Reebok -- I Am What I Am. Topic Case Study

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Case Study over view

Internal: Reebok overview, History Key Facts, Brands Reebok Actual & Proposed Vision and Mission Economic Performance Financial History Strengths and weaknesses Analysis: IFE External: Industry overview and comparison of financial ratios Manufacturing 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

Reeboks Overview

Reeboks 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 OF REEBOK 1890-1930's Reebok's United Kingdom-based ancestor company was founded for one of the best reasons possible: athletes wanted to run faster. So, in the 1890s, Joseph William Foster made some of the first known running shoes with spikes in them. By 1895, he was in business making shoes by hand for top runners; and before long his fledgling company, J.W. Foster and Sons, developed an international clientele of distinguished athletes. 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." 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 $60, they were the most expensive running shoes on the market. 1980's By 1981, Reebok's sales exceeded $1.5 million, but a dramatic move was planned for the next year. In 1982, Reebok introduced the first athletic shoe designed especially for women; a shoe for a hot new fitness exercise called aerobic dance. The shoe was called the Freestyle, and with it Reebok anticipated and encouraged three major trends that transformed the athletic footwear industry: the aerobic exercise movement, the influx of women into sports and exercise and the acceptance of well-designed athletic footwear by adults for street and casual wear. Explosive growth followed, which Reebok fueled with new product categories, making Reebok an industry leader. In the midst of surging sales in 1985, Reebok completed its initial public offering (stock symbol is NYSE: RBK). A year later, Reebok made its first strategic acquisition, The Rockport Company. Rockport was a pioneer in using advanced materials and technologies in traditional shoes and the first company to engineer walking comfort in all

types of dress and casual shoes. In the late 1980s, Reebok began an aggressive expansion into overseas markets and Reebok products are now available in more than 170 countries and are sold through a network of independent and Reebok-owned distributors. Creating innovative products that generate excitement in the marketplace has been a central corporate strategy ever since Reebok introduced the Freestyle. In the late 1980s, a particularly productive period began with The Pump technology and continues today, with breakthrough concepts and technologies for numerous sports and fitness activities. 1990's In 1992, Reebok began a transition from a company identified principally with fitness and exercise to one equally involved in sports by creating several new footwear and apparel products for football, baseball, soccer, track and field and other sports. That same year, 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 select few of the worlds most talented, exciting and cutting-edge athletes. Since then, the company has focused on those athletes who represent the top echelon of sports and fitness. 1999-2000 In 1999-2000, Reebok and the National Football League announced an exclusive partnership that serves as a foundation of the NFLs consumer products business. The NFL granted a long-term exclusive license to Reebok beginning in the 2002 NFL season to manufacture market and sell NFL licensed merchandise for all 32 NFL teams. The license includes on-field uniforms, sideline apparel, practice apparel and an NFL-branded footwear and apparel collection. Logos

Products

Brands Reebok International Rock Port RBK CCM Hockey (Worlds largest) Greg Norman Apparel Ralph Lauren Brand The Hockey Company Avia Onfield Apparel Athletic footwear DMX2000 3D Ultralite Ralph Lauren Apparel line

Reebok Stock Information (NYSE-RBK)

Stock Symbol: RBK. Went public in 1985 and is traded on the New York Stock Exchange. Share Price 1996 1997 1998 1999 $ 69.62 $ 58.31 $ 56.97 $ 56.53

REEBOK'S VISION

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 STATMENT

Continue to bring inspiration to present and future athletes, while maintaining the company's standard of quality for its products.

REEBOK'S MISSION

Always Challenge and Lead through Creativity At Reebok, we see the world a little differently and throughout our history have made our mark when weve had the courage to challenge convention. Reebok creates products and marketing programs that reflect the brands unlimited creative potential.

PROPOSED MISSION STATMENT

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.

REEBOK'S POSITIONING Celebrate Individuality in Sport and Life Reebok understands that people are, above all, unique. Reeboks positioning reflects this; celebrating the distinct qualities that make people who they are - their unique points of view, their individual style and their remarkable talents and accomplishments. Reebok celebrates their individuality, their authenticity and the courage it takes to forge their own path to greatness. While some may call them crazy or eccentric, Reebok calls them visionary and original. REEBOK'S PURPOSE To Empower Global Youth to Fulfill their Potential Reebok recognizes that it has a responsibility to make a positive, lasting difference in the lives of our consumers, employees, partners and the world at large. For two decades, Human Rights, through the Reebok Human Rights program, were the primary focus of this effort. In 2007, Reebok expanded on what had been built and created a Global Corporate Citizenship platform with a purpose for the brand, to empower global youth to fulfill their potential. The primary pillar of the platform is Reebok 4 Real, which combines and maximizes the energy, resources, funds and passion of employees, athletes and artists, and our retail partners to create a network of empowerment that will help underprivileged, underserved youth around the world fulfill their potential and live healthy, active lives.

Economic Performance (Sales by regions)

1999 USA UK Europe 1,609 M 545 M 476 M

1998 1,858 M 522 M 585 M

1997 2,000 M 661 M 510 M

Other countries

267 M

258 M

47 M

Net Sales** 1997 1998 1999 $ 3,641 M $ 3,223 M $ 2,897 M $ 135.12 $ 23.92 $ 11.04

Net Income

Net sales decrease(1997 to 1999)= Net Income decrease (1997 to 1999)=

$743M $124.08M

Sales (Shoes) 72% *Sales (Apparels) 28%

Key internal Factors Affecting Reebok 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 SBUs Advertisement campaign

Weaknesses

1999 USA UK Europe Other countries

1998 1,858 M 522 M 585 M 258 M

1997 2,000 M 661 M 510 M 47 M

Rely on retail stores to sell products Issues with foot lockers Poor employment practices at their international manufacturing sites Heavy dependency on footwear sales

1,609 M 545 M 476 M 267 M

IFE (Internal Factor Evaluation) Matrix

Internal strength

Weight

Rating Weighted Score 1-4 3 4 4 4 4 3 4 4 3 3 Rating 1 1 2 2 (WxR) 0.15 0.40 0.40 0.20 0.20 0.15 0.40 0.40 0.15 0.15 Weighted Score 0.05 0.05 0.20 0.20 3.20

0.0-1.0 Profits increasing 0.05 Paul B. Fireman CEO 0.10 Carl J.Yankowski, EVP 0.10 Teams more connected to the consumer 0.05 Multi-brand strategy 0.05 Dedication to employees 0.05 Hydro mover moisture technology 0.10 DMX technology 0.10 4 major divisions & 6 SBUs 0.05 Advertisement campaign 0.05 Internal Weakness Weight Rely on retail stores to sell products 0.05 Issues with foot lockers 0.05 Poor employment practices at their international 0.10 manufacturing sites Heavy dependency on footwear sales 0.10 Total (including Strengths & Weaknesses) 1.00 CONCLUSION

Reebok gain 3.20 IFE total weighted score which is above 2.50 thats why Reebok is Internally very strong

Key External Factors Affecting Reebok

Opportunities Established objectives Result-oriented culture Strengthen management team Contemporize products Relevant advertising and marketing campaigns Grow quality market share Restructured production creation teams Its a Womans 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 (External Factor Evaluation) Matrix Opportunities Weight Rating 1-4 4 2 3 2 2 1 1 4 Rating 2 1 2 2 2 2 Weighted Score (WxR) 0.60 0.10 0.30 0.10 0.10 0.05 0.03 0.40 Weighted Score 0.20 0.03 0.10 0.10 0.18 0.10 2.38

0.0-1.0 Established objectives 0.15 Restructured production creation teams 0.05 Its a Womans World young women 0.10 The Sounds and Rhythm of Sport. fashion 0.05 consumers National Football League campaign 0.05 Changed leadership for difficult brands 0.05 Ability to create synergy between brands 0.03 Special Technology 0.10 Threats Weight Strong US dollar 0.10 Weak department store channel 0.03 Foreign market is suffering 0.05 Economic decline in key markets 0.05 Chinese products 0.09 Strong Competition 0.10 Total(Opportunities & Threats) 1.00

Conclusion Reebok gain 2.38 EFE total weighted score which is above 2.50 thats why Reebok is Externally facing strong competition.

Competitive profile matrix

Athletic Market Share

Tows Matrix:

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)

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)

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

STARS Greg Norman Reebok Apparel

Question Mark Athletic footwear DMX2000 3D Ultralite Ralph Lauren Apparel line

Cash Cows Rock Port

Dogs Avia

IE Matrix (Internal Evaluation) IFE EFE 3.20 2.38

Grand Strategy Matrix

QUADRANT 2 (Proposed Strategies)

Market development Market penetration Product Development Horizontal Integration Divestiture

SPACE Matrix

Y-Axis Financial Strength Environment Stability X-Axis Competitive Advantage Industry Strength -5==X Coordinate -3 +2 +4 -1==Y Coordinate +3

QSPM Matrix

US Market

Foreign Market

Weight Internal strength 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 SBUs Advertisement campaign Internal Weakness Rely on retail stores to sell products Issues with foot lockers Poor employment practices at their international manufacturing sites Heavy dependency on footwear sales 0.0-1.0 0.03 0.05 0.05 0.02 0.03 0.03 0.05 0.05 0.02 0.03 Weight 0.02 0.02 0.05 0.05

Rating 1-4 2 3 3 3 3 2 4 4 2 2 Rating 1 1 2 2

W. Score (WxR) 0.06 0.15 0.15 0.06 0.09 0.06 0.20 0.20 0.04 0.06 W. Score 0.02 0.02 0.10 0.10

Rating

W. Score (WxR) 0.12 0.20 0.20 0.06 0.12 0.09 0.20 0.15 0.08 0.09 W. Score 0.02 0.02 0.10 0.10

4 4 4 3 4 3 4 3 4 3 Rating 1 1 2 2

Opportunities Established objectives Restructured production creation teams Its a Womans 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 Total(Opportunities & Threats) Conclusions

Weight 0.06 0.03 0.05 0.03 0.03 0.02 0.02 0.05 Weight 0.05 0.02 0.03 0.02 0.04 0.05 1.00

Rating 4 2 3 2 2 1 1 4 Rating 2 1 2 2 2 2

W. Score 0.24 0.06 0.15 0.06 0.06 0.02 0.02 0.20 W. Score 0.10 0.02 0.06 0.04 0.08 0.10 2.52

Rating 4 1 3 3 1 2 3 4 Rating 2 1 2 2 2 2

W. Score 0.24 0.03 0.15 0.09 0.03 0.04 0.06 0.20 W. Score 0.10 0.02 0.06 0.04 0.08 0.10 2.79

A major weakness of Reebok is located in their top management. They lack top management depth and face high management turnover. This is attributed to the CEO, Paul Firemans inability to delegate efficiently. Key employees and top management were sometimes left out of the "loop". Additionally, the board of directors felt Firemans salary was too high.

In advertising, Reebok had difficulty positioning itself. Reebok changed advertising agencies eight times and they earned a reputation as a difficult client. Reebok aimed to differentiate its shoe and apparel lines and hired Shaquille ONeal as a superstar endorser. Then Reebok changed advertising agencies and Shaqs new role was contradictory to the old. Reebok largest customer is Footlocker, yet they established poor relations with them, when they ignored their request to manufacture a specialty line exclusively for Footlocker. Reebok was a poor listener to Footlocker, which has a good ear to consumer wants and needs. Recommendations Immediately, Reebok should drastically improve its relation with its largest distributor Footlocker. Then evaluate its manufacturing situation in the Far East, to see if the benefits outweigh the costs of a lowered reputation. The firms ROI has decreased and they need to manage their new assets better. We would recommend a brief turnaround strategy. Contraction would include increasing their accounts receivable turnover to increase profits by collecting their accounts sooner and divesting in unprofitable divisions that dont follow their marketing strategy like the health and fitness clubs. Then in the Consolidation phase they can measure their success by aiming for increases in their fixed asset turnover and ROI ratios. Lastly, and most importantly, Reebok needs to improve their top management environment and utilize the skill that they are paying for. Ignoring delegation duties in the top management will not reduce the management turnover and will limit managements progress. Reebok has a strong name and even stronger campaign plans. However, the company has a few areas that need to be analyzed and corrected. The areas include:

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 Alternatives: 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 companys 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 comforts or sports Reebok need to consolidate US sales compared to international sales and international competitors Difficult to expand towards other sports or population segments

Implementations (Actions): Women:

Kids:

Open specific stores specialized only for women Increase R&D expenses by 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

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)

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.