Nike+ and its competitors: a running battle?

By 6 March 2013 47

For a few years now, Nike has been operating, in collaboration with Tomtom and Apple, a series of devices that allow walkers and runners to record and follow various parameters related to their walk or run history (like distance, speed, burned calories, …). The concept is the following: the runner trains with a GPS sportwatch or with a smartphone equipped with the Nike+ app and once the training session is over, the data recorded on the device can be uploaded on the website This site allows the runner to follow his/her training stats, share them with “friends”, join groups (e.g., “LLN joggers”), or challenge friends (e.g., “who’s going to be the fastest on 10km in 2013?”). For more thorough descriptions, see the wikipedia entry or this 2009 Wired article.

Similar competing devices exist on the market. Take, for example, the Garmin Forerunner series. Yet, so far, the Nike+ system is incompatible with such competing devices. This means, for instance, that it is not possible for a jogger using a Garmin watch to upload his/her data on the Nike+ website.

One may wonder why Nike has opted for this strategy of incompatibility. Isn’t it fair to say that Nike’s objective with its Nike+ service is to increase both the traffic on its online shop and the visibility of its brand? If so, attracting runners who use competing devices would prove profitable. But there may be other reasons as to why an open strategy is not such a good idea for Nike.

This is what I ask you to reflect upon: What are the pros and cons of an open vs. closed strategy for Nike with its Nike+ service?

(This post has been written in collaboration with Benoît Hanzen, Senior Consultant at Weave Consulting. You can access previous comments to this post here.)

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47 Responses to Nike+ and its competitors: a running battle?

  1. Sacha Navez 25 February 2016 at 00:53 #

    At first, the aim of nike was to create a community of customers and increase the engagement toward the brand. Then they quickly realized that it contributed to the raise of their sport shoes sales which was not expected. “It was never about how can we convert some percentage of users [to buy Nike shoes],” says Stefan Olander, global director of Nike consumer connections. ( )

    Now Nike+ is a global running community. Role of expectations is really important in order to gain new customers to join this service. But Nike is doing it well with strong marketing campaigns through videos that show you all the benefits and make you feel part of this challenging community.

    Nike uses both direct and indirect network effect with its feature Nike+. They try to create a platform that deliver a unique experience with features like “Nike Fuel” only available with nike products like “Fuel band” which create an indirect network effect. On the other side, the more people are gathered on the platform the more it is engaging. These services are valuable for customers when a critical mass is reached. This is even truer since your friends can use the app and create micro communities. And that’s the whole strategy change of Nike. They have developed a social network effect with a whole range of products, features and services with which users can interact.

    We can speak also about switching cost, once you begin to share your running data, your experience and that you feel to be part of this community, you may prefer to not change from a service to another. It means leaving your data, sessions and friends behind you. (

    Nike creates more than just a community of people, they create a community of products say Bonchek and Choudary ( ). We also speak also about a new concept of ” social product” and “Social Network of Things” instead of “Internet of things”. Companies now start to think about the social life of their products.
    The FuelBand SE is “not just a piece of hardware or an app,” emphasized Olander. “Nike is betting on a future with connected shoes, where each individual shoe learns from the data aggregated from a network of connected shoes… [In fact,] Nike is creating an entire ecosystem of connected products (Hyperdunk shoes), a social network of products (FuelBand), a social network of people (Nike ), and a collaborative platform (Digital Sport).” Theses services are a new source of competitive advantage and challenge companies to better leverage the intelligence of the network of other connected products. ( ;

    To that extent, the closed strategy of nike makes sense but the Value Proposition and basic product have to stay strong in comparison of competitors. They should manage to stay up to date. Other products with more precise data or measurement can be a threat to the stability of such platform. More than just a community engagement tool, nike has developed a new range of social and interconnected products.

  2. Jooris Christelle 24 February 2016 at 11:33 #

    The market of mobile applications has strongly increased these past few years. More specifically the sport applications know a great growing success too (increase of 53% from 2014 to 2015 (1)). Launch an application is then a really great idea for brands for their notoriety and Nike has it surely well understood. But did they choose the better option at the introduction of its Nike+ application by choosing a closed strategy?

    We can notice that the partnership between Nike, Apple and Tomtom is really impressive because they are three big brands that have a huge notoriety and possess many advanced technologies. It is a big advantage because they can build together high quality products because they are all very competent in their domain. Indeed, working with partners can be lead to profitable synergies.
    But to form an alliance with only Apple and Tomtom locks Nike to a closed strategy. Indeed, only the people who possess Iphone or Ipod or Tomtom sportwatch can download the application. That leads to a limited number of users although the number of people who possess an Apple phone is already high significant. However, the Apple consumers who can benefit from the app can feel them very privileged and they could price it. That could make them more loyal to the brands. This strategy can lead to a network effect but this effect will be limited because the app is only reserved for the Apple users.
    Another advantage of the closed strategy is the cost of the creation of the app. Indeed, in order to be used on every smartphones, the app should be adapted for each of them. This is not only more expensive but it takes also more time than just create the app for one type of smartphone as Nike+ which is adapted only for the different versions of Iphones and Ipods.
    Moreover, the partnership leads to switching cost for the people who bought the sportwatch which works only with Nike+. So if they want to move to another running app, they have to give up their watch which was an significant investment (around 135€ (2)).

    In both strategies (open and closed), the people who possess the Nike+ application and who want to move to another will face another type of switching costs. As a matter of fact, Apple proposes different kind of running application; it is then really easy to change. (3) But, they will loose all their data they collected with the app (history, progress, statistics, …) and they will also loose all their friends. Moving to a competitor means begin again at the starting point which could be disappointing and discouraging. Then, it could brake the people to change their app. Of course, this fact will only work with the people who were invested on the app.

    This closed strategy has not only advantages. Indeed, some disadvantages exist and Nike was aware because its strategy has already been adapted since its start, as we will see.
    An important aspect of the application Nike+ is the relation between people created on it. In fact, the users can share their performances to their friends and challenge them… And in order to allow that part of the application, the people have to add many friends on the application. The more users can add other users and the more products compatible with the app the more they will appreciate the application. We can call this phenomenon the network effect. More specifically, we can also point the direct network effect which explain that the non-users will be tempted to join the app more there are people on the network. This fact can work with both strategies but it will be bigger with the open one.

    The closed strategy of the brands seems to open itself. Indeed, Nike extended its partners in order to allow Nike+ on non-Apple items. In 2014, Nike made a partnership with Samsung, which is a big competitor of Apple (4) in order to offer Nike+ app on Samsung phones (5). In 2015, Nike has also made partnership with Garmin, Wahoo Fitness et Netpulse. (6) Nike+ is compatible with Android now. (7) All these extensions lead to a more open strategy, which means that the Nike+ can know better network effect now than before.

    To sum up, both closed and open strategies have pros and cons. In this case, closed strategy was perhaps not the better option because Nike moved to a more open strategy as we have just mention. Nike has to be creative and improve his strategy to fight against his competitors and especially Addidas which launch Boost Energy League and which is highly present on the social media. (8)


  3. charlotte catfolis 24 February 2016 at 10:32 #

    First Nike has managed to develop on social networks. One objective of the brand is to create a great community. The closed strategy is therefore an attractive strategy for Nike. The presence of Nike online has allowed to create a link between the brand and consumers but also between consumers together. To permit such a creation, Nike implements mobile applications and products incompatible with other brands.

    Nike + is a competitive advantage that the brand must maintain. To become a member of the community Nike + , it is necessary in all cases to buy a product or download an Nike application. The wide variety of services makes possible to develop this community. The customer can interact with other sportsmen. Nike has managed to become the privileged partner of athletes.

    Also this closed strategy seems to be working and does not harm to the brand because Nike is clearly a success and their turnover is immense. Moreover the Nike +’s community are approximately 13 million people.

    Then the fact of having a closed strategy allows a better information management. If the athlete gives up Nike + for a competitor such Garmine, it loses all its data. He also loses the ability to maintain a relationship with the Nike + community. The Nike +’s users are not influence to go to the concurrency. Nike maintains its users.

    Furthermore all business can not afford to use a closed strategy. This seems to succeed in Nike because Nike is a great brand known worldwide. “The famous comma of Nike”.

    However everything seems to work for Nike, which adopted the closed strategy. But Nike is not sheltered that a competitor creates a larger community.


  4. Rafaël Vansteenberghe 24 February 2016 at 10:31 #

    The Nike+ service is a way for the brand to attract more customers on its website but also to have some positive advertising. Furthermore, this device encourages people to do sports and so to buy equipment (why not Nike clothes/shoes?).

    This device is based on the network effect. It means that the service will become more valuable for people as new users are adopting the device (1). So, the first idea that comes to our minds is that Nike has made an error by keeping other brands, such as Garmin, out of the business because it could give to Nike+ less visibility, less customers and so less utility for the current and potential new users. However, is it really necessary to attract all the customers by making partnerships with ALL the possible partners?

    To answer to this question, one should remember that this kind of partnerships can be a cost for Nike. They had to negotiate with Apple and TomTom. These brands have certainly asked exclusivity to Nike by being the only possible partners. So, a totally open strategy has important cons as it is not always possible to obtain this strategy because of the negotiations with the brands wanting exclusivity and as it is also a cost because of the prospective profit sharing or the negotiations.
    Furthermore, it is not always a good idea to attract too much people in a network. When everybody is using a device, we can observe congestion (1) but also pollution. An example of this kind of pollution is the comment section of YouTube, where some artists have sometimes to close it because of the trolls. These two effects of congestion and pollution can make the network less attractive for potential new users.

    Let’s now analyze the pros… By having a partnership with only a few actors, the strategy of Nike is simple: they want to reach the “critical mass” necessary to attract more and more users (1). Once this critical mass is attained, the utility of being part of the network will reach a sufficient value and new users will be attracted. So, it is not necessary for Nike to attract ALL the customers, but just enough to seem attractive to not yet convinced people.
    Furthermore, by restraining the number of partnerships, Nike is creating some kind of “exclusivity effect”. Indeed, Nike has a partnership with Apple, a brand that can be seen as “luxury” and, above all, a network of “iPeople” part of the “iNetwork”. So, Nike is not only using an already existing and strong network to feed their own one, but they are also creating some kind of “private closed club” with people using the sexiest smartphones and wearing expensive, good looking clothes. This effect makes Nike+ even more attractive for people and it is another reason to keep some other partnerships out of the business.

    By balancing the pros and cons mentioned above, I personally agree with the strategy used by Nike because I think it is the best solution to catch enough people to seem attractive for potential new users without being bothered by the negative effects of having too much people and (always restrictive) partnerships.

    Reference :

  5. Van Lil Thomas 24 February 2016 at 10:13 #

    First of all, we can observe in this article that Nike uses a closed strategy for his Nike+ app. It means that there is no compatibility between Nike+ and the other competing devices.

    On the one hand, the advantage of using this kind of strategy is to eliminate the competitors of the market. Nike tries to be the most famous brand on this market and to avoid being bothered by the competitors.

    However, it is very difficult to do it. According to me, only big companies are able to do it, because they already have a large visibility and a lot of clients (even if they are clients from another market, for example the textile market for Nike) what are real advantages to reach this ambitious goal. A way to justify this incompatibility is to be different from the other devices. The differentiation is really important. It is why Nike adds some specificities like for example the synchronization of your Spotify playlists with the application. This new partnership with Spotify allows Nike to increase his visibility and give the Spotify users the envy to use the Nike+ app (and maybe the envy to run). This feature could be really interesting for the joggers that are listening to music while running. We just have to look the joggers around us to notice that it is really common. By the way Spotify plays on it too by suggesting “running” playlist to help the runners while they are running. So it is a win-win situation for these partners. In addition to this, Nike is still improving his partnership with Apple with news features, in particular the data’s transfer with the health app of the Iphone.

    On the other hand, this closed strategy has disadvantages too. Overall the fact that the company using this strategy is alone, stand aside from the others. The incompatibility set by Nike makes difficult the attraction of new clients which are already users of the competitor devices because the transfer of data’s is impossible. These clients with data’s have to make sacrifices to switch to Nike+ (it can be perceived as a switching cost). It is maybe why we can see now that Nike is changing his strategy. Indeed, Nike abandoned the idea of incompatibility and now it is possible to transfer his data’s from another device to Nike+. It means perhaps that this closed strategy was not the right choice for Nike…


  6. Margot Detollenaere 23 February 2016 at 17:46 #

    The main purpose of my comment is to explore the strategy of incompatibility adopted by Nike with its Nike+ service.

    First at all, the creation of Nike+ service is a great illustration of collaboration between recognized brands that linked different industries together such as sports, music and electronics. I definitively would associate it to an innovative strategy, known as co-creation. Indeed, “co-creation […] brings different parties together […], in order to jointly produce a mutually valued outcome. Co-created value arises in the form of personalized, unique experiences for the customer (value-in-use) and ongoing revenue, learning and enhanced market performance drivers for the firm (loyalty, relationships, customer word of mouth).” (1) Thanks to Nike, users received value through new running experiences. On the other hand, Nike did not only obtain financial benefit but also a competitive advantage by creating a community between runners and getting information about them. The fact that customers are able to compare and share their performances with others may represent advertising for firms.

    Bearing in mind the previous points, I will now turn to the question of closed strategy. By making a partnership with Apple, Nike made the choice to accept incompatibility. As said above in the article, Nike+ service is incompatible with some competing devices. They decided to retain proprietary control rather than open up their services to others. It helps firms to maximize performance. The pooling of skills can lead to a better quality product. Additionally, closed strategy causes switching costs and permits firms to create better customer loyalty. Another relevant point is that Nike can control the ability of customers to interconnect with its community.

    However, closed strategy can also bring some drawbacks. Indeed, some consumers could be apprehensive regarding future switching costs or lock-in issues. Likewise, Nike could face strong competitors whose service offers comparable features but is non-proprietary. To me, it is important that Nike continually adapts its strategy. For instance, after the apparition of many rivals (Runkeeper, Runtastic, etc.) Nike decided to develop an Android version of Nike+ Running application (which was exclusive to iOS until 2012).

    To conclude, it is clear that many companies face the dilemma between openness or control. But according to me, there is no correct route. It depends on the ultimate goal of the firms and the kind of values they want to share and further develop.


    (1) Wikipedia. 2016. “Co-creation”. Online. (Page consulted on February 22, 2016)

    (2) Cristando, J., Lodigiani, B., Surdo, C. s.d. “Nikeplus Ecosystem Strategy”. Online. (Page consulted on February 22, 2016)

    (3) Bower, G. 2015. “Is Nike and Apple’s relationship on the rocks?”. Online. (Page consulted on February 22, 2016)

    (4) Horsey, J. 2012. “Nike+ Running App Arrives On Android”. Online. (Page consulted on February 22, 2016)

  7. Martin Tombal 23 February 2016 at 11:03 #

    Having an open strategy on the Nike+ app would seem a priori like an interesting strategy for Nike, as it does have many advantages. However, a successful company as Nike would probably already have done it, if it truly was better than a closed strategy. Why keeping a closed strategy then?

    Let’s first take a look at the advantages of an open strategy.

    Allowing brands as Garmin, Samsung, etc. to use Nike+ would attract a lot more people on Nike’s website, and would also give to the company much more visibility on the market. This would probably lead in the end to more sales, and a higher turnover.

    It would also lead to more apps creation, by independent developer, who would use the Nike+ platform as a way to sell their own app, what would in the end mean less work for Nike’s own developer.

    So why does Nike stick with a closed strategy?

    By opening Nike+ to everybody, Nike would treat it as a simple commodity. Meaning that Nike+ would not be considered as a differentiating element in their strategy. However, we can clearly see that it is not the case. Nike+ is used to attract customer on the company’s website, and to give much more visibility to the brand. It can then be considered as a differentiating element that has to be treated outside of the company, as Nike’s core business is not related to IT. In order to do so the theory suggest to build partnership.

    Nike has a strong partnership with Apple and Tom-tom. Allowing direct competitors of those two brand like Samsung and Garmin to use their app, does not seem like the best strategy to keep this partnership strong and durable.

    Some experts tends to say that you should let partners and sponsors deal with your most valuable platform, and let the others deal with the less valuable one. As Nike+ seems like a highly valuable platform for Nike, it seems reasonable for them to let Apple and Tom-tom developing the applications.

    Also today, with the rise of the social media, it is almost an obligation to build a strong community in order for a platform to be successful. This is what we call the network effect. By opening the platform to everybody, Nike would lose the strength and loyalty of their community, simply because the users would lose the feeling of exclusivity they have.

    By building a partnership with Apple and Tom-tom, Nike managed to build his own community on the already very strong ones owned by those two companies, especially Apple.

    References :

    – Guillaume, P. (2016). Slides supporting the course ‘Strategic Management of Information Systems’, Louvain School of Management

  8. Ophélie Duquesne 22 February 2016 at 14:23 #

    A successful and well-known brand as Nike has certainly many good reasons not to adapt an open strategy for his services for runners. After the announcement of Nike about his collaboration with Apple, other big international brands did similar collaborations, for instance Adidas and Samsung. It probably means it is more interesting for the companies to have a closed strategy.

    A first advantage of a closed strategy we can mention is that we can reach a wide audience. Apple and Garmin are worldwide brand with a good recognition so Nike users can rely on the good partnership Nike has with these two other brands. They respectively already have a good brand recognition and a lot of customers that can become Nike’s potential buyers. But as it is a closed partnership, Nike can’t reach all the potential buyers on the market.

    If Nike decides to close an agreement with Garmin to develop an app compatible with the Garmin watch, it won’t be fair for Tom-tom as they are competitors on the GPS-market. In a certain way, Nike does indirect advertising for Tom-tom because the app is only compatible with their watches. And doing advertising for both competitors can cause some distortions on the market. It’s a win-win situation. But if a brand gets a bad image, both partners will suffer from this reputation.

    The collaboration with Apple and Tom-tom leading to a closed strategy creates customer loyalty because customers need to buy a product from a specific brand to be able to use the app. They will also have to buy the accessories from the same brand otherwise it won’t work with the app. The negative aspect is that it causes switching costs. People don’t want to buy a new product just to be able to use that app, even more when the product is expensive as an iPhone can be. I personally use one GPS with my hockey team but from another brand and it would represent a high cost if we all had to buy a new one to run and use the Nike’s app.

    A big advantage of a closed strategy is that it can reduce the costs (especially in R&D) because each brand is specialized in a domain (here Nike in sports, Apple in IT and Tom-tom in orientation, GPS) so they can produce the best performing app for runners. The competition for such apps is quite big so the app needs to be perfect. Top sportsmen often use that kind of technology to increase their performances.

    Within the framework of this course, we can also mention the impact of the social medias on such collaborations. Users can share their sports session on Facebook or Twitter and their friends can easily click on the link and know more about the app and the brand. It is also facilitated as everybody does it on its smartphone and it is easy to share and check anytime you want.

    But it seems that Nike is slightly changing his strategy has the app is now compatible with Garmin watches and is available for Android (hardware used for Samsung mobile phones).

  9. Gregory Merguerian 21 February 2016 at 10:33 #

    Nike + was the first to implement these kind of sensors on the market, it was something that was never seen before. They concluded at first a partnership with Apple and its I-phones where the app was already pre-installed on all devices. After some time, they developed an Android app to enlarge their customer base.

    The fact that Nike + system is not compatible with similar devices can be firstly seen as a way to keep the “exclusiveness” of using Nike’s devices. It has also helped Nike build a community thanks to social networks but also the easiness to find friends to compete with, find coaches,… The first example of a company that applies the same principles that comes in mind is Apple with its very closed ecosystem, what can also be said is that it is also a winning strategy, Apple and Nike are both powerhouses with great customer loyalty.
    Applying a closed strategy may also be simpler when implementing software updates because all users have the same device. On top of that when a new Nike+ product will launch, whether it’s a new sensor or a complementary device, people will be more likely to buy it. To reinforce this hypothesis, one can just look at Apple, after every new Iphone launch, people buy more of them than the year before while there aren’t huge improvements anymore, the fact is that users are locked-in.

    On the other hand, it can be a very dangerous strategy according to me. At first, Nike+ was one of the unique GPS sensor provider but now there are so many other competitors such as Fitbit, Jawbone and even Xiomi with great OS and that give much more details than Nike+. Some other competitors such as Runtastic don’t even ask for an additional sensor for it to work.
    Going for an open-strategy will only enlarge Nike’s market share. By making other brands devices compatible with Nike+, other platform users will have the opportunity to discover what it’s like to use the Nike app and may even go for a Nike sensor after some time, unless it is already too late?

  10. Lowyck Marie 17 February 2015 at 22:40 #

    First, it should be noted that Nike has managed a lucrative partnership. Indeed, it is not necessary to show Apple’s supremacy in the electronic industry. By partnering with Apple, Nike is already proving all its power and this association of leaders, each in its field, can reach a wide audience. It is also easy to notice that Apple uses a closed strategy. In order to fully enjoy all its facilities, you must have the iPhone, the Mac and the iPad, otherwise you have an incompatibility risk. In other words the two companies have the same strategic vision. The fact that the application is only compatible with Apple also eliminates the cost of designs for other operating systems.

    Secondly, certain facilities related to closed strategies create customer loyalty. Indeed, by dint of using the application, going on the Nike site, tracking results, and creating an historical background, Nike will succeed in building a customer loyalty. The holder of this technology will be accustomed to all of this and as we all know humans do not like changes, meaning he or she will continue to use it in the forseeable future and will be more reluctant to change any application or even smartphone.

    The rise of the importance of social networks is also a source of benefit to their advertising. Users of the application can transmit their results on Facebook, share them with friends, challenge or simply show their evolution. Out of curiosity, other facebook users will click on the link, discover the principle and may try the application. Even if the user does not adopt the technology, the visibility of the brand and its website enhanced and a consumer might feel frustrated by not being able to enjoy the application and become a potential customer.

    Finally, with using a closed strategy, Nike keeps a grip on its business. The brand decides who can join their application and who will be incompatible. This remains a real advantage in terms of competitiveness and power. This technique allows Nike to consolidate its leadership.

    On the other hand, the closed strategy does not have only advantages. Being associated with Apple or TomTom may harm Nike’s image if a scandal were to break out in one of the two companies or for users who are against the brands.
    Some people will also move to other technologies because they do not accept the feeling of being blocked, to be forced to follow the compatibility of a closed strategy. Finally, this strategy limits the audience because, although the iPhone is widespread, it is already necessary to get one and it is not cheap.

  11. Debuisson Nicolas 17 February 2015 at 21:04 #

    The closed strategy used by Nike is debatable but this strategy brings, in my opinion, more benefits than disadvantages. First, a partnership between different companies (Nike, Apple and Tomtom) generally allows a better product quality and lower costs. Nike is a sports equipment manufacturer and not a high-tech firm. Design a program based on a GPS application is not easy for Nike. A partnership with Apple and TomTom is simpler because the two firms have the know-how to design such a program. Firms are complementary in this case.

    Secondly, the closed strategy by Nike allows creating a switching cost for customers who have purchased the Nike watch. This type of strategy is particularly effective when the firm has a large market power. Customers who bought the watch will remain at Nike for products related with the watch, because it is expensive for them to switch brands.

    In view of the disadvantages of this type of strategy, I think it is harder Nike to create network effect. Indeed, an open strategy would have helped attract more potential customers and thus it’s more easier to create a network effect. However, the closed strategy can also help to create kind of a “community” around the product, which reinforces the network effect.

    In conclusion, I think the “closed strategy” made by Nike is quite relevant to their product.

  12. Maxime Vigneron 17 February 2015 at 18:21 #

    We could make a comparison between Nike and Apple, they both are very famous brand with a high market share and they both use a closed strategy. Indeed, Apple’s devices are often incompatible with devices of other companies. Despite this, they still are very popular. By making a partnership together, Nike and Apple are combining their brand-recognition and create a product with large expectation and with a large demand. So a first pros for closed strategy concern the recognition of the product and a free promotion of the product through their brand-name.

    An other advantage of such strategy is linked to the domain of expertise of Nike (Sport wear). In order to create a product requirering IT competencies, it is more profitable for Nike to let a exclusive partner work on the digital and electronical parts than working with several partners requirering an higher implication of Nike in the process.

    Moreover, thanks to this strategy, Nike can charge a higher price because people are willing to pay more for a product produce in collaboration with Apple. But on the other hand, they may have a lower market share because of this closed strategy. I guess the profitable effect of this partnership is larger than the negative one but in the long term when the announcement effect wil be passed, a more open strategy increasing the market share will be more interresting for Nike at least.

    A possible cons for Nike is the high negociation power of Apple due to their exclusive contract concerning Nike+. Indeed, they can reap a larger part of the benefits due to their monopoly power than several partners competiting with each other.

    In conclusion, I would say that this strategy is mainly profitable in the short term using an annoucement effect and their brand-name but in the long term a more open strategy will allow Nike to touch more potential consumers.


  13. Valencia Katanga 17 February 2015 at 16:40 #

    When the Nike+IPod project was launched in 2006 the CEO of Nike described it as “a partnership between two iconic, global brands with a shared passion for creating meaningful consumer product experiences through design and innovation”( . So in this regard it seems to me that Nike decided to link their well-known name to another, Apple and in this case, in order to work together on new service and products they can offer to their respective customers. As they probably both invested and worked together on this project from the ground up its seems logical that the compatibility/ benefits would be limited to those two companies, hence a rightful “close” strategy.

    First, a definite advantage was, at first, the possibility for Nike (sport related products) to penetrate a new market that was dominated by Apple (Digital music) at a relatively low cost benefiting from its very large customer base. This association made sense as most people already had the tendency to listen to music while exercising,… But this association makes it now hard for either one of them to abandon the partnership and establish themselves in the market independently as they would use the comparative advantage they gained during the partnership to become competitors. Indeed, open strategy implies more competition and that is probably one thing they wanted to avoid by being sure that they were the only duo distributing this exact service/product/total experience.

    Second, uniting two leaders of their field did give a stamp of approval to the Nike+IPod and direct recognition for the product. Moreover, both companies benefiting from a strong image as innovators , credibility and positive perceptions can join marketing efforts leading to an increased geographical spread and media exposure. However this close strategy represents a risk as the potential shortcomings of one of Apple’s products (e.g. IPhone 6 bending) could have a negative influence on the common product (Nike+Running). In an open strategy, where Nike+Running was compatible with other devices, it would have less of an impact if any.

    We can see by the success of Nike+IPod and the last one (Nike+Running) that this kind of partnership seems to have more advantages than pitfalls and the tendency might be think that it was a brilliant move. Nevertheless, it is a risky one.

  14. Gwenael Bailly 17 February 2015 at 15:31 #

    Nike is a well-known brand and the world leader for sporting goods. The brand is very popular across the world and Nike puts a lot of money into advertising and sponsoring to improve its visibility day after day.
    For example, they are sponsoring the best football players and team and in exchange, those make publicity for the brand on TV, on their pages on social medias, etc…

    This introduction leads us to our first argument in favor of a closed strategy: Nike wants to be an exclusive brand. By doing so, the firm ensure that is image is not linked with too much other brand and have the freedom to choose only the best and more valuable partnerships. For the Nike+ application, Nike is clearly associated with Apple, which is also a popular and prestigious brand.
    By using a closed strategy, Nike can choose exactly where the firm wants to go and reinforce its image: they are not just a classic sport brand anymore, but they are also part of social medias and fashion.
    Eventually, the firm can charge higher prices to their customer because they are aware that the brand has a more prestigious connotation and a better reputation.

    On the other hand, the main danger of such a strategy may be that being to exclusive leads to a loss of market share. Indeed, they may have been the first to launch a product of this kind with success but now they have to find new arguments and features to face the competition.

    If they are not ready to make some partnerships, other players may do it and reach the users of Nike+. The firm must not forget that there is a large panel of potential customers that like to have the freedom to choose.

    A good representation of the pro and the con of such a strategy is the competition between iOS and Android: one is a closed OS, very exclusive, charge high prices and is quite prestigious, and the other is cheaper, more open and less fashion.
    Apple makes huge profits because of the prices and Android because of the quantity of users they are reaching.

    To conclude, a closed strategy can be a very good thing for the firm if they know exactly how they want to compete on the market. The most important thing is still to have a clear positioning.

    Sources :


  15. Arnaud Gourdange 16 February 2015 at 15:01 #

    Of course, the first obvious of this closed strategy is that Nike wants to increase his sales because the brand is based on sport equipment. With this strategy, they hope to convince people to use their own equipment but they also hope to convince friends of their users to buy this equipment in order to compare their results. This strategy is also easier and less costly for Nike. Not only is the equipment different but also the software behind it. It might be really difficult for Nike to make different technologies compatible. Even if this could increase their visitors on their website, the investment could not be worth it.

    The strategy followed is the same that Apple with their phones. They want to create a community around their products. If they used an open strategy, they wouldn’t be able to create a strong community of people being proud of the equipment they own.

    Another pro of the closed strategy can be seen with the switching costs. If a person uses Nike+ and his bracelet/watch becomes obsolete, if he wants to try a Garmin watch, he knows that he won’t be able to use anymore the Nike+ system thus he has more probability of buying a new Nike+ watch/bracelet.

  16. Florent Dauvister 16 February 2015 at 14:09 #

    With the booming influence of social media from 2005/2006 onwards, Nike has had to rethink its marketing strategy to adapt to new internet trends.

    Nike+ started as a product that required Nike sneakers with a special sensor to work with the first iteration of the app available on iPod. Nike had a complete control over what services they provided and what devices worked with their app. It was mostly to make people buy their products rather than subtly push the Nike brand through indirect app advertising that much consumers don’t see as intrusive or even as advertising itself.

    Over the years, they have had to adapt their Nike+ app to the ever growing market or smartphone and smartwatch, making the app available and working without actually having to purchase a Nike+-ready pair of sneakers. It is easy to assume that Nike wanted and still wants as much control over their Nike+ app as possible. Hence they regard keeping the app closed to non-Nike approved devices.

    Why? Because Nike can keep the data about its consumers and potential consumers to themselves, because Nike can push marketing campaign through their own approved devices, because Nike can also use those devices as marketing tools to communicate with consumers without them realising that the app acts as a marketing and communication tool for the Nike brand and its products while still providing what the consumers want which is an app with the benefits the consumers are looking for.

    On the other hand, keeping a closed strategy restricts the expansion of the Nike+ service and potentially reach new consumers.

    In conclusion, Nike had to make a choice between sharing knowledge about its consumers, their habits and a possible unsubstantial amount of market share and keeping full control over the service they provide to be able to push their marketing and communication agenda and gather very valuable information about their consumers.

    It was undoubtedly the right move for Nike as the Nike+ app and its service have helped Nike be as relevant as ever in the social media space.

  17. Justine H 15 February 2015 at 13:20 #

    Generally, in the technology industry, incompatibility issues between brands are arising regularly and what we can notice is that at first the product is available to only one brand before becoming open to more brands over the years. Some examples are Office that became available on Iphone only a few weeks ago or the Nokia GPS HERE that is available on Windows and Android but not yet on iOS.
    From the standpoint of users, the disadvantage of a closed strategy of Nike with its Nike+ service is that it does not allow them to use any brand of products. As a user I would prefer devices to be compatible with all brands.
    From the standpoint of Nike, the interest of a closed strategy with its Nike+ service could be explained by the following :
    – Technological constraints : by working with selected brands, Nike does not have to develop a different program for each brand to make them communicate between each other ;
    – Potential exclusive contracts : brands maybe decided to have the collaborative monopoly with Nike. They could have signed an agreement of cooperation with Tomtom and Apple and therefore there may be a non-compete clause which prohibits Nike to work with Garmin, which is the main competitor of Tomtom, or to work with Android, which is the main competitor of Apple) ;
    – Commercial strategy : Nike wants to position itself as a premium brand and therefore they only want to collaborate with other premium brands. It gives a sense of belonging to a “club”. Nike products are high-end products in sport and Apple products are high-end products in smartphones so there may be a desire to keep this high-end products image. If they open to all brands there is a risk of diluting this image.
    These reasons could explain why Nike products are incompatible with some brands despite the fact that users would prefer an open strategy.

  18. Joseph Abi-Khalil 13 February 2015 at 12:14 #

    I think by adopting this strategy, Nike is basing itself on the fact that nowadays the majority of people have a Smartphone. The compatibility with the iphone makes all the iphone users using the Nike + and after looking it up there is also an Android version for the same App. Thus, what Nike is I think trying to do, is to take advantage of this network effect where someone owning an iphone and using the app will encourage his entourage (either running on ios or android phones) to get the app and using it. Moreover Garmin and Tomtom do propose the same products (GPSs´ and both have running watches) so Nike won´t have big incentives to endangeour its collaboration with Tomtom and go with Garmin.

    Moreover it could also be a wish from Tomtom and Garmin. Indeed, since Garmin is compatible with the addidas app ´´mi-coach´´only. Thus making Nike compatible with Garmin or the other way around for micoach could force the prices of the watches to go down due to an increase of competition which is something that the two gps competitors won´t like. Thus an agreement between Nike – Tomtom and Addidas – micoach could be present in order to preserve the market shares and the prices at a certain level.

  19. José M. Gaspar 5 April 2014 at 00:40 #

    The advantages of pursuing a closed strategy can be summarized as follows: The application may find itself in both network markets and system markets. Concerning the former, the fact that there is a large online community that can share their statistics and even challenge one another means that there are direct network effects. Hence, the more users this application has, the greater the incentives for other users to adopt the application.
    Concerning the latter, it is true that there is also scope for indirect network effects. Just think on the amount of applications that have been created and are compatible with Nike+. There is the IPOD Sensor, the fuelband SE to wear on the wrist, the sportwatch GPS, and at least one gaming console for kinectic training (the xbox). It is still a closed strategy because Nike maintains exclusivity on complementarity with these technologies, while at the same time remaining incompatible with competing devices.

    However, the aforementioned may constitute disadvantages, mainly for consumers. If Nike+ remains incompatible, this may augment coordination problems. When this happens, market mechanisms fail leading to either excess inertia or momentum as users may choose to stick to or adopt Nike+ even if they were better off with a different application. This is more likely the more dominant Nike+ should become in the long run, and the more complementary services to Nike+ are developed as this will enhances indirect network effects.
    Furthermore, a higher incompatibility means higher switching costs for consumers.

    The pros of adopting a more open approach I am mainly concerned with are those with respect to the final consumers. From the theory of industrial organization, enhanced compatibilty is likely to promote competition and drive down prices and lead to a market expansion thus resulting in a larger consumer surplus.

    The problem with enhanced compatibility is that it reduces quality differentiation. For a company which is arguably very efficient and probably enjoys a very large installed base, this means that enhancing compatibility is not very attractive and makes it little likely that Nike will adopt a more open strategy.

  20. Elias Pereira 4 April 2014 at 20:52 #

    First of all, we may admit that NIKE+ and Garmin Forerunner (GF) (we only consider two competitive firms) are avoiding competition by colluding at extensive margin. That is, the two firms collude by avoiding entry into each other’s markets (segments) since competition makes prices fall (ordinary athletes for NIKE and professional athletes for Garmin Forerunners). Second, the diluted gains by making GF series compatible may be larger than marginal gains obtained from open market to GF.
    Excluding the possibility of collusion, a closed strategy by NIKE has its advantage. All thing being equal, a closed strategy (incompatibility of GF series) means switching costs for NIKE’s customers who value the possibility of uploading their historical data on website and, among others, sharing it with others (friends, family, …). Thus, they became a lock-in consumer and give more market power for NIKE. Further, NIKE’s service triggers network effects which increase the switching costs making the lock-in consumer a valuable asset for NIKE. Yet, a closed strategy keeps customers loyal to NIKE´s products (GPS sportwatch and NIKE+ app) and provides benefits from the value of data of NIKE’s customers, especially, information on customers’ demand and thus gets competitive advantage for NIKE.
    However, on the other hand, with an open strategy, NIKE has also advantages. It can attract more consumers to its service (uploading data), raising both the traffic of its online shop and the visibility of its brand. The economies of scale may arise by sharing their own knowledge and technology and thus decreasing the average costs of supplying the services. Yet, diversification of supply capacity may eliminate the specific risk of NIKE’s product/services. Finally, regarding to network effects and switching costs, with open strategy we should note the following: the switching costs of using the GF series disappear, since both product give access to upload the data on website. So, all thing being equal, a consumer is indifferent between Garmin watch and GPS sportwatch. Network effects, in turn, arise from two channels: the direct and indirect network effects. The direct network effect results by the fact there are more consumers on website and so more interaction among them. The indirect network effects result by the fact that more users in the NIKE+ system and the effects of economies of scale incentive the firms to improve and expand the applications and more incentive for consumers (runners) to join to the system.

  21. NT 26 February 2014 at 23:57 #

    Closed-they are market leaders thus they may feel like they do not have an immediate need to change/open.
    include a feeling of exclusivity for consumers, along with direct Network effects i.e. within a group/community, the more people who use the app, the more utility a consumer will gain from using it too. This can increase loyalty. However, a consumer’s utility can also depend on the number of compatible software systems in a market, which goes against Nike+’s current strategy.

    Cons: Switching costs are very high as moving to another, incompatible network means that consumers will lose out on their accumulation of knowledge, connections to friends/groups, fitness progress to date stored. A closed strategy also means it is harder for new consumer to start using this app as they may not want to limit themselves to the one app which is exclusive, and then find that other groups are using mixed/compatible apps. This incompatibility means higher switching costs for consumers. Over time, their competitors may develop compatibility with each other, making Nike the outlier and harming their market leadership/stance/dominant position.

    Pro’s: Economies of scale could be found if Nike+ opened up their strategy, and actually began to be the ones who co-operated with their competitors to create one “mega” app. However, this is a bit idealistic considering competition and market forces, and seeing as there is huge rivalry between Garmin and TomTom

    Cons: Having an open strategy means Nike+ would be more vulnerable and prone to competition.

    It is interesting to consider why Nike+ is currently a market leader as Garmin Forerunner, the most similar competitor, was released in 2003, 7 years before Nike+. But due to the connection with iPod, Nike+ appealed to the Apple generation or bubble of iPod users, perhaps this was the comparative advantage Garmin should have sought. In fact, did a case of sequential adoption even occur?

  22. Po-Wei Huang 26 February 2014 at 23:56 #

    pros of closed:
    If the customer wants to use the nike+ service, he/she need to have an idevice or an equipment with nike+ app, then customer wont buy a product from other competitor in the market.

    pros of opened:
    Nike could give the use right to other equipment brand, it will have the chance to attract more customer to use Nike+, and I think it might the internet effect.

    pros of both:
    Nike is one of the leaders in sportwear industry. It’s brand reputation will attract the consumer of ios to use them, and it will stick customer with nike’s app(because of the first player in this sporting assistance app).

    it may not have the maximum pros if nike+ keeps the strategy with closed, because if every equipment could have nike+ inside, it will reach the critical mass easily.

  23. Rui Moutinho 26 February 2014 at 23:54 #

    The Nike + app allows the user to save their progress data race , share and compare with friends , always focused on motivating the social circle of the user to achieve a goal. This application has finally become almost a “game” because beyond the personal goals of each user, created a certain competitiveness between them, ie, players can compete against each other and even post it on Facebook .
    Nike and Apple are two brands who appreciates the relationship with their consumers. Each one in its segment, they are considered lovemarks, loved by consumers. Having a Nike or an Apple product is a status symbol for the owner, and that can justify an increase on price that is not disputed by the consumer because there is some exclusivity.
    Once Nike+ was the first app on this market, opted first to develop a partnership with Apple in order to focus first on customers who have a preference for more exclusive products. As Apple, Tom Tom is also a leader in its activity.
    Tom Tom is a world leader in location and navigation systems in partnership with Nike + launched the Nike + SportWatch GPS, one facing clock for racing that provides users with a racing experience with direct connect functionality with the site
    The fact of Nike+ was the first app of this kind beside the fact that the brand has opted for a closed strategy provided an opportunity to gain more customers, starting with the type of costumers with exclusive preferences (Apple and Tom Tom customers).
    Apparently Nike’s strategy is now “opening ” a bit, considering there is already the Nike + application for Android systems . Probably this action is due to the fact that new threats begin to appear on the market , as well as Adidas , Sony and others, but also because they have already conquered a large part of the customers who have a preference for exclusive products, so now maybe it’s time to explore more potential customers to avoid the competitors success.
    In my opinion the entry strategy of Nike (closed strategy) market was assertive, but in the long run it does not seem to be the best option because the competition in this market is growing faster. For a brand with the awareness and history of Nike, the closed strategy allied with a partnership with Apple and Tom Tom provided a “healthy” entry on the market, although, this strategy worked well because the name and the value of the brands otherwise it would have been much harder to entry.
    The opened strategy and the closed strategy have several advantages and disadvantages depending on the market, brand, costumers, partnerships, competitors and etc, so I think Nike should adapt the strategy depending of these factors.

  24. Ben 26 February 2014 at 23:01 #

    Nike+ is operating in a not so old market where there are not many competitors. They are looking for a strategy which permit them to limit the market and reach a dominant position by creating a barrier to entry and avoid new competitors. This is what they doing thanks to their collaboration with Apple. This has some effects as described below.

    By excluding its competitors, Nike+ try to gain some direct network effects. People have an incentive to join the network Nike+ if they have already friends using the application. In this way, they could compare their results, distances, etc… This can be seen also through the new “fuelband” they promoted. With the Nike+ application, more you have friends using the application, more you accumulate Fuelband points. This is an additional way to grab network effects.
    In the same way, if Nike+ success to collect enough consumers and overtake the critical mass, they will create a barrier to entry and discourage their competitors. It will be difficult for them to gain market shared due to the switching costs involved.
    The association with Apple give to the brand a way to benefit of Apple’s great brand image and to put on the leader status. They are both leader in their respective markets and their combination allow the application to be seen as a top product, of good quality. Also, if a customer want to accede the Nike+ application to join his friends but doesn’t have an IPhone or IPod, he will buy a Nike gear and contribute to increase the Nike’ sales.
    Behind this effects, if a large number of customers are using the Nike+ application, it will grow the visibility of the Nike’s products thanks to their visits on the Nike website to consult their results and compare them with friends.

    On the other hand, the choice of an open strategy may allow Nike to have more visitors on their website, comparing to what they know currently. But they need to improve their application and offer a better one than their competitors with this in mind.
    Finally, there are some risks with a closed strategy if the brand isn’t a market leader or if a concurrent become bigger. The customer could suffer switching costs to acquire Nike gear or Apple products.

  25. Raquel Soares 26 February 2014 at 22:50 #

    Nike is a company that has already established its market power and so chooses to acquire a closed stategy relative to its competitors. Today, Nike is the most popular brand of sports goods also given the quality of their products. Therefore, no need to opt for an open strategy, which tries to attract more consumers for no incompatibility with products from other brands. For Nike it no longer makes sense because it has already acquired the visibility of their products on the market and its line of customers. In my view the best strategy for Nike is closed strategy, maintaining the exclusivity of their products and making the entry of competitors in the market more difficult.

    The partnership with Apple was a big gamble by the nike, which can see their sales increase focused attention not only of their clients but also of the faithful followers of the Apple brand. Evolving with new market technologies next to a large company connected to that market. Both this partnership as the partnership with TomTom contribute to improving corporate image.

    However a closed strategy with partnerships that Nike has can also have their cons. Can lead to loss of some customers that having to obtain products from these brands to be able to use the Nike + application, that type of products are expensive and are not accessible to every type of consumer. But then consumers who are also customers of Apple and TomTom brands will prefer to opt for this type of service.

    A strategy or other has pros and cons, it all depends on the vision and continued that business wants to give. For Nike might be best to keep your closed strategy, limiting the entry of competitors and maintaining the exclusivity of their products, because it is already a benchmark in the market. Partnership with Apple and TomTom are also benchmarks and closed strategies allows for a range of clients from Apple / TomTom for Nike and vice versa.

  26. Carla 26 February 2014 at 21:16 #

    There are companies that prefer using a closed strategy even though it has its downsides. We can take for example how Apple caught up to Microsoft by having a close strategy with their products. So, many would think that a close strategy might be the best way to go, but the truth is that there are advantages and disadvantages in both open and closed strategies.

    When we talk about Nike, we talk about a multinational company since 1964 and that it is well known as selling good quality products, so it has earned the trust of their clients and attracting new ones every day. Having this in mind the advantage of having a closed strategy would be that clients who already trust Nike will continue to purchase the products attached to the ones they already own. The service that Nike gives in their website is not looking for revenues, it’s just something they give like an extra to convince people to buy their products instead of the competition, and by giving this service they are also opening their online shop for more people to see it, but of course if the Nike+ service would be compatible with more devices, an open strategy, they would be able to attract more customers. But also by having a closed strategy you’re giving a sort of elite treatment to those who chose to be faithful to your brand. So the problem or the disadvantage comes when talking about customers outside Nike frequent buyers. By having a closed strategy they are limiting the options for this customers, because if they don’t give their full support to Nike products it will be more difficult for them to commit and buy Nike products.

    By having an open strategy you are welcoming all types of customers; frequent buyers, new buyers and buyers from the competition, so the options are more for them to buy from and it opens up the Nike products for more people. You are not limiting your targets and this way your brand is able to get to more people. But by having an open strategy you’re also taking away special treatment customers get by being faithful.

    After realizing that both strategies haves their ups and downs is up to every company to decide which type of business they would like to be, and what kind of treatment they want to give to their customers. Every business is different and every sector in the market will react differently.

  27. Marina 26 February 2014 at 20:09 #

    Launching Nike + in 2006 allowed the company to offer new interaction and experience to its customers. As a result of this new network Nike is not only a company offering sport clothes and accessories, but it brings the customers more closer to the company processes and vice versa. Offering different types of interaction, the platform makes running even alone a social activity. Setting goals, creating a running maps, play lists or even the possibility to meet other partners are only few of the benefits that customers may experience being part of this Nike society.

    Beyond all the positive effects for customers, the expected outcome of the platform is to make clients loyal, attract new and to sell more of its products. The success of the platform is obvious, not only of the large number of users, but from the expanding variety of products offered. The figures also confirm the success, by August 2009 over 1.3 million runners has subscribed and Nike’s share in the US Running market has increased to 61%. This has led to significant financial results as well. (

    It is an unobtrusive way of marketing, reaching bigger target of customers. I have read in the other comments that there are many other similar products with better quality, but Nike +is more for enthusiasts and casual runners rather than experts.

    Having all that positive results makes me believe that Nike has chosen the right strategy. Using this closed strategy allows them to differentiate from similar products and still to be reachable for a huge variety of customers. The idea of the platform is to make a Nike community and every community has its own specific features. Using any of the Nike products for tracking or an Apple device allows users to distinguish from every runner and to create a real Nike society.

  28. Kerem Altın 26 February 2014 at 19:48 #

    With its website,Nike is obviously trying to create a network effect by some marketing strategies like posting on the home page the activity (total calories,steps,miles runed,achievements earned,etc) of its community called Nike + Community,trying to make people join,which is quite successful with the help of the notoriety of Nike in sportswear (especially in the global athletic footwear according to and its cooperation with the smartphone giant Apple(Apps for Iphone,pedometer built in Ipod nano,etc).
    Using a closed strategy,Nike is forcing consumers who want to use its website,to buy a sports tracker(sportwatch,fuel band,running app) branded Nike.
    What if Nike uses an open strategy?In my opinion,it can lose market share in sport watch market to its competitor Garmin which seems to have a niche strategy,different than Nike,which targets to more professional athelets,with some characteristics like better battery life(more than two times longer than Nike Sportwatch) and water resistance of 50 meters in even its cheapest watch with which you can even dive(Nike Sportwatch is only 5 atm resistant,you can only take a shower with it).So,a professional swimmer or diver who wants to join the Nike + Community(because his friends use it) will definitely buy the Garmin one.
    Another reason to use closed strategy is,Garmin has a better product line of sportwatch with 8 products from 129 to 399 euros,while Nike only has two from 149 to 169 euros.So Garmin would be more convenient for professional athelets as i said before.
    It is a fact that,using a open strategy,the number of users will increase.However,i’m not sure if the value that they bring will be more than the cost of making the site compatible with other devices.
    In my opinion,Nike does not need that move as its notoriety is very high in the sport communities.On the other hand,i don’t think Garmin will want that cooperation too because if two web sites remain open Garmin’s site will loose traffic to
    Finally,i think that it’s better for the two to have two other websites with closed strategy.

  29. Ferté 26 February 2014 at 19:34 #

    As part of this work whose goal is to compare the pros and the cons of using a closed or open strategy, I will first examine the closed strategy followed by Nike with its Nike+ application.

    The closed strategy is particularly interesting as it creates switching costs which are of course to be balanced by the users with the added value provided by the application. A strong functionality of the Nike application is the possibility for consumers to save personal data, and to share them with others. Making Nike+ App only available on Apple devices is part of strategy to make users feel part of the strongly branded Apple community. From another point of view, storing customer information allows Nike to propose products in line with customer interest and to use this data to develop products that better fit their needs.

    Besides, the app is linked to Nike’s website, which enhances the loyalty to the entire brand. Of course, you need to visit the website to store and see your personal data, as well as to enjoy the other functionalities (as sharing it with friends, join groups, etc.) which increases both the traffic on its online shop and the visibility of its brand.
    Nike uses thus its Nike+ App mainly as a promotional tool for its products sold on its website. Nike is not making money with the app, but attracts by this means customers and encourages them to buy complementary products.

    An important point is that the application was originally only available in the App store. As mentioned by Wikipedia, Nike and Apple created originally together an activity tracker device and Nike launched the Nike+ App afterward. Therefore, it could seem logical that Nike decided to follow the same strategy as Apple, which is known for its closed strategy. It can also participate to reinforce Apple and Nike brand image (knowing that they are both leading companies), and creates an impression of belonging to a community. However, Nike has recently made its Nike+ App available on Android , which is maybe a step to an open strategy or rather the recognition of the dominance of Android on the smartphone market.

    It is true that the closed strategy can be a barrier to the network effect. Consequently this strategy while consolidating Nike’s market presence, does not really expand it. One could argue that Nike is already a leading brand, that Nike+ app has 18 million global users and thus that Nike does not really need to expand its branding.

    The closed strategy makes some very good points, but so does the open strategy.
    The open strategy has the advantage of increasing network effects, by making it easier to steal customers from competitors. The principle is to attract as many customers as possible, at least until you reach the critical mass. Sharing experience is at the heart of the Nike+ app, which reinforces the idea that Nike tries to attract as many customers as possible.
    It also increases the awareness of the brand, which could be interesting for Nike especially in the running purview. It allows Nike to attract new users that don’t even know the brand (or its specific products). It is particularly true for sportswear customers who are generally loyal to a brand.

    Moreover, the open strategy is interesting to benefit from expertise of other firms. And for instance, if a jogger using a competitor’s product could upload its data on the Nike website, Nike could in return advertise its other products.

    In conclusion, I think that Nike has taken a good decision, knowing that Nike+ has 18 million global users. In my point of view, the closed strategy worked for Nike because the company was already a leading brand. In this case, Nike needed more to create switching costs than to take care of attaining a critical mass of customers.

  30. Osimon 26 February 2014 at 13:03 #

    By arguing in favor of a closed strategy, we can say that it offers exclusivity of the product. Nike is creating a need to be part of a special community. They have enough influence, and this influence is even more intense with the strong partnerships that they have (TomTom and Apple). That situation is increasing the network effect, people are willing to join the community and therefore, Nike seems to have interest to stay on this closed market with their large amount of users.

    The willingness of staying in the closed market may also come from the partners. TomTom, which is considered as co leader(1) with Garmin in the market of GPS, therefore, want to keep the business closed. They will then present some incentive to Apple in order to keep going in a closed market with the objective to stay away from competition with Garmin on this GPS sports watch sector.

    Finally, we can see some switching cost advantages in this particular situation. Indeed, they had already attracted many customers in their business. The willingness for customers to switch to Garmin sports watches may be quite weak. Nike’s customers are already used to the system and they will have strong switching cost in case of moving from Nike to for example Garmin sports watches. Nike then has to work hardly on the competition before the subscription to attract lots of users.

    On the other hand, with a closed strategy, there is a risk of stagnancy. It seems hard to keep improving a product or a service without any competitive pressure. Excluding competitors may eventually diminish the innovation potential of the firm.

    With an open strategy, Nike may attract more and more customers and therefore extend his community of users. Being compatible with different brands will increasing the interest for the brand and then increase the profit made.

    Despite this, with an open strategy, we can use the argument used in disfavor of the closed strategy. With the fact that, low competition may reduce innovation! Here, too strong competition may lead to lost that can affect the profit.

    As a conclusion, the choice of the strategy depends on the status of the brand, and how they want to be seen by the consumers. It looks like Nike wants here to be more exclusive by closing this market. But it can evolve, and being in an open strategy can also present some advantages.


  31. François Tamigneaux 26 February 2014 at 12:25 #

    In the case of its new technology, Nike decided to opt for a closed strategy. We cannot say that a closed strategy is better than an opened strategy as they both present different pros and cons. Let’s analyse what are those for the Nike+ service closed strategy.

    Firstly, Nike displays a strong brand image of innovative and high-quality company. Through this venture with Apple and TomTom, it strengthens even more this image as both partners might also be considered as such. Therefore, it can increase loyalty of consumers satisfied by the collaboration aligned to the values they express. This could not be the same if Nike decided to open its service to third parties which wouldn’t show the same kind of image. Plus, this could enable the firm to attract Apple and TomTom consumers which didn’t make of Nike their first choice.

    Secondly, by adopting a closed strategy to such a technology, Nike might get its consumers locked-in. Indeed, if consumers have already shared many data on the Nike + service, they won’t want to lose this goldmine of information. Thus, they’ll be trapped into buying over and over Nike products. Futhermore, this enable the company to launch products better adapted to their customers’ needs and thus, do price discrimination.

    However, this strategy could also have negative impacts to the brand. Indeed, Nike has to face tough competition from another massive company which is Adidas. The latter also developped its app service (miCoach) to track people’s performance ( However, miCoach is available on a wider range of phones (iOS, Android and Windows Phone 8). This means that a bigger community could be growing from Adidas’ app and weaken the network effect of Nike’s app. This implies that the firm has to evolve. This is why their app is now present on Android but with restictions. Indeed, the last update is only available for Apple’s products at the moment (

  32. Bryapro 26 February 2014 at 11:41 #

    The market of fitness tracking, and lifelogging more generally, has dramatically expanded in the last few year. With companies such as Sony and Samsung entering this market this year, the competition that will be facing Nike will be stiff.

    Nike has adopted a closed strategy for his line of activity tracker device since the introduction of the Nike+iPod in 2006. Back then, this device had little to no competition, let alone the level of brand awareness that the combination of two giants like Apple and Nike had. That first-mover advantage had clearly a lot to do with the decision to take on a closed strategy. Being the first meant easily capturing the entire market for fitness trackers and creating high barrier to entry for subsequent new entrants. Nike’s choice to partner up with Apple also created a link that would be hard to break in the short run. Therefore making it impossible to switch to an open strategy until their contract expired.

    An open strategy would broader the community using the Nike+ Running app, but at what cost ?
    The main goal of Nike wasn’t so much the sales of it’s device but the positive effect that they had on the rest of Nike’s products sales. By the end of 2006, Nike second-quarter profit had risen to an unexpected 8,1 percent thanks in part to those Nike+ devices ( If Nike had let other manufacturers use its app, the brand hype, moreso than the brand awareness, would have been a lot flatter. New entrants wouldn’t have needed to bear the cost of R&D that had gone into the creation of the Nike+ fitness tracker and would have therefore been able to offer a similar product at a cheaper price while still use Nike’s app. And as time passes, another app could have taken its place and Nike would soon be out of that market or would need a lot of effort to make a comeback. This situation would more importantly render void Nike’s plan to boost its other products’ sales. If Nike hadn’t been the first to enter that market but had been a late new entrant, it could be argued that an open strategy would have yielded the best results. As it would, if the best app of its kind, have swept a lot of users from their current app. These users would have probably still have to endure some switching cost such as losing their historical data though.

    In our case, Nike has adopted a closed strategy and being first has let it create a vast network of users. But since most of the switching cost comes down to the historical data, Nike is not an undisputed leader in this market anymore. Companies like Fitbit in 2008, Jawbone in 2011 and many others have started launching their own fitness tracker devices and have been successful in creating their own community. In this now crowded market, Nike will need more than it’s brand awareness to stay relevant.

    Sony has announced it’s own lifelogging band which will log a lot more than your average fitness tracker. We are talking incoming calls, texts, social media notifications, music and games played, app used, sleeping cycles and much more.
    Samsung is also gearing up on this with its life-logging app and its smartwatches.
    The transition between those fitness tracking devices to these new lifelogging devices is gonna be hard on Nike. That is unless it’s partnership with Apple continues and it can become part of that (r)evolution.

  33. Ciaran 26 February 2014 at 11:38 #

    Nike + is a running app among several, allowing runners to collect and analyse their running data. The Nike + website allows runners to share content with other members, but only if the information comes from a Nike device such as a running watch or the Nike + app. What reason could Nike have opted for a strategy where their product is incompatible with other devices?
    On one side, this strategy could come from a marketing decision to preserve exclusivity and to make runners feel that they are part of the Nike + community. It could also come from a sales decision to enhance the bundle effect; joining the Nike + application with the different gears that Nike proposes. On the other side, with the variety of running applications on the market that runners can link to their Facebook account, the Nike + website doesn’t offer anything special to its customers. An application such as RunKeeper proposes the same kind of service than that of the Nike + app, making it not as unique as its incompatibility strategy wants it to appear. Therefore, it’s not obvious to see why the Nike + website accepts information only from Nike gears. If the service provided by the Nike + website is as good as they pretend they lose out from not allowing other devices to interface with it. First, allowing other devices would bring more customers to the Nike + website, turning some of them into potential Nike addicts. Second, throughout the network effect, if the community grows, the value of the Nike + concept would increase.
    Runners keep a record of their information to be able to share with friends, throw challenges and compete with each other. To do so, runners are not obliged to use a Nike device, they can just download the Nike + application (free) and can post their sporting achievements on Facebook. At the end, I think that the bundling of Nike gear with the Nike + app is only to be part of a community and to feel exclusive, a worthwhile marketing strategy for what is already a strong brand.

  34. Hexin Shi 25 February 2014 at 22:45 #

    In my opinion, both open and closed strategy for Nick with its Nick+service has advantages and disadvantages.

    On the one hand, advantages of closed strategy of Nick+service have the follow points. Firstly, it can increase the sell of Nick products (no matter is the competing devices or other related products, for example shoes). Because Nick+system is incompatible with other competing devices, if you want use Nick+service, you should buy Nick devices. Secondly, it can attract people’s awareness of Nick, so this is can in order to increase market share and be a dominant position. Finally, it can decrease entry and restrict other competitors like Garmin Forerunner.

    Disadvantages of closed strategy of Nick+service are consisting of the following aspects. Initially, it can easily to develop discrimination. For example, if you are a user of Garmin Forerunner, you want upload your data to Nick+websit, you will find it doesn’t work, only because you are not the user of Nick device. Lastly, it can help Nick to be a dominant position, so maybe it can develop the abuses of dominant position. Because this strategy will restrict other competitors and decrease entry, maybe it can let Nick enjoy a monopoly position in the future and Nick will increase the price and grab profits, harm consumers and market as well as.

    On the other hand, advantages of open strategy of Nick+service have some reasons. Firstly, more users of other devices can upload data to Nick+website can promote investment in R&D and innovation of competing devices. Because more firms in the competing devices market can promote innovation development of devices, each firm want to be the best one, so they will invest R&D to produce the more advanced products to consumers. Secondly, it can promote entry of other devices and protect competition in market. Lastly, if more users of other devices can enjoy the service of Nick+website , Nick can have more high reputation from it and can promote the products to do more better (more users of other devices, you can get more information of other devices, so this opinion and information can let Nick to do more better than its competitors).

    More firms/brands in the market, Nick can get fewer profits. This is the disadvantage of open strategy of Nick+service. Because the open strategy can promote entry indirectly.

    In collusion, different strategies have different disadvantages and advantages, so Nick firm should based on different situation and different market condition to choose different strategies.

  35. Wolverine 25 February 2014 at 16:17 #

    As a casual jogger myself with a simple heart rate monitor, I don’t find the Nike+ a good tool, as it only logs speed and distance (not through GPS), not even the heart rate. I have personally used SportsTracker which logs the distance on a map and a separate simple heart rate monitor, but I haven’t used an online service for following my development.

    As it turns out the Nikeplus website is compatible with atleast Garmin ( ) but this service is provided by an outside website, which makes the data nearly perfectly compatible. This requires limited technological knowledge, but it is a hassle, as it is not an official tool. This kind of services usually appear if there is a need (closed strategy by Nike), and Nike probably is aware of this. I consider that the most important factor of choosing a closed strategy is the willingness to make money through Nikes traditional channels, i.e. selling sports apparel. Nike for instance aimed at making all of it’s shoes Nike+ compatible ( A jogger can still buy a sensor and use shoes from another brand, but doesn’t need to if he chooses Nike shoes. Nike want’s to remain a sports apparel company, and not become an IT service provider. As Apple and TomTom are joined in this venture it seems likely that they have specific roles in the endeavour. The Nike+ is hence just a way to sell more Nike shoes, as it provides an after sales service for the users of the shoes. Nike also benefits from the sales of the data logging wristband named Fuelband, which can replace the iPod or iPhone as the data logger, making the following of your activity easier. Hence the link to Apple products is not necessary. This is a good thing, as the current version is not compatible with Android or Windows phone. Thus the benefit from the closed strategy is the income from the sales of the Nike+ compatible apparel i.e. shoes and the sales of the Fuelband ($149). The closed strategy also motivates the users to be more brand loyal.

    Several other similar service providers have the same strategy. For instance SportsTracker (a Nokia SpinOff) provides a free App, but the heart rate monitoring belt costs 80€ and is incompatible with other similar services. However there are now emerging generic hardware (heart rate bands) which are compatible with multiple service providers, but those Apps are not always free as the Nikeplus and SportsTracker (

    The cons of the closed strategy is lower penetration of the software, but it is not really a problem if the online service is considered a secondary product which does not aim at generating direct revenue. Also the traffic on Nikes webstore is probably lower. As mentioned before the Nike+ system is only officially compatible with Nikes and Apples products, and hence it lowers the overall user amounts, as people without Apple products or Nikes own Fuelband cannot use the service. I personally do not own either, and hence I would opt for an other system, which is based on a platform I already have (Android Smartphone).

    I believe that the competition in this type of service providers is very tough, and Nike has a solid money making model through it’s closed strategy, especially in countries with lots of iPhone and iPod users. Everyone already knows Nike, so does it need more network effects of publicity? In the long run the free apps might dissappear, or lack funds to develop to the next stage, whereas Nike is large company with stable income from it’s closed strategy, which allows it to be at the forefront of both harware and software development with it’s partners.

  36. Arnaud De Visscher 25 February 2014 at 16:15 #

    I think that the pro of an open strategy for Nike is a higher number of subscribed persons to their Nike+ app and thus a higher rate of sales of this same app: it seems quite logical that if different devices (other than TomTom or Apple) can run their application, there will be more users. Not everyone has indeed an Iphone or even a smartphone (in this last case, I assume people to use a GPS watch).
    By being on a wider network, Nike could also reinforce its image of sport partner. No matter what device you prefer to use, Nike will be there for supporting you during your effort. Regarding the question of advertising, it is hard to say if displaying its app on various devices will raise its brand awareness mainly because Nike has already a huge one. But it could perhaps convince youth that they are the best.

    The pro of a closed strategy lies in the brand image of the companies at play. Nike provides an indirect positive image to their partners: Sport is healthy for my body and so is Nike. If Nike has a strong relationship with TomTom and Apple, they should be good for me too. Of course this may seem exaggerated but it reflects what happens in the subconscious of the consumer. Furthermore, Nike, by its nature of well-known brand can raise the sales rate of apps for Apple and perhaps the products of Apple (or TomTom) as well. In return, by keeping these relationships with well acclaimed companies in their category (smartphones and GPS), Nike will be associated with quality and success. I think that this cannot be (or at least badly) fulfilled by working neither with companies producing cheap smartphones or GPS devices or neither with not top selling companies.

  37. Caroline Sokolowski 25 February 2014 at 15:16 #

    Thanks to the development of technologies, recording its running performances has become very common those few last years. Many competing devices exist: Garmin Forerunner, Suunto Ambit, Timex Ironman Run Trainer 2, Polar RC3 or the SportWatch of Nike. Also, many applications have popped up: RunKeeper, Endomondo, MapMyRun and Nike+ are among the most popular. “Nike+ now has over 18m members tracking their exercise with a FuelBand, SportWatch or fitness app” (Summers N., 2013). Being initially developed with Apple, a real community has been created by Nike with its Nike+ service. Nike could have opted for a strategy of compatibility with other devices. However, it has made the choice of a closed strategy. Why such a choice? What are the pros and cons of an open vs. closed strategy for Nike with its Nike+ service?

    The advantages of a closed strategy for Nike seem to overpass the ones of an open strategy. The choice of Nike seems to be highlightened through various points.

    Firstly, the Nike+ strategy is based on the idea of the network effect. Everything seems to be made in order to motivate runners enhancing the Nike+ community: “challenging friends”, “sharing your success” thanks to social networks, “finding better roads” thanks to advices of others, etc. The higher the number of runners, the higher are the gains for each single jogger. Nike+ benefits from its incompatibility with other devices. The most runners join the community, the more probability it has of becoming bigger and of reaching the “absorbing barrier”. Indeed, a fan of Polar RC3 could decide to adopt Nike+ due to the network effect. If Nike+ reaches the “absorbing barrier”, it is sure that its community will get bigger and bigger. I agree with Xinyu Li saying that Nike reinforces its barrier to entry with the Nike+ service.

    Secondly, due to the incompatibility with other devices, Nike+ is creating switching costs. Each device is working differently. Moving to the competitor implies a loss of all saved personal running data, of the experiment of sharing with the community X and of the ease of using the device. Changing of device is thus not only a question of price. Nike is closer to its customers, it can forge a tighter relationship with them and also create a long term engagement.

    Finally, having a closed strategy allows to increase both the traffic on the website and the visibility of the brand. In order to check the statistics, runners must go on the Nike+ website. In doing so, the bigger the community, the higher Nike has the opportunity to show its products. The Nike+ service motivates people running thanks to personal coach and to the community but it also allows the society to advertise its products to people who have the highest probability of buying them. When going on the website, the first thing remarkable is the FuelBand, SportWatch, the running app and the Kinect Training. Even if the Nike+ application
    is free, this strategy may give incentives to people of buying Nike’s products.

    However, the fact of refusing the open strategy has also some drawbacks. Indeed, some facts can prove that Nike could benefit from an open strategy.

    In one hand, by having an open economy, Nike could reach and attract more customers. The database would then be shared. It has some advantages (enhancing technologies, benefiting of economies of scales, etc.) and some disadvantages (share the data of all the valuable community with others, etc.). This standing point seems to be close to the intellectual property problem. It could for sure bring benefits for customers but what about the repercussion on the firm?

    In the other hand, not accepting an open strategy may create a huge risk for Nike. What would happen if another company creates a bigger community? What would happen if another firm reaches the “absorbing barrier” before Nike? Is it ready to lose customers because of the incompatibility’s choice? Even if Nike seems to benefit from its brand recognition, nobody is set aside of becoming obsolete.

    In conclusion, having an open or closed economy is a tough decision to take. Both have advantages and disadvantages. Nike has decided to remain closed. The future will show us if it was the right decision to follow, or not.

  38. d tm 25 February 2014 at 12:54 #

    Nike doesn’t want to increase traffic or brand visibility for the sake of it. Of course, the ultimate objective is to increase sales or margins and thus profits.

    In on hand, by following an open strategy, the increased online networks and reputation will surely have a positive effect on profits (ceteris paribus). On the other hand, it may also have a positive effect on its competitor’s sales. As these are durable substitute products, then, if consumers buy from Nike’s competitors they will probably not buy from Nike, translating into a negative effect on sales for the latter.

    Therefore, the analysis of this topic must have the following research question: does the positive effect in profits from an open strategy outweigh the negative effect? And the answer is, of course, it depends.

    Many arguments were already put forward in previous posts, mainly in regard to the creation of switching costs vs exploration of network effects. The spillover analysis is also interesting and its result will depend on whether we assume firms are competing à la Bertrand or à la Cournot.

    The analysis I want to introduce is whether it could be possible for Nike to follow an open strategy, taking fully advantage of its positive effects and minimizing the negative ones, basically, turning threats into opportunities. If Nike’s competitors benefit from Nike’s open strategy, then Nike could appropriate part of that benefit by asking its competitors to pay for each of their consumers who are using Nike+. The framework for this analysis will end up being the same as the model of licensing an innovation to competitors. Therefore, if Nike believes their innovation will be disruptive and thus wipe out competition, they should keep Nike+ closed. In the case it isn’t, there are benefits from following an open strategy, licensing Nike+ to its competitors.

  39. Rubens Moura 24 February 2014 at 18:19 #

    I will start analyzing the pro and cons of the adoption an open strategy. In the plus side, I would list the following elements:
    – Amplification and better exploitation of the network effect as a greater number of consumers are reachable by allowing competitors to share some services provided by a particular company.
    – By reaching a larger network, companies are able to better examine consumers’ preferences and, thus, to develop new products which fits better to their wishes.
    – Open strategies ease the exchange of information among a firm and its competitors. This enhances a company to learn from the business strategy of its peers and possibly implement improvements on other products in favor of its own interests
    – Open strategies may also encourage competing firms to establish further agreements. That becomes particularly interesting in the case on which firms aim to develop future projects jointly, given the facts that, under these circumstances, they would be able to share initial investments, better mitigate risks and so on.
    On the downside, I would mention that:
    – Dominant companies may have their positions challenged by competitors with reduced relative importance in the market. In other words, leading companies have less to learn from minor competitors by letting them use its services than the other way around.
    – In this type of business strategy, companies that own an innovative idea face to substantial difficulties to avoid imitation from its competitors.
    – In the case of Nike+, one could expect that competitors would free-ride on some of the investments (already incurred or to be incurred in the future) by Nike, such as marketing campaigns, expenditure required to set up the website, the one related with the creation of its own Costumer Assistance Services among others aspects.

    Regarding the closed strategy, the benefits that companies can enjoy are the same of the drawbacks presented on the open strategy: sustain dominant position, prevent imitation from competitors and reduce free-riding on several sources of investments. As negative points -besides the reduction of both brand visibility and the traffic of online users in Nike’s shops mentioned in the text of this blog – one can mention that the gains of exchanging information with partners and competitors mentioned above will not materialize.

  40. Quentin Castelain 24 February 2014 at 17:43 #

    Reading the article and the posted comments, it seems pretty obvious to me that having an open strategy would not benefit Nike.

    First of all, thanks to their social platform, which has the biggest market shares in the running/sporting community apps, Nike benefits of a huge network effect. Indeed, the more people will join Nike+, the more incentive it will give to other people (friends, family, acquaintances) to also join Nike + instead of other apps – such as Endomondo and Garmin for example.

    Secondly, the fact that Nike+ is a closed platform is a source of switching costs. Because people value the app – which they can only use if they have bought the right Nike product(s), because their friends are also using the app (which more relates to a network effect, as stated before) and because the use of the app is kept simple and it might take them some time to get used to a new one, people will be willing to have more costs to stay with Nike but, most importantly, they will also regard a change of brand/product as more costly, because it won’t offer them the exact same comfort and/or network than Nike+

    Third, Nike has put a lot of investments in the development of Nike+, and letting other brands be compatible with their application might be seen as a lost in regards of return on their investment, as people are ready to spend money to get the right gear to use the app.

    Fourth, it may be that making the Nike+ app compatible with one or more other brands will cost a lot to Nike in terms of development. Every brand of GPS-integrated runing device calculates, stocks and interprets data differently, which would inevitably lead in huge changes in terms of development and data handling.

    Fifth, in our times, data is gold. So why would Nike want to share their data handling system with others , As it would take away from them one of the main strategic advantages they may have for the development of future devices and/or gadgets, based on the habits of their users ?

    The only arguments I could find for Nike to be wanting to work with an open strategy regarding Nike+ would be the brand recognition that would come with it. As Garmin users, for example, would use the Nike+ app and/or website to collect and share their running data, they might be more willing to buy Nike products in the future (if their expererience has been good). But I reckon a global and historical brand as Nike does not need such an “improvement”.

    They could also want to work on an open strategy and build a common platform, in collaboration with the other brands, thereby lowering their costs thanks to costs of scale. But, again, I reckon this would have enormous costs to develop, as the collected data would have to be treated differently, or all the systems would have to be modified. but I also reckon that Nike does not need this, as their app is working just fine the way it does now.

  41. CB 23 February 2014 at 14:50 #

    On one hand, choosing an open strategy would mean that consumers will be able to be in interaction with all users (even if they didn’t buy from the same firm). This will increase the consumers’ willingness to pay. And this is extremely important for firms. So this could be a reason why Nike could adopt an open strategy and so make Nike+ compatible with other brands.
    But on the other hand, it will make the competition much stronger and cancel out the competitive advantage that Nike has with Nike+. This is why Nike chose a closed strategy. As Nike is very good at meeting consumers’ expectations, it is logical for them to offer incompatible product. The competition will be completely different, it will almost be inexistent.

    We could see that in another way. The main goal of Nike+ is to create a community so it’s important for consumers that others run with Nike+. If it wasn’t the case, nobody will join it. Hence, the network effect is strong. So Nike has a lot to gain to be incompatible because buyers want to coordinate and all adopt a single network. But if some consumers don’t want to follow the mass, the network effect will be weak. So compatibility can be better if tastes differ and the switching will be easier. So Nike has to make partnerships that make sense for consumers.

    In conclusion, the pro of an open strategy is that Nike+ could attract much more consumers. But the con is that it sharps the competition and cancels its competitive advantage. The pro of a closed strategy is that Nike is able to attract consumers and, as the network effect is strong, Nike could dominate the market by using incompatibility strategy. But the con is that there may be a risk that consumers with different taste are unwilling to follow.

  42. Alexandre Faber 22 February 2014 at 17:33 #

    It looks like the scrutinized market of (let’s call it) portable training coach devices is of an oligopolistic kind with just a handful of rivaling firms (Nike, Garmin, Polar, Motorola, Strava). These firms are competing for what looks like a series of niche segments. There is some room for product differentiation in both vertical and horizontal directions; e.g. the amount and quality of data that can be extracted (heart-rates, distances, calories burned, trajectory maps), quality of the materials, etc. Crucially, Nike, Garmin, Polar and co. offer further, complementary services. Such services, like the provision of a social network platform for users of these devices and software that stores exercise data and extracts meaningful information from your data history add value to the devices. Should Nike and co. allow for interoperability between services and devices, i.e. make these services compatible with competing devices?
    First of all, note that were the firms to make these services compatible with the competitors’ devices, they would also increase the value of the competitors’ devices. Introducing such compatibility can be seen as an investment. We’ve seen in the Innovation Economics class that unless such investment is met by a soft response of the competitors, it is not worth investing (see Belleflamme & Peitz, 2012: 492-496; Leahy & Neary, 1997). Here, response is likely to be tough because spillovers are large (the investment renders the platform and services thereupon accessible to competing devices) and no one has an incentive to invest in interoperability.
    This being said the above framework advanced by Leahy & Neary (1997) abstracts away the possibility that such platform can be used for advertising purposes (which, by the way could be rather effective since it is targeted directly to enthusiastic runners, or at least so it seems), thereby indirectly contributing to further revenues. Note also that increasing the number of users of such platforms can be valuable for other reasons, especially extracting information (through surveys, behavior on the platforms, etc.) from very specific customer segments that can prove useful for (targeted) marketing purposes. Yet, giving access to only those consumers who actually use the firm’s device can also be interesting if loyalty rebates are a profitable strategy.
    It also abstracts away the idea of network effects and more specifically that the service itself becomes more valuable as the number of users increase. Katz & Shapiro (1985), Farrell & Saloner (1985) and Chen, Doraskelski & Harrington (2007) predict that as the installed customer bases become more asymmetric, product compatibility is less likely to occur because the firms with the larger shares would lose their competitive advantage conferred through the larger networks.
    Secondly, allowing for interoperability of such services with competing devices would reduce switching costs and thus undermine rents that could otherwise be extracted from locked-in customers. This seems like a particularly compelling argument in this case; especially the data storing, treatment & analysis services are an essential complement to the device without which the device would lose most of its value. In addition, the personal value put on the data history increases as your data base becomes greater. Since the scrutinized devices are durable goods, users gather data for dozen workout sessions before the device eventually breaks. When looking for replacement, one important attribute looked for in the replacement product is that it should ensure access to the data set, continued data collection, and no disruptions in data analysis. Similarly, at some point we’ve all had the frustrating experience of confronting discontinuity in the data because the OECD, World Bank or other bodies have changed the time intervals or variable definitions thereby compromising our empirical projects.
    Thus companies have no interest in facilitating data transfers (especially exports) between their and their competitors’ devices. Strava, for instance is currently rendering transferability more complicated, see: Further evidence for the actuality of the problem is the existence of a dozen of third party companies which have specialized in data transfer, gathering and analysis services for the scrutinized devices. See:

    Belleflamme, Paul & Martin Peitz (2012): Industrial Organization: Markets & Strategy, Cambridge University Press.
    Chen, Jiawei, Ulrich Doraskelski & Joseph Harrington (2007): ‘Avoiding market dominance: product compatibility in markets with network effects,’ The RAND Journal of Economics, 40(3), 455-485.
    Farrell & Saloner (1985): ‘Standardization, Compatibility, and Innovation,’ The RAND Journal of Economics, 16(1), 70-83.
    Katz, Michael & Carl Shapiro (1985): ‘Network Externalities, Competition, and Compatibility,’ The American Economic Review, 75(3), 424-440.
    Leahy, Dermot & Peter Neary (1997): ‘Public Policy Towards R&D in Oligopolistic Industries,’ The American Economic Review, 87(4), 642-662.

  43. Xinyu Li 20 February 2014 at 21:39 #

    First of all, I’d like to say something about the positioning of Nike+, compared to its competitors (taking Garmin Forerunner as an example to illustrate). What Nike+ differentiates from Garmin Forerunner (GF) is that it does not focus on accuracy but to make it as simple or fun (you can listen to music and even share playlists with others) as it can be to promote a healthy way of living and, in addition, to create a social network associated with this kind of healthy lifestyle. However, GF, since its coal technology embedded is GPS with multiple modes displayed, it’s more accurate than Nike+. In this way, Nike+ is more like for ordinary people while GF is more eligible for athletes or someone looking for more precise track of his exercise. Their positioning is not so compatible in this sense.
    Second, Nike started the program Nike+ with its corporation with Apple, which both of them are ranking top in the most valuable global brands, have more costumer awareness than its competitor. With its incompatibility with GF, Nike only reinforces the barrier to entry.
    Third, simply the technological possibility of make it compatible may not be that profitable. Consider the cost and risk to apply open strategy for its website may be too high compared to the profit it will bring.
    Fourth, its online social networking works admirably in strengthening brand loyalty. The social network creates emotional link with its users and through this network, Nike+ gains more awareness by the word of mouth effect or simply because young people love things popular.
    Last, it also increases sales of Nike products. For example, Nike+ iPod kits have generated a strong growth in sales according to the statistic proof.
    If Nike+ takes open strategy, there may be a possibility to access to the technology of GF and thus make refinements with its own products. However, this may not bring much utility to itself since so far, the satisfaction of Nike+ users is higher than its competitor. We can draw the rough conclusion based on our daily life experience and the comments of users on the Internet.
    Besides, the network effect may be an extra benefit since open strategy can definitely bring more users to the web, which may be more realistic and useful than the first benefit I mentioned above.

  44. Matthieu 20 February 2014 at 17:40 #

    What are the pros and cons of an open vs closed strategy for nike?

    I will try to mention some pros of their strategy:

    – They are the pioneer, so with the first customer they created a kind of network effect: people can share stat or challenge with friend. So when a new customer wants to buy such kind of watch, if they have friend who use the nike+ app, of course they want to use the same app. So they cannot buy a garmin watch, so they have to buy a Nike one… They create a direct network effect

    – Imagine a customer has to buy a new watch, he had a Nike+ before (he lost it for example), he may desire to buy a garmin one, to test it. But the customer knows that if it doesn’t like the application, he can’t go back to the nike application because it is not allow with the garmin watch. So it refers to the theory of the switching costs.

    Off topic: I read an article of the problems of this kind of application; some insurance can use this kind of information (heartbeat for example), to calculate for example life expectancy and adapt their offer.

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