Porter Five Forces of Reebok
Industry Analysis
Using:
Michael Porter’s Industry Forces Model
Reebok International, Ltd. (1995): The Nike Challenge
Case Authored By:
Thomas L. Wheelen, Moustafa H. Abdelsamad, Shirley E. Fieber, and Judith D. Smith
Analysis By:
Tim Sacks
Threat of New Entrants
Barriers to Entry
The athletic shoe industry is slowly becoming a global oligopoly. There are many barriers to entry preventing new entrants from capturing significant market share. Large athletic shoe manufacturers enjoy economies of scale that create cost advantages over any new rival. Today’s athletic shoes are highly technical. An extremely large capital investment is required for new firms to open athletic shoe factories and conduct research and design to create a popular athletic shoe. Recently, Nike has incorporated forward vertical integration into their corporate level strategy. Nike opened discount factory outlet stores in rural areas and retail stores in urban shopping meccas. Monolithic athletic manufacturing companies utilize economies of scale by spending millions on product endorsements and advertisements by spreading the high cost over their entire yearly sales. The aggressive marketing campaigns turn their products into household names making it arduous for new firms to compete. Athletic shoe manufacturers greatly attempt to differentiate their products from all shoe manufacturers. For example, Nike aggressively markets their shoes with a visible air chamber in the sole. Reebok pushes their “Pump” feature to increase product differentiation. The capital requirements can be a high entry barrier to a new firm to the industry. However, an existing dress shoe manufacturer may enter the athletic shoe industry simply by re-tooling their manufacturing plant. Access to athletic shoe distribution channels is a moderate barrier to entry. This all depends on the status of the entering firm. If they are a startup firm,
Using:
Michael Porter’s Industry Forces Model
Reebok International, Ltd. (1995): The Nike Challenge
Case Authored By:
Thomas L. Wheelen, Moustafa H. Abdelsamad, Shirley E. Fieber, and Judith D. Smith
Analysis By:
Tim Sacks
Threat of New Entrants
Barriers to Entry
The athletic shoe industry is slowly becoming a global oligopoly. There are many barriers to entry preventing new entrants from capturing significant market share. Large athletic shoe manufacturers enjoy economies of scale that create cost advantages over any new rival. Today’s athletic shoes are highly technical. An extremely large capital investment is required for new firms to open athletic shoe factories and conduct research and design to create a popular athletic shoe. Recently, Nike has incorporated forward vertical integration into their corporate level strategy. Nike opened discount factory outlet stores in rural areas and retail stores in urban shopping meccas. Monolithic athletic manufacturing companies utilize economies of scale by spending millions on product endorsements and advertisements by spreading the high cost over their entire yearly sales. The aggressive marketing campaigns turn their products into household names making it arduous for new firms to compete. Athletic shoe manufacturers greatly attempt to differentiate their products from all shoe manufacturers. For example, Nike aggressively markets their shoes with a visible air chamber in the sole. Reebok pushes their “Pump” feature to increase product differentiation. The capital requirements can be a high entry barrier to a new firm to the industry. However, an existing dress shoe manufacturer may enter the athletic shoe industry simply by re-tooling their manufacturing plant. Access to athletic shoe distribution channels is a moderate barrier to entry. This all depends on the status of the entering firm. If they are a startup firm,