Strategic Thought Transformation - The IIPM Think Tank

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