Sneakers War Essay Example for Free

Sneakers War EssayMarketing Management SNEAKER WARS two hundred7 Nike neer lacks for boldness. The Beaverton sneaker goliath young personfully offered the German National Soccer Federation $778 jillion to sponsor its bailiwick soccer team for 10 social classs in an audacious flow to rattle its German oppose adidas and long-time sponsor of the German team. Nikes forward-looking-sprung(prenominal) chief executive, Mark Parker, upped the boldness quotient again on Feb. 6, when he outlined an ambitious plan to grow revenues by $8 jillion in hoops team years.In his commencement major initiative since inheriting the top spot ( knob Executive) in January, 2006, Parker explained to localizeors at Nikes annual analyst phoner how the caller-up aims to grow to $23 one million million in global revenue by 2011. The comprehensive long strategy calls for reshaping the management structure redefining Nikes relationship with its fast-changing, digitally impelled consumer a nd adding 100 naked as a jaybirdborn company stores intercontinental in three years. Were primordially changing the way we organize the company, Parker said. Nike is as hungry and as driven as weve ever been before and becoming more focused and more competitive. composition analysts and investors applauded very much of Nikes new strategy, some questioned whether the company could actually do it. After all, revenues would need to rise 53% over 5 years, or average some 9% a year, to reach the come in of $23 billion. Its vent to be challenging to achieve $8 billion in new gross revenue without turning around slumping sales events in Europe, Japan, and the U. S. basketball grocery a crucial $3 billion to $3. billion market share. I think its going to be tough for them, said John Shanley, financial analyst for Susquehanna Financial. Basketball, for example, is shrinking in terms of sales. They pee 96% of the market share in the $100 or more damage point. How do you get high single-digit ontogeny when you already pose more than 96% of the market? Nike executives wing short in offering specific details to some of these questions and focused more on photograph a broader picture of the new strategy.They stressed a multi-pronged approach that includes reorganizing the Nike check into six main gymnastic theatrical roles running, basketball, soccer, womens fitness, mens training, and sport culture that are expected to generate 75% of the notices growth. The company had previously divided the mug into three segments footgear, garb, and equipment. Growth is also expected to come from emerging markets and potential acquisitions. But Nike Brand professorship Charlie Denson said the company can reach the $23 billion target without new acquisitions. As for new markets, china is expected to become Nikes second biggest market prat the U.S. , potentially chalking up $1 billion in sales. Nike is building a strategy for growth across chinaware that im subtract foster new connections with Chinese youth, a market share plan designed to reap benefits far beyond the capital of Red China Olympics adjacent year, top executives said last week. By tapping into swelling consumerism, label consciousness and new hearty freedoms among Chinas youth, Nike hopes to cement and expand its current position as the leading athletic footwear and apparel note in the worlds most populous country, currently the companys quaternth-largest market.With more or less $600 million in current annual sales, Nike believes China has the potential to be the companys second-largest market behind the United States with revenue of $1 billion within five years. The company estimates some 50 million Chinese youth play basketball. We think our opportunity there is to connect more deeply with local culture, Parker said, explaining Nikes general China strategy. Parker said Nike pass on create products and sell and digital experiences designed to resonate wi th wired, hip and bequeathing-to-sp suppress Chinese youth living in different cities and regions. Ultimately, thats going to be our best foundation for growth going forward, Parker said. China is a prime component in the global Nike puzzle that entrust help push total sales for the Beaverton, Oregon-based company toward a target of $23 billion by 2011. Nike also views India, whose population growth rate is rising faster than Chinas and Russia as potential $1 billion markets. Although the budget for Nikes 2008 Beijing Olympics strategy has not barely been planned, Nike Brand President Charlie Denson said that commitment would be major. But, Denson said, We are looking beyond Beijing. A recent Just Do It campaign that aired on Chinese television featured a adolescent woman basketball player and a young male skateboarder who spoke of their lives and dreams through sports. A pop Internet-based advertising campaign that followed the television advertisements encouraged teenagers to send in their own stories. While soccer and basketball are the most popular sports among Chinese youth, Nike also sees a huge market for its sports culture footwear and apparel lines that capture the allure of sports without the performance aspects.Trevor Edwards, Nikes vice president of global brand and category management, explained that Nike is move to encourage Chinese youth to find their individual voice. The Just Do It campaign and some others, Edwards said, communicated that we were a brand closely opportunity we were a brand about hope. Nike sponsors 22 out of 28 Chinese sports federations. While the best-known Chinese athlete in the United States, basketball centre Yao Ming, is signed with Reebok, a division of Adidas AG , popular Chinese hurdler and Olympic gold medallist Liu Xiang is a Nike athlete.Even though much of Nikes trade campaign in China is based on youth identity operator, Nike wants to make sure their footwear fits the millions. To that end, Nikes e ngineers and physiologists back at their headquarters conform out been collecting data about Chinese feet. But the company will not say whether specific footwear lines will be launched for China. Nikes India business has grown 40% since last year thanks in part to its efforts in cricket. Nike executives also said they plan to invest aggressively in other potential billion-dollar markets such as Russia and Brazil.Back in the USA, Nikes efforts to add new retail stores and elevate its partnership with existing retailers is a big part of its new strategy. This effort comes at a time of sluggish sales from some of its biggest retailers mall-based chains Foot Locker (FL) and Finish derivation (FINL). Nike executives said the company plans to grow its direct-to-retail business to 15% of total sales, or $3. 5 billion, from 12% today. The segment includes its own stores, factory outlets, and an e-commerce division, which executives expect to see a significant increase in revenues over the next five years.For the planned retail investment, Nike will increase capital spending to $475 million annually, up from adept under $400 million, Nike said. Gary DeStefano, president of Nikes global operations, stressed its retail goal is to make Nike a break in retail partner This is not about Nike vs. the retailers, he said. This is a partnership. We believe this could be a growth strategy. But probably Nikes boldest bet is on the consumer. In the eyes of Parker, this new and evolving digitally driven consumer is reshaping the sell landscape. The power is now in the onsumers hands, and Parker believes Nike and other consumer brand companies need to adjust to the new market dynamics. Consumers have never held as much power as they do today, Parker said. And clearly the power has shifted to consumers. Nikes Denson said this fundamental shift can be captured in the way the company studies its consumer profiles. In the past, managers used to consider 18- and 22-year-olds as part of the aforesaid(prenominal) demographic target. no. he says they are treated as separate and different markets when it comes to age, inte relievos, and tastes. We spent the last 30 years trying to bundle things, and now its almost the reverse and we have to un-bundle things, Denson said, explaining Nikes new efforts to tailor products to individual consumers. Despite these fundamental changes in how Nike approaches its customers and its reshaped management structure, some things never change. Nike the Great Compromiser its audacious self and competitive juices still run strong. It still has goals to dominate markets where it is not already No. 1, and its redoubling efforts to unseat rival Adidas as the worlds top supplier of soccer shoes and apparel.Its recent tenderise to sponsor the German national team is part of its 2010 goal to dominant the football brand, said Nike marketing vice-president Trevor Edwards. We believe its time to create separation. This is not a game of chicken. Some things never change. Adidas expects growth overseas, curiously in Asia, to push sales at its Reebok division to US$5 billion ($7. 42 billion) over the next three to five years, up from US$3 billion, adidas chief Herbert Hainer said yesterday.The worlds second-largest sporting goods overlord by and by Nike also said it expected to cut costs including at Reebok, which it acquired last year by about 87 million euros ($1. 6 billion) this year. That will more than offset integration costs, resulting in an overall cost savings of about 10 to 20 million euros, Hainer said. For the Reebok brand, the main growth driver will be Asia and to a certain extent Europe as well. Key markets like Germany and France are underdeveloped, as is Russia. Emerging markets have a huge potential and we will grow in the US, but by far not at the pace of Asia. Much of that growth will come toward the latter part of that fulfilment with the brand expecting only modest revenue growth, sa id Paul Harrington, president and CEO of the Reebok brand. Adidas, the German based sporting goods giant, bought Reebok in a US$3. 8 billion deal, looking to complement its force play in Europe with a major US brand that had greater strength in the counterfeit segment. But the Reebok brand has been a drag on Adidass performance thus far. In November 2006, the German company lowered its 2007 profit growth forecast to 15 per cent from 20 per cent, citing trouble at Reebok.Adidas shares have slid almost 14 per cent since the Reebok takeover closed on January 31, 2006. Rival Nikes shares have risen about 24 per cent over that time. Reeboks sales have been lagging in the United States and the United Kingdom, though adidas plans a big elaborateness for the brand in Asia, including about 3200 stores in China, India and Russia by 2010. It is to open 200 stores in China and 90 in Russia this year. The brand is also eyeing an expansion in Japan, South Korea, Turkey, Poland and other parts of Eastern Europe.In Brazil, Argentina, Switzerland and Spain, where the brand is still sold by third-party distributors, the company is working to barter for out those contracts, but some may have to run their course through to 2012. At present, about 40 per cent of the Reebok brands sales come from North America and 40 per cent from Europe. Part of what makes the expansion outside the United States so appealing is that profit margins tend to be high in the rest of the world, Hainer said. You have much higher quantity on the US market, but much more value, higher profit margins on the European or Asian market. Adidas plans to reposition its Reebok brand to target sport apparel consumers who value individuality, with a goal of broadening beyond an urban youth target audience and re- show Reeboks grow as an athletics performance brand. The strategy comes as Germany-based adidas ramps up its investment in Reebok a year after acquiring the brand and then seeing Reebok sales fall into a slump. The revised brand strategy builds off the edgy I am what I am campaign Reebok adopted four years ago by embracing hip-hop culture and youth-oriented entertainment alongside its traditional athletics performance market.The new strategy will maintain the I am what I am subject field in many of Reeboks advertisements. But it also will position Reebok as an American-inspired global brand that celebrates individuality in sport and life, according to Adidas. Reebok President and Chief Executive Paul Harrington said the brand will gently shift emphasis toward suburban consumers of all ages without abandoning the urban youth targeted by I am what I am. Reebok also will try to reconnect with consumers who value athletic performance over fashion.While I am what I am wont go by the wayside, It may not be as loud as it was when we first launched it, Harrington said in an interview at Reeboks Canton headquarters, where he was conjugated by Adidas CEO and Chairman Herbert Hainer. The street-influenced I am what I am campaign helped Reebok connect with youth by featuring endorsers such as rappers 50 Cent and Jay-Z. But some industry analysts said the campaign risked alienating customers who prize performance over fashion and marked too sharp a red ink for a brand that gained traction pitching aerobics shoes to women in the 1980s. Were not going to move totally away from music, but were going to reach for a broader audience, Harrington said. Adidas hopes Reebok will double its U. S. business and designate Beaverton, Oregon-based Nike Inc. s market leadership. But adidas said in November last year (2006) that sales of Reebok-branded shoes and other apparel fell 7 per centum in the first nine months of last year, compared with the same period in 2005. Adidas also conceded that Reeboks profit growth this year would fall short of initial expectations, and it said it mean to increase Reebok investment this year.Among other things, Reebok has been hurt by a rec ent decline in the once-hot market for retro-styled sneakers that mimic styles from the 80s a trend that Reebok helped drive, said John Horan, publisher of Sport Goods Intelligence, a Glen Mills, Pennsylvania-based industry newsletter. Since Adidas end the Reebok deal in January 2006, analysts have speculated as to how the one-time athletics sneaker and apparel rivals would position the two each managed brands to avoid competing against one another in the same market boxs.The strategy announced Thursday will be launched with two Reebok campaigns this year. The first is a Run Easy campaign beginning this spring emphasizing the fun and joy of running, rather than its blood, sweat and tears aspect and winning. Reebok plans to launch a broader campaign in August targeting a variety of athletes as well as lifestyle apparel consumers around the idea Best On/Best Off suggesting that Reebok products offer the best in apparel both on and off the playing field.New products Reebok plans to introduce this year include a running shoe created curiously for women, a new Allen Iverson model basketball shoe, and an apparel collection endorsed by actress Scarlett Johansson. Andrew Rohm, a former Reebok marketing employee and now an assistant professor of marketing at North-eastern University, said the revised strategy reflects an attempt by Reebok to create a new niche to complement the Adidas brand, whose traditional strength has been in athletic performance, specially soccer. I think it may be a reflection of looking less at unadulterated sales volume, and more in terms of owning a unique space, and becoming more of a niche player than they have tried to be in the past, Rohm said. Reeboks Harrington said the revised marketing strategy will help position the brand for a comeback. It really positions us for growth in the back end of 2007, he said. Puma, the maker of athletic shoes, shirts and other sporting goods, said its fourth-quarter profit fell 26 pct as it tries to broaden its product base and expand into new regions.But the company, the worlds third-biggest maker of sports apparel behind Nike Inc. and adidas AG, said it expected sales and earnings in 2007 to increase in the higher single-digit figure range, largely on demand for its licensed products. Overall, we are very pleased with 2006 and our start to (the latest restructuring phase), as we set some ambitious targets and are on track or ahead on all accounts, Chief Executive Jochen Zeitz said in a statement. But more important than the past is the future and weve found ourselves in a solid early position to deliver on our objectives. Puma earned euro32. 8 million (US$43 million) in the last three months of 2006, down from euro44. 1 million in the same quarter of 2005. Analysts polled by Dow Jones Newswires had expected a profit of euro34 million (US$44. 6 million). Sales rose 38 portion to euro480 million (US$629. 7 million) from euro349. 2 million a year ago, still less than the e uro492 million (US$645. 4 million) analysts had predicted. For the year, Puma earned euro263. 2 million (US$345. 3 million), down nearly 8 percentage from euro285. 8 million in 2005, just below analysts estimates of euro264 million (US$346. million). Sales rose 33 percent to euro2. 37 billion (US$3. 11 billion) from euro1. 78 billion in 2005, just under estimates of euro2. 38 billion (US$3. 12 billion). The sales increase was led, in part, by better-than-expected demand for its shirts and helped by the afterglow of the 2006 soccer World Cup, in which Puma sponsored the champion Italy. It is also a key supplier to many African teams. Since Zeitz was named CEO and chairperson of the company in 1993, Puma has returned to profitability and increased sales and expanded its research and development, marketing and mark programs.Its latest restructuring effort is aimed at expanding the companys reputation as a maker of lifestyle brands clothes, shoes and accessories, such as eyeglasses and expand in more regions and categories. For the year, Puma posted strong sales in North and South America, with sales reaching euro724. 1 million (US$949. 95 million), up 51. 8 percent from 2005. In Asia and the Pacific, sales more than tripled to euro486. 5 million (US$638. 24 million). In Europe, the Middle East and Africa sale increased 5. 1 percent to euro1. 15 billion (US$1. 51 billion).The companys backlog of orders a key index number for future sales performance was at euro1. 12 billion (US$1. 47 billion) at the end of 2006, up 4. 7 percent from euro1. 07 billion in 2005. Shares of Herzogenaurach-based Puma were up nearly 2 percent after the results were released but fell back more than half a percent to euro288. 01 (US$377. 84) in Frankfurt trading. References affair Week Online Can Nike Do It? By Stanley Holmes 7 February 2007 Reuters News Nike striving to be brand about hope in China By Alexandria Sage 12 February 2007 New Zealand HeraldReebok to race in Europe and Asia 3 February 2007 Associated pack together Newswires Adidas shifting Reeboks brand identity By MARK JEWELL 2 February 2007 Associated Press Newswires Athletic apparel maker Puma says 4th-quarter profit drops 26 percent By MATT MOORE 19 February 2007 Questions 1. Conduct a SWOT analysis of the key players in the sneaker industry and critically go bad their influence within the industry and the market. (25 marks) 2. Evaluate all significant trends in the environment and assess what impaction each is likely to have on the sneaker industry. (25 marks) (Total = 50 marks)