Strategic Factors of Reebok International - Case Study Example

V. ANALYSIS OF STRATEGIC FACTORS A. Situational Analysis Internal Analysis Strengths: Reebok International, Ltd. is led by a strong management team, rallying the growth of the company’s footware and sports apparel business across multiple segments of the US and international markets—men, women and children. Reebok is an established brand in the athletic shoes and sports apparel market. The company has achieved gains in terms of sales and market share through extensive advertising and promotions worldwide. The company is generally profitable; increasing its earnings by a hefty 27% in 2001 despite the ill effects of a weakening dollar and also generated a healthy stream of cash flows from operations. Weaknesses: The company operates on a low resource (financial) base. It needs to pump up its equity base or resort to additional leverage when faced with investment opportunities Limited raw material sources for its footware products can impair production and distribution. Innovations initiated by Reebok do not always meet customer preferences. Reebok sells its products through inefficient distribution channels. External Analysis Opportunities: Ineffective marketing strategies prevent Reebok from taking full advantage of market opportunities. To defend its market position and increase its profitability, Reebok should realign its marketing platforms. Consumer power and preferences. It should focus more on research and development; hire experienced consultants and specialists to aid in product development. The number of internet users is continuously rising. Make the website more accessible as an after sale service channel for clients’ complaints and inquiries. Intense competition in the market. Reebok has been pursuing relentlessly the athletic shoes segment controlled by Nike which resulted only to increasing administrative expenses for Reebok. The company needs to target an unserved but profitable segment of the market to increase sales and boost image minus the fierce competition. Distribution channels. The company depends largely on department stores to sell its products. Reebok should explore other channels that would effectively promote the increased visibility of its products in the market. Threats: Consumer purchasing power and preferences. Consumer preferences and purchasing power can shift anytime and therefore cannot be accurately forecasted. Intense competition in the industry. The company can lose its market position to competitors should it fail to compete effectively. Consumer demand. Risks of over production and underproduction abound. Fashion and fads. Reebok products have a shelf life not exceeding 3 months and the design could fizzle out to new trends without a good follow-up. Intellectual property rights. The company produces its products through independent manufacturers in third world countries. Despite the enforcement of patent laws, knockoffs proliferate in many international markets which have an adverse affect on Reebok’s revenues. See Annex 1 for the SWOT matrix. B. Review of Current Mission and Objectives 1. Current mission is attainable. Our passion for winning creates our possibilities. We harness the boundless creative energy of every individual to make the differences that count - to captivate the consumer and create an exceptional global brand and organization. We make a difference: To our customers; to our employees; to our shareholders; to our athletes; And to the world in which we live. (reebok.com, 1995) 2. The company’s objectives are ideal for companies in the industry. … leader in the design and development of authentic products and services, and to influence the athletic lifestyle trends of the world … (reebok.com, 1995) VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY A. Strategic Alternatives 1. Market Development: Shift focus to a more profitable market segment a. [Pros] Enhanced brand image and increased sales through new segment b. [Cons] Entail the overhaul of existing marketing platforms and loss of synergistic benefits derived from existing clients and product lines. Costly but feasible. 2. Streamlining: Improve existing procurement, production and distribution procedures. a. [Pros] Reduced production costs and lead time, increased gross margins in the long run and creates new sources of raw materials for footware product lines as well as develop more efficient distribution channels. b. [Cons] Process would entail additional costs and could take a longer time to complete than expected with no guaranteed results 3. Maintain Status Quo: Defend market position in the industry at all costs a. [Pros] Reebok needs to stick to more conservative demand forecasts to effectively control marketing, advertising and other related expenses; minimize production problems, cut costs and generate adequate cash flow for debt servicing. b. [Cons] Competition in a mature market controlled largely by Nike translates to increasing marketing and other related expenses. B. Recommended Strategy 1. Recommending the implementation of the Market Development Strategy [Alternative 1] to increase brand value and gain a bigger market share, if not a controlling interest in the athletic shoes and sports apparel market. 2. Proposed segment is the 45 + age group dominated by Reebok (Myers et al., 2001) or the Baby Boomer Market that is roughly a market of 80 million Americans. 3. Reposition the Reebok brand as a “performance product” focused on the target age group. 4. Safety features should be incorporated with footware products as baby boomers are described to be trying to stay active in a body thats aging (DiNubile, as cited in Asp, 2005) 5. Product lines intended for outdoor activities should also be developed apart from contact sports, with 40% of the subject segment looking for new outdoor activities, among them backpacking/hiking (47%), road biking (38%), camping (30%) and paddle sports (23%). (NPD Group, as cited in Rab, 2004) 6. Existing standards of quality should be maintained and pricing should be a set a little over the market average. 7. Expenses related to this strategy should be amortized over a 5 year period. VII. IMPLEMENTATION 1. Revamp of existing marketing platforms and repositioning to new segment must be implemented gradually, say 4 to 5 years, so as not to impair the gains achieved by Reebok from its existing market segments. 2. Existing segments should not be abandoned. The X and Y generation will mature and serve as the future market of the baby boomer segment proposed as target segment. Hype created through advertising and endorsements from this segment should be continued but made less conspicuous. 3. Apply existing marketing strategies to new segment such as increased brand visibility through relevant sponsorships and brand endorsements. 4. The men’s category of the baby boomer segment should be penetrated first considering that more pairs of shoes are sold in this category. 5. Identify a potential endorser/s from among the popular baby boomer lineup. 6. Allot adequate budget to fund R&D expenses for this new segment and related product lines. Additional leverage would be necessary if not the infusion of additional capital. 7. Initially sell the new product lines in specialty stores and Reebok retail stores. VIII. EVALUATION AND CONTROL 1. Performance should be measured a year after the launch of the new product line. 2. Apart from sales and income figures, brand value should be measured through commissioned survey and research. References Frequently Asked Questions. Retrieved January 20, 2007. http://www.reebok.com/useng/faq/default.htm Myers, B., Lott, M., Gulledge F. (2001). MBACES Sports Marketing: Reebok—A Case Analysis. Retrieved January 21, 2007. http://frankiegulledge.com/MBAces/reebok_a/default.htm Asp, K (2005), Boomeritis: A New Sports Concern for Baby Boomers. Retrieved January 22, 2007. http://healthlibrary.epnet.com/ RAB Instant Background Report For Baby Boomer Market. Retrieved January 21, 2007. http://www.rab.com/rab/saleslink/secure/ibs/ib_result.cfm Annex 1: SWOT Matrix Strengths Global marketing efforts Image-enhancing advertising and promotion programs worldwide Variety of products Brand image Management Production quality Weaknesses Limited supply sources for a few product components Low financial resources Customer loyalty / relationship Innovation of products Distribution channels Opportunities Consumer purchasing power and preferences Intense competition in the industry Fashion and fads Continuous increase of internet users New discoveries and development Distribution channels Internet Threats Weakness in retail markets Intense competition in the industry Consumer demands Fashion and fads New discoveries and development Intellectual property rights Read More