Strategic Thought Transformation - The IIPM Think Tank

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The Gazelle way to India Strategies of Reebok in the Indian market; a commentary synopsis An IIPM Intelligence Unit Publication STRATEGIC INNOVATORS 79
C A S E S T U D Y Well, if you’ve not heard of this one, then your management heart has been surely not been beating too many times in the past few years eh But pray allow us to present the cliche once more; for the sake of the argument... So here goes – “Once upon a time, in a distant country lived two salesmen. They were assigned to visit a desert island. One of the two reported back ‘Unbelievable! No one wears shoes here. No scope for business!’ The second salesman reported back, ‘Unbelievable! No one wears shoes here. Huge business opportunity!’ A small trite allegory, which is oft repeated when the name Reebok is mentioned, drawing the connection that Reebok is the second salesman & the desert island signifies India. Reebok entered India in the year 1995 and presently enjoys the leadership position in the country. Reebok India is the subsidiary of Boston-based fitness and sportswear giant Reebok International Ltd. Though gaining the leadership position can not be attributed only to the early entry strategy of the company, it is a fact that India is one of the few geographical markets where Reebok has left arch-rival Nike behind. The Adidas Advantage … Nike would now face stiff competition from the combined force of Reebok and Adidas. German based Adidas acquired Canton, Mass based Reebok on August 3rd, 2004. In 2004, the combined global sales of Reebok and Adidas stood at $12 billion ($8 billion from Adidas, $4 billion from Reebok) against Nike whose sales were $14 billion. The combination will not only yield results in terms of profi ts or revenues or market share but also provide a strong and a comprehensive product portfolio to both of the companies. While Reebok has a strong foothold in tennis, fi tness and basketball, Adidas is strong in soccer and team sports. But acquisitions should not only be restricted to paperwork, they should have real life implications too. Unless the two companies work hard on resolving post merger confl icts, the expected synergies could well end up in debilitating disappointments... When Reebok (which literally means a ‘Gazelle’ in Africa) entered India, the sport shoe market was at a very nascent stage. Not only were Indians used to only formal ‘shoes’, domestic competition from the likes of Liberty, Action etc had ensured that even for sports shoes, high prices were unheard of! And consumers at that point of time THE SEED SOWN: 1890-1930 In the 1890s, the fi rst spiked running shoes were made by Joseph William Foster. By 1895, he was catering to the ‘shoes’ need of some top runners. Within a short span of time, his company, J. W. Foster and Sons, boasted of an international clientele comprising well-known athletes, It is also the contented makers of the running shoes worn by Harold Abrahams and Eric Liddell, famously shown in fi lm Chariots of Fire. THE NAMING RITUAL 1950-1980 It was the year 1958, when Jeffery and Joseph, grandsons of Joseph William Foster, founded a companion company by the name of REEBOK, which in Afrikanese means a gazelle. In 1979, Paul Fireman, a partner in an outdoor sport goods distributorship, noticed Reebok in an international trade show. He became the North American distributor and introduced in US three running shoes priced at $60, at that time the most expensive running shoes in the market. THE WINDS OF CHANGE 1980-1990 By late seventies and early eighties, Reebok’s sales were exceeding $1.5 million. In 1982, Reebok came out with a revolutionary product – Freestyle – an athletic shoe for women for a fitness exercise called aerobic dance. This concept resulted into the emergence of three new trends – the aerobic exercise movement, the infl ux of women into sports and exercise and the acceptance of well-designed athletic footwear by adults for street and casual wear. Freestyle later came to be known as Classic, the best selling product of the Reebok portfolio. In 1985, Reebok came out with its IPO (Initial Public Offering). This was also the time when The Pump® technology was introduced, which is a path breaking technology in sports and fitness activities. The year 1989 saw the company launch Step Reebok®. In related Reebok with being an imported “illogically high priced” brand, meant only for the upper classes. As Reebok was averse to positioning their brand as only being a high society brand, it stuck to its traditional mix of being associated with sports, marketing its brand as a normal sportswear statement. Clearly, education its first ten years, Step Reebok became an international fi tness phenomenon as millions of people in 16 countries used the program to stay in shape. TIME FOR TRANSITION 1990-2000 Early nineties saw Reebok changing its focus from being only fi tness and exercise centric to being a sports shoe company. The product portfolio now comprised shoes for varied sports. Also it signed numerous athletes, teams and federations. The new millennium saw Reebok coming out with a yet new concept – core training. The company states core training as follows – The training program is based on athletic and physical therapy training principles, representing a signifi cant shift in how to approach exercise, and training by focusing on “quality” (not “quantity”) of movement. Central to the program is the Reebok Core Board, the fi rst-ever exercise board offering a three dimensional action that tilts, twists, torques and recoils with the body’s movements. When used together, Reebok Core Training and the Reebok Core Board provide a highly effective, strength training workout that conditions the user for daily living, whether in sports or for daily living. THE ERA OF AU COURANT 2000... In December 2000, Reebok and NFL entered into a ten year exclusive license agreement where Reebok had the rights to manufacture market and sell NFL products to all the NFL teams. In August 2001, another ten year agreement was made with NBA, the Women’s National Basketball Association (WNBA) and the National Basketball Development League (NBDL). In February 2002, Reebok and the Indy Racing League (IRL) went in for a multi year agreement which made Reebok the offi cial outfi tter of IRL. It was in this year, that another brand Rbk was launched, a collection inspired from street footwear and apparel. 80 STRATEGIC INNOVATORS An IIPM Intelligence Unit Publication
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