Athletic Shoe and Reebok

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Reebok was founded in Bolton, United Kingdom and is currently headquartered in Canton, Massachusetts. I selected this firm for my report because Reebok manufactures athletic shoes, apparel and accessories some of which I utilize in my life. Reebok is a lesser-known company than a firm like Nike but still is powerful in it’s own right. Reebok produces everything from t-shirts to sneakers and is why I chose to do my report on this particular firm. Since 2005 Reebok has been a subsidiary of the German company Adidas. The company name comes from the Afrikaans spelling of rhebok, a type of African antelope or gazelle.

The original name of the company is Mercury Sports. In 1960, two of the founder’s grandsons Joe and Jeff Foster renamed the company Reebok in United Kingdom, having found the name in a dictionary won in a race by Joe Foster as a boy; the dictionary was South African edition hence the spelling. The company lived up to the J. W. Foster legacy, manufacturing first-class footwear for customers throughout the United Kingdom. In 1979, Paul Fireman, a United States sporting goods distributor saw a pair of Reeboks at an international trade show and negotiated to sell them in North America.

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He negotiated for the North American distribution license and introduced three running shoes in the U. S. that year. In 1958 the Reebok company was formed by Foster’s grandsons and in 1979, at the height of the running shoe boom, three models were introduced into the US market. Although they were the most expensive shoes on the market, demand soon outgrew supply. At $60, they were the most expensive running shoes on the market. Adidas plans to buy the outstanding shares of Reebok for $59 apiece in cash, valuing the transaction at $3. 8 billion. Reebok’s executive board has agreed to the deal.

Adidas has said it will pay for the acquisition with a mix of equity and debt. It raised $795 million by selling new shares in November and has also secured a 2 billion euro revolving credit agreement, which might help as a back-up. Shares will be bought only after Reebok shareholders have given the go-ahead for the deal, according to Adidas. The deal will create a firm with combined annual sales of around $11 billion. Global market leader Nike posted sales of $13. 7 billion in its 2004/05 fiscal year. Adidas expects the deal to boost net income by more than 10 percent in the medium term.

Sales are seen growing at a mid- to high single-digit rate, while cost savings are expected to reach 125 million euros annually by the third year once the deal is done. Reebok will become a separate brand within the new group, supplementing the key Adidas and small golf sports units Taylormade and Maxfli. All brands will report to Adidas’ executive board in the Herzogenaurauch headquarters near Nuremberg. The deal is set to enhance Adidas’ position in the United States, which accounts for 50 percent of the sports footwear market alone. According to industry magazine Sporting Goods Intelligence, Nike holds an estimated 36 percent of the U.

S. market, Reebok around 12. 2 percent and Adidas 8. 9 percent. In contrast, Reebok has a much better position in the lifestyle fashion market, where Adidas has been struggling to imitate the success of Puma. Reebok is also known for women’s wear, aerobic and fitness sportswear. In the year 1981, Reebok’s sales exceeded $1. 5 million, but a dramatic move was planned for the next year. In 1982, Reebok introduced the first athletic shoe designed especially for women. In the midst of surging sales in 1985, Reebok completed its initial public offering.

In the late 1980s, Reebok began an aggressive expansion into overseas markets and Reebok products are now available in more than 170 countries and are sold through a network of independent and Reebok-owned distributors. In 1992, Reebok began a transition from a company identified principally with fitness and exercise to one equally involved in sports by creating several new footwear and apparel products for football, baseball, soccer, track and field and other sports. In 2000, Reebok and the National Football League announced an exclusive partnership that serves as a foundation of the NFL’s consumer products business.

The NFL granted a long-term exclusive license to Reebok beginning in the 2002 NFL season to manufacture, market and sell NFL licensed merchandise for all 32 NFL teams. In January 2006, adidas-Salomon AG acquired Reebok, forever altering the worldwide sporting goods industry landscape. The Reebok Company was incorporated in 1979. The organizers of Reebok were J. W. Foster and his sons. Reebok’s net sales in 2010 were around $16 million, combined with their new owners Adidas they rake in over $16 billion in yearly revenue. In 1995 operating costs soared to 32. % of sales, exceeding the industry average of 27%. Reebok is ranked number 795 on Forbes. com’s list of wealthiest companies. Growth exploded and sales soared from $13 million in 1983 to $307 million in 1985, sales tripled in one year, reaching $919 million in 1986. $1. 4 billion was reached by 1987 and $2. 7 billion was reached by 1991. Reebok signed up 3,000 athletes to wear Reebok shoes at the 1996 Olympics in Atlanta that blew out the budget. Customers of Reebok are generally athletes and people who participate in any type of athletic activity including yoga and other activities.

Reebok produces goods such as athletic shoes, athletic apparel, and other sporting goods accessories. Reebok’s largest competitor is currently Nike, it was formerly a combination of Nike and Adidas before Reebok and Adidas completed their merger. The current key executives and directors at Reebok are Ull Becker, David Baxter, Jim Gaber, Bill Holmes, Charlie Maurath, Dave Mischler, Matt O’Toole, and John Warren. Some of the strengths of the Reebok brand are access to retailers through its direct distribution strategy, field service and promotion representatives that add value by traveling the U.

S. teaching retailers and consumers about the products’ features and benefits, they are well equipped to handle future supply shortages by manufacturing in multiple countries, there is a high brand loyalty, they have high market penetration, there is a high brand recognition, they have the ability to respond to customers’ needs and desires. Some of the important personnel policies at Reebok are benefits for their employees, work schedules, breaks and leaves, salaries and pay schedule, performance reviews and promotions, as well as terminating employment.

The key skills needed to accomplish the firm’s mission are a dedicated pool of employees who have the proper work ethic and etiquette to keep a multi-billion dollar corporation like Reebok running as smoothly as possible. In 1993, a company publication stated that their objective is to become the best, most innovative and exciting sporting goods company in the world. Since Reebok has diversified into so many different show lines, it has a large number of competitors with whom to contend. However, diversification is also leverage, as if one market segment is facing a decline in sales, other segments are able to make-up for the losses.

Rebok decided to diversify its shoe line to avoid becoming too dependent on a few lines of sneakers. The company has diversified into international markets and into several product niches. First, Reebok diversified into women’s aerobic shoes. This was highly successful, since the company was able to get into a new market segment which was yet unexplored. Secondly, Reebok diversified into high performance walking and causal footwear. The acquisition of Avia in 1987 effectively combined two of the fastest-growing athletic footwear makers in the USA. Furthermore, Reebok as able to add yet another product, a product which could satisfy the most serious athlete. This represented an excellent opportunity for Reebok to directly compete with its worst rival, Nike. The fourth diversification occurred when Reebok’s subsidiary, Rockport company, acquired the John A, Frye Company, which produced high-quality leather boots. These high-class, high-priced and high-quality boots would add another line of footwear to Reebok’s product mix. The fifth diversification occurred in 1987, when Reebok decided to purchase an Italian upscale sportswear manufacturer.

Reebok used the company as a distributor in Italy. This diversification would aide Reeboks struggling apparel division. Nike did a similar acquisition in 1989 of Cole-Haan in order to improve styling of products. The final diversification was made in 1989, when the company acquired CMI’s Boston Whaler unit, which manufactures and sells power boats for the US government and for recreational use. Since Reebok characterizes itself as a “marketing-type company”, dealing mainly in sporting goods and leisure products with an upper-scale image.

The attitude of Reebok employees toward their superiors is overall a good one, never have reports surfaced of employees being unsettled with any on goings concerning the management of their employer. As sales increased so rapidly in the mid 80s, Fireman, who was Chairman and CEO, gave up his position to a management team more experienced in handling such a large company. The new management team proved to be inept. The company went through three different top managers in five years. In August 1992, Fireman took charge and wasted little time in bringing in a new team and planned an aggressive thrust back into the market.

The major problems that are facing Reebok in 1989-1990 are solely related to the organization and to the top management in particular. Virtually all indicators of financial performance for Reebok in recent years show strongly positive results, and sales are increasing. In August 1989, two of the key personnel in the top management of Reebok resigned. The loss of these two personalities would be the main cause to the problems that are now facing the company. Joseph Labonte, the former president and operating officer who joined the company in 1987 and Mark Goldston, the former chief-marketing officer were great assets to the organization.

Furthermore, they held key-positions in a marketing-oriented company operating in a highly competitive market. Both of the persons had managerial experience in multibillion-dollar organizations, and they had both extensive experience in heavy marketing and advertising of consumer brand names. However, none in the whole top-management team had any experience in the footwear industry. The loss of these key personalities caused a managerial vacuum in top-management. Fireman, took the positions of chairman, president, and CEO. That is an impossible task.

Fireman is trying to centralize the organization, and thereby divert responsibility to other key personnel. Still, each executive manager is responsible for too many jobs. For instance, John Duerden is the senior vice president and president, and CEO, Reebok Brands Division Worldwide. 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.

Reebok’s main product-line weakness is in its apparel division. Many incentives are offered to Reebok employees such as benefits, medical insurance, dental insurance, group life insurance, long & short-term disability insurance, travel accidental death and dismemberment insurance, employee stock purchase plan, savings and profit sharing retirement plan, paid vacation, paid sick leave, paid holidays, educational assistance, dependent care and medical care reimbursement accounts, life balance resources, employee assistance programs, employee discounts, fitness and wellness centers, and a casual business environment.

The types of securities sold to the public from Reebok are in the form of shares. The shares of Reebok are sold on the New York Stock Exchange. There was the Federal Trade Commission lay price-fixing charges the company faced in May 1995 Reebok paid out $9. 5m to settle. The current performance of Reebok’s securities is on the rise and currently improving. Over the past three years Reebok has been continually growing and turning a profit despite a down economy. In 1987 Nike had sales of only $900 million while Reebok’s was soaring at $1. 4 billion but Reebok’s sales slowed and by 1990, Nike overtook it with $2. 4 billion in sales compared to Reebok’s $2. 16 billion in sales. Reebok began to steadily lose ground. Recent financial news made by Reebok was when they had to pay $25 million dollars to tone down advertisement for shoes that claimed to reshape people’s backsides. This news was most certainly met with negative feedback from the public due to the false advertising for the extremely popular sneaker that is currently out on the market. Surprisingly this did not affect Reebok on the New York Stock Exchange due to the company’s speedy response to the advertising mishap.

Reebok has been huge in keeping up their end of the bargain in social responsibility. Ten years ago they started the Reebok humans rights awards which recognizes people who are genuinely inspiring activists. Reebok’s biggest competitor Nike has been boycotted against while Reebok has experienced none of these things. Nike’s overall labor record is also worse than that of Reebok. Reebok isn’t perfect though, their contracting factories in Southern China are riddled with wage, hour, and health violations, and Reebok continues to exploit child labor to stitch soccer balls in Pakistan despite a public pledge to put an end to the practice.

The danger is that the rhetoric of corporate social responsibility can be an effective disguise for seriously antisocial behavior but there is, of course, another side to that coin: namely the opportunity to point out the hypocrisy of the matter. Reebok’s 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. The internal strengths of Reebok relative to its competitions is all of the following. First, the company’s 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 have continued to increase since then. With very few manufacturing facilities, Reebok has a high level of liquidity. Also the earnings per share has increased, and revenues increased from $12. 8 million in 1983 to more than $1. 8 billion in 1989. The company has operated with minimal long-term debt, and has the financial resources to invest in new market roles. 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. Reebok’s 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, Reebok’s 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 external threats that are impacting on the company’s operations are concentrated to competitive threats, litigation’s, and in the manufacturing arena. First, the harsh competition from the main competitors in the industry is significant. To keep-up with the competition’s 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 product line.

Weakening markets may be a serious threat to Reebok. Reebok’s plan to relocate its headquarters to Amsterdam will enable it to centralize its European leadership team and more effectively manage its regional priorities. Also as a result of this program, the company will redirect and strengthen resources against its priority European markets, customers and categories, specifically range merchandising, brand marketing and sales. My evaluation of this particular firm, Reebok is that despite this extremely troublesome economy they are managing to stay a float and successfully turn a profit.

They have had a few issues regarding their CEO’s and other members of the management team but that’s a normal part of any business. Nothing or no one in this world is perfect and every company has its flaws, even a multi billion-dollar corporation such as Reebok. What I personally attained from doing this report was a very in depth look at a company I’ve heard about a lot but never really knew anything substantial about it. This report really made me delve into the business side of the company, a company whose products I use and people all over New York City use every single day.

Every time I put on an authentic National Football League jersey the Reebok logo is right there stitched onto the sleeve. Reebok may not get all of the hype and media attention that their biggest competitor and rival Nike gets but they do manage to hold a big part of the market, even more so now that they partnered with another giant in Adidas. The methods I used to asses the firm’s performance were methods that I would use to find any information, by going to the library and using all the resources available to me such as books and most importantly the internet.

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Athletic Shoe and Reebok. (2017, Jan 07). Retrieved from

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