Final answer:
Nike has decided to pursue a strategy of product differentiation by branching out into new product categories such as MP3 players.
Step-by-step explanation:
Nike has decided to pursue a strategy of product differentiation. Product differentiation refers to any action that firms take to make consumers perceive their products as different from their competitors'. By branching out into entirely new product categories such as MP3 players, Nike is diversifying its product portfolio and offering unique products to attract different customer segments.
Nike is pursuing a diversification strategy by extending into new product categories such as MP3 players, seeking to reduce risk and reach new customers with product differentiation. This move requires Nike to maintain a strong and consistent brand reputation to achieve success in the new market.
When Nike, a company known for its sports shoes and apparel, begins branching out into entirely new product categories such as MP3 players, it is pursuing a strategy of diversification. Diversification is a business strategy that involves a company extending its range of products or markets. This approach can help reduce risk as the company's portfolio becomes more varied and less dependent on its traditional markets. Nike's move into MP3 players represents a significant shift from its core products, indicating an intention to reach new customers and create additional revenue streams.
Such strategic product differentiation can also be seen as a means to make consumers perceive Nike's products as unique compared to its competitors'. Through differentiation, a brand like Nike can develop a competitive advantage by offering products with distinct features, benefits, or brand associations. This move might reflect Nike's aim to capitalize on its strong brand image and to leverage it in the technology sector.
However, with diversification and product differentiation, Nike must ensure that its brand reputation remains consistent and strong. As the history of branding has shown, delivering a consistent product and protecting the brand is essential for maintaining a sound reputation.