Reebok

IA

W . M

T A H

M A I

Team Members •Qaisar S. Khokher 2541 •M. Afzal Hashmi 2517 •Tehmina Hafeez 1760

Nike 2003

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 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 • Rock Port • RBK CCM Hockey (World’s largest) • Greg Norman Apparel • Ralph Lauren Brand • The Hockey Company • Avia • Onfield Apparel

• • •

Athletic footwear DMX2000 3D Ultralite • 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 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 countries

267 M

258 M

47 M

Economic Performance(1997-99) 1997 1998 1999

Net Sales**

Net Income

$ 3,641 M $ 3,223 M $ 2,897 M

$ 135.12 $ 23.92 $ 11.04

• Net sales decrease(1997 to 1999)= • Net Income decrease (1997 to 1999)= *Sales (Shoes)

72%

*Sales (Apparals)

28%

$743M $124.08M

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 at their international Teams more connected to the manufacturing sites consumer 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 0.0-1.0

Rating 1-4

Weighted Score (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: – Footwear – Apparel – Equipment

Operating Regions: – US – Europe, Middle East and Africa (EMEA) – Asia Pacific – Americas

Manufacturing: Nationality of Contract Suppliers

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 •Strong Competition

EFE Matrix Opportunities

Weight 0.0-1.0

Rating 1-4

Weighted Score (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 •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)

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-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-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)

BCG Matrix Market Growth Rate

High •Greg Norman •Reebok int’l

Rock Port

?

•Athletic footwear •DMX2000 •3D Ultralite •Ralph Lauren Apparel line

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 Environment Stability X-Axis Competitive Advantage Industry Strength

+4 -1==Y Coordinate -5==X Coordinate +2

+3 -3

QSPM Internal strength

US Market Weight 0.0-1.0

Rating 1-4

Foreign Market

W. Score (WxR)

Rating

W. Score (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

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 manufacturing sites

0.05

2

0.10

2

0.10

Heavy dependency on footwear sales

0.05

2

0.10

2

0.10

Opportunities

Weight

Rating

W. Score

W. Score

Rating

Rating

W. Score

W. Score

QSPM(con’t) Opportunities

US Market Weight

Rating

W. Score

Foreign Market 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 consumers

0.03

2

0.06

3

0.09

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

•

Alternative:

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