BCG Matrix and SWOT Analysis of Reebok

BCG Matrix and SWOT Analysis of Reebok BCG Matrix to analyze the product portfolio of REEBOK Overview of the Indian Footwear Sector The footwear sector is a diverse industry which covers a wide variety of materials (textile, plastics, rubber and leather) and products from different types of mens, womens and childrens footwear to more specialized products like snowboard boots and protective footwear. This diversity of end products corresponds to a multitude of industrial processes, enterprises and market structures. The footwear market consists of the total revenue generated through the sale of all types of mens, womens and childrens shoes. The market is valued at retail selling price with any currency conversions calculated using constant 2007 annual average exchange rates. The Indian Footwear Industry The Indian footwear market has seen very healthy increases in its growth over the past five years, although it was outperformed by the larger Chinese market during this period. Its value and volume are set to increase at a with double-digit annual growth rates over the forecast period. The Indian footwear industry is a significant segment of the leather industry in India. It ranks second among the footwear producing countries next to China. It produces more of gents footwear while the worlds major production is in ladies footwear. The industry is labor intensive and is concentrated in the small and cottage industry sectors. While leather shoes and uppers are concentrated in large scale units, the sandals and chappals are produced in the household and cottage sector. In the case of chappals and sandals, use of non-leather material is prevalent in the domestic market. The major production centers of India are Chennai, Ranipet, and Ambur in Tamil Nadu, Mumbai in Maharastra, Kanpur in U.P., Jalandhar in Punjab, Agra and Delhi. The following table indicates concentration of units in various parts of the country The Indian footwear industry is provided with institutional infrastructure support through premier institutions like Central Leather Research Institute, Chennai, Footwear Design Development Institute, Noida, National Institute of Fashion Technology, New Delhi, etc in the areas of technological development, design and product development and human resource development. The availability of abundant raw material base, large domestic market and the opportunity to cater to world markets makes India an attractive destination for technology and investments. The Indian footwear retail market is expected to grow at CAGR of over 20% for the periods spanning from 2008 to 2011. Footwear is expected to comprise about 60% of the total leather exports by 2011 from over 38% in 2006-2007. Presently, the Indian footwear market is dominated by Mens footwear market that accounts for nearly 58% of the total Indian footwear retail market. By products, the Indian footwear market is dominated by casual footwear market that makes up for nearly two-third of the total footwear retail market. The Indian footwear market scores over other footwear markets as it gives benefits like low cost of production, abundant raw material, and has huge consumption market. The annual domestic consumption of shoes in India is 1.1 billion pairs and it is estimated that the footwear market is around Rs 10, 000 crore and will grow at 10% pa, this offers great opportunities for a company like Bata to expand. MNC Brands Sold in India are sold Adidas, Aldo, Bally, Clarks, Ecco, Florshiem, Ferragammo, Hush Puppies, Lee cooper, Lloyd, Marks Spencer, Nike, Nine West, New Balance, Reebok, Rockport, Stacy Adams, Levi Strauss , Lee Cooper, Puma, Bata. Indian Brands sold in India are Red Tape, Liberty, Khadims, Lakhani, Metro, Action, Provogue, ID, MB Footwear, Firangi Reebok: Reebok India commands a 51% market share in the premium sportswear industry in the Rs 2000-crore premium sportswear market.. It plans to increase the store count from the existing 500 to over 600 before 2008. Reebok reaches out to its target customers through its 500 exclusive Reebok Stores, 200 Shop in the shop outlets 2500 dealer outlets. The company has plan to tap tier II and Tier III ci ties. Reebok is planning to add 55 new lifestyle stores by the end of this year. It offers different segments for both men and women like sports and fitness footwear, apparel, accessories, fitness equipment and the lifestyle section. The Global Footwear Industry The global footwear market grew by 4.1% in 2008 to reach a value of $208.4 billion. In 2013, the market is forecast to have a value of $272.5 billion, an increase of 30.7% since 2008. The market grew by 4.8% in 2008 to reach a volume of 11.6 billion pairs. In 2013, the market is forecast to have a volume of 15.1 billion pairs, an increase of 30.2% since 2008. Europe is the largest footwear market, accounting for 42.3% of the global value. The global footwear market consists of the total revenues generated through the sale of all types of mens, womens and childrens shoes. The market is valued at retail selling price with any currency conversions calculated using constant 2007 annual average exchange rates. Reebok International, a subsidiary of Adidas, is engaged in the design, marketing and distribution of sports, fitness and casual footwear, apparel and equipment. The company primarily operates in North America, Europe and Asia Pacific. The company recorded revenues of E2,333 million in the fiscal year ended December 2007, a decrease of 5.7% over 2006. The operating profit of the company was E109 million in the fiscal year 2007, an increase of 26.7% over 2006. . According to 2004 figures by the Sporting Goods Manufacturers Association International, Nike had about 36%, Adidas 8.9% and Reebok 12.2% market share in the athletic-footwear market in the U.S. Introduction- REEBOK Reebok is an American-inspired, global brand that creates and markets sports and lifestyle products built upon a strong heritage and authenticity in sports, fitness and womens categories. The brand is committed to designing products and marketing programs that reflect creativity and the desire to constantly challenge the status quo. Reebok India Reebok started its operations in India in 1995. Headed by Managing Director Mr. Subhinder Singh Prem, Reebok India has a pan-India presence with branch offices in Mumbai, Kolkata and Bangalore and ranks at the top amongst international footwear companies in India. The Companys brand vision is fulfilling potential, its mission – Always challenge and lead through creativity. Reeboks brand values are authentic, individualistic, courageous, empowering, innovative and real. Reebok has introduced its internationally acclaimed fitness programs in India, conducted under 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 800 trainers till now. Reebok India commands a 54% market share in the premium sportswear industry according to 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, 200 Shop in the shop outlets 2500 dealer outlets. Reebok has the single largest store in Hyderabad. REEBOKS VISION Fulfilling Potential 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. REEBOKS 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 weve had the courage to challenge convention. Reebok creates products and marketing programs that reflect the brands unlimited creative potential. REEBOKS POSITIONING Celebrate Individuality in Sport and Life Reebok understands that people are, above all, unique. Reeboks 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. REEBOKS PURPOSE To Empower Global Youth to Fulfill their Potential Commitment to Corporate Responsibility is an important legacy and hallmark of the Reebok brand.For two decades, Human Rights, through the Reebok Human Rights program, was the primary focus of this effort. Reebok has expanded on what had been built and created a Global Corporate Citizenship platform with a purpose for the brand that will help underprivileged, underserved youth around the world fulfill their potential and live healthy, active lives. REEBOKS BRAND TERRITORY Having Fun Staying in Shape Having Fun Staying in Shape comes to life through a fun, bold, provocative manner expressed through fresh, eye catching imagery signed off with a unique Reeword. The tone and manner allows the consumer to look at sport and lifestyle through our lens of Ree. HISTORY 2000 In 2000, Reebok and the National Football League announced an exclusive partnership that serves as a foundation of the NFLs 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. 2001 In 2001, Reebok formed a long-term strategic partnership with the National Basketball Association under which Reebok designs, manufactures, sells and markets licensed merchandise for the NBA, the Womens National Basketball Association (WNBA) and the National Basketball Development League (NBDL), the NBAs minor league. Reebok secured the exclusive rights to supply and market all on-court apparel, including uniforms, shooting shirts, warm-ups, authentic and replica jerseys and practice gear for all NBA, WNBA and NBDL teams. Reebok also had exclusive rights, with limited exceptions, to design, manufacture, market and sell headwear, T-shirts, fleece and other apparel products for all teams in most channels of distributions. In 2006, Reebok transferred the NBA rights to the adidas Brand. 2002 In 2002, Reebok launched Rbk – a collection of street-inspired footwear and apparel hook-ups designed for the young man and woman who demand and expect the style of their gear to reflect the attitude of their lives: cool and edgy, authentic and aspirational. Inspired by street fashion, Rbks marketing is culturally relevant as well. With many of the industrys most marketable and valuable sports assets on its roster, Reebok rolled-out an integrated marketing campaign that fused together sports, music, technology and entertainment, and was designed to connect the Reebok Brand to millions of new consumers around the world. The global marketing campaign was launched in early 2002 and featured select Reebok athletes paired with some of the music industrys most successful hip-hop and rap artists. Reebok tapped into something the industry had not yet seen, and became a pioneer in the fusion of sports, music and technology. 2003 2003 was a landmark year for Rbk. Reebok formed an unprecedented partnership with rap musician Jay-Z, which included the design and marketing of the S. Carter Collection by Rbk, which launched in April. With the partnership, Jay-Z became the first non-athlete to have a signature athletic footwear collection. The launch of Jay Zs first shoe was extremely successful around the world. Later that year, Reebok teamed up with another superstar of the rap world, 50 Cent. The result was the equally successful â€Å"G Unit Collection by Rbk.† 2004 In 2004, Reebok became the worlds leading producer of hockey apparel and equipment with its acquisition of The Hockey Company. The Hockey Companys brands, CCM, Koho and Jofa, are among the most respected in the sport. Reebok has a long-term licensing agreement with the National Hockey League, under which the company serves as the supplier of authentic â€Å"on-ice† game jerseys to all 30 NHL teams. It also has the exclusive worldwide rights to manufacture and market authentic, replica and practice jerseys using the names and logos of the NHL and its teams. Reebok also has exclusive agreements with the Canadian Hockey League, the American Hockey League and the East Coast Hockey League. 2005 In early 2005, Reebok launched Rbk Hockey, a new and innovative line of ultra-high performance hockey equipment, sticks and skates and signed hockey phenom Sidney Crosby, who has lived up to his billing as the leagues next great player. In two short years, Rbk Hockey has become one of the most visible and in-demand hockey brands on the market. In 2005, Reebok launched its largest global integrated marketing and advertising campaign in nearly a decade. I Am What I Am is a multi-faceted campaign which links all of the brands marketing and advertising efforts under the I Am What I Am umbrella. The campaign encourages young people to embrace their own individuality by celebrating their contemporary heroes. Celebrities featured in the campaign include music icons Jay-Z, Daddy Yankee and 50 Cent; top athletes Allen Iverson, Donovan McNabb, Curt Schilling, Kelly Holmes, Iker Casillas and Yao Ming; screen stars Lucy Liu, John Leguizamo and Christina Ricci; and skateboarder Stevie Williams. 2006 In January 2006, adidas-Salomon AG acquired Reebok, forever altering the worldwide sporting goods industry landscape. Shortly after the close of the acquisition, Reebok Chairman and CEO Paul Fireman announced he was leaving the company to pursue other interests, and Paul Harrington was named President and CEO of the Reebok brand. Today, the adidas Group, which includes the adidas, Reebok, TaylorMade-adidas Golf and Rockport brands is a global leader in the sporting goods industry and offers a broad portfolio of products. Products from the adidas Group are available in virtually every country of the world. Activities of the company and its more than 80 subsidiaries are directed from the Groups headquarters in Herzogenaurach, Germany. 2007 Reebok launched Run Easy, one of the most comprehensive running campaigns in the brands history. The goal of the campaign was to inspire consumers around the world to fulfill their potential and celebrate their individuality. The message of the campaign was that while many other brands speak about the blood, sweat and tears of running, Reebok celebrated the camaraderie, joy and fun of running – Run Easy. In addition, Reeboks partnership with the National Hockey League took center stage with the unveiling the Rbk Edge Uniform System, a complete, team-wide redesign and re-engineering of the NHL uniform, and the opening of the NHL Powered by Rbk retail store in New York City. Reebok also launched its There are Two People in Everyone marketing campaign for the second half of 2007 in select regions. The global marketing campaign highlights Reeboks unique brand point of view of celebrating the individuals balance between sport and life. The campaign, featuring international sport stars such as Allen Iverson, Yao Ming, MS Dohni and Nicole Vaidisova, declared that there is more to an athlete than his or her sport. 2008 Reeboks global marketing campaign, ‘Your Move launched in March of 2008 and evolved Reeboks positioning as the brand that celebrates individuality and supports those who choose to do things their way. Expressed as a global brand campaign, ‘Your Move was an invitation to people to do it their way in sport and in life. The ‘whats your move? ad was a literal expression of this philosophy: key assets including Thierry Henry and Alexander Ovechkin showed us their moves and invited consumers to show us theirs. In the summer of 2008, Reebok and driving ace Lewis Hamilton announced a multi-year partnership at a spectacular 3-D event in Amsterdam, home of Reeboks European Headquarters. At the event, Reebok unveiled â€Å"The Athlete within the Driver,† gave media a rare insight into Hamiltons demanding fitness regime. Hamilton revealed how Reeboks Smoothfit training footwear and apparel range helped him to train better than ever before. 2009 In February 2009, Reebok launched the Jukari Fit to Fly workout, the first in a series of initiatives to come out of a new, long-term partnership with Cirque du Soleil. Jukari Fit to Fly makes fitness fun again by introducing a new way to move. The workout has been created on a specially-designed piece of equipment called the FlySet. The result is a workout that gives the sensation of flying while strengthening and lengthening the body through cardio, strength, balance and core training. Also in 2009, Reebok made a pledge to tone the butts and legs of women around the world with its innovative EasyTone footwear. Featuring first-of-its-kind balance pod technology, the shoe generates incredible results thanks to proprietary technology invented by a former NASA engineer. Brands Reebok International Rock Port RBK CCM Hockey (Worlds largest) Greg Norman Apparel Ralph Lauren Brand The Hockey Company Avia Onfield Apparel Athletic footwear DMX2000 3D Ultralite Ralph Lauren Apparel line REEBOK SWOT ANALYSIS Reebok International was a major player in the sports and fitness products market, with a particular emphasis on footwear. Its main strengths lied in its size and strong brand awareness. While footwear is clearly its core product, concerns were being raised over its comparative disinterest in the associated athletic apparel market, which is over twice the size of the footwear market. STRENGTHS Growing sales revenue As part of a strategy to grow quality market share, the company continued to invest in three key product and marketing platforms: Performance, RBK and Classic. Reebok International was the second largest manufacturer of athletic shoes in the US, behind Nike. The Reebok brand continued to drive sales pushing it closer to major competitors, Nike and Adidas. Reebok had become the number two or number three brand in most of its overseas markets. It held around 10% of the global market, compared to Nikes 34% and Adidas 15%. The company has been able to increase revenues and improve operating margins despite some challenging retail conditions in many key markets around the world in 2004. Excellent marketing strategy The company employed a strategy of reinventing its brands in order to gain market share. In order to enhance its Reebok brand, the company introduced a new street inspired product collection, RBK, in 2002, followed by an effective marketing strategy which carried into 2003 and 2004. During 2003/2004, the Reebok product offerings generated healthy sell-through performance at retail. Alongside reinventing brands, the company introduced new marketing campaigns to promote them. To support the RBK product Reebok created a marketing campaign entitled Reeboks Sounds and Rhythm of Sport, which fuses music and entertainment with sports and performance. Celebrity associated sponsorships The company expanded its product offerings into more lifestyle and performance categories, introducing new product segments for both the NBA and NFL, including NBA and NFL footwear, classic lifestyle apparel and performance gear for off-the-field activities. Reebok sponsored many top athletes in tennis; Andy Roddick and Venus Williams; as well as music stars Jay-Z, Pharrell Williams and 50 Cent. Yao Zings impact in the Asian market is hugely important to Reebok. Affiliating itself to such globally renowned celebrities enhanced the company name among many different customer groups. Strong womens sector Another one of Reeboks strengths was its success in the womens sector. The market for womens athletic shoes is larger than that for men, accounting for around 46% and 40% of the sectors value respectively. In volume terms, the womens sector was even more important, 46% compared to 35%. Reeboks market share of womens athletic shoe sales was around 35%, and has been boosted by its Its A Womans World marketing campaign. WEAKNESSES Classics under fire The company had come under fire from its rivals in the classics department. In the past Reebok has controlled this shoe category without much competition, however companies such as Nike and Adidas were coming up with their own classic shoes. Reebok were still the market leaders in that area but the gap kept narrowing. Low market share in apparels Reebok controlled only about 1.4% of the apparel market. This posed a problem when squaring up with its fierce competitor, Nike. The footwear markets growth was slowing. Athletic apparel gives scope for a larger and more diverse range of products, keeping the market fast moving. The apparel market was 2.4 times larger than the footwear market. Nike took charge there, with its innovative designs, and contracts with sports teams and organisations throughout the world. Danger of stockpiling products by retailers Futures, or ordered in advance sales, represented around 60-70% of Reeboks business. This has been valuable to Reebok in the past; however five of the companys brands that represent around 60% global market share could cause problems in the future. Futures growth for these five brands was around 9.5% on a dollar-weighted basis. This growth was alarmingly fast. Reebok had to be careful as retailers may be ordering more than they can sell. This could result in a sudden cut off in orders, leaving the company with large inventories and a decrease in sales. OPPORTUNITIES Increase average shoe price Reeboks average price per shoe in athletic footwear stores, which account for around 15% of the market, was considerably lower than average. Its average price per shoe is $45, compared with an outlet average closer to $60. The companys lower than average shoe price is partly due to the high percentage of basic products sold, which is itself partly attributable to its traditional position in the womens sector. This left plenty of space for the company to muscle in on higher priced sales, as its products and promotional efforts improve. As well as raising brand awareness, Reeboks sponsorship deals helped the company increase its average sales price. Draw attention toward new technological developments Reebok had started developing its product to make it more modern and has invested heavily in added technology to enhance its shoes. Reebok had a lot to gain from a continued investment in more technologically advanced, premium products. In 2003, the company introduced new fashionable and technologically advanced products tied to new integrated marketing programs. These displayed an enhanced and prominent vector logo which ties back to the Professional athletes wearing the products on the field. This branding created a real point-of-difference for its performance products and should help to generate consumer interest at point-of-purchase. These products are supported at retail with a new performance marketing campaign, which utilises the athletes and the vector logo in new and creative ways. This campaign included television, print and in-store marketing packages. Encourage a strong brand push in Europe The company planned to enhance its European market, recruiting new management talent and initiating an aggressive program to regionalise this business utilising a consistent brand image throughout Europe. Reebok executed unified product, marketing, and sales strategies across all borders in Europe, thereby presenting the Reebok Brand in a more relevant and consistent manner. Exploit Nikes lack of high profile sponsorship Nike, the worlds most successful sportswear brand and footwear producer struggled to fill the void vacated by Michael Jordan. This was the first time in a long time that Nike did not have an eminent sports star to spearhead their marketing drive. This has left an opening for the likes of Reebok to exploit, particularly in the basketball arena. The company took the Chinese sensation from Nike, Yao Ming, hoping to increase market share by 10% to 30% by 2006. THREATS Over reliance on footwear sales Footwear is Reeboks largest division and the company relies fairly heavily on the footwear market. That was a competitive field experiencing much slower growth than in previous years and, like most other producers, Reebok felt that it must do more to increase sales. Reebok had also to be aware that the market for more expensive footwear was slowing. This could ultimately force prices down, should this trend continue for a significant period of time. With the company so reliant on footwear, it risked losses, whereas other competitors such as Nike can fall back on their apparel division. Diverted from historical markets Reeboks original success stemmed from the womens aerobics market in the 1980s. It has since become apparent that the company has shied away from its roots. Reeboks womens products represent only 25% of its athletic apparel volume. The womens apparel sector actually accounts for around 40% of industry sales, which suggests that Reebok risked losing out in the key market that transformed them into a global company. Product portfolio strategy introduction to the boston consulting box Introduction Thebusiness portfoliois the collection of businesses and products that make up the company. The best business portfolio is one that fits the companys strengths and helps exploit the most attractive opportunities. The company must: (1) Analyze its current business portfolio and decide which businesses should receive more or less investment, and (2) Develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained. Methods of Portfolio Planning The two best-known portfolio planning methods are from the Boston Consulting Group (the subject of this revision note) and by General Electric/Shell. In each method, the first step is to identify the various Strategic Business Units (SBUs) in a company portfolio. An SBU is a unit of the company that has a separate mission and objectives and that can be planned independently from the other businesses. An SBU can be a company division, a product line or even individual brands it all depends on how the company is organised. The Boston Consulting Group Box (BCG Box) Using the BCG Box (an example is illustrated above) a company classifies all its SBUs according to two dimensions: On the horizontal axis: relative market share- this serves as a measure of SBU strength in the market On the vertical axis: market growth rate- this provides a measure of market attractiveness By dividing the matrix into four areas, four types of SBU can be distinguished: Stars -Stars are high growth businesses or products competing in markets where they are relatively strong compared with the competition. Often they need heavy investment to sustain their growth. Eventually their growth will slow and, assuming they maintain their relative market share, will become cash cows. Cash Cows- Cash cows are low-growth businesses or products with a relatively high market share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit so that they continue to generate the strong cash flows that the company needs for its Stars. Question marks- Question marks are businesses or products with low market share but which operate in higher growth markets. This suggests that they have potential, but may require substantial investment in order to grow market share at the expense of more powerful competitors. Management have to think hard about question marks which ones should they invest in? Which ones should they allow to fail or shrink? Dogs- Unsurprisingly, the term dogs refers to businesses or products that have low relative share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. Using the BCG Box to determine strategy Once a company has classified its SBUs, it must decide what to do with them. In the diagram above, the company has one large cash cow (the size of the circle is proportional to the SBUs sales), a large dog and two, smaller stars and question marks. Conventional strategic thinking suggests there are four possible strategies for each SBU: (1) Build Share: here the company can invest to increase market share (for example turning a question mark into a star) (2) Hold: here the company invests just enough to keep the SBU in its present position (3) Harvest: here the company reduces the amount of investment in order to maximise the short-term cash flows and profits from the SBU. This may have the effect of turning Stars into Cash Cows. (4) Divest: the company can divest the SBU by phasing it out or selling it in order to use the resources elsewhere (e.g. investing in the more promising question marks). THE BOSTON CONSULTING GROUP BOX (BCG BOX) OF REEBOK STARS  · Greg Norman Apparel Question Mark  · Athletic footwear  · DMX2000 Cash Cows  · Rock Port Dogs  · Avia Stars: [high share; high growth] 1. The Collections moisture-wicking innovative Play Dry ® technology and unique Performance. Luxury. 2. Style. combination continue to differentiate the brand. Influenced by one of the worlds leading golf professionals and identified by the four-color shark logo, Greg Norman Collection has become a complete lifestyle brand since beginning as knitwear line in 1992. India is now a major sourcing hub for Reebok Internationals golf apparel and accessories brand Greg Norman Collection. The $100 million brand which retails at $60 to $90 per piece globally sources about 30-40% of its total apparel needs from India. According to Ms Biszantz, the entire Greg Norman range was being outsourced from India including the regular knitwear polos, the fragile rain suit and even Greg Normans patented play dry technology apparel range. At present, the range is being outsourced from five vendors located across the country, these include textile majors like: Ahmedabad based Arvind Mills and Gokuldas Exports, apart from companies like Gurgoan-based Matrix and Faridabad-based Super Fashion and Gupta Exim. The design and merchandising inputs are however still comi ng from New York. The Greg Norman Collection made its debut in the Indian retail market through the opening of an exclusive brand store in Gurgaon The company plans to set