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