Digitalization has become one of the most prominent trends in recent decades, and it had a substantial effect on businesses regardless of their size or industry. Consequently, companies are required to find new ways of interacting with their customers, attracting new clients, and fighting competition. The aim of this report was to explore the challenges generated by digitalization and explain how companies can use strategic marketing methods to address and overcome them. The objectives of the report were to review the key trends of digitalization, explain how they impact businesses, and analyze how strategic marketing methods could benefit companies in this context.
The report used the example of Nike to illustrate the impact of digitalization on large retailers. It was concluded that digitalization had impacted the ways in which companies sell their products and interact with customers. Digitalization also raised competition in the retail sector and pressured companies to create innovative tools, products, and services to compete successfully. Under these circumstances, strategic marketing can provide the insight and tools necessary to sustain competitive advantage and maintain customer relationships, thus enhancing companies’ performance and market position. It is recommended that companies use strategic marketing to analyze their environment and engage customers through SWOT, PESTLE, and value-based marketing.
Table of Contents
- Digitalization and Business
- Nike and Digitalization
- Strategic Marketing and Digitalization
- Reference List
Technological progress has a significant effect on the business landscape because it creates unique opportunities and challenges for various companies. Modern people rely on technology in many aspects of their lives, including communication and shopping. The development of online shopping, social media, and smart technologies as part of the general trend toward digitalization shaped the way people interact with one another, obtain information, and make purchase decisions. Consequently, digitalization has become one of the most prominent challenges in strategic marketing evident in the 21st century.
Digitalization forces companies to adapt to the new reality while also developing innovative technologies to succeed in the digital environment. The aim of the present report is to explore the challenges caused by digitalization and suggest how companies can use strategic marketing methods to overcome them. The report will consider the example of Nike to exemplify how digitalization affects companies in the retail sector.
Digitalization and Business
Digitalization refers to the increased use of modern technologies by people, businesses, and other entities. Digitalization became a critical trend of the 21st century due to the fast development and adoption of new technologies. The effect of digitalization on business is evident in various areas, from manufacturing to customer service. In terms of marketing, the challenges presented by digitalization relate mostly to increased smartphone ownership, social media use, and online shopping.
Smartphones are one of many examples of new technology that has been widely accepted by modern people. Smartphones are different from other mobile communication devices since they can be used for searching the web, taking pictures, interacting on social media, watching videos, counting steps, taking notes, and for many other tasks. The multi-purpose nature of smartphones is among the main reasons for their popularity.
According to the Pew Research Center (2019), the share of Americans who owned a smartphone in 2019 was 81%, compared to 35% in 2011. For modern businesses, this necessitates understanding and adapting to smartphone usage patterns and preferences of users. For instance, companies need to make their web pages mobile-friendly so that people could view them from their smartphones, and develop apps for easier interaction with customers.
Another trend related to digitalization that affects the contemporary business landscape is social media use. Social media platforms are widely used for communication today, with 69% of American adults using Facebook and 73% using Youtube regularly (Perrin & Anderson, 2019). The rise of social media caused a shift in consumers’ preferences in terms of communication, with many people preferring to contact others through social media instead of calling or texting.
Moreover, people also use social media to obtain information about current events, products, and companies. Hence, businesses that do not have an established online presence might struggle with attracting customers, gaining their trust, and building their brand. Consequently, companies need to adapt to new patterns of social media use in order to remain successful.
Online shopping is also a significant trend of the digital age, which stems from people’s increased online time. As a result of digitalization and associated trends, people spend a considerable share of their day online, with one-third of U.S. adults reporting being online almost constantly and nearly half saying that they are online several times a day (Perrin & Kumar, 2019). When people spend so much time online, they often multi-task and use this time to shop. Another research study showed that about 80% of Americans bought online in 2016, with 15% shopping online weekly and 28% ordering from online shops a few times a month (Smith & Anderson, 2016).
Today, the prevalence of online shopping seems to be even higher. Online shopping is highly convenient and less time-consuming than offline shopping, so people expect companies to provide them with a way to buy their products online. Hence, more and more companies are opening online shops, which requires establishing new distribution channels, logistics, and storage, and making other operational changes. In addition to this, online shopping also requires companies to find new ways of marketing their products.
Additionally, digitalization affected competition between business, with adept use of new and innovative technologies becoming a competitive advantage and a source of differentiation for companies operating in various industry sectors. Apart from competing in the physical world through advertising, geographic positioning, and other methods, companies of today also compete in the digital environment (Van Gorp & Honnefelder, 2015; Vătămănescu, Nistoreanu & Mitan, 2017).
n fact, digitalization also shifted the competitive landscape in terms of Porter’s Five Forces. With a variety of multi-brand online shops, the risk of new entrants in most retail sectors and has become higher, increasing the bargaining power of buyers along the way. On the one hand, the rise of online marketplaces, such as Amazon, means that small retail businesses now have better access to consumers. On the other hand, with the development and popularization of online shopping, manufacturers can now sell their products online directly rather than through distributors. As a result, customers have more options to choose from, and it has become harder for companies to influence their purchase decisions.
Overall, the substantial effect of digitalization on businesses is evident. The influence of digitalization on the macroenvironment of businesses extended from technological forces to sociocultural factors, and thus it affects the relationship between companies and their customers. Competition in retail has also increased as a result of online shopping, increasing the power of buyers and the threat of new entrants. In this context, strategic marketing necessitates the use of new approaches and methods that would allow companies to fight digital competition and attract more customers.
Nike and Digitalization
Nike is among the most popular sportswear brands in the world, although it faces substantial competition from other large brands, such as Adidas and Puma. As an established brand, Nike has been attempting to adapt to and capitalize on digitalization over the past decade, adopting online shopping, digital advertisement, mobile applications, and other digital tools to sustain competition in the retail sector. Still, Nike’s approach can be used to exemplify some weaknesses and threats that are relevant to large corporations in the digital age.
Nike has been keeping up with the key trends of digitalization by establishing an online store, engaging with customers on social media, and using digital advertising to attract more customers. Nike has also been active in developing new ways for smartphone users to interact with the brand by creating online shopping and training apps and integrating services with various digital devices, such as smartwatches. This shows Nike’s adept use of modern technology and its willingness to adapt to changes and capitalize on them.
Nike’s use of social media is a cause for concern since its presence on different platforms is uneven. For instance, Nike stopped using its Facebook page in 2018, and its Youtube channel and Twitter have far fewer subscribers, views, and likes than its Instagram page. Given the high popularity of these two platforms among adults, Nike’s online presence is somewhat weak. Additionally, the uneven use of social media may be a sign that the company does not have the capacity necessary to produce high-quality content for multiple online channels.
The first opportunity for Nike would be to enhance its online presence by producing high-quality content for various online media. Sharing different types of content on different social media would help Nike to leverage its online presence and engage a wider audience, thus contributing to its global branding efforts. In addition, Nike would benefit from using a product differentiation strategy to distinguish its online store from competitors (Hooley et al., 2011). For example, short delivery times or virtual assistance for online customers could help Nike to develop its relationship with customers in the online sphere.
The primary threats faced by Nike in the age of digitalization are competition, deterioration of customer relationships, and continuous technological innovations. Competition in retail has become even more significant due to the rise of new selling and communication channels, causing Nike to compete with various types of sportswear companies online, both large and small. With the growing popularity of online shopping, Nike has fewer opportunities for face-to-face customer communication, too (Bilgihan, Kandampully & Zhang, 2016). This raises the importance of online customer service and the quality of brand-customer interactions.
Finally, as an industry leader, Nike is also expected to keep up with the most recent technological innovations, which puts pressure on Nike to continuously develop new tools and methods for digital communication, engagement, and marketing. Failing to respond to these threats could affect Nike’s success in digitalization and impair its competitive position.
Strategic Marketing and Digitalization
Based on the discussion above, there are many ways in which companies can navigate through digitalization using strategic marketing methods. First of all, strategic marketing offers a variety of analytic methods that may help companies to understand their internal and external environment better. For example, SWOT and PESTLE tools can be used by businesses to draw comparisons between their external environment and their strengths or weaknesses, thus assisting in identifying new opportunities for growth and development and supporting market orientation (Hooley et al., 2011; Joensuu-Salo et al., 2018). Secondly, strategic marketing tools provide companies with new ways to engage customers and interact with them to develop brand image and reputation, gain popularity, and establish trust (Hooley et al., 2011).
Value-based marketing is one example of a strategic marketing method that could be relevant in the digital age. As explained by Joensuu-Salo et al. (2018), even though digitalization has transformed the logic of value creation, value-based marketing is still vital to organizational success, and thus businesses have to learn how to use this method in the modern context. Thirdly, strategic marketing can assist companies in anticipating new developments in technology use and capitalizing on them to create a competitive advantage. This is particularly relevant in fast-changing markets, such as retail, where shifts in technology and consumer behavior are correlated. Therefore, by applying the principles and methods of strategic marketing, companies can address new challenges posed by digitalization and become more successful.
On the whole, the report fulfilled its aim by showing that digitalization is among the critical challenges for businesses in the 21st and that strategic marketing could help companies to navigate through it. The report highlighted and explained the effects of various trends associated with digitalization on businesses, such as smartphone use, social media communication, online shopping, and competition.
Using the example of Nike, the report also explored how companies can use their strengths to find new opportunities in digitalization, thus gaining a competitive advantage. Based on the information gathered from research, strategic marketing methods can help companies to evaluate their external and internal environment, increase customer engagement, and prepare for new technological changes in the context of digitalization. In particular, companies are recommended to use PESTLE and SWOT analyses, along with value-based marketing, to enhance their market position in the digital age.
Bilgihan, A., Kandampully, J. & Zhang, T. C. (2016) ‘Towards a unified customer experience in online shopping environments’, International Journal of Quality and Service Sciences, 8(1), pp. 102-119.
Joensuu-Salo, S, et al. (2018) ‘Firm performance among internationalized SMEs: the interplay of market orientation, marketing capability and digitalization’, Administrative Sciences, 8(3), pp. 31-43.
Perrin, A. & Anderson, M. (2019) Share of U.S. adults using social media, including Facebook, is mostly unchanged since 2018. Web.
Perrin, A. & Kumar, M. (2019) About three-in-ten U.S. adults say they are ‘almost constantly’ online. Web.
Pew Research Center (2019) Mobile fact sheet. Web.
Smith, A. & Anderson, M. (2016) Online shopping and e-commerce. Web.
Van Gorp, N. & Honnefelder, S. (2015) ‘Challenges for competition policy in the digitalised economy’, Communications & Strategies, 99(1), pp. 149-162.
Vatamanescu, E. M., Nistoreanu, B. G. & Mitan, A. (2017) ‘Competition and consumer behavior in the context of the digital economy’, Amfiteatru Economic, 19(45), pp. 354-366.
Hooley, G. et al. (2011) Marketing strategy & competitive positioning. 5th edn, Harlow: Pearson.