(Reebok & Addidas)

MANAGEMENT INFORMATION SYSTEM (BPMN6053 GROUP B)

1.0

Why is business integration important to Reebok? 1.1

Increase supply chain efficiency

1.1.1 Cooperation across the supply chain is being made easier by the availability of enterprise systems by own acts together internally. 1.1.2 By the way, way, via business integration across Reebok, it begins to seem possible to attack the larger issues of the extended supply chain. Once Reebok have good information on their own sales, inventory, or production figures, it is much easier to share that with other companies. For example major systems alike SAP vendors are also making it an explicit part of their strategy to support Reebok communications in their product package offerings. 1.1.3 Besides that, implementation of business integration allow Reebok to

incorporate its manufacturing partners and customers

around the globe through Internet EDI links links as well as ultimately plans to tie its systems directly to theirs. 1.1.4 Reebok can also utilize utilize this integration platform by offering offering customers access to enterprise information through its official web sites. Through these internet sites customers can use to order the products from their home or just check on availability and pricing. The Web site helps to advertise their products in a wider scale. It will give the customers information about the new product release and company information. This literally helps to increase the brand popularity of the company among the customers. 1.2

Enhanced customer service and network relationships

1.2.1 The main reason implementing business integration for construct strong customer service and also key to growing corporate businesses.

Some

studies

have

suggested

that

the

typical

manufacturer stands to cut the time between а customer's order and

the arrival of the shipments by 15-40 per cent with well-implemented business integration software. 1|Page


1.2.2 Reebok can use integration data to manage its entire business better. These are emphasis via System a like SAP, systems software etc. when everything Reebok know about their customers available at every touch point across their business and meet the needs throughout the customer life-cycle. 1.3

Cost-cutting in internal operations

1.3.1 At the most fundamental level, integration systems offer ways to squeeze costs out of internal supply chain operations. They accomplish this mainly by cutting across and linking together the traditional functions of the business, in the same way that good business process management does. This always refers to replace inventory with information. 1.3.2 Reebok has all the typical supply chain problems such as storage of raw materials, stock turn over, product forecast, procurement etc. Its product line experiences seasonal sales peaks that make a hard time for product forecasting. So Reebok can use а

business integration system to link its forecasts to production scheduling and ultimately to procurement. Through this it dramatically can cut inventory levels (liability). By the way, help to translate to higher warehouse capacity with good projection and planning with the profit earn. 1.4

Strategic Insight

1.4.1 Integration of all the communication tools, avenues and sources within a company into seamless business intragroup systems will maximize the impact on consumer and also minimal cost. 1.4.2 Therefore Reebok can use business integration system to link all internal group communication in one hub. As result, when everything is integrated it’s easier for Reebok employees or even

management to understand how their organization is operating and ensure processes are as streamlined as possible which indirectly increase customer satisfaction. 2|Page


2.0

Diagram what information is collected and how s it is used in the new

system at Reeboks. Specify the format of data collected at each point

New system in Reebok: 2.1

Re engineering

Re engineering is the analysis and design of workflows and business process management within an organization. A business process is a set of logically related task performed to achieve a defined business outcome. Process reengineering began on private sector technique to help organization rethink how their do work in order to improve customer service , cut operational cost and become world class competitor .Business is basically fundamental rethinking and radical re design, made to an organization existing resources. 2.2

Private architecture

Reebok installed a privately designed architecture for voice, video, and data. Reebok communicates not only with its worldwide distribution base but also with its ad agency and other suppliers. IT currently developed an electronic image library to enable product shots to be distributed to every country where Reebok does business. The system dropped the new product lead time from six months to three, and, in some case. 2.3

Passport

To improve this process, Trainer developed a software package called Passport. Passport rationalizes product codes and shoes size. It does also give small distributors and subsidiaries access to the system. 2.4

Lotus Notes

Lotus Notes is used to store the catalogues with mail links through cc: Mail 2.5

Electronic data interchange

Electronic data interchange with 10-15 percent of its retailers. This commitment enables goods to be tracked through shipping companies, customs, and warehouses. 3|Page


2.6

Hoover

A data capture system to information from databases around the world, is linked to customer database that track what customers have ordered and what they want.

4|Page


3.0

When problems arise with the network, or the software, how can they be identified and resolved? How do we set up an IS group to solve problems and help users?

The problem that arise can be identified by the complain that had being make by the customer. For example compliant regarding the size or colour of the product. The problem that happens also can be detected by doing a checking of the product inventories and raw material stocks when retailers and distributions placed orders. Once it have the order but the inventories are not being reduce it means have a problem regarding the system that had being use and the company need to make faster corrective action to make sure the business can be success. The company see the problem that they facing in the AFS system so the company taking action by push for new features such as a Web-based system to handle business-to-business transaction with their suppliers. The company learned about the problem almost immediately. It prove went the company pays VML to run its computer programme Seer to scan Internet blogs from the comment of their customers. Based on this immediate action take the company told customer to treat their product before sell it. Through the information system the company use news media approach such as Youtube and Second Life to market their product. The company also use the website to help them emphasizes the benefit of information system to create flexible supply chain and they use this platform to share information to produce and ship he right product to each market. Reebok installed Radnet Inc “Webshare groupware system to maintain its website. The system has tool

for email, discussion group and bulletin boards.IT currently developed an electronic image library to enable product shots to be distribute to very country where the company do a business and this help a lot to improve the communication between company and their customer. Information system (IS) also helps to improve the process in the business. Reebook itself use passport which is rationalizes product code and shoe size which means gives small distribution and subsidiaries’ access to the system through the personal computer it will help the customer and make customer 5|Page


feel easily doing business with the company.

Lotus Notes also

being use to

help to store the catalogues with mail link through cc :Mail IS also help the company by using

hoover to

help the company capture

system to “suck in” information from database around the world and it linked

to customer database that track what customers have orders and what they want. Use electronic data interchange with 10-15 percent of retailers it will enables goods to be tracked through shipping companies, customs and warehouse.

6|Page


4.0

How has Reebok been hampered by its information system?

Peter Burrows as chief technology officer (CTO) was counting on the system to handle the major transactions at Reebok, so he could avoid the necessity of rewriting the old applications to become Y2K compliant. By May, 1999, the system was still not fully operational. Among other problems and bugs, the system was too slow to check product inventories and raw material stocks when retailers and distributors placed orders Peter Burrows as chief technology officer (CTO) was counting on the system to handle the major transactions at Reebok, so he could avoid the necessity of rewriting the old applications to become Y2K compliant. By May, 1999, the system was still not fully operational. Among other problems and bugs, the system was too slow to check product inventories and raw material stocks when retailers and distributors placed orders. In year 1993 assessment identified major problem with Reebok’s information system incompatible databases, system that were old and inflexible and both costly and time-consuming to change. Many critical business processes were manual and paper based, such as financial consolidation, factory purchase order placement, and there was a notable lack of standardization of hardware and software. Based on this assessment, Reebok’s management was faced with a

challenge. Given a fragmented global technology infrastructure, how would Reebok international archive a truly transnational configuration leading to the global efficiencies it sought and yet maintain the local responsiveness required for its customer. Reebok management recognizes that in order to archive sustainable competitive advantage it was necessary to proactively develop on enterprise information system architecture that would facilitate global efficiencies in production and distribution.

7|Page


5.0

Write a report to management that describes the primary cause of the

problems, a detailed plan to solve them, and show how the plan solves the problems and describe any other benefits it will provide. 5.1

INTRODUCTION

On August 3, 2005, Adidas-Salomon AG announced its plans to buy all outstanding shares of Reebok International Ltd.'s stock at $59.00 per share, for a total of $3.8 billion. Upon announcement, Reebok stock rose 30% while Adidas climbed 7%. As stated by Herbert Hainer, CEO of Adidas, "This is a once-in-a-lifetime opportunity to combine two of the most respected and wellknown companies in the worldwide sporting goods industry. Together, we will expand our geographic reach, particularly in North America, and create a footwear, apparel and hardware offering that addresses a broader spectrum of consumers and demographics" (Adidas.com). A primary goal of the acquisition has been to challenge industry leader Nike for a higher share of the United States sporting goods market as well as the global sporting goods market. The acquisition has prompted much discussion as to what the future holds for the sporting goods industry and its major players. 5.2

MAJOR PROBLEM FACING REEBOK ON 1989 TO 1990

Reebok's share of the athletic shoe market fell to 28% in 1988, and Nike made serious inroads into Reebok's market share and threatened to regain the market leader position. By the year-end 1989, Nike had regained the position. Nike used new technology to design for its new products and the new casual shoe would be introduced in the spring of 1990. Therefore, this would be a strong competitor for the company. Not only did the Nike go back to the No 1 position, but also in 1988, Converse was making efforts to become competitive in the area of high-tech and women's athletic footwear. Thus, it gave Reebok lots of pressure on its products development and market share in the coming years. The problem was not only from outside competitors, the problem was also within the internal operation. Since the management styles conflicting was with the those of Fireman, President and Chief operating officer, Joseph Labonte and Chief Marketing officer, Mark Goldston both resigned from Reebok in 1989. After their resignation, Fireman 8|Page


reorganized the company, and this movement may lead to delay the reaction to competitor's movement. Of operation result side, from 1989 to1990, the net revenue increases, but the net income slowdown. 5.3

CORE COMPETENCIES & COMPETITVE ADVANTAGE

Competitive advantage is a special edge that allows an organisation to deal with market and environmental forces better than its competitors. Whereas, sustainable competitive advantage is one that is difficult for competitors to imitate. This distinction is essential when evaluating the acquisition and its effects. A merger of this scale is inherently complex, dealing with issues such as global positioning of companies, corporate cultures, and the allocation of resources. To better understand the advantages gained from the AdidasReebok merger, it has been examined the following: Through these various analyses, it has been have discovered that the importance of branding is paramount for success in this industry.

Our research also identifies the

specific danger of competition between Adidas and Reebok. Our analysis of the Adidas-Reebok merger shows how it will gain a sustainable competitive advantage that may one day dominate the footwear industry both domestically and internationally. The fact that Adidas and Reebok control such different aspects of the shoe industry will help to ensure their success. To fully understand how Adidas-Reebok will gain a sustainable competitive advantage over Nike, the situation must be looked at from several different points. These include industrial, customer and competitor analyses, as well as a look at the different marketing strategies and changing marketing trends.

9|Page


5.4

Using Michael Porter’s Industry Forces Model

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, it is extremely difficult to get shelf space at major shoe retailers. If the firm is currently in the dress shoe industry, and is entering the athletic shoe industry, they may use their existing connections to easily access athletic shoe distribution channels. Switching costs are very low for the athletic shoe industry.

Shoes are

relatively inexpensive personal goods that are frequently replaced. 10 | P a g e


Cost disadvantages independent of scale are moderate. Many athletic shoe customers are brand loyal and are reluctant to try a new athletic shoe. Additionally, previous aggressive marketing campaigns have increased not only brand and individual product name recognition. Government policy is a low entry barrier, as all manufacturers in every industry are subject to factory safety laws. Threat of Retaliation

The threat of retaliation is high in the athletic shoe industry. For example, if a small new competitor attempts to gain market share by dumping their products, the much larger computer firms are more capable of absorbing losses associated with driving the new competitor out of business. The threat of new entrants to the profit potential of athletic shoe manufacturers

is

minimized

through

high

entry

barriers,

but

incumbent

manufacturers must stay aware of other shoe manufactures attempting to enter the athletic shoe industry. Rivalry Among Existing Firms

In the athletic shoe industry, corporations are mutually dependent.

A

competitive move by one firm directly effects competitors, forcing retaliation or counterefforts. For example, Reebok’s expansion of the women’s walking shoe, inspired other firms to follow. The number of competitors is stable, partially due to high entry barriers. This adds to the rivalry among existing firms. Manufacturers watch each other carefully and make appropriate countermoves to match a competitor’s move. The rate of industry growth is stable, but the quest for global market share is eminent. Nike and Reebok are not as dominant globally, compared to the U.S. This increases global rivalry. Product characteristics are related to market share. Name recognition alone sells athletic shoes. The larger the market share, the greater advertising capabilities and hence increased name recognition. Athletic shoe manufacturers relentlessly try to minimize fixed costs. Many shoe manufacturers reduce their costs by assembling athletic shoes abroad where

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labor is less expensive and tax laws are minimal.

This increases rivalry, when

manufacturing savings pass to the consumer. Capacity has minimal impact on rivalry, because most firms have means to manufacture the demanded amount of athletic shoes. This ability to meet demand reduces market because most firms overproduce and drive down the selling price. Low exit barriers and diversity among competitors has minimal impact on profit potential. If the athletic shoe industry becomes too unprofitable, firms could switch to other shoe markets. Additionally, diversity among firms is small because every firm follows one another. The rivalry among existing firms is high where weak firms are easily acquired by fierce competitors. This may have a high impact on profit potential. Bargaining Power of Buyers Woolworths’s shoe chains account for 23% of the U.S. athletic shoe

sales. Their dominant retail market share gives them a large amount of power. Furthermore, Woolworth’s dominant market position contributes to concentration of the buyers industry. Smaller firms have difficulty competing with mighty Woolworth’s

chains and other large shoe retailers. Woolworth’s chains pose a moderate to low threat of backward integration. In the event of backward integration, Woolworth’s would be subject to

some of the high barriers to entry. Plus, they would have to continue to sell their competitors products because retail shoe sales are the core competency of their corporation. Buyers have high switching costs in regards to opportunity cost. If an athletic shoe retailer decided to drop one of the popular athletic shoe brands, their sales would fall due to high consumer brand loyalty. Most buyers have a medium profit margin so price sensitivity of buyers is moderate. In the athletic shoe industry, price increases pass to the consumers. The overall impact from buyer’s bargaining power to profit potential is

moderate.

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Bargaining Power of Suppliers

Athletic shoes are manufactured primarily from raw materials including rubber, leather and nylon. These materials could be classified as commodities, where the manufacturing process adds to their value.

For this reason, the suppliers have

limited bargaining power, and little impact on profit potential. Threat of Substitute Products and Services

Athletic shoes are designed to improve comfort and personal safety during periods of increased movement. Substitutes for athletic shoes are using other forms of shoes, or going barefoot. A large population of athletic shoe consumers wear athletic shoes strictly because they are comfortable. Comfortable dress shoes or sandals are equally interchangeable with minimal switching costs. If the athletic shoe is used for sports, then there are relatively few substitutes.

Given these

reasons, the threat of substitute products is moderate and the impact to profit potential is moderate to high. Relative Power of Other Stakeholders

The U. S. government has low power over the athletic shoe industry. Many shoe manufacturers have plants outside the United States, where U.S. laws are not applicable.

To minimize the relative power of other stakeholders

corporations strategically locate their plants throughout the world. Forces driven by market demand are the only forces that may significantly affect profit potential. Therefore, the relative power of other stakeholders ability to impact profit potential is moderate to low.

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5.5 Overall Assessment •

The threat of new entrants to the profit potential of athletic shoe

manufacturers

is

minimized

through

high

entry

barriers,

but

incumbent

manufacturers must stay aware of other shoe manufactures attempting to enter the athletic shoe industry. •

The rivalry among existing firms is high where tender firms are easily

acquired by fierce competitors. This may have a high impact on profit potential. •

The overall impact from buyer’s bargaining power to profit potential is

moderate. •

Suppliers have limited bargaining power, and little impact on profit

potential. •

The threat of substitute products is moderate and the impact to profit

potential is moderate to high. •

The relative power of other stakeholders ability to impact profit potential

is moderate to low. •

The overall profitability on the industry is moderate to low level and

could increase with future consolidation.

This is because of high rivalry, many

substitute products and a little buyers bargaining power.

5.6 The Integration

Also, by standardizing processes of using information technology implement in Reebok company like SAP, AFS , BW, Retail Inventory Management if having advance information technologies and processes to meet the changing requirement to-re-engineering, improve its communication, supply chain system, use electronic data interchange and improving organizational data and process. This will result in increased operational efficiency and lowers cost across their power generating products. This will shift company to meet the world requirement for sport shoes industry.

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REFERENCES

http://faculty.lebow.drexel.edu/KwakH/lecture/ppt/MKTG634/Web/swot_analysis.htm. http://www.articlesbase.com/marketing-articles/adidasreebok-merger-1983240.html http://faculty.lebow.drexel.edu/KwakH/lecture/ppt/MKTG634/Web/swot_analysis.htm. http://www.articlesbase.com/marketing-articles/adidasreebok-merger-1983240.html Reebok International, Ltd. (1995): The Nike Challenge - Case Authored By :Thomas L. Wheelen, Moustafa H. Abdelsamad, Shirley E. Fieber, and Judith D. Smith

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(Reebok & Addidas)

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