Last week Nike told investors that it expected sales to be lower this year than last year. The FT reported that “Nike is in a crisis”. Where Nike’s strategy has gone wrong illustrates why you need to pay attention to the four facets of a good strategy.
- Choosing a challenge: Focus on customer needs. Nike lost sight of the needs of its core customers, because it chose to focus on the goal of increasing sales via its own stores. Such a move doesn’t meet customer needs, but their own need to increase their margin.
- Choosing a solution: Choose a specific target customer group. Nike changed its target customer groups from individual sports to men, women and children, so from specific to generic, but its competitors did not. This is a real-life demonstration that one size does not fit all. One analyst wrote “The concept of being all things to all consumers in the sector is effectively over.”
- Executing the plan: The strategy has to fit with the capabilities of the company. This strategy required a big change in how the company operates. It was put into effect by hiring a new CEO from the tech industry. “Having a tech executive who came in to run a consumer product company and introduce a strategy shift, it’s proven to be the wrong approach,” wrote another analyst.
- Making money: Trying to grow while cutting costs is unlikely to succeed. Nike restructured to save costs, investing less in individual sports when it shifted to the generic target groups.
Nike has partially reversed course by rehiring a former executive to rebuild its retail sales channels. Looking at the other missing facets of good strategy, Nike should put more effort and resources into understanding its consumers and going back to making targeted products for them. Right now, their competitors are beating them by doing precisely that.
© Veridia Consulting, 2024
