1. MMII –Session 7-8
Harish Keswani

2. Reebok vs Nike in India
• Since the entry of Reebok, Nike and Adidas in
1995–1996, the Indian sportswear market
evolved, gained sophistication and established a
presence for brands. Prior to the entry of these
foreign players, Indian sportswear market was
undeveloped and sports culture was non-
existent.
• Since the beginning Reebok outperformed Nike
and emerged as a clear market leader with 51%
market share in 2007

3. Reebok vs Nike in India
• Background in 1990s
• There were few companies like – Bata and
Liberty, which offered utilitarian products with
very little emphasis on manufacturing trendy
shoes.
• The market was very price sensitive,
underdeveloped and majorly for men and kids.
Due to the lack of sports culture in India demand
for sports goods was primarily from educational
institutes and government departments like
police and railways.

4. Reebok vs Nike in India
Background in 1990s
• However, liberalisation resulted in an increase in the
buying capacity of the Indian middle class. Coupled
with this, foreign players instilled a new health
consciousness among Indians thus giving rise to the
demand for sport shoes. Promotional campaigns and
internationally styled stores encouraged people to
purchase an extra pair of shoes and T-shirts and
change their lifestyle.
• People also got familiar with the notion that different
kinds of shoes are required for different sports.

5. Reebok vs Nike in India
Background – What did the customers want ?
http://www.scribd.com/doc/4934036/Adidas-Mktg-Industry-Analysis-India

6. Reebok vs Nike in India
Market expansion
• Demand was created for medium to high priced
shoes as well. Huge market size along with the
rise in demand for the sportswear boosted
confidence of companies to sell footwear in the
premium segment.
• Many domestic players like Phoenix, GeoSport
action emerged along with international players.
• However, due to the small market size, which was
INR 2.5 billion in 2001 for the super premium
market, the challenge for the manufacturers was
to expand the market size of this segment

7. Reebok vs Nike in India
Starting up in India
• In 1995, Reebok International Ltd. entered India
through a 80:20 joint venture with Phoenix Overseas
Ltd., a Delhi-based shoe manufacturer. Since its entry,
Reebok has been competing with major global
sportswear giants Nike and Adidas, which entered in
1995 and 1996 respectively.
• However, in India, Reebok established itself as a
leading sportswear company with a 51% market share
and INR 900 crore turnover in 2007

8. Reebok vs Nike in India
ENTRY STRATEGY
• Though Reebok had a first-mover advantage in India, it faced the
challenge of building a market for branded sports shoes from
scratch. At that time, branded shoes and stores with American
format were unknown and the highest priced shoes available were
at INR 1,000. The choice in front of Reebok was to target either the
mass market or the premium segment, comprising of 30 million
people with shoes worth INR 2,500 and above.
• With the aim of retaining its global image, Reebok opted to offer
products, priced above INR 2,000 for the premium segment.
Reebok imported the designs from its parent company. Initially, it
brought 60 models of shoes and apparels like T-shirts, shorts and
sweatshirts selected from the company’s global offerings.
• Despite being high priced, customer response was favourable
• However, Reebok had to educate its customers about the product
benefits of its high priced shoes. Reebok intensified its efforts to
transform Indian consumer’s perception regarding sports shoes.

9. Reebok vs Nike in India
EDUCATING CUSTOMERS – INCREASING AWARENESS
• Reebok introduced different types of shoes for different sports for
the beginners. Further, Reebok aimed at developing health
consciousness among the Indians. As the company wanted to grow
by creating a fitness culture in India
• 1998, Reebok began the Reebok Instructor Alliance Programme. As
a part of this programme Reebok trained fitness instructors to
create health consciousness among people
(Influencers)
• Reebok also customised its shoes according to Indians’ needs. For
example, after analysing that Indians have broader feet as
compared to foreigners, Reebok introduced shoes with a broader
forefoot in comparison to its rival players’ narrower forefoot shoes.
Since 1999, when Reebok achieved its first breakeven, the company
has continuously been making profits. In 2000, Reebok achieved
INR 70 crore turnover and garnered 50% market share
• In contrast, Nike was still struggling

10. Reebok vs Nike in India
Slow competition to Reebok
• Although Nike enjoyed high brand awareness, it failed
to position its brand favourably in India.
• Unlike Reebok, Nike entered India through a license
agreement with a Delhi-based trading firm, Sierra
Industrial Enterprise (Sierra), a licensee, distributor and
retailer of international brands.
• In India, all the marketing and distribution decisions of
Nike were taken by Sierra. Nike was slow in developing
products and bringing the latest designs in the Indian
market. It was only after 2000 that it imported its
international range in India.
Q- Apart from branding and marketing, what is important
for market penetration ?

11. Reebok vs Nike in India
Advantage Reebok
• Among its competitors, Reebok was the first to
introduce product innovations in the country.
• For example, in 2005, Reebok introduced body-
mapping apparel that controls extra moisture from the
body. Every month it launches 20–30 new styles of
products
• Moreover, based on its research that even women are
becoming health conscious and are regularly involving
in various fitness activities, Reebok forayed into the
women’s segment in 1999. To target the women’s
segment, Reebok opened 15 exclusive women retail
outlets by 2008. 15%–20% of Reebok’s income comes
from the women’s segment (Niches)

12. Reebok vs Nike in India
Nike’s positioning
• Unlike Reebok that reinforced its global positioning of being a
sports and fitness brand, Nike positioned itself as a lifestyle brand in
India, pricing its shoes in the range of INR 1,800–INR 5,000 and
apparel between INR 600 and INR 2,000.
• Nike launched lifestyle sport products for the upper segment of
consumers.Its initial product range included
footwear, apparel, equipment and accessories for golf and tennis.
For the promotion of its golf shoes, it signed 35 sportspersons from
six states in 2001.
• Apart from its support to promising athletes in the sport, it has
taken its commitment a step further by its association with the golf
academy and the nike-bhupathi tennis village
• But Nike was also slow in expansion. Depending on Sierra for
distribution of its products, Nike had only 35–40 retail outlets as
against Reebok’s 100 by 2000.
Discuss positioning

13. Reebok vs Nike in India
Market presence:
• To increase its visibility, Reebok had created an extensive
retail presence in India. With a view of retaining its high
tech brand image, the company decided to market through
retail outlets. It opened it’s first retail store in 1995 and by
2003 Reebok had 85 exclusive stores, 75 shop in shop
outlets and 2,500 dealer outlets.
• In order to create an international ambience in its retail
outlet, Reebok invested in creating exclusive retail stores.
• To further penetrate into the Indian market, in 2001,
Reebok tied up with Bata India for the sale of Reebok
footwear through Bata’s 1,300 retail outlets in India
• In order to connect with customers, Reebok also adopted
an aggressive promotion and marketing strategy

14. Reebok vs Nike in India
Market expansion into new age group
• In order to increase its market share, Reebok targeted kidswear
segment in 1998 with shoes priced between INR 890 and INR 990.
This product failed to capture Indian consumers as they found it to
be expensive.
• Later in 2002, Reebok launched a new product range priced
between INR 490–INR 690 and targeted at school going kids.
• In order to expose the brand to kids, Reebok tied up with schools
like Shriram School in Delhi, Delhi Public School, GD Goenka Public
School and Scottish High School Bishop Cotton in Shimla and Sagar
School in Haryana that made Reebok shoes as part of their uniform.
• Also in 2007, Reebok targeted kidswear segment more aggressively
to increase its market size and make its presence in the INR 3,500
crore branded kids wear market. Offering a range of casual
footwear, apparel and accessories for kids aged between 5–12
years,

15. Reebok vs Nike in India
BRAND ENDORSEMENTS
• Apart from understanding the Indian consumer needs
accurately and customising its products, Reebok
established a nationwide retail presence and connected
emotionally with its consumers. However, Reebok’s
leadership was attributed mainly to its association with
cricket
• While Nike was spending dollars endorsing international
sportspersons for its products, Reebok garnered popularity
by leveraging on the cricket craze of the nation.
• In 1996, it signed Rahul Dravid as the brand ambassador of
Reebok India. Since then, Reebok has signed high profile
Indian sportspersons like Mohammad Azharuddin,
Mahendra Singh Dhoni, Mohammad Kaif, Yuvraj Singh,
Harbhajan Singh, Irfan Pathan from cricket and Sagarika
Ghatge and Bipasha Basu from Bollywood

16. Reebok vs Nike in India
• To promote its products in India, Nike advertised through
international sports persons. Its brand ambassadors included
Michael Jordan, Tiger Woods and Maria Sharapova
• However, since 2004, after its license agreement with Sierra
terminated and Nike India became a subsidiary of its parent
company, it started operating independently in the Indian market.
To counter the challenge from Reebok, Nike took various steps to
build its brand and expand its market size.
• By 2006, to bring in the latest designs, Nike imported 80% of its
products from its parent company.
• Moreover, in 2006, Nike partnered with the fitness centre Gold Gym
to promote its products among women. Nike also began expanding
its distribution chain in India.
• In order to expand its market share, for the first time in India, Nike
had decided to change its market positioning by associating with
cricket.

17. Reebok vs Nike in India
Reebok’s Covert Marketing Strategies
• In 2005, to match its steps with Reebok, Nike
became the official kit sponsor to the Indian
cricket team with an investment of INR 196.66
crore. In spite of this, Reebok grabbed the
attention of the cricket lovers by placing its logo
on the bats of the Indian cricket players. A simple
yet effective strategy
• Reebok was successful in knocking down Nike
from establishing its presence in Reebok’s
territory. With increasing competition from
Reebok
Discuss counter strategy

18. Reebok vs Nike in India
Reebok’s Covert Marketing Strategies
• However, analysts doubt Nike’s success in associating with cricket as
its target customers are the upper segment. Harminder Sahni, chief
operating officer, Technopak Advisors, said, “Brands like Nike are
clearly focused on the upper segment of consumers. I’m not sure
whether cricket is any longer such a popular sport with that group.
Young consumers in the upper strata are more likely to be tuned
into events like the NBA or Premier League Football.”
• Moreover, to maintain its leadership position, in 2007, Reebok also
forayed into the lifestyle product segment. It launched a new range
of apparel and footwear named ‘Scarlett “Hearts” Rbk’ priced
between INR 1,999 and INR 6,999 for the elite, brand-conscious and
fashion lovers
There’s little doubt also that Nike’s market share will increase now. But
will the growth be sufficient to unseat Reebok as market leader?
Discuss

19. Key Concepts -Discussion
• Ref : Creating Competitive Advantage
(Chapter 18 –Principles of Marketing )
• Competitor Analysis
– Identifying Competitors
• Identifying competitors
• Assessing competitors’ objectives, strategies, SWOT,
and reaction patterns
• Selecting which competitors to attack or avoid

20. Key Concepts -Discussion
• Selecting which competitors
to attack or avoid
– Strong or weak competitors
– Close or Distant Competitors
– ‘Good’ or ‘Bad’ Competitors
– Finding uncontested market
spaces
– Designing a competitive
intelligence system
• Eg. TATA FIBRES – (Facts &
Information Based Reverse
Engineering of Strategy)

21. Key Concepts -Discussion
• Competitive Strategies
• Approaches
– Entrepreneurial Marketing
– Formulated Marketing
– Intrepreneurial Marketing
• Basic Competitive Strategies
– Overall cost leadership
– Differentiation
– Focus
• Customer-centered classification –
Gain leadership position by delivering
superior value to customers
– Operational Excellence
– Customer intimacy
– Product leadership

22. Key Concepts
• Competitive Positions
– Market Leader
strategies
– Market Challenger
strategies
– Market Follower
strategies
– Market Nicher
Strategies
• Balancing customer
and competitor
orientations

23. Interface of Marketing with
Finance

24. Marketing Performance Measures
(Ref: Principles of Marketing – Appendix 2)
• P&L Statement (Income statement, operating
statement)
• Difference between Balance Sheet and P&L ?

25. Marketing Performance Measures
(Ref: Principles of Marketing – Appendix 2)
• P&L -Statement of Financial Performance (eg. for a product or
division)
• Balance Sheet – Statement of Financial ‘Position’
Fixed costs &
Overheads

26. Marketing Performance Measures
(Ref: Principles of Marketing – Appendix 2)
• Break Even Sales
– Break Even Sales = Fixed Costs / Contribution Margin of Fixed costs
– To compute Total Cost = Fixed costs + Variable Cost
• Market Share = Company sales / Market Sales
• Gross Margin % = Gross Margin / Net Sales
• Net Profit % = Net Profit / Net Sales
• Operating Expenses % = Total Expenses / Net Sales
• Inventory Turnover Rate =
Cost of Goods sold/ Average Inventory at cost
(Higher the better, indicates better efficiency and profitability)
• ROI (Return on Investment)=
Net profit before tax/ Investment

27. Marketing Performance Measures
(Ref: Principles of Marketing – Appendix 2)
• Net Marketing Contribution
= Net Sales – cost of goods sold – marketing expenses
(Higher the better)
• Marketing Return on Sales and investment
– Marketing ROS = Net marketing contribution/ Net Sales
(Higher the better)
– Marketing ROI = Net marketing contribution/ Marketing expenses
(Higher the better)

28. The PIMS Project
• Although no manager should pursue growth for
growth’s sake, evidence suggests that in some
industries market share is an important determinant of
long-term profitability.
• The Marketing Science Institute at the Harvard
Business School undertook research in the relative
profitability of different market strategies.
• The PIMS (profit impact of market strategy) project
involved more than 600 businesses over a period of
more than 15 years.

29. Major Findings of the PIMS Study
• Absolute and relative market share are strongly correlated
with ROI.
• Product quality is key to market leadership and allows
companies with larger market shares to charge higher prices
and, therefore, achieve higher margins.
• ROI is positively correlated with market growth.
• Vertical integration can be beneficial later in the product life
cycle. Forward integration is more profitable than backward
integration.
• High investment intensity tends to depress ROI, as do high
inventory levels.
• Capacity use is critical for businesses with a high level of
capital intensity; companies with small market shares are
particularly vulnerable.

30. • These findings help to explain many business success
stories through the 1980’s and many business
performance declines of the 1990’s.
• These findings were beneficial at the time, but because
of the increase in technology over the past 20 years
these findings are becoming less and less relevant.
• This observation, basically, highlights the need for
executives to continually update their assumptions
about key strategic relationships.
Major Findings of the PIMS Study

31. Impact of Marketing Strategies &
Action Plans

32. Marketing Actions The Firm
Tactical Actions Strategies
Customer Impact
Market Impact
Financial Impact
Impact on Firm
Value
Marketing Assets
Market Position
Financial Position
Value of the Firm

33. Marketing Actions The Firm
Tactical Actions
Strategies
Promotion strategy,
Product strategy
Channel strategy, etc.
Customer Impact
Market Impact
Financial Impact
Impact on Firm
Value
Marketing Assets
Market Position
Financial Position
Value of the Firm

34. Marketing Actions The Firm
Strategies
Customer Impact
Market Impact
Financial Impact
Impact on Firm
Value
Marketing Assets
Market Position
Financial Position
Value of the Firm
Tactical Actions
Advertising
Service Improvements
Branding, Loyalty

35. Marketing Actions The Firm
Tactical Actions Strategies
Customer Impact
Impact on satisfaction,
Impact on attitudes, loyalty
Market Impact
Financial Impact
Impact on Firm
Value
Marketing Assets
Market Position
Financial Position
Value of the Firm

36. Marketing Actions The Firm
Tactical Actions Strategies
Customer Impact
Market Impact
Financial Impact
Impact on Firm
Value
Marketing Assets
Brand Equity
Customer Equity
Market Position
Financial Position
Value of the Firm

37. Marketing Actions The Firm
Tactical Actions Strategies
Customer Impact
Market Impact
Market share impact
Sales impact
Financial Impact
Impact on Firm
Value
Marketing Assets
Market Position
Financial Position
Value of the Firm

38. Marketing Actions The Firm
Tactical Actions Strategies
Customer Impact
Market Impact
Financial Impact
Impact on Firm
Value
Marketing Assets
Market Position
Market share,
Sales, etc.
Financial Position
Value of the Firm

39. Marketing Actions The Firm
Tactical Actions Strategies
Customer Impact
Market Impact
Financial Impact
ROI, IRR, NPV, EVA
Impact on Firm
Value
Marketing Assets
Market Position
Financial Position
Value of the Firm

40. Marketing Actions The Firm
Tactical Actions Strategies
Customer Impact
Market Impact
Financial Impact
Impact on Firm
Value
Marketing Assets
Market Position
Financial Position
Profits
Cash flow
Other measures
Value of the Firm

41. Marketing Actions The Firm
Tactical Actions Strategies
Customer Impact
Market Impact
Financial Impact
Impact on Firm Value
Forward thinking
Hinges on growth prospects
Marketing Assets
Market Position
Financial Position
Value of the Firm

42. Marketing Actions The Firm
Tactical Actions Strategies
Customer Impact
Market Impact
Financial Impact
Impact on Firm
Value
Marketing Assets
Market Position
Financial Position
Value of the Firm
Market capitalization
Total shareholder return

43. Next Session
• Financial Impact of Marketing Tactics
• Toyota Motor Company – Loosing its Quality Edge
Case Study – Interface of Marketing with Operations