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 ÃÂ· Ability to charge premium price by establishing an "image" ÃÂ· Access to new/different markets ÃÂ· Premium product placement in retail leading to higher sales ÃÂ· Image and celebrity endorsements create hopes/dreams/emotional attachment to product ÃÂ· Influence of negative activities on brand name (i.e. sweatshops) ÃÂ· Products are expensive decreasing customer base ÃÂ· Trademark infringement from fake products resulting in decreased customer satisfaction (i.e. poor quality products carrying the stolen Nike logo) ÃÂ· Presence of copy cat competitors (i.e.
Reebok) decreasing market share and driving Nike's prices down Economies of Scale ÃÂ· Shared distribution channels among varied product lines lower costs ÃÂ· Large size provides opportunity for more leverage against competition ÃÂ· Able to support campaigns/sponsor-ships increasing brand recognition ÃÂ· Efficient use of production facilities lowers costs ÃÂ· Size of company may be difficult to control leading to operating inefficiencies ÃÂ· Large scales may lead to more Federal Regulation Geographical Outreach ÃÂ· Ability to reinforce brand and create loyalty across cultures leading to a broad customer base ÃÂ· Increased company growth potential ÃÂ· Cross-subsidization of weaker markets ÃÂ· Difficult to coordinate company activities across cultural norms (i.e. marketing, distribution) ÃÂ· Foreign currency risk ÃÂ· Language barriers creating difficulty to advertise effectively ÃÂ· International regulatory issues Innovation & Production ÃÂ· Innovation may be difficult for competitors...