Category: Puma

Executive Summary

Puma SE is one of the leading firms in the sports industry. Started in 1948, this German company has had growth in its market share, making it the second largest firm in the sports industry. Initially a shoe making company, this firm soon started producing all types of sportswear, including balls. The company lost its ground to its arch rival, Addidas and other new entrants.

In its quest to recapture its lost markets, the company has set programs that would ensure that it regains its lead in the market. It has redefined its value proposition, extended its line of production and ventured into new industries. All these are meant to give it a new direction towards success. This effort has seen it capture some new markets in that it had lost to some of its competitors in this industry.

Introduction

Puma SE is one of the leading companies in the world in the sports industry. Established in 1948 when two brothers, Rudolf Dassler and Adolf Dassler broke up, Puma has grown from a family owned business to a partnership, and currently a public company with its shares listed in the countrys stock market (Woodruff 1997, p. 45).

It has a worldwide coverage, with a brand name that is known by many people across the world. In this sports industry, the company faces very strong competition from its arch rival which is also a sister company, Addidas. The Company has had cordial relationship with this firm, which is currently the market leader in this industry.

In this industry many firms have come into existence from various regions across the world. These new entrants are producing products with similar features as Puma, a fact that has seen competition sore in the world markets. The market share of Puma SE, from a technical view point, has significantly dropped (Payne & Holt 2001, P. 42).

Addidas still occupies the largest portion of home market share, and the world market in general. Presence of other international firms in this industry has further eaten up its market share. The firm is left with a limited market share, a fact that has seen it loose the glory it had in early 1970s.

Despite all these challenges, this firm has developed structures that would ensure that it remains competitive. It has broadened the scope of its products to go beyond shoes and balls. Currently, Puma produces virtually every sportswear. According to the reports given by Barnes and Pinder (2009, P. 45), the firm also plans to open a new line of designer clothes, outside its current sportswear productions.

Strategic Analysis

Profile of the Business

Puma SE operates in the sports industry. It sells among other items, sports shoes, sports clothing, and balls. Although the firm has specialized in various sportswear and designer clothes, the company basically started out as a shoe making company (Andreson & Rossum 2006, p. 45). Although it makes profit from other lines of products, its leading revenue earner still remains shoe making.

According to Cunningham (2000), Puma SE comes second in the world in production of sportswear. The sports shoes have proven to be the best income earner for the company that has diversified its products to various industries. In Germany, which is the home country, the firm has had a huge market for its shoes in various disciplines in sports.

Although the brother company, Addidas has maintained the lead in this sector, the company has had huge profits from the sale of shoes. According to Eggert and Ulaga (2002, p. 78), football shoes accounts for the largest income earner for the firm. Its market share within the home country in production of sports shoes is 26 percent.

Although this local market is controlled largely by Addidas, Puma has maintained a close pursuit of the firm. Puma also comes second to the sister company Addidas in supply of sportswear.

Its sports products have widely gained acceptance in the world market because of its associated quality. Dubois, Jolibert, and Muhlbacher (2007, P. 75) observe that this company positioned itself as a company that has the interest of customers at heart.

This firm started out as a small shoe manufacturing company following the fallout between Adolf and Rudolf who were managing the parent company. They agreed to split the parent company, a move that saw the inception of the two worlds leading sportswear companies: Addidas and Puma in 1948 (Cohen & Morrison 2000, p. 39).

This company experienced consistent growth since its inception to early 1990s. The external environment was conducive for growth. The main competitor within the local market was the sister company, Addidas.

The two companies avoided direct competition, always operating as a unit. Through this, they were able to exercise full control of the market. They could set the prices they felt preferable to them. Because they had full control of the industry, they could easily control the suppliers. Due to this monopoly kind of operation, the company was able to amass a large capital base.

Through this, it was able to expand its market share to cover the entire country of Germany after operating for only four years (Kotler, Keller, Brady, Goodman, & Hansen 2009, p. 63). It would later venture into other European markets. It started by selling its products in Russia, France, and the Great Britain. Milroy (1983, p. 46) reports that this firm grew rapidly in the European markets.

Having realized the potential that existed in the American markets, this firm opened a number of shops in the two American continents. In the north, it identified a number of exclusive distributers within United States of America. It would later open other shops in Canada.

In the south, it opened exclusive shops in Brazil. It would later open other shops in Uruguay, Paraguay, and Chile. Business was doing well and by 1992, this German firm had exerted its presence in the entire Europe, the American continents, Asia and most parts of Africa.

According to Piercy (2009, p. 73), this company currently ranks second in the world in production of sportswear, after the sister company, Addidas. Although Addidas has dominated over 50 percent of the worlds market in this industry at the expense of Puma SE, there is still a room for the firms expansion.

Best (2009, p. 36) reports that according to the current economic condition of the firm, Puma SE stands out as a very strong company in this.

A statement issued by the chairman, Mr. Jochen Zeitz, and the Chief Executive Officer, Mr. Franz Koch, in the last annual conference shows that the company has laid down proper strategies that would enable it recapture most of the markets it lost to its sister company, Addidas and other new entrants into this industry from various countries in the world (Atkinson 1990, p. 124).

This scholar reports that the chairperson was very categorical in his statement on the firms opinion about their arch rival company: Addidas. The chairman is reported to have said that Addidas was and would remain a sister company to Puma SE. This was a strong indication that the firm was not considering any direct confrontational competition with Addidas in its quest to recapture the markets it had lost to it.

However, the firms Chief Executive Officer gave a very strong pointer that the firm would engage in fierce battles in the world markets against new entrants that were threatening its existence in various world markets.

Currently, Puma SE has more than 9350 employees located in different regions across the world. These are individuals who are directly employed by this firm as full time employees. However, the firm employs over half a million individuals across the world indirectly. Most of these individuals are people who work as the exclusive shop owners who stock the products of Puma, or their employees.

Others are employed in the logistics of this company while down the ladder are the cobblers who would repair the shoes in case they are in bad shape.

By the close of 2010 financial year, the firm had a strong financial base which was an indication that it was doing well in this industry (Andreson, Narus, & Rossum 2011, P. 98). This was an indication that it was still competitive despite the new entrants that have heightened the rate of competition.

The companys balance sheet as at the end of this period was very strong. It showed that the company was in a position to finance most of its planned activities. It also showed that the company was able to settle all the debts, both long term and short-term, and still be in a position to run all its operations normally.

This supports the chairman and the chief executive officers statements that Puma is determined to ensure that it remained competitive in the world market. Its financial statements, in the appendix below show that the firm is in a position to manage competition.

Company Purpose

Pumas vision is based on four values: fairness, honesty, positivity and creativeness. In their profile, Puma envisions a world that is peaceful, safer, and more creative than what we have today (Ahmed & Rafiq 2002, p. 83). In achieving this, the company sets to play its part by ensuring that it is fair to its customers and honest in all its dealings. It strives to achieve positivity in all its activities and creativity in its products.

The Business Environment

According to Adam & Healy (2000, p. 30), business environment plays a very important role in a firms success or failure. No business operates in a vacuum. Every business has various environmental factors that affect its operations in one way or the other.

As such, businesses around the world has been keen to monitor the environment and manipulate those that can be manipulated to its advantage, and conform to those forces that cannot be manipulated. As Holbrook (2003, p. 74) says, environmental factors can be grouped into three broad categories.

The first category is the internal environment, which can be analyzed through SWOT analysis, the external environment that can be done using PESTEL analysis and the competitive environment.

The Internal Environment: SWOT Analysis

Puma SE can be analyzed through the above-mentioned tool to ensure that its internal environment is completely understood.

Strength of this company arises from a number of factors. The main source of strength of Puma SE in this industry is its many years of experience (Weiss 1994, p. 82). This firm has been in operation for a considerably long period and currently understands exact needs of the market.

This gives it an edge over other firms in this industry. Moreover, its huge financial base, committed employees and dominance in the world markets have seen it edge out other competitors in the market.

However, as Gilbert (2001, 65) notes, one main weakness of Puma SE has been its slow adoption to the emerging technologies. The technology is changing very fast and with it comes various changes that every firm should get adapted to. Puma, although currently uses the modern means of production, took too long to embrace technological changes. This saw its competitors like Addidas overtake it as the market leader. Its financial base is also comparative less, taking into account the economic strength of its main competitor, Addidas.

Opportunities arise in the market that has seen this firm prosper. The Olympics, World Cups and such other major sporting events offer this company opportunity to market its products.

This company manufactures balls and other sports gear. Major world sports events offer it a huge opportunity to sell its products in mass. Within the local market, the firm also sells its products to local teams and organization found in this country.

The environment is marred with a number of threats. One main threat to Puma SE is the ease with which new entrants come into this industry.

Many firms producing the same products as Puma have eaten into its market share, threatening to drive it out of the market (Ward 1999, p. 43). Governments policies in various countries have also hindered its growth as some are restrictive. Volatile fuel prices also increases cost of production, lowering the profits of the firm.

External Environment PESTEL Analysis

Puma SE also experiences external environmental forces that have very strong influence in its operations. The external forces can best be analyzed through PESTEL analysis.

The political environment within its home country, Germany has been very stable. Germany has had a long period of political stability, a fact that has seen Puma grow to other regions of the world. The government has also been supportive to this firm, always ready to offer financial support (Ulaga & Chacour 2001, p. 41). It has also created a conducive environment where firms can access funds for development with ease.

However the political environment in other world regions has not been very conducive. Other governments have been hostile, while in other regions like Afghanistan, there lacks political stability that can sustain normal running of business.

The economic environment of this firm has had mixed fortunes. Germany is the only European country that never experienced the 2008/2009 world economic recession (Andreson, Narus, & Rossum 2010, 45). This means that Puma SEs local market was not affected by the recession.

However, the firm operates in various other regions across the world, including the US, which was greatly affected by the recession. As the local market remained conducive, the international market was volatile, and to an extent, very weak.

Sports is a recreational activity, hence it enhances the social welfare of mankind. The social environment of Puma SE is much dictated by the industry in which it plays. Sports are loved across the world.

Being one of the facilitator of various sports popular in various regions, Puma has gained popularity in various regions. Having sponsored renowned sportsmen like Pele, Etoo and Maradona, many people have come to identify with its products, especially the football shoes (Lindgreen & Finn 2005, p. 16).

Technological environment plays a major role in the firms development in this industry. Technological changes have seen new methods of production come into existence. Technology brings with it mixed blessings. If a firm adapts technology at the right time and in the right manner, it would reap positively from it.

However, if it is slow to its adaption or adopts wrong technologies, the effect can be adverse. Puma learnt this and has adopted the new technologies. This has seen it prosper within this industry.

Environmental concerns like pollution have been a major issue within this industry. This firm, alongside the sister company, Addidas and their suppliers have been accused by an environmentalist group called Greenpeace of playing a major role in pollution of the environment (Frankfort-Nachmias & Nachmias 1992, p. 91).

In response to this, Puma has promised to reinvent its methods of production to minimize its levels of pollution. This was an attempt to ensure that it builds its public image.

As Bailey (1996, p. 72) states, no firm can operate in a lawless environment. Law is very important in ensuring that as an individual or entity enjoys his or her freedom, he or she does not interfere with others.

This way, business environments would have peace that it requires. Puma has always strove to ensure that its entire operations are within the confines of the law. This is to ensure that it does not face litigation in case it can be avoided.

The competitive environment has been tough for Puma. Once a flourishing firm with only Addidas as the main competitor, Puma currently operates in a very competitive market. New firms have emerged in various regions challenging the position of Puma in the world market.

Although Puma is still considered the second largest company in this industry, its market share has been significantly reduced in the world market (Flint, Woodruff, & Fisher 2002, p. 124). Back at home, Addidas takes a larger part of the market share, straining this firm even further. However, the firm has managed to keep afloat the competition through devising competitive strategies that has seen it increase its profitability.

Stakeholder Theory

Stakeholder theory helps in understanding the companys in entirety in regard to individuals and corporate bodies that play part in its running. By conducting stakeholder analysis on Puma, it would be possible to determine the main decision makers, and how their decisions affect other members and the firm in general.

Puma has its shares traded publicly, and therefore its board of directors would have the final say in decision making. As such, it is important to understand factors that influence their decision-making.

Markowitz Portfolio Theory

Puma operates as a public company. The shareholders of this company expect returns from their investment. Markowitz Portfolio theory holds that shareholders return can be evaluated from two fronts, which are current dividend yield and capital gains yields. When investors buy shares of this company, their hope is that their shares would appreciate and they would be able to get profits after some time.

This can only be realized if the company is recording gains in its operations. Puma has registered some growth over the last three years as can be seen in its financial statements shown in the appendix below. For this reason, shareholders capital gains yield is positive.

Strategic Development

Puma has had a slow growth over the last part of the twentieth century. The firm was doing well in the early seventies when it was threatening to floor its arch rival, Addidas. Briggs (1986, P. 37) reports of an incident during the1972 World Cup when Puma used Pele to market its football boots even after an agreement between Puma and Addidas that the two competitors would avoid using Pele in that tournament.

Since then, the trust between the two firms has dropped, a fact that has seen both of them treat each other with some elements of suspicion, though they have maintained cordial relationships, always avoiding scenarios that could lead to direct confrontation. Puma SE has developed strategic plans that would enable it prosper in the highly competitive market.

Basis of Competition

As stated above, completion in this industry is very rife. Bryman (2001, p. 73) laments that most of the new firms that come into existence are merely copy cuts. He asserts that most of them lack creativity that would see to it that they prosper in this competitive market.

As such, competition has become so stiff because items taken to the market are identical. In the sports industry, Puma faces the same problem. Many of the new firms that have come into existence are producing products that are exactly similar to Pumas products. It forces the company to devise methods that would ensure that it is able to manage this stiff competition.

Puma has ensured that it attracts customers to its products. To help in doing this, the firm has differentiated its products by its company logo for ease of identification from an array of similar products. The company has then positioned its products as user defined. Every product has its specific use as per the customers needs, and Puma is available to provide this.

It has developed value proposition that makes the brand be associated with quality for every single product they avail to the market. Always avoiding pricing as a market strategy, Puma has focused on providing quality to enhance its competitiveness (Fifield 2007, p. 63).

Its products have therefore acquired a special niche in the market, making them stand out among the rest as the preferred quality provider. As such, many customers have come to like the products and are making purchase of the products at the peril of other compotators.

Existing Strategy

Puma has reinvented its strategies to match the competitive environment. Competition in the market is so stiff and it would be very easy for a firm to fall if care is not taken. Many firms in many countries across the world have started producing similar products as Puma in markets that were previously dominated by Puma. What is worse is the fact that these firms receive their governments protections (Edkins & Maja 2009, p. 79).

With the current rising nationalisms in various countries and the need to ensure that local firms prosper, governments have formulated policies that would ensure that local firms are protected from external aggression. The policies are meant to bar firms like Puma and other related foreign firms from operating in such countries.

Having realized this, Puma has decided to embrace collaboration with local firms to facilitate national acceptance. Local firms are permitted by Puma to operate under the brand name Puma, but with full independence from the parent Puma.

The firms would in turn be expected to stock Puma products, besides other products that such local firms may wish to stock, provided the products are not direct competitors of Pumas products. The firm has also aggressively gotten into massive development of new products to ensure that it remains relevant in the market (Cukor-Avila 2000, p. 46).

Some products like the Puma sports shoes are currently considered cash cows for the firm because of their constant income generation over the years. Some designs of shoes and clothing that were considered out of fashion (dogs) were eliminated. The firm plans to venture into clothing industry other than sportswear. This strategy is to ensure that the firm increases its revenue base.

Generation of Strategic Options

Puma SE has designed programs that would help it capture new market. As mentioned above, the company currently produces other lines of products besides the sportswear. It produces designer clothes. The firm has also made concerted effort to recapture its lost market share, by creating patents in various locations around the world (Balnaves & Caputi 2001, p. 79).

With its impressive balance sheet, this company is in a position to finance most of its expansion plans. Its adoption of new technologies is meant to ensure that it reduces cost of production as it increase profits.

Evaluation and Ranking Options

The strategies that this firm has plans to adopt or has adopted already comes at a cost. Installing technological equipments have huge financial consequences. However, it is cost effective in the long run. Starting new lines of production may mean putting more on investment.

However, it would help the firm venture into new markets. The most important point is that the firm has to be in a position to withstand the financial consequences of the move it makes.

Choice of Strategies

Based on the above analysis, the best option for this firm would be to open new lines of production. Because most of its products have reached their full life circle, new products would ensure continuity and increased profitability. It would also ensure that as the cash cows bring in money, there are other fall back options.

Implementation

Puma should devise a plan on how it would implement its planned strategies. The chart below would help summaries the process this firm should take in the implementation.

There should be a team within research and development department part that should be responsible for idea screening. The idea should undergo a full process of scanning to determine its viability. If viable, market research should be done to ensure that the product would receive expected acceptance.

The management should allocate enough finance to this department to ensure that all the stages are carried out successfully. The next stage would involve production of sample which would then be taken to the market for testing. If the product passes this stage, it can then be commercialized.

Recommendations

Because of the heightened competition that exists in this industry, Puma should consider getting an edge over other competitors in this industry. The following recommendations should be considered by this company when implementing the new strategies:

• The management should consider adopting emerging technologies of production as a way of ensuring that their production method meets the market standards.
• The top management should actively involve all the employees in idea generation because it is the employees who are always in touch with the customers.
• Research on new products, improvement of existing products or new technologies should always be in line with the market requirements.
• In launching new products in the market, the research and development team and the marketing department should ensure that they create a special niche for the product in the market.
• Puma should consider having a collaborative relationship with its arch rival, Addidas in order to face other emerging competitors as a unit. This would help the two companies have stronger bargaining power both with the suppliers and the market.

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Appendix

Introduction: Pumas Organizational Structure

Puma SE is a German multinational company that operates within the global sports industry. The company key regions of operation are Europe, North and Latin America, and Asia. Since the year 2005, the company has indicated its interest in Africa in terms of sourcing raw materials, as well as marketing. In 2004, Puma SE enjoyed a share of 1percent of the global sports equipment market behind Nike, Reebok, and Adidas and also had 5 percent market share of brands where it was ranked the fifth (Anonymous, 2004, p.10).

Puma was established by Rudolf Dassler in 1948 after he and Rudi Dassler split the family shoe business. In the late 50s, the company became a limited partnership and went public in 1980 (Palepu et al., 2007, p.318). The company deals primarily with athletic footwear, apparel, and accessories. The corporation transformed into a market-oriented firm that is concerned with diversifying the brand into superfluity of lifestyle and fashion options (Miller, 2010, p.2). The company focus drifted a far its conventional centralized structure to becoming a virtual sports company. The decentralized structure is reflected by the way Puma operates from three headquarters in Germany, the United States, and Hong Kong. Around 90 percent of the footwear is produced in Asian countries, as well as 60 percent of the apparel (Anonymous, 2004, p.117).

This paper is intended to assess Pumas operative and market environments in order to discover its competitive advantages and opportunities in place. There will also be a determination of the competences, resources, weaknesses, threats, and strengths the company can use to exploit these opportunities.

Market environment analysis

As stated by Adam MacLeod, a sports business analyst, the European and American markets for sports equipment have a somewhat mature lifecycle (MacLeod, n.d., p.3). This has resulted from the interest and dominance of the key market players within these markets. Therefore, this section seeks to analyze the global environments in terms of macro and microenvironments. The tools projected for this part are PESTLE and Porters Five Forces analysis.

PESTLE Analysis

Political, economic, socio-cultural, and technological factors are considered to be centered on any business environment, as illustrated below.

Political Analysis

For Puma, SE went through a massive restructuring to operate in the wider global market. This process of restructuring exposed the company to different political factors across various economies. Governments stability is a key factor that affects the company. For example, wars in Afghanistan and terrorist attacks, geopolitical uncertainty led the company to move its production from Pakistan (Anonymous, 2004, p.116). At the same time, the political stability in China made the company increase its factories in the country, leading to a sales increase of 34.6% (Anonymous, 2004, p.117).

Economic Analysis

Principally, the position of the German economy with respect to monetary concerns, as well as stock exchanges, is a fundamental element that motivates the Pumas trade. The economic drifts within the domestic realm and that of the affiliating states tend to have a substantial bearing on the corporation. For instance, the rapid growth in China and Indias economy is suspected by the company to be the major contributor to the increase in revenues. The fact that the company is determined to open 25 stores in India reflects this suspicion.

Social environs

Consistent with Canada Newswire (2011), life drifts have been posing an immense variation in the global sports industry. In fact, the industry partakes have been incessantly progressing with respect to private tastes, technologies, as well as prevalent games. Several diverse sports seem to be attaining reputation in the core areas where Puma SE Corp operates in. The approval of sports, namely skateboarding, alongside diving, ought to be assumed as an imperative facet in planning, developing, and administration of Puma SE. The increasing number of women in sports should be taken into consideration. For instance, the number of female students in American high schools who participate in sports has risen by 33% (Canada Newswire, 2011).

Technological setting

Apropos the technological dynamics, Puma concentrates more on the research and developmental undertakings and similarly on the applications of mechanization, particularly those allied to the information technology. Indeed, online sales through the companys website contributed 470.1 million Euros in 2010 (Puma, 2010, p.103). Additionally, the maturity of the technological know-how might distress the progress because of the agitated nature of expertise. With its global operations, it is important for Puma to consider global communication in order to facilitate the operations efficiently.

Legal environment

Foreign trade regulations, including treaties and trade agreements, which must be obeyed by companies and member countries, are the key legal factors that affect Puma. Countries like China and India have entered into many agreements with Western nations, which must be considered by the company. Taxation policies also have a big impact on Pumas business since they add expenses that reduce revenue though they can also be barriers to entry to the potential markets. Differed taxes in 2010 added up to 50.7 million Euros, which constituted an increase of 2.1% when compared to the financial year 2009 (Puma, 2010, p.110).

Environment analysis

Puma SE is affected by environmental regulations and standards, just like any other manufacturing firm. The organization has been taking measures regarding the environment after some factories were accused of destroying the environment. This led to the establishment of the Social Accountability and Environmental Standards team to oversee the implementation of the code of conduct as pertaining to environments (Anonymous, 2004, p.114). The companys effort to ensure sustainable development in terms of environment sensitivity has enabled the company to expand its outsourcing activities significantly.

Porters Five Forces

Michael Porter a famous market analyst proposed an internal environment analysis depicted below.

Rivalry

The degree of rivalry in the global sports equipment industry is relatively high. There are very many firms, including branded companies like Nike, Reebok, Adidas, Asics and Fila which operate within the industry. There are also other emerging firms such as Li Ning, Anta and Mizuno which have shown substantial performance within the competitive market (Business Wire, 2011, p.5). In such a competitive environment, Puma is required to improve its competitive advantage in order to stimulate growth.

Threat of new entrant

The growth of sports equipment industry and new manufacturers in growing economies are increasing the threat of new entrants. This increment is in the short run intensifying competition in an already mature industry (Varga, 2010, p.5). However, Puma is a recognized brand with high reputation in the markets the new entrants are targeting. With many of them targeting the Asian region, the company has already shifted much of its operations to the region.

Threat of substitute

The sports equipment market is fragmented with many big retail chains offering apparel and footwear products across the world. These businesses are a source of important threat to Puma SE in terms of alternative products. Luckily, the company has its own distribution network which comprises of many branded concept stores, factory outlets, and online stores. The functionality of the distribution network was reflected in the year 2010 where retail operations increased by 2.6% (Puma, 2010, p.103).

Bargaining power of buyers

The sports equipment market is characterized by stiff competition which offers buyers high bargaining power. Despite the existence of local manufacturers, Puma has to compete with branded companies such as Nike and Reebok in almost all markets. Many consumers are aware of this competition and take this advantage to leverage prices. As Sheehan et al (2002) observe, Puma and other branded companies have been forced to reduce average prices by the cheap products offered by manufacturers in medium-end section (p.25-43).

Bargaining power of suppliers

The production of sports apparel, footwear and accessories requires a range of raw materials that originate from different areas. Like many other sports equipment firms, Puma must rely on the suppliers for these low materials. As a result, the bargaining power of the suppliers is quite high in this industry. Puma has a very wide supplier base across many parts of the world including Africa where it sources cotton for apparel production (Puma, 2010).

Market structure

Puma is among the branded companies who have developed competitive advantage in the global sports equipment market. This is an oligopoly market with relatively few major players controlling the market including Nike, Adidas, Reebok, Puma, Fila, Lotto, Kappa, Umbro, New balance and Asics. Puma is a leader in European markets while the Asian operations are of a great significance. As stated by the former Chief Executive Officer Jochen Zeitz, Pumas organic growth strategy ensures the positioning towards full brand potential (Puma, 2010, p.6). This is a commitment to sustaining its performance despite the concentration of firms in the international market.

Strategic grouping

The global sports equipment in industry consists of many strategic groupings including those companies that deal with general leisure products, recreations products, specialty brands and private labels. Primarily, Puma deals with branded sports products though there is a general categorization of the general recreations and leisure products. The company has achieved this through strategic alliances with other recognized companies in target markets. In 2010, the company transformed from PUMA AG to PUMA SE by co-branding the new sports and lifestyle division and PPR a French luxury group (Puma, 2010, p.6). Moreover, Puma acquired some important firms such as Equipment brand Cobra Golf and Wilderness Holdings Limited in order to reinforce its commitment to sports performance (Puma SE, 2011, p.1).

Market segmentation

The global sports equipment market is segmented according to the benefit sort by the consumers. Nevertheless, Puma focuses on three segments of brands; Puma brand, Cobra Golf brand and Tretorn brand (Bloomberg Business Week, 2011, p.1). Puma brand involves sports performance lifestyle such as footwear, apparel, fragrances and bikes plus accessories including timepieces and eyewear for different categories such as motorsports, football, running, body train and sailing. Cobra Golf brand involves golf equipment while Tretorn brand includes leisure shores, tennis balls and rubber boots. Furthermore, Puma provides sport fashion products in collaboration with designer labels.

Strategic analysis

Strategic analysis of Puma is centered on several success factors provided by Miller, the famous marketing analyst of the 21^st century.

Resources

Puma SE has several important threshold and distinctive resources that could ensure a sustainable competitive advantage as discussed below.

Threshold resources

Adrian Haberberg and Alison Rieple who are famous gurus in strategic management explain threshold resources as those resources that are not strategic yet are still important because they help a business to meet the criteria for survival in an industry (Haberberg & Rieple, 2008, p.285). Puma has several manufacturing plants, brand concept stores and retail outlets that have enabled the company to satisfy the customer needs and reach many at the ground level. The company has also adopted new technologies for its product development and management which have improved the speed and quality of production. Besides, Puma promotes and develops employees potential by assigning high level of personal responsibility, as well as providing suitable training measures (Puma, 2010, p.119).

Distinctive resources

According to Haberberg and Rieple, distinctive resources are strategic resources that are scarce to acquire and provide the company with a sustainable competitive advantage (p.285). Pumas distinctive resource lies with its innovative capability by the R&D team. The company is committed to ensure a team that is always armed with the innovative skills. For instance, the company offers vocational training in collaboration with the Cooperative State University in an effort to identify the potential employees who can facilitate companys growth. The company has a global talent management system (People Puma) through which the performance and competency of employees is assessed in order to identify the most talented, and train them according to their talents (Puma, 2010, p.119).

Core competency

The core competencies of a company refer to the capabilities that form the source of competitive advantage (Hitt et al, 2011, p.82). Pumas strong brand name is one of the sources of competitive advantages. Throughout, the company has developed strong brands that have hit most of the markets. Jochen Zeitz, former CEO confirmed that Pumas strategy is committed to building a portfolio of strong, complementary brands in its sports and lifestyle arena (Puma, 2010, p.6). Among the renowned brands is the spiked shoes for running that have gained substantial respect from athletes. The key success factors of Puma include strong presence in the market which stems from strong brand and recognitions.

Another core competency in Puma is a sponsorship strategy for individuals and sports events across the world (Amis et al, 1999). The fact that the company sponsors Usain Bolt, the renowned Jamaican sprinter, has increased its market share in the Latin America (Miller, 2010, p.2). This runner has been one of the most effectual tools in advertising the company within the developing markets. This corporation has won recognition among the elite and older individuals through its Cobra Golf division that sponsors golf events across Europe. There is no doubt that the quarterly growth of 2.7% in the first quarter of 2011 is a result of the new segments the company is realizing through the sponsoring activities (Puma, 2011, p.4).

Value chain analysis

In 1998, Michael Porter, a recognized expert, due to his contribution to marketing, emphasized his opinion about a firms value chain to comprise of the primary and supportive activities (p.36).

In accordance with Porters organization, Puma SE delivers value to their customers through its value chain that comprise a number of primary and supportive activities.

Primary activities

For inbound logistics, Puma ensures availability and delivery of raw materials by monitoring the suppliers activities across the world. Indeed, the company has taken a step further to support the people who provide with raw materials such as cotton farmers in Africa. Approximately, 90% of the factories are directly connected with the suppliers as of 2004 (Anonymous, 2004). The company is also securing the delivery of enough labor for the factories by collaborating with learning institutions to develop students for specific jobs in the company.

For the operations, Puma has maintained a strong focus on research and development which ensures quality products and early entrance in potential markets. For example, the company spent 63.6 million Euros on product design development in 2010 compared to 58.1 million Euros spent in 2009 (Puma, 2010, p.3). These activities are accompanied by the adoption of new information technology applications that facilitate operations.

For outbound logistics, Puma has a comprehensive distribution channel that ensures that the customers throughout the 80 countries it operates get products at the right time. This channel includes privately managed and outsourced supply chains. The chains get the products to the customer through the companys branded stores and the retail outlets managed by the company.

Secondary activities

For supportive activities, Pumas value chain includes business and resources management that is supported by information technology activities. These include BI applications, SSP information management and financial applications that manage overseas operations. Human resource activities include managing more than 9,313 employees, environmental groups, acquisitions risks, and labor councils. Product development activities involve the development of diversified portfolio, lifestyle labels, and customized products.

VRIN framework analysis

Puma SE derives value through its decentralized structure that ensures distributed control over the key areas of operation. The Hong Kong headquarters are responsible for the Asian operations and primarily deal with production. The Germany headquarters has the obligation for European market and is mostly concerned with global administration. The US headquarter has the responsibility of marketing activities of the company.

Puma rare capabilities are associated with a portfolio of strong, complementary brands and involvement in sustainability. The brand is respected not only by the customers across the world, but by some of the most prominent sports men in the world. Conversely, Puma is recognized as the leader in environment sustainability (Puma, 2010, p.10). This has elevated the companys position in the face of many regulatory bodies, which sometimes become a barrier to expansion.

Inimitable capabilities for Puma are centered on the leadership, team working, and deployment of resources. The company has a strong management team that is steered by a strategy-oriented CEO, Franz Koch. Employees are developed to work in teams that allows for knowledge sharing similar to the Japanese kanban system (Guneri et al, 2009).

Pumas decentralized governance is evidently non-substitutable considering the cost and time of restructuring. This form of governance offers the company the advantage of controlling overseas operations more efficiently. The system also allows for better research of potential markets in the growing economies.

Strategic fit analysis

The analysis conducted suggests that Puma has a number of opportunities that arise in the growing economies as well as challenges posed by the stiff completion. The company must face legal limitations and saturation in some markets in the presence of perceived new entrants. There are other threats from substitute products while the suppliers and buyers have substantial borrowing power. Fortunately, the company is well established with recognition across many markets. There is also the advantage created by its strategic grouping that ensures a better segmentation and differentiation of the market.

Puma has an array of threshold resources that ultimately ensures its survival in the industry. The many production facilities, sales outlets, and innovation capabilities position the company strategically in the market. The core competency of sponsorship is important as it plays the dual-role of marketing and corporate social responsibility. However, VRIN analysis leads to the assumption that Puma should improve their primary activities and develop demand projections as well as forecasts resulting from lesser storage, and therefore tied-up capital. The company also needs to look at sales and marketing channels as to where sales are highest as the company lacks clear definition of these activities.

Puma: SWOT Analysis

Strengths

Puma has a strong brand equity that enhances position within the market place. Through innovation and marketing, the companys sports footwear and apparel exhibit very strong brand equity. This brand equity allows the company to secure a relatively large share of the footwear market: about 3% as of 2010 (Puma, 2010, p.90). Puma constant focus on new technology to improve their products has made them to be among the market leaders. The recent partnership with French Group PPR has spawned a new era in technology for the industry. Puma produces its sport products at low cost and distributes them over a broad network. The low-cost production revolves around suppliers in Asian and Latin America countries.

Weaknesses

Puma product portfolio is not exhaustively diversified and it misses some sport segments such as motorsports. This weakness has been linked to the recent decline in revenues, especially during the 2007 to 2009 recession. During this period, the companys growth rate slowed by 2.7% showing underperformance which probably led to a competitive disadvantage (Puma, 2011, p.10). When compared to the industry leaders, Pumas distribution system lacks efficiency. With most of the manufacturing operation taking place in Asia and Latin America while the marketing is in North America and Europe, the company is a bit slow in meeting the demand. Puma has lower financial resources when compared to the industry leaders, which limits the capabilities that lead to the companys competitive power.

Opportunities

Pumas new product launches is a big opportunity. The companys innovation thinking within sports equipment industry has enabled them to release new products every year. Once again, Pumas partnership with PPR has only enhanced their potential to release new products. Acquisitions, such as those of Equipment Brand Cobra Golf, are enabling the company to acquire the sports segments that it has lacked throughout. More sponsorship is also an opportunity for the company, as the recent sponsorship of Usain Bolt has enabled the company to dominate the Latin America maker with a share of 26% (Larmann, 2011, p.15). Eric Larmann, a business analyst confirms that growth in the footwear market is scheduled to increase from $62.11 billion to $69.48 billion between 2009 and 2014 and can be a big opportunity for footwear firms (Larmann, 2011, p.9).

Threats

High competition is a big threat for Puma. The company is forced to compete with many different manufacturers including, Nike, Adidas, New Balance, k-Swiss, Reebok, and Asics. The new sport segments are also opening the door to new competitors like Mizuno. The increase of the counterfeit products threatens to decline sales from the Puma brands. Spurred by the internet sites, sales in online counterfeit goods increases by 9% in 2009 and by 2010 they amounted to $500 billion in total global annual sales (Larmann, 2011, p.9). Low quality products can damage Pumas brand image, as customers are receiving products with lower caliber that the real Puma brand.

Recommendations for the Business Model of Puma

Despite Puma SE showing substantial leverage of the market place, the company still lags behind several competitors such as Reebok, Nike and Adidas in terms of the market share. This indicates that the company needs to enhance its competitive advantage in order to increase its market share. The best way to achieve this is to establish a counteractive strategy. This can be done by improving the activities that affect the value given to customers such as sales and services operation. The company can use the key strengths to exploit the opportunities, as well as transforming the weaknesses into strengths. The success factors should be directed to the customer satisfaction especially.

References

Amis, J., Slack, T. & Berrett, T. 1999. Sports sponsorship as distinctive competence. European Journal of marketing, Vol.33 (3/4), pp.250-272.

Anonymous. 2004. Sportswear industry data and company profiles background information for the play fair at the Olympics campaign. Web.

Bloomberg BusinessWeek. 2011. PUMA SE (PUM: Extra). Web.

Business Wire. 2011.Research and markets: China sporting goods industry. Web.

Canada Newswire. 2011. Ferrari and Puma announce long-term partnership. Canada Newswire.

Guneri, A. F., Kuzu, A. & Taskin, G. A. 2009. Flexible kanban to enhance volume flexibility in a JIT environment: a simulation based comparison. International Journal of Production Research, Vol. 47(24), pp.6807-6819.

Haag, S., Baltzan, P. & Phillips, A. 2006. Business driven technology. New York, NY: The McGraw-Hill Companies, Inc.

Haberberg, A. & Rieple, A. 2008. Strategic Management: Theory and Application. Oxford, UK: University Press.

Hitt, M., Ireland, D. & Hoskisson, R. 2011.Strategic management: Competitiveness and globalization Concepts. Mason: South Western Cengage Learning.

Larmann, E. 2011. Nike, Inc. Situation Analysis. Web.

MacLeod, A. n.d. Puma AG Market Buster. Web.

Miller, S. 2010. Marketing analyses Von Puma. New York, NY: GRIN Verlag.

Palepu, K. G., Healy, P. M., Peek, E. & Bernard, V. L. 2007. Business analysis and valuation: text and cases. Florence, KY: Cengage Learning EMEA.

Phatak, A. V., Bhagay, R. S. & Kashlak, R. J. 2009. International management: managing in a diverse and dynamic global environment. New York, NY: McGraw-Hill Company.

Porter, M. E. 1980. Competitive strategy: techniques for analyzing industry and competitors. London: The Free Press.

Porter, M. 1998. Competitive advantage: Creating and sustaining superior performance: With a new introduction. New York: Simon and Schuster.

Puma SE. 2010. Annual report 2010. Web.

Puma SE. 2011. Puma acquires Equipment Brand Cobra Golf. Web.

Puma SE. 2011. Puma SE financial report January-September of 2011. Web.

Sheehan, C., Nelson, L. & Holland, P. 2002. Human resource management and outsourcing: the impact of using consultants. International Journal of Employment Studies, Vol.10 (1), pp.25-43.

Spence, M., & Kale, S. 2011. Optimizing the internal value chain: Principles and practices. Journal of Management Organization, Vol.14 (2), pp.193-206.

Varga, M. 2010. Analyzing the Australian fashion industry according to Porters five forces. New York: GRIN Verlag.

PUMA SE Company

The strategic research report will delve much on Puma SE Company. This is renowned German International Corporation which conducts most of its business operations in the universal sports industry. Rudolf Dassler inaugurated Puma in 1948 after a family shoes business was split. The corporation developed into a limited partnership in late 1950s but became a public company in the financial year 1980 (Puma, 2011, p.10).

Products and Market Area

Puma SE operates in various regions across the globe. However, the key operational areas for Puma SE include Asia, Latin America, North America and Europe. The corporation has expressed interest in Africa since 2005 where it aims to market its products and outsource raw materials. The major primary dealings of Puma SE include accessories, footwear and apparels (Puma, 2011, p.10)

Justification of the company choice

Puma SE has become a renowned multinational corporation whose operations have attracted many investors and researchers alike. The transformation of Puma into a market focused firm means that it has to diversify its brands into superfluous fashion and lifestyle alternatives (Miller, 2010, pg.2).

However, to overcome various market entry barriers, gain competitive edge and emerge a global leader in the sports industry, the company has developed and implemented various market and operational strategies (Spence & Kale, 2011, pg.197). It is on the basis of Puma SE strategies and market share that the researcher is obliged to perform a strategic research on this company.

Key players in the industry

Globally, Puma SE faces strong competition from legendary corporations like Adidas, Nike and Reebok. This corporation however reveled in a 1% share of the total international sports equipment market in the fiscal 2004 behind its closest market rivals. The company was ranked fifth in the same year after garnering 5% of the entire market brand shares (Puma, 2011, p.10).

Interesting aspects of sports industry

Various corporations found in the sports industry face stiff competitions. These has led to various challenges, creation of market opportunities and tendering of different products to suit clients demands in order to gain competitive advantage.

By the nature of its competitive environment, it becomes more interesting to assess core competencies, threats, weaknesses, strengths and resources that Puma SE utilizes to exploit the emerging opportunities. As Porter (1980) asserts, it is interesting to examine the currently applicable Puma SE business and market strategies including resources, capabilities, value chain and modes of international market penetrations.

Methodology: Assignment approach

To successfully accomplish this task and realize the set objectives, the researcher will obtain relevant information from EIU reports, the weekly economist journals, annual reports, the financial times, data monitor sectorial reports, ABI as well as Google and Google scholar.

The acquired data and information will analyzed through the use of tools such as VRIN framework, SWOT, PESTEL, strategic grouping, Porters five forces, market segmentation and structure. Besides, value chain analysis, resources, VRIN framework and core competencies will be used for strategic fit analysis (Porter, 1998, pg.36). Recommendations will be offered based on the findings.

References

Miller, S 2010, Marketing analyses Von Puma, GRIN Verlag, New York, NY.

Porter, M 1998, Competitive advantage: Creating and sustaining superior performance with a new introduction, Simon and Schuster, New York, NY.

Porter, ME 1980, Competitive strategy: Techniques for analyzing industry and competitors, Free Press, London, UK.

Puma SE 2011, Puma SE financial report January-September of 2011. Web.

Spence, M., & Kale, S 2011, “Optimizing the internal value chain: Principles and practices”, Journal of Management Organization, vol. 14, no.2, pp.193-206.

Introduction

When Puma experienced efficiency issues in its Swedish warehouse after a rapid growth, the management steered the adoption of a mobile system that could save the situation. This system became one of the most supportive elements of the warehouse afterwards. Therefore, this paper investigates the motive that led to this adoption, the various components of the system and the benefit it had on the firm, employees and customers.

Operational issues

Puma has always been committed to positioning itself in the marketplace through technology adoption including automation, IT and social media (Laird 2012; Palli, Biogiotti & Melchiorri n.d.). The motive behind the establishment of the mobile system by Puma revolves around three major factors.

First, the earlier paper-based system had become inefficient due to the rapid growth of the company. For Puma which dealt with consumer products, efficiency was paramount as it determined the creation of a royal customer base as well as the relationship between the firm, employees and customers.

As compared to the computerized system, the older system required the physical efforts of the human resources to be put in all activities which greatly reduced efficiency. Indeed, Palli, Biogiotti and Melchiorri (n.d.) explain how Puma has continued to enhance efficiency through operational systems’ flexibility and performance.

The other factor involves errors that led to many customer complaints and unnecessary wastage of resources. It can be argued that unlike an automatic system, a manual system such as the paper-based system can and has resulted into numerous human errors. Therefore, when the system made incorrect deliveries, the customers obviously complained and lost the trust they had in the company.

As a matter of fact, the company could not accommodate loss and had to implement a more reliable system. In addition to customer complaints, tangible and intangible resources were wasted. Human resources were employed in large numbers and had to spend more time in order to complete an order which eventually led to low profitability.

Another factor that could have driven Puma to use the mobile system was speed. It is apparent that an automated system could work faster than a manual system and the many activities involved in ordering and delivering products required a faster system.

Advanced planning and scheduling being important to the company compelled it to think of a system that could synchronize deliveries with warehouse needs. In fact, Puma is not only committed to faster warehouse processes, but has also used speed as a branding strategy.

For instance, DigitalBuzz (2012, p.1) observes how the firm uses a discount campaign that is designed to increase the purchasing speed of customers in Mexico.

The mobile system

The mobile system implemented in Puma comprised of three core components: handheld computer, bar codes and a central server. The hand held computer identifies the correct bay and confirms that the scanned items correspond to the orders. The bar codes separate the incoming and outgoing deliveries by coding them in a manner that the computers can identify each of them.

The central server allows for the synchronization of the computers and the bar codes with a wireless network. This is enhanced by 17 Cisco Wi-Fi access points that connect the handheld computers to the central server. In this manner, the system allows different orders to be sent and received by different users automatically.

Benefits

The mobile system increased Puma’s profitability through higher performance and low cost labor. The increased speed enabled the firm to serve a wider customer base which directly related to higher profitability. The efficiency of the system allowed the management to concentrate their decision on other issues such as marketing thus enhancing the performance of the firm.

As compared to the previous system which demanded for more employees, the mobile system cut the labor supply provided by shift workers thus reducing the cost of labor significantly. Moreover, the enhanced performance of the employees also increased the unit output of an individual employee hence lower cost per employee.

The mobile system adopted by Puma is beneficial to the employees in that it eliminated most of the tedious activities and increased their motivation. The automation eliminated activities like writing down every order or walking up and down the warehouse restocking orders. In addition to that, Roos (2005) related job satisfaction to employee motivation and the new system allowed the employees to be more self-dependent and resourceful thus adding to their motivation.

On the side of consumers, the mobile system allowed the company to create customer value. This came about due to improved customer service and expectations. The firm was able to speed up order requests and eliminate any errors that could have occurred in the process (Kolesar, Van-Ryzin & Culter 1998). As customers expected to be served reliably by such a reputable company, this achievement met the needs appropriately.

Conclusion

Due to rapid growth, Puma experienced some problems related to their warehouse operations and meeting the needs of customers, employees and the firm as a whole. Therefore, the motivation to adopt a mobile system for the warehouse originated from the need to increase efficiency, reduce errors and increase speed.

This system that comprised of handheld computers, bar codes and a central server was able to automate most of the warehouse operations. The benefits accrued inform of increased profitability, employees’ satisfaction and creation of customer value.

Reference List

Digital Buzz 2012, Puma: The world’s fastest purchase. Web.

Kolesar, P., Van-Ryzin, G. & Culter, W. 1998, Creating customer value through industrialized intimacy. Web.

Laird, S. 2012, In sign of the times, Puma sends bloggers to cover sailing race. Web.

Palli, G., Biogiotti L. & Melchiorri, C., An open source distributed platform for the control of the Puma 560 manipulator. Web.

Roos, W. 2005, The relationship between employee motivation, job satisfaction and corporate culture. Web.

Executive Summary

Puma SE is one of the leading firms in the sports industry. Started in 1948, this German company has had growth in its market share, making it the second largest firm in the sports industry. Initially a shoe making company, this firm soon started producing all types of sportswear, including balls. The company lost its ground to its arch rival, Addidas and other new entrants.

In its quest to recapture its lost markets, the company has set programs that would ensure that it regains its lead in the market. It has redefined its value proposition, extended its line of production and ventured into new industries. All these are meant to give it a new direction towards success. This effort has seen it capture some new markets in that it had lost to some of its competitors in this industry.

Introduction

Puma SE is one of the leading companies in the world in the sports industry. Established in 1948 when two brothers, Rudolf Dassler and Adolf Dassler broke up, Puma has grown from a family owned business to a partnership, and currently a public company with its shares listed in the country’s stock market (Woodruff 1997, p. 45).

It has a worldwide coverage, with a brand name that is known by many people across the world. In this sports industry, the company faces very strong competition from its arch rival which is also a sister company, Addidas. The Company has had cordial relationship with this firm, which is currently the market leader in this industry.

In this industry many firms have come into existence from various regions across the world. These new entrants are producing products with similar features as Puma, a fact that has seen competition sore in the world markets. The market share of Puma SE, from a technical view point, has significantly dropped (Payne & Holt 2001, P. 42).

Addidas still occupies the largest portion of home market share, and the world market in general. Presence of other international firms in this industry has further eaten up its market share. The firm is left with a limited market share, a fact that has seen it loose the glory it had in early 1970s.

Despite all these challenges, this firm has developed structures that would ensure that it remains competitive. It has broadened the scope of its products to go beyond shoes and balls. Currently, Puma produces virtually every sportswear. According to the reports given by Barnes and Pinder (2009, P. 45), the firm also plans to open a new line of designer clothes, outside its current sportswear productions.

Strategic Analysis

Profile of the Business

Puma SE operates in the sports industry. It sells among other items, sports shoes, sports clothing, and balls. Although the firm has specialized in various sportswear and designer clothes, the company basically started out as a shoe making company (Andreson & Rossum 2006, p. 45). Although it makes profit from other lines of products, its leading revenue earner still remains shoe making.

According to Cunningham (2000), Puma SE comes second in the world in production of sportswear. The sports shoes have proven to be the best income earner for the company that has diversified its products to various industries. In Germany, which is the home country, the firm has had a huge market for its shoes in various disciplines in sports.

Although the brother company, Addidas has maintained the lead in this sector, the company has had huge profits from the sale of shoes. According to Eggert and Ulaga (2002, p. 78), football shoes accounts for the largest income earner for the firm. Its market share within the home country in production of sports shoes is 26 percent.

Although this local market is controlled largely by Addidas, Puma has maintained a close pursuit of the firm. Puma also comes second to the sister company Addidas in supply of sportswear.

Its sports products have widely gained acceptance in the world market because of its associated quality. Dubois, Jolibert, and Muhlbacher (2007, P. 75) observe that this company positioned itself as a company that has the interest of customers at heart.

This firm started out as a small shoe manufacturing company following the fallout between Adolf and Rudolf who were managing the parent company. They agreed to split the parent company, a move that saw the inception of the two world’s leading sportswear companies: Addidas and Puma in 1948 (Cohen & Morrison 2000, p. 39).

This company experienced consistent growth since its inception to early 1990s. The external environment was conducive for growth. The main competitor within the local market was the sister company, Addidas.

The two companies avoided direct competition, always operating as a unit. Through this, they were able to exercise full control of the market. They could set the prices they felt preferable to them. Because they had full control of the industry, they could easily control the suppliers. Due to this monopoly kind of operation, the company was able to amass a large capital base.

Through this, it was able to expand its market share to cover the entire country of Germany after operating for only four years (Kotler, Keller, Brady, Goodman, & Hansen 2009, p. 63). It would later venture into other European markets. It started by selling its products in Russia, France, and the Great Britain. Milroy (1983, p. 46) reports that this firm grew rapidly in the European markets.

Having realized the potential that existed in the American markets, this firm opened a number of shops in the two American continents. In the north, it identified a number of exclusive distributers within United States of America. It would later open other shops in Canada.

In the south, it opened exclusive shops in Brazil. It would later open other shops in Uruguay, Paraguay, and Chile. Business was doing well and by 1992, this German firm had exerted its presence in the entire Europe, the American continents, Asia and most parts of Africa.

According to Piercy (2009, p. 73), this company currently ranks second in the world in production of sportswear, after the sister company, Addidas. Although Addidas has dominated over 50 percent of the world’s market in this industry at the expense of Puma SE, there is still a room for the firm’s expansion.

Best (2009, p. 36) reports that according to the current economic condition of the firm, Puma SE stands out as a very strong company in this.

A statement issued by the chairman, Mr. Jochen Zeitz, and the Chief Executive Officer, Mr. Franz Koch, in the last annual conference shows that the company has laid down proper strategies that would enable it recapture most of the markets it lost to its sister company, Addidas and other new entrants into this industry from various countries in the world (Atkinson 1990, p. 124).

This scholar reports that the chairperson was very categorical in his statement on the firm’s opinion about their arch rival company: Addidas. The chairman is reported to have said that Addidas was and would remain a sister company to Puma SE. This was a strong indication that the firm was not considering any direct confrontational competition with Addidas in its quest to recapture the markets it had lost to it.

However, the firm’s Chief Executive Officer gave a very strong pointer that the firm would engage in fierce battles in the world markets against new entrants that were threatening its existence in various world markets.

Currently, Puma SE has more than 9350 employees located in different regions across the world. These are individuals who are directly employed by this firm as full time employees. However, the firm employs over half a million individuals across the world indirectly. Most of these individuals are people who work as the exclusive shop owners who stock the products of Puma, or their employees.

Others are employed in the logistics of this company while down the ladder are the cobblers who would repair the shoes in case they are in bad shape.

By the close of 2010 financial year, the firm had a strong financial base which was an indication that it was doing well in this industry (Andreson, Narus, & Rossum 2011, P. 98). This was an indication that it was still competitive despite the new entrants that have heightened the rate of competition.

The company’s balance sheet as at the end of this period was very strong. It showed that the company was in a position to finance most of its planned activities. It also showed that the company was able to settle all the debts, both long term and short-term, and still be in a position to run all its operations normally.

This supports the chairman and the chief executive officers’ statements that Puma is determined to ensure that it remained competitive in the world market. Its financial statements, in the appendix below show that the firm is in a position to manage competition.

Company Purpose

Puma’s vision is based on four values: fairness, honesty, positivity and creativeness. In their profile, Puma envisions a world that is peaceful, safer, and more creative than what we have today (Ahmed & Rafiq 2002, p. 83). In achieving this, the company sets to play its part by ensuring that it is fair to its customers and honest in all its dealings. It strives to achieve positivity in all its activities and creativity in its products.

The Business Environment

According to Adam & Healy (2000, p. 30), business environment plays a very important role in a firm’s success or failure. No business operates in a vacuum. Every business has various environmental factors that affect its operations in one way or the other.

As such, businesses around the world has been keen to monitor the environment and manipulate those that can be manipulated to its advantage, and conform to those forces that cannot be manipulated. As Holbrook (2003, p. 74) says, environmental factors can be grouped into three broad categories.

The first category is the internal environment, which can be analyzed through SWOT analysis, the external environment that can be done using PESTEL analysis and the competitive environment.

The Internal Environment: SWOT Analysis

Puma SE can be analyzed through the above-mentioned tool to ensure that its internal environment is completely understood.

Strength of this company arises from a number of factors. The main source of strength of Puma SE in this industry is its many years of experience (Weiss 1994, p. 82). This firm has been in operation for a considerably long period and currently understands exact needs of the market.

This gives it an edge over other firms in this industry. Moreover, its huge financial base, committed employees and dominance in the world markets have seen it edge out other competitors in the market.

However, as Gilbert (2001, 65) notes, one main weakness of Puma SE has been its slow adoption to the emerging technologies. The technology is changing very fast and with it comes various changes that every firm should get adapted to. Puma, although currently uses the modern means of production, took too long to embrace technological changes. This saw its competitors like Addidas overtake it as the market leader. Its financial base is also comparative less, taking into account the economic strength of its main competitor, Addidas.

Opportunities arise in the market that has seen this firm prosper. The Olympics, World Cups and such other major sporting events offer this company opportunity to market its products.

This company manufactures balls and other sports gear. Major world sports events offer it a huge opportunity to sell its products in mass. Within the local market, the firm also sells its products to local teams and organization found in this country.

The environment is marred with a number of threats. One main threat to Puma SE is the ease with which new entrants come into this industry.

Many firms producing the same products as Puma have eaten into its market share, threatening to drive it out of the market (Ward 1999, p. 43). Governments’ policies in various countries have also hindered its growth as some are restrictive. Volatile fuel prices also increases cost of production, lowering the profits of the firm.

External Environment PESTEL Analysis

Puma SE also experiences external environmental forces that have very strong influence in its operations. The external forces can best be analyzed through PESTEL analysis.

The political environment within its home country, Germany has been very stable. Germany has had a long period of political stability, a fact that has seen Puma grow to other regions of the world. The government has also been supportive to this firm, always ready to offer financial support (Ulaga & Chacour 2001, p. 41). It has also created a conducive environment where firms can access funds for development with ease.

However the political environment in other world regions has not been very conducive. Other governments have been hostile, while in other regions like Afghanistan, there lacks political stability that can sustain normal running of business.

The economic environment of this firm has had mixed fortunes. Germany is the only European country that never experienced the 2008/2009 world economic recession (Andreson, Narus, & Rossum 2010, 45). This means that Puma SE’s local market was not affected by the recession.

However, the firm operates in various other regions across the world, including the US, which was greatly affected by the recession. As the local market remained conducive, the international market was volatile, and to an extent, very weak.

Sports is a recreational activity, hence it enhances the social welfare of mankind. The social environment of Puma SE is much dictated by the industry in which it plays. Sports are loved across the world.

Being one of the facilitator of various sports popular in various regions, Puma has gained popularity in various regions. Having sponsored renowned sportsmen like Pele, Etoo and Maradona, many people have come to identify with its products, especially the football shoes (Lindgreen & Finn 2005, p. 16).

Technological environment plays a major role in the firm’s development in this industry. Technological changes have seen new methods of production come into existence. Technology brings with it mixed blessings. If a firm adapts technology at the right time and in the right manner, it would reap positively from it.

However, if it is slow to its adaption or adopts wrong technologies, the effect can be adverse. Puma learnt this and has adopted the new technologies. This has seen it prosper within this industry.

Environmental concerns like pollution have been a major issue within this industry. This firm, alongside the sister company, Addidas and their suppliers have been accused by an environmentalist group called Greenpeace of playing a major role in pollution of the environment (Frankfort-Nachmias & Nachmias 1992, p. 91).

In response to this, Puma has promised to reinvent its methods of production to minimize its levels of pollution. This was an attempt to ensure that it builds its public image.

As Bailey (1996, p. 72) states, no firm can operate in a lawless environment. Law is very important in ensuring that as an individual or entity enjoys his or her freedom, he or she does not interfere with others.

This way, business environments would have peace that it requires. Puma has always strove to ensure that its entire operations are within the confines of the law. This is to ensure that it does not face litigation in case it can be avoided.

The competitive environment has been tough for Puma. Once a flourishing firm with only Addidas as the main competitor, Puma currently operates in a very competitive market. New firms have emerged in various regions challenging the position of Puma in the world market.

Although Puma is still considered the second largest company in this industry, its market share has been significantly reduced in the world market (Flint, Woodruff, & Fisher 2002, p. 124). Back at home, Addidas takes a larger part of the market share, straining this firm even further. However, the firm has managed to keep afloat the competition through devising competitive strategies that has seen it increase its profitability.

Stakeholder Theory

Stakeholder theory helps in understanding the company’s in entirety in regard to individuals and corporate bodies that play part in its running. By conducting stakeholder analysis on Puma, it would be possible to determine the main decision makers, and how their decisions affect other members and the firm in general.

Puma has its shares traded publicly, and therefore its board of directors would have the final say in decision making. As such, it is important to understand factors that influence their decision-making.

Markowitz Portfolio Theory

Puma operates as a public company. The shareholders of this company expect returns from their investment. Markowitz Portfolio theory holds that shareholders’ return can be evaluated from two fronts, which are current dividend yield and capital gains yields. When investors buy shares of this company, their hope is that their shares would appreciate and they would be able to get profits after some time.

This can only be realized if the company is recording gains in its operations. Puma has registered some growth over the last three years as can be seen in its financial statements shown in the appendix below. For this reason, shareholders capital gains yield is positive.

Strategic Development

Puma has had a slow growth over the last part of the twentieth century. The firm was doing well in the early seventies when it was threatening to floor its arch rival, Addidas. Briggs (1986, P. 37) reports of an incident during the1972 World Cup when Puma used Pele to market its football boots even after an agreement between Puma and Addidas that the two competitors would avoid using Pele in that tournament.

Since then, the trust between the two firms has dropped, a fact that has seen both of them treat each other with some elements of suspicion, though they have maintained cordial relationships, always avoiding scenarios that could lead to direct confrontation. Puma SE has developed strategic plans that would enable it prosper in the highly competitive market.

Basis of Competition

As stated above, completion in this industry is very rife. Bryman (2001, p. 73) laments that most of the new firms that come into existence are merely copy cuts. He asserts that most of them lack creativity that would see to it that they prosper in this competitive market.

As such, competition has become so stiff because items taken to the market are identical. In the sports industry, Puma faces the same problem. Many of the new firms that have come into existence are producing products that are exactly similar to Pumas’ products. It forces the company to devise methods that would ensure that it is able to manage this stiff competition.

Puma has ensured that it attracts customers to its products. To help in doing this, the firm has differentiated its products by its company logo for ease of identification from an array of similar products. The company has then positioned its products as user defined. Every product has its specific use as per the customer’s needs, and Puma is available to provide this.

It has developed value proposition that makes the brand be associated with quality for every single product they avail to the market. Always avoiding pricing as a market strategy, Puma has focused on providing quality to enhance its competitiveness (Fifield 2007, p. 63).

Its products have therefore acquired a special niche in the market, making them stand out among the rest as the preferred quality provider. As such, many customers have come to like the products and are making purchase of the products at the peril of other compotators.

Existing Strategy

Puma has reinvented its strategies to match the competitive environment. Competition in the market is so stiff and it would be very easy for a firm to fall if care is not taken. Many firms in many countries across the world have started producing similar products as Puma in markets that were previously dominated by Puma. What is worse is the fact that these firms receive their government’s protections (Edkins & Maja 2009, p. 79).

With the current rising nationalisms in various countries and the need to ensure that local firms prosper, governments have formulated policies that would ensure that local firms are protected from external aggression. The policies are meant to bar firms like Puma and other related foreign firms from operating in such countries.

Having realized this, Puma has decided to embrace collaboration with local firms to facilitate national acceptance. Local firms are permitted by Puma to operate under the brand name Puma, but with full independence from the parent Puma.

The firms would in turn be expected to stock Puma products, besides other products that such local firms may wish to stock, provided the products are not direct competitors of Puma’s products. The firm has also aggressively gotten into massive development of new products to ensure that it remains relevant in the market (Cukor-Avila 2000, p. 46).

Some products like the Puma sports shoes are currently considered cash cows for the firm because of their constant income generation over the years. Some designs of shoes and clothing that were considered out of fashion (dogs) were eliminated. The firm plans to venture into clothing industry other than sportswear. This strategy is to ensure that the firm increases its revenue base.

Generation of Strategic Options

Puma SE has designed programs that would help it capture new market. As mentioned above, the company currently produces other lines of products besides the sportswear. It produces designer clothes. The firm has also made concerted effort to recapture its lost market share, by creating patents in various locations around the world (Balnaves & Caputi 2001, p. 79).

With its impressive balance sheet, this company is in a position to finance most of its expansion plans. Its adoption of new technologies is meant to ensure that it reduces cost of production as it increase profits.

Evaluation and Ranking Options

The strategies that this firm has plans to adopt or has adopted already comes at a cost. Installing technological equipments have huge financial consequences. However, it is cost effective in the long run. Starting new lines of production may mean putting more on investment.

However, it would help the firm venture into new markets. The most important point is that the firm has to be in a position to withstand the financial consequences of the move it makes.

Choice of Strategies

Based on the above analysis, the best option for this firm would be to open new lines of production. Because most of its products have reached their full life circle, new products would ensure continuity and increased profitability. It would also ensure that as the cash cows bring in money, there are other fall back options.

Implementation

Puma should devise a plan on how it would implement its planned strategies. The chart below would help summaries the process this firm should take in the implementation.

There should be a team within research and development department part that should be responsible for idea screening. The idea should undergo a full process of scanning to determine its viability. If viable, market research should be done to ensure that the product would receive expected acceptance.

The management should allocate enough finance to this department to ensure that all the stages are carried out successfully. The next stage would involve production of sample which would then be taken to the market for testing. If the product passes this stage, it can then be commercialized.

Recommendations

Because of the heightened competition that exists in this industry, Puma should consider getting an edge over other competitors in this industry. The following recommendations should be considered by this company when implementing the new strategies:

• The management should consider adopting emerging technologies of production as a way of ensuring that their production method meets the market standards.
• The top management should actively involve all the employees in idea generation because it is the employees who are always in touch with the customers.
• Research on new products, improvement of existing products or new technologies should always be in line with the market requirements.
• In launching new products in the market, the research and development team and the marketing department should ensure that they create a special niche for the product in the market.
• Puma should consider having a collaborative relationship with its arch rival, Addidas in order to face other emerging competitors as a unit. This would help the two companies have stronger bargaining power both with the suppliers and the market.

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Appendix

Introduction: Puma’s Organizational Structure

Puma SE is a German multinational company that operates within the global sports industry. The company key regions of operation are Europe, North and Latin America, and Asia. Since the year 2005, the company has indicated its interest in Africa in terms of sourcing raw materials, as well as marketing. In 2004, Puma SE enjoyed a share of 1percent of the global sports equipment market behind Nike, Reebok, and Adidas and also had 5 percent market share of brands where it was ranked the fifth (Anonymous, 2004, p.10).

Puma was established by Rudolf Dassler in 1948 after he and Rudi Dassler split the family shoe business. In the late 50s, the company became a limited partnership and went public in 1980 (Palepu et al., 2007, p.318). The company deals primarily with athletic footwear, apparel, and accessories. The corporation transformed into a market-oriented firm that is concerned with diversifying the brand into superfluity of lifestyle and fashion options (Miller, 2010, p.2). The company focus drifted a far its conventional centralized structure to becoming a virtual sports company. The decentralized structure is reflected by the way Puma operates from three headquarters in Germany, the United States, and Hong Kong. Around 90 percent of the footwear is produced in Asian countries, as well as 60 percent of the apparel (Anonymous, 2004, p.117).

This paper is intended to assess Puma’s operative and market environments in order to discover its competitive advantages and opportunities in place. There will also be a determination of the competences, resources, weaknesses, threats, and strengths the company can use to exploit these opportunities.

Market environment analysis

As stated by Adam MacLeod, a sports business analyst, the European and American markets for sports equipment have a somewhat mature lifecycle (MacLeod, n.d., p.3). This has resulted from the interest and dominance of the key market players within these markets. Therefore, this section seeks to analyze the global environments in terms of macro and microenvironments. The tools projected for this part are PESTLE and Porter’s Five Forces analysis.

PESTLE Analysis

Political, economic, socio-cultural, and technological factors are considered to be centered on any business environment, as illustrated below.

Political Analysis

For Puma, SE went through a massive restructuring to operate in the wider global market. This process of restructuring exposed the company to different political factors across various economies. Governments’ stability is a key factor that affects the company. For example, wars in Afghanistan and terrorist attacks, geopolitical uncertainty led the company to move its production from Pakistan (Anonymous, 2004, p.116). At the same time, the political stability in China made the company increase its factories in the country, leading to a sales increase of 34.6% (Anonymous, 2004, p.117).

Economic Analysis

Principally, the position of the German economy with respect to monetary concerns, as well as stock exchanges, is a fundamental element that motivates the Pumas trade. The economic drifts within the domestic realm and that of the affiliating states tend to have a substantial bearing on the corporation. For instance, the rapid growth in China and India’s economy is suspected by the company to be the major contributor to the increase in revenues. The fact that the company is determined to open 25 stores in India reflects this suspicion.

Social environs

Consistent with Canada Newswire (2011), life drifts have been posing an immense variation in the global sports industry. In fact, the industry partakes have been incessantly progressing with respect to private tastes, technologies, as well as prevalent games. Several diverse sports seem to be attaining reputation in the core areas where Puma SE Corp operates in. The approval of sports, namely skateboarding, alongside diving, ought to be assumed as an imperative facet in planning, developing, and administration of Puma SE. The increasing number of women in sports should be taken into consideration. For instance, the number of female students in American high schools who participate in sports has risen by 33% (Canada Newswire, 2011).

Technological setting

Apropos the technological dynamics, Puma concentrates more on the research and developmental undertakings and similarly on the applications of mechanization, particularly those allied to the information technology. Indeed, online sales through the company’s website contributed 470.1 million Euros in 2010 (Puma, 2010, p.103). Additionally, the maturity of the technological know-how might distress the progress because of the agitated nature of expertise. With its global operations, it is important for Puma to consider global communication in order to facilitate the operations efficiently.

Legal environment

Foreign trade regulations, including treaties and trade agreements, which must be obeyed by companies and member countries, are the key legal factors that affect Puma. Countries like China and India have entered into many agreements with Western nations, which must be considered by the company. Taxation policies also have a big impact on Puma’s business since they add expenses that reduce revenue though they can also be barriers to entry to the potential markets. Differed taxes in 2010 added up to 50.7 million Euros, which constituted an increase of 2.1% when compared to the financial year 2009 (Puma, 2010, p.110).

Environment analysis

Puma SE is affected by environmental regulations and standards, just like any other manufacturing firm. The organization has been taking measures regarding the environment after some factories were accused of destroying the environment. This led to the establishment of the Social Accountability and Environmental Standards team to oversee the implementation of the code of conduct as pertaining to environments (Anonymous, 2004, p.114). The company’s effort to ensure sustainable development in terms of environment sensitivity has enabled the company to expand its outsourcing activities significantly.

Porters Five Forces

Michael Porter a famous market analyst proposed an internal environment analysis depicted below.

Rivalry

The degree of rivalry in the global sports equipment industry is relatively high. There are very many firms, including branded companies like Nike, Reebok, Adidas, Asics and Fila which operate within the industry. There are also other emerging firms such as Li Ning, Anta and Mizuno which have shown substantial performance within the competitive market (Business Wire, 2011, p.5). In such a competitive environment, Puma is required to improve its competitive advantage in order to stimulate growth.

Threat of new entrant

The growth of sports equipment industry and new manufacturers in growing economies are increasing the threat of new entrants. This increment is in the short run intensifying competition in an already mature industry (Varga, 2010, p.5). However, Puma is a recognized brand with high reputation in the markets the new entrants are targeting. With many of them targeting the Asian region, the company has already shifted much of its operations to the region.

Threat of substitute

The sports equipment market is fragmented with many big retail chains offering apparel and footwear products across the world. These businesses are a source of important threat to Puma SE in terms of alternative products. Luckily, the company has its own distribution network which comprises of many branded concept stores, factory outlets, and online stores. The functionality of the distribution network was reflected in the year 2010 where retail operations increased by 2.6% (Puma, 2010, p.103).

Bargaining power of buyers

The sports equipment market is characterized by stiff competition which offers buyers high bargaining power. Despite the existence of local manufacturers, Puma has to compete with branded companies such as Nike and Reebok in almost all markets. Many consumers are aware of this competition and take this advantage to leverage prices. As Sheehan et al (2002) observe, Puma and other branded companies have been forced to reduce average prices by the cheap products offered by manufacturers in medium-end section (p.25-43).

Bargaining power of suppliers

The production of sports apparel, footwear and accessories requires a range of raw materials that originate from different areas. Like many other sports equipment firms, Puma must rely on the suppliers for these low materials. As a result, the bargaining power of the suppliers is quite high in this industry. Puma has a very wide supplier base across many parts of the world including Africa where it sources cotton for apparel production (Puma, 2010).

Market structure

Puma is among the branded companies who have developed competitive advantage in the global sports equipment market. This is an oligopoly market with relatively few major players controlling the market including Nike, Adidas, Reebok, Puma, Fila, Lotto, Kappa, Umbro, New balance and Asics. Puma is a leader in European markets while the Asian operations are of a great significance. As stated by the former Chief Executive Officer Jochen Zeitz, Pumas’ organic growth strategy ensures the positioning towards full brand potential (Puma, 2010, p.6). This is a commitment to sustaining its performance despite the concentration of firms in the international market.

Strategic grouping

The global sports equipment in industry consists of many strategic groupings including those companies that deal with general leisure products, recreations products, specialty brands and private labels. Primarily, Puma deals with branded sports products though there is a general categorization of the general recreations and leisure products. The company has achieved this through strategic alliances with other recognized companies in target markets. In 2010, the company transformed from PUMA AG to PUMA SE by co-branding the new sports and lifestyle division and PPR a French luxury group (Puma, 2010, p.6). Moreover, Puma acquired some important firms such as Equipment brand Cobra Golf and Wilderness Holdings Limited in order to reinforce its commitment to sports performance (Puma SE, 2011, p.1).

Market segmentation

The global sports equipment market is segmented according to the benefit sort by the consumers. Nevertheless, Puma focuses on three segments of brands; Puma brand, Cobra Golf brand and Tretorn brand (Bloomberg Business Week, 2011, p.1). Puma brand involves sports performance lifestyle such as footwear, apparel, fragrances and bikes plus accessories including timepieces and eyewear for different categories such as motorsports, football, running, body train and sailing. Cobra Golf brand involves golf equipment while Tretorn brand includes leisure shores, tennis balls and rubber boots. Furthermore, Puma provides sport fashion products in collaboration with designer labels.

Strategic analysis

Strategic analysis of Puma is centered on several success factors provided by Miller, the famous marketing analyst of the 21^st century.

Resources

Puma SE has several important threshold and distinctive resources that could ensure a sustainable competitive advantage as discussed below.

Threshold resources

Adrian Haberberg and Alison Rieple who are famous gurus in strategic management explain threshold resources as those resources that are not strategic yet are still important because they help a business to meet the criteria for survival in an industry (Haberberg & Rieple, 2008, p.285). Puma has several manufacturing plants, brand concept stores and retail outlets that have enabled the company to satisfy the customer needs and reach many at the ground level. The company has also adopted new technologies for its product development and management which have improved the speed and quality of production. Besides, Puma promotes and develops employees’ potential by assigning high level of personal responsibility, as well as providing suitable training measures (Puma, 2010, p.119).

Distinctive resources

According to Haberberg and Rieple, distinctive resources are strategic resources that are scarce to acquire and provide the company with a sustainable competitive advantage (p.285). Puma’s distinctive resource lies with its innovative capability by the R&D team. The company is committed to ensure a team that is always armed with the innovative skills. For instance, the company offers vocational training in collaboration with the Cooperative State University in an effort to identify the potential employees who can facilitate company’s growth. The company has a global talent management system (People Puma) through which the performance and competency of employees is assessed in order to identify the most talented, and train them according to their talents (Puma, 2010, p.119).

Core competency

The core competencies of a company refer to the capabilities that form the source of competitive advantage (Hitt et al, 2011, p.82). Puma’s strong brand name is one of the sources of competitive advantages. Throughout, the company has developed strong brands that have hit most of the markets. Jochen Zeitz, former CEO confirmed that Puma’s strategy is committed to building a portfolio of strong, complementary brands in its sports and lifestyle arena (Puma, 2010, p.6). Among the renowned brands is the spiked shoes for running that have gained substantial respect from athletes. The key success factors of Puma include strong presence in the market which stems from strong brand and recognitions.

Another core competency in Puma is a sponsorship strategy for individuals and sports events across the world (Amis et al, 1999). The fact that the company sponsors Usain Bolt, the renowned Jamaican sprinter, has increased its market share in the Latin America (Miller, 2010, p.2). This runner has been one of the most effectual tools in advertising the company within the developing markets. This corporation has won recognition among the elite and older individuals through its Cobra Golf division that sponsors golf events across Europe. There is no doubt that the quarterly growth of 2.7% in the first quarter of 2011 is a result of the new segments the company is realizing through the sponsoring activities (Puma, 2011, p.4).

Value chain analysis

In 1998, Michael Porter, a recognized expert, due to his contribution to marketing, emphasized his opinion about a firm’s value chain to comprise of the primary and supportive activities (p.36).

In accordance with Porter’s organization, Puma SE delivers value to their customers through its value chain that comprise a number of primary and supportive activities.

Primary activities

For inbound logistics, Puma ensures availability and delivery of raw materials by monitoring the suppliers’ activities across the world. Indeed, the company has taken a step further to support the people who provide with raw materials such as cotton farmers in Africa. Approximately, 90% of the factories are directly connected with the suppliers as of 2004 (Anonymous, 2004). The company is also securing the delivery of enough labor for the factories by collaborating with learning institutions to develop students for specific jobs in the company.

For the operations, Puma has maintained a strong focus on research and development which ensures quality products and early entrance in potential markets. For example, the company spent 63.6 million Euros on product design development in 2010 compared to 58.1 million Euros spent in 2009 (Puma, 2010, p.3). These activities are accompanied by the adoption of new information technology applications that facilitate operations.

For outbound logistics, Puma has a comprehensive distribution channel that ensures that the customers throughout the 80 countries it operates get products at the right time. This channel includes privately managed and outsourced supply chains. The chains get the products to the customer through the company’s branded stores and the retail outlets managed by the company.

Secondary activities

For supportive activities, Puma’s value chain includes business and resources management that is supported by information technology activities. These include BI applications, SSP information management and financial applications that manage overseas operations. Human resource activities include managing more than 9,313 employees, environmental groups, acquisitions risks, and labor councils. Product development activities involve the development of diversified portfolio, lifestyle labels, and customized products.

VRIN framework analysis

Puma SE derives value through its decentralized structure that ensures distributed control over the key areas of operation. The Hong Kong headquarters are responsible for the Asian operations and primarily deal with production. The Germany headquarters has the obligation for European market and is mostly concerned with global administration. The US headquarter has the responsibility of marketing activities of the company.

Puma rare capabilities are associated with a portfolio of strong, complementary brands and involvement in sustainability. The brand is respected not only by the customers across the world, but by some of the most prominent sports men in the world. Conversely, Puma is recognized as the leader in environment sustainability (Puma, 2010, p.10). This has elevated the company’s position in the face of many regulatory bodies, which sometimes become a barrier to expansion.

Inimitable capabilities for Puma are centered on the leadership, team working, and deployment of resources. The company has a strong management team that is steered by a strategy-oriented CEO, Franz Koch. Employees are developed to work in teams that allows for knowledge sharing similar to the Japanese kanban system (Guneri et al, 2009).

Puma’s decentralized governance is evidently non-substitutable considering the cost and time of restructuring. This form of governance offers the company the advantage of controlling overseas operations more efficiently. The system also allows for better research of potential markets in the growing economies.

Strategic fit analysis

The analysis conducted suggests that Puma has a number of opportunities that arise in the growing economies as well as challenges posed by the stiff completion. The company must face legal limitations and saturation in some markets in the presence of perceived new entrants. There are other threats from substitute products while the suppliers and buyers have substantial borrowing power. Fortunately, the company is well established with recognition across many markets. There is also the advantage created by its strategic grouping that ensures a better segmentation and differentiation of the market.

Puma has an array of threshold resources that ultimately ensures its survival in the industry. The many production facilities, sales outlets, and innovation capabilities position the company strategically in the market. The core competency of sponsorship is important as it plays the dual-role of marketing and corporate social responsibility. However, VRIN analysis leads to the assumption that Puma should improve their primary activities and develop demand projections as well as forecasts resulting from lesser storage, and therefore tied-up capital. The company also needs to look at sales and marketing channels as to where sales are highest as the company lacks clear definition of these activities.

Puma: SWOT Analysis

Strengths

Puma has a strong brand equity that enhances position within the market place. Through innovation and marketing, the company’s sports footwear and apparel exhibit very strong brand equity. This brand equity allows the company to secure a relatively large share of the footwear market: about 3% as of 2010 (Puma, 2010, p.90). Puma constant focus on new technology to improve their products has made them to be among the market leaders. The recent partnership with French Group PPR has spawned a new era in technology for the industry. Puma produces its sport products at low cost and distributes them over a broad network. The low-cost production revolves around suppliers in Asian and Latin America countries.

Weaknesses

Puma product portfolio is not exhaustively diversified and it misses some sport segments such as motorsports. This weakness has been linked to the recent decline in revenues, especially during the 2007 to 2009 recession. During this period, the company’s growth rate slowed by 2.7% showing underperformance which probably led to a competitive disadvantage (Puma, 2011, p.10). When compared to the industry leaders, Puma’s distribution system lacks efficiency. With most of the manufacturing operation taking place in Asia and Latin America while the marketing is in North America and Europe, the company is a bit slow in meeting the demand. Puma has lower financial resources when compared to the industry leaders, which limits the capabilities that lead to the company’s competitive power.

Opportunities

Puma’s new product launches is a big opportunity. The company’s innovation thinking within sports equipment industry has enabled them to release new products every year. Once again, Puma’s partnership with PPR has only enhanced their potential to release new products. Acquisitions, such as those of Equipment Brand Cobra Golf, are enabling the company to acquire the sports segments that it has lacked throughout. More sponsorship is also an opportunity for the company, as the recent sponsorship of Usain Bolt has enabled the company to dominate the Latin America maker with a share of 26% (Larmann, 2011, p.15). Eric Larmann, a business analyst confirms that growth in the footwear market is scheduled to increase from $62.11 billion to $69.48 billion between 2009 and 2014 and can be a big opportunity for footwear firms (Larmann, 2011, p.9).

Threats

High competition is a big threat for Puma. The company is forced to compete with many different manufacturers including, Nike, Adidas, New Balance, k-Swiss, Reebok, and Asics. The new sport segments are also opening the door to new competitors like Mizuno. The increase of the counterfeit products threatens to decline sales from the Puma brands. Spurred by the internet sites, sales in online counterfeit goods increases by 9% in 2009 and by 2010 they amounted to $500 billion in total global annual sales (Larmann, 2011, p.9). Low quality products can damage Puma’s brand image, as customers are receiving products with lower caliber that the real Puma brand.

Recommendations for the Business Model of Puma

Despite Puma SE showing substantial leverage of the market place, the company still lags behind several competitors such as Reebok, Nike and Adidas in terms of the market share. This indicates that the company needs to enhance its competitive advantage in order to increase its market share. The best way to achieve this is to establish a counteractive strategy. This can be done by improving the activities that affect the value given to customers such as sales and services operation. The company can use the key strengths to exploit the opportunities, as well as transforming the weaknesses into strengths. The success factors should be directed to the customer satisfaction especially.

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