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Roller blade sports equipment company, Exercises of Finance

NITTE UniversityFinance

case study on roller blade, all thing about the sports company

Typology: Exercises

2017/2018

Uploaded on 09/08/2018

shreyas12345
shreyas12345 🇮🇳

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VIDEO CASE 5
ROLLERBLADE: ON TOP OF THE MARKET
What's the hottest sports/leisure activity in the United States?
Basketball? Soccer? Running? Dancing? None of these: It's in-line
skating. Since 1995, when in-line skating jumped from third to first
place, more Americans have put on their skates and taken to the
asphalt than have joined any other participation sport. And as all
those Americans hit the asphalt, companies such as Rollerblade
have produced a flood of new in-line skate models and types.
Knowing that idols such as Madonna and J.F.K., Jr., like to in-line
skate enhances the popularity of the sport even more.
The number of new models and skates attests to the wide
ranging motivations Americans have for skating. For some, it's just
fun—afternoon exercise in the park and a chance to get some fresh
air and sunshine. For others, in-line skating is serious exercise ideal
for maintaining fitness. Still others race or compete on skates or
participate in sports associated with in-line skates, such as hockey.
To keep up with the market, manufacturers of in-line skates
carefully study market statistics, looking for changes. For example,
an examination of data on the Rollerblade Website
(www.rollerblade.com) indicates rapid growth in the total number of
in-line skating participants, even if growth is slowing a bit. Between
1994 and 1995, in-line skating participation grew 20 percent
(compared to growth rates higher than 30 percent in the preceding
five years.) Growth reached 22 percent between 1995 and 1996.
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VIDEO CASE 5

ROLLERBLADE: ON TOP OF THE MARKET

What's the hottest sports/leisure activity in the United States? Basketball? Soccer? Running? Dancing? None of these: It's in-line skating. Since 1995, when in-line skating jumped from third to first place, more Americans have put on their skates and taken to the asphalt than have joined any other participation sport. And as all those Americans hit the asphalt, companies such as Rollerblade have produced a flood of new in-line skate models and types. Knowing that idols such as Madonna and J.F.K., Jr., like to in-line skate enhances the popularity of the sport even more. The number of new models and skates attests to the wide ranging motivations Americans have for skating. For some, it's just fun—afternoon exercise in the park and a chance to get some fresh air and sunshine. For others, in-line skating is serious exercise ideal for maintaining fitness. Still others race or compete on skates or participate in sports associated with in-line skates, such as hockey. To keep up with the market, manufacturers of in-line skates carefully study market statistics, looking for changes. For example, an examination of data on the Rollerblade Website (www.rollerblade.com) indicates rapid growth in the total number of in-line skating participants, even if growth is slowing a bit. Between 1994 and 1995, in-line skating participation grew 20 percent (compared to growth rates higher than 30 percent in the preceding five years.) Growth reached 22 percent between 1995 and 1996.

What do changes in the popularity of in-line skating mean for a company like Rollerblade? Rollerblade pioneered in-line skating in the United States when Brennan and Scott Olson decided to sell in- line skates to hockey players during the off-season in the early 1980s. Throughout most of the 1980s, Rollerblade had market shares of around 80 to 100 percent. But as in-line skates sales grew, so did the competition. Firms such as K2 entered the market and the competitive pressures forced all firms to create distinctive differences between their brands. With its early jump on the competition and aggressive marketing, Rollerblade has maintained a market share greater than 40 percent, but doing so requires paying close attention to the market. Recent declines in the growth rate call for examining market data even more closely. To understand the market, you must first answer the question, “Who skates”? Thirty-five percent of all skaters are children under 12, and 29 percent are teens. But the greatest growth in number of skates in 1996 versus 1995 occurred among adults aged 35 to 54 years (a 61 percent increase). When you couple that with the fact that baby boomers—yes, those same 35- to 54-year-olds—are the largest age group in the United States, it doesn't take a rocket scientist to figure out where the potential market growth is. Nor does it take much science to realize that the kids, teens, and adults skate for different reasons.

skate purchases to replace worn out equipment or to trade up to skates with different features such, as faster wheels, better brakes, better fit, and greater comfort. For these skaters, Rollerblade has to design new models in colors and styles that appeal to each age group. As a result, there may be more models and styles aimed at kids and teens than at adults. Statistics tend to support this reasoning—more children (83 percent) and teens (84 percent) are classified as advanced skaters than adults (66 percent). More advanced skaters typically will pay more for skates than beginners. A Money magazine article indicated that beginners should purchase skates that cost about $100 but more advanced skaters might well pay as much as $339. In-line skaters are evenly divided between men and women. But men and women often have different motivations for skating and look for different skate styles and colors, prompting Rollerblade to think in terms of men's versus women's skates. In-line skaters also tend to be more upscale, with an average household income of $53,000 versus the U.S. average of $46,000. This could be interpreted to mean that this is an upscale sport— reserved for those with the money— or that companies such as Rollerblade have priced themselves above the mass market. Believing the latter, in 1992 Rollerblade introduced its Blade Runner line of affordable skates, protective gear, and accessories for kids and adults. These products are sold by mass merchandisers to separate them from the

more expensive products found in specialty and sporting goods shops. In order to maintain leadership in an industry, a firm must sell to the market segment that sets the industry standard. In many industries, that's the high-end, high-price product segment. For in- line skates, it's the segment of aggressive skaters who are the ultimate consumers and who set the standard for performance. For this market, it is extremely important that a brand be distinguished from the skates their parents use. For them, Rollerblade has developed a new line of skates with a logo consisting of a backward R and a B. To understand the needs and wants of these users, and to build a stronger relationship with this segment, Rollerblade invites aggressive skaters such as Chris Edwards to its facilities several times a month to work with its R&D people and to test skates. Competition also forces changes. K2 came out with an athletic shoe on wheels, which forced Rollerblade to take a close look at this concept. In fact, Rollerblade brought out the Synergy line of soft-shell skates—not a fabric skate but also not the hard model skates of the past. Although Rollerblade officials think most consumers will like the feel of fabric skates in the store, they worry that customers might well be turned off to in-line skating if the fabric skates don't last very long or give poor performance. Skating with your toe poking out the front of the shoe is neither fun nor safe.

such as these, and preventing any more slides in its market share, demands that Rollerblade stay in close contact with its market. Questions for Discussion

  1. What subculture, family, reference group, life cycle, or social class influences affect the purchase of in-line skates?
  2. According to the Maslow hierarchy, what motives are satisfied by in-line skating? How does learning affect participation in and purchase of in-line skates?
  3. Using the four categories of buying behavior identified in the chapter, describe the first-time purchase of in-line skates and a fourth-time purchase of such skates. How will the knowledge base of the consumer change between the first and fourth purchases?
  4. How is postpurchase behavior likely to affect the purchasers of fabric skates versus the purchaser of the Synergy skates from Rollerblade?
  5. Fabric skates are an innovation in the in-line skating industry. Evaluate these on the basis of relative advantage, compatibility, complexity, divisibility, and communicability. Has Rollerblade made the best response to fabric skates with its soft-shell skate?
  6. (^) How might the entry of Reebok and Nike affect Rollerblade's position in the in-line skating industry? How could Rollerblade respond to the marketing efforts of these competitors? References: “Vendors Line Up for In-Line,” Women’s Wear Daily, March 20, 1997, p. 11; “Showscope Q1 ’97,” Sporting Goods Business, March 24, 1997, pp. 50-2; “In-Line Activewear,” Women’s Wear Daily, November 2, 1995, p. 18; Andy Bernstein, “The SGB Interview with Dennis Shafer (President and CEO Rollerblade),” Sporting Goods Business, June 23, 1997, pp. 42-43; Alyssa Lustigman, “Shaping Up,” Sporting Goods Business, June 1996, p. 36; Elif Sinanoglu, “Whiz Past Those $339 In-Line Skates,” Money, March 1995, p. 178; and information from the Rollerblade Web site.