Commodity Chains and Marketing Strategies

In the excerpt from his book, “Commodity Chains and Marketing Strategies: Nike and the Global Athletic Footwear Industry”, Miguel Korzeniewicz studies the Global Commodity Chain (GCC) of the Nike Corporation. Korzeniewicz begins by describing how GCCs are very useful, especially in highlighting advantageous strategies, which companies apply to increase marginal product along the links of the chain. GCCs are also useful, he continues, for the linking of patterns in “core areas” of the world to countries he refers to as “peripheral”. The patterns he focuses on is the extremely successful marketing sector of Nike and its subsequent consumption in the “core” areas of the world, namely western, developed countries, and its relationship with production patterns in “peripheral” countries, meaning eastern, developing countries. Miguel briefly describes the recent trends in the US athletic shoe market from 1981-1990. The reason for his analysis of the Nike Corporation is in part because of the phenomenal growth in this sector of the economy. Product differentiation, price segregation, and cultural changes (the “fitness boom” of the late seventies and early eighties) all contributed to the incredible expansion. But Miguel contributes this growth to something else, too: “the most fundamental innovation of these enterprises, however, has been the creation of a market, and this has entailed the construction of a convincing world of symbols, ideas, and values harnessing the desires of individuals to the consumption of athletic shoes”. In other words, Nike, and other corporations such as Reebok and Adidas, has formed demand in a specific, and lucrative, area of the economy.
Korzeniewicz continues by stating that “Nike’s rise to prominence has been based on its ability to capture a succession of nodes along the commodity chain, increasing its expertise and control over the critical areas of design, distribution, marketing, and advertising”. Nike’s innovative changes in these areas, Korzeniewicz concludes, contributed to a “fundamental reshaping of production and consumption” which resulted in, ultimately, the transformation of the global commodity chain.
Miguel next assesses Nike’s transformation in two distinct time periods. The first is from 1976 to 1984, a time which he labels as “Marketing as an upgrading strategy.” During these years, Nike made changes in three critical areas of marketing and production. First, Nike capitalized on the “fitness boom” through the implementation of multiple highly visible endorsements. Their first major success was in signing Larry Bird, who ended up on the cover of a 1979 Sports Illustrated wearing Nike shoes. Second, Nike changed distribution norms by signing a deal with Footlocker which created a more reliable and efficient market. Finally, Nike was never a manufacturing company. Nike has always been in the business of marketing, designing, and distribution, while sub-contracting the actual production of their shoes. In this first time period, Nike began to turn to South Korea and Taiwan in hopes of finding cheap labor. Since Nike’s move in the mid-seventies, millions of companies have followed their example.
In the second time period, post-1985, Nike began making huge changes in product design and advertising. In product design, Nike shocked the world by overcoming financial difficulties of the mid-eighties and coming out with the “Air Jordan” line. This line was not only lucrative, but it also was one of the first large-scale endorsements of a professional athlete. The advertising campaigns associated with the new line were also revolutionary; they were post-modern, subtly showing the product while associating it with virtues popular at the time.
Nike’s amazing development over the past 30 years, Korzeniewicz concludes, is due to their changes in domestic marketing and overseas subcontracting. These changes were revolutionary at the time, yet now millions of companies are following Nike’s path. By manipulating the commodity chain of import, distribution, marketing, and advertising, Nike made huge profits and resulted in “uncommon success”. Today, Nike is working on their online resources. Such new developments such as personalized shoe design and online shopping are the next frontiers to be transformed in the pursuit of profit.