Case Study #4 – Reebok

Case Study #4 – Reebok

Section One – Background

The intricacy of designing and efficiently initiating a global sports product could be devastating to global sport business leaders, especially those who lack international products as well as marketing strategies and awareness. Since the late 1980s, Reebok has remained a leader in the world fitness industry. However, its rise to dominance began in the 90s. It has endlessly looked for marking options and strategies to extend its products to new places and customers. Even with its line in the shoe and apparel industry, the firm also started to explore other alternatives, including the competitive cycling market. It entered this market by starting with small sponsorship programs and later introduced the Reebok cycling team. This product mainly targeted performance cyclists by serving them with independent bicycles. In general, its strategy in the bike market entailed focusing on health and fitness consumers as opposed to performance consumers. However, its policy took drastic turns during the later 90s and early 2000s because the company wanted to adopt Nike’s positioning plan. This move made the firm to experience a considerable downturn in its competitive edge and international business success. In 2003, the firm’s fitness business started growing and gaining significant progress internationally (Hecox, 2013).

Section Two – Problem Statement 

The firm has sustained its bike business for fifteen years and is now attempting, by all means, to expand it into the global market. In attempts to operate in this industry, Reebok will need a license that will enable it to have a valid entry into the global bike industry. Equally, the firm will also need efficient internationalization to enter into this market successfully. But, the level of constraints involved with any internationalization strategy includes the entry mode, cultural influences in different countries, and choice of overseas markets.  Because Reebok is in the global fitness market, it has to pick a convenient entry mode into the bike industry. Likewise, since licensing has several restrictions regarding brand positioning, promotion, product creation, and distribution channels, Reebok has to remain strategic. As initially noted, Reebok’s brand tactic significantly changed in the 90s and early 2000s because it tried to use Nike’s positioning plan internationally (Hecox, 2013). This attempt resulted in a failed global business and ineffective competitive positioning. As discussed in the case, bikes were not a strategic priority during the 90s for Reebok.

Section Three – SWOT Analysis  

Strengths

1. The company’s brand has a positive brand momentum in the market.

The company’s bike business is functionally and cost-competitive with industry competition internationally (Hecox, 2013).

2. The company has a broad scope and variety of bike collections, including accessories, which give retailers different options.
3. The successful retail business in the United Kingdom shows that Reebok’s bike line is thriving and fast-developing (Hecox, 2013).

Weaknesses

1. The company is currently depending on retail and bike partners to design and make its bike products (Hecox, 2013).
2. The firm’s bike collection does not have a signature innovation that it can depend on for its future business (Hecox, 2013).
3. The organization’s bike line also lacks aesthetic and graphic design capacities and identity.
4. The company’s bike business also lacks an effective and integrated marketing strategy by region to align and support its specific retail partners.

Opportunities

1. The current bike brands in the sporting industry are moving to lower-end target and mass distribution of goods.
2. Retailers in the sporting industry seek for product and brand differentiation for their businesses (Hecox, 2013).
3. The channel of goods distribution in the bike industry lacks a strong consumer brand, which Reebok can take advantage of and thrive in its future business.
4. Available technology advancement and innovation can enable advanced bike design as well as production (Hecox, 2013).

Threats

1. The cycling consumption is down to almost 42MM today from a high of about 59MM in the 90s.
2. Retailers in the sporting market are increasingly entrenched with supplier 5-base.
3. The United States’ bike market sales are drastically decreasing, with all bikes distribution representing a saturated industry.
4. Most of the distribution channels in the bike industry are facing increasing pressures, including competitive and margin pressure, from several market players.

Section Four – Alternative Solutions  

Solution 1: Consider exporting its bike products as a vital entry mode

1. Pro – The Company can quickly expand its markets, leaving it less dependent on any single production strategy.
2. Pro – Because it is less costly, Reebok can produce massively and attain larger economies of scale, with better margins.
3. Con – Unless the company’s management is careful, the firm can lose its focus on its home market and its existing customers.
4. Con – The Company’s administration costs might increase because it will be dealing with export regulations and policies when trading with different countries overseas.

Solution 2: Adopt licensing and franchising as its entry point into international markets

1. Pro – With licensing, the company will require limited funds or capital outlay.
2. Pro – This type of entry is fast and less risk for the company to use in attempts to enter the global bike market.
3. Con – Low control levels, with low local knowledge on different foreign markets.
4. Con – the licensee might become the company’s main competitor because it would have transferred sufficient knowledge and expertise that can be used against it.

Solution 3: Adopt partnering and strategic alliance as its entry point into international markets

1. Pro – Shared risks and costs, which can reduce the amount of investment required.
2. Pro – There are several organizational, economic, and strategic gains in using this approach to internationalization (Malhotra, Agarwal, & Ulgado, 2003).
3. Con – High costs as compared to exporting or even licensing and franchising.
4. Con – Besides, this mode entails integration issues between different corporate cultures.

Solution 4: Adopt acquisition as its entry point into international markets

1. Pro – It is fast and can give the company the ability to acquire resources and other required competencies swiftly.
2. Pro – It enables high market power, giving the business the ability to build a robust market presence in different countries.
3. Con – This mode is associated with several integration issues, including difficulty in adapting to overseas cultures.
4. Con – High costs and significant financial consequences.

Section Five – Conclusion and Recommendation  

As seen from the above discussion, Reebok has different ways to take its bike business to various global markets. For instance, it can decide to export its products, use licensing as well as franchising, partner, and form alliance with other brands or acquire other businesses in oversea markets. One recommendation is that the firm’s products should have consistent quality because excellent products satisfy consumer needs. The company can also engage its employees to ensure that they meet its goals and customers’ needs. Lastly, the firm should ensure that it has a constant product development to guarantee the quality, creativity, and strategy alignment.

References

Hecox, M. (2013). Sport licensing and internationalization: A case analysis of the reebok bike business. Case Studies in Sport Management, 2(1), 45-56.

Malhotra, N. K., Agarwal, J., & Ulgado, F. M. (2003). Internationalization and entry modes: a multitheoretical framework and research propositions. Journal of international marketing, 11(4), 1-31.