Can you solve this case? In September 2014, Puma retained star athelete Usain Bo
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Can you solve this case?
In September 2014, Puma retained star athelete Usain Bolt, tlie world's fastest man, as brand ambassador and launched a new campaign — Forever Faster — to send the message that Puma was and would continue to be "the fastest sports brand in the world."^ In August 2015, Puma launched its second round of Forever Faster campaigns with a new marketing line: "What are you training for?" The campaign promoted theidea of driving athletes to train harder in order to perform better. The multi-million euro campaign promotedthe brand's latest shoe with ads showing Bolt and the Arsenal football club undergoing limit-pushing training schedules over a course of four weeks to extract more fi-om their performance.^ Puma wanted tomake it clear to the world "that it needed to be seen as a major player — that life isn't all about Adidas and Nike," suggested Nigel Currie, managing director of the British company brand Rapport, a sports sponsorship agency.''
Puma's global aspirations also extended to advancing its market position m India. Despite Puma's presencein the hidian market since 2006, the sportswear brand had not reahzed its goal of capturing the lead position.Puma's marketing push finally paid dividends when m June 2015, the brand recorded, for the fii'st trnie,sportswear sales in India ahead of Adidas, Reebok, and Nike (see Exhibit 1).^ Puma's success in India couldbe primarily attributed to the company's marketmg techniques, judicious expansion, and customer-acquisition su?-ategy.^ Indian consumers were already changing their lifestyle in response to increased health concerns, andfitness progi-ams were gi'owing in popularity. The retail sportswear segment experienced unprecedentedgrowth as a result, and companies rode the fitness wave to maximize retiu-ns on their investaients.
Puma had moved ahead of Adidas and Nike to become the leading brand in India, but how long wouldPuma be able to hold its position in the face of sustained expansion by domestic footwear brands such as Liberty Shoes Ltd (Liberty), Relaxo Footwear Ltd (Relaxo), and Paragon Footwear (Paragon)? These localbrands had increased their retail footprint and were expanding their distribution networks beyond their regional presence in order to gain a substantial market share.^ Puma needed a plan to strengthen its brandingand pricing strategies to stave off competition from these domestic companies. Could Puma sustain itsleadership position in the years to come?
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PUMA WORLDWIDE
Puma SE (Puma), headquartered in Germany, was considered one of the world's leading sportswear brands.It had been designing, developing, marketing, and selling footwear, accessories, and apparels since 1948.The company categorized its product portfolio by sport (such as football, fitness and training, rumiing, motorsports, and golf) and owned other popular brands, such as Puma, Dohotex, Cobra Golf, and Brandon(see Exhibit 2). Puma employed approximately 10,000 people and distiibuted its products in more than 120countries worldwide.^ To capture a leadership position globally. Puma revised its mission statement in 2013to "be the fastest sports brand in the world," meaning fast reaction to new trends, reduced time to market with imiovations, and speed in problem solving. The company's repositioning initiative, such as its Forever Faster campaign, was a reflection of its new revised mission statement.'
PUMA INDIA
Puma first entered the Indian market in the early 1990s with a licensing agreement with Carona. Theagreement was revoked m 1998, and in 2002, Puma re-entered the Indian market by sharing its license and distribution partnership with Planet Sports. Under this model, Puma was responsible for quality and brandconsistency while Planet Sports was in charge of sourcing, dish'ibution, and retail of Puma products in India.'°
India's monthly per capita income was expected to grow by over 10 per cent in FY2015/16 m comparison to FY2014/15." The Indian consumer lifestyle had undergone a massive shift: disposable income levelshad increased and people were adopting international b r a n d s . B y 2006, there had been a fourfold increase m the availability of intemational accessories and shoe brands in India.
To leverage this growmg trend and strengthen its brand position in India, Puma established its first executive outlet in the countiy in 2006, manufacturing and disu?'ibiiting apparel, footwear, and accessories across multiple cities in the country.^'* After three and a half years of operations. Puma reported a profit in 2009.'^ Despite entering the Indian market after its peers (Nike, Reebok, and Adidas), Puma had consistently maintained its growth above the industiy average rate and, ultimately, in 2015, surpassed its competition to gain a leading position."" In 2015, Puma recorded its highest number of sales in India, forthe fu'st time ahead of its competitors Adidas, Nike, and Reebok."
SUCCESS MANTRA
Puma's marketing strategy, judicious expansion plans, and resistance to using discount campaigns led toPuma's lead in India.'^
Retail Strategy
Puma's position as leading sportswear brand in India was primarily due to Puma's prudent expansionstrategy and clever vendor engagement. Puma focused on long-term sustainability, never opening multiplestores in the same location. This safeguarded the brand from over-disteibution and helped Puma maintainthe quality of distribution across its stores.W ith this strategy. Puma steadily built its network of340 stores across 115 cities in India. O f the 340 stores, 320 stores were operated under the franchise model.^° Puma reported 13 per cent same-store sale growth in 2014 as compared to 2013.
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In addition to maintaining tight control over its distribution network. Puma adopted a clever vendorengagement. When Reebok closed 300 of its 900 stores, retailers were handicapped. Puma leveraged this opportiuiity to gradually gi-ow its partnership with Rishabh Sports Station — Reebok's biggest vendor —and with other vendors in order to fill the market gap left by Reebok's absence.^'
Product Portfolio
With the rise in disposable incomes, change in consumer preferences, and escalatmg health awareness, sports apparel and equipment companies were launching new products and models to satisfy growing Indianconsumer demand. To take advantage of this opportunity. Puma introduced two of its leading shoe brands — Mobium and Faas — to Indian consumers in fiscal year FY2014/15. Mobium Ride, the average price for a traditional, men's athletic jogging shoe, was priced at US$138.04; the model Faas 600S was priced at US$122.70^^ — comparable to pricing by Nike and Adidas. Puma also launched the Nightcat Powered edition under its Mobium brand, and introduced its Ignite brand of ruiming shoes and Alexander McQueen's stylish global collection to Indian consumers.Puma planned to add other brands from its global portfolio to India's product portfolio m the coming years.
To build strong brand loyalty. Puma focused on developing products that fit well, were liglit, and moved with the person wearing the product. Tlie style quotient was always a crucial parameter in Puma's product mix. Consumers were central to Puma's sti'ategy; hence, after assessing a demand for flip-flops and sandals. Puma introduced a collection of stylish wear exchisively for the Indian market. Puma sold over 5 millionpairs of flip-flops and sandals inFY2014/15.^^
Promotional Strategy
Puma built its brand on the pillars of a desirable product mix and engaging marketing.^^ In addition to being known for sports apparel. Puma gradually built its image as a fashion mspirational brand with dynamicdesigns and stylish products. Consumers associated the fashion items with unchallenged passion, determination, and sentiment for sport.^^
As part of its initiative to increase brand awareness, the company launched a Forever Faster campaign inpartnership with the Indian Super League football franchise.^^ This tie-up fit well with Puma's plan to focus on a football wear collection and concentrate its marketing efforts around football.^' Puma had Usain Bolt, a world-record holding sprinter and Puma's brand ambassador, launch the Forever Faster campaign in India inSeptember 2014^° to signal the brand's seriousness about makmg Puma the fastest sports brand in India.
To raise the consumer engagement level, Puma invested in a food, drinks, and entertainment venue — thePuma Social Club. The club was located in the poshest area of Bengaluru and was a hit among the local millennials.^' In addition, Puma put together a compilation of music and a concert series under Puma Loves
Vinyl — a campaign to comiect with consumers at a personal level.^^
Price
With growing competition. Puma had two options to push its sales further: the company could use a discounting model, like its competition, or continue on the path of sustained and slow growth.^^ Thecompany decided to persist with the gradual growth strategy, which brought Puma the success it sought.
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To make the brand accessible to more customers. Puma lowered the entry barrier with low-priced entry products. Puma's products ranged fi'om an affordable $25 to $230.^''
Customer Focus
Puma focused on continuous monitoring and improvement of the customers' store experience. Tire brand had a liuge fan following, particularly among the youth. Bemg consumer-cenfric, Puma developed its products after identifying these consumers' needs. The consequent launch and success of flip-flops and sandals exclusively forthe hidian market validated Puma's effort and commitaient.^^ In line with its focus on India, Puma launched an exclusivefitnessshoefor women.PulseXT inthesummerof2015.AbhishekGanguly,managingdhectorofPuma India, declared, "We have planned a veiy aggi*essive autuimi and winter and will continue to launch global iimovative technology-oriented products suitable for India. You will see a lot more of us."^''
E-Commerce Model
Worldwide use of smartphones and tablets to access the Internet drove the e-commerce model on anunprecedented growth trajectory. With all companies trying to gain a share ofthe online market. Puma, too, built its presence through popular marketplaces such as Amazon, Jabong, Snapdeal, and Flipkart.
In late 2013, former managmg director of Puma India, Rajiv Melita, indicated that selling Puma's products online was a marketing advantage the company wanted to exploit:
Between 16 [and] 25 years of age, a lot of people are shopping online. Because we are a lifestyle brand, consumers end up shopping multiple times for a lifesfyle product than a performance product which lasts for some time. . . . ^'
Online is a lot more dynamic. If I want to launch a new shoe, all I have to do is make sure it's in my warehouse and take the graphic, which can happen in two hours. Our online business is as goodas a Brigade Road store in Bangalore and is one of the largest store equivalents m terms of sales.Also, it's a marketing advantage, if not anything else.^^
To curb heavy online discounts, Puma excluded onlme fi'anchise operations.^^ Puma earned a 15 per centrevenue share fi-om its online segment in 2014. To extend its onlme reach. Puma planned to boost its onlinepresence and strengthen the content and offerings o f its online portal, Puma.com.'*°
INDIAN SPORTSWEAR MARKET
The sportswear industry was defined as an aggregation of performance, outdoor, and sports-inspired clothing and footwear.'" All kinds of dresses, shorts, trousers, tops, coats, jackets, track suits, athletic sets,swimwear, underwear, hosiery, clothing, and accessories (including gloves, headwear, and scarves) were included under the clothing segment. Children's, men's, and women's footwear — sports shoes, sandals, pumps, and more — were included under the footwear category.'*^
The sportswear industiy in India was valued at $3 billion in 2013 and was predicted to reach $4.9 billion by 2018.'*^ The industry gi-ew 25 per cent in 2013 and was expected to increase at a compounded annualrate of 10 per cent from 2013 to 2018. Within the sports apparel segment, current sales value of performance
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apparel grew by 20 per cent; outdoor apparel, by 28 per cent; and sports-inspired apparel, by 18 per cent, in 2013 (see Exhibits 2 and 3).'"*
MAJOR COMPETITORS
Adidas
Adidas had ruled the Indian sportswear industry for more than a decade. The increasing presence of the brand across major Indian cities and its tie-up with the Indian cricketer icon, Sachin Tendulkar, foradvertisements helped the fmn become a sportswear leader.''^ To further increase its market presence across the world, Adidas acquired Reebok in 2005 for $3.8 billion.'"' However, since 2012, Reebok's Indian armwas tangled in various commercial irregularities.'*^ Owing to the hregularities in the Indian unit, Adidas reported a loss of €125 million (roughly equivalent to ?8.7 billion or US$135 million in 2005) from its global profits. Further losses of €70 million (?4.88 billion or US$76 million in 2005) were estimated i f thecase was not handled soon.''^ The failure to leverage the Reebok brand added to Adidas' financial losses; in 2015, Adidas lost its position as market leader. Adidas indicated it might sell Rockport, Reebok's shoebrand, to regain its position in India.'" To start a fresh chapter, in September 2015, Adidas identifiedRanveer Singh as brand ambassador for its streetwear label Adidas Originals,^" leveraging the actor'sstardom and his connection with youth.
Reebok
Although a relatively small player, Reebok had an established market in key regions such as North Americaand India. In order to grow its market presence, Reebok was purchased by Adidas in 2005 for US$3.8 billion. In India, Reebok targeted the 15 to 50 age group and promoted its brand with advertisementstargeted at cricket.^* However, in 2012, Adidas announced that it had uncovered several incidents of commercial irregularities at Reebok's India unit. As a consequence, Adidas closed a substantial number ofReebok outlets.^^ Reebok's struggles resulted in poor financials in 2013.^^ In a bid to regain its leadership position in sportswear in India, Reebok planned to launch more than 100 of its FitHub^'* stores, targetedtowards urban consumers.
Nike
Nike had an established base in India. The company had a sh'ong year in 2013 with respect to returns andinvestments. The company increased its investment in brand promotions with targeted advertisements and official sponsorship of the Indian cricket team. In addition to brand promotions, Nike strengthened its distribution network across smaller cities with a larger presence in multi-brand outlets.^* To drive its salesfurther, Nike offered various seasonal discounts and offers to lure customers. Instead of investing in an online retailing site of its own, Nike established an online presence through tie-ups with severalmarketplaces, such as Snapdeal, Flipkart, Jabong, and Myntra." Although Nike did not market its ownproducts online, it did use its website to keep fans abreast of the latest product launches and store releases.'^
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Domestic Companies
In addition to global sportswear brands, India had an established presence of popular regional brands such as Libeity, Lancer, and Relaxo. Affordable sportswear products from regional brands were gaining popularityamong Indian consumers. These brands slowly bridged the gap between the domestic and international brandsales by inti'oducing new designs and colours as part of thek product portfolios. Leading footwearmanufacturers, such as Relaxo and Liberty, launched women's footwear designs to target a gi'owing marketneed. Domestic companies invested in increasing their penetration across India and launching desii'ed brandvariants within different price platforms in order to tap into the burgeoning oppoitunity^'.
THE CHANGING INDIAN CONSUMER
India's economic growth and rising household incomes were expected to take consumer spending to a level of $3.6 trillion by 2020. Food, housing, consumer durables, transport, and communication were expected to reap the most of consumer spending. The Indian consumer market was dominated by the younger generationand was becoming increasingly sopliisticated and brand conscious. Y oung upper-middle-class consumers were looking beyond the utility aspect of a product to seek brand and lifestyle statements connected with the product.*"
India's consumer confidence continued to be the highest globally and had unproved more in the secondquarter of the 2015 calendar year due to a positive economic environment and low inflation.*'' There was a visible change in consumer attitude towards sports and fitness as a result of an increase m healthawareness.''^ With the inclusion of physical exercise in an Indian's daily regime, many state governmentswere building parks in urban locations to cater to the demand for morning and evening walks.*^ Gyms and health clubs in India were taking advantage of the opportunity and offering a variety of fitness programmes,such as yoga, dancing, spinning, aerobics, and more.'''' With the growing presence of fitness and healthclubs and gyms in metropolitan areas and top-tier cities in India,''^ the sportswear industiy was set forunprecedented growth.** Additionally, an mcreasing number of sporthig events, such as the Indian PremierLeague and marathon events, fostered sports growth in India.*'
PUMA'S DILEMMA
The evolving consumer landscape, rising e-commerce oppoitunities, and mcreasing health awareness had fiielled massive gi'owth in the sportswear industiy. After continuous efforts over eight years, Puma was at last in the number one brand position in India, taking the lead fi'om Adidas.*^ However, although Puma led Adidasand Nike in total sale volumes, there was only a narrow differential margin among the thi'ee. This implied thatthe 1-2-3 positions could undergo reshuffling anytime m the futiire.*' In anticipation of the competitors'response to Puma's new success, what should Puma's strategy be in order to maintain its lead in the competition? How should Puma build on its current brand equity to sustain its leadership position and turnconsumers into brand loyahsts? Domestic footwear brands were also expanding theii' retail footprint and distribution networks to gain a sizeable market share beyond theii* regional presence. What should be Puma'ssti-ategic, branding, and pricing sti-ategies to overcome competitionfi-omdomestic companies?
Explanation / Answer
For improving the competition in India puma should focus on creating an online strategy by using E-Commerce as tool for selling it's products across the country. As company is directly focusing on creating outlets on malls and highly price structures, company should open their outlets in major markets across Different cities as well as humour can also increase their overall availability of the products by designing their products according to the Indian customer. Aggressive pricing as well as discount schemes can also be very beneficial for the company to acquire greater amount of revenue from the same market segment as well as improving the overall sales of the products. This type of approach would help Puma to grow prominently into the market and to provide adequate sales and support structure for expanding its business across many parts of India.
Projecting itself as environment friendly brand as well as creating look and opportunity by putting up a manufacturing plant in India would be the most appropriate way for providing unethical support to the overall cultural aspects of India and this type of approach would benefit the organisation by creating a distinctive brand identity of eco-friendly as well as human friendly organisation which is operating in the same country.
For overcoming competition aggressive pricing and the pricing should be determined by studying available competitors. This determination of pricing would definitely help humour to do a better business in the specific market segment and to provide adequate solution for the problem using digital media and other specific mediums.
All in all we can say that Puma can use digital mediums to improve their overall availability of opportunities for the organisation for improving its overall business in the specific region.
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