Reebok of America Inc.
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Reebok started in the 1890s by Joseph William Foster in England. The original mission of the company was to enhance performance in long-distance track events by improving equipment. The business started on a very low-scale, where all shoes were hand-made. The ever increasing demand for athletic apparel and shoes has made the company grow into a highly diversified operation with its products distributed in 28 countries.
Reebok USA., Ltd was formed in 1979 by Paul Fireman. The original marketing strategy was aimed at prestige and at high prices. In the beginning, the company had little luck in penetrating the market, and in 1981, PLC, a British wholesaler of footwear acquired 56 percent of the common stock in exchange for $77,500 in cash. Fireman and PLC agreed that neither party would sell its stock to third parties.
A few years later, Reeboks sales exceeded $1.5 million and the company contracted with a South Korean firm to manufacture the shoes. In 1982, the company introduces the first womans athletic shoe. Sales rose to $3.5 million in 1982, and in 1983 the sales increased to $12.8 million. By 1985, Reeboks sales reached $307 million. The same year, Reebok International and Reebok USA., Ltd merged and Reebok International, Ltd was formed. Stock was issued to the public at $6, and in 1986 the price of one share rose to stunning $38.
In 1986, Reebok gave PLC the exclusive right to control, inspection and shipment of finished goods from South East Asia. Reebok pays the subsidiary 4% on the first sales of $100 million, 3% on the second, 2% on the second and finally 1% on of all purchases exceeding $300. At the same time, Fireman was elected chairman of the company.
In 1987, Fireman set the goal of becoming a $2 billion dollar multinational firm by the year 1990. This was to be achieved by acquisitions, internal development, and international expansion. The company puts heavy emphasis on consumer research, and on research and development activities.
Several horizontal acquisitions have been made by Reebok. Rockport company, a manufacturer of high-performance walking shoes was acquired in 1986. Rockport would become the most dominant name in the walking shoe industry. In April 1987, Reebok purchased Avia Group International, an Oregon-based athletic shoe company. This acquisition effectively combined two of the fastest-growing athletic footwear makers. Furthermore, in September 1987, Reebok purchased Ellesse International S.p.A., and Italian sportswear manufacturer for its shaky apparel division which was not doing too well.
Presently. Reebok characterizes itself a “marketing-type company”, dealing mainly in sporting goods and leisure products with an upper-scale image.
SWOT Analysis.
The internal strengths of Reebok relative to its competitions is all of the following. First, the companys financial position is extremely strong. The financial growth of Reebok has been phenomenal. According to Forbes, the company enjoyed the highest growth rates from 1983-1987, and sales has continued to increase since that. With very few manufacturing facilities, Reebok has a high level of liquidity (current ratios exceeding 2.0). Furthermore, earnings per share has increased, and revenues increased from $12.8 million in 1983 to more than $1.8 billion in 1989. Furthermore, the company has operated with minimal long-term debt, and has the financial resources to invest in new market niches.
Secondly, Reebok International is more diversified than the competition. The company markets a wide array of show-wear, which has been possible by early strategic acquisitions of reputable companies. For instance, Rockport is the most dominant brand in the walking shoe industry. Also, Reebok is a clear market leader in the tennis shoe market.
In addition, Reeboks brand image stands for quality, the latest technology and prestige. The company has been in business for a longer time than any of the competition, and the company has been able to create favorable brand recognition. Moreover, Reeboks top management is highly marketing oriented, and most of the key personnel come from a marketing background. This is a strength in this business, since the industry is market driven instead of product driven. Also, an increase in demand is the expected market trend.
The weaknesses of Reebok International includes all of the following. First, the management. After that Joseph Labonte and Mark Goldston both reigned, Fireman is the chairman, president, and the CEO of Reebok. The company is highly dependent on one single person, who will not be able to effectively handle all of the required tasks. Also, in the new reorganization, AVIA is no longer represented in group of four operating corporate officers. This could cause internal tensions within the corporation. I believe that there is a conflict of interest in the top management, between the entrepreneurial like character Fireman and “the spirit of his company.” The resignations of Labonete and Goldston came as a result of their management styles conflicting with those of Fireman. Moreover, Reeboks main product-line weakness is in its apparel division.
The opportunities of Reebok are the following. Continue market diversification and expansion into international markets in search for new potential customers. Furthermore, by diversifying into multinational markets it may be possible to pro-long the very short product life cycles in the industry by manipulating the marketing of different product niches in different nations. For instance, if the sale of one product-line is declining in the USA, the same product may be launched in South East Asia, and vice versa. The financial strength of the company makes it possible for Reebok to continue to ensure market leadership with effective research and development strategies. It is very important in this industry t make sure that you are on top-of-the-line in all products. Moreover, I still believe that there is potential for growth in the apparel industry, and that Reebok should focus on merging or purchasing a well-known apparel manufacturer. Reeboks strong product name should do well on clothes and accessories.
The external threats that are impacting on the companys operations are concentrated to competitive threats, litigations, and in the manufacturing arena. First, the harsh competition from the main competitors in the industry is significant. To keep-up with the competitions penetrating efforts will cost a lot of money and put a lot of pressure on marketing and research and development. Also, the short product life cycles play an important role in the return on investment in a particular