Transcript Commodity Chains and Marketing Strategies: Nike and the

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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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
 Nike begins importing 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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