Reebok

Team Members

•Qaisar S. Khokher

2541

•M. Afzal Hashmi

2517

•Tehmina Hafeez

1760

Nike

2003

I A

M. W

HA

T I A

M

Case-Study Overview

• Internal:

• Reebok overview, History, • Brands

– Reebok Actual & Proposed Vision and Mission

– Economic Performance – Financial History

– Strengths and weaknesses • Analysis: IFE

• External:

– Industry overview

– Opportunities and threats • Analysis: EFE – Competitors • Analysis: CPM • Market Share • Analysis – SWOT Matrix – BCG matrix – IE matrix

– Grand Strategy Matrix – Space Matrix

– QSPM

• General Analysis • Recommendations • Decisions

– Why our decision?

– Strategic implementation

• Current Update • References

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.

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

Brands

• Reebok International

• Rock Port

• RBK CCM Hockey

(World’s largest)

• Greg Norman

Apparel

• Ralph Lauren Brand

• The Hockey

Company

• Avia

• Onfield Apparel

•

Athletic footwear

_{Athletic footwear}

•

DMX2000

_DMX2000

•

3D Ultralite

_{3D Ultralite}

•

Ralph Lauren Apparel

_{Ralph Lauren Apparel}

line

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

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)

47 M

258 M

267 M

Other

countries

510 M

585 M

476 M

Europe

661 M

522 M

545 M

UK

2,000 M

1,858 M

1,609 M

USA

1997

1998

1999

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:

• Profits increasing

• Paul B. Fireman, CEO • Carl J.Yankowski, EVP

• Teams more connected to the

consumer

• Multi-brand strategy

• Dedication to employees

• Hydro mover moisture

technology

• DMX technology.

• 4 major divisions & 6 SBU’s • Advertisement campaign

WEAKNESSES:

• Rely on retail stores to sell

products

• Issues with foot lockers

• Poor employment practices

at their international manufacturing sites

• Heavy dependency on

IFE Matrix

3.20 1.00

Total (including Strengths & Weaknesses)

0.20 2

0.10 Heavy dependency on footwear sales

0.20 2

0.10 Poor employment practices at their international manufacturing sites

0.05 1

0.05 Issues with foot lockers

0.05 1

0.05 Rely on retail stores to sell products

Weighted Score Rating Weight Internal Weakness 0.15 3 0.05 Advertisement campaign 0.15 3 0.05 4 major divisions & 6 SBU’s

0.40 4 0.10 DMX technology 0.40 4 0.10 Hydro mover moisture technology

0.15 3 0.05 Dedication to employees 0.20 4 0.05 Multi-brand strategy 0.20 4 0.05 Teams more connected to the consumer

0.40 4

0.10 Carl J.Yankowski, EVP

0.40 4

0.10 Paul B. Fireman CEO

0.15 3 0.05 Profits increasing Weighted Score (WxR) Rating 1-4 Weight 0.0-1.0 Internal strength

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

Business Structure

Operating Segments:

– Footwear

– Apparel

– Equipment

Operating Regions:

– US

– Europe, Middle

East and Africa

(EMEA)

– Asia Pacific

– Americas

Manufacturing:

External Opportunities and

Threats

OPPORTUNITIES: •Established objectives •Result-oriented culture

•Strengthen management team •Contemporize products

•Relevant advertising and marketing

campaigns

•Grow quality market share

•Restructured production creation

teams

•“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

THREATS:

•Strong US dollar

•Weak department store channel •Foreign market is suffering

•Economic decline in key markets •Chinese products

EFE Matrix

2.38 1.00

Total(Opportunities & Threats)

0.10 2 0.10 Strong Competition 0.18 2 0.09 Chinese products 0.10 2 0.05 Economic decline in key markets

0.10 2

0.05 Foreign market is suffering

0.03 1

0.03 Weak department store channel

0.20 2 0.10 Strong US dollar Weighted Score Rating Weight Threats 0.40 4 0.10 Special Technology 0.03 1 0.03 Ability to create synergy between brands

0.05 1

0.05

Changed leadership for difficult brands

0.10 2

0.05 National Football League campaign

0.10 2

0.05 “The Sounds and Rhythm of Sport.” – fashion consumers

0.30 3

0.10 “It’s a Woman’s World” – young women

0.10 2

0.05 Restructured production creation teams

0.60 4 0.15 Established objectives Weighted Score (WxR) Rating 1-4 Weight 0.0-1.0 Opportunities

Competitive Profile

Matrix (CPM)

SWOT Analysis

W-T Strategies

•Maintain brands to lessen the effect of the US dollar and foreign markets (W4, T1, T3)

•Strengthen brands to be less dependent on department store channels (W4,W1, T2)

•Lessen the reliance on retail stores to avoid the effects of weak department store channels (W2, T2)

•Promote brands in different markets to lessen the reliance on suffering key markets (W4, T4)

S-T strategies

•Utilize the teams’ connection to the consumer to counteract sales lost because of the strong US dollar, weak department store channels, and suffering foreign market (S4, T1, T2, T3)

•Utilize multi-brand strategy to find a connection to foreign markets (S5, T3)

•Use the increased profits to research other profitable markets to strengthen the foreign market and avoid the negative effects of declining key markets (S1, T3, T4)

W-O Strategies

•Strengthen objectives to curb the effect on heavy dependent brands (O1, W4)

•Utilize the changed leadership to correct difficult brands (O11, W4)

•Strengthen campaigns to correct difficult brands and lessen the need to rely on department stores (O3, W1, W4)

S-O Strategies

•Use the expertise and experience of Fireman and Yankowski to carryout objectives (S2, S3, O1)

•Further increase profits by utilizing the restructures production creation teams (S1, O7) •Further strengthen the multi-brand strategy with planned campaigns (S5, O3, O4, O5)

•Further strengthen the multi-brand strategy with changed leadership and synergy to grow quality market share (S5, O6, O11, O12)

BCG Matrix

Rock Port

Rock Port

?

•Athletic footwear_{Athletic footwear}

•DMX2000_DMX2000

•3D Ultralite_{3D Ultralite}

•Ralph Lauren Apparel _{Ralph Lauren Apparel} line

line

Avia Avia

Relative Market Share

Relative Market Share

M

ar

ket

Gr

o

w

th R

a

te

M

ar

ket

Gr

o

w

th R

a

te

Low

Low

High

High

High

High

Low

Low

•Greg Norman_{Greg Norman}

IE Matrix

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

0.10 2

0.10 2

0.05 Poor employment practices at their international manufacturing sites 0.02 1 0.02 1 0.02 Issues with foot lockers

0.02 1

0.02 1

0.02 Rely on retail stores to sell products

W. Score Rating W. Score Rating Weight Internal Weakness 0.09 3 0.06 2 0.03 Advertisement campaign 0.08 4 0.04 2 0.02 4 major divisions & 6 SBU’s

0.15 3 0.20 4 0.05 DMX technology 0.20 4 0.20 4 0.05 Hydro mover moisture technology

0.09 3 0.06 2 0.03 Dedication to employees 0.12 4 0.09 3 0.03 Multi-brand strategy 0.06 3 0.06 3 0.02 Teams more connected to the consumer

0.20 4

0.15 3

0.05 Carl J.Yankowski, EVP

0.20 4

0.15 3

0.05 Paul B. Fireman, CEO

0.12 4 0.06 2 0.03 Profits increasing W. Score (WxR) Rating W. Score (WxR) Rating 1-4 Weight 0.0-1.0 Internal strength

2.79 2.52 1.00 Total 0.10 2 0.10 2 0.05 Strong Competition 0.08 2 0.08 2 0.04 Chinese products 0.04 2 0.04 2 0.02 Economic decline in key markets

0.06 2

0.06 2

0.03 Foreign market is suffering

0.02 1

0.02 1

0.02 Weak department store channel

0.10 2 0.10 2 0.05 Strong US dollar W. Score Rating W. Score Rating Weight Threats 0.20 4 0.20 4 0.05 Special Technology 0.06 3 0.02 1 0.02

Ability to create synergy between brands

0.04 2

0.02 1

0.02

Changed leadership for difficult brands

0.03 1

0.06 2

0.03 National Football League campaign

0.09 3

0.06 2

0.03 “The Sounds and Rhythm of Sport.” – fashion

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

0.03 1

0.06 2

0.03 Restructured production creation teams

0.24 4 0.24 4 0.06 Established objectives W. Score Rating W. Score Rating Weight Opportunities

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

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.

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

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

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

• 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,

Thank you!

• Questions?

• Comments?