Reebok -- I Am What I Am.

Topic Case Study

PRESENTED TO

SIR LIAQUAT

TEAM MEMBERS

QAISAR SARDAR KHOKHER 2541

MOHAMMAD AFZAL HASHMI 2517
TEHMINA HAFEEZ
1760
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
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 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 NFL’s 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 (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 Information (NYSE-RBK)

• 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
 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 we’ve had the courage to challenge convention. Reebok creates products and
marketing programs that reflect the brand’s 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. Reebok’s 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 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

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 (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 SBU’s
• Advertisement campaign

Weaknesses

1999 1998 1997

• Rely on retail stores to sell products
• Issues with foot lockers
USA •
•
1,609 M 1,858 M
Poor employment practices at their international manufacturing sites
Heavy dependency on footwear sales
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
IFE (Internal Factor Evaluation) 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 0.10 2 0.20
manufacturing sites
Heavy dependency on footwear sales 0.10 2 0.20
Total (including Strengths & Weaknesses) 1.00 3.20

CONCLUSION

Reebok gain 3.20 IFE total weighted score which is above 2.50 that‘s 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
• “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 (External Factor Evaluation) 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 0.05 2 0.10
consumers
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

Conclusion

Reebok gain 2.38 EFE total weighted score which is above 2.50 that‘s 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 Question Mark

• Greg Norman • Athletic footwear

• DMX2000
• Reebok Apparel • 3D Ultralite

• Ralph Lauren Apparel

line

Cash Cows Dogs

• Rock Port • Avia

IE Matrix (Internal Evaluation)

IFE 3.20

EFE 2.38
Grand Strategy Matrix

QUADRANT 2 (Proposed Strategies)

• Market development
• Market penetration
• Product Development
• Horizontal Integration
• Divestiture
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 Matrix

US Market Foreign Market

Weight Rating W. Rating W.

Score Score
Internal strength 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 0.02 3 0.06 3 0.06
consumer
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 0.05 4 0.20 4 0.20
technology
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

W. W.
Internal Weakness Weight Rating Rating
Score Score

Rely on retail stores to sell 0.02 1 0.02 1 0.02

products
Issues with foot lockers 0.02 1 0.02 1 0.02
Poor employment practices at 0.05 2 0.10 2 0.10
their international manufacturing
sites
Heavy dependency on footwear 0.05 2 0.10 2 0.10
sales
Opportunities Weight Rating W. Rating W.
Score Score

Established objectives 0.06 4 0.24 4 0.24

Restructured production creation 0.03 2 0.06 1 0.03
teams
“It’s a Woman’s World” – young 0.05 3 0.15 3 0.15
women
“The Sounds and Rhythm of 0.03 2 0.06 3 0.09
Sport.” – fashion consumers
National Football League 0.03 2 0.06 1 0.03
campaign
Changed leadership for difficult 0.02 1 0.02 2 0.04
brands
Ability to create synergy 0.02 1 0.02 3 0.06
between brands
Special Technology 0.05 4 0.20 4 0.20

Threats Weight Rating W. Rating W.

Score 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(Opportunities & 1.00 2.52 2.79
Threats)

Conclusions

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 Fireman’s inability to delegate efficiently. Key employees and top management were
sometimes left out of the "loop". Additionally, the board of directors felt Fireman’s 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 O’Neal as a superstar endorser.
Then Reebok changed advertising agencies and Shaq’s 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 firm’s 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
don’t 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 management’s
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 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 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:

• 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

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)

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.