Managing Reebok
History of Reebok
The company of Reebok started in England in around 1890 to provide shoes which could help athletes run faster. The cleated running shoes were developed by Joseph William Foster and he had then started a company to make hand-stitched athletic shoes for the runners of that time. The enterprise continued in that manner and started with the name of Reebok International due to the starting of a new company by the grandsons of JW Foster. The name was taken from the name of an African gazelle. The company came to USA in 1979 when Paul Fireman bought an exclusive license for distribution of Reebok in North America. From the beginning itself, the products were the most expensive, and were being sold for $60 a pair even in 1979. The sales increased over time, and became $1.3 million in 1981, and then the production capacity of the plant in UK was exceeded.
This led to a tie up with Pentland Industries, who are a British shoe distributor to establish a production facility in Korea. For $77,500 Pentland got 56% of the Reebok stock. This was also the time that aerobic dancing became popular as a fitness craze and there were no shoes available for women. The situation was taken advantage of by the company and it started a product for that market. Then it came out with the 'Freestyle' line of shoes and the sales of the company boomed from $3.5 million in 1982 to $3.6 billion by 1997. Then the two companies of Reebok USA and Reebok International merged into Reebok International. At this time four million shares were offered to the public, and this also permitted Pentland to become a major shareholder, though the CEO and Chairman's position continued with Paul Fireman. The money collected was used for financing the growth of the company.
What are the industries and Reebok's management strategies and trends for the last two years?
The company has internally viewed the present position and has outlined fourteen difficulties that they are likely to face in the future. The company's business was viewed to be subject to the economic conditions in the major markets of the company. The conditions reflected unlimited recession, inflation, a general weakness in retail markets and downward trends in consumer purchasing powers and resultant brand preferences. This situation was accentuated by the events of 9/11 and the generally weak economic conditions have led to lower confidence among investors, a lowering of demand from consumers and thus a reduction in spending. There were hopes however that the economies of UK, Europe and Asia / Pacific regions will help in the improvement of the situation. This has made the company feel that the outlook for business was uncertain. The other point to worry was that the total market for athletic footwear and apparel was highly competitive, and the important considerations by the customers was of price, quality, design, brand name, marketing and promotion and the capacity of the company to meet delivery commitments to retailers.
Some of the competitors had more financial powers and this also hurts the company. Where the market has matured, further growth may be practically impossible to achieve. For Reebok, the sales increased by 4.5% to $2.993 billion from the previous figure of $2.865 billion. There was an adverse effect on sales due to the fact that foreign currencies weakened against dollar. At the same time, the decrease was mainly in the Asia Pacific region, as there was an increase in all other regions for the company in U.S., Europe and Latin America. Thus the sales performance of the company for 2001 can be described as being good. This becomes clearer when we see that the sales of other companies showed a downward trend. The sales of Rockport declined by 5.4% overall and the domestic sales decreased by 9.0%. The sales of Ralph Lauren decreased in 2001 by 8.8% from the previous year's figures. Thus it is clear that there was a general decline in footwear sales in all three divisions of the company. The entire general decline had been anticipated.
What are Reebok's and the industry's management competencies?
One of the major problems faced by Reebok and its competitors was due to the continuous increase of the list of banned substances in consumer products. Reebok had taken aggressive action to meet these specifications. Yet, the changes had been made so rapidly that at certain points Reebok had products in distribution that were not in line with the latest directives of the...
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