Nike supply and demand analysis

Supply and Demand Conditions and Price Elasticity of Demand

Ayanna Marshall

Southern New Hampshire University

June 3, 2018

Supply and Demand Conditions and Price Elasticity of Demand

Demand and supply provide a critical setting where it is possible to determine whether an organisation is performing within an industry. High demand and supply are essential in creating a well-developed business environment where it is possible to achieve a higher level of organisational success. Organizations, therefore, put in place strategic measures to influence the performance levels of their products in the Market. Price elasticity is based on the changing prices of products and its influence on demand. Nike is one of the well-engaged companies in the Apparel Accessories Sports equipment industry. Key measures have been put in place, which was aimed at improving the company performance within the industry.

Demand and supply conditions for Nike products

The company operational strategy has focused significantly on the need to diversify company performances, which have been essential in creating a highly diversified business setting where it is possible to achieve a higher level of success based on the sales that are made by the company. The highly competitive nature of the Apparel Accessories Sports equipment industry has ensured that the company can transform its operational. Production and marketing strategies to remain competitive within the market. The company’s demand and supply conditions have been central to strategic measures that are put in place where it is easier to ensure that the strategies and policies that have been put in place improve the company performance levels (Brohi et al., 2016).

The company has maintained steady development over the years getting its highest sales in 2015, which was an increase of 26% regarding broad-based revenue growth. The connection that the company has established with consumers through customer-centered approach has been essential in creating a highly competitive setting where it has been possible to maintain a significant share within the industry. The specific target market has also created a highly distinct and effective strategy where the company has been able to achieve a higher level of organisational success over the years.

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The company has produced some of the bestselling brands in the market. In 2013, the company created the Air Jordan shoe, which was limited to 505,000 pairs, and the steel model, which was sold at the cost of $225 a couple. The popularity of the Steel show was very high that the demand was extremely high regardless of the income of buyer. The limited availability of the company products has been a strategic move, which has been developed by the company to eliminate the threat of counterfeits in the market and boost sales and demand.

The company's strong brand in the market has been vital in improving the demand for the company products due to unique quality. Nike's supply chain has been mostly successful over the year. It has strategically outsourced its factories to third parties to control the cost of production with its 744 companies in over 43 countries. Most of the company’s factories are found in the United States, Vietnam, Thailand and China (Ramaswamy & Ozcan, 2016).

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Quality, design and brand have been key factors that have had a significant influence on Nike Inc. strong presence within the Apparel and sports industry. These factors are essential in improving company presence, which enhances its performances and revenue generation.

Price elasticity

The price elasticity of demand takes into consideration the response of the quantity demanded based on the change in the price of products and services delivered. The flexibility of the product is determined by diverse factors which include the availability of alternatives, time and consumer income. The Apparel and sports industry have significant close substitutes available and thus critical focus on essential processes that are put in place develop a highly integrated focus on fundamental concepts, which define market engagement (Distelhorst et al., 2016).

The availability of direct competitors makes it critical for the company to integrate strategic measure, which is essential in defining the strategies that the company is willing to implement and achieve a higher level of success within the market. Nike Inc. has embraced a flexible pricing strategy where each of the products that are provided by the company has a different price. The company products range from $60 to $400.

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Despite the presence of stiff competition, the company has been having annual growth in sales, which have positively influence revenue growth over the years. Some of Nike Inc. brands have had massive success across different markets. The Jordan shoe has been one of the key Nike brands that the company has ever produced. Despite the high prices ranging from $170 to $400, customers are more than willing to wait in line to get a pair (Jacobs, 2015).

The attractiveness of the company has been due to strong brand presence due to the high quality of the products that are produced by the company. The changes in prices of the Nike Inc. products do not entirely have a more significant influence on the company demand since the development of a strong brand that is based on honesty and integrity. It delivers some of the highest quality products in the market. Even though elasticity has influenced the company performance, it provides a different consideration where it is possible to achieve a higher level of success. Sports shoes are not a necessity, but the willingness to spend on the company products regardless of the prices is very high among company customers across different markets (Sodhi & Tang, 2017).

Price elasticity has been essential in creating a more significant influence under which it has been possible to achieve an improved level of understanding in developing a flexible pricing strategy, which reflects on the spending ability of the company customers. The integration of a customer-centred approach has been critical in developing a highly diversified business environment where it is possible to achieve a higher level of organizational success.

References

Brohi, H., Prithiani, J., Abbas, Z., Bhutto, A. H., & Chawla, S. K. (2016). Strategic Marketing Plan of Nike.

Childs, M., & Jin, B. (2018). Nike: An Innovation Journey. In Product Innovation in the Global Fashion Industry (pp. 79-111). Palgrave Pivot, New York.

Distelhorst, G., Hainmueller, J., & Locke, R. M. (2016). Does lean improve labour standards? Management and social performance in the Nike supply chain. Management Science, 63(3), 707-728.

Jacobs, D. G. (2015). Practical example of base source optimization: footwear profiling at Nike, Inc (Doctoral dissertation, Massachusetts Institute of Technology).

Knittel, C. R., & Pindyck, R. S. (2016). The simple economics of commodity price speculation. American Economic Journal: Macroeconomics, 8(2), 85-110.

Ramaswamy, V., & Ozcan, K. (2016). Brand value co-creation in a digitalized world: An integrative framework and research implications. International Journal of Research in Marketing, 33(1), 93-106.

Sodhi, M. S., & Tang, C. S. (2017). Supply Chains Built for Speed and Customization. MIT Sloan Management Review, 58(4), 7.

INSTRUTORS FEEDBACK

Good Efforts! Your Milestone 2 section is incomplete. Add the following:

Supply and Demand Conditions

· Good broad description of the market for Nike athletic sports’ wear products. To evaluate market trends in demand over time for Nike athletic sports’ wearproducts, you need data on variables such as Nike athletic sports’ wear sale figures/numbers overtime which are measures of market performance/demand. Then analyze the sales data for five years (for example, 2013 - 2017) to evaluate/analyze demand trends overtime and their impact on Nike athletic sports’ wear market performance. You should then connect the sales data to determinants of demand and supply factors to explain howthe determinants of demand and supply factors have impacted Nike athletic sports’ wear market sales overtime. The determinants of demand and supply factors to explain/examine are:

Determinants of demand

· Income

· Price of related goods

· Tastes

· Population and demographics

· Expected future prices

Determinant of supply

· Input costs

· Technological improvement

· Prices of substitutes

· Number of firms in the market

· Expected future price

Price Elasticity of Demand: Add the following:

· Analysis of Price Elasticity of Demand – Add/include information clearly justifying how you would determine the price elasticity for Nike athletic sports’ wear products are price elastic or inelastic.

· Consumer responsiveness to price changes – Good efforts. Expand the section a bit more clearly explaining how price elasticity factors: availability of substitutes, passage of time, definition of the market, share of budget would affect the consumer responsiveness to price changes for Nike athletic sports’ wear products.

· Pricing Decisions – Explain clearly how the price elasticity of Nike athletic sports’ wear products impacts Nike’s pricing decisions and revenue growth.