The Nike Files

We are going to take a look at Nike Air® technology using the VRIO framework, and will expand on how the marketing of this technology has helped provide Nike with a sustained competitive advantage in the athletic shoe market. When Nike introduced its first shoes that incorporated Nike Air® technology, they immediately gained a competitive advantage.  The reason  - athletic shoes were being constructed using polyurethane or rubber for the midsole, which would breakdown quickly or was too hard to begin with.  Nike Air® midsoles employed an air sole to absorb shock and slow the breakdown of the midsole.  In the beginning, the air sole was not visible.  Over the years, Nike has improved this technology to the point that the entire midsole is comprised of air soles on some models of running shoes. Nike has enjoyed a sustained competitive because it created a technology to be used in shoes that was valuable, rare, costly to imitate, and has been exploited remark...

In 1999 the athletic apparel industry received a shock from a little-known company called Under Armour.  Featured in the movie Any Given Sunday was a new alternative to the t-shirts that athletes would commonly wear under their uniforms.  This new under garment was lightweight, tight-fitting, and wicked away moisture to keep the athlete cool during hot conditions.  The movie created a buzz and the ad placed in ESPN magazine helped Under Armour "generate a $750,000 increase in sales."( http://www.uabiz.com/company/history.cfm )  The emerging industry of performance wear was born. Little did Nike know that it could have been first to market on this and could have created a huge barrier to entry.  Nike developed its Dri-Fit® technology in 1991, but missed the boat on the multiple uses for the "wick away" fabric.  Nike's Dri-Fit® technology was used specifically in the brand's golf apparel.  Because Nike didn't realize the potential of this technology ...

The athletic shoe market is extremely competitive, and once Nike became the industry leader it has never looked back. Nike has had to deal with many "imitators" over the years.  Since it introduced its air technology in the '80s, the competition has tried to imitate or surpass the technology with its own version of shock absorption.  Fortunately for Nike, it holds a patent for this technology, giving it the advantage that they need to remain at the top. The most recent threat to Nike, Under Armour, is struggling in the athletic shoe market.  They were successful in building their brand from a simple compression line of sports under garments to a full line of athletic products.  However, they lacked the "know how" in the footwear area and have had to deal with a learning curve that has been a major factor in the lackluster performance of the footwear line. Because of the volume of goods it produces, Nike has favorable access to the raw materials required to...

In 2016, Nike posted sales of nearly $19.87 billion from its footwear division alone.  The next closest competitor was Adidas at $10.68 billion.  ( https://www.statista.com/statistics/278834/revenue-nike-adidas-puma-footwear-segment/ ) When people purchase Nike shoes, they have expectations.  Expectations that they are purchasing a high-quality product.  These expectations have evolved from years of consistency at Nike and have created brand loyalty.  These repeat customers are willing to pay top dollar for Nike shoes.  Because Nike has been focused on its reputation of producing a quality product, it has created a greater economic value for its customers.  Greater economic value equals increased sales, and in the case of Nike, market dominance. Nike continues to push the limits of providing its customers with what they want, when they want it.  In doing so Nike has been able to maintain a higher economic value than their competitors, allowi...

When Phil Knight and Bill Bowerman started Nike as a running shoe company that offered only one type of shoe, no one could have ever imagined the growth this company would see.  Over the years there have been many strategic decisions made that have landed Nike in the Fortune 500.  The most notable of these decisions was the development of a line of basketball shoes worn by Michael Jordan. Because Knight and Bowerman were both runners, they had an understanding of what the shoes should be capable of and how they should feel.  Bowerman's initial shoe, the Cortez, was designed specifically for distance runners and was a huge success.  However, in order to grow they knew that Nike would need to be more than just a running shoe company. Nike had branched out into different sports in an attempt to generate additional revenue.  They even provided entire teams with Nike shoes for free as a means of advertising.  This helped Nike grow, but only to a point. In ...