Transcript Commodity Chains and Marketing Strategies

Commodity Chains and
Marketing Strategies: Nike
and the Global Athletic
Footwear Industry
Miguel Korzeniewicz, Ch. 18, pp. 163-172
(Excerpted from Korzeniewicz, “Commodity
Chairs and Marketing Strategies…,” in Gereffi &
Korzeniewicz, eds., Commodity Chains and
Global Capitalism,1994)
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Global Commodity Chains (GCC)
 GCC: the complex global network of
economic links which ties together groups,
organizations, and regions involved in the
production and distribution of goods
 GCC analysis is a development of the world-
system or global-system perspective (which,
themselves grow out of dependency theory)
(Gereffi & Korzeniewicz, eds., Commodity Chains and Global Capitalism, 1994)
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GCC challenges idea that “development” in
capitalism is contained within nation-states
 Development in context of capitalism is a
global process
 GCC tracks the organizational, geographical,
& cultural dimensions of world-wide chains for
the manufacture & distribution of goods

e.g.,clothing, automobiles, food, & drugs
(Gereffi & Korzeniewicz, eds., Commodity Chains and Global Capitalism, 1994)
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Focusing on the distribution segment of GCC
 Inadequate attention has been paid to the
design, distribution and marketing nodes
within a GCC

Yet these are often the sources of innovation
that allows firms to capture greater shares of
wealth in a commodity chain
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Athletic footwear market shows how
GCCs are embedded in cultural trends
 Marketing & consumption patterns in “core”
shape production patterns in peripheral and
semi-peripheral countries
 The social organization of advertising,
fashion, and consumption shapes the
networks & nodes of GCCs
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Trends in the US Athletic Shoe Market
 Continued phenomenal rates of growth
 Highly segmented by consumer age groups
 Teenagers the most important consumers

Athletic shoes constructed and promoted
among teens as important & visible symbol of
social status and identity
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Sports footwear market highly
segmented by:
 Consumer age group
 Model/target sport
 Price

Price rather than appearance & functionality is
the key factor differentiating athletic shoes as
status symbols
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Nike Corporation has become the largest and
most important sneaker company in the US
 In 2004, Nike’s share of market is 42%
# 2: Adidas (27%)
 # 3: Reebok (12%)

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The key to Nike’s rise?
 ability to capture a succession of nodes along
GCC, increasing its expertise and control
over critical areas:
 design
 distribution
 marketing
 advertising
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US Athletic Footwear Industry % Market Share
by Sales Volume (2004)
Nike
Adidas
111
3 2
5
Reebok
6
Puma
42
New Balance
12
Sketchers
K-Swiss
Vans
27
Asics
Saucony
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The most fundamental industry
innovation is the creation of a market
 constructing a convincing world of symbols,
ideas, and values harnessing the desires of
individuals to the consumption of athletic
shoes (165)
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Capitalism and Commodity Fetishism
– Marx (1867)
 Fetishism, in ancient religions, meant the belief that inanimate
objects such as icons, trees, clouds, etc., possess human
properties
 Fetishism is the belief that natural objects have supernatural
powers, or that something created by people has power over
people
 In Marx's critique, commodity fetishism denotes the mystification
of human relations said to arise out of the growth of capitalism,
when social relationships between people are expressed as,
mediated by and transformed into, objectified relationships
between things (commodities and money)
 links the subjective aspects of economic value (exchange
value) to its objective aspects (use value)
 subjective=brand (image) vs. objective=product (uses)
 In this formulation, Marx attempted to capture the essential
nature of all ideological illusions of bourgeois society
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Pd. 1: Gaining control over import &
distribution nodes of GCC (1962-1975)
 Nike sells tens of millions of sneakers in the
US annually, yet all manufacturing operations
are conducted overseas
 From the start Nike imports shoes from Japan
 Nike concentrates its design, distribution, and
marketing activities in the US
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Nike is the archetype of a global
sourcing strategy: subcontracting
 Nike originated by importing shoes from
Japan

It has subcontracted nearly all of its production
overseas ever since
 Nike’s VP for Asia-Pacific: “We don’t know the
first thing about manufacturing.”
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Pd. 2: Marketing as an upgrading
strategy (1976-1984)
 Nike enhances competitive position by
extending control to marketing
 Nike redesigns subcontracting strategy to
seize new opportunities in Southeast Asia


First in South Korea & Taiwan
Later, China, Thailand, and Indonesia
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Pd. 3: Design, advertising, and return
to the semiperiphery (post-1985)
 Another period of high growth based on
innovations in product design and advertising


“Air Nike” comes out
Nike signs its most popular endorser, Michael Jordan
 Continued targeting new niche markets

e.g., aerobics & athletic apparel
 Subcontracting strategy changes again

returns to South Korea for more specialized,
sophisticated, and experienced manufacturers
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Conclusions
 Case study confirms a division of labor
between core & peripheral/semi-peripheral
countries


Core specializing in services
Periphery/semi-periphery specializing in manufacturing
 Korean and Chinese firms produce the actual
shoe, as US-based Nike promotes the
symbolic nature of the shoe–and appropriates
the greater share of value from sales
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