Strategic management project (1)

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strategic analysis of reebok

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Strategic management project (1)

  1. 1. PROJECT REPORT ON STRATEGIC ANALYSIS OF REEBOK Submitted as a part of CONTINUOUS ASSESSMENT- 1 For the partial fulfillment of award of degree of Master of Business AdministrationSubmitted To:- Submitted To:-Prof. Hemraj Verma Aruna Chauhan :- 1103102173 Gaurav Kumar :- 1103102128 Rajneesh kr. Yadav:- 1103102136 Pragya :-1103102129 Harshit Kansal:- 1103102133 Umang Bajpai:- 1103102125 (Members of Group-3, MBA-Batch3) School of Business 1
  2. 2. Oct 2012 Table of ContentS. No. Chapters Executive Summary1 Introduction to the company2. Analysis of Vision, Mission & Core values3. The External Environment Analysis4. The Internal Environment Analysis Competition Analysis Industry Structure (Using Porter‟s Five forces5. model) Competitive Profile Matrix (Based on Key Success factors)6. Any additional analysis (Application of BCG tool)7. Conclusion Referen ces 2
  3. 3. Executive SummaryThe Company The Mission at Reebok is to be on the cutting-edge of sport and lifestyle productsbuilt upon a strong heritage in sports(Reebok, 2011). Reebok strives to challengeconvention and lead through creativity and have been doing so for over 100 years(Reebok,2011). The company was founded on one important value in the 1890‟s, helping athletesrun faster (Reebok, 2011). Since then the main vision has been to help athletes fulfill theirpotential (Reebok, 2011). Reebok is an American- inspired global brand, which celebratesindividuality of the athlete while also helping the athlete to obtain goals they once thoughtunattainable (Reebok, 2011). Reebok is a subsidiary of Adidas Sportswear. 3
  4. 4. IntroductionReebok started its operation in INDIA in 1995. Headed by Managing Director Mr. SubhinderSingh Prem and it has dominated the India sports market with 51% market share far aheadof its competitors NIKE, PUMA etc. Reebok India has a PAN India presence with its branchoffices in Mumbai, Kolkata, Bengaluru. It has always challenged and lean through creativity.It has introduced products in a wide range of sport shoe category from running, walking,aerobics, lifestyle, and newly introduced Runtone ready, Zigdynamic, Realflex etc. Itcelebrates individuality in sports and lifestyle. Reebok has introduced its internationallyacclaimed fitness programs in India, conducted under the banner of Reebok InstructorAlliance, which is dedicated to fitness instructors, personal trainers and health club owners.Reebok has trained and certified more than 800 trainers till now.Reebok has introduced its internationally acclaimed fitness programs in India, conductedunder the banner of Reebok Instructor Alliance, which is dedicated to fitness instructors,personal trainers and health club owners. Reebok has trained and certified more then 800trainers till now.Reebok India commands a 54% market share in the premium sportswear industry accordingto the calendar year December 2008. Its revenue has touched 1400 Crores (at retail price)in 2008. It plans to increase the store count from the existing 500 to over 600 before 2007.Reebok reaches out to its target customers through its 500 exclusive Reebok Stores, 200Shop in the shop outlets & 2500 dealer outlets. Reebok has the single largest store inHyderabad. 4
  5. 5. Mission And Vision Analysis Reebok’s VisionFulfilling Potential"Reebok is dedicated to providing each and every athlete - from professional athletes torecreational runners to kids on the playground - with the opportunity, the products, and theinspiration 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 thoughtun-reachable " Reebok’s MissionAlways Challenge and Lead through Creativity“At Reebok, we see the world a little differently and throughout our history have made ourmark when we‟ve had the courage to challenge convention. Reebok creates products andmarketing programs that reflect the brand‟s unlimited creative potential.” Nike’s Vision“To carry on his legacy of innovative thinking, whether to develop products that helpathletes of every level of ability reach their potential or to create business opportunities thatset Nike apart from the competition and provide value for our shareholders.” Nike’s Mission ” To bring inspiration and innovation to every athlete in the world"*”If you have a body, you are an athlete.” – Bill Bower 5
  6. 6. Analysis on the basis of elements of mission Statement In InSon. Elements Reebok numeri Nike numeri c c 1 Customers Yes 1 yes 1 2 Product or Services Yes 1 yes 1 3 Market No 0 no 0 4 Technology Yes 1 yes 1 Concern for Survival, 5 Yes 1 no 0 Growth & Profitability 6 Self-concept No 0 yes 1 Concept for Public 7 Yes 1 no 0 Image Concern for 8 No 0 no 0 employees Total 5 4 Value in percentage 62.5 50Interpretation of mission statement:-After analysis the mission statement of Reebok & Nike is: On the basis of various para-meters like customers, product or services, market, technology, growth & profitability, self-concept, concern for employees etc. We find that overall percentile/value of statement ofREEBOK is much better than the NIKE. Which is clearly shown in above table that Reebok ishaving overall 62.5 avg. percentile and nice is having 50 avg. percentile which is 12.5%greater than nice. So, it means that reeboks mission statement is much better than thenice.For analysis the mission statement firstly, we convert the data into numeric form for gettingthe output in percentage form. 6
  7. 7. ENVIRONMENTAL ANALYSIS OF REEBOKBasically, it means those aspects of the surroundings of business which affect its operationand determine its effectiveness. It is mixture of complex, dynamic and uncontrollablefactors within which a business is to be operated. And these are those factors which affectthe business for taking the managerial decision by the top-level management of thecompany. These are divided in two part internal and external environment of company.Internal environmental Factors:-These are those factors which are controllable by the company. .Some factors are given below:1) Company objective:For the core board initiative included: Maximize the incremental footwear and apparel sell in and sell through opportunity with key Reebok retail partners. Re-energize the fitness and sports industry enabling Reebok to recapture its leadership position. Successfully integrate the Reebok core business into the overall strategic goals of Reebok International (Be Reebok) and interactive marketing strategies. Achieve Reebok EPS should be higher than the EPS during 2011 is 4.29$. Generate a Reebok positive ROI in 24 months. Capture maximal mass market sales volume of core boards and videos2) Marketing strategies: Create, produce and deliver a breakthrough Reebok core training video series that generated excitement around the Reebok core training phenomena. Reebok merge with aides. Execute an integrated Reebok marketing asset strategy to launch and deliver Reebok core training to the fitness and sport training market. Maximize the penetration of Reebok core training into the US and key international markets by tapping the global Reebok University human infrastructure (master trainers, alliance members etc. 7
  8. 8. 3) Reebok’s Fitness Culture and Positioning: Reebok created Reebok core training and the Reebok core board based on a breakthroughtraining technology and consumer market research. By synthesizing the intrinsic humanneed for self improvement and feeling good with the functional needs of improved strengthand performance for an active lifestyle, Reebok endeavored to redefine sports and fitness.Reebok‟s goal was to communicate the key benefits to consumers globally. This targetedapproach would ensure deep penetration and allow Reebok to create the necessary “forestfires” to successfully drive Reebok core training nationally and globally.4) Reebok Core Board Product Development Strategy:Reebok decided to externalize most of the product development, manufacturing andDistribution value chain activities. Reebok would utilize the strength of strategic alliancePartners to develop product and support club and retail distribution as well as the salesAnd some trade marketing for the Reebok core boards and programming. Reebok wouldFocus internal resources on the marketing activities related to health clubs and consumerRetail that would allow it to strategically align with footwear and apparel marketing goalsAnd enable it to leverage existing fitness assets.5) Core Training Program:- Build program to emphasize strength training as key element for a total body workout Offer short (15 -30 minute) executions of Core Training classes to induce trial and Appeal to men Train instructors to incorporate strength training into Core Board useThese are the above mention some internal factors which are controllable by the company. 8
  9. 9. External Environmental Factors PESTLE ANALYSIS1) Political & legal:- Reebok policy is to control and monitor hazardous substance to protect human health and environment one of those is to eliminate PVC making progress in finding substitutes like polyurethane, ethyl vinyl, silicones thermoplastic rubber. Reebok also provide training sessions on employment standards and HR systems, health and safety is important for the company. Establishing teams to manage and monitor SARS in Asia factory, washing stations, disinfectant units. Finally Reebok protects and supports the rights of its employees by following all the current employment laws. Excise and customs duty for sports shoes raw materials has decreased providing a relief.2) Economic:- As a multinational company Reebok helps countries to decrease unemployment by increasing every year the number of employees. Labor salary is high in Germany and France but not so expensive in China (Suzhou). This is the reason that most of factories located in Asia.3) Social:- Reebok products declare in any raise, age, religion, and lifestyle, always in fashion with special design in any of product. Focus in people who like sports and athletes, almost everybody can purchase Reebok products. Usually men and women from urban sector with an annual income of 1.5 laths are users of Reebok . Frequent users are those with an annual income of 5 lakhs or more. As a crucial component of Reebok‟s Global Corporate Citizenship Platform, the Reebok Foundation focuses its philanthropy in communities where Reebok‟s offices are located. The Foundation strives to promote social and economic equality by funding non- profit organizations delivering programs aimed at inner-city youth and underserved groups to empower youth to fulfill their potential – programs that provide youth with the tools they need to lead healthy, happy and actives lives. 9
  10. 10. 4) Technical:- R&D teams at Reebok create footwear, apparel and hardware with the primary focus on developing products that provide maximum performance, comfort and fit for the consumer. Teams are structured along the brand‟s product category focus in addition to certain cross-category groups such as the Reebok Advanced Concepts (RAC) team. Activities are primarily located in Canton/Massachusetts, USA to facilitate close collaboration with the respective product marketing teams. 10
  11. 11. Internal Environmental Factors SWOT ANALYSIS OF REEBOKA SWOT analysis is a critical portion of every marketing plan. It outlines the company‟sStrengths and Weaknesses, and the market‟s Opportunities and Threats that pertain to theproduct. The SWOT analysis is an important step in planning as it outlines whether theinformation will assist the company in completing its objectives or if there will be anobstacle that must be moved first. Strength and weakness are the favorable aspects of thecompany and Opportunities, threat are the unfavorable aspect of company. So, the swotanalysis of reebok is given below:- Favorable Unfavorable Strengths Weaknesses (1) Brand Equity (1) Reebok owns few official (2) Reebok-Adidas merger. stores and relies more on (3) Reebok is one of the top athletic retailers. shoe companies in U.S. in terms of (2) Reebok doesn‟t own factories market share. and they depend on producingInternal (4) Barefoot shoes are scientifically industries in their production. healthier than any other kind of shoes. (3) Previous reputation of (5) 76 independent sensors on the releasing faulty products. bottom of Reebok Realflex barefoot (4) Few sponsors associated with shoes promote natural movement, Reebok. flexibility, and comfort. (6) The price is the average of main competitors. (7) Customizing the shoes with the styles and colors customers prefer. Opportunities Threats (1) Expanding current market and reach (1) Many companies produce current markets with their new products. barefoot shoes and this leads to aExternal (2) Marketing towards several age strong competition. groups to increase profits. (2) Changing trends in footwear (3) Product development opportunity. technology. (4) Expanding to market for the product (3) As barefoot shoe is a want on social media websites. and not a need, some people may (5) Creating new channels of think twice before purchasing. communication on social media websites. (4) Poor economy 11
  12. 12. Industry Analysis of REEBOK PORTER’S FIVE FORCE MODEL PORTER’S FIVE FORCE MODEL SNO. PARTICULAR DEGREE 1) THREAT OF NEW ENTRANTS LOW 2) RIVALRY AMONGST EXISTING FIRMS HIGH 3) BARGAINING POWER OF BUYERS - MODERATE 4) BARGAINING POWER OF SUPPLIERS MODERATE 5) THREAT OF SUBSTITUTES HIGHIn detail given below:-NEW ENTRANTSThere are many barriers to entry preventing new entrants from capturing significant marketshare. Today‟s athletic shoes are highly technical. An extremely large capital investment isrequired for new firms to open athletic shoe factories and conduct research and design tocreate a popular athletic shoe. The aggressive marketing campaigns turn their products intohousehold names making it arduous for new firms to compete. Athletic shoe manufacturersgreatly attempt to differentiate their products from all shoe manufacturers.If they are a startup firm, it is extremely difficult to get shelf space at major shoe retailers.If the firm is currently in the dress shoe industry, and is entering the athletic shoe industry,they may use their existing connections to easily access athletic shoe distribution channels.Switching costs are very low for the athletic shoe industry. 12
  13. 13. RIVALRY AMONGST EXISTING FIRMSIn the athletic shoe industry, corporations are mutually dependent. A competitive move byone firm directly effects competitors, forcing retaliation or counter efforts. For example,Reebok‟s expansion of the women‟s walking shoe, inspired other firms to follow.The number of competitors is stable, partially due to high entry barriers. This adds to therivalry among existing firms. Manufacturers watch each other carefully and makeappropriate countermoves to match a competitor‟s move.The rate of industry growth is stable, but the quest for global market share is eminent. Thisincreases global rivalry. Product characteristics are related to market share. Namerecognition alone sells athletic shoes. The larger the market share, the greater advertisingcapabilities and hence increased name recognition.Capacity has minimal impact on rivalry, because most firms have means to manufacture thedemanded amount of athletic shoes. This ability to meet demand reduces market becausemost firms overproduce and drive down the selling price.Low exit barriers and diversity among competitors has minimal impact on profit potential. Ifthe athletic shoe industry becomes too unprofitable, firms could switch to other shoemarkets. Additionally, diversity among firms is small because every firm follows oneanother. The rivalry among existing firms is high where weak firms are easily acquired byfierce competitors. This may have a high impact on profit potential.BARGAINING POWER OF BUYERSBuyers have high switching costs in regards to opportunity cost. If an athletic shoe retailerdecided to drop one of the popular athletic shoe brands, their sales would fall due to highconsumer brand loyalty. Most buyers have a medium profit margin so price sensitivity ofbuyers is moderate. In the athletic shoe industry, price increases pass to the consumers.Theoverall impact from buyer‟s bargaining power to profit potential is moderate.BARGAINING POWER OF SUPPLIERSAthletic shoes are manufactured primarily from raw materials including rubber, leather andnylon. These materials could be classified as commodities, where the manufacturing processadds to their value. For this reason, the suppliers have limited bargaining power, and littleimpact on profit potential. 13
  14. 14. THREAT OF SUBSTITUTESAthletic shoes are designed to improve comfort and personal safety during periods ofincreased movement. Substitutes for athletic shoes are using other forms of shoes, or goingbarefoot(rural areas). A large population of athletic shoe consumers wear athletic shoesstrictly because they are comfortable. Comfortable dress shoes or sandals are equallyinterchangeable with minimal switching costs. If the athletic shoe is used for sports, thenthere are relatively few substitutes. Given these reasons, the threat of substitute products ismoderate and the impact to profit potential is moderate to high. 14
  15. 15. COMPETITOR ANALYSIS OF REEBOK REEBOK NIKE PUMAKEY SUCCESS FACTOR Weight Rating Wt’d score Rating Wt’d score Rating Wt’d score 0.0 to 1.0 1 to 4 1 to 4 1 to 4 DOMESTIC MARKET 0.1 4 0.4 2 0.2 3 0.3 POSITINING INTERNATIONAL MARKET 0.1 4 0.4 3 0.3 3 0.3 POSITIONING CUSTOMER LOYALTY 0.08 3 0.3 3 0.24 3 0.24 0.1 4 0.4 4 0.4 4 0.4 BRAND RECOGNITION 0.09 3 0.27 3 0.27 4 0.36 PRICE COMPETITIVENESS 0.07 4 0.28 4 0.28 3 0.21 PRODUCT QUALITY RELATIONSHIP WITH 0.07 3 0.21 4 0.28 3 0.21 MANUFACTURERS AND SUPPLIERS 0.1 4 0.4 3 0.3 3 0.3 PRODUCT R&D 0.1 4 0.4 3 0.3 2 0.2 PRODUCT DIVERSITY 0.07 3 0.21 3 0.21 2 0.14 FINANCIAL POSITION 0.08 4 0.32 4 0.32 3 0.24 MARKETING 0.04 3 0.12 3 0.12 3 0.12 ORGANIZATIONAL STRUCTURE 1 3.71 3.22 3.02 TOTAL 15
  16. 16. CONDITION(RATING SCALE) 1 LESS THAN AVERAGE 2 AVERAGE 3 MORE THAN AVERAGE 4 STRONGLYINTERPRETATIONAfter competitive analysis of Reebok & nike, we conclude that the reebok faces fiercecompetition from all sides. The athletic shoe industry is quite large and very competitive.Reebok receives most of its competition from Nike. Which is clearly shown in above table,that reebok is having better market then nike & other competitors in the shoes industries.And Reebok has been capturing 4.5% market more than that of nike. The EPS of reebokin FY2011 is $ 4.26, which is higher than the FY2010, that is $ 3.5. 16
  17. 17. CONCLUSIONFrom the above-study, we were able to conclude that people buy Reebok products mostlybecause of comfort and they mostly go for the quality & brand value of the product. And theReebok is positioning to be a high-endathletic footwear brand and a leader in its industry.The „after-sales‟ service provided also acts as a factor for the purchase decision. Theproduct quality & comfort along with style & promotional strategies of using sportscelebrities as their endorser has helped Reebok gain the significant market share.andaccording to the above study reebok is the leading company in compare to nike in the shoeindustry due to its product durability. . 17

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