Puma Company’s International Business Strategy

Puma Brand and Drivers of Growth in the Indian Sportswear Industry

Several things made Puma a successful product. As a brand, Puma focused more on its consumers than on the profit margins. The company provided footwear that fit their clientele. For example, while entering the Indian market, the company realized that more clients preferred flip-flops and sandals as compared to closed shoes. The company included the said type of shoes for the Indian market to their portfolio. In turn, the company recorded massive profits compared to their competitors. In the same breath, it is crucial to acknowledge that the company’s strategy takes a country approach as opposed to a global approach. By doing so, the company customized its products based on the socio-economic and cultural preferences of its clients in different countries.

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The company’s retail strategy also led to its success. For example, franchising helped the company become very successful. Taking the case of Puma India, in 2016, the company had 340 stores in the country. 320 of the 340 stores were franchises (Puri & Krishna, 2016). According to Puri and Krishna (2016) franchising is an efficient way of pushing one’s product to a new market as it uses local connections to develop trust amongst its target clients. In the same breath, Puma did not pick out partners for the franchises. The company used a strategic approach, where they made deals with local footwear stakeholders to sell their products. For example, the company made a partnership deal with Rishabh Sports Station, which was Reebok’s largest vendor (Puri & Krishna, 2016) when Reebok closed some of their shops.

Thirdly, the promotional strategy used moved the company ahead of many of its competitors. The company invested in other ventures, such as a posh social club in the Indian suburbs, to attract its clients. The Forever Faster campaign was also enhanced to capture the new markets. Initially, the said campaign focused on athletes, but with the new markets, it focused more on the client, creating the idea that Puma’s shoes were not only fit for athletes, but for everyone who wears them.

The Indian sportswear industry grew by 25% in 2013 due to sports-inspired clothing. Many of the locals began to prefer lighter sportswear with high-performance rates. Puma took advantage of the new trend to create lighter footwear for the Indian market. Additionally, it changed its marketing strategy also to involve the ordinary people. Another growth factor of the Indian sportswear as the disposable income level increased. Additionally, the consumers became more aware in regards to fitness and health. Thus, exercising became an excellent way for Puma to make profits. Additionally, the public became more invested in good health. More people joined gyms and started exercising. The trend increased consumer demand of sports gear and companies such as Puma took advantage of the situation. The company also provided a variety of sporting merchandise that would entice the general public.

Maintaining the Leadership Position in the Indian Sportswear Market

Even though Puma leads its rivals in the Indian market, the company still has much to do regarding maintaining the leadership position it enjoys. To begin with, Puma has to change its strategy. The company has used the same marketing approach for approximately eight years. It is the said plan that has allowed Puma to become the number one brand in India. Indeed, one can argue that even though the strategy ensured the company recorded the highest profits compared to its competitors, it has to be adjusted to fit the company well enough to maintain its current position. In the new strategy, Puma has to consider the growing E-Commerce model and the evolving Indian market as well. Whereas the market is still pushed by fitness and healthy living, the cost of living in India has gone up (Nakassis, 2016).

Even though Puma tapped into the E-Commerce model, much still has to be done in the same regard. Additionally, new online marketing strategies have come up. The company would have to revise their online marketing strategies to incorporate the said new policies. For example, the current prevailing trend in digital marketing is the use of “online focus groups”. For instance, sports fanatics have online groups, which offer a great opportunity for organizations such as Puma to advertise their products. One can argue that Puma already has experience in this type of marketing, albeit using the strategy offline. As stated, the company has already set up a high-end social club in the Indian suburbs. The same concept applies to the use of online focus groups.

It can also be argued that Puma has to revise its prices or make better shoes at a more affordable rate. With the cost of living going up, access to disposable income is limited. Thus, to the target market, the purchase of shoes and other sportswear is preferential. The revision of prices will ensure that clients can still purchase Puma products at all times. It is vital that the company does not stop manufacturing their top brands in the country. The reason behind this is that some consumers are loyal to brand and product (Sengupta, 2013). Thus, replacing or removing the product from the market would mean losing profits. Puma also has to ensure that they manufacture high-quality merchandise. According to Baisya (2013), the modern consumer is very keen on quality. The trend is expected to grow more in the near future.

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Fighting Foreign Brands in the Market

According to the 2016 census, India has approximately 1.3 billion people (NPCS, 2014). The large population has attracted numerous companies in the country. Suffices to mention, more sportswear companies have also entered the Indian market. To fight the competitors, Puma has to become the ultimate household name in the region. There are several things that the company should consider in an attempt to become the biggest domestic name in India. First, the company has to produce footwear for all people regardless of their socio-economic status. According to NPCS (2014), 22% of the population in India is living below the country’s poverty line. 267 million people in the country are in the middle-class economic bracket. The change in the structure of the Indian society has allowed more people to amass wealth and live well. It is important to note that whereas Puma offers low-priced products compared to its competitors, a large percentage of people in the country cannot afford their products. Thus, the company has to make sure it has products for each type of individual in the market.

Secondly, to fight the response from the other international brands and become the number one footwear brand, the company has to create a monopoly in the market. Since it is not the first footwear company in the region, Puma has to make sure its products are in every store all across the country. Baisya (2013) argues that the marketing strategy ensures that a potential consumer will always have a Puma product to consider regardless of the type of footwear he/she is looking for, or the store he or she loves to shop. It is important to mention that this strategy will require massive production. Thus, the company has to consider its capacity to produce that many shoes to cover all major stores in India. It is advisable that the company start with one city at a time. The process of choosing which cities to start with should be based on the company’s current profitability margin, where the most profitable regions get the full store coverage.

Theories of International Business

One theory of international business that can be found in the Puma case is the Monopolistic Advantage Theory. Buckley and Ghauri (2015) explain that the Monopolistic Advantage Theory explains that international companies have to create a sense of monopoly, or near monopoly, to be successful in a foreign market. The theory applies to the Puma case as the company seeks to achieve monopoly through franchising. As stated, in 2016, Puma had 340 stores in India out of which 320 were franchised. Buckley and Ghauri (2015) confirm that many franchises are a partnership between local stores and international brands. By partnering with the local stores, Puma creates a form of trust with its target audience. Additionally, the monopoly is achieved as Puma shoes can be found in almost all stores. Since it is much cheaper for the company to use franchises, it is easier for them to also supply products all through the country.

Another theory that can be applied in the Puma case is the product life cycle theory. Buckley and Ghauri (2015) explain that the product lifecycle notes that international products usually have their first successful venture in the US. Other companies in developing countries then import the said merchandise attracting the companies producing said materials to establish manufacturing plants in the developing countries. In the case of Puma, whereas the brand is German, it is very successful in the US. Before Puma moved into the market, some local shops imported the brand. Due to the large market size, and the popularity of the brand, the company decided to open its stores in the country.

The New Trade Theory can also be used to analyze Puma’s experience in the Indian market. According to the New Trade Theory, international trade increases the choices available to consumers and at the same time, reduces the costs of the products (Buckley & Ghauri, 2015). When Puma entered the Indian market, it found Nike and Reeboks among other competitors. Due to the availability of various brands, the company had to lower its costs considerably to gain an advantage over the rest. The other companies were also forced to revise their prices making footwear more affordable to the target market. It is important to note that while New Trade Theory pushes for reduction of cost based on the availability of different brands, it also stresses the need for quality. Many international companies fail to capture global markets due to their compromise on quality. To succeed in achieving the ultimate monopoly, Puma has to ensure all its merchandise, even the more affordable ones, are of high quality.

References

Baisya, K. R. (2013). Branding in a competitive marketplace. New Delhi: SAGE Publishers

Buckley, J. P. & Ghauri, N. P. (2015). International business strategy: Theory and practice. New York, NY: Routledge

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Nakassis, V. C. (2016). Doing style: Youth and mass mediation in South India. Chicago, IL: University of Chicago Press.

NPCS. (2014). Market research report on future of online retailing in India. New Delhi: Niir Project Consultancy Services

Puri, S. & Krishna, S. (2016). Puma’s challenge to maintain leadership in India. London, UK: Ivey Publishing

Sengupta, S. (2013). Strategic pokes: The business jalebi. New Delhi: SAGE Publishers

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