Strategic Competition in the Sneaker Industry

EXECUTIVE SUMMARY

Since the birth of the Internet in 1969 to its commercial adoption in the 1990s, the World Wide Web has enabled businesses and consumers to connect with one another to exchange and share information, anywhere and anytime. The web has provided consumers and businesses with enormous advantages by reducing the transaction time and increasing the level of convenience.

As we leap into the twenty first century, it seems as though everyone is on the Internet and more companies are establishing an online presence to maintain their competitive edge. Along with high speed Internet connections, the Internet has become an essential tool for any business to compete domestically or globally. In today's high speed environment, one would be hard pressed to find a Fortune 500 company conducting business with either other businesses or consumers to not have its own web site . Businesses are developing web sites to provide their consumers and business partners with information and e-commerce. Large firms who have not adopted e-commerce as part of their strategic initiatives will miss out on opportunities to attain growth and competitive advantage.

Nike and Adidas are two primary footwear companies along with their competitors who have adopted an online e-commerce strategy to increase their sales and product awareness. Most importantly, companies like Nike and Adidas have invested heavily into online brand building and image development. Nike launched the nike.com web site in August 1996 primarily to provide information to its consumers. In 1996, there were no e-commerce capabilities present, however the web site served as a brand building tool for the company. In 1999, Nike redesigned their web site with expanded e-commerce functionality. Adidas launched their web site in the spring of 2000, which was later integrated with e-commerce capabilities during that summer.

Attaining market share is important to both Nike and Adidas. In order to maximize their market share, both Nike and Adidas have placed a great importance in developing their branding and marketing strategies on the net through web appearance and user friendly functionalities such as ease of purchase, speed, and navigation.

Nike and Adidas have adopted a merchant model which encompassed three pillars of their e-commerce strategy: pure-play e-tailer, bricks and clicks, and their online store. The main purposes of acquiring relationships with pure-play e-tailers is to promote and market products; focus on the content to create new exposure and; gather, gain and transfer market knowledge to their business counterparts.

The Internet has proven to be a useful tool for firms such as Nike and Adidas by increasing sales and reducing cost. But most importantly their web sites have provided them with an intangible asset such as market research and consumer buying behaviors. With the data retrieve from consumers, these firms are able to analyze and monitor the buying behaviors of their consumers. The data can also be used to exploit new marketing campaigns and promotions. Furthermore, the data collected can be used to produce innovative designs and improve their research capabilities.

Although, there are perceived benefits in conducting e-business over the Internet there are also potential barriers. The major barrier of e-commerce with respect to large firms such as Nike and Adidas is the technological barrier ranging from infrastructure to security. An ongoing battle the e-commerce industry faces is security. With time and additional research and resources, this problem will be mitigated. Meanwhile, both Nike and Adidas must minimize their technological risks.

While both Nike and Adidas currently have an essential advantage over their rivals, there are chances that their advantages will not last forever. The Internet has redefined competition therefore changing the evolution of competition. Although, Nike and Adidas have engaged in e-commerce there are apparent gaps within their e-business strategy. E-commerce is only available in restricted regions such as the United States and the United Kingdom, therefore opportunities exists within the global market to expand. The future will prove to be very interesting for both Nike and Adidas, and those who move quickly will dominate the market.

INTRODUCTION

A daring dream began in 1920 when Adi Dassler fashioned his first shoe in Herzogenaurach, Germany. In 1948, Adidas was founded along with its identifying trademark, the three stripes. From its inception, Adidas has faithfully adhered to three guiding principles embedded deep into its DNA: produce the best shoe for the requirements of the sport, protect the athlete from injury, and make the product durable. As time has passed, Adidas has evolved and is now one of the premier global leaders in sporting brands offering athletic footwear, apparel and accessories. This feat has been cultivated through continuous innovation and a broad product portfolio. With time, Adidas discovered that in order to continue to evolve further its strategy had to include the Internet. This led to the development of www.thestore.adidas.com, an e-commerce site focused on interactively profiling Adidas's extensive product offerings accompanied by detailed product information.

Initially, what started as Blue Ribbon Sports in 1962 became Nike Inc. in 1972, based in Beaverton, Oregon. Nike was named for the Greek winged goddess of victory. The founders were Bill Bowerman, a track & field coach and Phil Knight, a runner under Bowerman. From their modest start, Nike has grown to be a global leader in the sporting goods industry. It is recognized as the world's leading designer, marketer and distributor of athletic footwear, apparel, and accessories for a wide variety of sports and fitness activities. For Nike, an established and growing organization, a strong Internet presence felt like a natural extension to their already globally focused strategy. Today www.niketown.com, Nike's e-commerce site offers a unique experience, products and product information for its potential and existing customers.

ANALYSIS OF E-COMMERCE

Attaining market share is important to both Nike and Adidas. In order to maximize their market share, both Nike and Adidas have placed a great importance in developing their branding/ marketing strategies on the net through web appearance and user friendly functionalities. The analysis below represents the web site positioning map which identifies some of the key performance criterion in determining the web site positioning strategy for both Nike and Adidas. The upper right quadrant indicates a high rating in both