Reebok

Current Situation

Overall, the current situation of Reebok International is satisfactory. Reebok reports improved third quarter 2002 earnings, which have given the company encouragement to proceed with their long-term planning for 2003. Reebok currently maintains a position in the top three athletic shoe brands, and plans to continue expanding its product line and improving its brand image. Accounts receivable at December 31, 2002, increased by $38.4 million December 31, 2001, an increase of 10.0% as a result of increased sales in the fourth quarter of 2002 as compared to 2001, however days sales outstanding in accounts receivable decreased by 5 days. Despite the current economic situation domestically and abroad, Reebok expects to see improvements in 2003 through strategic marketing, financial assessment, and increased social responsibility.

Financial Performance

The company's overall gross margin was 36.7% of sales for 2002, as compared to 37.9% for 2000, a decrease of 120 basis points. U.S. apparel sales of the Reebok Brand increased by 37.8% to 461.2 million from $334.7 million in 2001. For the year ended December 31, 2002, total marketing expenses for the Reebok Brand approximated 10.7% of net sales, as compared to 10.5% during 2001. Sales of the other brands were $112.4 million in the first nine months of 2002, a decrease of 8.4% from sales of 122.7 million in the first nine months of 2001. However, selling, general, and administrative expenses for the first nine months of 2002 were $708.8 million, a 2.4% increase when compared to $692.2 million the previous year.

Strategic Posture

Developed in 1995, the Reebok Charter establishes the mission of the company and clearly states the company's philosophy of doing business and its core values. For over a century, Reebok International has been one of the most productive footwear companies. "Reebok is a global sports and fitness company with a heritage dating back to 1895. We are a leader in the design and development of authentic products and services, and we influence the athletic lifestyle trends of the world. Reebok is a true partner with its customers and is relentlessly committed to their success. Built on a foundation of trust, listening and innovation, we are their customers' most valued resource for quality products and information and the leading authority in sports and fitness." Reebok's objective is to ignite a passion for winning, to do the extraordinary, and to capture the customer's heart and mind.

Reebok is committed to excellence and innovation. They demonstrate their excellence by setting exceptional performance standards, which they then achieve through focused perseverance and vigorous execution. Innovation and fresh ideas drive their company to create powerful breakthrough products and inspirational marketing and advertising. Reebok strives to make a difference to their customers, employees, shareholders, athletes, and the world in which everyone lives. The company has developed various strategies so that their company can be ran in a productive manner. A few of their strategies are as follows:

1.) To create innovative products that generates excitement in the marketplace.

2.) To align its brand with a few of the world's most talented, exciting, and cutting edge products.

Strategic Managers

Reebok International's strategic managers consist of the Board of Directors and top management. The Board of Directors is obligated to approve all decisions that affect the long-run performance of the corporation. Top management is responsible for the implementation of corporate goals and objectives.

The Board of Directors of the Reebok International Corporation currently has 10 members and may expand to include 12. The Chairman of the Board is also the Chief Executive Officer. He and Jay Margolis, President and Chief Operating Officer, are the only two insiders. Most of the directors are currently holding, or have retired from, positions of executive leadership of other firms. One member of the board is a retired Executive Vice President of Reebok International There is one woman on the Board of Directors and the average age is 56.

The Board of Directors is divided into three classes, having staggered terms of three years each. It is common for Board members to be re-elected to serve more than one term. Half of the Board is currently serving their first term, and four members have been on the Board for more than 10 years.

There are five committees of the Board:

§ The Audit Committee is responsible for surveying the accounting and auditing activities.

§ The Board Affairs Committee reviews committee assignments and chairmanships and gives suggestions to the Board taking into account the desires of individual Board member.

§ The Compensation Committee establishes and administers all of the company's employee benefit and compensation plans.

§ The Executive Committee has the authority to exercise the full authority of the Board of Directors between meetings of the board, as allowed by law.

§ The TIDE Committee is responsible for evaluating the company's Shareholder Rights Plan.

Figure 1.1 shows Reebok's Organization Chart, which describes the arrangement of the work positions within top management.

Figure 1.1

The External Environment

The External Environment of a company consists of the areas that comprise the opportunities and threats of the firm. It also entails the societal environment and the industrial environment.

External Factor Analysis Summary (EFAS) Table

The EFAS Table (Figure 1.2) assesses the major opportunities and threats of the firm by using weight (importance of the factor) and rating (level of company response) to calculate a weighted to score to determine the internal position of the company.

Figure 1.2

External Factors Weight Rating Weighted Score Comments

Opportunities

*NBA & NFL Promotion .20 5 1.00 Promotion has caused an increase in sales

*World Cup

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