Introduction
The rapid development of the international business presents the opportunity to expand in new markets and gain the attention of more customers. Considering that the well-known brands have already won the majority of markets of the US and Europe, the entrance to the Middle East seems to be rather attractive. In particular, the United Arab Emirates (UAE) is one of the countries that show tremendous growth rates, which makes it a great arena for expansion. This paper aims to create the marketing evaluation of Nike’s potential entrance into the UAE, including the Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis. In addition, the Political, Economic, Social, Technological, Environmental, and Legal Factors (PESTEL), Market Entry Strategy Analysis (MESA), and marketing mix analyses are provided. It is anticipated to determine the opportunities and challenges that can be faced by Nike as well as identify the most beneficial entry strategies.
Selection of Company
Nike Corporation is a US-based multinational company that offers sports products for customers, including footwear and apparel. Headquartered in Beaverton, Oregon, it employs more than 44,000 people all over the world and has more than $ 29 billion in revenue annually (Mahdi, Abbas, Mazar, & George, 2015). The company is named after the Greek god of victory, claiming that everyone has a body is an athlete, who needs high-quality supplies for doing sport. Nike was established in 1964 and today, it is largely present in North and South America, Europe, and China. The company works hard towards continuously revolutionizing its products via research and improvements based on technology development. For instance, the cooperation with Apple allowed for creating a monitoring device, or shoes with Flywire and Lunarlite Foam were designed recently to help in reducing weight.
SWOT Analysis
Strengths
Nike does not have its own factories and a permanent production base, which makes its organization mobile and dynamic. The company constantly seeks the cheapest, but, at the same time, quality production: as soon as they find the optimal location at the moment, they immediately move production there. The high quality of products allows Nike to implement innovative ideas and rapidly expanding their production, developing new products (Mahdi et al., 2015). The collaboration with such companies as Apple promotes the design of technologically advanced shoes and devices. The other strength is associated with the fact that Nike is a global brand with a celebrated logo and impressive mission. Nike is currently the most successful sports brand in the world, and its marketing campaigns are focused on enhancing brand awareness. The diversified products of this corporation are sold through robust distribution channels to various segments of the market, including football, baseball, running, et cetera.
Weaknesses
The key disadvantage of Nike is that its profit significantly depends on the footwear segment competition and prices. If the rivals would introduce new successful strategies, it may be difficult for the company to compete. Poor working conditions and wages for employees present one more weakness, which negatively impacts the reputation of Nike (Mahdi et al., 2015). The previous incidents and violations of employee rights for a proper work environment also characterize the attitude of people. In addition, Nike’s prices are higher than those of competitors, such as Adidas.
Opportunities
The emergence of new technologies in production reduces the cost and time for their manufacture. Also, when a new generation model appears that meets the latest requirements of athletes in its technical characteristics, demand immediately grows for it, which makes it possible to expand the production line. The development of new product lines, including sunglasses, sportswear, or devices, is the result of the mentioned opportunity as well (Shank & Lyberger, 2014). The increase in segmentation would allow serving more categories of customers to meet their needs. The support for international events, including Fédération Internationale de Football Association (FIFA) or Olympics, is likely to improve brand recognition and loyalty. The introduction of a fashion brand line and further global expansion is also beneficial in terms of strengthening the brand.
Threats
An increase in the number of competitors in the market may deprive the company of some consumers. The rising demands from government agencies, such as the increased import quotas, as well as tighter control over business activities, may affect the amount of income taxes). Shank and Lyberger (2014) state that the fluctuations in currency compose one more threat that may reduce the profit of the company. The sensitivity of Nike to price largely determines its success in the international market. In addition, the company can suffer losses due to the huge number of fake products that many consumers purchase due to the lower price at the expense of quality. The fierce competition should also be noted since the rivals tend to use more aggressive marketing strategies and work on product enhancement.
Target Country
The UAE market is selected for this marketing investigation as presents a promising option for Nike’s expansion in the Middle East. Currently, the Gulf marketing group has already started cooperation with Nike with the purpose of offering its products to the Emirati population (Zarrouk, El Ghak, & Abu Al Haija, 2017). However, the fact that the relationships between two companies are at their initial stage, it is essential to explore the local market in detail, thus understanding how to approach to maximize customer satisfaction and revenue. The UAE’s distribution channels are robust, which allows suggesting that Nike would be met with excitement from potential customers. In order to prepare marketing strategies, a PESTEL analysis is used, focusing on political, economic, social, technological, environmental, and legal issues of the UAE market.
PESTEL Analysis
Political Environment
There are several political factors that should be taken into account before the expansion. In general, the UAE has relatively good trade relationships with other countries that import their products and services. The government encourages the links between the local and foreign enterprises to promote trade benefits via open policies and infrastructure development. A stable internal politics of the region is one of the most important factors that guarantee long-term cooperation with Nike. However, all seven emirates of the UAE possess their specific regulations and governmental organizations, which prioritize the need for flexible management. In terms of external politics, the country may have conflicts with the neighboring countries on the subject of land or oil ownership.
Economic Factors
Due to diversification, the economy of the UAE shows high stability, which shapes a fruitful business environment. In particular, the Gross Domestic Product (GDP) of the country was estimated at $ 414.18 billion in 2018, which is 14.4 percent higher compared to the figures of 2017 (Al-Shayeb & Hatemi-J, 2016). The country ranks the 8thplace with a score of 77.6 in the list of 2019 Index of Economic Freedom. This score makes the UAE the first in the Middle East and North Africa region, and it is much greater than the global average indicators. It should also be emphasized the Emirati government values and stimulates Foreign Direct Investment, which is developed mainly in real estate, trade, and finances. A $5 billion Ghadan 21 (Tomorrow 2021) initiative was launched by Abu Dhabi to empower entrepreneurship (Zarrouk et al., 2017). The paramount advantage of the UAE is that it has strong purchasing power and an interest in diversifying its economy.
Along with the advantages, it is important to mention some critical drawbacks as well. The fall in oil prices in mid-2014 and a general decrease in economic growth rates negatively affected the UAE stock market indicators. Nevertheless, the rises in oil prices and incentive measures have a positive effect on the economy of the UAE in 2019 (Zarrouk et al., 2017). Recently, the Abu Dhabi authorities developed a set of economic measures that are designed to stimulate the trade sector and create new jobs. The Dubai Government has also taken a number of initiatives to attract additional foreign investment.
Social Environment
Speaking of the socio-cultural issues in the Emirati context, one should state that there are the local population and a lot of expatriates from different countries. Driven by globalization, many people come to the UAE to find a job and improve their lives. There is a rather low unemployment rate in the country, which equals about three percent. Typically, the native residents live in comfortable conditions and have well-paid jobs. There is a Ministry of Happiness that was established to increase employees’ workplace satisfaction and head the list of the happiest countries in the world. Religion is of great importance for Emiratis, who follow Sharia rules, wear specific clothing, and live in accordance with Quran statements, which are reflected in all spheres of life (Al Zaidi & Ahmad, 2019).
Technology Impact
The contemporary rapid development of the UAE can be characterized as the pursuit of the most innovative ideas and solutions. Along with the global intention to implement technology in customer experience, the country is in the vanguard of this movement. One of the main factors that clearly demonstrate the expansion potential is that the UAE’s population consists of many young persons, who are technologically savvy and ready to try new products with the perspective of using them in their daily routine. The second factor is associated with the rich resources of the UAE that allow purchasing equipment and investing in devices. In other words, this market is able to invest in research and development to capture customers and keep them loyal for a long time. The entrance into the Emirati market is likely to bring not only more revenue but also contribute to Nike’s technology advancement in general.
Environmental Conditions
Since the country is located in a hot and dry climate, the high use of air conditioners and low farming rates can be noted. At the same time, some emirates include coastal territories that can be utilized for trade by sea. Among the environmental challenges faced by the UAE, one may identify the ecological footprint, including the invasive species, limited water resources, carbon emissions, overfishing, and land degradation (Al Zaidi & Ahmad, 2019). The Emirates conduct essential research and design environmental projects in the areas of climate change and sustainability. In addition, there is a bulk of policies that regulate pollution, waste, as well as sustainable consumption. The creation of natural reserves, eco-tourism promotion, and policy development prove that the country is committed to protecting its bioresources.
Legal Aspects
While there are universal laws that cover the whole country, each of the seven emirates has its particular trade policies and procedures. In the case of legal actions, the review of the political leadership is necessary since the judiciaries are dependent on them. The UAE is regarded as one of the less corrupt countries, yet nepotism is still an inevitable feature of business. Sharia law is another significant issue that should be discussed in terms of Emirati legal factors. Sharia is not just a collection of regulations, prohibitions, and a set of laws that punish misconduct, but it is considered by Emirati as the path of security and morality, life in accordance with the Will and Grace of Allah. A significant part of the laws is based on Sharia. On the one hand, the country’s authorities want to order and comply with these standards. On the other hand, strict laws do not suit tourists and may limit the development of business.
Product Categories
The majority of the products of Nike are designed for athletes, yet there are those that are likely to be used for leisure activities by all people. The most updated products of the company, such as Apple Watch Nike, utilize modern technology to upgrade customer experience. The entrance to the UAE market requires cultural adaptation: for example, the local women would not use T-shirts in public gyms or swimsuits on beaches. The products offered to the Emirati should be adjusted if required by the social and cultural norms of the country. The following categories would be introduced:
- Footwear (training, running, walking, tennis, outdoor activities, volleyball, et cetera);
- Apparel (pullovers, hoodies, T-shirts, tights, special swimwear for women, socks, and bags);
- Equipment (electronic devices, timepieces, eyewear, and other sports features).
Marketing Mix
Product
This section focuses on discussing the product as the complex of the product categories identified in the previous section of this paper. The implementation of the product policy is to be based on the production and sale of products that are in demand in the given market. It is to be achieved by orienting the company to the needs and requirements of customers, both their own and potential ones (Baker, 2014). The emphasis should be placed on product personalization since the Emiratis value their comfortable lifestyles and welcome products that make it easier to do sports. Accordingly, customer satisfaction is another priority that should be set to ensure that they want to buy it.
The attitudes of the citizens of the UAE can be described as positive towards foreign products in case they provide evident benefits. Nike’s orientation to innovations is expected to cause additional interest. Adaptation is the key strategic alternative that can be suggested due to its ability to adjust to the local markets (Khan, 2014). On the contrary to extension or invention, adaptation leads to the preservation of brand authority and related advantages, including customer recognition and low production change expenses. One may anticipate selling 2 million shoes and 1.5 million items of apparel and equipment within the first year of the entrance, which is justified by the limited number of stores and high initial interest of customers.
Price
In today’s market conditions, price is a fundamental factor at the stage of consumer decision-making regarding the appropriateness or inappropriateness of the acquisition of goods. Nike’s pricing management process is complex and time-consuming, and there are a number of objectives that must be considered when developing an effective pricing strategy. Firstly, it must be carefully planned based on the target audience’s potential spending. Secondly, it is necessary to take into account the specifics of the production of the product, including cost, market position, place and time of sale, pricing policy of competing companies, and specific features of potential buyers (Khan, 2014). The impact of competitors with their approaches to marketing in the UAE sports market is the main environmental factor that deserves precise attention. Initially, the cost of products can be slightly higher than those of rivals, which is to be justified by high-quality and individualization of demands. At the same time, the average price of items should not significantly prevail over that of the products sold in the US market. The total revenue expectations would approximate $ 3 billion within a year.
Place
The concept of place is of paramount importance since it is considered from the perspective of the covered services for consumers. According to Khan (2014), proper planning of distribution places allows companies to achieve the most effective coverage of the target audience by correctly positioning their branches and providing them with everything necessary for better service delivery. The following places will be arranged:
- Retail stores;
- Online stores along with home delivery.
The main goal of retail stores will be related to assisting customers with finding and purchasing their desired products. The qualified staff and the opportunity to demonstrate product potential serve as the two advantages of this channel of distribution (Shank & Lyberger, 2014). Large outlets with a great choice of products and small specialized sports retailers will be engaged in the realization of Nike’s entrance into the UAE market. As for the online channel, it will be devoted to satisfying customer needs in a remote manner through a convenient selection of products and timely help via online chat communication with the staff members. With the amount of time people spend online, this distribution channel is likely to be used extensively due to its convenience and user-friendliness
Promotion
Promotion can be understood as any form of communication used by organizations to inform, persuade, or remind consumers of their products and services. This includes the entire set of measures to promote products and services and may include advertising, public relations (PR) events, direct marketing, sales promotion events, et cetera (Khan, 2014). Active people aged between 16 and 45 will compose the target audience that has a high demand for sportswear and accessories. The objective of promotion is to build brand awareness among the Emirati population and stimulate them to buy Nike’s products.
Mass advertising will be employed via social media, celebrities, and traditional advertising methods as they provide the basis for a successful entrance campaign. Personal selling will be used by qualified employees in stores to enrich customer relationships. Also, coupons and special offers will compose a sales promotion strategy, while public relations will be promoted by means of green technology application and sponsoring social and environmental events. The basic advertising message will be formulated as follows: To contribute to human potential development, create ground-breaking products and make a positive impact on the Emirati community. Print, online, and social media will be utilized to spread the specified message. Promotion expenditures will approximate $ 500 thousand for the first year of market entry.
Main Success Factors
- An individual approach to marketing with a focus on the Emirati culture;
- Comprehensive advertising with a set of options to reach customers;
- High expected return on investment (ROI) that is the profit against the investment, which should be achieved due to value-based price formation;
- Technologically savvy and active customers, who would enjoy Nike’s innovations;
- Online presence would facilitate the lives of the target customers, making them easier and richer.
MES Analysis
After analyzing the company’s external environment, the following suggestions can be made to improve the marketing system. Nike should closely monitor the development of technologies, using the latest production methods to not only help reduce production time and costs but also improve product quality. The marketing plan will be planned in such a way that it remains not only holistic for the long term but also flexible across the seven emirates (Baker, 2014). This will be a program guiding the company within several years, taking into account constant adjustments in connection with the changing business and social environment.
Entry Mode
There is a range of well-developed options for entering new markets, of which several modes seem to be especially beneficial for Nike’s expansion to the UAE. The main international expansion modes of Nike include licensing, foreign direct investment, exporting, franchising, and joint ventures. While considering the UAE market, it is imperative to remember that the company would need knowledge about the new market and the assistance of local firms in adjusting the marketing strategies. In this connection, licensing and joint venture are selected as the most pertinent and feasible entry modes.
Licensing
The first suggested mode is licensing that refers to granting another company the permission to use the brand of Nike to sell its products on the local market. This strategy is associated with fewer risks and receiving royalty payments from the other business. In many sectors of the UAE, foreign investors have restricted ownership positions, which, however, can be resolved by operating in free trade zones (FTZ) that offer 100% ownership (Gollnhofer & Turkina, 2015). The benefits of this mode for Nike are quick registration and additional opportunities for manufacturing. Licensing would allow the company to establish stringent conditions for compliance with the processes and marketing policies of the company, serving as a convenient way to organize local production in the target foreign market without high investment. The most important advantage of such a mode is the relatively low cost of organization, maintenance, and monitoring.
Joint venture
The creation of a joint venture is another option that implies that a separate company is composed of two or more firms when the extent of responsibility and risks are shared between them. Nike may create a joint venture with one of the Emirati companies in order to obtain access to knowledge, resources, people, and technologies. In this case, De Villa, Rajwani, and Lawton (2015) state that the firm shares the risks with the other company, and the revenue is also expected to be divided between them in the initially agreed manner. The main advantage of the joint venture is gaining access to certain market knowledge and technologies. This may be a partner’s distribution network, knowledge of the specifics of the market, production base, or patents. This entry mode is cheaper than acquiring an entire company and allows circumventing many entry barriers in highly competitive markets (Gollnhofer & Turkina, 2015). The disadvantage of this strategy includes the risk of managerial conflicts in connection with the different priorities of Nike and a partner company.
Pricing
The paramount goals of successful entrance into the UAE market are low investment needs and high return on investment. The two selected entry modes fully meet these requirements as they are associated with low financial risks. The pricing strategy should be discussed with the local retailers who would obtain licenses to sell Nike’s products and the joint venture companies. Based on the market analysis and Nike’s current pricing in the multinational arena, one can assume that the price of products offered should incorporate a value-based approach (De Villa et al., 2015). In other words, the emphasis is to be placed on the value the products can bring to customers. In general, the proposed price is to be higher than that of the rivals, yet it can include discounts, coupons, and other deals. It is important to provide flexible prices yet in the set diapason.
Promotion
The purpose of product promotion is to inform potential customers about the existence of the product, its place of sale, and methods of consumption. Promotion tools for Nike’s campaign in the UAE comprise advertising, sales promotion, public relations, emotional branding, social media, and the work of sales representatives. Both print media, including billboard commercials, newspaper columns, and flyers, along with online presence would be utilized to gain customer attention.
Strategic planning
It is one of the marketing approaches, which is the process of choosing the organization’s goals and methods to accomplish them. A set of actions and decisions should be considered by Nike’s marketing to lead to the development of specific strategies: detailed, comprehensive plans designed to ensure the organization’s mission and its long-term goals. The objective of strategic planning is to provide innovations and changes in the organization to a sufficient degree (Baker, 2014). The strategic plan should be supported by extensive research and evidence. Therefore, it is necessary to constantly engage in the collection and analysis of a huge amount of information about the sectors of the national economy, the market, competition, and so on. In addition, strategic marketing gives the firm certainty and individuality, which allows it to attract target customers and helps in selling products.
Advertising (print media)
The national language of the UAE is Arabian, and the majority of Emiratis prefer it to read news and communicate with each other. At the same time, there are a lot of businesses that use English as the lingua franca for documentation and business interaction. Therefore, the print media should have a combined Arabian-English language to allow the local customers to understand that Nike is sensitive to their culture. The daily newspapers and monthly magazines should be contacted with the intention to place Nike’s prospects. In particular, the Emirates News Agency (WAM), the National and Khaleej Times, as well as international magazines that have their Arabian version should be used. Billboards and other outdoor print media are other decisions that can be placed on buildings, metro, bus stops, and retail outlets.
Social networks
Likewise many corporations, Nike should skillfully use social networks to a maximum. The brand representatives can directly communicate with customers via Facebook, Instagram, or WhatsApp pages, and Nike can take one of the first places among the companies that pay attention to their presence online. The company has several Twitter accounts for various affiliate brands, mainly focusing on the mention function usage. In other words, a substantial part of Nike’s Twitter movement is responding to customer requests that may directly appeal to their preferred brand, which was not possible previously. The Arabian Nike staff members should individually address questions regarding products and orders made by people in spite of the fact that Nike still has a general account for a support service that was specifically aimed to answer customer requests.
Today, Nike’s Instagram account is the most popular on this social network: the number of subscribers to it is impressive – more than13 a million. By publishing more videos and art photographs, Nike would create an attractive image both in its main account and subsidiary ones, for example, Nike UAE. The company should understand the purpose and benefits of Instagram and subscribers’ expectations; therefore, in its accounts, customers can find a vast number of spectacular landscapes and live photos, as well as catalog pictures of people who wear Nike. In addition, the company can implement a tool called Nikephotoid that can be used by customers to customize their sneakers on Instagram photos. YouTube and WhatsApp are also among the most widely used social media in the UAE, which can be applied by Nike to notify customers of new products. Information about new brand lines and discounts can be provided by means of YouTube videos with celebrities and brand ambassadors.
Emotional branding
It is a marketing strategy in which a brand appeals to the needs of a potential buyer, his desires, or his emotional state in order to build his reputation. This is especially true when shoppers feel a connection with the brand, like affection, love, or friendship, which can be unconscious or intended. Brand ambassadors present another beneficial marketing decision that can vividly show customers the effectiveness of the products offered. For instance, the cooperation of Under Armor with Dwayne Johnson contributes to the maximization of sales, and the brand ranks among the first among the global sellers of sportswear and apparel. Johnson designs his own product line called The Rock and shows it on his Instagram during training, yet it remains a part of the company, stimulating overall revenues. This example seems to be an appropriate solution for Nike to enter the UAE market by finding a prominent athlete engaged in sports and ready to cooperate. For example, Saeed Al Maktoum, a sport shooter, Mohamed Fawzi, a football player, or any other relevant person can be invited to Mike’s campaign.
Resources Required
To manage the new initiative, Nike needs a variety of resources to successfully enter the UAE market. The support from the UAE government is essential in terms of policies and taxation, without which the company can face significant barriers. Vast financial resources are needed to enter this market by merging with or licensing local retailers. Moreover, the basic theoretical premise of access that entrenched firms always have advantages over potential participants should also be called into question (Baker, 2014). In an environment of a dynamic market, Nike, as a new entrant, can introduce new technology ahead of existing firms or develop a new product that will give them competitive advantages.
For a period of one to two years, a new product should be in the zone of close attention of all top managers. Constant monitoring of the situation will allow time to identify and correct errors and inaccuracies, thus minimizing the risk of failing with the entry. In addition to human resources, customer care service is another vital resource that should help in obtaining customer feedback and improving the product and marketing. Also, shipping, traveling, and communications should be considered as necessary resources. It is possible to estimate that $ 5 million will be required to meet marketing needs ($ 1 million), machinery and rent ($ 2 million), budget for employees ($ 1 million), and other resources ($ 1 million).
Conclusion
To conclude, it should be emphasized that Nike is an international American-based company that seeks more opportunities to expand to other countries. It operates in the field of sportswear, apparel, and equipment, setting the mission of providing healthy lifestyles and encouraging people to be more active. While Nike has such weak points as strong market competition and poor working conditions, its focus on the technological advancement of the products allows the company to plan the expansion to the UAE market. This paper reveals that the latter is a relatively young yet rapidly developing platform that is attractive to enter. It is expected to reach the Emiratis who are aged 16-45, both men and women, with paying more attention to the local social and cultural peculiarities. A set of marketing tools is considered in this paper, determining that the combination of innovative and traditional methods is the best solution possible.
The critical analysis of Nike’s current position and the UAE’s environment allows stating that the company has great opportunities for building productive relationships with Emirati customers. The chosen strategies of licensing and joint venture are advantageous in terms of the target market since they possess low financial risks, adequate investment, and the opportunity to learn the preferences and attitudes of the local population. Most importantly, these strategies increase Nike’s chances to succeed due to the use of modern technologies that have helped Nike achieve unprecedented growth progress and attract a lot of loyal customers all over the world. Understanding that print advertising would not be sufficient to achieve such results, the brand should also rely on social media, emotional branding, and strategic planning. Thus, one should recommend Nike to expand to the UAE market of sportswear and accessories, and it has great potential to attract customer attention. Such a decision is justified by the thorough analysis presented in this paper, including the internal environment, product placement, promotion options, and entry modes selected.
References
Al Zaidi, S. M., & Ahmad, S. Z. (2019). Tone fitness ladies studio: Market segmentation or market mix? Emerald Emerging Markets Case Studies, 9(1), 1-15.
Al-Shayeb, A., & Hatemi-J, A. (2016). Trade openness and economic development in the UAE: An asymmetric approach. Journal of Economic Studies, 43(4), 587-597.
Baker, M. J. (2014). Marketing strategy and management (5th ed.). New York, NY: Palgrave Macmillan.
De Villa, M. A., Rajwani, T., & Lawton, T. (2015). Market entry modes in a multipolar world: Untangling the moderating effect of the political environment. International Business Review, 24(3), 419-429.
Gollnhofer, J. F., & Turkina, E. (2015). Cultural distance and entry modes: Implications for global expansion strategy. Cross Cultural Management, 22(1), 21-41.
Khan, M. T. (2014). The concept of’marketing mix’and its elements (a conceptual review paper). International Journal of Information, Business and Management, 6(2), 95-107.
Mahdi, H. A. A., Abbas, M., Mazar, T. I., & George, S. (2015). A comparative analysis of strategies and business models of Nike, Inc. and Adidas group with special reference to competitive advantage in the context of a dynamic and competitive environment. International Journal of Business Management and Economic Research, 6(3), 167-177.
Sambidge, A. (2014). UAE retail group eyes big expansion for sports shops. Arabian Business. Web.
Shank, M. D., & Lyberger, M. R. (2014). Sports marketing: A strategic perspective (5th ed.). New York, NY: Routledge.
Zarrouk, H., El Ghak, T., & Abu Al Haija, E. (2017). Financial development, Islamic finance and economic growth: Evidence of the UAE. Journal of Islamic Accounting and Business Research, 8(1), 2-22.