What To Do About Nike Overpriced And Above Average Priced Essays Examples

Products as compared to competitors, and how it can negatively affect the company as a whole.

Introduction
NIKE, Inc was founded as an importer of Japanese shoes has now grown into the world’s most leading manufacturers of footwear and sports accessories. Nike has a leading market in the world with outlets in over 160 countries with 22000 outlets around the world. They primarily master in producing good quality sports footwear and have contracts with many sports teams and clubs all over the world. Nike has many competitors in the market who also master in designing footwear. The problem associated with the Nike products are their price. Their products are usually of high price compared with their competitors such as Adidas and Puma. Both of these companies also produce good quality and competitive products as Nike does at a cheaper price.

Analysis

Problem Definition
Nike have strong competition in the market in the production of sportswear especially footwear. Their overly increased priced products can have a negative effect on their target market as their competitors are producing a very competitive sportswear and at an affordable price. Nike being the leader in the market and the world’s largest brand of selling sportswear has an annual sale of $25 Billion compared with its competitors Adidas ($20 Billion) and Puma ($4.7 Billion). Nike has more sales compared with its competitors but the prices of their products are not affordable to many customers. Due to their overpriced products customers usually prefer to buy products from their competitors at an affordable price. This increase in price over the years has affected their target market which has shifted their customers to various other brands especially Adidas. Adidas according to many is Nike’s biggest competitor so far in the market. Nike usually targets the US market while the Adidas targets the European market. Both are arch rivals of each other. Nike is more popular in sports industry compared to Adidas and they also have many market names as well. Nike products are of touch better quality and have better sports equipment. Because of their quality and their market name they set their products prices a bit high compared with their competitors.

Factors behind this issue

Nike’s market is getting bigger and bigger and they are getting more investment then before they are investing more on technology and introducing new technology in their products. They generate twice as much cash then Adidas and invest twice as much as Adidas. Nike has a better domestic market and has made inroads in the football field as well which was before this completely owned by Adidas. Nike spends a lot on its marketing as well as production. They use advanced technological gadgets such as motion sensors to record the speed and the jump of an athlete. With such Hi-tech use of gadgets in their products they are bound to increase prices of their products. When Nike introduced its most expensive sneakers in 2012 by the name of LeBron X there was an outrage against Nike on the high price of their sneakers. Many thought that the product is out of reach because of the economic and unemployment situation in the US. Many of the Nike’s products are being made and produced in several countries of Asia this means that Nike gets their products done at good quality by cheap labor in the third world countries. Getting their manufacturing done in the other countries increases the total expense of the production consequently this becomes a factor in increasing the product price for the consumer use. Their main target markets are those who can afford their products. Due to global economic crisis and recent increase in the unemployment Nike is losing market at the lower level though their annual revenue generation is far more than their competitors. There have been many critics on Nike not because of their product quality but mainly due to product pricing. Over the years Nike has affected the society in both positive and negative ways which has directly affected their market as whole in both positive and negative ways. The critic whom they usually receive is regarding their manufacturing being done in third world country for which they pay less and sell for more to their customers. The global recession is going on for quite a long time now. This recession directly affects the company in it sales and revenue generation. This increase in the prices of their products can directly affect Nike’s sale as people would not be earning more wages so they won’t be able to buy Nike’s products.

Alternatives

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Reducing Price

Maintaining the profits while reducing the cost and the cost cutting is a strategic decision which is made on the concept of organize planned program. The cost can be reduced to a certain level of price keeping in mind the total expenses on the shipment and production. Reducing the cost of the overpriced products would attract more and more customers towards Nike’s products which the customers usually buy from Nike’s competitors. Maintaining the same level of price as their competitors would attract their competitor’s customers as well because of the quality of apparel and accessories which Nike produces. This reduction in the overpriced products will have its own Pros and Cons on the company as whole. The advantages from this steps expected are tremendous increase in customers as Nike has a bigger name in the market, more customers would assure more sales however it’s going to be a slow process in the beginning with not much annual sales as before the reduction of prices.

Shifting the manufacturing industry at home

Shifting the production industry from Asia to the US would also have positive effect on the company. Firstly they will bring back employment to their own country which means more people will have employment chances. This would also ensure that the company uses its own industry for the manufacturing its products hence booming the industry as well. They will not have to pay shipment expenses and hence the product price will already be lowered. This step also has its own pros and cons. The advantages would be that they will create employment opportunities, the increment in the industrial growth and less expenses on shipment. The disadvantages could be related to their market in different countries. Nike develops products in accordance to requirement of the country. They keep in mind their traditions and produce product. This thing will be greatly affected on Nike’s behalf.

Using less technological gadgets

One of the main reasons for overpriced Nike products is that they use new innovative ideas and implement them on their products. Nike uses information technology to the max in order to make their products more technological. The use of technology involves the installing of Hi-Tech gadgets on their products. This vast use of technology on their products directly increases the production expense hence becoming a reason for the increase in the products price. Use of less technological features in the products would consequently bring down the price and would ensure that the product is feasible for a majority of customers to buy. However like every other solution this one has also its positive and negative effects. The disadvantage to this solution is that the quality of their products will be at stake. Nike is usually known for the quality of products hence the decrease in the quality of the products by reducing the technological use will directly affect the brands image in the market. On the other hand the use of less technological use will cause a decrement in the price of their products and this will directly affect the sales as more people would be able to buy their products.

Conclusion

The objective was to define the problem statement and do the analysis to see that how this problem can have a negative effect on the company. Nike’s product and price analysis was done with its competitors such as Adidas and puma. Thorough analysis on the products quality and products materials was done. The results showed that Nike’s quality of accessories and price were high compared with its competitors. However the global economics crisis and high product prices of Nike products can have a negative effect on the company. A few solutions were proposed for management’s consideration which included reduction in the current price, shifting of manufacturing industry from Asia to US and finally using less technological gadgets in their products. The positive and negative effects of these solutions were stated. In the end it is concluded that this increase in the price of Nike’s products can have an impact on their annual sales hence solution are provided for the management to look into this problem and draw way out pattern.

References

Smith, E. (2010, April 27). How Has Nike Impacted Society? Retrieved April 5, 2015, from http://www.mademan.com/mm/how-has-nike-impacted-society.html
Nike performance innovations on display in a summer of competition. (2012, July 18). Retrieved April 5, 2015, from http://news.nike.com/news/nike-unveils-performance-innovations-for-summer-of-competition
Wilsey, M., & Lichtig, S. (n.d.). The Nike Controversy. Retrieved April 5, 2015, from https://web.stanford.edu/class/e297c/trade_environment/wheeling/hnike.html
White, M. (2012, August 24). Guess What? Most People Won't Buy Sneakers for $300 -- Or Even $200. Retrieved April 6, 2015, from http://business.time.com/2012/08/24/guess-what-most-people-wont-buy-sneakers-for-300-or-even-200/
Nye, J. (2012, August 22). Outrage as Nike unveils $315 sneakers - their most expensive ever - and bans midnight launches to stop violent stampedes for the coveted shoes. Retrieved April 6, 2015, from http://www.dailymail.co.uk/news/article-2191833/Outrage-Nike-unveils-315-sneakers--expensive--bans-midnight-launches-stop-violent-stampedes-coveted-shoes.html