shoe making strategy for india

Abstract

The case, "Reebok's Game Plan in India" gives an overview of the entry of Reebok, the international sports shoe giant, into India, the entry of its global competitors, Nike and Adidas into India and the strategies adopted by the three players to build up their market shares. The case specifically deals with the strategies adopted by Reebok in India to deal with the competition from Nike and Adidas. The case gives insights into Reebok's venture into the kids market and its emphasis on fitness . The challenges that the company could face in India have also been discussed. The case deals with the market conditions that prevailed in India during the entry of these players, the competition among the domestic players and the changes that the multinational companies brought about in their strategies to increase their market shares.

NTRODUCTION

With 50 percent market share of the Indian sports shoe market in 2001, Reebok India (Reebok), the Rs.950 million Indian arm of the Boston (USA)-based $3 billion fitness and sportswear giant Reebok International Ltd. had left competitors Adidas and Nike behind. Being the first of its kind to enter India, Reebok had an edge over its competitors. In 2001, its business had grown by 18 percent. The firm was confident of a 35 percent growth, by December 2002 by achieving a sales target of Rs.1.3 billion. The average growth of the industry was less than 15 percent at that time. In 2001, the three global brands, Reebok, Adidas and Nike, together sold sportswear worth less than Rs.1.8 billion in India.

According to Siddharth Varma (Varma), managing director, Reebok India, creating a motivating and relevant brand position in India would increase the sales volumes. However, the parent company had issued a mandate that its Indian subsidiary should stick to the company's vision of instilling fitness consciousness among people and, at the same time stay focused on maintaining its leadership position in India.

Reebok underwent several changes in order to increase its visibility in the Indian market. It forayed into the kids footwear market where the sales volumes were higher. However, Reebok did not want to lose sight of what it originally was - a fitness brand. The company felt that its fitness platform would fit well in the Indian market as it was better understood than sports. However analysts felt that the fitness footwear and apparel market in India were at a nascent stage, and had limited scope.

While Reebok made some adjustments in its marketing strategy in India, Nike and Adidas were very cautious while entering the Indian market. Both Nike and Adidas positioned themselves as lifestyle products.

BACKGROUND NOTE

The liberalization of the Indian economy in 1991 led to an increase in the buying capacity of the country's middle class. This created optimism among industry players regarding sales in the premium segment (Rs. 700 - Rs. 1,200) of footwear. During the same period, many Indian manufacturers also came up with a wide range of sports shoes (Phoenix's Power Range, Liberty's Force 10 and Geosport, Action).

They catered to the middle class sports lovers with shoes priced between Rs.500 and Rs.750. However, the super premium segment (Rs. 1,200 and above) remained the domain of the multinational companies, which had entered the country in the 1990s (Refer Table I). According to analysts, during the late 1990s, every player in the industry was targeting the population of 10 million with an annual income of Rs. 45,000 (and above) for medium- priced shoes and the population of 2 million with an annual income of Rs. 75,000 (and above) for super premium shoes.

The market was small, and the challenge for all the three players was to expand it. By 2001, the super premium footwear market (Rs. 1200 and above) was estimated to be Rs. 2.5 billion, and it was estimated to be growing at an annual rate of 10-12 percent.

COMPETITION

Reebok India

The major activities of Reebok International Ltd. included designing and marketing of sports and fitness products including footwear and apparel. In October 1995, Reebok International Ltd. entered into a 80:20 joint venture with the Delhi-based Phoenix Overseas (Reebok India Co.). Initially, Reebok offered 65 varieties of sports shoes and sports clothing such as T-shirts, shorts and sweatshirts in 5 exclusive stores in Delhi and Mumbai. At the lower end of the portfolio, the company offered a basic pair of plain jogging (or casual) shoes priced at Rs. 1,300, while other mid-range shoes were priced up to Rs. 2,500.

In 1999, a range of 40 models of shoes, priced between Rs.990 and Rs. 1,500, was first introduced in India and then taken to other developing markets like Brazil and Africa. In the same year, Reebok launched its special range of cricket shoes called Pro. The company's first concept store in the capital, Planet Reebok, was also opened in the same year. Reebok had also introduced a golf footwear range and a top-end range of women's apparel....