Nike’s corporate cost leadership strategy includes a moderate level of diversification. The operational relatedness between businesses is very high. They share most information and technology needed to succeed. Nike falls into the category of related constrained, since less than seventy percent of revenue comes from a dominant business and all businesses share product, technological and distribution linkages. Nike’s diversification is related because the firm builds upon or extends its core competency and resources/capabilities to create value. Also, economies of scope are incorporated. For example, Cole Haan line of luxury footwear and Bauer hockey utilize cost savings from capabilities and competencies that were developed in one of its businesses, Nike, and used in the others. Nike expects activity sharing among units to result in increased strategic competitiveness and improved financial returns, which it has seen. Moreover, intangible resources are difficult for competitors to imitate and/or understand. This allows the other businesses to gain an advantage immediately over competitors.
Another firm that has pursued an effective combination strategy is Nike. When customer preferences moved to wide-legged jeans and cargo pants, Nike's market share slipped. Competitors such as Adidas offered less expensive shoes and undercut Nike's price. Nike achieved the turn-around by cutting costs and developing new, distinctive products. Nike reduced costs by cutting some of its endorsements. Company research suggested the endorsement by the Italian soccer team, for example, was not achieving the desired results. Michael Jordan and a few other "big name" endorsers were retained while others, such as the Italian soccer team, were eliminated, resulting in savings estimated at over $100 million.
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