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Essay on marketing, topic: Distribution Strategies of the Nike Company
Distribution is an important factor in marketing, since manufacturers and producers achieve their marketing goals by supplying and transporting their products to both small and large scale businesses. By doing this, they generate profits and at the same time enlarge the number of customers they posses since they can reach them wherever they are. It can be argued that as a result of a widespread distribution of various products, they are purchased even in the remote parts of the world (Kotler 400-510).
DEFINITION OF DISTRIBUTION
Distribution is transferring of the ownership of a product from a manufacturer to a consumer. In case a manufacturer does not transfer the product directly to the consumer, there may be intermediaries. Based on this, a distribution channel is a chain of intermediaries where each transfers a product until it reaches the final consumer (Kotler et al. 356-623).
EFFECTS OF DISTRIBUTION ON OTHER MARKETING ELEMENTS AND DECISION MAKING
Marketing elements include distribution, pricing, products and promotion. Based on this, the price of a product will be increased by the distribution cost. As a result, when distribution channels are extensive, it results in the increase of a product’s final retail price since each intermediate agent would like to make a profit in the process of distribution.
A newly manufactured product reaches the customer through the distribution chain that is combined with its advertising. Lastly, distribution affects the quality of a product, especially in vertically distinguished firms. Based on this, the product value of a high-quality channel diminishes when it is distributed on a one-sided mode while the value of a low-quality channel would rise when it is distributed on a multiple-sided basis. It can be noticed that distribution affects decision making in marketing since the more efficient a product is in the market, the high profits its sale brings. This will help the manufacturer expand their distribution strategies in order to gain a bigger profit (Gorchels et al. 50-120).
The Nike Company was established by Bill Bowerman and Philipp Knight in 1964 where it was formally called “Blue Ribbon Sports”. Initially, this firm was selling Onitsuka Tiger shoes right from Knight’s automobile. As a result of the profit increase, the first store was opened at Pico Boulevard in California in 1966. Considering the company’s extensive sale, the establishers decided to launch their own design of footwear rather than work with the products of Onitsuka Tiger. Carolyn Davidson created a new footwear design: it was a sporty shoe known as Swoosh in 1971. Based on this, a soccer shoe called “Nike” became the first piece of Swoosh design which was released to the market in summer 1971 (Katz 40-106).
It is clearly indicated that Bowerman’s gobbledygook design formed the basis of
the firm’s initial self-designed product. He built up and advanced the alleged waffle sole which was used in production of the iconic “Waffle Trainer” in 1974. As a matter of fact, the Nike company conquered approximately a half of the American sports footwear market. It is argued that it was the “word-of-foot” publicity that contributed to the drastic growth of the Nike company rather than television advertisements. Nevertheless, Nike used television to publicize its products, which resulted in enlarging its production and helped embrace many other kinds of sports and conquer new territories all over the world (Katz 40-106).
DISTRIBUTION STRATEGIES FOR NIKE COMPANY
a) Channel levels applied by Nike. It is of big significance to note that the Nike company has more than 20,000 retailer shops all over the world, which comprises Nike industrial unit stores, Nike stores and Nike Town stores, as well as internet-based shops which assist in selling and distributing Nike’s sports products. From this information, it can be concluded that the distribution channel levels within the Nike company include the following elements: manufacturer-wholesaler-retailer-consumer. In this case, the Nike factory stores indicate the manufacturer channel level while the Nike stores and the Nike Town stores are for wholesale of the Nike products. Retail shops and internet-based stores belong to the retail channel level (Kotler et al. 436-600).
b) Types of channels used by the Nike company to reach its customers. The Nike company uses different channels in advertising its products. These include the sales force, dealers, telemarketing, the internet, agencies and distributors. The Nike company used the sales force channel having signed a sponsorship agreement with a sports team, which serves as an effective advertising tool. By doing this, the company enlarged its market despite the fact that it targets the athletes: now non-professionals are strongly interested in buying Nike’s products. On the other hand, the Nike company uses distributors in spreading its products. Level-based distribution is used where the products of the highest quality are entrusted to certain distributors while less expensive products are to be sold at a reduced price at extra-large retail stores like Wal-Mart (Gorchels et al. 50-120)
As discussed earlier, the Nike company has been using television in advertising its products since 1982. Based on this, even though telemarketing channels have not been considered as a key advertising method in a company’s marketing operation, some people just admire the shoes worn by their favorite players like Ronaldinho and hence buy them. Further, the company’s products advertising has been made through agencies. For example, an organization based in Portland and called “Wieden+Kennedy” contributed to the Nike company’s expansion in sales. The company’s “Just Do It” slogan developed by Dan Wieden is considered to be a gem of the world sportswear marketing. Finally, the Nike company advertises and sells its products through the internet where it has specific websites where customers also get the latest information about Nike’s goods (Katz 40-106).
c) Achievement of integrated channels in the Nike company.
– Vertical marketing system. This marketing system importantly engrosses manufacturers, wholesalers and retailers as the main components of the distribution process. These parties need to work in harmony in order to cater for the needs of the customers while the manufacturers of the product team up with wholesalers in the process of product distribution and marketing. As a result, the Nike Company has earned a great credit worldwide.
– Horizontal marketing system. This marketing system involves two companies manufacturing different products but cooperate when selling them. In this case, Nike should work together with athletic teams so that it can market its products while, on the other hand, the athletic clubs get the necessary funding. Thus, athletic teams advertise the company’s product, which would increase the product’s sale.
– Multi-channel marketing system. This marketing system encompasses more than one method in product distribution and marketing. In this case, the information a customer draws from the internet through the Nike company’s internet-based websites helps him/her purchase a product from retail shops (Kotler et al. 436-600).
d) Statistics of these strategies. As a result of the development of the distribution strategies and marketing systems, the Nike company obtains approximately a 47% market share of all the footwear producing companies. Based on this, the company’s sales have amounted to $3.7 billion, which indicates that these strategies have led to expansion of the company’s volume of sales and hence the increase of profit. Thus, the Nike company has turned into the leading supplier of sports shoes and clothing all over the world. Nike has more than 20,000 retail shops in different countries, which has assisted the company in providing and delivering their products to the customers worldwide. Nike’s sales have increased to 52% between 2005 and 2009, which was the result of its extensive distribution strategies. The emerging markets like Russia and China have primarily contributed to the increase in sales of the company’s products (Kotler et al. 436-600).
Distribution strategies applied by the Nike company have substantially contributed to the increase in sales of its products all over the world. This can be explained by the company’s extensive advertising and marketing systems which allow every customer to have access to the company’s footwear and clothing. On the other hand, the company should open up new markets in developing countries and create new retail shops. In addition, it is advisable for the company to lower the prices of their best quality products so that a bigger percent of customers may afford them.
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Kotler, Philip. Marketing Management. 11th edition. New Jersey: Prentice Hall, 2002.
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Kotler, Philip, Kelvin Keller, and Kaliski Burton. Marketing Management. Australian edition. New Jersey: Prentice-Hall Publishers, 2008.