MODULE CODE: 19MBA509A

MODULE NAME: STRATEGIC MANAGEMENT

PROGRAMME: MBA

DEPARTMENT: MANAGEMENT STUDIES

Name of Student:
Registration Number:
Batch: 2019-2021
Module Leader: Dr. Devakumar G
 Declaration Sheet
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Course MBA Batch Full-Time 2019-2021
Module Code 19MBA509A
Module Title STRATEGIC MANAGEMENT
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TABLE OF CONTENTS
Declaration Sheet ........................................................................................................................................ 2
INTRODUCTION ................................................................................................................................ 4
BCG MATRIX ..................................................................................................................................... 5
Cash Cows ........................................................................................................................................ 6
Stars ................................................................................................................................................. 6
Question Mark.................................................................................................................................. 6
Dogs ................................................................................................................................................. 7
PORTERS 5 FORCE ANALYSIS ............................................................................................................ 8
Bargaining power of buyers ............................................................................................................. 8
Bargaining power of suppliers.......................................................................................................... 8
Rivalry among existing competitors ................................................................................................ 8
Threat of substitute products .......................................................................................................... 9
Threat of a new entry: ..................................................................................................................... 9
RECOMMENDATIONS ..................................................................................................................... 10
REFERENCE...................................................................................................................................... 11
INTRODUCTION

Puma SE, branded as Puma, is a German multinational corporation that designs and manufactures athletic
and casual footwear, apparel and accessories, which is headquartered in Herzogenaurach, Bavaria,
Germany. Puma is the third largest sportswear manufacturer in the world.[4] The company was founded in
1948 by Rudolf Dassler. In 1924, Rudolf and his brother Adolf Dassler had jointly formed the company
Gebrüder Dassler Schuhfabrik (Dassler Brothers Shoe Factory). The relationship between the two brothers
deteriorated until the two agreed to split in 1948, forming two separate entities, Adidas and Puma. Both
companies are currently based in Herzogenaurach, Germany.
Puma has been a public company since 1986, listed on the Frankfurt Stock Exchange. French luxury group
Kering (formerly known as Pinault-Printemps - Redoute or PPR) holds 16%, Kering's largest shareholder
Artemis SA owns 29% of the share capital. [5] Since 1 July 2013, the company has been led by former
football professional Bjørn Gulden (CEO).
As of 2017, Puma SE employs more than 13,000 people worldwide and distributes its products in more
than 120 countries.[6][7]
Following the split from his brother, Rudolf Dassler originally registered the new-established company as
Ruda, but later changed the name to Puma.[8] Puma's earliest logo consisted of a square and beast jumping
through a D, which was registered, along with the company's name, in 1948. Puma's shoe and clothing
designs feature the Puma logo and the distinctive "Formstrip" which was introduced in 1958.
Puma offers products for Basketball, Football, Running, Training and Fitness, Golf, Motorsports and
Sportstyle. It has sponsored a number of legendary athletes, including Pelé, Eusébio, Johan Cruyff, Diego
Maradona, Lothar Matthaus, Clyde Frazier, Jim Hines, Boris Becker, Martina Navratilova, Tommie Smith,
Joe Namath, Linford Christie, Colin Jackson, Heike Drechsler and Michael Schumacher among others.
Currently, international footballers Sergio Agüero, Antoine Griezmann, Marco Reus, Romelu Lukaku, Luis
Suárez, David Silva, Vincent Kompany, Sunil Chhetri, and many more are sporting Puma football boots.[10]
 BCG MATRIX

The BCG Matrix has been developed in 1970s by Boston Consultancy Group with the aim to help
organizations to differentiate between profitable and non-profitable ventures. Knowledge about the
market share and growth potential of a product helps the management to make investment decision and
refrain from spending resources on products that are not likely to give favourable results. The analysis
using BCG Matrix is based on a framework including four components, cash cows, stars, question marks
and dogs. Puma is based inGermany, operating in the apperals industry supplying its products across the
world. The company has been operating for more than 80 years and has become one of the renowned
manufacturers of sport wear. The BCG Matrix analysing the product portfolio of Puma is presented below:

MUFTI
NIKE

MARKET SHARE
ADIDAS REEBOK

LEVIS PARX
ARROW

WRANGLER COOPER

RELATIVE MARKET SHARE

Cash Cows
There are some products that tend to offer a great deal of financial strength to the company which are
regarded as cash cows. These items have been high performing products in the past and have gained a
massive market share over the years. The BCG Matrix further indicates that the cash cows have limited
scope for further development of the market share as the industry segment has attained significant level of
maturity. The cash cows are beneficial for an organization as they provide the firm with a continuous
stream of sales and revenue. The PUMA segment has been a cash cow for the company in the past decades
as the consumers had a high demand for sportswear. In the recent times, this situation has shifted and
dairy based confectionary items have lost their place as a cash cow. In the contemporary apparel industry,
Puma has experienced stable financial growth through shoes brand which has created a better sales
outlook for the company.
Stars
The products that are a part of the star category can be differentiated from the cash cows on the basis of
the growth potential of the industry. Even though they have significant market share, the industry is still
growing which shows the chances of further increase in sales and revenues from the star product.
Consequently, the target of a higher market share can be obtained by focusing on continued production of
these items, which is supported by the high demand from consumers. The star products can develop to
such an extent that they become cash cows for an organization by gaining higher market share and the
eventual maturation of the industry. Puma had been able to generate a great deal of financial income from
its shoe unit. The company will need to rethink its production and marketing strategy in order to make it
cash cow. The higher production and increased supply of cocoa is a favourable change in the industry
which could help the company to increase the production sports wear.
Question Mark
Apart from the high revenue generating products, there are some items that are not being a source of
financial stability for a firm. It is uncertain whether these items would play a part in financial growth of the
organization or not. Therefore, they are termed as question marks in the BCG Matrix. In case if these
products have an improved financial performance, they can be classified as stars. Since the industry has
high growth opportunity, these items have the chance of gaining financial improvement with the passage
of time. On the other hand, the low financial output exposes these items to the risk of becoming a dog.
Lather have not been able to produce favourable result for the company in the recent time. The sales
volume of this product has declined, pushing the company towards financial trouble. As observed by Lewis
(2016), the manufacturing of leather was altered due to a change in the design, which has not been
received well by the target market.
Dogs
The last category in BCG Matrix is dogs, which includes the products that are consuming organizational
resources but are not able to produce the return on the investment. The low ROI makes these products a
probable target for elimination from the product portfolio. One of the reasons why these products are not
performing well is that the industry is indicating a slow pace of development, thus reducing the chances of
securing a higher market share. One of the products manufactured by Puma is racing jackets. According to
Manning (2009), the sales of jackets has dropped up to 2% which shows changing consumption of jackets
in the target market. Another area where Puma needs to bring improvement is the market share of its
watches, which have been underperforming products in terms of sales and revenue.
Porter’s Five Forces Analysis

A model was put forward by Michael. E. Porter in an article in the Harvard Business Review in 1979. This
model, known as Porter's Five Forces Model is a strategic management tool that helps determine the
competitive landscape of an industry. Each of the five forces mentioned in the model and their strengths
help strategic planners understand the inherent profit potential within an industry. The strengths of these
forces vary across the industry to industry, which means that every industry is different regarding the
profitability and attractiveness. The structure of an industry, even though it is stable, can change over time.
These Porter’s five forces are as follows:

 Threat of New Entrants

 Bargaining Power of Suppliers
 Bargaining Power of Buyers
 Threat of Substitute Products or Services
 Rivalry Among Existing Firms
Puma Porter’s Five Forces Analysis

Threat of New Entrants

 The economies of scale is fairly difficult to achieve in the industry in which Pumaoperates. This
makes it easier for those producing large capacitates to have a cost advantage. It also makes
production costlier for new entrants. This makes the threats of new entrants a weaker force.
 The product differentiation is strong within the industry, where firms in the industry sell
differentiated products rather a standardised product. Customers also look for differentiated
products. There is a strong emphasis on advertising and customer services as well. All of these
factors make the threat of new entrants a weak force within this industry.
 The capital requirements within the industry are high, therefore, making it difficult for new entrants
to set up businesses as high expenditures need to be incurred. Capital expenditure is also high
because of high Research and Development costs. All of these factors make the threat of new
entrants a weaker force within this industry.
 The access to distribution networks is easy for new entrants, which can easily set up their
distribution channels and come into the business. With only a few retail outlets selling the product
type, it is easy for any new entrant to get its product on the shelves. All of these factors make the
threat of new entrants a strong force within this industry.
 The government policies within the industry require strict licensing and legal requirements to be
fulfilled before a company can start selling. This makes it difficult for new entrants to join the
industry, therefore, making the threat of new entrants a weak force.

How Puma can tackle the Threat of New Entrants?

 Puma can take advantage of the economies of scale it has within the industry, fighting off new
entrants through its cost advantage.
 Puma can focus on innovation to differentiate its products from that of new entrants. It can spend
on marketing to build strong brand identification. This will help it retain its customers rather than
losing them to new entrants.

Bargaining Power of Suppliers

 The number of suppliers in the industry in which Puma operates is a lot compared to the buyers.
This means that the suppliers have less control over prices and this makes the bargaining power of
suppliers a weak force.
 The product that these suppliers provide are fairly standardised, less differentiated and have low
switching costs. This makes it easier for buyers like Puma to switch suppliers. This makes the
bargaining power of suppliers a weaker force.
 The suppliers do not contend with other products within this industry. This means that there are no
other substitutes for the product other than the ones that the suppliers provide. This makes the
bargaining power of suppliers a stronger force within the industry.
 The suppliers do not provide a credible threat for forward integration into the industry in which
Puma operates. This makes the bargaining power of suppliers a weaker force within the industry.
 The industry in which Puma operates is an important customer for its suppliers. This means that the
industry’s profits are closely tied to that of the suppliers. These suppliers, therefore, have to
provide reasonable pricing. This makes the bargaining power of suppliers a weaker force within the
industry.
How Puma can tackle the Bargaining Power of Suppliers?

 Puma can purchase raw materials from its suppliers at a low cost. If the costs or products are not
suitable for Puma Series 2013 1, it can then switch its suppliers because switching costs are low.
 It can have multiple suppliers within its supply chain. For example, Puma can have different
suppliers for its different geographic locations. This way it can ensure efficiency within its supply
chain.

Bargaining Power of Buyers

 The number of suppliers in the industry in which Puma operates is a lot more than the number of
firms producing the products. This means that the buyers have a few firms to choose from, and
therefore, do not have much control over prices. This makes the bargaining power of buyers a
weaker force within the industry.
 The product differentiation within the industry is high, which means that the buyers are not able to
find alternative firms producing a particular product. This difficulty in switching makes the
bargaining power of buyers a weaker force within the industry.
 The income of the buyers within the industry is low. This means that there is pressure to purchase
at low prices, making the buyers more price sensitive. This makes the buying power of buyers a
weaker force within the industry.
 The quality of the products is important to the buyers, and these buyers make frequent purchases.
This means that the buyers in the industry are less price sensitive. This makes the bargaining power
of buyers a weaker force within the industry.
 There is no significant threat to the buyers to integrate backwards. This makes the bargaining
threat of buyers a weaker force within the industry.

How Puma can tackle the Bargaining Power of Buyers?

 Puma can focus on innovation and differentiation to attract more buyers. Product differentiation
and quality of products are important to buyers within the industry, and Pumacan attract a large
number of customers by focusing on these.
 Puma needs to build a large customer base, as the bargaining power of buyers is weak. It can do
this through marketing efforts aimed at building brand loyalty.
 Puma can take advantage of its economies of scale to develop a cost advantage and sell at low
prices to the low-income buyers of the industry. This way it will be able to attract a large number of
buyers.

Threat of Substitute Products or Services

 There are very few substitutes available for the products that are produced in the industry in which
Puma operates. The very few substitutes that are available are also produced by low profit earning
industries. This means that there is no ceiling on the maximum profit that firms can earn in the
industry in which Puma operates. All of these factors make the threat of substitute products a
weaker force within the industry.
 The very few substitutes available are of high quality but are way more expensive. Comparatively,
firms producing within the industry in which Puma operates sell at a lower price than substitutes,
with adequate quality. This means that buyers are less likely to switch to substitute products. This
means that the threat of substitute products is weak within the industry.
How Puma can tackle the Threat of Substitute Products?

 Puma can focus on providing greater quality in its products. As a result, buyers would choose its
products, which provide greater quality at a lower price as compared to substitute products that
provide greater quality but at a higher price.
 Puma can focus on differentiating its products. This will ensure that buyers see its products as
unique and do not shift easily to substitute products that do not provide these unique benefits. It
can provide such unique benefits to its customers by better understanding their needs through
market research, and providing what the customer wants.

Rivalry Among Existing Firms

 The number of competitors in the industry in which Puma operates are very few. Most of these are
also large in size. This means that firms in the industry will not make moves without being
unnoticed. This makes the rivalry among existing firms a weaker force within the industry.
 The very few competitors have a large market share. This means that these will engage in
competitive actions to gain position and become market leaders. This makes the rivalry among
existing firms a stronger force within the industry.
 The industry in which Puma is growing every year and is expected to continue to do this for a few
years ahead. A positive Industry growth means that competitors are less likely to engage in
completive actions because they do not need to capture market share from each other. This makes
the rivalry among existing firms a weaker force within the industry.
 The fixed costs are high within the industry in which Puma operates. This makes the companies
within the industry to push to full capacity. This also means these companies to reduce their prices
when demand slackens. This makes the rivalry among existing firms a stronger force within the
industry.
 The products produced within the industry in which Puma operates are highly differentiated. As a
result, it is difficult for competing firms to win the customers of each other because of each of their
products in unique. This makes the rivalry among existing firms a weaker force within the industry.
 The production of products within the industry requires an increase in capacity by large increments.
This makes the industry prone to disruptions in the supply-demand balance, often leading to
overproduction. Overproduction means that companies have to cut down prices to ensure that its
products sell. This makes the rivalry among existing firms a stronger force within the industry.
 The exit barriers within the industry are particularly high due to high investment required in capital
and assets to operate. The exit barriers are also high due to government regulations and
restrictions. This makes firms within the industry reluctant to leave the business, and these
continue to produce even at low profits. This makes the rivalry among existing firms a stronger
force within the industry.
 The strategies of the firms within the industry are diverse, which means they are unique to each
other in terms of strategy. This results in them running head-on into each other regarding strategy.
This makes the rivalry among existing firms a strong force within the industry.
RECOMMENDATIONS

 In terms of product innovation, 20% of the 26-45 age group want to see the introduction of
new shoes.

 50% of the surveyed population shoes keeping its fashion in mind.

 Consumers in the 26+ age group, on an average, see Availability as a more important factor in
buying a shoe as compared to price. Thus, premium shoes can be introduced or promoted to
target this segment

 Emphasize the fashion benefits of shoes, while not associating it with puma directly

 Launch a new product focusing on comfort like apparels at a premium price, targeting the 26-
45 age group

 Explore the possibility of affordable products for the 45+ age group

 Introduce a product which focuses on comfort, in order to counter growing market share
 References

 Desbordes, M., Aymar, P., & Hautbois, C. (Eds.). (2019). The Global Sports Economy: Contemporary
Issues. NY: Routledge.
 Gupta, G., & Mishra, R. P. (2016). A SWOT analysis of reliability centered maintenance
framework. Journal of Quality in Maintenance Engineering, 22(2), 130-145.
 Gürel, E., & Tat, M. (2017). SWOT Analysis: A theoretical review. Journal of International Social
Research, 10(51), 994-1006.
 Phadermrod, B., Crowder, R. M., & Wills, G. B. (2019). Importance-performance analysis based
SWOT analysis. International Journal of Information Management, 44, 194-203.
 Puma SE – Annual Report 2018.
 Puma SE – Innovation – Culture of Firsts.
 Puma SE – Puma and Porsche Design Enter into Strategic Partnership.
 Puma SE’s E-Commerce Website.
 U.S. Department of Commerce – International Trade Administration – Textiles, Apparel & Sporting
Goods.
 U.S. Department of Commerce – International Trade Administration – The Consumer Goods
Industry in the United States.