Introduction and Overview of the two companies selected
The rivalry between Nike and Reebok has been one riddled with strong competition. As consumer products brands, their overall relevance is based heavily on the niche they occupy in the consumers mind related to their products. Here both companies used dramatically different strategies in order to compete effectively in a highly competitive market.
Started in 1964 by Phil Knight and Bill Bowerman, , Nike was originally name Blue Ribbon Sports. And operated primarily out of Eugen Oregon. Here, the brand slowly transformed itself into the company we recognize today as a dominate sports apparel company. Nike spends heavily on it brand, investing billions of dollars into advertising and marketing. Here, the company attempts to position itself as a premium consumer products brand that provides the highest quality goods and services. They also heavily leverage brand and athlete sponsorships to better compete in the apparel market. The strategy here is to align the Nike brand with the worlds preeminent athletes. By doing so, Nike hoped consumers who identify with the athletes greatness would associate their achievements with the Nike brand, thus creating even stronger demand for companies apparel (Azam, 1999).
Reebok however looked to position itself as a much more affordable option for consumers. Founded in 1958, their price points where much lower than Nike, but this was made up by higher sales volume. Reebok much like Nike invests heavily in its brand , research and development. However it focused its products on hockey, running, football and basketball.
SWOT Analysis Nike
Strengths
Very strong pricing power
Very strong brand and brand awareness
Conservative balance sheet allowing for heavily capital investment into future products
Very strong research and development team
Experience and tenured management team
Strong Free Cash Flows. Access to low cost debt due its cash flow reliability
Global Prescence and diverse product offerings
Weaknesses
Large size could potentially be a hindrance to capitalizing on changing consumer trends
Negative reputation for using sweat shop and other low-cost labor sources . Poor labor conditions in foreign countries
Retailers still have a strong influence on how and which products are showcased in stores
The company still has a large dependence on the United States market
Business is dependent on favorable economic conditions
Opportunities
Emerging markets, particularly China
Wearable technologies and the ability to acquire market leaders in this space
ESG apparel and the ability to capitalize...
In the case of Reebok this is much less of an issue as the brand is not seen as a very high-end product and therefore is not subject to a large degree of counterfeiting from China and India. Likewise the company has a very strong opportunity within international markets similar to that of Nike. Here, international markets are very compelling due to the rising middle class of both India and China. Both markets tend to have a large desire to purchase American made products, which presents a strong opportunity for Nike and Reebok. The ability for Reebok to capture a dominate position in China can ultimately help it compete better on the international stage with Nike.
Conclusions
To conclude, Nike and Reebok are two very different and distinct companies. When comparing the two however, Nike clearly has the dominate position in the market. It has created an economic moat that is difficult for Reebok to dimmish. It strong brand and brand awareness are very dominate in the sports apparel industry. Likewise its marketing, branding and advertising are unparalleled in business. Its large global position also allows it to source funds from any part of the world and redirect the capital to improve business operations or strategy implementation. Reebok however, competes based on volume and lower costs products. The value proposition of Reebok is predicated on providing consumers with the most value for their money and therefore caters to a different market segment. Lower to middle class consumers typically purchase Reebok products due in part to their combination of price and value. The largest opportunities for both companies lie within…
