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Reebok International Ltd.

Reebok International Ltd.

100 Technology Center Drive
Stoughton, Massachusetts 02072
U.S.A.
(781) 401-5000
Fax: (781) 297-7402
Web site: http://www.reebok.com

Public Company
Incorporated:
1979 as Reebok U.S.A.
Employees: 6,948
Sales: $3.64 billion (1997)
Stock Exchanges: New York
Ticker Symbol: RBK
SICs: 2329 Mens & Boys Clothing, Not Elsewhere Classified; 2339 Womens, Misses & Juniors Outerwear, Not Elsewhere Classified; 2393 Textile Bags; 3149 Footwear, Except Rubber, Not Elsewhere Classified

Reebok International Ltd. is one of the worlds leading athletic footwear and apparel makers. The company first gained prominence by opening up a new market for athletic shoesaerobic exercise shoes for women interested in fashion as well as functionand subsequently built upon that success by expanding into other sports and products and by seeking business around the world. Reebok currently sells footwear and apparel in the sports, fitness, and casual sectors, under such brands as Reebok, Weebok, Greg Norman, Rockport, Ralph Lauren, and Polo Sport. The company also operates about 150 factory direct stores, including Reebok, Rockport, and Greg Norman stores.

British Roots

Reebok began its growth into a worldwide enterprise in 1979 when Paul B. Fireman, a marketer of camping and fishing supplies, noticed the products of a small British athletic shoemaker, Reebok International, at a Chicago sporting goods show. Looking for a business opportunity, Fireman acquired the North American license for the companys products, founding Reebok U.S.A.

The British parent company, the oldest manufacturer of athletic shoes in the world, got its start in the 1890s in Bolton, England, when Joseph William Foster began handcrafting shoes with spiked soles for runners. By 1895 he was the head of J.W. Foster and Sons, Inc., providing shoes to worldclass athletes, including the 1924 British Olympic running team. In 1958 two of Fosters grandsons founded Reebok, named after an African gazelle, to manufacture running shoes in Bolton, and this company eventually took over the older firm.

After Fireman acquired the right to sell Reebok products made in Britain in the United States, he introduced three topoftheline models of running shoes, with price tags of $60, the highest on the market. Sales topped $1.5 million in 1981, but after two years in the extremely competitive U.S. market, Firemans enterprise was out of money, and he sold 56 percent of his fledgling company to Pentland Industries PLC, another British shoe company. Reebok used the infusion of cash to open a factory in Korea, thereby significantly lowering production costs.

1982 Debut of Aerobic Exercise Shoes

The companys fortunes began to change dramatically, however, in 1982 with the introduction of a shoe designed especially for aerobic exercise. Unlike traditional athletic shoes, which were made of unglamorous materials in drab colors, Reebok aerobics shoes were constructed of soft, pliable leather and came in a variety of bold, fashionable colors. Reeboks Freestyle aerobics shoe was the first athletic shoe designed and marketed specifically for women, and it quickly became hugely popular. By selling its shoes to women, Reebok had opened up a new market for athletic shoe sales. This market would continue to expand as women began to wear their comfortable athletic shoes on the street, for daily life. In addition, the company both contributed to and profited from the boom in popularity of aerobics in the early 1980s, sponsoring clinics to promote the sport and its shoes.

In 1983, the year following the introduction of the shoe for aerobics, Reebok sales shot to $13 million. The company had become the beneficiary of a fullfledged fad. By the following year, sales of Reebok shoes had reached $66 million, and Reebok U.S.A. and its corporate sponsor, Pentland Industries, made arrangements to buy out Reebok International, the companys British parent, for $700,000. In addition, the company expanded its offerings to include tennis shoes, although shoes for aerobics continued to make up more than half of Reeboks sales in 1984.

By 1985 Reeboks had gained a large following of trendy young consumers, and the shoes standing as a fashion item was solidified by the appearance of actress Cybill Shepherd wearing a bright orange pair of Reeboks under her formal black gown at the presentation of the Emmy awards. Such celebrity endorsements, as well as an advertising budget of $5 million, helped to push the companys 1985 sales to more than $300 million, with profits of nearly $90 million. Fireman, Reeboks founder, set up an office in California to help the company stay on top of trends and maintain its shoes popularity.

In July 1985 Reebok International stock was offered publicly for the first time, selling over the counter at $17 a share. By this time international sales of Reebok shoes were contributing 10 percent of revenues. By September the company was unable to meet the continuing high demand for its products and was forced to restrict the number of shoes available to individual stores until it could expand production at its South Korean factories.

Consumers who were able to purchase Reebok shoes were finding that their high price tag did not guarantee high quality, as the shoes soft leather uppers sometimes fell apart within months. Reebok launched an attempt to improve quality control in 1986, increasing its number of onsite factory inspectors from 7 to 27. Although the companys production reached four million pairs a month by mid1986, a backlog of $400 million in orders existed, and plans were made for further expansion of production capacity. In keeping with this gain, Reeboks advertising budget grew to $11 million, and the company began advertising on television for the first time.

Diversification in the Mid1980s

Anticipating an inevitable decline in the popularity of its aerobics shoeswhich contributed 42 percent of the companys sales in 1985as the aerobics trend peaked and slacked off, Reebok moved to further protect its sales position in 1986 by diversifying its product offering. The company began by introducing sports clothing and accessories, limiting sales to $20 million so that growth could be controlled. In addition, the company inaugurated a line of childrens athletic shoes, called Weeboks, at the end of 1986. Perhaps the most significant innovation was the introduction of a basketball shoe. In entering this market, Reebok was stepping up its competition with rival athletic shoemakers Nike and Converse, which controlled a large part of the lucrative basketball shoe market. By the end of 1986, revenues from basketball shoes totaled $72 million and made up 8.6 percent of Reeboks total sales.

In June 1986, Reebok was rebuffed in its first attempt to expand through the acquisition of other companies, when Stride Rite Corp., another shoe manufacturer, rejected Reeboks offer. Reebok was successful, however, in its negotiations for the purchase of Rockport Company, a leading maker of walking shoes with sales of around $100 million that had gotten its start in the early 1970s. Rather than integrate the new companys operations closely with its own, Reebok maintained a separation between the two, even to the extent of allowing the companies products to compete with each other.

Later that year, in an effort to better manage its growth, the company was restructured into three areas: footwear, apparel, and international products. Sales tripled in 1986 to reach $919 million, and the companys stock began trading on the New York Stock Exchange at the end of the year.

By the start of 1987, Reeboks backlog of orders for all its lines of shoes had grown to $445 million, indicating that demand for its products continued to be strong. With Fireman, as chairman, receiving record compensation tied to the companys profits, Reeboks growth continued unabated, and the company embarked on a string of purchases of other shoe companies. In March 1987 Reebok made arrangements to buy Avia Group International, Inc., another maker of aerobic shoes, for $180 million. Following this move, the company sold $6 million worth of stock to raise money to help offset the cost of its acquisition, reducing Pentland Industries interest in the company from 41 to 37 percent. The companys pace in buying other footwear manufacturers did not slow, as Reebokowned Rockport acquired a bootmaker, the John A. Frye Company, in May 1987. This 125yearold company, which also marketed handsewn shoes, had yearly sales of about $20 million. One month later, after forming a Canadian subsidiary, Reebok Canada Inc., Reebok used it to purchase the ESE Sports Company, Ltd. Reebok closed out 1987 by finalizing plans to acquire the U.S. division and the U.S. and Canadian rights to the trademark of an Italian apparel company, Ellesse International S.p.A., for $25 million, a more modest version of an earlier plan to acquire the entire company.

Company Perspectives:

Key Areas of Focus for Reebok International: Continue to develop innovative products for athletes. These products attract serious athletes and fashion trendsetters, creating market excitement. Continue to sponsor athletes and teams in major U.S. and global sports. Accelerate the expansion in soccer, the worlds most popular sport. Build presence in other sportssuch as badminton or wrestlingthat evoke strong loyalties in certain markets. Bolster leadership in fitness and womens sports. Provide instruction, leadership and inspirationas well as excellent product offerings. Continue developing worldclass logistical and information systems to maximize assets, speed time to market and achieve other efficiencies. Continue to expand the apparel business, focusing on authentic sports and fitness apparel that is both functional and fashionable. Build closer, cooperative relationships with retailers. Customize services to better fit their needs. Continue improving retail presence.

In addition to purchases of other shoemakers and apparel companies, Reebok continued to expand its own offerings in 1987, as part of an effort to maintain and protect its market share by providing a wide variety of products. The company introduced shoes designed specifically for walking, in hopes of establishing a presence in a field that Reebok chairman Fireman believed would be the next fad in fitness, and also began offering volleyball shoes and dressier styles for women. This trend continued in the next year with the introduction of shoes for golf.

In an attempt to shed its reputation as a company noted for fashion products, as opposed to serious highperformance athletic shoes, Reebok entered the fray of hightech design innovations, an area previously dominated by its competitor Nike, with the introduction of energy return system shoes. At the end of 1987, Reebok held a quarter of the market for basketball shoes and dominated the field in aerobics, tennis, and walking shoes.

Late 1980s Doldrums

In 1988 Reeboks long and meteoric rise began to show signs of flagging as the companys historically high profit margins went into a slump. Reeboks strength in the youth market, focused primarily on basketball shoes, was shaken by a massive advertising campaign by competitor Nike, which spent $7 million in advertising in the first quarter of 1988 when Reebok spent only $1.7 million.

In an effort to regain lost ground, Reebok went on the offensive, publicizing its products in several ways. The company gave away shoes to young people known as style makers and renovated urban playgrounds. In addition, Reebok sponsored a series of rock concerts to raise money for human rights groups and inaugurated a Reebok Human Rights Award. Starting in August 1988, Reebok also devoted a portion of its $80 million advertising budget to an innovative and esoteric television and print campaign, built around the theme Reeboks let U.B.U., which featured people expressing their personalities in unique ways while wearing Reeboks. The campaign was unsuccessful, however, and by the end of 1988 earnings had fallen by onefifth on sales of $1.79 billion.

In March 1989 the company unveiled a new $30 million advertising campaign entitled The Physics Behind the Physique. This push was focused on women, traditionally Reeboks strongest customer base, and connected sweaty physical exertion with sex and narcissism. These relatively rapid shifts in emphasis from performance to fashion and back again began to muddle the consumers idea of what the company stood for, and Reebok continued to see its portion of the market slip as its sales growth waned. Commentators observed that the company appeared to have lost its focus.

Reebok also underwent a period of turmoil in its administrative and executive structure during this time. In August 1989 the companys head of marketing, Mark Goldston, left after less than a year with the company, and two months later, its president, C. Joseph LaBonte, brought in by Fireman only two years earlier, resigned as well. In addition to these changes at home, Reebok moved to strengthen its international management team at this time.

Reebok sold its Frye boot subsidiary in 1989. The company then made its only purchase outside the footwear and sportswear industries, buying a manufacturer of recreational boats, Boston Whaler, Inc., for $42 million in 1989.

The Pump Introduced in 1989

Although Reeboks market share had fallen behind Nikes, to 22 percent by the end of 1989, the seeds of Reeboks resurgence were sown in midNovember with the introduction of The Pump, a basketball shoe with an inflatable collar around the ankle to provide extra support. Although the expensive shoes made up only a small portion of Reeboks overall sales, the popularity of the new technology lent a sorely missed air of excitement to the companys brand name.

Reacting to its previous difficulties and continuing challenges in both the fashion and performance shoe markets, Reebok rearranged its corporate structure at the beginning of 1990, splitting its domestic division into two areas, one focusing on performance products and the other on fashion products. A month later, the company further restructured by merging its international and U.S. units into one global business.

Reebok split with its ad agency, Chiat/Day/Mojo, in an effort to regain lost market share. To do so, the company built on its recent success with The Pump technology by expanding The Pump to other lines of footwear, including aerobics, crosstraining, running, tennis, walking, and childrens shoes. In addition, facing a relatively mature and highly competitive U.S. market for athletic shoes, Reebok looked to foreign markets, which made up a quarter of the companys sales, for further growth.

Results were immediateoverall European sales grew 86 percent in 1991 alone. By 1992 Reebok products were available in approximately 140 countries outside the United States, holding a number one ranking in sales for nine of those countries, including the United Kingdom, Canada, and Australia. U.S. growth stood at less than 10 percent. The company needed to project its image as a leader in innovative athletic apparel through products in other sports categories that would display the latest in Reebok technology.

Reebok premiered football and baseball shoes in 1992, and more than 100 players in the major leagues donned the companys footwear. Marketing momentum increased as Notre Dames Fighting Irish captured the Cotton Bowl championship on New Years Day, 1993, sporting the Reebok football shoes supplied them throughout the season. The development of a shoe for basketball players on playground courtsbranded the Blacktopbecame very successful in 1991. Reebok acquired two other sports apparel manufacturers, consolidating their products with Reeboks own line of clothing and accessories; sold subsidiaries Boston Whaler and Ellesse; and positioned Reebok, Rockport, and Avia to be the principal operating units of the future. In early 1993 Reebok struck an agreement with golf legend Jack Nicklaus to create a unique line of golf shoes. Reebok also generated tremendous sales with its debut of a casual, nonathletic footwear line called Boks during the fall of 1992.

Reebok took steps to enhance its reputation through sponsorship of targeted sporting events and support of humanrights programs. The company became the sponsor of the Russian Olympic Committee through 1996 and the International Hockey Federation Olympic Winter Games for 1994. Reeboks commitment to human rights led to the establishment of the Witness and Volunteer Programs in 1992. In 1993 Reebok increased its budget for a global publicity campaign, estimated at $115 million. During the 1993 SuperBowl, the company aired a 60second commercial premiering Planet Reebok, a campaign associating Reebok products with intense competition and high performance. Reebok renewed relations with Chiat/Day/Mojo to promote individual products and began a weekly Top 30 countdown radio program based on the Planet Reebok theme.

1990s Struggles

The repositioning of Reebok away from fitness/fashion toward an emphasis on highend performance sneakers, which began in 1992, proved troublesome. The company signed up several highprofile athletes to endorsement contracts. Most notable among these was emerging basketball superstar Shaquille ONeal, but the subsequently launched Shaq Attaq sneakera white sneaker when black shoes were the hot commodity at a hefty $130 price tagfailed miserably. Instead of catching up to Nike, Reebok was now falling further behind, its market share declining to 20 percent by 1995. That year institutional shareholders, irked by several years of flat profits, pressured Reebok to bring in an outsider to run the company but Fireman retained his position as chairman, CEO, and president.

The company found some success with the 1996debuted Shaqnosis basketball shoe, but generally flat sales of athletic shoes in the mid1990s exacerbated Reeboks problems. The push into performance sneakers also translated into large increases in expenses, resulting in decreasing net income, from $254.5 million in 1994 to $164.8 million in 1995 to $139 million in 1996. In June 1996 Reebok sold Avia to American Sporting Goods. The company in October 1996 pulled the plug on the Boks brand, after earlier in the year gaining the rights to design, develop, manufacture, and distribute mens, womens, and childrens footwear under the Ralph Lauren label.

In February 1997 Reebok suffered much embarrassment when it was forced to apologize for naming a womens running shoe the Incubus. Unbeknownst to the shoes designers, an incubus is an evil spirit that in medieval times was believed to have sex with sleeping women. The outlook for the company brightened some with the development of successful products utilizing new shoe technology. In April 1997 the DMX series made their debut following three years in development. The DMX shoeavailable in running, walking, and basketball modelsfeatured air that moved underfoot to provide better cushioning, and was an attempt by Reebok to take on Nikes blockbuster Air line. Also introduced in 1997 were running, walking, basketball, and womens fitness shoes featuring 3D Ultralite technology, Reeboks entry into the lightweight performance footwear sector.

Despite the apparently resurgent newproduct development activity at Reebok, a company turnaround was far from complete. During the early months of 1998 the company had to contend with a marketplace flooded with athletic footwear, leading to inventory surpluses and price cuts. In response, Reebok took a restructuring charge of $23.7 million in the first quarter of 1998 for costs related to eliminating management layers, combining business units, and cutting its workforce by 500, or 10 percent. At the same time the company was in the process of severely trimming its roster of costly celebrityathlete endorsements, aiming to reduce the number to about 20. In June 1998 Reebok terminated its contract with ONeal, who had already been shopping around for another sponsor, one that would pay him more than the $3 million he had been receiving each year from Reebok. By this time, Allen Iverson had replaced ONeal as Reeboks top basketball endorser, through a deal estimated at $5 million per year. August 1998 brought another management change as Carl Yankowski was brought in as president and chief executive of the Reebok brand. The fourth person to hold that position in the last decade, Yankowski had previously spent time as an executive at PepsiCo Inc., Polaroid Corp., and Sony Electronics Inc. It remained to be seen whether Yankowski would be able to reverse the fortunes of the struggling shoe manufacturer.

Principal Subsidiaries

Ralph Lauren Footwear Co., Inc.; RBK Thailand, Inc.; Reebok Aviation, Inc.; Reebok CHC, Inc.; Reebok Eastern Territories, Inc.; Reebok Foundation, Inc.; Reebok International Securities Corp.; Reebok Securities Holdings Corp.; The Reebok Worldwide Trading Company, Ltd.; The Rockport Company, Inc.; Avintco, Inc.; RFC, Inc.; Reebok Austria GmbH; Rockport Gmbh (Austria); Reebok Belgium SA; Reebok Do Brasil Servicos a Participacoes Ltda (Brazil); Rockport do Brasil Comercio, Servicese Participacoes Ltda. (Brazil); R.C. Investments Ltd. (Canada); Reebok Canada Inc.; Reebok France S.A.; Rockport France S.a.r.L.; American Sports and Leisure Vertriebs GMBH (Germany); Reebok Deutschland GmbH (Germany); Reebok (China) Services Limited (Hong Kong); Reebok Far East Ltd. (Hong Kong); Reebok Trading (FAR EAST) Limited (Hong Kong); Reebok India Company; Reebok Technical Services Private Limited (India); Reebok Ireland Limited; Reebok Italia S.r.l. (Italy); Rockport International Trading Co. Italy S.r.l.; Reebok Japan Inc.; Rockport Japan Inc.; Reebok Korea Limited; Reebok Korea Technical Services Company, Ltd.; Reebok (Mauritius) Company Limited; Rockport Mexico S.A. DE C.V.; Reebok Distribution B.V. (Netherlands); Reebok (Europe) B.V. (Netherlands); Reebok International Finance B.V. (Netherlands); Reebok Nederland B.V. (Netherlands); Rockport (Europe) B.V. (Netherlands); Rockport (Nederland) B.V. (Netherlands); Reebok (Philippines) Services Co., Inc.; Reebok Poland SA; Reebok Portugal Artigos Desportives Lda; Reebok Russia (Retail), Inc.; Reebok Leisure SA (Spain); Reebok (South Africa) (Proprietary) Limited; Reebok (Switzerland) Ltd.; Reebok (Taiwan) Services Company; Subsidiary enterprise Reebok Ukraine; J.W. Foster & Sons (Athletic Shoes) Limited (U.K.); RBK Holdings pic (U.K.); Reebok Eastern Trading Limited (U.K.); Reebok International Limited (U.K.); Reebok Sports Limited (U.K.); Reebok UK Limited; The Rockport Company Limited (U.K.); Rockport International Limited (U.K.).

Principal Operating Units

The Reebok Division; The Rockport Company; Greg Norman Division.

Further Reading

Grimm, Matthew, Deft Reebok Strides into Womens Walking, Brandweek, August 24, 1992.

____, Reeboks Big Idea, Brandweek, January 25, 1993.

Jensen, Jeff, Better Days Ahead on Planet Reebok, Advertising Age, June 26, 1995, p. 4.

Labich, Kenneth, Nike Vs. Reebok: A Battle for Hearts, Minds and Feet, Fortune, September 18, 1995, p. 90.

La Monica, Paul R., Reebok International: Flat of Foot, Financial World, August 3, 1993, p. 18.

Pereira, Joseph, Can Air Pockets Help Reebok Catch Nike in High-Performance Sneaker Marathon?, Wall Street Journal, March 27, 1997, pp. Bl, B19.

____, Reebok Trails Nike in Fight For Teens Hearts and Feet, Wall Street Journal, September 23, 1988.

Pulliam, Susan, and Joseph Pereira, Reebok CEO Fireman Faces Criticism by Institutional Holders, Wall Street Journal, September 14, 1995, pp. Cl, C2.

Reidy, Chris, Reebok Delivers a Boot, Boston Globe, July 1, 1998, p. Al.

Sellers, Patricia, Reebok Gets a Lift, Fortune, August 18, 1997, p. 180.

Sloan, Pat, Reebok Takes Off Around the Planet, Advertising Age, January 25, 1993.

Smith, Geoffrey, Reebok Is Tripping Over Its Own Laces, Business Week, February 26, 1996, pp. 62, 64, 66.

Smith, Geoffrey, and Mark Maremont, Can Reebok Regain Its Balance?, Business Week, December 20, 1993, pp. 108-9.

The Sneaker Wars, Forbes, March 25, 1993.

Tedeschi, Mark, Paul Fireman (interview), Sporting Goods Business, January 6, 1997, pp. 62-63.

Therrien, Lois, Reeboks: How Far Can a Fad Run?, Business Week, February 24, 1986.

Vickers, Marcia, After Tripping on Its Laces, Reebok Is Focused Again, New York Times, March 2, 1997, p. F3.

Watkins, Linda M., Reebok: Keeping a Name Hot Requires More Than Aerobics, Wall Street Journal, August 21, 1986.

Where Nike and Reebok Have Plenty of Running Room, Business Week, March 11, 1991.

Wulf, Steve, A Costly Blunder, Sports Illustrated, July 6, 1992.

Elizabeth Rourke and Edna M. Hedblad
updated by David E. Salamie

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Reebok International Ltd.

Reebok International Ltd.

100 Technology Center Drive
Stoughton, Massachusetts 02072
U.S.A.
(617) 341-5000
Fax: (617) 341-5087

Public Company
Incorporated: 1979 as Reebok U.S.A.
Employees: 4,600
Sales: $3.02 billion
Stock Exchanges: New York
SICs: 5139 Footwear; 5136 Mens/Boys Clothing; 5137 Womens/Childrens Clothing

Reebok International is one of the worlds leading athletic footwear and apparel makers. The company first gained prominence by opening up a new market for athletic shoesaerobic exercise shoes for women interested in fashion as well as functionand subsequently built upon that success by expanding into other sports and products and by seeking business around the world.

Reebok began its growth into a worldwide enterprise in 1979 when Paul B. Fireman, a marketer of camping and fishing supplies, noticed the products of a small British athletic shoemaker, Reebok International, at a Chicago sporting goods show. Looking for a business opportunity, Fireman acquired the North American license for the companys products, founding Reebok U.S.A.

The British parent company, the oldest manufacturer of athletic shoes in the world, got its start in the 1890s in Bolton, England, when Joseph William Foster began handcrafting shoes with spiked soles for runners. By 1895 he was the head of J. W. Foster and Sons, Inc., providing shoes to world-class athletes, including the 1924 British Olympic running team. In 1958 two of Fosters grandsons founded Reebok, named after an African gazelle, to manufacture running shoes in Bolton, and this company eventually took over the older firm.

After Fireman acquired the right to sell Reebok products made in Britain in the United States, he introduced three top-of-the-line models of running shoes, with price tags of $60, the highest on the market. Sales topped $1.5 million in 1981, but after two years in the extremely competitive U.S. market, Firemans enterprise was out of money, and he sold 56 percent of his fledgling company to Pentland Industries PLC, another British shoe company. Reebok used the infusion of cash to open a factory in Korea, thereby significantly lowering production costs.

The companys fortunes began to change dramatically, however, in 1982 with the introduction of a shoe designed especially for aerobic exercise. Unlike traditional athletic shoes, which were made of unglamorous materials in drab colors, Reebok aerobics shoes were constructed of soft, pliable leather, and came in a variety of bold, fashionable colors. Reeboks Freestyle aerobics shoe was the first athletic shoe designed and marketed specifically for women, and it quickly became hugely popular. By selling its shoes to women, Reebok had opened up a new market for athletic shoe sales. This market would continue to expand as women began to wear their comfortable athletic shoes on the street, for daily life. In addition, the company both contributed to and profited from the boom in popularity of aerobics in the early 1980s, sponsoring clinics to promote the sport and its shoes.

In 1983, the year following the introduction of the shoe for aerobics, Reebok sales shot to $13 million. The company had become the beneficiary of a full-fledged fad. By the following year, sales of Reebok shoes had reached $66 million, and Reebok U.S.A. and its corporate sponsor, Pentland Industries, made arrangements to buy out Reebok International, the companys British parent, for $700,000. In addition, the company expanded its offerings to include tennis shoes, although shoes for aerobics continued to make up more than half of Reeboks sales in 1984.

By 1985 Reeboks had gained a large following of trendy young consumers, and the shoes standing as a fashion item was solidified by the appearance of actress Cybill Shepherd wearing a bright orange pair of Reeboks under her formal black gown at the presentation of the Emmy awards. Such celebrity endorsements, as well as an advertising budget of $5 million, helped to push the companys 1985 sales to more than $300 million, with profits of nearly $90 million. Fireman, Reeboks founder, set up an office in California to help the company stay on top of trends and maintain its shoes popularity.

In July 1985 Reebok International stock was offered publicly for the first time, selling over the counter at $17 a share. By this time international sales of Reebok shoes were contributing ten percent of revenues. By September the company was unable to meet the continuing high demand for its products and was forced to restrict the number of shoes available to individual stores until it could expand production at its South Korean factories.

Consumers who were able to purchase Reebok shoes were finding that their high price tag did not guarantee high quality, as the shoes soft leather uppers sometimes fell apart within months. Reebok launched an attempt to improve quality control in 1986, increasing its number of on-site factory inspectors from seven to 27. Although the companys production reached four million pairs a month by mid-1986, a backlog of $400 million in orders existed, and plans were made for further expansion of production capacity. In keeping with this gain, Reeboks advertising budget grew to $11 million, and the company began advertising on television for the first time.

Anticipating an inevitable decline in the popularity of its aerobics shoeswhich contributed 42 percent of the companys sales in 1985as the aerobics trend peaked and slacked off, Reebok moved to further protect its sales position in 1986 by diversifying its product offering. The company began by introducing sports clothing and accessories, limiting sales to $20 million so that growth could be controlled. In addition, the company inaugurated a line of childrens athletic shoes, called Weeboks, at the end of 1986. Perhaps the most significant innovation was the introduction of a basketball shoe. In entering this market, Reebok was stepping up its competition with rival athletic shoe makers Nike and Converse, which controlled a large part of the lucrative basketball shoe market. By the end of 1986, revenues from basketball shoes totaled $72 million and made up 8.6 percent of Reeboks total sales.

In June 1986, Reebok was rebuffed in its first attempt to expand through the acquisition of other companies, when Stride Rite Corp., another shoe manufacturer, rejected Reeboks offer. However, Reebok was successful in its negotiations for the purchase of Rockport Company, a leading maker of walking shoes with sales of around $100 million that had gotten its start in the early 1970s. Rather than integrate the new companys operations closely with its own, Reebok maintained a separation between the two, even to the extent of allowing competition.

Later that year, the company was restructured into three areas: footwear, apparel, and international products, in an effort to better manage its growth. Sales tripled in 1986 to reach $919 million, and the companys stock began trading on the New York Stock Exchange at the end of the year.

By the start of 1987, Reeboks backlog of orders for all its lines of shoes had grown to $445 million, indicating that demand for its products continued to be strong. With Fireman, as chairman, receiving record compensation tied to the companys profits, Reeboks growth continued unabated, and the company embarked on a string of purchases of other shoe companies. In March 1987 Reebok made arrangements to buy Avia Group International, Inc., another maker of aerobic shoes, for $180 million. Following this move, the company sold $6 million worth of stock to raise money to help offset the cost of its acquisition, reducing Pentland Industries interest in the company from 41 to 37 percent. The companys pace in buying other footwear manufacturers did not slow, as Reebok-owned Rockport acquired a bootmaker, the John A. Frye Company, in May 1987. This 125-year-old company, which also marketed hand sewn shoes, had yearly sales of about $20 million. One month later, after forming a Canadian subsidiary, Reebok Canada Inc., Reebok moved through it to purchase the ESE Sports Company, Ltd. Reebok closed out 1987 by finalizing plans to acquire the U.S. division and the U.S. and Canadian rights to the trademark of an Italian apparel company, Ellesse International S.p.A., for $25 million, a more modest version of an earlier plan to acquire the entire company.

In addition to its purchases of other shoemakers and apparel companies, Reebok continued to expand its own offerings in 1987, as part of its effort to maintain and protect its market share by providing a wide variety of products. The company introduced shoes designed specifically for walking, in hopes of establishing a presence in a field that Reebok chairman Fireman believed would be the next fad in fitness, and also began offering volleyball shoes and dressier styles for women. This trend continued in the next year with the introduction of shoes for golf.

In an attempt to shed its reputation as a company noted for fashion products, as opposed to serious high-performance athletic shoes, Reebok entered the fray of high-tech design innovations, an area previously dominated by its competitor Nike, with the introduction of energy return system shoes. At the end of 1987, Reebok held a quarter of the market for basketball shoes and dominated the field in aerobics, tennis, and walking shoes, its new entry.

In 1988 Reeboks long and meteoric rise began to show signs of flagging, however, as the companys historically high profit margins went into a slump. Reeboks strength in the youth market, focused primarily on basketball shoes, was shaken by a massive advertising campaign by competitor Nike, which outspent Reebok by $7 million to $1.7 million in the first quarter of 1988.

In an effort to regain lost ground, Reebok went on the offensive, publicizing its products in several ways. The company gave away shoes to young people known as style makers, and also renovated urban playgrounds. In addition, it sponsored a series of rock concerts to raise money for human rights groups, and in conjunction with this, inaugurated a Reebok Human Rights Award. Starting in August 1988, Reebok also devoted a portion of its $80 million advertising budget to an innovative and esoteric television and print campaign built around the theme, Reeboks let U.B.U., which featured people expressing their personalities in unique ways while wearing Reeboks. However, the campaign was unsuccessful, and by the end of 1988, earnings had fallen by one-fifth, on sales of $1.79 billion.

In March 1989 the company unveiled a new $30 million advertising campaign entitled The Physics Behind the Physique. This push was focused on women, traditionally Reeboks strongest customer base, and connected sweaty physical exertion with sex and narcissism. These relatively rapid shifts in emphasis from performance to fashion and back again began to muddle the consumers idea of what the company stood for, and Reebok continued to see its portion of the market slip as its sales growth waned. Commentators observed that the company appeared to have lost its focus.

Reebok also underwent a period of turmoil in its administrative and executive structure during this time. In August 1989 the companys head of marketing, Mark Goldston, left after less than a year with the company, and two months later, its president, C. Joseph LaBonte, brought in by Fireman only two years earlier, resigned as well. In addition to these changes at home, Reebok moved to strengthen its international management team at this time.

Reebok sold its Frye boot subsidiary in 1989. The company then made its only purchase outside the footwear and sportswear industries, buying a manufacturer of recreational boats, Boston Whaler, Inc., for $42 million in 1989.

Although Reeboks market share had fallen behind Nikes, to 22 percent by the end of 1989, the seeds of Reeboks resurgence were sown in mid-November with the introduction of The Pump, a basketball shoe with an inflatable collar around the ankle to provide extra support. Although the expensive shoes made up only a small portion of Reeboks overall sales, the popularity of the new technology lent a sorely missed air of excitement to the companys brand name.

Reacting to its previous difficulties, and continuing challenges in both the fashion and performance shoe markets, Reebok rearranged its corporate structure at the beginning of 1990, splitting its domestic division into two areas, one focusing on performance products and the other on fashion products. A month later, the company further restructured by merging its international and U.S. units into one global business.

Reebok split with its ad agency, Chiat/Day/Mojo, in an effort to regain lost market share. To do so, the company built on its recent success with The Pump technology by expanding The Pump to other lines of footwear, including aerobics, cross-training, running, tennis, walking, and childrens shoes. In addition, facing a relatively mature and highly competitive U.S. market for athletic shoes, Reebok looked to foreign markets, which made up a quarter of the companys sales, for further growth.

Results were immediateoverall European sales grew 86 percent in 1991 alone. By 1992 Reebok products were available in approximately 140 countries outside the United States, holding a number one ranking in sales for nine of those countries, including the United Kingdom, Canada, and Australia. U.S. growth stood at less than ten percent. The company needed to project its image as a leader in innovative athletic apparel through products in other sports categories that would display the latest in Reebok technology.

Reebok premiered football and baseball shoes in 1992, and more than 100 players in the major leagues donned its footwear. Marketing momentum increased as Notre Dames Fighting Irish captured the Cotton Bowl championship on New Years Day, 1993, sporting the Reebok football shoes supplied them throughout the season. The development of a shoe for basketball players on playground courtsbranded the Blacktop became very successful in 1991. Reebok acquired two other sports apparel manufacturers, consolidating their products with Reeboks own line of clothing and accessories, sold subsidiaries Boston Whaler and Ellesse, and positioned Reebok, Rockport, and Avia to be the principal operating units of the future. In early 1993 Reebok struck an agreement with golf legend Jack Nicklaus to create a unique line of golf shoes. Reebok also generated tremendous sales with its debut of a casual, non-athletic footwear line called Boks during the fall of 1992.

Reebok took steps to enhance its reputation through sponsorship of targeted sporting events and support of human rights programs. The company became the sponsor of the Russian Olympic Committee through 1996 and the International Hockey Federation Olympic Winter Games for 1994. Reeboks commitment to human rights led to the establishment of the Witness and Volunteer Programs in 1992. In 1993 Reebok increased its budget for a global publicity campaign, estimated at $115 million. During the 1993 SuperBowl, the company aired a 60-second commercial premiering Planet Reebok, a campaign associating Reebok products with intense competition and high performance. Reebok renewed relations with Chiat/Day/Mojo to promote individual products and began a weekly Top 30 countdown radio program based on the Planet Reebok theme.

Principal Subsidiaries

Avia Group International, Inc.; Reebok Canada, Inc.; Reebok International, Ltd.; Rockport Company, Inc.

Further Reading

Grimm, Matthew, Deft Reebok Strides into Womens Walking, Brandweek, August 24, 1992.

____, Reeboks Big Idea, Brandweek, January 25, 1993.

Pereira, Joseph, Reebok Trails Nike in Fight For Teens Hearts and Feet, Wall Street Journal, September 23, 1988.

Sloan, Pat, Reebok Takes Off Around the Planet, Advertising Age, January 25, 1993.

The Sneaker Wars, Forbes, March 25, 1993.

Therrien, Lois, Reeboks: How Far Can A Fad Run? Business Week, February 24, 1986.

Watkins, Linda M., Reebok: Keeping a Name Hot Requires More Than Aerobics, Wall Street Journal, August 21, 1986.

Where Nike and Reebok Have Plenty of Running Room, Business Week, March 11, 1991.

Wulf, Steve, A Costly Blunder, Sports Illustrated, July 6, 1992.

Elizabeth Rourke

updated by Edna M. Hedblad

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Reebok International Ltd.

Reebok International Ltd.

100 Technology Center Drive
Stoughton, Massachusetts 02072
U.S.A.
(617) 341-5000
Fax: (617) 341-5087

Public Company
Incorporated: 1979 as Reebok U.S.A.
Employees: 3,800
Sales: $2.16 billion
Stock Exchange: New York

Reebok International is one of the worlds leading athletic footwear and apparel makers. The company first leapt to prominence by opening up a new market for athletic shoes aerobic exercise shoes for women interested in fashion as well as functionand subsequently built upon that success by expanding into other sports and products and by seeking business around the world.

Reebok began its growth into a worldwide enterprise in 1979 when Paul B. Fireman, a marketer of camping and fishing supplies, noticed the products of a small British athletic shoe maker, Reebok International, at a Chicago sporting goods show. Looking for a business opportunity, Fireman acquired the North American license for the companys products, founding Reebok U.S.A. The British parent company, the oldest manufacturer of athletic shoes in the world, had gotten its start in the 1890s in Bolton, England, when Joseph William Foster began handcrafting shoes with spiked soles for runners. By 1895 he was the head of J.W. Foster and Sons, Inc., providing shoes to world-class athletes, including the 1924 British Olympic running team. In 1958 two of Fosters grandsons founded Reebok, named after an African gazelle, to manufacture running shoes in Bolton, and this company eventually took over the older firm.

After Fireman acquired the right to sell Reebok products made in Britain in the United States, he introduced three top-of-the-line models of running shoes, with price tags of $60, the highest on the market. Sales topped $1.5 million in 1981, but after two years in the extremely competitive U.S. market, Firemans enterprise was out of money, and he sold 56% of his fledgling company to Pentland Industries PLC, another British shoe company, for $77,500. Reebok used this infusion of cash to open a factory in Korea, thereby significantly lowering production costs.

The companys fortunes began to change dramatically, however, in 1982 with the introduction of a shoe designed especially for aerobic exercise. Unlike traditional athletic shoes, which were made of unglamorous materials in drab colors, Reebok aerobics shoes were constructed of soft, pliable leather, and came in a rainbow of bold, fashionable colors. Reeboks Freestyle aerobics shoe was the first athletic shoe designed and marketed specifically for women, and it quickly became hugely popular. By selling its shoes to women, Reebok had opened up a new market for athletic shoe sales. This market would continue to expand as women began to wear their comfortable athletic shoes on the street, for daily life. In addition, the company both contributed to and profited from the boom in popularity of aerobics in the early 1980s, sponsoring clinics to promote the sport and its shoes.

In 1983, the year following the introduction of the shoe for aerobics, Reebok sales shot to $13 million. The company had become the beneficiary of a full-fledged fad. By the following year, sales of Reebok shoes had reached $66 million, and Reebok U.S.A. and its corporate sponsor, Pentland Industries, made arrangements to buy out Reebok International, the companys British parent, for $700,000. In addition, the company expanded its offerings to include tennis shoes, but shoes for aerobics continued to make up more than half of Reeboks sales in 1984.

By 1985 Reeboks had gained a large following of trendy young consumers, and the shoes standing as a fashion item was solidified by the appearance on the Emmy Awards of actress Cybill Shepherd wearing a bright orange pair of Reeboks under her formal black gown. Celebrity endorsements such as this, in addition to an advertising budget of $5 million, helped to push the companys 1985 sales to more than $300 million, with profits of nearly $90 million. Fireman, Reeboks founder, set up an office in California to help the company stay on top of trends and maintain its shoes popularity.

In July 1985 Reebok International stock was offered publicly for the first time, selling over the counter at $17 a share. By this time international sales of Reebok shoes were contributing 10% of revenues. By September the company was unable to meet the continuing high demand for its products, and was forced to restrict the number of shoes available to individual stores until it could expand production at its South Korean factories.

Consumers who were able to get their hands on a pair of Reeboks were finding that the high price tag on the shoes did not guarantee high quality, as the shoes soft leather uppers sometimes fell apart within months, and Reebok launched an attempt to improve quality control in 1986, increasing its number of on-site factory inspectors from 7 to 27. Although the companys production reached four million pairs a month by mid-1986 there was a $400 million backlog of orders for Reebok shoes, and plans were made for further expansion of production capacity. In keeping with this gain, Reeboks advertising budget grew to $11 million, and the company began advertising on television for the first time.

Anticipating an inevitable decline in the popularity of its aerobics shoeswhich contributed 42% of the companys sales in 1985as the aerobics trend peaked and slacked off, Reebok moved to further protect its sales position in 1986 by diversifying its product offering. The company began by introducing sports clothing and accessories, limiting sales to $20 million so that growth could be controlled. In addition, the company inaugurated a line of childrens athletic shoes, called Weeboks, at the end of 1986. Perhaps the most significant innovation was the introduction of a basketball shoe. In entering this market, Reebok was stepping up its competition with rival athletic shoe makers Nike and Converse, which controlled a large part of the lucrative basketball shoe market. By the end of 1986, revenues from basketball shoes totaled $72 million and made up 8.6% of Reeboks total sales.

In June 1986, Reebok was rebuffed in its first attempt to expand through the acquisition of other companies, when Stride Rite Corp. another shoe manufacturer, rejected the Reebok offer to buy it. However, Reebok was successful in its negotiations for the purchase of Rockport Company, a leading maker of walking shoes with sales of around $100 million that had gotten its start in the early 1970s. Rather than integrate the new companys operations closely with its own, Reebok maintained the separation between the two, even to the extent of allowing competition.

Later that year, the company restructured itself into three areas: footwear, apparel, and international, in an effort to better manage its growth. Sales tripled in 1986 to reach $919 million, and the companys stock began trading on the New York Stock Exchange at the end of the year.

By the start of 1987, Reeboks backlog of orders for all its lines of shoes had grown to $445 million, indicating that demand for its products continued to be strong. With Fireman, as chairman, receiving record compensation tied to the companys profits, Reeboks growth continued unabated, and the company embarked on a string of purchases of other shoe companies. In March 1987, Reebok made arrangements to buy Avia Group International, Inc., another maker of aerobic shoes, for $180 million. Following this move, the company sold $6 million worth of stock to raise money to help offset the cost of its acquisition, reducing Pentland Industries interest in the company from 41% to 37%. The companys pace in buying other footwear manufacturers did not slow, however, as Reebok-owned Rockport acquired a boot-maker, the John A. Frye Company, in May 1987. This 125-year old company, which also marketed hand-sewn shoes, had yearly sales of about $20 million. One month later, after forming a Canadian subsidiary, Reebok Canada Inc., Reebok moved through it to purchase the ESE Sports Company, Ltd. Reebok closed out 1987 by finalizing plans to acquire the U.S. division and the U.S. and Canadian rights to the trademark of an Italian apparel company, Ellesse International S.p.A., for $25 million, a more modest version of an earlier plan to acquire the entire company.

In addition to its purchases of other shoemakers and apparel companies, Reebok continued to expand its own offerings in 1987, as part of its effort to maintain and protect its market share by providing a wide variety of products. The company introduced shoes designed specifically for walking, in hopes of establishing a presence in a field that Reebok chairman Fireman believed would be the next hot fad in fitness, and also began offering volleyball shoes and dressier styles for women. This trend continued in the next year with the introduction of shoes for golf.

In an attempt to shed its reputation as a company noted for fashion products, as opposed to serious high-performance athletic shoes, Reebok entered the fray of high-tech design innovations, an area previously dominated by its competitor Nike, with the introduction of energy return system shoes. At the end of 1987, Reebok held a quarter of the market for basketball shoes, and dominated the field in aerobics, its traditional strength, tennis shoes, and in walking shoes, its new entry.

In 1988 Reeboks long and meteoric rise began to show signs of flagging, however, as the companys historically high profit margins went into a slump. Reeboks strength in the youth market, focused primarily on basketball shoes, was shaken by a massive advertising campaign by competitor Nike, which outspent Reebok by $7 million to $1.7 million in the first quarter of 1988.

In an effort to regain lost ground, Reebok went on the offensive, publicizing its products in several ways, both usual and unusual. The company gave away shoes to young people it considered style-makers, and also renovated inner-city playgrounds. In addition, it sponsored a series of rock concerts to raise money for human rights groups, and in conjunction with this, inaugurated a Reebok Human Rights Award. Starting in August 1988, Reebok also devoted a portion of its $80 million advertising budget to an innovative and esoteric television and print campaign built around the theme, Reeboks let U.B.U., which featured idiosyncratic people doing bizarre things while wearing Reeboks. The campaign was a failure. By the end of 1988, earnings had fallen by one-fifth, on sales of $1.79 billion.

Trying again, the company unveiled a completely new $30 million advertising campaign, titled The Physics Behind the Physique half a year later, in March 1989. This push was focused on women, traditionally Reeboks strongest customer base, and connected sweaty physical exertion with sex and narcissism. These relatively rapid shifts in emphasis from performance to fashion and back again began to muddle the consumers idea of what the company stood for, and Reebok continued to see its portion of the market slip as its sales growth waned. The company appeared to have lost its focus.

Perhaps as an expression of that blurring of purpose, Reebok underwent a period of turmoil in its administrative and executive structure during this time. In August 1989 the companys head of marketing, Mark Goldston, left after less than a year with the company, and two months later, its president, C. Joseph LaBonte, brought in by Fireman only two years earlier, resigned as well. In addition to these changes at home, Reebok moved to strengthen its foreign management team at this time.

Reebok sold its Frye boot subsidiary in 1989. It then made its only purchase outside the footwear and sportswear industries, buying a manufacturer of recreational boats, Boston Whaler, Inc. for $42 million in 1989.

Although Reeboks market share had fallen behind Nikes, to 22% by the end of 1989, the seeds of Reeboks resurgence were sown in mid-November with the introduction of The Pump, a basketball shoe with an inflatable collar around the ankle to provide extra support. Although the expensive shoes made up only a small portion of Reeboks overall sales, the popularity of the new technology lent a sorely missed air of excitement to the companys brand name.

Reacting to its previous difficulties, and continuing challenges in both the fashion and performance shoe markets, Reebok rearranged its corporate structure at the beginning of 1990, splitting its domestic division into two areas, one focusing on performance and the other on fashion products. A month later, the company further restructured by merging its international and U.S. units into one global business. This caused the defection of Frank OConnell, U.S. division president.

At this time there was also a shake-up in the companys marketing department, and Reebok split with its ad agency, Chiat/Day/Mojo, in an effort to regain lost market share. To do so, the company built on its recent success with The Pump technology by expanding The Pump to other lines of footwear, including aerobics, cross-training, running, tennis, walking, and childrens shoes. In addition, facing a relatively mature and highly competitive U.S. market for athletic shoes, Reebok looked to foreign markets, which made up a quarter of the companys sales, for further growth. By 1990 the companys shoes were sold in 45 different countries, with the bulk of sales coming from Europe, Australia, and Japan. Overall European sales rose significantly to reach nearly $600 million in 1990, while U.S. sales of Reebok products remained flat, growing by only 2%. This pattern continued into the first quarter of 1991, as international sales grew by 86%, and growth in the recession-bound domestic market was less than 10%. Early in 1991 Reebok bought back more than 24 million of its shares from Pentland, reducing Pentlands share of Reebok to about 13%.

Heir to a corporate history of remarkable success, Reebok faces a challenging market in athletic shoes and apparel as it seeks to maintain its standing as one of the worlds leading footwear companies. After an initial period of astronomical growth, followed by a slight loss of direction, the company in the early 1990s appeared strong overall, and poised for continuing progress.

Principal Subsidiaries

Highland Import Corp.; Avia Group International, Inc.; Reebok Canada Inc.; Ellesse U.S.A., Inc.; The Rockport Company; Boston Whaler, Inc.

Further Reading

Therrien, Lois, Reeboks: How Far Can A Fad Run? Business Week, February 24, 1986; Watkins, Linda M., Reebok: Keeping a Name Hot Requires More Than Aerobics, The Wall Street Journal, August 21, 1986; Pereira, Joseph, Reebok Trails Nike in Fight For Teens Hearts and Feet, The Wall Street Journal, September 23, 1988; Where Nike and Reebok Have Plenty of Running Room, Business Week, March 11, 1991.

Elizabeth Rourke

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"Reebok International Ltd.." International Directory of Company Histories. . Encyclopedia.com. 22 Sep. 2017 <http://www.encyclopedia.com>.

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"Reebok International Ltd.." International Directory of Company Histories. . Retrieved September 22, 2017 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/reebok-international-ltd-1