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1. What does Puma need to do to maintain the leadership positionin the Indian sportswear market?

2. How should Puma prepare to ‘fight’ the response from foreignbrands in the Indian market?

3. What concepts and theories of international business arefound in the Puma case? Briefly discuss each one and relate them tothe case.

In September 2014, Puma retained star athlete Usain Bolt, theworld’s fastest man, as brand ambassador and launched a newcampaign — Forever Faster — to send the message that Puma was andwould continue to be “the fastest sports brand in the world.”2 InAugust 2015, Puma launched its second round of Forever Fastercampaigns with a new marketing line: “What are you training for?”The campaign promoted the idea of driving athletes to train harderin order to perform better. The multi-million euro campaignpromoted the brand’s latest shoe with ads showing Bolt and theArsenal football club undergoing limit-pushing training schedulesover a course of four weeks to extract more from theirperformance.3 Puma wanted to make it clear to the world “that itneeded to be seen as a major player — that life isn’t all aboutAdidas and Nike,” suggested Nigel Currie, managing director of theBritish company brand Rapport, a sports sponsorship agency.4 Puma’sglobal aspirations also extended to advancing its market positionin India. Despite Puma’s presence in the Indian market since 2006,the sportswear brand had not realized its goal of capturing thelead position. Puma’s marketing push finally paid dividends when inJune 2015, the brand recorded, for the first time, sportswear salesin India ahead of Adidas, Reebok, and Nike (see Exhibit 1).5 Puma’ssuccess in India could be primarily attributed to the company’smarketing techniques, judicious expansion, and customer-acquisitionstrategy.6 Indian consumers were already changing their lifestylein response to increased health concerns, and fitness programs weregrowing in popularity. The retail sportswear segment experiencedunprecedented growth as a result, and companies rode the fitnesswave to maximize returns on their investments. Puma had moved aheadof Adidas and Nike to become the leading brand in India, but howlong would Puma be able to hold its position in the face ofsustained expansion by domestic footwear brands such as LibertyShoes Ltd (Liberty), Relaxo Footwear Ltd (Relaxo), and ParagonFootwear (Paragon)? These local brands had increased their retailfootprint and were expanding their distribution networks beyondtheir regional presence in order to gain a substantial marketshare.7 Puma needed a plan to strengthen its branding and pricingstrategies to stave off competition from these domestic companies.Could Puma sustain its leadership position in the years to come?PUMA WORLDWIDE Puma SE (Puma), headquartered in Germany, wasconsidered one of the world’s leading sportswear brands. It hadbeen designing, developing, marketing, and selling footwear,accessories, and apparels since 1948. The company categorized itsproduct portfolio by sport (such as football, fitness and training,running, motorsports, and golf) and owned other popular brands,such as Puma, Dobotex, Cobra Golf, and Brandon (see Exhibit 2).Puma employed approximately 10,000 people and distributed itsproducts in more than 120 countries worldwide.8 To capture aleadership position globally, Puma revised its mission statement in2013 to “be the fastest sports brand in the world,” meaning fastreaction to new trends, reduced time to market with innovations,and speed in problem solving. The company’s repositioninginitiative, such as its Forever Faster campaign, was a reflectionof its new revised mission statement.9 PUMA INDIA Puma firstentered the Indian market in the early 1990s with a licensingagreement with Carona. The agreement was revoked in 1998, and in2002, Puma re-entered the Indian market by sharing its license anddistribution partnership with Planet Sports. Under this model, Pumawas responsible for quality and brand consistency while PlanetSports was in charge of sourcing, distribution, and retail of Pumaproducts in India.10 India’s monthly per capita income was expectedto grow by over 10 per cent in FY2015/16 in comparison toFY2014/15.11 The Indian consumer lifestyle had undergone a massiveshift: disposable income levels had increased and people wereadopting international brands.12 By 2006, there had been a fourfoldincrease in the availability of international accessories and shoebrands in India.13 To leverage this growing trend and strengthenits brand position in India, Puma established its first executiveoutlet in the country in 2006, manufacturing and distributingapparel, footwear, and accessories across multiple cities in thecountry.14 After three and a half years of operations, Pumareported a profit in 2009.15 Despite entering the Indian marketafter its peers (Nike, Reebok, and Adidas), Puma had consistentlymaintained its growth above the industry average rate and,ultimately, in 2015, surpassed its competition to gain a leadingposition.16 In 2015, Puma recorded its highest number of sales inIndia, for the first time ahead of its competitors Adidas, Nike,and Reebok.17 SUCCESS MANTRA Puma’s marketing strategy, judiciousexpansion plans, and resistance to using discount campaigns led toPuma’s lead in India.18 Retail Strategy Puma’s position as leadingsportswear brand in India was primarily due to Puma’s prudentexpansion strategy and clever vendor engagement. Puma focused onlong-term sustainability, never opening multiple stores in the samelocation. This safeguarded the brand from over-distribution andhelped Puma maintain the quality of distribution across itsstores.19 With this strategy, Puma steadily built its network of340 stores across 115 cities in India. Of the 340 stores, 320stores were operated under the franchise model.20 Puma reported 13per cent same-store sale growth in 2014 as compared to 2013. Inaddition to maintaining tight control over its distributionnetwork, Puma adopted a clever vendor engagement. When Reebokclosed 300 of its 900 stores, retailers were handicapped. Pumaleveraged this opportunity to gradually grow its partnership withRishabh Sports Station — Reebok’s biggest vendor — and with othervendors in order to fill the market gap left by Reebok’s absence.21Product Portfolio With the rise in disposable incomes, change inconsumer preferences, and escalating health awareness, sportsapparel and equipment companies were launching new products andmodels to satisfy growing Indian consumer demand. To take advantageof this opportunity, Puma introduced two of its leading shoe brands— Mobium and Faas — to Indian consumers in fiscal year FY2014/15.Mobium Ride, the average price for a traditional, men’s athleticjogging shoe, was priced at US$138.04; the model Faas 600S waspriced at US$122.7022 — comparable to pricing by Nike and Adidas.Puma also launched the Nightcat Powered edition under its Mobiumbrand, and introduced its Ignite brand of running shoes andAlexander McQueen’s stylish global collection to Indianconsumers.23 Puma planned to add other brands from its globalportfolio to India’s product portfolio in the coming years.24 Tobuild strong brand loyalty, Puma focused on developing productsthat fit well, were light, and moved with the person wearing theproduct. The style quotient was always a crucial parameter inPuma’s product mix. Consumers were central to Puma’s strategy;hence, after assessing a demand for flip-flops and sandals, Pumaintroduced a collection of stylish wear exclusively for the Indianmarket. Puma sold over 5 million pairs of flip-flops and sandals inFY2014/15.25 Promotional Strategy Puma built its brand on thepillars of a desirable product mix and engaging marketing.26 Inaddition to being known for sports apparel, Puma gradually builtits image as a fashion inspirational brand with dynamic designs andstylish products. Consumers associated the fashion items withunchallenged passion, determination, and sentiment for sport.27 Aspart of its initiative to increase brand awareness, the companylaunched a Forever Faster campaign in partnership with the IndianSuper League football franchise.28 This tie-up fit well with Puma’splan to focus on a football wear collection and concentrate itsmarketing efforts around football.29Puma had Usain Bolt, aworld-record holding sprinter and Puma’s brand ambassador, launchthe Forever Faster campaign in India in September 201430 to signalthe brand’s seriousness about making Puma the fastest sports brandin India. To raise the consumer engagement level, Puma invested ina food, drinks, and entertainment venue — the Puma Social Club. Theclub was located in the poshest area of Bengaluru and was a hitamong the local millennials.31 In addition, Puma put together acompilation of music and a concert series under Puma Loves Vinyl —a campaign to connect with consumers at a personal level.32 PriceWith growing competition, Puma had two options to push its salesfurther: the company could use a discounting model, like itscompetition, or continue on the path of sustained and slowgrowth.33 The company decided to persist with the gradual growthstrategy, which brought Puma the success it sought. To make thebrand accessible to more customers, Puma lowered the entry barrierwith low-priced entry products. Puma’s products ranged from anaffordable $25 to $230.34 Customer Focus Puma focused on continuousmonitoring and improvement of the customers’ store experience. Thebrand had a huge fan following, particularly among the youth. Beingconsumer-centric, Puma developed its products after identifyingthese consumers’ needs. The consequent launch and success offlip-flops and sandals exclusively for the Indian market validatedPuma’s effort and commitment.35 In line with its focus on India,Puma launched an exclusive fitness shoe for women, Pulse XT, in thesummer of 2015. Abhishek Ganguly, managing director of Puma India,declared, “We have planned a very aggressive autumn and winter andwill continue to launch global innovative technology-orientedproducts suitable for India. You will see a lot more of us.”36E-Commerce Model Worldwide use of smartphones and tablets to accessthe Internet drove the e-commerce model on an unprecedented growthtrajectory. With all companies trying to gain a share of the onlinemarket, Puma, too, built its presence through popular marketplacessuch as Amazon, Jabong, Snapdeal, and Flipkart. In late 2013,former managing director of Puma India, Rajiv Mehta, indicated thatselling Puma’s products online was a marketing advantage thecompany wanted to exploit: Between 16 [and] 25 years of age, a lotof people are shopping online. Because we are a lifestyle brand,consumers end up shopping multiple times for a lifestyle productthan a performance product which lasts for some time. . . . 37Online is a lot more dynamic. If I want to launch a new shoe, all Ihave to do is make sure it’s in my warehouse and take the graphic,which can happen in two hours. Our online business is as good as aBrigade Road store in Bangalore and is one of the largest storeequivalents in terms of sales. Also, it's a marketing advantage, ifnot anything else.38 To curb heavy online discounts, Puma excludedonline franchise operations.39 Puma earned a 15 per cent revenueshare from its online segment in 2014. To extend its online reach,Puma planned to boost its online presence and strengthen thecontent and offerings of its online portal, Puma.com.40 INDIANSPORTSWEAR MARKET The sportswear industry was defined as anaggregation of performance, outdoor, and sports-inspired clothingand footwear.41 All kinds of dresses, shorts, trousers, tops,coats, jackets, track suits, athletic sets, swimwear, underwear,hosiery, clothing, and accessories (including gloves, headwear, andscarves) were included under the clothing segment. Children’s,men’s, and women’s footwear — sports shoes, sandals, pumps, andmore — were included under the footwear category.42 The sportswearindustry in India was valued at $3 billion in 2013 and waspredicted to reach $4.9 billion by 2018.43 The industry grew 25 percent in 2013 and was expected to increase at a compounded annualrate of 10 per cent from 2013 to 2018. Within the sports apparelsegment, current sales value of performance apparel grew by 20 percent; outdoor apparel, by 28 per cent; and sports-inspired apparel,by 18 per cent, in 2013 (see Exhibits 2 and 3).44 MAJOR COMPETITORSAdidas Adidas had ruled the Indian sportswear industry for morethan a decade. The increasing presence of the brand across majorIndian cities and its tie-up with the Indian cricketer icon, SachinTendulkar, for advertisements helped the firm become a sportswearleader.45 To further increase its market presence across the world,Adidas acquired Reebok in 2005 for $3.8 billion.46 However, since2012, Reebok’s Indian arm was tangled in various commercialirregularities.47 Owing to the irregularities in the Indian unit,Adidas reported a loss of €125 million (roughly equivalent to ?8.7billion or US$135 million in 2005) from its global profits. Furtherlosses of €70 million (?4.88 billion or US$76 million in 2005) wereestimated if the case was not handled soon.48 The failure toleverage the Reebok brand added to Adidas’ financial losses; in2015, Adidas lost its position as market leader. Adidas indicatedit might sell Rockport, Reebok’s shoe brand, to regain its positionin India.49 To start a fresh chapter, in September 2015, Adidasidentified Ranveer Singh as brand ambassador for its streetwearlabel Adidas Originals,50 leveraging the actor’s stardom and hisconnection with youth. Reebok Although a relatively small player,Reebok had an established market in key regions such as NorthAmerica and India. In order to grow its market presence, Reebok waspurchased by Adidas in 2005 for US$3.8 billion. In India, Reeboktargeted the 15 to 50 age group and promoted its brand withadvertisements targeted at cricket.51 However, in 2012, Adidasannounced that it had uncovered several incidents of commercialirregularities at Reebok’s India unit. As a consequence, Adidasclosed a substantial number of Reebok outlets.52 Reebok’s strugglesresulted in poor financials in 2013.53 In a bid to regain itsleadership position in sportswear in India, Reebok planned tolaunch more than 100 of its FitHub54 stores, targeted towards urbanconsumers.55 Nike Nike had an established base in India. Thecompany had a strong year in 2013 with respect to returns andinvestments. The company increased its investment in brandpromotions with targeted advertisements and official sponsorship ofthe Indian cricket team. In addition to brand promotions, Nikestrengthened its distribution network across smaller cities with alarger presence in multi-brand outlets.56 To drive its salesfurther, Nike offered various seasonal discounts and offers to lurecustomers. Instead of investing in an online retailing site of itsown, Nike established an online presence through tie-ups withseveral marketplaces, such as Snapdeal, Flipkart, Jabong, andMyntra.57 Although Nike did not market its own products online, itdid use its website to keep fans abreast of the latest productlaunches and store releases.58 Domestic Companies In addition toglobal sportswear brands, India had an established presence ofpopular regional brands such as Liberty, Lancer, and Relaxo.Affordable sportswear products from regional brands were gainingpopularity among Indian consumers. These brands slowly bridged thegap between the domestic and international brand sales byintroducing new designs and colors as part of their productportfolios. Leading footwear manufacturers, such as Relaxo andLiberty, launched women’s footwear designs to target a growingmarket need. Domestic companies invested in increasing theirpenetration across India and launching desired brand variantswithin different price platforms in order to tap into theburgeoning opportunity59. THE CHANGING INDIAN CONSUMER India'seconomic growth and rising household incomes were expected to takeconsumer spending to a level of $3.6 trillion by 2020. Food,housing, consumer durables, transport, and communication wereexpected to reap the most of consumer spending. The Indian consumermarket was dominated by the younger generation and was becomingincreasingly sophisticated and brand conscious. Youngupper-middle-class consumers were looking beyond the utility aspectof a product to seek brand and lifestyle statements connected withthe product.60 India’s consumer confidence continued to be thehighest globally and had improved more in the second quarter of the2015 calendar year due to a positive economic environment and lowinflation.61 There was a visible change in consumer attitudetowards sports and fitness as a result of an increase in healthawareness.62 With the inclusion of physical exercise in an Indian’sdaily regime, many state governments were building parks in urbanlocations to cater to the demand for morning and evening walks.63Gyms and health clubs in India were taking advantage of theopportunity and offering a variety of fitness programs, such asyoga, dancing, spinning, aerobics, and more.64 With the growingpresence of fitness and health clubs and gyms in metropolitan areasand top-tier cities in India,65 the sportswear industry was set forunprecedented growth.66 Additionally, an increasing number ofsporting events, such as the Indian Premier League and marathonevents, fostered sports growth in India.67 PUMA’S DILEMMA Theevolving consumer landscape, rising e-commerce opportunities, andincreasing health awareness had fueled massive growth in thesportswear industry. After continuous efforts over eight years,Puma was at last in the number one brand position in India, takingthe lead from Adidas.68 However, although Puma led Adidas and Nikein total sale volumes, there was only a narrow differential marginamong the three. This implied that the 1–2–3 positions couldundergo reshuffling anytime in the future.69