The NIKE, Inc., which is engaged in the manufacture and sale of sports shoes as the main products, as well as related sports accessories and clothing, is the largest company that supplies sports goods worldwide. The company recognizes that it occupies a stable place in the market and its competitiveness is high, which allows NIKE to lead in the field of sports shoes and equipment (“Nike, Inc.: Annual report on form 10-K,” 2018).
It is possible to note that the company’s marketing categories are expanded considering the activities of the company in the framework of the demand and supply of sports shoes. These extended products are possible because NIKE supplies its goods not only for a small sporting event but also for everyday use (“Nike, Inc.: Annual report on form 10-K,” 2018). Today, the company’s income level is the highest in the last 13 years, reflecting 37% in 2018 (Figure 1). Based on data indicating sales results for several years, it is possible to estimate the demand for the company’s product.
One can consider trends in demand for NIKE products, regarding the sales data for the past few years. Hence, the sales trend from 2005 to 2010 is equal to 13,740 million U.S. dollars to 18,324 million U.S. dollars, respectively (“Nike’s revenue worldwide from 2005 to 2018 in million US dollars),” 2019). At the time of 2015, the income from sales reached 30,601 million U.S. dollars and increased to 36,397 million U.S. dollars in 2018 (“Nike’s revenue from 2005 to 2018 (in million US dollars),” 2019).
This information makes it possible to notice that the number of sales of NIKE products has increased and continued to grow with time. In turn, this data emphasizes not only revenue growth, but also steadily increasing demand for the company’s products. The growth in demand and supply, respectively, pushed the company to create new unique products for further expansion and made it the leader in the segment.
Moreover, NIKE claims that revenue increased by 12% in 2018 due to the increase in digital commerce and the introduction of new stores (“Nike, Inc. reports fiscal 2018 fourth quarter and full year results,” 2018). On this basis, the firm’s activity should focus on more significant investment of resources in the development of digital sales and an increase in the number of stores to expand its influence in the market. This approach will help maintain a steady rise in demand and, accordingly, the company’s profits.
The price elasticity of demand for NIKE products depends on several variables, including the reaction of buyers to the prices of goods, possible substitutes, and total income. Therefore, NIKE products have substitutes that other large sports shoe companies produce. It is possible to suppose that buyers can reduce the level of purchases of NIKE’s sports shoes with price changes. However, given that the company offers many years of experience and unique lines of sports shoes, including modern technologies such as Lunar, Zoom, Dri-Fit, and others, these products have no equivalent substitutes (“Nike, Inc.: Annual report on form 10- K,” 2018). In this case, it is possible to assume that the uniqueness of the goods, their high popularity and the loyalty of the company will keep buyers even in case of an increase in prices.
High demand for NIKE products and the proposed limited lines of shoes, which have no analogs, lead to price inelasticity. Given the annual growing income that amounted to 10.4 billion U.S. dollars in 2018, this can be said about the increase of the value of the company’s products (“Nike, Inc. reports fiscal 2018 fourth quarter and full year results,” 2018). If to consider this data, it is possible to say that the quantity of production does not change critically, regardless of price changes. Moreover, the demand for the company’s products is growing every year. In this case, it can be assumed that even if the price of the product will increase, total sales will not fall. In the case when the change in price does not significantly affect the income, it can be said that NIKE sports shoes are inelastic.
If to take into account the fact that the price of Nike sports products and income tend to move in one direction, this underlines the awareness of the company and the loyalty of the buyer. One can presume that the firm, understanding these trends, creates unique products that can keep changes in price and income at the same level. The company recognizes that it has many competitors in the global market, and new trends are creating more and more substitutes that can affect the pricing and income of the company (“Nike, Inc.: Annual report on form 10-K,” 2018).
However, NIKE holds one of the leading positions due to the design of new products using innovations, which supports the company’s place in the market. Thus, the release of such lines as Nike Basketball, Nike Running, and Nike Sportswear and other products using technologies and unique materials makes products a trend (“Nike, Inc.: Annual report on form 10-K,” 2018). In this case, it is necessary to underline that having goods that are irreplaceable, as well as customers’ commitment, the company can change the price without losing the total income. This provision leads to the fact that the price elasticity of demand for NIKE products does not determine new pricing decisions of the company since the company’s sports shoes do not have elasticity.
References
Nike, Inc.: Annual report on form 10-K. (2018). Web.
Nike, Inc. reports fiscal 2018 fourth quarter and full year results. (2018). Web.
Nike’s revenue worldwide from 2005 to 2018 (in million U.S. dollars). (2019). Web.