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Strategic Diversification By Nike This assessment presents the values Nike has developed throughout its functional business areas, how value creation is lacking in some business areas, and how the acquisition of The North Face would create additional value for Nike.

Strategic Value Creation of Nike The table below illustrates significant strategies Nike has employed to create value for its customers, the actual value created, and barriers to the creation of value.

VALUE CREATION STRATEGY HOW VALUE IS CREATED BARRIERS TO CREATING VALUE Brand/Image · Ability to charge premium price by establishing an "image" · Access to new/different markets · Premium product placement in retail leading to higher sales · Image and celebrity endorsements create hopes/dreams/emotional attachment to product · Influence of negative activities on brand name (i.e. sweatshops) · Products are expensive decreasing customer base · Trademark infringement from fake products resulting in decreased customer satisfaction (i.e. poor quality products carrying the stolen Nike logo) · Presence of copy cat competitors (i.e.

Reebok) decreasing market share and driving Nike's prices down Economies of Scale · Shared distribution channels among varied product lines lower costs · Large size provides opportunity for more leverage against competition · Able to support campaigns/sponsor-ships increasing brand recognition · Efficient use of production facilities lowers costs · Size of company may be difficult to control leading to operating inefficiencies · Large scales may lead to more Federal Regulation Geographical Outreach · Ability to reinforce brand and create loyalty across cultures leading to a broad customer base · Increased company growth potential · Cross-subsidization of weaker markets · Difficult to coordinate company activities across cultural norms (i.e. marketing, distribution) · Foreign currency risk · Language barriers creating difficulty to advertise effectively · International regulatory issues Innovation & Production · Innovation may be difficult for competitors...