A-Level Edexcel Business Assessing Competitiveness: Evaluate these two options and r

Question

Evaluate these two options and recommend which one is most suitable for Nike to maintain its global competitiveness.

Focus on cost competitiveness

By locating in countries such as Indonesia, Nike is able to reduce its operating costs, such as rent and labour costs.
These cost benefits can be passed on to customers in the form of lower prices, or kept by Nike in order to improve its profit margins.
Nike is a market leader, with $22.3bn of sales globally in 2018, and it may wish to maintain this leadership by having the ability to reduce prices for its products compared to Adidas and Asics.
This could be more prevalent in the case of Nike serving emerging economies, where disposable incomes are lower and customers may be more price sensitive.
Cost competitiveness provides the opportunity for higher profits, which may produce higher dividends for its shareholders and also provide funding for future shareholder investment if required.

Focus on differentiation

Nike Flex gives the business the opportunity to differentiate its brand through customers being able to customize their shoes and order them afterwards.
This feature could be beneficial since the customizability and personalization can drive both sales and loyalty for Nike.
Nike’s brand is already strong, being the global leader in sports footwear, and this partnership with Flex could help build the brand image of the business.
Customers may appreciate the ability to customize their shoes and therefore see more value in purchasing them.
Nike can utilize its website to allow customers’ orders to be submitted faster. Before this partnership, Nike had its NikeID website, which customers often used. However, there was a limit to the products available for customization.
Thus, differentiation through Flex gives Nike the opportunity to develop and expand this competitive advantage.

Potential judgement:
Cost competitiveness could be particularly beneficial in markets with lower average incomes, but it is not likely to be a strategy that Nike would pursue globally. This is because its strong brand is built on quality and innovation, particularly in developed markets in North America and Europe. However, these markets may be saturated, whereas ASEAN countries customers may have lower disposable incomes. This enables them to buy Nike's products at lower prices. Therefore, any policy of cost leadership is more likely to succeed if it is related to a low price strategy in developing markets like Indonesia.
Differentiation has been a part of Nike's branding from the inception. Therefore, concepts such as Flex are likely to build on this further, allowing Nike to build brand loyalty with customers who like the idea of customizing products and having them delivered in a specific time.
Competitors such as Adidas may not have adopted such an approach. Yet, though, it might be that Nike focuses Flex and further differentiates in established markets, with more familiar standard products being sold in emerging markets.

Evaluate these two options and recommend which one is most suitable for Nike to maintain its global competitiveness - Edexcel - A-Level Business - Question 2 - 2022 - Paper 1

Worked Solution & Example Answer:Evaluate these two options and recommend which one is most suitable for Nike to maintain its global competitiveness - Edexcel - A-Level Business - Question 2 - 2022 - Paper 1

Focus on cost competitiveness

Focus on differentiation

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