In 1964 in Oregon, Phil Knight and Bill Bowerman join together to make a new enterprise; each contributed about $500 to the partnership. The company started bringing low priced and high tech athletic shoes from Japan to replace the German domination of athletic shoes in the industry. In 1971, a graphic design student created the Swoosh trademark for a $35 fee. In the same year Jeff Johnson, Blue Ribbon Sports’ first employee, made his most durable contribution to the company in coming up with a new name, Nike, after the Greek goddess of victory. NIKE is the world's #1 shoemaker and controls over 20% of the US athletic shoe market.
Reebok’s ancestor-based company came from the United Kingdom and it was founded for one of the best reasons, to give athletes the best running shoes. Around 1890, Joseph William Foster made some of the first known running shoes with spikes in them. By 1895, he was in the process of making shoes by hand for top runners. Before long he started the fledgling company J.W. Foster and Sons and were exposed to international clientele with distinguished athletes. The company became known as Reebok, named for an African gazelle in 1958, when the founder’s grandsons started a companion company. Reebok’s products are available in more than 170 countries and they are #2 in the U.S. shoe making market.
The footwear industry is a complete package so the different stages of shoe design and manufacturing interact seamlessly. This means that design departments and supply chains can operate on different components within the same product family; it reduces the opportunity for error resulting in efficient and highly profitable production. For the first six months of Nike’s current fiscal year, they brought in $816.9 million in revenue, with a 35 percent increase over the same period a year ago. Meanwhile, the core Nike business grew from $5.26 billion to $5.89 billion, a 12 percent increase. As for Reebok Brand, worldwide sales in the 2004 fourth quarter increased 18 percent to $817 million. From the numbers we can see that the athletic shoemaker industry is profitable and both companies are very competitive. With that said, we will now go on with discussing some of the basic factors that helps the industry to grow in profitable way.
Jockeying among existi...
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... that the economy will begin to slow due to the slowly rising interest rates, athletic shoes and apparel, which Nike provides seem to continue to be of high demand. Moreover, the fact that Nike has very strong brand loyalty and a worldwide customer-base will help them to continue to prosper over the next three to five years and far beyond.
Reebok, while not currently as stable as Nike will probably grow over the next three to five years also. We don’t believe that they will have quite the success of Nike. However, they are pretty well anchored in at the number two spot with Adidas being the only real close competition. Reebok also will feel the affects of any possible economic slowing, but only if that actually happens, and it will not break the company anyway. Reebok too provides for a highly demanding industry, driven by the next big offering from a company. Furthermore, Reebok has fairly strong brand loyalty and a worldwide customer-base as well, just not quite as strong of brand loyalty or as large of a customer-base. As previously stated, Reebok will probably not reach the levels of sales that Nike currently does, but will still do well for themselves in the future.
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