An innovation diffusion of successive generations by system dynamics — An empirical study of Nike Golf Company

Article history: Received 19 April 2010 Received in revised form 1 September 2011 Accepted 1 August 2012 Available online 30 September 2012 Most multi-generation models investigate the monotonously incremental market potential of later generation by expanding applications for the product, besides, neither corporate marketing variables nor the competitive environment is considered. However, a new product introduced is not in a vacuum and the potential is more likely to be dynamic due to other influencing factors. Moreover, they tend to conduct the forecasts through trend extrapolation which normally neglects the extreme cases as outliers. This study constructs an integrated multi-generation diffusion model based on system dynamics, which considers dynamic market potential with a competitive relationship among generations and products. In addition, this study investigates how the price could be included as an explanatory variable. To verify the proposed model, an empirical study, Nike SQ SUMO and Nike SQ SUMO 5000 golf clubs, is investigated, in which their product life cycles just happen to cover themost extreme outlier, the Great Recession in 2008 and 2009. As a result, this model provides better forecasts by capturing the causes of industry dynamics. Accordingly, Nike could have been able to avoid unnecessary capacity expansion in May of 2007, August of 2008 and May of 2009 although there are peak periods, and can prepare more in December of 2007 and 2008 for Christmas holiday. © 2012 Elsevier Inc. All rights reserved.