwan and Korea. The time had come, yet again, to seek new factories, new countries.”[iv] It moved to China.

In every location, Knight outlines how Nike had to meet with local officials and factory owners and assess the value of establishing links there. By contrast, competitors like Adidas and Puma only began production in Asia in the 1990s.[v] In 2019, Nike has manufacturing bases in Indonesia, India, Pakistan, Malaysia, Thailand, Vietnam, and the Philippines.[vi]

Nike foresaw the arrival of fringe sports in the mainstream

In 1994, the United States hosted the soccer world cup for the first time. According to one survey, 71% of Americans didn’t know that the tournament was taking place.[vii] Furthermore, soccer ranked 67th among the most popular sports in the United States – lagging behind sports such as tractor pulling.[viii]

Despite this, Nike was investing in soccer. That year, it signed a deal to sponsor the men’s and women’s national teams of the United States.[ix] In 1996, the US women’s team won gold at the Olympic games. In 1998, Nike announced that its marketing focus for the coming years would be soccer.[x]

20 years later, a 2018 Gallup Poll showed that soccer was due to become the third most popular sport in the United States.[xi] Research conducted by Macquarie Capital estimated that it made €1.8 billion from merchandise sales at the world cup in the same year. One headline heralded: “The real World Cup final isn’t France vs. Croatia, it’s Nike vs. Adidas.”[xii]

Nike communicates what it is better than any of its competitors

In Shoe Dog, Phil Knight refers to the first high-profile athletes that Nike contracted – Steve Prefontaine, a young self-assured US middle-distance runner, and Ilie Năstase, an outspoken Romanian tennis player. Knight notes that the athletes were: “making our brand a symbol of rebellion and iconoclasm.”[xiii]

While the message being portrayed by rivals such as Adidas and Puma is often less clear to decipher, Nike has been consistent with its brand image since 1973. In 2018, its ‘dream crazy’ and Colin Kapernick commercials continued the pattern. In this regard, Nike has communicated better what it is, and what it represents, than any other company in the field.

[i] See: https://www.theguardian.com/lifeandstyle/2016/jun/11/brands-count-cost-celebrity-links-johnny-depp-maria-sharapova-

[ii] Nike (2019). “2018 Annual Report.” Available online at: https://s1.q4cdn.com/806093406/files/doc_financials/2018/ar/docs/nike-2018-form-10K.pdf

[iii] Knight, P. (2007). “Shoe Dog: A Memoir by the Creator of Nike.” Scribner.

[iv] Knight (2007) p.324.

[v] https://www.theguardian.com/world/2016/may/25/adidas-to-sell-robot-made-shoes-from-2017

[vi] Nike.com

[vii] https://guce.oath.com/collectConsent?sessionId=1_cc-session_043c59e9-5d2a-433a-bd7f-0c484bce5ba3&lang=en-GB&inline=false

[viii] Van Sterkenburg, J., Spaaij, R., (2014). “Mediated football: representations and audience receptions of race/ethnicity, gender and nation.” Soccer and Society, Vol 16, Issue 5-6, pp.593-603.

[ix] https://news.nike.com/news/the-definitive-history-of-nike-in-football

[x] https://www.nytimes.com/1998/05/11/business/media-business-advertising-nike-will-focus-soccer-women-s-sports-markets-while.html

[xi] https://www.forbes.com/sites/filipbondy/2018/01/08/soccer-will-soon-be-americas-third-favorite-spectator-sport/#75eeb79b3c53

[xii] https://www.cnbc.com/2018/07/13/the-real-world-cup-final-isnt-france-vs-belgium-its-nike-vs-adidas.html

[xiii] Knight (2007) p.211.