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Ibs mmii- sessions-7-8
 

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    Ibs mmii- sessions-7-8 Ibs mmii- sessions-7-8 Presentation Transcript

    • MMII –Session 7-8 Harish Keswani
    • Reebok vs Nike in India • Since the entry of Reebok, Nike and Adidas in 1995–1996, the Indian sportswear market evolved, gained sophistication and established a presence for brands. Prior to the entry of these foreign players, Indian sportswear market was undeveloped and sports culture was non- existent. • Since the beginning Reebok outperformed Nike and emerged as a clear market leader with 51% market share in 2007
    • Reebok vs Nike in India • Background in 1990s • There were few companies like – Bata and Liberty, which offered utilitarian products with very little emphasis on manufacturing trendy shoes. • The market was very price sensitive, underdeveloped and majorly for men and kids. Due to the lack of sports culture in India demand for sports goods was primarily from educational institutes and government departments like police and railways.
    • Reebok vs Nike in India Background in 1990s • However, liberalisation resulted in an increase in the buying capacity of the Indian middle class. Coupled with this, foreign players instilled a new health consciousness among Indians thus giving rise to the demand for sport shoes. Promotional campaigns and internationally styled stores encouraged people to purchase an extra pair of shoes and T-shirts and change their lifestyle. • People also got familiar with the notion that different kinds of shoes are required for different sports.
    • Reebok vs Nike in India Background – What did the customers want ? http://www.scribd.com/doc/4934036/Adidas-Mktg-Industry-Analysis-India
    • Reebok vs Nike in India Market expansion • Demand was created for medium to high priced shoes as well. Huge market size along with the rise in demand for the sportswear boosted confidence of companies to sell footwear in the premium segment. • Many domestic players like Phoenix, GeoSport action emerged along with international players. • However, due to the small market size, which was INR 2.5 billion in 2001 for the super premium market, the challenge for the manufacturers was to expand the market size of this segment
    • Reebok vs Nike in India Starting up in India • In 1995, Reebok International Ltd. entered India through a 80:20 joint venture with Phoenix Overseas Ltd., a Delhi-based shoe manufacturer. Since its entry, Reebok has been competing with major global sportswear giants Nike and Adidas, which entered in 1995 and 1996 respectively. • However, in India, Reebok established itself as a leading sportswear company with a 51% market share and INR 900 crore turnover in 2007
    • Reebok vs Nike in India ENTRY STRATEGY • Though Reebok had a first-mover advantage in India, it faced the challenge of building a market for branded sports shoes from scratch. At that time, branded shoes and stores with American format were unknown and the highest priced shoes available were at INR 1,000. The choice in front of Reebok was to target either the mass market or the premium segment, comprising of 30 million people with shoes worth INR 2,500 and above. • With the aim of retaining its global image, Reebok opted to offer products, priced above INR 2,000 for the premium segment. Reebok imported the designs from its parent company. Initially, it brought 60 models of shoes and apparels like T-shirts, shorts and sweatshirts selected from the company’s global offerings. • Despite being high priced, customer response was favourable • However, Reebok had to educate its customers about the product benefits of its high priced shoes. Reebok intensified its efforts to transform Indian consumer’s perception regarding sports shoes.
    • Reebok vs Nike in India EDUCATING CUSTOMERS – INCREASING AWARENESS • Reebok introduced different types of shoes for different sports for the beginners. Further, Reebok aimed at developing health consciousness among the Indians. As the company wanted to grow by creating a fitness culture in India • 1998, Reebok began the Reebok Instructor Alliance Programme. As a part of this programme Reebok trained fitness instructors to create health consciousness among people (Influencers) • Reebok also customised its shoes according to Indians’ needs. For example, after analysing that Indians have broader feet as compared to foreigners, Reebok introduced shoes with a broader forefoot in comparison to its rival players’ narrower forefoot shoes. Since 1999, when Reebok achieved its first breakeven, the company has continuously been making profits. In 2000, Reebok achieved INR 70 crore turnover and garnered 50% market share • In contrast, Nike was still struggling
    • Reebok vs Nike in India Slow competition to Reebok • Although Nike enjoyed high brand awareness, it failed to position its brand favourably in India. • Unlike Reebok, Nike entered India through a license agreement with a Delhi-based trading firm, Sierra Industrial Enterprise (Sierra), a licensee, distributor and retailer of international brands. • In India, all the marketing and distribution decisions of Nike were taken by Sierra. Nike was slow in developing products and bringing the latest designs in the Indian market. It was only after 2000 that it imported its international range in India. Q- Apart from branding and marketing, what is important for market penetration ?
    • Reebok vs Nike in India Advantage Reebok • Among its competitors, Reebok was the first to introduce product innovations in the country. • For example, in 2005, Reebok introduced body- mapping apparel that controls extra moisture from the body. Every month it launches 20–30 new styles of products • Moreover, based on its research that even women are becoming health conscious and are regularly involving in various fitness activities, Reebok forayed into the women’s segment in 1999. To target the women’s segment, Reebok opened 15 exclusive women retail outlets by 2008. 15%–20% of Reebok’s income comes from the women’s segment (Niches)
    • Reebok vs Nike in India Nike’s positioning • Unlike Reebok that reinforced its global positioning of being a sports and fitness brand, Nike positioned itself as a lifestyle brand in India, pricing its shoes in the range of INR 1,800–INR 5,000 and apparel between INR 600 and INR 2,000. • Nike launched lifestyle sport products for the upper segment of consumers.Its initial product range included footwear, apparel, equipment and accessories for golf and tennis. For the promotion of its golf shoes, it signed 35 sportspersons from six states in 2001. • Apart from its support to promising athletes in the sport, it has taken its commitment a step further by its association with the golf academy and the nike-bhupathi tennis village • But Nike was also slow in expansion. Depending on Sierra for distribution of its products, Nike had only 35–40 retail outlets as against Reebok’s 100 by 2000. Discuss positioning
    • Reebok vs Nike in India Market presence: • To increase its visibility, Reebok had created an extensive retail presence in India. With a view of retaining its high tech brand image, the company decided to market through retail outlets. It opened it’s first retail store in 1995 and by 2003 Reebok had 85 exclusive stores, 75 shop in shop outlets and 2,500 dealer outlets. • In order to create an international ambience in its retail outlet, Reebok invested in creating exclusive retail stores. • To further penetrate into the Indian market, in 2001, Reebok tied up with Bata India for the sale of Reebok footwear through Bata’s 1,300 retail outlets in India • In order to connect with customers, Reebok also adopted an aggressive promotion and marketing strategy
    • Reebok vs Nike in India Market expansion into new age group • In order to increase its market share, Reebok targeted kidswear segment in 1998 with shoes priced between INR 890 and INR 990. This product failed to capture Indian consumers as they found it to be expensive. • Later in 2002, Reebok launched a new product range priced between INR 490–INR 690 and targeted at school going kids. • In order to expose the brand to kids, Reebok tied up with schools like Shriram School in Delhi, Delhi Public School, GD Goenka Public School and Scottish High School Bishop Cotton in Shimla and Sagar School in Haryana that made Reebok shoes as part of their uniform. • Also in 2007, Reebok targeted kidswear segment more aggressively to increase its market size and make its presence in the INR 3,500 crore branded kids wear market. Offering a range of casual footwear, apparel and accessories for kids aged between 5–12 years,
    • Reebok vs Nike in India BRAND ENDORSEMENTS • Apart from understanding the Indian consumer needs accurately and customising its products, Reebok established a nationwide retail presence and connected emotionally with its consumers. However, Reebok’s leadership was attributed mainly to its association with cricket • While Nike was spending dollars endorsing international sportspersons for its products, Reebok garnered popularity by leveraging on the cricket craze of the nation. • In 1996, it signed Rahul Dravid as the brand ambassador of Reebok India. Since then, Reebok has signed high profile Indian sportspersons like Mohammad Azharuddin, Mahendra Singh Dhoni, Mohammad Kaif, Yuvraj Singh, Harbhajan Singh, Irfan Pathan from cricket and Sagarika Ghatge and Bipasha Basu from Bollywood
    • Reebok vs Nike in India • To promote its products in India, Nike advertised through international sports persons. Its brand ambassadors included Michael Jordan, Tiger Woods and Maria Sharapova • However, since 2004, after its license agreement with Sierra terminated and Nike India became a subsidiary of its parent company, it started operating independently in the Indian market. To counter the challenge from Reebok, Nike took various steps to build its brand and expand its market size. • By 2006, to bring in the latest designs, Nike imported 80% of its products from its parent company. • Moreover, in 2006, Nike partnered with the fitness centre Gold Gym to promote its products among women. Nike also began expanding its distribution chain in India. • In order to expand its market share, for the first time in India, Nike had decided to change its market positioning by associating with cricket.
    • Reebok vs Nike in India Reebok’s Covert Marketing Strategies • In 2005, to match its steps with Reebok, Nike became the official kit sponsor to the Indian cricket team with an investment of INR 196.66 crore. In spite of this, Reebok grabbed the attention of the cricket lovers by placing its logo on the bats of the Indian cricket players. A simple yet effective strategy • Reebok was successful in knocking down Nike from establishing its presence in Reebok’s territory. With increasing competition from Reebok Discuss counter strategy
    • Reebok vs Nike in India Reebok’s Covert Marketing Strategies • However, analysts doubt Nike’s success in associating with cricket as its target customers are the upper segment. Harminder Sahni, chief operating officer, Technopak Advisors, said, “Brands like Nike are clearly focused on the upper segment of consumers. I’m not sure whether cricket is any longer such a popular sport with that group. Young consumers in the upper strata are more likely to be tuned into events like the NBA or Premier League Football.” • Moreover, to maintain its leadership position, in 2007, Reebok also forayed into the lifestyle product segment. It launched a new range of apparel and footwear named ‘Scarlett “Hearts” Rbk’ priced between INR 1,999 and INR 6,999 for the elite, brand-conscious and fashion lovers There’s little doubt also that Nike’s market share will increase now. But will the growth be sufficient to unseat Reebok as market leader? Discuss
    • Key Concepts -Discussion • Ref : Creating Competitive Advantage (Chapter 18 –Principles of Marketing ) • Competitor Analysis – Identifying Competitors • Identifying competitors • Assessing competitors’ objectives, strategies, SWOT, and reaction patterns • Selecting which competitors to attack or avoid
    • Key Concepts -Discussion • Selecting which competitors to attack or avoid – Strong or weak competitors – Close or Distant Competitors – ‘Good’ or ‘Bad’ Competitors – Finding uncontested market spaces – Designing a competitive intelligence system • Eg. TATA FIBRES – (Facts & Information Based Reverse Engineering of Strategy)
    • Key Concepts -Discussion • Competitive Strategies • Approaches – Entrepreneurial Marketing – Formulated Marketing – Intrepreneurial Marketing • Basic Competitive Strategies – Overall cost leadership – Differentiation – Focus • Customer-centered classification – Gain leadership position by delivering superior value to customers – Operational Excellence – Customer intimacy – Product leadership
    • Key Concepts • Competitive Positions – Market Leader strategies – Market Challenger strategies – Market Follower strategies – Market Nicher Strategies • Balancing customer and competitor orientations
    • Interface of Marketing with Finance
    • Marketing Performance Measures (Ref: Principles of Marketing – Appendix 2) • P&L Statement (Income statement, operating statement) • Difference between Balance Sheet and P&L ?
    • Marketing Performance Measures (Ref: Principles of Marketing – Appendix 2) • P&L -Statement of Financial Performance (eg. for a product or division) • Balance Sheet – Statement of Financial ‘Position’ Fixed costs & Overheads
    • Marketing Performance Measures (Ref: Principles of Marketing – Appendix 2) • Break Even Sales – Break Even Sales = Fixed Costs / Contribution Margin of Fixed costs – To compute Total Cost = Fixed costs + Variable Cost • Market Share = Company sales / Market Sales • Gross Margin % = Gross Margin / Net Sales • Net Profit % = Net Profit / Net Sales • Operating Expenses % = Total Expenses / Net Sales • Inventory Turnover Rate = Cost of Goods sold/ Average Inventory at cost (Higher the better, indicates better efficiency and profitability) • ROI (Return on Investment)= Net profit before tax/ Investment
    • Marketing Performance Measures (Ref: Principles of Marketing – Appendix 2) • Net Marketing Contribution = Net Sales – cost of goods sold – marketing expenses (Higher the better) • Marketing Return on Sales and investment – Marketing ROS = Net marketing contribution/ Net Sales (Higher the better) – Marketing ROI = Net marketing contribution/ Marketing expenses (Higher the better)
    • The PIMS Project • Although no manager should pursue growth for growth’s sake, evidence suggests that in some industries market share is an important determinant of long-term profitability. • The Marketing Science Institute at the Harvard Business School undertook research in the relative profitability of different market strategies. • The PIMS (profit impact of market strategy) project involved more than 600 businesses over a period of more than 15 years.
    • Major Findings of the PIMS Study • Absolute and relative market share are strongly correlated with ROI. • Product quality is key to market leadership and allows companies with larger market shares to charge higher prices and, therefore, achieve higher margins. • ROI is positively correlated with market growth. • Vertical integration can be beneficial later in the product life cycle. Forward integration is more profitable than backward integration. • High investment intensity tends to depress ROI, as do high inventory levels. • Capacity use is critical for businesses with a high level of capital intensity; companies with small market shares are particularly vulnerable.
    • • These findings help to explain many business success stories through the 1980’s and many business performance declines of the 1990’s. • These findings were beneficial at the time, but because of the increase in technology over the past 20 years these findings are becoming less and less relevant. • This observation, basically, highlights the need for executives to continually update their assumptions about key strategic relationships. Major Findings of the PIMS Study
    • Impact of Marketing Strategies & Action Plans
    • Marketing Actions The Firm Tactical Actions Strategies Customer Impact Market Impact Financial Impact Impact on Firm Value Marketing Assets Market Position Financial Position Value of the Firm
    • Marketing Actions The Firm Tactical Actions Strategies Promotion strategy, Product strategy Channel strategy, etc. Customer Impact Market Impact Financial Impact Impact on Firm Value Marketing Assets Market Position Financial Position Value of the Firm
    • Marketing Actions The Firm Strategies Customer Impact Market Impact Financial Impact Impact on Firm Value Marketing Assets Market Position Financial Position Value of the Firm Tactical Actions Advertising Service Improvements Branding, Loyalty
    • Marketing Actions The Firm Tactical Actions Strategies Customer Impact Impact on satisfaction, Impact on attitudes, loyalty Market Impact Financial Impact Impact on Firm Value Marketing Assets Market Position Financial Position Value of the Firm
    • Marketing Actions The Firm Tactical Actions Strategies Customer Impact Market Impact Financial Impact Impact on Firm Value Marketing Assets Brand Equity Customer Equity Market Position Financial Position Value of the Firm
    • Marketing Actions The Firm Tactical Actions Strategies Customer Impact Market Impact Market share impact Sales impact Financial Impact Impact on Firm Value Marketing Assets Market Position Financial Position Value of the Firm
    • Marketing Actions The Firm Tactical Actions Strategies Customer Impact Market Impact Financial Impact Impact on Firm Value Marketing Assets Market Position Market share, Sales, etc. Financial Position Value of the Firm
    • Marketing Actions The Firm Tactical Actions Strategies Customer Impact Market Impact Financial Impact ROI, IRR, NPV, EVA Impact on Firm Value Marketing Assets Market Position Financial Position Value of the Firm
    • Marketing Actions The Firm Tactical Actions Strategies Customer Impact Market Impact Financial Impact Impact on Firm Value Marketing Assets Market Position Financial Position Profits Cash flow Other measures Value of the Firm
    • Marketing Actions The Firm Tactical Actions Strategies Customer Impact Market Impact Financial Impact Impact on Firm Value Forward thinking Hinges on growth prospects Marketing Assets Market Position Financial Position Value of the Firm
    • Marketing Actions The Firm Tactical Actions Strategies Customer Impact Market Impact Financial Impact Impact on Firm Value Marketing Assets Market Position Financial Position Value of the Firm Market capitalization Total shareholder return
    • Next Session • Financial Impact of Marketing Tactics • Toyota Motor Company – Loosing its Quality Edge Case Study – Interface of Marketing with Operations