Reference no: EM131398096

Nike Becomes a Technology Company

Named for the Greek goddess of victory, Nike is the biggest sports footwear and apparel company in the world. Nike designs, develops, and sells a variety of products and services to help in playing basketball and soccer as well as in running, men's and women's training, and other action sports. Nike also markets sports-inspired products for children and various competitive and recreational activities such as baseball, golf, tennis, volleyball, and walking. Nike is known for its leading-edge technologies to make its products more appealing and enhance user performance, including the advanced technology used to support the sports superstars associated with Nike as well as the technology used in the running shoes you can buy online. For example, Nike Air technology uses super gases encased in urethane plastic to provide superior cushioning for running shoes that minimizes stress on runners' joints each time their feet hit the ground. The make-up of the gas, the strength of the plastic, and their placement within the shoe give great cushioning without losing performance. Nike Air was the first major piece of shoe technology to come out of Nike, and it has influenced every other running shoe since. Of course, Nike has been using information technology in the design and manufacture of these leading-edge products, and now it is embracing information technology in new, more far-reaching ways. Some of Nike's most recent offerings are actually information technology products, such as the Nike+ FuelBand. The FuelBand is an activity tracker that is worn on the wrist and used with an Apple iPhone or iPad. The FuelBand enables its wearers to track their physical activity, steps taken daily, and number of calories burned. The information from the wristband is integrated in the Nike+ online community and phone application, allowing wearers to set their own fitness goals, monitor their progress on the LED display, and compare themselves to others who are part of the community. In addition, with Bluetooth 4.0 wireless technology, the FuelBand stays constantly connected, synchronizing the data it collects with the user's Nike+ account and giving feedback and motivation when needed. The Nike FuelBand has competitors, including trackers from Fitbit and Jawbone. Nike has made some improvements to its FuelBand SE to keep up with these competing devices, such as the ability to remind users to get up and walk around periodically, to measure specific workouts, and to measure activities such as yoga or bicycling. As Fitbit trackers have been able to do, the new FuelBand also measures sleep. However, the key differentiator of the FuelBand is not hardware or a feature; it's the point system created in conjunction with the gadget called NikeFuel. Nike's proprietary software turns all tracked movement into NikeFuel points, which can show achievements, be shared with friends, or engage others in competition. According to Nike, NikeFuel is its universal way of measuring movement for all kinds of activities. NikeFuel provides users with a metric that enables comparisons-no matter what height, weight, gender, or activity-to past performance, another person, or a daily average, which Nike defines as 2,000 Fuel points. Nike won't divulge exactly how the metric is calculated. Nike increasingly wants other fitness technology products to integrate with Nike+ and provided funding and assistance to small companies that are building applications for this purpose. The more people measure their activity with NikeFuel, the more they are locked in to the Nike+ ecosystem of movement-tracking devices- and the harder it will be to switch to other wearable computing devices. You can't get credit for the Fuel points you've accumulated if you decide to switch to a Fitbit wristband. Nike's integration of information and information technology into its products keeps people coming back to Nike's own website and apps. Other Nike+ devices include the Nike+ SportWatch GPS and the Nike+ Running App, available for both Apple and Android mobile devices. The Nike+ SportWatch GPS keeps track of your location, pace, distance, laps, calories burned, and (with the Polar Wearlink+) heart rate. After recording a run on the Nike+ SportWatch GPS, you can upload workout information to Nikeplus.com by plugging the SportWatch into your computer's USB port. Once your data have been uploaded, Nikeplus.com enables you to track your progress, set goals, see where you ran, and find great routes. The Nike+ Running app maps your runs by using GPS so you can track your progress and get the motivation you need to keep going. The Nike+ Running app tracks distance, pace, time, and calories burned, giving you audio feedback as you run. Users can automatically upload to nikeplus.com to see their runs, including the route, elevation, and NikeFuel points. They can even post the start of their run to Facebook and hear real-time cheers for each Like or comment they receive. The latest version of this software includes training programs, coaching tips, and daily workouts. A new Next Moves feature on the home screen allows runners to flip easily through suggested challenges, for example, to run their fastest 5 kilometers or go their farthest distance. Users of multiple Nike+ devices can visit the nikeplus.com site to access all their data, including lifetime NikeFuel points accumulated from all their Nike+ devices. The Nike+ ecosystem is part of a larger phenomenon called the Internet of Things (see Chapter 7), in which individual devices such as sensors, meters, and electrical appliances are connected to the Internet so that the performance of people, and machines, can be monitored and analyzed. Other consumer product companies besides Nike are embracing this technology with gadgets such as Internet-connected water bottles to gather water consumption data or Procter & Gamble's web-enabled toothbrush, which links to a smartphone and records brushing habits. Nike has no interest in making money by selling the detailed information it gathers about users' workout routines to help companies and advertisers target their ads. That information may be valuable to other companies, but what Nike really wants to do is build cool-looking devices that closely connect to its own software. It's all about serving one particular kind of customer: the athlete.

Case Study Question

1. Evaluate Nike by using the competitive forces and value chain models.

2. What competitive strategies is Nike pursuing? How is information technology related to these strategies?

3. In what sense is Nike a technology company? Explain your answer.

4. How much of an edge does Nike have over its competitors? Explain your answer.