Reebok International Inc.

1
Reebok International Inc.

• A Comprehensive Analysis

2
Industry Analysis

• Cyclical, Non-durable Goods Industry
• 15.7B, most sales in 3rd and 4th quarters
• Product Life Cycle
• 15-18 months to make 3-6 to sell
• Important Product Types
• Running 28.6, basketball 20.7, cross
  training/athletic 12.8

3
Industry Analysis

• Brand Image
• Very important, 2 of industrys brands in top 100
• Return on Equity
• 18.11 vs. 15.9 across all industries

4
Industry Analysis

• Porters 5 Forces
• Power of Customers Low
• Fragmented top 10 control 14 of retail sales
• Threat of Substitute Products Low
• You want to live healthy, so you want to
  exercise. What are you going to wear?

5
Industry Analysis

• Porters 5 Forces cont.
• Threat of New entrants Low
• Established brands and RD capital intensive
• Power of Suppliers Low to Medium
• Production shifts to lower wage areas
• Companies like long-term relationships, some
  switching costs
• Industry Rivalry High
• Mature market, competition based on
  differentiation

6
Industry Analysis

• Beyond Porter
• No Significant Changes in Shoe Sales
• Peaks and valleys in the last few years
• Effect of the Popularity of Sports
• The more people want to be associated with
  sports, the higher the industry revenues
• Population of Most Profitable Consumers
• Not likely to change, unless

7
Industry Analysis

• Recap
• Industry is favorable, except for high rivalry
  within the industry
• Industry is not expending
• Consumer base is not expanding
• Hence
• Rivalry is likely to remain fierce

8
Industry Analysis

• Evaluation
• Industry attractive to be in, not attractive to
  enter
• Dominant players are likely to remain dominant,
  since differentiation is the name of the game

9
Market Share Major players
10
Analysis of Competitors

• Primary Competitors
• NIKE Inc. The market leader in the sports
  footwear industry. They dominate the basketball
  and running shoes category.
• Adidas-Salomon Was the leading athletic
  footwear company till the 80s, when it lost out
  its No. 1 position to Nike. They dominate the
  football shoes category.

11
NIKE Inc. Core Competencies

• Lies in its superior brand and technology. Its
  brand value for the year 2002 was 7.724 billion.
• International diversification strategy Related
  diversification
• Dispersing value chain amongst different nations

12
NIKE Inc. Transnational Strategy

• Global integration cost efficiency achieved by
  manufacturing in countries where labor cost is
  low.
• Requires centralized control
• Swift response to local responsiveness helps
  them achieve differentiation based on national
  adaptation.
• Requires de-centralized control

13
Adidas-Salomon

• Brand value 3.690 billion for the year 2002
• Strategy is focused on continuously developing
  and strengthening their brand
• Into footwear and apparel, bicycle components
  Mavic, ski and snowboard equipments Salomon,
  golf clubs and accessories TaylorMade

14
Adidas-Salomon

• Lions share of soccer shoes market but the
  industry leader Nike is stepping into their
  territory
• Danger of being perceived as a fuddy-duddy brand
  by the youth

15
Reebok International Overview

• Founded in 1979 by Current CEO Paul Fireman
• World Headquarters at Canton, MA
• Markets Sports and Fitness Products and Casual
  Footwear
• Third Largest Seller of Athletic Footwear in the
  World
• Second Largest in the US

16
Organization

• Reebok Brand
• Rockport Company
• Ralph Lauren and Polo Brands
• The Greg Norman Brand

17
Sources of Revenue

• Wholesale Distribution of footwear and Apparel
• Licensing Trademarks and Other Intellectual
  Property

18
Sources of Competitive Advantage

• Integrating Common Operations
• Economies of Scope
• Diversification
• Brand Image

19
The Reebok Brand

• Rbk
• Performance
• Classic

20
Product Manufacturing

• Designs and Markets Footwear
• Manufacturing Outsourced to Low-Cost
  Manufacturers in Latin America and South East
  Asia

21
2002 Outsourcing Breakdown

• China(53)
• Indonesia (27)
• Thailand (13)
• Vietnam (6)

22
Outsourcing China

• China is the largest supplier of Athletic Shoes
• Admission into WTO

23
Outsourcing Monitoring

• Carefully monitors Product Quality
• Factory Conditions
• Substances used in Production

24
Technology

• DMX
• The Pump
• 3D Ultralite

25
Channels of Distribution

• Athletic Specialty Stores
• High-end Retail Stores
• Sporting Goods Stores
• Moderate and Better Department Stores
• Factory Outlets (115 in the US)
• Concept Stores (5 in the US)
• Selling Online

26
International Operations

• Marketed in 170 Countries
• 48 of Athletic Shoe Revenue Comes from Overseas
• Prolonging Product LifeCycles

27
Advertising Strategy

• Endorsements from major sports figures
• Allen Iverson
• Venus Williams
• Andy Roddik

28
Sports Licensing

• Exclusive Supplier of Uniforms to NFL during
  2002-2003 Season
• Exclusive Supplier of Uniforms and Practice Wear
  to 19 NBA Teams and All Teams in WNBA

29
Conclusions and Recommendations

• Brand Image
• Financial Position allows Reebok to make heavy
  investment in increasing their brand value
• Opportunity in Alternative Sports Markets
• Introducing moderate-priced shoes and gain
  control of major distributor channels like
  FootLocker