Abstract
The presented paper aims to contrast and compare the business models of two sport brands through the specification and analysis of brand models, positioning and competition strategies. The brands under consideration involve Puma and Reebok. The methodology provided a scrupulous review of the credible secondary sources on the topic under research involving the case studies, academic papers, newspaper articles etc. The study shows that both brands have occupied their own niches and offered the products that are differently positioned on the market and which aim is to serve the clients of different status. Whereas Reebok is closely associated with the cross-fit trainings and fitness, Puma focuses on enforcing the sustainability policies and ongoing innovations. The companies are recommended to follow their current strategies and promote the innovations in their fields.
Key words: brand strategy, Puma, Reebok, competitive analyses
Introduction
The competition within the sportswear industry has always been rather tight. For years, it seemed that Adidas and Nike have deprived others of hope for the new market shares as these two rivals have been occupying the leading positions year after year. Nevertheless, the recent emerging of the new brands such as Lululemon proves that certain factors might undermine the confidence and position advantages of the old players. The elements that might be crucial in this regard include the business strategy, model, positioning and the competition strategy. All of these factors will be examined in the course of this paper with relation to the famous brands such as Reebok and Puma.
Literature Review
The views on the business strategies and models have evolved over the years. Chan and Reich (2007) asserted that the strategies of companies usually lack the clearness and coherent structure. Huff , Barclay & Copeland (1997) stressed that the strategy is related to the decisions that are passed by the top managers of the company. Additionally, it consists of the important actions that are necessary to implement to reach the meaningful goals. Fodrigues (2002) has demonstrated that strategies are not equally viable across different environmental settings. In general, the strategies are described in a rather general way. Indeed, they provide for the set of goals as well as the method plans that are used for their implementation.
Methodology
The presented article aims to employ the analysis of the secondary data in order to fulfill the purpose of the study. The data will be retrieved from the academic articles, newspaper publications, the information located on the official websites of the brands, the case studies as well as the blog materials supported by the credible evidence.
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Objectives of the Study
The objectives of the article are as following:
1. Examining the business strategies of Puma and Reebok.
2. Identifying the business models of Puma and Reebok.
3. Determining the competitive and positioning strategies of both brands.
4. Comparing the strategies and business models of Puma and Reebok.
5. Drawing conclusions and providing the recommendations as to the further improvements of the business strategies and models of the companies.
Competitive Environment
The competitive environment is filled with the rivals of various business capabilities. The biggest one is the Nike Company that is currently considered to be the leading company within the industry. In 2013 the company reported the revenue of about $25.3 billion, which is 8% percent increase compared with the previous year (Von der Heydt 2013). The company aimed to increase its revenue to $35 billion by the end of 2015. The forecast as to the sales provides for an increase of the rate by 9% annually. The company expects increased growth coming from the converse subsidiary and new innovative products such as fitness bracelets.
Adidas is another holder of the biggest market share within the industry. The company is ranked the world’s second-larger maker of sporting goods. Its annual revenue equals to $23 billion in 2015 (Von der Heydt 2013). Adidas has unfortunately decreased its forecast for the sales rates due to the difficult distribution in the Russian Federation, weak golf market and other reasons. Other important market players are Asics and Brooks, which represent the specialist players, and the newer brands such as Lululemon.
Background of Puma
Puma has been created by German brothers Rudi and Adi Dassler when the latter decided to split their company into Adidas and Puma. Rudolf Dassler wanted to establish the company that would compete with his brother’s brand within the same country. By the end of 1950, Rudolf has transformed the company into the limited liability partnership. Puma had promptly won the hearts of the customers since it was quite innovative brand and the one that could provoke and inspire customers to reach higher goals. The company was the first one to use the vulcanization technique and manufacturing of the shoes with help of the Velcro fasteners. Due to the increased competition in the market, Puma went public (Zaman 2013). Then it also started a rapid and comprehensive reorganization of the brand aiming to adjust the corporate structure to the needs of growing markets. The company decided to change its vector to the market-oriented one. The company decided to employ the decentralization practices and established three headquarters in three countries.
Puma has also been known for its successful use of the sports apparel. Currently, the company operates in three sectors involving the accessories, footwear and apparel. Its products are extremely diversified and officially sold in more than 80 countries in the world.
Background of Reebok
Reebok International is a subsidiary of the Germany based brand Adidas that has a worldwide established reputation of the leader in the footwear and sport apparel industry. Reebok alone has long been positioned as the US leading sports-shoe maker and seller. Moreover, the company is directly associated with the hockey as it manufactures the sports equipment needed for this kind of sport activities. The company currently owns more than 220 retail shops. Yet, it should be stressed that since 1980s the company experiences slow decrease of the sales rates. Adidas refers to Reebok as to its milestone acquisition that has been made to revitalize the brand and make it more levels – oriented. Regardless of all tensions following the acquisition, Reebok has managed to save its identity and headquarters.
Business Model of Puma
The Puma is a well-established brand with the world’s famous reputation. It has its branches created in more than 90 countries so far. The later means that the company enjoys a wide and diverse target audience located all around the world (Bristow 2011). The logo of the company demonstrating the jumping puma, a cat in motion, is among the most popular and recognized logos in the world. The extensive product line helps the company to leverage from fitting the interests and needs of any client worldwide.
The brand has also established the trustworthy relations with the other larger companies from the neighboring industries such as Ferrari and BMW (Bristow 2011). The latter is especially important for raising the sales rates and revenue during the championships and sports competitions. Additionally, these partnerships help the company to win the new markets share and reach even greater volumes of the clients worldwide. Moreover, the business partnership with BMW definitely contributes to the increase of credibility of the brand in eyes of the potential customers (Bristow 2011).
At the same time, Puma frequently acts as a sponsor of the famous athletes who advertise the brand and make it more recognizable for the customers. The company, of course, has to finance the relevant expenses of the athletes. Yet, as it has been mentioned, the company benefits from the fame of the celebrities wearing its products.
Finally, products of the brand are subject to ongoing innovation and creativity of the designers working for the brand. Today the company’s main focus of attention is drawn to the biometrics and to the zoning which requires the use of the specific materials and constructions.
Business Model of Reebok
The business model of Reebok is largely based on the customer support service available for the clients 24/7. The famous websites such as Amazon and Bazaar Voice rank this company and its products rather high. Its lines frequently receive the marks approaching 5 (the maximum rate).
Reebok also has a better Business Bureau Profile while none of its entities is registered with the Bureau. The Forbes, as most influential business journal for all ages, reports that Reebok’s established partnerships have incredible future potential to re-enforce the brand’s identity among the competitors. Considering its marketing strategy, one should stress that Reebok has established clear communication channels with its customers. The company official website traffic estimated at 15.852. Currently, the company possess 5 out of 10 Google rate.
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The brand defines itself as the one that focuses a lot on the cross-fit. It is the key selling point of the company and it enables the customers to compete and perform the activities that could involve people of all ages. They realized the growing potential of the fitness markets and without hesitation they seized it, not waiting for the competitors. At the same time, as a part of the advertising strategy the company has signed the agreement with the famous stars such as Jon Jones and Ronda Rousey who served as the walking advertisers of the brand. Both stars are fighters of the UFC that somehow relates to the cross-fit trainings.
Currently, the brand is among the top sellers of the athletic footwear and apparel in the world. The Reebok stresses on the brilliant combination of the technology and design in its products. The prices that are assigned for the product lines of the company are affordable even for the low classes, so that the company represents itself as the one that is accessible for each class of the society. At the same time, there is, of course, the premium range group that suits the needs of the premium class clients. Reebok also has established and long-lasting partnerships with the sports stars as well as with the largest distributors of the sports apparel and footwear. Moreover, the company frequently sponsors the international sports events as well as international teams.
Strategy of Puma
The business strategy of Puma is related closely to the issues of sustainability and environment-friendly policies. The marketing and competing strategies of this brand are nowadays built around these two notions due to their high appreciation by the customers. The idea of the sustainability is also rooted in the business processes of the company. In accordance with the official interpretation of the business strategy of the company located on its official website, the company defines the sustainability as the development that meets the needs of the current period without compromising or threatening the ability of the future generations to meet their needs. Furthermore, the company asserts on its compliance with the United Nations guiding Principles of Business and Human Rights that is based on three important notions, which are the corporate responsibility, the state duty to protect and the respect to remedy.
Moreover, the company differentiates three dimensions of the sustainability (PUMA Official Website). The economic sustainability refers to the use of different strategies of utilizing the resources in such a way that will both be beneficial for the company and not detrimental to the environment and future generations. The company commits to provide the safeguarding economic growth as well as employment together with the profitability over time.
The social sustainability relates to the creation of the human working conditions and non-admissibility of the violations of labor laws in the workplace. The company commits to follow the national and international laws related to the work conditions (Confino 2012). In addition, Puma promises to be a good corporate citizen contributing to the social welfare and well-being of its employees. The company asserts that the social responsibility means transparent operations, exercising of the due diligence practices and working in cooperation with the industry leaders to decrease any kind of the negative impact.
Finally, the company stresses on observing the notion of the environment sustainability that is largely based on the premise of precautionary principle. The later provides that the company produces the goods under the conditions that comply with the international healthcare standards and do not cause harmful effects on the humanity or the environment (Confino 2011).
The competing strategy of the brand is built around the Puma’s financial performance and its roots in such sports as soccer and athletics. The company has also recently released the new mission statement which is, “Forever Faster” (Von der Heydt 2013). This one is definitely better than the previous one, which consisted of one long and quite confusing sentence. Secondly, Puma relies significantly on the footwear as its largest market segment. Moreover, the company heavily invests into the innovations that helps the company to drive the growth margins. Furthermore, the brand is known for keeping the trustworthy and transparent relations with its sponsors.
Strategy of Reebok
The strategy of Reebok is obviously focused on the winning of the once lost market shares as well as the repositioning of the brand and making it more recognizable for the general public. In general, the flagman of its strategy is the launching of the new products lines to fit the needs and meet the expectations of old fans. In 2011 the company has launched the RealFlex, the sports shoes that were created for and stressed on the importance and promotion of the natural movement and sport lifestyle. RealFlex had more than 75 sensors on the bottom of the shoes that were strategically important to help the athlete to twist, expand, bend the leg and support the aspirations for the natural movement.
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Realizing the strengths of the competitors, Reebok also aims to increase the sales rates and expand the market share owned by the company. Therefore, Reebok has to follow the current tendencies related to the sports apparel and the body tonics for the athletes. To meet these goals, the company has launched the Easy Tone walking shoes as well as the Run Tone shoes claiming that they adjust to the wearer’s legs muscles. Eventually, the company has raised its sales rates claiming to have sold over millions of these pairs of shoes.
Due to the overall success of the Easy Tone, the company decided to expand the line of the products associated with this sub-brand. Therefore, it has launched the collection of the tops and bottoms with the similar logos and purposes. However, the image of the company was eventually destroyed by the accusations of the deceptive advertising. As as a result, the company had to pay $25 million as compensation for the customers who have happened to purchase the sport shoes produced within the mentioned line.
Comparison of the Business Models and Strategies of the Companies
Drawing the similarities and differences between the two brands, it should be stressed that they are quite similar in their business models and strategies whereas they slightly differ in their competitive strategies and positioning on the market. First of all, two of them operate in the same industry which sportswear and sport apparel. However, whereas Puma relies largely on its global distribution channels, Reebok focuses more on creation the associations between the cross-fit tendency and its products. The company has even contracted the sports stars from this field. Additionally, the company is known for the successful combination of the smart designs with the advances in the technology field. At the same time, the brand has been compromised for the deceptive advertising as well as malpractice.
Puma, on the other hand, opposes to Reebok (Adidas). The company business model is successful due to the several factors. The company stresses on its strategic partnerships with the industrial giants such as BMW and Ferrari that prevents the company from the sales instabilities. Over the course of years the company has not been involved in scandals or other controversial cases. It stresses on the innovations and technology, and having introduced the new slogan for its products the company definitely has turned a new page in the history of its production.
At the same time, both brands still have to face the tight competition within the industry. Both of them, of course, have created the competition strategies as well as the strategies used for the positioning on the market. The Reebok, therefore, stresses on its accessibility, affordable prices and relation to the cross-fit trainings. Puma presents itself as an innovative brand that manufactures the products for the upper-income citizens.
Recommendations
Assessing the findings of the research, it should be stressed that both companies are quite successful in implementing their strategies. They succeeded in finding and occupying their niches on the market as well as at tailoring the effective competitive strategies. As for the recommendations, Reebok is advised to outline its market share in the future and to employ the mechanisms that would help to enhance its positions on the market. Puma is recommended to follow its sustainability cure of marketing as well as keeping an eye on the innovations, technologies and future designs.