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					    Commodity Chains and
    Marketing Strategies: Nike
    and the Global Athletic
    Footwear Industry
Miguel Korzeniewicz, Ch. 18, pp. 163-172
(Excerpted from Korzeniewicz, “Commodity
Chairs and Marketing Strategies…,” in Gereffi &
Korzeniewicz, eds., Commodity Chains and
Global Capitalism,1994)


                                                  1
Global Commodity Chains (GCC)
 GCC: the complex global network of
   economic links which ties together groups,
   organizations, and regions involved in the
   production and distribution of goods

 GCC analysis is a development of the world-
   system or global-system perspective (which,
   themselves grow out of dependency theory)


(Gereffi & Korzeniewicz, eds., Commodity Chains and Global Capitalism, 1994)

                                                                               2
GCC challenges idea that “development” in
capitalism is contained within nation-states

 Development in context of capitalism is a
    global process

 GCC tracks the organizational, geographical,
    & cultural dimensions of world-wide chains for
    the manufacture & distribution of goods
         e.g.,clothing, automobiles, food, & drugs



(Gereffi & Korzeniewicz, eds., Commodity Chains and Global Capitalism, 1994)

                                                                               3
Focusing on the distribution segment of GCC

 Inadequate attention has been paid to the
  design, distribution and marketing nodes
  within a GCC

     Yet these are often the sources of innovation
      that allows firms to capture greater shares of
      wealth in a commodity chain




                                                       4
Athletic footwear market shows how
GCCs are embedded in cultural trends

 Marketing & consumption patterns in “core”
  shape production patterns in peripheral and
  semi-peripheral countries

 The social organization of advertising,
  fashion, and consumption shapes the
  networks & nodes of GCCs



                                                5
Trends in the US Athletic Shoe Market


 Continued phenomenal rates of growth
 Highly segmented by consumer age groups
 Teenagers the most important consumers
     Athletic shoes constructed and promoted
      among teens as important & visible symbol of
      social status and identity



                                                     6
Sports footwear market highly
segmented by:

 Consumer age group
 Model/target sport
 Price
     Price rather than appearance & functionality is
      the key factor differentiating athletic shoes as
      status symbols



                                                         7
Nike Corporation has become the largest and
most important sneaker company in the US


 In 2004, Nike’s share of market is 42%
   # 2: Adidas (27%)
   # 3: Reebok (12%)




                                              8
The key to Nike’s rise?
 ability to capture a succession of nodes along
  GCC, increasing its expertise and control
  over critical areas:
      design

      distribution

      marketing

      advertising




                                               9
US Athletic Footwear Industry % Market Share
           by Sales Volume (2004)

                                         Nike
                 111                     Adidas
             3 2
         5
                                         Reebok
     6
                                         Puma
                        42
                                         New Balance
12
                                         Sketchers
                                         K-Swiss
                                         Vans
             27
                                         Asics
                                         Saucony   10
The most fundamental industry
innovation is the creation of a market

 constructing a convincing world of symbols,
  ideas, and values harnessing the desires of
  individuals to the consumption of athletic
  shoes (165)




                                                11
Capitalism and Commodity Fetishism
– Marx (1867)
 Fetishism, in ancient religions, meant the belief that inanimate
  objects such as icons, trees, clouds, etc., possess human
  properties
 Fetishism is the belief that natural objects have supernatural
  powers, or that something created by people has power over
  people
 In Marx's critique, commodity fetishism denotes the mystification
  of human relations said to arise out of the growth of capitalism,
  when social relationships between people are expressed as,
  mediated by and transformed into, objectified relationships
  between things (commodities and money)
    links the subjective aspects of economic value (exchange
      value) to its objective aspects (use value)
    subjective=brand (image) vs. objective=product (uses)
 In this formulation, Marx attempted to capture the essential
  nature of all ideological illusions of bourgeois society

                                                                     12
Pd. 1: Gaining control over import &
distribution nodes of GCC (1962-1975)
 Nike sells tens of millions of sneakers in the
  US annually, yet all manufacturing operations
  are conducted overseas

 From the start Nike imports shoes from Japan


 Nike concentrates its design, distribution, and
  marketing activities in the US


                                                   13
Nike is the archetype of a global
sourcing strategy: subcontracting

 Nike originated by importing shoes from
  Japan
     It has subcontracted nearly all of its production
      overseas ever since


 Nike’s VP for Asia-Pacific: “We don’t know
  the first thing about manufacturing.”


                                                      14
Pd. 2: Marketing as an upgrading
strategy (1976-1984)

 Nike enhances competitive position by
  extending control to marketing

 Nike redesigns subcontracting strategy to
  seize new opportunities in Southeast Asia
     First in South Korea & Taiwan
     Later, China, Thailand, and Indonesia


                                              15
Pd. 3: Design, advertising, and return
to the semiperiphery (post-1985)
 Another period of high growth based on
  innovations in product design and advertising
     “Air Nike” comes out
     Nike signs its most popular endorser, Michael Jordan


 Continued targeting new niche markets
     e.g., aerobics & athletic apparel


 Subcontracting strategy changes again
     returns to South Korea for more specialized,
      sophisticated, and experienced manufacturers
                                                             16
Conclusions
 Case study confirms a division of labor
  between core & peripheral/semi-peripheral
  countries
     Core specializing in services
     Periphery/semi-periphery specializing in manufacturing
 Korean and Chinese firms produce the actual
  shoe, as US-based Nike promotes the
  symbolic nature of the shoe–and appropriates
  the greater share of value from sales

                                                           17

				
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