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T I A M Nike

IA
M . W
H
2003
Team Members
•Qaisar S. Khokher 2541
•M. Afzal Hashmi 2517
•Tehmina Hafeez 1760
Case-Study Overview
• Internal: • Analysis
• Reebok overview, History, – SWOT Matrix
• Brands – BCG matrix
– Reebok Actual & Proposed – IE matrix
Vision and Mission – Grand Strategy Matrix
– Economic Performance – Space Matrix
– Financial History – QSPM
– Strengths and weaknesses
• General Analysis
• Analysis: IFE
• External: • Recommendations
– Industry overview • Decisions
– Opportunities and threats – Why our decision?
• Analysis: EFE – Strategic implementation
– Competitors • Current Update
• Analysis: CPM • References
• Market Share • Questions
Reebok’s Overview

• Reebok’s principal business activity is to design, development


& worldwide marketing of high quality footwear, apparel &
equipment.
• Distributed around the world: (Asia, Australia, Canada, Europe,
Latin America, and the United States)
• Reebok is 3rd largest seller of athletic footwear and athletic
apparel in the world.
• Remain market leader since 1996
• Employees: 9,102 only in USA.
History
1890-1930's

• Reebok's United Kingdom-based ancestor company for


athletes those wanted to run fast.
• 1890s, Joseph William Foster made first known running shoes
with spikes.
• By 1895, he was in business making shoes by hand for top
runners;
• The family-owned business proudly made the running shoes
worn in the 1924 Summer Games by the athletes celebrated in
the film "Chariots of Fire."
History
1950-1980

• In 1958, two of the founder's grandsons started a companion


company that came to be known as Reebok, named for an
African gazelle.
• In 1979, Paul Fireman, a partner in an outdoor sporting goods
distributorship, spotted Reebok shoes at an international trade
show. He negotiated for the North American distribution
license and introduced three running shoes in the U.S. that
year at price $60, they were the most expensive running shoes
on the market.
History
1980's

• By 1981, Reebok's sales exceeded $1.5 million,


• In 1982, Reebok introduced the first athletic shoe designed
especially for women; a shoe for new fitness exercise called
aerobic dance & named the shoe Freestyle,
• Reebok anticipated and encouraged three major trends that
transformed the athletic footwear industry:
– the aerobic exercise movement,
– the influx of women into sports
– well-designed athletic footwear for adults for street and
casual wear. .
• In 1985 Reebok completed initial public offering
• In 1986 Reebok acquired the Rockport Company.
• Late 80s, Reebok shoes are available in 170 countries.
History
1990's

• In 1992, Reebok equally involved in sports by creating several


new footwear and apparel products for football, baseball,
soccer, track and field and other sports.
• Reebok began its partnership with golfer Greg Norman,
resulting in the creation of The Greg Norman Collection.
• In the late 1990s, Reebok made a strategic commitment to align
its brand with a selected worlds most talented athletes.
• Late 90’s Reebok and the National Football League announced
an exclusive partnership
Logo Development
Products
Products
Brands
• Reebok International • Athletic footwear
• Rock Port • DMX2000
• RBK CCM Hockey • 3D Ultralite
(World’s largest) • Ralph Lauren Apparel
• Greg Norman line
Apparel
• Ralph Lauren Brand
• The Hockey
Company
• Avia
• Onfield Apparel
Reebok Stock (NYSE-RBK)
Information
• Stock Symbol: RBK.
• Went public in 1985 and is traded on the
New York Stock Exchange.
• Share Price
1996 $ 69.62
1997 $ 58.31
1998 $ 56.97
1999 $ 56.53
Vision Statement

“Reebok is dedicated to providing each and every


athlete - from professional athletes to recreational
runners to kids on the playground - with the
opportunity, the products, and the inspiration to
achieve what they are capable of. We all have the
potential to do great things. As a brand, Reebok has
the unique opportunity to help consumers, athletes
and artists, partners and employees fulfill their true
potential and reach heights they may have thought
un-reachable ”
Proposed Vision
Statement

“Continue to bring inspiration to present


and future athletes, while maintaining the
company's standard of quality for its
products.”
Mission Statement

“At Reebok, we see the world a little differently and throughout


our history have made our mark when we’ve had the courage
to challenge convention. Reebok creates products and
marketing programs that reflect the brand’s unlimited creative
potential. ."
Proposed Mission
Statement
“To continue to offer quality products with increasing
growth in the industry and expanding globally. Our
mission has always been to provide a competitive edge
by developing the most technological products. Keeping
in mind fair labor practices in all our suppliers’ factories,
while maintaining a competitive advantage, with the
shareholders interests, and company profits in mind. We
also believe our employees are one of our most
important assets. To increase the responsibility towards
the environment by evaluating the impact of day to day
operation and attempts to change operations that have a
negative impact.”
Economic Performance:
Sales by Regions (1997–1999)

1999 1998 1997

USA 1,609 M 1,858 M 2,000 M


UK 545 M 522 M 661 M
Europe 476 M 585 M 510 M
Other
267 M 258 M 47 M
countries
Economic
Performance(1997-99)
Net Sales** Net Income

1997 $ 3,641 M $ 135.12


1998 $ 3,223 M $ 23.92
1999 $ 2,897 M $ 11.04

• Net sales decrease(1997 to 1999)= $743M


• Net Income decrease (1997 to 1999)= $124.08M
*Sales (Shoes) 72%
*Sales (Apparals) 28%
Internal
strengths and weaknesses
STRENGTHS: WEAKNESSES:
• Rely on retail stores to sell
• Profits increasing products
• Paul B. Fireman, CEO • Issues with foot lockers
• Carl J.Yankowski, EVP • Poor employment practices
• Teams more connected to the at their international
consumer manufacturing sites
• Multi-brand strategy • Heavy dependency on
• Dedication to employees footwear sales
• Hydro mover moisture
technology
• DMX technology.
• 4 major divisions & 6 SBU’s
• Advertisement campaign
IFE Matrix
Internal strength Weight Rating Weighted Score
0.0-1.0 1-4 (WxR)
Profits increasing 0.05 3 0.15
Paul B. Fireman CEO 0.10 4 0.40
Carl J.Yankowski, EVP 0.10 4 0.40
Teams more connected to the consumer 0.05 4 0.20
Multi-brand strategy 0.05 4 0.20
Dedication to employees 0.05 3 0.15
Hydro mover moisture technology 0.10 4 0.40
DMX technology 0.10 4 0.40
4 major divisions & 6 SBU’s 0.05 3 0.15
Advertisement campaign 0.05 3 0.15
Internal Weakness Weight Rating Weighted Score
Rely on retail stores to sell products 0.05 1 0.05
Issues with foot lockers 0.05 1 0.05
Poor employment practices at their international manufacturing sites 0.10 2 0.20
Heavy dependency on footwear sales 0.10 2 0.20
Total (including Strengths & Weaknesses) 1.00 3.20
Industry Overview
• Athletic footwear manufactures captured nearly one-third of
the total footwear market in the early 1970s.
• Over a span of more than 25 years, American consumers spent
$300 billion on 7.5 billion pairs of athletic shoes.
• Reebok international Ltd. and Adidas became $ 3.5 Billion
companies, while Nike Inc. became the first ever $ 9.5 Billion
company.
• By 1996 the number of establishments had dropped to about
52, with 12 factories closing since 1995.
• China's imports increase by 6 percent to 1.26 billion pairs .
• Brazil's share increased 2.3 percent to 83.5 million pairs .
• Vietnam's share jumped 91.9 percent to 23.5 million pairs.
• The US markets continue to be dominated by imports from
countries with low-cost labor.
• From 1997 to 2001, the value of industry shipments declined
from $ 219.6 million to $106.5 million.
• U.S. shoe manufacturing plants declined by 775 between 1967
and 2001.
Business Structure
Operating Segments: Operating Regions:
– Footwear – US
– Apparel – Europe, Middle
– Equipment East and Africa
(EMEA)
– Asia Pacific
– Americas
Manufacturing:
Nationality of Contract Suppliers
External Opportunities and
Threats
OPPORTUNITIES:
•Established objectives THREATS:
•Result-oriented culture
•Strengthen management team
•Contemporize products •Strong US dollar
•Relevant advertising and marketing •Weak department store channel
campaigns •Foreign market is suffering
•Grow quality market share •Economic decline in key markets
•Restructured production creation •Chinese products
teams •Strong Competition
•“It’s a Woman’s World” – young
women
•“The Sounds and Rhythm of Sport.”
– fashion consumers
•National Football League campaign
•Changed leadership for difficult
brands
•Ability to create synergy between
brands
•Special Technology
EFE Matrix
Opportunities Weight Rating Weighted Score
0.0-1.0 1-4 (WxR)
Established objectives 0.15 4 0.60
Restructured production creation teams 0.05 2 0.10
“It’s a Woman’s World” – young women 0.10 3 0.30
“The Sounds and Rhythm of Sport.” – fashion consumers 0.05 2 0.10
National Football League campaign 0.05 2 0.10
Changed leadership for difficult brands 0.05 1 0.05
Ability to create synergy between brands 0.03 1 0.03
Special Technology 0.10 4 0.40
Threats Weight Rating Weighted Score
Strong US dollar 0.10 2 0.20
Weak department store channel 0.03 1 0.03
Foreign market is suffering 0.05 2 0.10
Economic decline in key markets 0.05 2 0.10
Chinese products 0.09 2 0.18
Strong Competition 0.10 2 0.10
Total(Opportunities & Threats) 1.00 2.38
Athletic Shoe Market Share
Competitive Profile
Matrix (CPM)
SWOT Analysis
S-O Strategies W-O Strategies
•Use the expertise and experience of Fireman •Strengthen objectives to curb the effect on heavy
and Yankowski to carryout objectives (S2, S3, dependent brands (O1, W4)
O1) •Utilize the changed leadership to correct difficult
•Further increase profits by utilizing the brands (O11, W4)
restructures production creation teams (S1, O7) •Strengthen campaigns to correct difficult brands
•Further strengthen the multi-brand strategy with and lessen the need to rely on department stores
planned campaigns (S5, O3, O4, O5) (O3, W1, W4)
•Further strengthen the multi-brand strategy with
changed leadership and synergy to grow quality
market share (S5, O6, O11, O12)

S-T strategies W-T Strategies


•Utilize the teams’ connection to the consumer to •Maintain brands to lessen the effect of the US
counteract sales lost because of the strong US dollar and foreign markets (W4, T1, T3)
dollar, weak department store channels, and •Strengthen brands to be less dependent on
suffering foreign market (S4, T1, T2, T3) department store channels (W4,W1, T2)
•Utilize multi-brand strategy to find a connection •Lessen the reliance on retail stores to avoid the
to foreign markets (S5, T3) effects of weak department store channels (W2,
•Use the increased profits to research other T2)
profitable markets to strengthen the foreign •Promote brands in different markets to lessen
market and avoid the negative effects of declining the reliance on suffering key markets (W4, T4)
key markets (S1, T3, T4)
BCG Matrix

?
High
Market Growth Rate •Athletic footwear
•Greg Norman •DMX2000
•Reebok int’l •3D Ultralite
•Ralph Lauren Apparel
line

Rock Port
Avia

Low
High Relative Market Share Low
IE Matrix
IFE 3.20 EFE 2.38
Grand Strategy Matrix

QUADRANT 2 (Proposed Strategies)


•Market development
•Market penetration
•Product Development
•Horizontal Integration
•Divestiture
SPACE Matrix
SPACE Matrix
Y-Axis
Financial Strength +4
Environment Stability -1==Y Coordinate +3
X-Axis
Competitive Advantage -5==X Coordinate -3
Industry Strength +2
QSPM US Market Foreign Market

Internal strength Weight Rating W. Score Rating W. Score


0.0-1.0 1-4 (WxR) (WxR)
Profits increasing 0.03 2 0.06 4 0.12

Paul B. Fireman, CEO 0.05 3 0.15 4 0.20

Carl J.Yankowski, EVP 0.05 3 0.15 4 0.20

Teams more connected to the consumer 0.02 3 0.06 3 0.06

Multi-brand strategy 0.03 3 0.09 4 0.12

Dedication to employees 0.03 2 0.06 3 0.09

Hydro mover moisture technology 0.05 4 0.20 4 0.20

DMX technology 0.05 4 0.20 3 0.15

4 major divisions & 6 SBU’s 0.02 2 0.04 4 0.08

Advertisement campaign 0.03 2 0.06 3 0.09

Internal Weakness Weight Rating W. Score Rating W. Score


Rely on retail stores to sell products 0.02 1 0.02 1 0.02

Issues with foot lockers 0.02 1 0.02 1 0.02

Poor employment practices at their international 0.05 2 0.10 2 0.10


manufacturing sites
Heavy dependency on footwear sales 0.05 2 0.10 2 0.10

Opportunities Weight Rating W. Score Rating W. Score


QSPM(con’t) US Market Foreign Market

Opportunities Weight Rating W. Score Rating W. Score

Established objectives 0.06 4 0.24 4 0.24


Restructured production creation teams 0.03 2 0.06 1 0.03

“It’s a Woman’s World” – young women 0.05 3 0.15 3 0.15

“The Sounds and Rhythm of Sport.” – fashion 0.03 2 0.06 3 0.09


consumers
National Football League campaign 0.03 2 0.06 1 0.03

Changed leadership for difficult brands 0.02 1 0.02 2 0.04

Ability to create synergy between brands 0.02 1 0.02 3 0.06

Special Technology 0.05 4 0.20 4 0.20


Threats Weight Rating W. Score Rating W. Score

Strong US dollar 0.05 2 0.10 2 0.10


Weak department store channel 0.02 1 0.02 1 0.02
Foreign market is suffering 0.03 2 0.06 2 0.06
Economic decline in key markets 0.02 2 0.04 2 0.04

Chinese products 0.04 2 0.08 2 0.08


Strong Competition 0.05 2 0.10 2 0.10

Total 1.00 2.52 2.79


Conclusions

• weakness of Reebok is located in their top


management
• Reebok changed advertising agencies
eight times and they earned a reputation
as a difficult client
• Never listen the foot lockers
Recommendations
Reebok is basically internally strong organization with lazy
management team However

• It develop a more detailed plan grow sales.


• Reliance on department store channels
• Suffering foreign markets
• Find markets that are not in an economic decline
• Strengthen the brand name and message of suffering brands
• Need strong goals and plan to grow the sales & global
reputation
• By changing advertising agencies frequently, Reebok has dug
themselves in a marketing hole. To accomplish their current
goals they need to produce better marketing campaigns.
• Change Management
Decisions

• Primary: Focus on finding the most promising customers (kids


and women) and introduce more products or improve current
ones to satisfy potential increase in demand

• Alternative:
– Keep expanding into current and future foreign markets by being
aggressive and the worldwide leader of the footwear industry
– Accelerate funding for numerous marketing campaigns in order to get to
specific markets or customer groups
– Focus on improving working conditions and human rights at
international manufacturer centers and at the same time increasing their
productivity
– Implement product diversification with company’s newest technologies
so resulting increased earnings could be reinvested into R&D plans
Why this strategy?
• U.S. Women: Prefer fashion, not footwear, they
prefer clothing, we must create a shopping style
based in athletic shopping.
• U.S. Kids: E-commerce, influenced by
innovation and design, not only comfort or sports
• We need to consolidate US sales compared to
international sales and international competitors
• Difficult to expand towards other sports or
population segments
Implementation
Actions:
• Women:
– Open specific stores specialized only for women
– Increase R&D expenses in women products
– Increase Marketing expenses by designing a specific campaign
for women using female endorsements
– Create a new logo for women market which would be associated
with fashion trends and introduce new products
• Kids:
– Increase R&D expenses in kids products
– Increase Marketing expenses by designing a specific campaign
for kids
– Introduce more soccer and basketball products targeting potential
youth market
• Research in international market to find out what are the new
trends related with women and kids products (Long-term)
Update: 2006-2007
• In 2006 Reebok become a subsidiary of German giant
Addidas (AW)
• Fireman become separate from management
• President and CEO
Paul Harrington
• SVP and Chief Communications Officer
Denise Kaigler
• SVP; President and CEO, Onfield Apparel Group
David Baxter
References
• http://finance.yahoo.com
• Reebok Annual Reports
• Reebok Quarterly Reports
• Annual ranking of America's largest corporations
• www.reebok.com
• www.bigcharts.com
• www.businessweek.com
• www.wikkipedia.org
• Strategic Management Concepts and Cases; Fred R. David,
10th Ed.
Thank you!
• Questions?
• Comments?