Nike is an extremely popular brand for the sports oriented audience and they also well-known in conditions of sponsored those top players from soccer to basketball, then to tennis and etc. It isn't hidden news that India can be an existing market for top brands, sports footwear and apparels. People in India are moving towards high quality products. Nowadays, India is within rise in conditions of luxury market.
Nike had a license agreement with Sierra Industrial Enterprises last for 7 years and ended in the entire year 2004. Rather than renewing the agreement, Nike has decided to launch Nike India as its subsidiary. In year 2005, it launches of personalized Nike promotions for the Indian athlete and also its first cricket shoes, air Zoom Yorker. THE ENVIRONMENT Zoom Yorker premiered this September by pace bowlers S Sreesanth and New Zealand's Shane Bond, who have been signed on brand ambassadors for the product. Thus, in order to be successful in India, a marketing strategy is required to design promotions pitched around cricket. As the same year, Nike beating Reebok and Adidas by competing its rights to become the state kit sponsor for the Indian cricket team for another 5 years with the privilege of paying Rs. 1. 96 billion to the Board of Control for Cricket India (BCCI). Nike Cricket was a new contract as showed the fans Nike's loyalty to Team India and its commitment to the market as well. The offer has bought in fresh momentum to Nike India (Biwalkar, 2006).
Besides that, the contract with BCCI allowed Nike to launch official BCCI cricket merchandise comprising of replica team jerseys, kit bags and backpacks. The offer was an enormous branding chance of Nike. Nike earned a total of $20 million for the sales of certified merchandise during 2005 and in the same year, Nike aired its first Cricket Advertisement through the World Champions Trophy cricket tournament and it brought high sales for the year because of the effectiveness of the cricket-based promotions. Then it was followed by Nike foray into cricket accessories and equipment because of the very successful of Cricket promotions. During their relationship with BCCI and Team India, in the 2007 World Cup, where India lost out in the first rounds itself. Soon after that, in year 2007, the Team India then went on to win the inaugural World T20 Championship and also have not lost an individual test series either home or away. In addition to that, India winning the ICC World Cup in 2011 edition in addition has creates higher brand opportunity for Nike in India (Biwalkar, 2006).
2. 1Gains of entering into India
Nowadays, many global companies started to establish their manufacture procedures in low priced countries especially Nike. Nike is likely to enter India. According to Credit Suisse, the India's monetary is one of the business that most effective and growth steady. India is the world's fourth greatest economy. The growth of the India have been increased tripled and people believe that it will continue steadily to increase double again in future with 9 to 10 per cent growth over another 20 to 25 years (FICCI, 2010).
Today, India's economy is seen as a liberalized foreign investment. They start to open for business by allowing the foreign company to enter to India in 2006. The liberalization and deregulation restriction of foreign investment had attracted Nike to establish procedure in India. In this manner, eliminate of some rules has given a potential to Nike getting into India (Choudhury, 2009).
Besides that, the benefit that may be gain from India is the populations which can be exceeding one billion. Its labor pool is recognized as the second largest after china. Therefore, they have a huge number of skilled and talented workers. For the reason that every year there are around 1. 2 billion to 3. 1 billion people graduates are added to workforce in India. The number of unskilled workers will certainly reduce while increasing in skilled workers. They may have the knowledge and general skill to use the machine. From then on, Nike can hire more labor to perform their manufacturing procedures in India (FICCI, 2010).
Other than that, there is absolutely no language barrier for Nike to run their manufacturing operations in India. As India also is the most significant nation speaking English on the planet. This quality talent will be benefiting Nike as they can communicate effectively and build good relationship with the employees. As they have no problem in communication so it can helps to smooth the procedure and management of the business. Further, Nike can convince them as they offer working opportunity to them. They are prepared to works and corporate with them. While using talent of the worker, it can benefit Nike by increasing the productivity of the product. The increasing in the productivity will not affect the grade of the product. While it can help Nike increases their sales and generates more profit as they have more stock to market. They still can strength their position, reputation and can compete with their competitor (India, n. d. ).
Of course, the number one benefit getting into India because of the significant cost benefits. As the main dissimilarities is the gap of the labor cost in India that your salary of the labor in India is leaner than the developed countries. For instance, a full time knowledgeable developer in the U. S. with experienced, their salary is around $50 to $80 each hour. However, if we compare with the developer work in India, this type of experienced and knowledgeable labor's salary can be negotiated right down to only $15 each hour. Besides that, the overall flexibility of the salary price in India had also benefits Nike to lessen down their budget and thus, increase their profit (Outsource2india, n. d. ).
Furthermore, establishment of manufacturing in the India will beneficiate the rise and globalization of any brand. As we realize that Nike is a globally well-known brand, their product is have a tendency to be sold anywhere round the world. Thus, they have a tendency to focus on globally rather than locally. In so doing, it could have the connection to the production around the world. By operation in India, Nike can increase their products mobility across the world because India in a position to provide a huge labor pool in low cost. Thus, they can produce their products in high volume but low priced as a result of fully availability of resources. In this way, Nike have more product produced to sell and can fulfill the demand of customer form anywhere any corner to globalize the Nike's brand (Rakeshcalton, 2007).
2. 2 Shortcoming of Getting into India
However, there is also some shortcoming of getting into India. One of these is the instable and fractious in politics, their social is inequities and heterogonous. In last decade, there had been conducted four times of election and prime ministers had been changed six times. In this consequences had make the economic reforms have been slow down. The instability of political in India can make Nike worries to enter India as the legal uncertainty of the united states. This can make Nike can't accurately predict on foreign investment, ownership, pricing or tax issues of Nike in an instability political in India (Yallapragada & Paruchuri, n. d. ).
Besides that, the rate of the tariff is different and not stable, yearly the rules of tax and tariff policies of India change with the budget of the government without notice. Their tariff is concerning complicated as they rate is differently by each person in the staff of the tariff authority. For example several foreign investors establish operation in Mauritius as no needed to purchase tax dividends or capital gains as Indians does. In the entire year of 2000, there have been 5 foreign investor in Mauritius received noticed by the tax authorities to ask for income taxes worth about $2 million. After the tax notices, several of the foreign investor was leave Indian market (Yallapragada & Paruchuri, n. d. )
Other than that, the infrastructure in India is one of the barriers that must definitely be considered by Nike. The development infrastructure of India was suffering from corruption and bureaucratic inefficiencies. Even year 2000 they have put effort on infrastructure building but the gap remain huge between demand and offer infrastructure. For example, they expand the space of the roads eight times over past decades but this expand still not enough to the grew vehicle 200 times over the period. The bad road condition creating the transporting goods from place to place takes weeks. The poor infrastructure is discouraged Nike establishes operate in India. In general, the most serious problem entering India is the way to obtain electricity. Power cuts often occur in India cause business operation of the machine had been stopped and start to have their own power generators. Beside changes of the power supply may lead to burn out motors and also lead to loss profit like Japanese company paid extra cost to avoid the breakdown of the device due to voltage changes (Yallapragada & Paruchuri, n. d. ).
Furthermore, corruption is the major issues that happened in India. It's made the quality of the Indian's politicians had decreased. Individuals about the world seeing the politician in India is greedy. The excessive regulations, taxes and licensing system have been causes people try to bribe everyone from the most notable officer in civil service. Meanwhile it will lead to the unfair market occurs in India and turned the investors pull out from India (Yallapragada & Paruchuri, n. d. ).
In addition to a spot, that is the problem of intellectual property of the Nike. If Nike establishes their manufacturing operation in India will facing the chance to the merchandise, reputation and position in market. According to the twelve-monthly report of Nike, large percentages of the merchandise are worn for casual or leisure purposes. Their brand is very familiar and popular around the earth. Customer buy their product is due to offer quality and the innovation of these product. But the most importance thing is people recognize their product by looking at the logo Nike, when they start to see the logo they'll know it's the product of Nike. If Nike establish procedure in India will facing the condition of men and women imitate and copy to their product with 'NIKE' logo sell it in market. This will likely affect the sales of their product. At the same time, people feel hard to differentiate the imitate product with the true once may cause them confusion and switching to another brand. Therefore their position and reputation in market will be affected, people no more reliable with their product (Organization, n. d. ).
As every person known that, Nike is the greatest seller in the footwear industry. Nike attracts consumers mainly on young generation. The core competency of Nike is the innovation and the product quality construction of the product design. Priority of Nike's product includes athletic, informal and leisure footwear for man, women and children. In the series of footwear the Nike produce is categorize into few types, for example, running, training, and etc. also shoes that special for outdoor, recreational use and other athletic. Different activities will use different design of shoes. Besides that, few percentage of Nike products are sport apparel, accessories, plastic product and performance equipment.
Now, Nike is planning to focus on the upper segment of consumers which is aged between 12 and 17 years. As all over the world, these is their core audience and it sees no reason why India should be any different. According to the retail consultants, Sahni, he mentioned that Nike will launch new products that including small size of cricket shoes and the replica gear where to create and build a long-term effect by addressing customers' needs at an early age (Biwalkar, 2006).
Other than that, Nike would also watching tennis and football and they're determined to tap into the under-15 group as well. In March 2006, Nike has partnership with the All India Football Federation by providing an opportunity for Indian players who are under-15 to involed in the Manchester United Premier Cup which is an annual international Nike tournament. The winners will be flown to Bangkok to take part in the South East Asia leg. Further, Nike has signed on the contract with Bhaichung Bhutia who is India's leading football star to endorse their products to be able to inspire the audience. Not football only but tennis as well. Nike has also deal with the Bhupathi Tennis Academy which promising players in the top segment of consumers will get a chance to take part in the Nike Junior Tour's International Masters Championship in France (Biwalkar, 2006). As Nike has produces an array of sports equipment such as football, tennis, jogging shoes, sportswear, and etc. Thus, it would bring huge benefits for Nike in conditions of high sales and profit because of the India's populations are exceeding one billion and it's really still continue growing.
In the twelve-monthly report of Nike Incorporate, its mention very clearly that in fiscal 2011, contract factories in China, Vietnam, Indonesia, and India made approximately 39%, 33%, 24% and 2% of total Nike Brand footwear, respectively (NIKE, INC. , 2011). Nike foot wears are mostly made by factories in other country beyond your United State. Thus, to be able to protect the business identity of Nike, the most crucial step that needs to be taking into consideration by Nike is to state in the rule and regulation in the agreement between the company and India. Nike can protect it brand name through its trademark and pattern. This can avoid the unlawful use of Nike brand name by its competitors (Organization, n. d. ). With license agreement, unaffiliated parties are allowing to manufacture and sell their Nike products. Nike earned its strong brand reputation all over the world, therefore its must strengthen the protection with their trademark before getting into other country. Due to the inadequately in protecting Nike intellectual property right may affect Nike business. Through this way, Nike can increase it bargaining power of supplier in India.
In addition, strong distribution chain is one of the Nike's competitive advantages. A strong distribution chain will let company more easily to distribute product to customer. Customer can get the merchandise in anytime and anywhere. Therefore, Nike can strengthen this competitive advantage in India because nowadays India is the world's fourth greatest economy. The growth of the India had been increased in future with 9 to 10 per cent growth over the next 20 to 25 years (Mishra, 2011). This will help to raise the India's demand of the product. Nike can also grab these opportunities as soon as possible by establishing Nike's retail outlet in the united states, for example, Nike town in India. That's Nike's independent outlet in India.
On the other hand, budget of establishing outlet in India also low because difference gap of the labor cost of India and the developed countries. The labor cost of India is lowest compare with other developed countries. The flexible of the salary allow Nike to lessen down their budget. Reduce the budget will let company ability to establishing more outlets (Outsource2india, n. d. ).
Nevertheless, before Nike enter into the market, the most crucial step is to solve the problem of rate of tariff is difference and not stable in India. In the event occur same situation with Mauritius, Nike need apply legal system to protect own company and maintain good relationship with India's government. The legal system of a country is of immense important to international business because dissimilarities in legal system can affect the attractiveness of an country as an investments site (Yallapragada & Paruchuri, n. d. ). Through the use of legal system, Nike can use black and white writing to verify the rate of tariff in future with government that is calls agreement. Even occur political problem in country or session economical peak or down, the federal government also cannot simply change the rate of tariff after two parties sign the agreement. The government need follow the condition of agreement until end from it. So, Nike can avoid receive any hidden tax without notice from government.
Last but not least, the challenge of infrastructure in India would be the challenging task for Nike. In order to solve the unstable of power supply in India, Nike can use solar energy. It really is natural resources that can be used in their operation. Though it need a big cost for the installation for the solar system, but it just one single time cost. It's some sort of cost saving in the future. This can avoid from an abrupt of power cut during their procedure of producing product that will lead to profit loss (Engineering, n. d. ). As Puri said, "Sustainability has been our priority; performance was our focus for the new cricket gear. " (Ganguly & Sheth, 2012).
In conclusion, our group had figured India is a fast and steady market to purchase. There are numerous gains that people are able to identify from Nike India. India is a country that is lower in manufacture procedure cost. In 2006, India government has attracted foreign company to enter India. India has a huge pool of labor behind the major supplier, China. Nevertheless, India in addition has no language barriers because India is the largest nation speaking English on the planet.
In addition to that, there's also shortcomings determined in India. India has an extremely instable and fractious politics. Not just that, the tariff rate in India is not stable, the guidelines of tax and tariff policies change with the budget of the federal government without notice. Infrastructure in India is also one of the barriers considered by Nike when entering to the marketplace. The introduction of infrastructure of India was caused by the serious corruption and bureaucratic inefficiencies. In general, the most serious problem entering India is the way to obtain electricity. The last shortcoming identified is the intellectual property of Nike.
Last but not least, the shortcomings of India are solved by advice made by our group. Nike can protect their brand name by using trademark and pattern. To be able to solve the challenge of rate and tariff, Nike can apply legal system to protect own company and keep maintaining good relationship with India's government. The legal system can be used is black and white agreement. They are able to also opt for solar technology to overcome the shortage of electricity.
In this assignment we are able to learn the opportunities and threats of entering India. This assignment has thought us how to totally use the opportunities and find ways to overcome the threats of the marketplace.