Swoosh, there it is
Unquestionably, NIKE, Inc. (NYSE:NKE)’s brand name is its greatest asset. The brand ranks at number 26 on Forbes list of the most powerful brands with an estimated value of nearly $16 billion. For some perspective, Pepsi and Adidas rank 27 and 53 respectively.
However, brand name is only part of the equation for Nike. As the saying goes, sometimes it takes money to make money, and Nike’s strategy in China is a great example of financial strength at work. CEO Don Blair hopes to double NIKE, Inc. (NYSE:NKE)’s revenue in China to $4 billion by 2015. That’s a daunting task, considering the footwear king will be attempting to sell running shoes and snowboarding accessories to a nation not particularly interested in either sport.
That means that Nike will have to do what it does best: Market like a champion. The company has signed the first Chinese Olympic gold medalist in track and field (Lui Xiang) to promote running. To generate interest in snowboarding, NIKE, Inc. (NYSE:NKE) built a course outside of Beijing, flew in snowboarding legends, and sponsored the “Nike Snow Jam Series” in 2012.
On the other hand, promoting basketball should prove to be an easier channel to pursue, especially considering Nike can cart three-time MVP LeBron James from city to city. In fact, since coming into the league in 2003, James has made nine trips to the world’s most populated country.
Looking ahead, King James may have some company on his future Asian exploits. NIKE, Inc. (NYSE:NKE) made a short-term investment in a relatively unknown Taiwanese-American from Harvard in 2010 by the name of Jeremy Lin, which is looking like it’ll pay long-term dividends. With “Lin-sanity” quickly becoming the most popular Asian basketball player in the world, Nike will be sure to cash in big.
Ultimately, the story of NIKE, Inc. (NYSE:NKE) has been and will continue to be its ability to leverage its unmistakable brand name and financial strength to create global growth opportunities.
Lululemon
According to Bloomberg Businessweek, in the U.S. alone, the women’s athletic apparel is a $30 billion dollar business. With Lululemon Athletica inc. (NASDAQ:LULU) pulling in $1.4 billion in revenue in 2013, investors aren’t the only ones taking notice. GAP, Nordstrom, and Nike have all gotten in on the action by developing lines of yoga-inspired apparel.
However, Lululemon Athletica inc. (NASDAQ:LULU) has been able to continue to grow its market share due, in part, to its competitive advantage. Which is, well, snob appeal.
What exactly is “snob appeal?” It’s the reason people buy BMWs or shop at Whole Foods Market, Inc. (NASDAQ:WFM) — there’s a sense of superiority surrounding those brands. This can be superior product quality, it could be authenticity, or it could be totally made up! But when a product becomes something more than just the product, that is, when it stands for ideas like luxury or a certain lifestyle, pants aren’t just pants anymore – and what’s more advantageous than that?
However, when a company depends on snob appeal, any issue with the products’ credibility becomes magnified. This will show to be especially true if yoga pants are so sheer that customers can’t bend over without everyone knowing the color of their underwear.
