Businessmodel of Nike

Customer Segments

Nike has a mass market business model, with no significant differentiation between customers. The company targets its offerings at any consumer who is interested in athletic footwear and apparel.

Value Proposition

Nike offers four primary value propositions: accessibility, innovation, customization, and brand/status.

The company creates accessibility by offering a wide variety of options. It has acquired numerous footwear and apparel firms since its founding, including Converse and Hurley International. These actions have enabled it to expand its product lines, giving consumers more to choose from.

The company places a strong emphasis on innovation. It maintains the Nike Explore Team Sport Research Lab at its headquarters, a research facility focused on designing cutting-edge products. It also operates the Nike Advanced Product Creation Center, focused on technology incorporation.

The company enables customization through its service NikeID. It allows customers to personalize various aspects of their shoes, including sport style, traction, and colors. Socks can also be tailored.

The company has established a strong brand as a result of its success. It is the top seller of athletic footwear and apparel globally. It has partnered with several of the world’s leading athletes to promote its products, including Michael Jordan, Cristiano Ronaldo, and Tiger Woods. Lastly, the company has won many honors, including recognition as the “World’s Most Innovative Company“ by Fast Company (2013) and the “Most Admired Company in America“ for apparel three years in a row.

Channels

Nike’s main channel is physical retail stores, including its Nike-branded stores. It also acquires customers through its website and a combination of independent distributors and licensees worldwide. The company promotes its offering through its social media pages, online/print/TV advertising, brand events, and sponsorships of athletes and professional/college sports teams.

Customer Relationships

Nike’s customer relationship is primarily of a self-service nature. Customers use its products while having limited interaction with employees. The company’s website provides answers to frequently asked questions. That said, there is a personal assistance component in the form of phone, e-mail, and live chat support.

Key Activities

Nike’s business model entails designing and developing its products for customers.

Key Partners

Nike utilizes independent contractors for manufacturing purposes. The items are produced in 146 footwear factories located primarily in Vietnam, China, and India, as well as 408 apparel factories located mostly in China, Vietnam, Sri Lanka, Thailand, Indonesia, Malaysia, and Cambodia.

The company’s aforementioned Nike Explore Team Sport Research Lab maintains research partnerships with several leading universities and institutions in North America, Europe, and Asia. The alliances provide it with access to top athletes as well as cutting-edge science findings.

Key Resources

Nike’s main resources are its physical and human resources. Its Nike Explore Team Sport Research Lab, which creates innovations, has state-of-the-art research equipment. It also features over 40 researchers, many of whom have earned Master’s degrees and doctorates in various disciplines including biomedical engineering, biomechanics, kinesiology, mechanical engineering, physics, physiology, and systems science. The company maintains advisory boards and research committees consisting of athletes, trainers, coaches, orthopedists, podiatrists, equipment managers, and other experts who provide guidance in the product design and development process. Nike has five distribution centers in Memphis, TN as well as centers in California. Lastly, it places a high priority on its intellectual property, maintaining the third-largest design patent portfolio in the U.S.

Cost Structure

Nike has a value-driven structure, aiming to provide a premium proposition through frequent enhancements to its products. Its biggest cost driver is cost of sales, a variable expense that primarily includes inventory and warehousing costs. Other major drivers are in the areas of overhead, sales/marketing, and administration, all fixed costs.

Revenue Streams

Nike has one revenue stream: sales of its athletic footwear, apparel, equipment, and accessories.