The trends in demand over time for Nike company have maintained an upward trend. The pattern makes the company stay ahead of its competitors. The sports apparel industry engages in a marketing strategy to ensure that it stays ahead of its main competitors, including Adidas and Puma. The sportswear company has its target population, mainly between the ages of 16 years and 40 years. Exploration of the demand over time of the company suggests that it has maintained an upward trend. In the year 2014, the revenues of the company increased by 10 percent, leading to a total of $28.8 billion in revenue (Singh, 2019). In 2019, the income of the company increased by 4% in comparison to the previous year (Figure 1). The increment brought the total revenue of the company to a total of $39.1 billion. Increased revenue generated by the company over time is a reflection of the increased demand and supply conditions of the company.
Figure 1: Nike’s Quarterly Earning Versus Estimates (Source: Singh, 2019)
The recommendation for the Nike company to increase its productivity is that it should engage in a useful market analysis to determine the changing trends in the market. Following the determination of the market trends, the company must involve in production measures to match the existing patterns. The market should also focus its pricing in a way that makes it a fair brand compared to its competitors. The presence of a highly competitive market compels the brand to ensure that it adopts strategies that make it stand out from the competitors,
The price elasticity of demand refers to the percentage change exhibited by the quantity demand for goods and services, divided by the change in the percentage of its pricing. Nike created a new pricing strategy in 2014. The strategy followed the market analysis of the company that determined the appreciation of its products. The marketing strategy created entailed the increment in the pricing of the brand products, with the company increasing its prices by four to five percent annually. The sportswear company has various substitutes for its products. The main competitors of the brand, consequently providing the alternatives include the Adidas and the Puma brands. The evaluation of the price elasticity of demand is done through the determination of the market share that the company holds and dividing it by the annual change in its pricing.
The consumer responsiveness to price changes for the Nike product includes the availability of substitutes for the product. Despite the Nike brand being among the top sports shoe brand for a sports shoe, the price elasticity of demand is affected by the fact that the brand has its significant substitutes (Jiang, 2019). The substitutes make the force brands price their materials at a low cost to ensure that the products remain attractive to the consumers.
The price elasticity of demand affects the decision that the firm makes in pricing its products. The firm uses a pricing strategy that makes the products attractive. With the availability of other brands that would efficiently substitute Nike products, the company must channel its pricing in a way that unifies the pricing of the brands with the substitutes. The uniformity of the valuing is essential in ensuring that even with the presence of the alternatives, the brand manages to attract new customers and to maintain its old customers (Jiang, 2019). The goal of the company is to ensure that as it increases its pricing to maintain a position similar to that of brand prestige and that the pricing does not lead to the loss of customers.
Jiang, W. (2019). Sustainable Development of Supply Chain in Footwear Industry–Take Nike as the Case. Asian Business Research, 4(3), 86.
Singh, A. (2019). Overview of Nike Earnings, Leverage, and Valuation – Market Realist. Retrieved 22 April 2020, from https://marketrealist.com/2019/10/overview-of-nike-earnings-leverage-and-valuation/