Reebok was found in 1890 by Joseph Foster in the UK. It initially started with running shoes as a family business. The business shifted to the US in 1958. Today it is one of the most well-renowned brands of sports shoes. It has a very strong distribution channel with a strong brand name. It has stores in 170 countries. It has hired a number of celebrities as their brand ambassadors such as 50-cent, Jay-Z, and Icelly Holmes.
Following is a detailed Porter Five Forces Model Analysis of Reebok:
Competitive Rivalry – High
The athletic shoe industry is a very competitive industry. Any move taken by one of the players is immediately looked in and also implemented by others. E.g. Reebok launched female shoe ware which was also copied by the other brands such as Nike. Due to high entry barriers, there are only a very few players in the international level (SlideShare, 2012). These include Nike and Adidas. However, at a national level in various countries, there are brands that have captured a strong market share in that nation such as Bata and Service in Pakistan. However, this competition is a non-price competition. It is a competition of having the largest range of products. Brand image and customer loyalty are strong tools of promotion being used by these brands. Thus, for Reebok the competitive rivalry is high.
Threat of New Entrants – Low
Establishing a shoes manufacturing industry requires significant capital. Also, all shoe and apparel models are patented making it difficult for new entrants to copy well-recognized designs. The existing giant players have reached economies of scale and have outsourced their production facilities to Asian countries that have helped them to significantly reduce their production and labor costs leading to greater profit margins. The industry is dominated by branded products and a strong brand loyalty which further raises the entry barriers. However, there are no strong government regulations (Varghese, 2013). Overall, there are low threats for Reebok for new entrants.
Bargaining Power of Suppliers – Low
There are a large number of suppliers that can supply the raw material such as leather, rubber and other raw materials needed to make the shoes and other stuff. There is no cost associated with switching of suppliers as the quality remains the same. Also, using backward vertical integration acquisition with suppliers is common in the shoes and apparel industry. There is a fragmented supplier concentration. Some of the suppliers are Eminent Industries and Viscotex Composites. Reebok only requires the supplier to meet a certain quality standard and any supplier that can do so will be a potential supplier if current supplier tries to increase prices. Thus, the bargaining power of the suppliers is low in the case of Reebok.
Bargaining Power of Buyers – Low
Shoes and apparel industry in which Reebok operates gives the brands very strong powers. The high-end brands and large companies are able to decide the price points for their products. Other than differentiated products such as athletic, orthopedic or dance shoes, substitutes available are usually of lower quality. There are almost no bulk buyers in this industry. There is less sensitivity to price due to brand recognition and brand loyalty. However, these brands do give incentives to buyers during seasonal sales. There is very little product differentiation. In certain developing countries such as Pakistan, local brands such as Bata and Service are providing substitutes of Reebok shoes and have gained market share in the region. Thus, the bargaining power of the buyers is low for Reebok.
Threat of Substitutes – Medium
Except for specialized shoes such as athletic shoes or orthopedic shoes, footwear of Reebok can be substituted by sandals. Also, the switching cost is very low. However, there is no substitute to the specialized shoes of Reebok such as athletic shoes because of the comfort and safety they offer to athletes during periods of increased movement. Alternatives to these are going barefoot or sandals, which cannot be considered as substitutes. Therefore, the threat of substitution for Reebok is of a moderate level.
References
SlideShare, 2012. Reebok. [Online] Available at: https://www.slideshare.net/oopshobo/reebok-12888265 [Accessed 14 June 2017].
Varghese, A., 2013. Analysis on shoe industry based on Porters 5 force model. [Online] Available at: https://www.slideshare.net/annavarghese1485/analysis-on-shoe-industry-based-on-porters-5-force [Accessed 14 June 2017].