Chat with us, powered by LiveChat Please answer the following (in a Case Study / written - Study Help
  

Please answer the following (in a Case Study / written paper format):

Remember, do NOT use bullets. You can break your paper into sections as shown below. The questions are prompts to help you focus on key areas of the case and provide analysis accordingly.

Do not use any outside research whatsoever.

All research is contained within the case PDF. Please provide your own, original analysis.

Read the case study PDF: Asics: Chasing a 2020 Vision in order to complete this assignment.

RULES / Important notes:

Do not use any outside research whatsoever.

· All research is contained within the case PDF. Please provide your own, original analysis.

· Any use of outside research, discussion with anyone (including classmates) will result in a failing grade

· Case studies are from the perspective of the information in the case. If you know “in real life” what Asics ended up doing you cannot use this information. You are only to use information in the case to perform analysis or make recommendations.

· References should be made to material taken from the case. (if you cite the case, mention the citation as you would any source that is not your own ideas).

· Covid-19 / Pandemic impacts on strategy

· You will usually be asked to make a minimum 3 strategic recommendations in most assignments. The pandemic is NOT to be a core part of your strategic analysis UNTIL AFTER you have provided 3 examples that examine the business without regards to the pandemic.

· IF you choose to make Covid a central point, it will need to be your 4th recommendation (3 recs need to be non-pandemic related)

· The reason / the “Why”: While the pandemic has clearly had global impact, it is vital you learn to analyze businesses, markets and strategies without only looking at the pandemic alone. The pandemic is a somewhat rare event and we want to make sure we exercise other forms of situational and strategic analysis as well.

· Grade impact: You will lose as much as a full grade level if your analyses all hinge on the pandemic alone.

· Sustainability & influencer strategies are a given, mentioning them without research and market insights is the worst form of leadership… therefore they are NOT allowed unless specifically directed.

· If you want to use them, ask in advance (email me) and let’s decide if there’s a strategic reason backing their use (feel encouraged to explore)

· If they are specifically requested then they will be relevant to your answers and encouraged

· The reason / the “Why”: Students have tended to simply use influencers or sustainability as suggested business strategies with no research or data backing them. Analyzing the impacts of sustainability is encouraged IF you are willing to do the research to back it up.

· If it matters to the business or to you then contact me in advance at [email protected] and let’s vet whether you are strategically applying sustainability.

· Obligatory use of “sustainability” or “influencer” will result in points loss – as much as a grade level

· Never use first person (I, me, myself) in class writings. They will result in immediate loss of a grade level

· The reason / The “Why”: We are here to write as future leaders so let’s “level up” our discourse such that we communicate at the most senior level possible.

· SPECIAL TIP: The answer is always…. always… always start with the consumer (namely customer segments) and creating value for them.

· Value creation is always our goal

· ALWAYS FOCUS ON SEGMENTS… become “customer obsessed”

· Remember – demographics are not segments – we want to include everyone who shares the same drive and passion and demographics alone will rarely, if ever, capture those drivers. (see video for more commentary)

AGAIN!!!

Do not use any outside research whatsoever.

All research is contained within the case PDF. Please provide your own, original analysis.

Read the case study PDF: Asics: Chasing a 2020 Vision in order to complete this assignment.

1. Strategies:

· Analyze Asics proposed strategies that were under consideration

· At a high-level, why were these considered opportunities?

2. Customers:

· Elaborate upon Asics target customer segments and which new segments were they seeking to gain appeal

· Why was it important to look beyond serious / marathon runners alone?

3. Company & Competitors:

· Examine Asics’ position in the marketplace along with their product line. (Exhibit 3 may be helpful)

· Look at Asics portfolio of brands

· Into what product areas are they looking to expand and what are the challenges?

· Do mid-tier products appeal to different segments?

· What are the pricing challenges?

· Examine Asics key competitors – How did Asics compare to its competitors?

· Where were there gaps in the brand, positioning and/or product line? Were these risks or opportunities?

4. Proposed new direction:

· Given your analysis so far, has Asics made the right decisions in terms of product line and positioning?

· What is the role of DTC and how does it make sense to their future plans?

· What is Asics plan for a new brand?

a) Does their brand make sense in light of the new direction they wish to achieve (customers, products, market position and so on)?

b) Have they differentiated and done so to the degree needed to compete?

c) Does their new product line and strategy align with their brand

· What are the potential upsides (or downsides) of the RunKeeper acquisition?

a) Does it appeal to the right customers?

b) How might this work or possibly fail?

c) Does it make Asics more competitive and how?

5. Risks

· Given your analyses, should Asics be doing anything differently?

· What are 2-3 major risks you’ve uncovered to their strategy or new direction?

6. Recommendations

· Provide at least 2 (or more if you choose) recommendations for Asics to succeed based upon ALL your analysis above and the case study.

REQUIRED EXERCISE (BEFORE YOU WRITE): Perform a brand pyramid analysis of Asics using the case document. Use bullet points – this is an EXERCISE and NOT a written analysis. You may use a drawing or do this via text. A brand pyramid has been added so you can see the visual. Your analysis should mirror your work from the discussion board assignment as follows: (REMEMBER TO USE CASE EXHIBITS TO SEE IMAGES)

SALIENCE (Category)

· At first sight or contact with the brand what do most customers perceive or think of Asics?

· Describe needs this general category fulfills for target segments

· Recognition – how is Asics recognized and regarded within its category by target segments?

PERFORMANCE & IMAGERY

· Features & Functional – what features do target segments like about Asics and its product(s)? (Remember they are trying to expand)

· Product Design (elements that we know matter)

· List product/design and how your brand’s design differentiates and what it communicates

· What level and type of performance do customers expect?

· List some points where brand confusion may occur.

· (From video: Think Keurig where some customers believe Keurig has instant coffee in their k-cups instead of high quality grounds. The company needs to change this perception. This can also be something the company does well but not enough customers are aware)

· What type of imagery does Asics use to differentiate and set themselves apart?

JUDGEMENTS & FEELING

· Given Asics’ chosen tagline and branding how does it connect to the judgements and feelings of its target customer segments?

· What do core customers feel the brand says about them?

· Emotional Connection – describe the emotional fulfillment target segments receive from Asics

· Social Connections – what social value does Asics deliver to target segments? (Think Prius and how it allows customers to communicate they are “green” just by driving such a unique looking vehicle)

· Remember social media matters here

RESONANCE

· How do die hard users bond with Asics?

· What are at least 3 levels of deep feeling or connection Asics is seeing with its best customers that it can try and use to resonate with a wider audience?

9 – 5 1 7 – 0 6 0

R E V : A P R I L 2 4 , 2 0 1 8

Professor Elie Ofek and Executive Director Nobuo Sato and Senior Researcher Akiko Kanno (Japan Research Center) prepared this case. It was
reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business
School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements,
sources of primary data, or illustrations of effective or ineffective management.

Copyright © 2016, 2017, 2018 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-
545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

E L I E O F E K

A K I K O K A N N O

ASICS: Chasing a 2020 Vision
In mid-April 2016, Motoi Oyama, President and CEO of major sporting goods manufacturer ASICS

Corporation (ASICS), had just returned to his office in Kobe, Japan, after attending a kickoff meeting
with Runkeeper executives in Boston, where, to his surprise, it had still been snowing. Two months
earlier, ASICS had acquired FitnessKeeper Inc., which operated the fitness-tracking application
Runkeeper. Oyama pondered how ASICS could best utilize this new asset going forward.

ASICS sales of 428 billion yen in 2015 had exceeded the target set out five years earlier; however,
profits were much lower than desired. The goal for the coming five years was ambitious: annual sales
of 750 billion yen with operating income of at least 10% of sales. Yet Oyama believed that the direction
described in the new five-year strategic plan, “ASICS Growth Plan 2020” (AGP 2020), was promising.
One of the core strategies proposed was to expand the customer base from serious runners to a wider
audience. Another was to embrace a direct-to-consumer (DTC) mindset, a shift from the past business
model that was heavily based on dealing with large retailers, to having more company-owned retail
outlets and direct interactions with end consumers. A third strategy was to communicate a consistent
brand worldwide, which would allow consumers to develop an emotional connection with ASICS
products. However, dilemmas abounded on how to bring these core strategies to life.

By far the most successful ASICS category was running. ASICS shoes were an established brand
among “serious runners” who appreciated the shoes’ high quality and functionality, the result of
continuous technical innovations. In fact, nearly 50% of finishers in major international marathons
wore ASICS shoes—more than any other brand. But participation in full marathons was no longer
growing. Instead, data suggested that participation in casual running of 5K and 10K distances, often
called “fun runs,” were on the rise. (See Exhibit 1 for trends in running races.) In order to attract
consumers in the Fun Run segment, ASICS felt it needed to offer shoes that were more stylish and at a
lower price point. While such a move could spur growth en route to meeting the 2020 goals, it risked
alienating ASICS’ core customers. Moreover, given smaller expected margins, the company would
have to sell three mid-market pairs to get the same dollar margin as on one of its higher-priced shoes.

Another approach to widening the customer base was to intensify recent efforts in what ASICS
called “lifestyle” categories. In 2002, the company had resurrected the Onitsuka Tiger brand, with an
emphasis on trendy, European fashion–oriented, high-end shoes and apparel. In January 2015, the
company also relaunched the ASICS Tiger brand, featuring casual shoes with thick gel soles and
designs inspired by hip U.S. street wear. However, that meant promoting three different brands—

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ASICS, Onitsuka Tiger, and ASICS Tiger—all of which had the company’s signature 4-stripes logo,
posing challenges in terms of how to avoid brand confusion and how to allocate marketing resources.

With respect to communications, up to this point the company was mainly hitting on the themes of
exceptional performance and desire to win, allowing each region to tailor the message as it saw fit.
Management now sought a globally unified strategy that would create a deeper emotional connection
between the consumer and the ASICS brand. But what that emotion should be was yet to be determined.

Oyama thought about the lofty 2020 goals he had intimated to investors a couple of months ago,
just as the $85 million acquisition of Runkeeper was publicly announced. The fitness application by
now had over 40 million registered users worldwide. It was tempting for him to believe that this asset
would propel the company to achieve new heights. But to his dismay, discussions on how to exactly
integrate Runkeeper with ASICS felt like they were just running around in circles.

Sports Footwear and Apparel Background
The first rubber-sole shoes that were called “sneakers” were developed in 1916, and soon after,

Massachusetts-based Converse developed the world’s first shoes for basketball, the “All Star,” which
became popular among professional players. Since the 1970s, the demand for sneakers grew as jogging
became increasingly popular in the U.S. The Los Angeles Olympic Games in 1984 also gave a boost to
the demand for sports footwear and apparel. The 1980s saw the emergence of many sneaker brands,
each with its own cushioning technology, and companies developed different products for each sport.
The number of sports-shoe models grew dramatically between the 1970s and 1990s.

By 2015, Nike and Adidas were the dominant number-one and number-two players, respectively,
in the global sportswear industry, each generating sales that were three to six times those of rivals in
each region. 1 ASICS, Puma, New Balance, and Under Armour competed for the third position. (See
Exhibit 2 for key competitor financials and Exhibit 3 for ASICS competitive brand position.)

Nike , the world’s largest footwear, apparel, and equipment company, was established in 1964
in Oregon. Cofounder Phil Knight had the aspiration to offer affordable, high-quality running shoes.
Ironically, the company initially imported Onitsuka Tiger sneakers (later ASICS) from Japan under the
name Blue Ribbon Sports. In 1971, it started the Nike brand, after the name of the Greek goddess of
victory, and created the by-now-famous Swoosh trademark. Cofounder Bill Bowerman developed the
innovative waffle-sole shoes without spikes that could grip equally well on grass or bark dust.2 In 1978,
Nike launched the “Air” model that used special cushioning technology in its midsole, which triggered
other manufactures to join the race to develop high-tech sneakers. The “Air Jordan” model launched
in 1984 and led to explosive sales. In the 1980s, Nike’s running-shoe business saw a downturn, and the
company was forced to restructure. The company decided to shift its focus from products for top
athletes to those that met broader consumer needs. 3 The famous campaign “Just Do It” helped attract
a wider range of customers and led to a turnaround in sales in the 1990s.4 Nike’s sales revenue as of
the fiscal year ending May 2015 were US$30.6 billion and net income was US$3.27 billion; 60% of sales
were from footwear, and 28% from apparel.5

Adidas In 1924, Adi Dassler and his brother, Rudolf, started an athletic shoe company. In 1948,
the company was divided; Adi founded Adidas, while Rudolf founded Puma. Adidas produced top-
selling shoes for different sports, such as “Adizero” soccer cleats, “Stan Smith” tennis shoes, and the
“Country” running sneakers. The “Trefoil,” its logo with three stripes, became one of the most popular
brand symbols. 6 The Adidas Group also owned Reebok and TaylorMade.

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Following the exit of the founding family in the early 1990s, change in leadership and questionable
strategic decisions resulted in record losses in 1992. The new CEO appointed in 1993 turned around
the business by changing the company from being sales-driven to being marketing-driven. The
company went public in 1995.7 Adidas was the first in the industry to introduce a lifestyle segment.
The company divided the brand into two groups: “Adidas Performance,” which was purely sports
oriented, and “Adidas Originals,” which was fashion oriented with premium and stylish designs.8
Adidas collaborated with public figures and celebrities, which was effective in appealing to young
adults.9 The Adidas Group’s net sales in FY2015 (ending December 2015) were euro 16.9 billion, and
net profit was euro 720 million. 10 About 49% of sales were from footwear, and 41% from apparel.11
Although number two overall, in the football (or soccer) category it held the number-one spot with
roughly 36% market share (compared to Nike’s 29% share).12

Puma In 1952, according to company claims, founder Rudolf Dassler developed soccer shoes
with the world’s first screw-in studs (although similar technology gained fame when the German
national team won the 1954 World Cup wearing Adidas and not Puma cleats). 13 In 1967, cartoonist
Lutz Backes created the famous logo with a leaping cat, and the company gradually extended its
product range into sportswear, with the logo appearing on all Puma products. 14 In 1998, Puma began
collaborating with designers such as Jil Sander, which ushered in a new trend in the industry.

The company was vying for the number-three global position and made large investments in
marketing. It competed with Nike and Adidas in soccer, and with other sports and fashion brands in
the lifestyle category. 15 In their “Forever Faster” campaign in 2015, the company featured brand
ambassadors such as Usain Bolt to emphasize Puma as the fastest sports brand. It also focused on
women by positioning its brand as “the most fashion-forward global sports brand.”16 The company
grew sales from 2006 to 2012 before turning to a decline in 2013 due to expanding too rapidly and large
spending in mass marketing.17 Puma’s net sales in FY2015 were euro 3.4 billion, with net profits of euro
37.1 million. About 44.5% of net sales were from footwear and 36.7% from apparel.18

Under Armour The company was founded in 1996 by Kevin Plank, a former varsity American
football player. Plank developed “Under Armour Heat Gear” T-shirts made of synthetic fabrics that
could keep athletes cool, dry, and light even in the most intense heat conditions. The following year,
he developed the “ColdGear” fabric, which could keep athletes warm, dry, and light in cold weather.
These innovative shirts quickly became popular among American football players. The company had
25 global websites and almost 200 directly owned retail stores around the world, and its DTC business
was 30% of net revenues.19 In 2015, the company recorded revenue of US$3.96 billion, achieving a five-
year compound annual growth rate of 30%, and net income of US$232 million. 20 Seventy percent of
sales were from apparel and 17% were from footwear.21

New Balance New Balance was founded in Boston, Massachusetts, in 1906 as a manufacturer of
shoes that provided arch support and corrected flat feet. In the 1960s, the company began
manufacturing running shoes for athletes, and was known for offering a wide variety of sizes, like
shoes with very narrow or very wide widths. In the 1970s, the business expanded, taking advantage of
the running boom. The company was privately held and recorded sales of US$3.3 billion in 2014.22

In 2015, New Balance announced that it would enter the soccer category, which would result in
head-on competition with Nike and Adidas.23 CEO Robert DeMartini made the move to presumably
shift the company’s focus back from lifestyle products to the athletic business. He commented, “There
is no doubt we need reinvigoration. We were not growing as much as in the early 2000s and
unintentionally we were getting older . . . and our customers are aging.” 24 He stressed the need for a
focus on performance. 25 In December 2015, New Balance announced that it would become the principal

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partner for the New York City Marathon, replacing ASICS, which had been the partner for 25 years.
The company was said to have offered approximately $90 million for an 11-year deal.26

ASICS Company History

Early Years and Diversification

In 1949, Kihachiro Onitsuka founded the sports-shoe maker Onitsuka Shokai in Kobe, Japan. The
company manufactured high-performance basketball and marathon shoes. In 1957, the company
acquired the trademark for its tiger design, and formally established the “Onitsuka Tiger” brand. In
the 1964 Tokyo Olympics, 47 athletes wearing Onitsuka shoes won medals, and the brand became well
known outside of Japan.27 Onitsuka started marketing the shoes in the U.S., and the tiger mark was
changed to the sleeker four-stripe design. In 1977, after sensing that the lack of apparel offerings
inhibited securing sponsorship deals, Onitsuka merged with two sportswear companies. At that point,
the company name was changed to ASICS, which was the acronym of Anima Sana in Corpore Sano,
meaning “A Sound Mind in a Sound Body” in Latin. The company grew, and many top athletes wore
ASICS products in major sporting events. In 1986, the company released the first jogging shoe
incorporating a new shock-absorbing material—GEL technology—designed to protect athletes’ feet.
Through the 1980s, when Japan experienced a period of rapid economic growth, the company
expanded its product lines to new areas such as tennis, badminton, bowling, skiing, and golf, as well
as clothing and sporting goods. (See Exhibit 4 for company timeline and milestones.)

Restructuring and Overseas Expansion

In the early 1990s, the Japanese domestic market saw a sharp downturn triggered by the burst of
the asset-inflated economy. The skiing and golf boom ended, which hit ASICS hard, and the company
plunged into the red and recorded net losses from 1993 to 1999. Another factor behind the company’s
slump was a decline in the domestic school-shoe business as competition emerged. In Japan, ASICS
had been a dominant player in school shoes as well as gym equipment used in school clubs. It was a
stable business since products were distributed through wholesalers and large orders could be
expected once the maker became a specified contractor for the school. But it was a practice that
increasingly put priority on selling volume rather than margins, resulting in low profitability.

On the other hand, ASICS continued to improve the quality of its products, especially running shoes,
by applying advanced technologies. It was difficult, however, for the company to command a premium
in Japan because the brand was perceived unfavorably among consumers. ASICS’ image was that of
unstylish shoes associated with school, as opposed to the “cool” and prestigious perceptions that
brands like Nike and Adidas enjoyed. The domestic market was also not expected to grow much given
the declining and aging population. Consequently, the company decided to withdraw from its
unprofitable businesses and concentrate on the running-shoe category overseas.

In 1998, ASICS launched a global campaign in U.S. and European markets. The company sponsored
marathon events in New York and other major cities. This turned out to be effective because the
grassroots effort coincided with the boom in marathon participation. The number of officially
recognized marathon races worldwide increased dramatically (threefold over a 20-year span) and with
it the demand for high-performance footwear. Many marathon runners chose ASICS shoes due to their
advanced functionality and cushioning (see Exhibit 5 for marathon finishers by shoe brand).

In time, ASICS also found overseas success in tennis, volleyball, and later, rugby. Katsumi Kato,
Director and Managing Executive Officer, Senior General Manager of Global Sales Division, explained

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the rationale: “The demographic and mindset of people that participate in tennis and volleyball is quite
similar to that of marathon runners. In fact, many runners also play these sports—but they used ASICS
for running and Nike for tennis. So we thought, why not leverage the recognition we have from
running to get our consumers or their friends to buy ASICS shoes for tennis and volleyball?” The
company followed its playbook of sponsoring major events as well as up-and-coming players. By 2015,
25 of the top 100 ranked tennis players wore ASICS shoes.

In 2002, to add to its athletic business overseas, the company relaunched Onitsuka Tiger in Europe
as a lifestyle brand. Unlike ASICS-branded products, the Onitsuka Tiger line was developed for town
use, with fashionable designs and thin soles. The brand was well received. By the fiscal year ending
March 2006, the company’s overseas sales exceeded its domestic sales for the first time. In 2008, Oyama
was appointed as President of ASICS. He was the first president with overseas management and
marketing experience. He stepped up the company’s global efforts and aggressively implemented
organizational reforms, like appointing board members with international business experience and
establishing a global management committee with non-Japanese executives.

In 2010, ASICS announced its mid-term business plan, “ASICS Growth Plan 2015” (AGP 2015),
which set a goal of 400 billion yen in sales with a 10% operating income ratio by FY2015. In the plan,
the company declared it would concentrate on three major areas: running, athletics (tennis, rugby,
volleyball, etc.), and lifestyle (the Onitsuka Tiger brand). The company vowed to strengthen ASICS’
positioning as a “True Sports Performance” brand. At the same time, it would decrease its emphasis
on soccer, basketball, and golf, where Nike and Adidas already had a strong global presence. ASICS
opened flagship stores in London (2008), New York (2014), and Paris (2015) to strengthen its apparel
business. 28 The stores were located near places where people went to run, like Central Park in New
York, and were intended to serve as showrooms for runners who were not familiar with the ASICS
brand. In company stores, customers could buy shoes fitted for their specific running style using the
ASICS Foot ID system, which created highly accurate 3-D foot maps and analyzed the movement of
the customer’s feet when running. By March 2016, the company had 785 directly owned stores
worldwide and a direct e-commerce business in 14 countries. (See Exhibit 6 for store locations.)

In 2015, ASICS managed to top the net sales goal. However, operating income of 27.4 billion yen
fell short of the 40 billion yen target. While the footwear category greatly exceeded AGP 2015
expectations, particularly running shoes, the apparel business did not fare as well, despite the various
initiatives to expand this side of the business. (See Exhibit 7 for ASICS financials.)

The New ASICS Growth Plan for 2016–2020
In February 2016, Oyama announced a new five-year strategic plan, AGP 2020, which would remain

effective up to the critical year when the Tokyo 2020 Olympic Games would be held. The plan set out
six core strategies: (1) shift to a DTC mindset, (2) expand the consumer base, (3) communicate a
consistent brand, (4) create differentiated innovation, (5) pursue operational excellence, and (6) develop
people and the team. The first four strategies were meant to lay the foundation for the types of products
and segments the company would serve and how it would reach customers.

Shift to a DTC Mindset

In the investor meeting announcing AGP 2020, Oyama commented, “Up to now, most of our sales
have been through sporting goods retailers. But in today’s environment there is nothing more
important than carrying out direct two-way dialogues with consumers.” Accordingly, ASICS planned
to change all product development and sales processes to be more consumer-centric. The company

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planned to open about 60 new own retail stores globally each year for the next five years. Where to
locate them and what experience they would offer remained an open question.

Management further acknowledged that increasingly consumers gathered information through
smartphones and social networks and purchased goods online—areas where ASICS lagged. The
company had an e-commerce platform, but sales resulting from it were very low. Oyama noted, “We
sell 70 million pairs of shoes a year and only 1 million of those are through our own e-commerce
platform.” About 17% of sales originated from online retailers like Amazon and Zappos. In general,
ASICS did not offer any discounts in its own retail stores for new products, though other retailers
(including e-retailers) sometimes offered price promotions and special deals on new models. Previous
season’s shoes were typically discounted to clear inventory.

The apparel challenge ASICS sought to enhance its apparel business as a key component of
the DTC shift. In a typical store, shoes were displayed on the back wall, taking up relatively little space,
while apparel occupied the middle area. Apparel sales were vital in justifying prime retail space costs.
In 2015, the company’s apparel sales were 14.4% of total sales, the lowest among the major sports
brands. New players Under Armour and Lululemon Athletica (Lululemon) in particular had a much
higher percentage of apparel sales. Lululemon, with over 350 stores worldwide, had been riding the
“athleisure” wave: casual clothing people wore for exercising and almost all other occasions, like
women wearing yoga pants when going out after work, or wearing athletic casual clothing to social
events. The trend was connected to an increase in people who were conscious about fitness or
considered athletics as a lifestyle. 29 Lululemon relied very little on other retailers as its company-
operated store sales amounted to over 75% of total sales, and another 18% was from online sales. 30
Traditional sports brands such as Nike and Adidas also expanded into athleisure clothing.

In 2016, the athleisure market was estimated to be US$97 billion. 31 Some saw it as a fad. Others
believed it would unlikely go away soon as it reflected a lifestyle that people of all generations found
appealing.32 ASICS knew it wanted to play in this category but, given the intense competition, it would
need to come up with differentiated products, and success was by no means guaranteed.

Expand the Consumer Base

The core of the company’s main brand, ASICS, was performance running footwear, which
accounted for over 50% of total sales. The highly functional and technically advanced shoes were
designed to serve dedicated athletes competing in marathon races. This was the result of a conscious
effort since the late 1990s to succeed in international markets by focusing on the long-distance running
category. ASICS shoes became known among marathon runners as offering superior cushioning for
comfort and designed to enhance performance. Paul Miles, Senior General Manager, Global Marketing
Division, commented, “For serious runners the ability to shave a few seconds from their marathon time
is a key goal, and that has been our main value proposition to this segment.” Many consumers
associated ASICS with “gel,” as it was the first company to introduce this substance in the sole of the
shoe. The flagship Gel-Kayano series, named after its designer, had seen 22 model improvements since
it first debuted in 1993. In 2015, the company launched the Gel-Quantum 360, which featured gel
throughout the entire sole. ASICS running shoes were released at prices between US$150–$200, higher
than most other global brands, yet still had strong support among serious runners, who represented
about 17% of the market (25% of spending). The MetaRun shoe, which included advanced materials
for added cushioning and a novel structure for stability, was released in a limited edition in late 2015
at a price of $250; initial allocations sold out almost immediately in some markets.

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Going for the Fun Run segment Although the company planned to keep pushing the
envelope on high-performance running footwear, several reasons caused management to ponder
expanding beyond the serious-runner segment. First, it was unclear how much value its core
consumers would continue to place on functional improvements. Isao Kato, Director and Managing
Executive Officer, General Manager of Corporate Strategy noted, “In our product development efforts
we consider eight criteria: cushioning, stability, breathability, durability, fit, light-weight, flexibility,
and grip. And a new model has to be superior to the old model along at least one of these. But having
made so many advances over the years, whether runners can actually still recognize improvements in
these criteria is a different question.”

Second, the number of marathon runners seemed to be plateauing, even declining. Miles offered his
view: “The core ASICS customer is a serious and stoic runner. Many are male, upper middle class, and
over 35 years old. In recent years it has become difficult to get a bib to enter major city marathons. So
these runners began asking themselves, ‘Why am I doing this?’ Others, after running several
marathons, felt that they ‘have been there and done that,’ so there was no longer a desire to go through
the process again. At the same time, another segment emerged that ran for health or recreational
reasons. These consumers typically ran much shorter distances, between 5K and 10K (as opposed to
42K), and often did so with others. They were younger and more female in comparison to serious
runners and seldom bought the ASICS brand. He added, “If you ask these folks, ‘Are you a ‘runner?’
they think this designation doesn’t apply to them. And because ASICS is the ‘runner’s brand’ that
sponsors marathons, we didn’t register as relevant for them. For these ‘fun runners’ the activity is not
about run time, it is about the experience and enjoyment. They are also much more price sensitive and
not looking for $200 shoes.” (See Exhibit 8 for motivations of runner segments.)

Production, pricing, and margins To attract fun runners, the company decided to develop a
mid-tier line of shoes, which would be ASICS branded and released toward the end of 2016. Yet this
decision came with several challenges. First, on the development side, Isao Kato noted, “For serious
runners development is about performance enhancements, while for fun runners it is more about feet
protection.” Katsumi Kato added, “Being a trusted brand with high technology is important, but that
is not enough. We need to infuse excitement. Fun runners are more fashion conscious and look for
interesting upper designs. A key success factor we have been tackling is ‘design appeal’ for younger
consumers, so we are hiring creative design talent. We also need to change people’s mindset internally,
like product developers.”

Second, because the company’s production processes were structured to make high-performance
models, and as these commanded consumer prices of $150–$200, the company was able to earn a 50%
margin on each pair. Pricing still had to be finalized for the mid-tier line. However, with current
practices, the margin for shoes priced in the $50–$75 range would be considerably lower than on typical
ASICS shoes. To tackle this issue, the company set up a team called “Break Through,” which worked
on taking out some of the high-end functions and streamlining production. Even if margins improved
to 50%, the company would still make less money on each pair relative to its high-end models, which
raised all kinds of concerns—from the need to sell much greater volumes to the need to prevent
cannibalization across …

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