As the world tuned in for 2010 FIFA World Cup in South Africa, Nike was readying itself for a five-year growth strategy where it would attempt to achieve long-term, sustainable growth across its entire portfolio.
Nike has long been the world’s dominant sports company. Its brand alone is worth around $15 billion, three times that of Adidas, and ten times that of Reebok. It also sponsors many top athletes - with LeBron James, Roger Federer, Rafael Nadal, Rory Mcllroy and Cristiano Ronaldo perhaps the most prominent - yet despite this, it still regards itself as a ‘growth company’.
The FIFA World Cup is arguably Nike’s busiest period. In 2006, it was criticized for its digital strategy, with the Harvard Business Review stating that its Joga Bonito campaign ‘did not capitalize on the deeper and less obvious changes in consumer expectations’. To add insult to injury, a team sponsored by Nike hasn’t won the tournament since 2002, with its nearest rival Adidas, backing two of the last three winners.
The timing of Nike’s investor meeting in 2010 may have been coincidental. But their relative lack of success in the tournament could have been the wake up call its strategic team needed. The brand can always rely on strong sales in the United States, but in emerging countries, which are greatly influenced by the FIFA World Cup, Nike’s prominence was nowhere near as strong.
At the beginning of 2014, Nike was struggling to make much of an impact in Greater China. Two years earlier, in 2012, Nike predicted that its revenue would double in China to $4 billion in four years. This prediction proved to be widely optimistic, with the company failing to negotiate the necessary cultural barriers. For example, Forbes stated that Nike’s reliance on using iconic sports stars to promote its products - whilst successful in Europe and the United States - didn’t work because of Chinese parents focus on academia and not sports.
Nike’s presence in China, however, has been a slow burner. Recently, the company announced that its revenues had increased 15% year on year, the highest they’ve ever been. Caused by a culmination of the Chinese population’s increasing disposable income, the appeal of Western culture with the nation’s youth and a steady rise in gym memberships, the brand’s in the best shape it’s ever been in that part of the world.
Outside of China, other emerging economies - such as Brazil and Mexico - have seen their revenues grow by 25%. This is expected to increase even further, with the Rio De Janeiro Olympics set to be a platform for further growth.
Amid this success, Nike has also been championing sustainability.
As a key part of its targets in 2010, the company wanted to drive its long-term growth by promoting green strategies and manufacturing processes. Nike’s made real strides in this area too. Its Flyknit Lunar 1+ running shoe, for example, reduces manufacturing waste by 80% compared with traditional production methods. They’ve also been working hard to improve the working conditions of their factory workers in some of the world’s most deprived nations, setting up the Nike Foundation, which looks to provide children who are living in extreme poverty with the resources to go to school. This strategy has reshaped Nike’s image after its famous sweatshop scandal in 1997.
Nike’s growth stance is commendable and should see them continue to diversify their portfolio and move into new markets. Its journey in China shows that they also have the ability to be patient and ride out negativity until the market moves in their favor.
The United States and Western Europe will continue to be Nike’s main markets. Nike’s aggressive growth strategies, however, have seen its global presence increase and is perhaps the main reason why its revenues were up by 7% this quarter. This highlights the success that Nike’s experienced over the last five years and that despite its FIFA World Cup woes, it’s still the world’s leading sports brand.