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Digital Transformation in the Sports Apparel Industry: the Case of Nike, Inc

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Digital Transformation in the Sports Apparel Industry: the Case of Nike, Inc Digital Transformation in the Sports Apparel Industry: The Case of Nike, Inc. Master Thesis submitted in fulfilment of the Degree Master of Science in Management (Entrepreneurship, Innovation & Leadership) Submitted to Prof. DDr. Arno Scharl Lukas J.M. Stangl 1521009 Vienna, 10th August 2020 I AFFIDAVIT I hereby affirm that this Master’s Thesis represents my own written work and that I have used no sources and aids other than those indicated. All passages quoted from publica- tions or paraphrased from these sources are properly cited and attributed. The thesis was not submitted in the same or in a substantially similar version, not even partially, to another examination board and was not published elsewhere. 10.08.2020 Date Signature I II ABSTRACT The global revenue of the sports apparel industry is larger than it has ever been before. Digital transformation has been a driver for the industry, leading to digital innovations within the industry. This has led to the fall of market leaders while creating opportunities for new market entrants by capturing market share through leveraging new technolo- gies. The company Nike, Inc. has been the market leader in the sports apparel industry for several decades and is known to be a forerunner in innovation. The purpose of this research is to examine how digital transformation has affected Nike, Inc. and the sports apparel industry and how it will shape the future. A secondary aim is to investigate how Nike’s customers perceive these changes and to scrutinize their digital needs and expec- tations. This research furthermore aims to conclude about the digital needs and expec- tations of Nike’s customers and if they align with Nike’s strategy. The research used a triangulation of three methods and provides a holistic analysis to make recommendations to the management of Nike. Primary research was conducted through a questionnaire-based customer survey and expert interviews with the man- agement and specialists at Nike. Secondary research included reviewing frameworks for strategic analysis. The analysis distinguishes digital natives (i.e. aged 21 years or younger) and digital immigrants (i.e. aged above 21 years). The results showed that these two groups differ in their sales-channel preferences, digital needs and expecta- tions. The secondary research was confirmed by the findings from the expert interviews and customer survey. Overall, Nike’s digital transformation strategy appears to align with the needs and expectations of the company’s customers. III IV ACKNOWLEDGEMENTS I sincerely express my gratitude to Dr. Lidija Lalicic and Prof. DDr. Arno Scharl for their roles as my thesis co-supervisors. Moreover, I want to thank the management and spe- cialists at Nike, Inc. for making this research possible and I am thankful for the support of my family and friends. I am incredibly grateful for the academic experience this M.Sc. program has provided me with and that I was able to contribute to the topic of digital transformation through my academic research. V TABLE OF CONTENTS AFFIDAVIT ............................................................................................................................................... I ABSTRACT ............................................................................................................................................. III ACKNOWLEDGEMENTS ......................................................................................................................... V LIST OF FIGURES .................................................................................................................................... X 1 INTRODUCTION ............................................................................................................................ 1 1.1 RESEARCH AIMS AND OBJECTIVES ................................................................................................. 2 1.2 THESIS STRUCTURE.................................................................................................................... 3 2 LITERATURE REVIEW ..................................................................................................................... 5 2.1 SPORTS APPAREL INDUSTRY ......................................................................................................... 5 2.1.1 Market Overview ............................................................................................................. 6 2.1.2 History of Sports Apparel Industry .................................................................................... 8 2.1.3 Sales and DistriBution Channels ....................................................................................... 9 2.2 DIGITAL TRANSFORMATION ....................................................................................................... 13 2.2.1 Opportunities ................................................................................................................ 14 2.2.2 Risks .............................................................................................................................. 15 2.3 CUSTOMER RESEARCH ............................................................................................................. 18 2.3.1 Customer Evolution........................................................................................................ 19 2.3.2 Customer Journey Mapping ........................................................................................... 21 2.4 THEORETICAL FRAMEWORKS...................................................................................................... 22 2.4.1 Porter’s Five Forces ........................................................................................................ 22 2.4.2 The Value Chain ............................................................................................................. 26 2.4.3 Digital Transformation Roadmap ................................................................................... 28 3 NIKE, INC. ................................................................................................................................... 30 3.1 CORPORATE HISTORY ............................................................................................................... 30 3.2 INDUSTRY ANALYSIS ................................................................................................................ 30 3.2.1 Industry Rivalry .............................................................................................................. 31 3.2.2 Threat of Entry .............................................................................................................. 31 3.2.3 Threat of SuBstitutes...................................................................................................... 32 3.2.4 Bargaining Power of Buyers ........................................................................................... 32 3.2.5 Bargaining Power of Suppliers ....................................................................................... 32 3.2.6 Industry Attractiveness .................................................................................................. 33 3.3 VALUE CHAIN ANALYSIS ........................................................................................................... 33 3.3.1 Primary Activities ........................................................................................................... 33 3.3.2 Support Activities ........................................................................................................... 34 3.4 DIGITAL TRANSFORMATION ROADMAP OF NIKE, INC. ...................................................................... 36 4 METHODOLOGY .......................................................................................................................... 39 4.1 TRIANGULATION APPROACH ...................................................................................................... 39 4.2 RESEARCH INSTRUMENTS .......................................................................................................... 40 4.2.1 Interview ....................................................................................................................... 40 4.2.2 Survey ........................................................................................................................... 43 4.3 SURVEY-BASED HYPOTHESES...................................................................................................... 45 4.4 DATA ANALYSIS ...................................................................................................................... 47 VI 5 RESULTS AND DISCUSSION.......................................................................................................... 48 5.1 CUSTOMER SURVEY ................................................................................................................. 48 5.1.1 Descriptive and Analytical Statistics ............................................................................... 48 5.1.1.1 Demographics and Product Preferences (Questions 1–4 and 6) .......................................... 49 5.1.1.2 Shopping-specific Insights (Questions 7–16) ....................................................................... 51 5.1.1.3 Satisfaction with Nike, Inc. Products and Services (Questions 17–23) .................................. 56 5.1.1.4 Brand Attachment (Questions 24–27) ...............................................................................
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