ASICS: Chasing a 2020 Vision - files.transtutors.com · 517-060 ASICS: Chasing a 2020 Vision . 2 . ASICS, Onitsuka Tiger, ASICand S Tiger—all of which had the company’s signature

9-517-060

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—

This document is authorized for use only in Lawrence Potter's Integrated Business Experience 1 - Q4 2018 at Western Sydney University from Sep 2018 to Dec 2018.

517-060 ASICS: Chasing a 2020 Vision

2

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.


ASICS: Chasing a 2020 Vision 517-060

3

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



4

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



5

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



6

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.



7

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 tiers, especially if sold in the same outlets as high-end ASICS shoes.

Third, it was yet to be determined how best to communicate these new shoes to target consumers—in particular, whether a grassroots approach of sponsoring short races could work here. Attacking the $50–$75 price tier also raised competitive concerns. ASICS had significant share in the high-end running market, often occupying the number-one or number-two spot. But Nike was dominant in the mid- and low-end segments. “It will be a challenge to compete with Nike in the mid-tier segment, but



8

in order to grow in the U.S. we must get some of their share,” explained Isao Kato. “But we don’t want to do it through lower prices.”

Communicate a Consistent Brand

Before 2008, ASICS had been using separate visuals and messaging for ads in different countries, which made it difficult to create a unified brand image. “Before, overseas subsidiaries were given autonomy to develop product lines fit for their region. For example, each subsidiary had different colors for our major running shoes,” explained Akihiko Sadaka, Manager of the Strategic Planning team in the Corporate Strategy department.

Building on the “a sound mind in a sound body” theme, reflective of the company’s name, in 2009 ASICS globally implemented the tagline “Sound Mind, Sound Body,” which was used until 2011. The ads portrayed a runner whose body and mind were talking to each other. The campaign was intended to show runners that ASICS was about balancing mental and physical achievement. In 2010, the company made commercials that featured “The Cleansing Power of Sport,” with a runner sprinting through walls of water as words such as “fear,” “stress,” and “doubt” fell away from his body, thus showing how negative thoughts get shed off by exercising in ASICS gear. Between 2012 and 2013, ASICS used the tagline “Made of Sport,” which celebrated the true-sport athlete’s journey to personal victory. The campaign featured a selection of elite and amateur athletes who dedicated themselves to hard work and training. At the end of each ad, the audience was asked, “Are you made of sport?” inviting viewers to evaluate their own sport credentials.33

In 2014, the company was still heavily targeting serious runners, sponsoring around 180 running events, including marathon races in New York, Paris, Mumbai, Tokyo, and Los Angeles. That year, ASICS launched a year-long campaign using the tagline “We Are Marathoners,” with the aim of further associating ASICS with serious running and inspiring who it called “Unlimited Competitors” to do more sports. In 2015, the company rolled out a series of short films, each featuring one of ASICS’ sponsored athletes, with the tagline “It’s a Big World. Go Run It.” The message sought to encourage every runner around the globe to push boundaries and achieve their goals.34 Management had data suggesting that by 2015 unaided brand awareness for ASICS was 50% globally (60% in the U.S.).

In February 2016, the company launched a new campaign, “Want It More.” The ad showed people running, working out in weight rooms, and sparring in boxing rings, with a voice-over saying, “If you really want to be an athlete, just wanting is not enough.” The campaign seemed to exemplify the “tough-fitness” marketing approach that was also used by other brands, although ASICS’ ad agency commented that the ad was intended to have a broader meaning: “If you want to get better, whoever you are, then ASICS will help you get there.“35 (See Exhibit 9 for “Want It More” campaign ads.)

At the February 2016 investor meeting, Oyama raised the need to communicate a consistent brand as one of the core strategies in the AGP 2020: “Our products are well regarded for their exceptional function, but in addition to pursing function, we will make sure that consumers gain a better understanding of our brands so that we can deepen the emotional connection with them.” The company still needed to figure out what emotion could resonate with consumers and how to balance the desire to relate to performance-oriented individuals as well as recreational-oriented ones. Katsumi Kato offered his perspective: “Of course we want to be a trusted performance brand, but we also need to be a fun and exciting brand.” It was a difficult question whether the tagline “Want It More” was effective in reaching segments that cared about things other than performance. “It may seem that ‘Want It More’ is about winning, but actually it could be about many things, like wanting more peace of mind. However, because the industry is now so focused on winning, it becomes just about winning,”



9

explained Miles. Some suggested going back to a “Sound Mind, Sound Body” theme. But that also raised objections, because ASICS did not want to be perceived as a “yoga brand.”

The company had been using the creative agency 180 Amsterdam, which came up with the tagline “Impossible Is Nothing” for Adidas. Oyama felt that it was time to shift to a more aggressive and emotionally charged message and decided to switch to California-based 180LA. “We want to create a brand image that has a distinguished tone from competitors like Nike, Adidas, or Under Armour. Consumer attitudes and emotional needs in the U.S. are evolving, and we need to become more of an American company to survive because it is the largest sportswear market,” he explained. Miles was tasked with devising a new brand position for ASICS that would guide communications for several years to come, as management was not pleased with the constant changing of taglines and messages.

New York City (NYC) Marathon In December 2015, ASICS announced that it would stop sponsoring the NYC Marathon after the 2016 race. “The event had been our icon of all the city marathons. It was not an easy decision,” explained Katsumi Kato. Marathon sponsors were allowed to have stores in the expo where the runners came to register. ASICS sold a few million dollars of product during the NYC Marathon exhibition in 2015. Signage and marathon officials wearing ASICS-branded apparel gave critical exposure to the brand. “Marathons are important to sponsor, but it is just one day where we spend a lot of money. NYC marathon runners already know ASICS well; we need to invest in different areas where we can get a higher ROI and widen the target market,” said Katsumi Kato. Oyama noted, “We couldn’t justify matching the New Balance bid, which was much higher than what we had been paying. How this will affect our brand image, though, is hard to say.”

As a partial replacement, the company planned to open an expensive flagship store on Fifth Avenue in NYC toward the end of 2016. “We want to make it into a showroom that serves as a marketing tool for our brand. Even if we do not sponsor the event, we can influence sales by having people see the store and walk in,” explained Oyama. The cost of operating the flagship store was estimated to be a few million dollars a year. “We were spending roughly that amount to sponsor the marathon, so we see this as an alternative form of marketing,” he added.

Tokyo 2020 Olympic Games For the upcoming Tokyo 2020 Olympic Games, and for the first time in its history, ASICS decided to bid aggressively to be appointed as a Gold Partner. In the past, ASICS had supported participating Olympians, but Gold Partner status was different. All Olympic Committee members and volunteers as well as Japanese athletes (in national team events and ceremonies) would wear ASICS apparel. The sponsorship required large funding, around $119 million36 over five years, but the company hoped it would help promote its brand on the global stage.

Interestingly, throughout its expansion into global markets ASICS had not emphasized its country of origin. Oyama cited research indicating that most consumers thought ASICS was an American brand or had no clue which country it was based in. “We never played up the Japanese aspect because we didn’t think we could benefit from the association the same way that Japanese car makers like Honda and Toyota did,” he explained. In the lead-up to the Tokyo Olympic Games, management had to decide whether to change that stance and directly connect ASICS to its Japanese heritage.

Juggling a Portfolio of Brands In addition to managing the introduction of a new mid-tier footwear line under the ASICS name,

the company also had to co-manage its two other lifestyle brands: Onitsuka Tiger and ASICS Tiger. (See Exhibit 10 for pictures of shoes and Exhibit 11 for logo and retail outlet visuals of each brand.)



10

Onitsuka Tiger Onitsuka Tiger was a lifestyle and luxury brand influenced by European fashion. The name was originally used to market sports shoes in the early years (until the company became ASICS in 1977). In the 2000s, there was a boom in demand for retro-style sneakers for town use in Europe. ASICS decided to reintroduce the brand for that purpose. Footwear design was based on the original Onitsuka Tiger shoes, called the “Mexico” style, which had thin soles. “There was discussion as to whether the brand should be managed under the ASICS name, but ultimately we concluded it should be separate—although some might be able to tell it’s made by the same company because of the four stripes,” explained Isao Kato. The retro sneakers were well received in Europe and other overseas markets. The brand became well known after actress Uma Thurman wore yellow Onitsuka Tiger shoes in the movie Kill Bill in 2003. The brand also released an apparel line, which was sophisticated, sports–inspired, and contemporary. In 2013, Onitsuka Tiger partnered with Italian designer Andrea Pompilio to create a new line of shoes and clothing. Products were sold only in Onitsuka Tiger direct retail shops or select boutique-type stores. About 80%–85% of sales were from shoes, with each pair costing on average 10,000–12,000 yen. About half of customers were women. Onitsuka Tiger also boasted a premium Nippon Made line that was carefully produced by Japanese craftsmen, with most versions costing over 20,000 yen a pair.

Promotion was done through direct store locations and digital vehicles. Onitsuka Tiger had its own website with links to online stores separate from the ASICS e-commerce site. The digital “Onitsuka Tiger Magazine” featured interviews with celebrities. “More recently, we use YouTube and bloggers who talk about the brand, and we also use Instagram and Facebook,” explained Toshifumi Hara, General Manager of the Marketing Department Lifestyle Division. Some online influencers were given incentives, such as free products; others were passionate users. Miles noted, though, “You cannot always control what they will say.” Featuring the brand in fashion shows was also considered.

ASICS Tiger In 2015, sensing demand for sneakers as a fashion statement in the U.S., the company relaunched the ASICS Tiger brand, which was the company’s athletic footwear brand in the 1980s and early 1990s. The GEL-LYTE series, which came with thick shock-absorbing soles, was a past hit. The newly launched ASICS Tiger brand targeted young sneaker fans. The shoes had the shape of the classic original shoes and portrayed the familiar four stripes, but used new materials and colors to create designs associated with U.S. street fashion. “We relaunched the brand as a lifestyle brand to enter the U.S. sneaker market and create a brand of shoes for walking around town. But we wanted a brand different from ASICS since it is more casual, and different from Onitsuka Tiger because the style and target market are different,” explained Isao Kato.

A little over a year after the relaunch, ASICS Tiger sales were growing. About 75% of sales were from male customers in their 20s and 30s, primarily in the U.S. Many were so-called “sneakerheads,” who were obsessed with sneakers. “The U.S. street fashion field is where influencers will play a key role. If influencers like them, then kids will line up for them,” said Miles. The main sales channel for ASICS Tiger was through wholesale, reaching big-box retailers such as Foot Locker and Dick’s Sporting Goods, and placed alongside sneakers from other brands. Nike Air Max and certain New Balance models were the main competitors. “Currently, it is difficult to have an ASICS Tiger store because we do not yet have apparel,” noted Hara. With the AGP 2020 calling for ASICS Tiger sales to increase dramatically, Hara spoke of future plans: “As sneakerheads are a relatively niche market, going forward we will put effort into reaching a broader crowd.” The question was who and how. To target young women, for example, the company considered adopting new colors and a price range lower than the current 8,000 yen. How to position the brand was a topic of intense internal debate.

The company was looking to double the sales of its lifestyle brands over the next five years.



11

The Potential for Brand Confusion

Strategically, management believed that keeping the three brands separated could help avoid the difficulties some firms had encountered when using the same name to offer lifestyle/fashion products, which eroded their perception as performance brands. Some even hoped that the various brands could complement each other. Oyama commented, “An athlete should win the race running in ASICS shoes and go on the podium to receive the gold medal in Onitsuka Tiger shoes.” Similarly, a consumer might wear ASICS for exercising and ASICS Tiger for hanging out with friends.

Other executives, however, had concerns about the portfolio. For example, while the sales channel approach for Onitsuka Tiger ensured that the brand was never presented in the same stores as ASICS-branded products, the same was not true for ASICS Tiger. The following situation was common. In Japan, ABC Mart, Japan’s largest shoe retailer with over 700 stores, had been selling ASICS-branded products. After the launch of ASICS Tiger, ABC Mart carried both brands. Hara explained the complexity: “Because it is difficult to control the store experience, some customers were confused about the brand name ASICS Tiger, which was similar to ASICS.”

The situation was made worse by the logo choice for ASICS Tiger, which just said “asics.” Hara explained, “We did not put the word ‘Tiger’ in the logo, because then people might mix Onitsuka Tiger with ASICS Tiger.” Miles admitted, “The choice and roll-out of the ASICS Tiger logo was a bit ‘halfbaked.’ The differences are subtle. The ASICS core brand is in dark blue and has the signature swirl symbol, while the ASICS Tiger brand is in a lighter shade of blue and in a different font with no symbol.” The company was working on a new logo for ASICS Tiger, but it was not yet clear what that should entail. “We need to establish a distinctive expression for each brand,” claimed Miles. But he also acknowledged that marketing three separate brands was not an easy task: “It requires a lot of resources, and I am not sure we are allocating enough to each brand.” Katsumi Kato observed, “If the marketing budget is 100 points, how should we allocate them across the three brands? I am not sure we have a clear answer. Nike basically has one brand name which is more efficient. We are 1/8 the size of Nike, so with three brands and an even split that translates to a 1/24 budget for each brand.”

Lastly, the company was conscious of possible cross effects once they launched the new mid-tier line of ASICS-branded footwear in late 2016. With the mid-tier shoes targeting a younger crowd, focusing more on design and less on performance, and with a more affordable price tag, “There is certainly potential for cannibalization with ASICS Tiger,” commented Katsumi Kato.

The Runkeeper Acquisition With the advent of smartphones and wearables, consumers sought to incorporate technology into

their fitness routines. Nike had its own training app, Nike+, that worked with devices powered by Apple Inc. and Google Inc.37 To compete with Nike, many sportswear firms acquired fitness-app companies. Adidas acquired Runtastic, a fitness app with 70 million users, in August 2015 for $239 million.38 Under Armour bought MapMyFitness Inc., which measured training and performance, in 2013 for $150 million; spent $475 million in 2015 to acquire MyFitnessPal, which also had a database of nutrient components to track calorie intake; and paid $80 million in 2015 to get Endomondo, a fitness app with 80 million users. Runkeeper was one of the few major independent fitness apps left in the market. (See Exhibit 12 for share of user minutes by fitness-app brand.)

In February 2016, ASICS announced plans to acquire Boston-based FitnessKeeper, which operated the fitness app Runkeeper. Its founder and CEO, Jason Jacobs, commented, “Partnering with ASICS . . . makes a ton of sense. We both have deep roots in and focus on running as a core component



12

of the fitness experience, and there is strong alignment between our brands and core values.”39 The two companies felt that they brought complementary strengths to the table, and ASICS retained Runkeeper’s entire management structure. By the end of 2015, Runkeeper had about 33 million members, with about 5.5 million active in a given month and triple that figure in a year.

Runkeeper Background

Founded in 2008, FitnessKeeper operated a digital fitness platform. Its Runkeeper app was one of the first to use the GPS function built into smartphones to track exercise statistics of activities such as running, walking, or cycling. The app provided analytics, coaching, and other advanced functionality. Runkeeper’s user base was mainly casual runners who were typically busy people trying to fit exercise into their lives. The average run of many of its users was 2.5 miles, and over half took 10 minutes or longer to run a mile. “Our app caters to this segment because it is more approachable, quirky, and fun, which has led to greater ‘stick-to-it-iveness,’” explained Jacobs. “The hardest thing with fitness is sticking to it. And many people were finding success with Runkeeper because of how we positioned our app, how they interfaced and set goals within it, and because it allowed them to connect with like-minded people and learn about relevant events—all of which drove loyalty.” Most of the other fitness apps, he felt, were more performance and achievement oriented, with the ‘elite athlete’ in mind. (See Exhibit 13 for images of Runkeeper’s interface.)

Runkeeper's main source of revenue was from users upgrading to a paid subscription ($9.99 a month) to receive premium functionality, although Jacobs acknowledged that many subscribed as a way to support the company. It also had an online store featuring merchandise from various sports brands, and would receive a kickback from each sale. Jacobs tended to oppose pushing ads onto users, but he increasingly supported certain user-relevant promotions: “For example, if a sportswear brand sponsors a challenge such that when a member completes, say, 50 miles within a certain period, he or she gets a 20% off coupon for new running shoes, that could be perceived as a value-add offer by the consumer rather than spam marketing.” Although the user base had steadily grown over the years (see Exhibit 14 for Runkeeper’s user-base trends), Runkeeper was not yet profitable in early 2016.

Runkeeper+ASICS=?

Runkeeper had the potential to give ASICS access to a new customer segment that it had not served before, many of whom were part of the Fun Run segment. “At the first stage, we can collect a lot of data to see customers’ behavior and better understand their habits,” explained Miles. However, it was still unclear what to do with this information and how else ASICS could utilize Runkeeper. For starters, the company heavily debated whether the ASICS name and swirl logo should replace or be featured somewhere on the app’s interface. Rival Under Armour had assembled a digital fitness community by connecting all its platforms (UA Record, MapMyFitness, Endomondo, and MyFitnessPal) and using the name “Under Armour ConnectedFitness”; its logo appeared on each of the apps.40 Some in the company favored a similar move in order to generate greater brand awareness for ASICS. Yet others worried about how Runkeeper members would react.

Second, with a desire to boost DTC sales as one of the core AGP 2020 strategies, ASICS executives pondered whether and how to generate e-commerce purchases from Runkeeper users. Should ASICS-related messages pop up on the app? Should ASICS send members occasional e-mails? Furthermore, the Runkeeper online store currently featured merchandise from other brands; should that stop? Should the store offer only ASICS-branded footwear and apparel? Many worried about potential backlash, particularly since data had shown that only 25% of Runkeeper users wore ASICS shoes. Katsumi Kato asked, “If we put the ASICS name and logo on the app and make recommendations for



13

our products, will that turn off the other 75%?” And as Miles put it, “Part of the reason people use Runkeeper is because it is independent. If they wanted a fitness app by a large brand they would go to Nike+. The big question would be, how will users respond to attempts to drive them to ASICS’ e-commerce site?” Jacobs added, “Our community thinks of us as a trusted advisor for their fitness journey; we are like a valued ‘concierge’ to them. We need to figure out how to leverage that trust without appearing to be abusing it.”

Complicating matters, ASICS had its own fitness app, MY ASICS, which was launched in 2012. The app had about 1 million registered members worldwide, with about 500,000 active users. MY ASICS was geared to the serious runner and offered training programs based on an individual’s running objectives. About 70% of MY ASICS users continued the training program up until the race, and were able to achieve their target time. The tools embodied advanced sports theories and research conducted by the ASICS Institute of Sport Science. It included an adaptive training module that dynamically adjusted recommendations depending on progress. Management was not sure what to do with the MY ASICS app in light of acquiring Runkeeper. Katsumi Kato explained, “Some feel that, to avoid confusion, we should maintain the two apps separately—have MY ASICS serve the fanatic ‘core’ customer and Runkeeper serve the casual runner.” Others felt that the company should combine them, as there was no point in maintaining two apps. Jacobs added, “Maybe we should have one app and offer users the advanced features of MY ASICS as an upgrade for a monthly fee. This might allow self-selection, letting serious runners feel they have ‘premium’ status.”

Oyama felt that Runkeeper should factor heavily in reshaping ASICS’ entire digital presence and offer a path to embrace the Internet of Things (IoT). He thus had two assignments for Jacobs, CEO of Runkeeper and now the Head of Global Digital of ASICS: “We want to create a more usable platform leveraging Runkeeper because it has been difficult for us to get people to register their information on our platform.” Oyama also believed that ASICS could leverage Runkeeper to venture into new areas, such as home fitness. “Many women in the U.S. are doing fitness at home instead of going to the gym; hence there may be demand for a coaching system for home fitness,” he commented. Jacobs was a bit more conservative: “Nike has had Nike+ for many years and Under Armour and Adidas got into the game before ASICS, but no one has yet proven the strategic value across the assets. I would like to see us first prove the synergies between our companies in running before we branch out into other areas.”

The Long Race Ahead Sitting at his desk, Oyama wondered whether he had promised shareholders too much: Would

ASICS be able to achieve the financial targets set in AGP 2020 of 750 billion yen in sales and a 10% operating income ratio? Would the key strategies in the plan—a shift to DTC, expanding the consumer base, and communicating a consistent brand—allow achieving these objectives? Did the brand architecture in place and the Runkeeper acquisition provide a strong enough basis for execution? Not lost on his mind was the hyper-competitive environment he operated in. Nike and Adidas were the industry heavyweights and no other company could realistically catch them anytime soon. But when the Tokyo 2020 Olympic Games rolled around, would ASICS be able to capture the ‘bronze medal’ and be the third-largest player?

With so many issues to tackle, Oyama felt he needed to clear his mind. He put on his GEL-Kayano 22 shoes, tapped on the Runkeeper app, which he had recently downloaded, and went out for a run.



14

Exhibit 1 Trends in Marathon and Shorter Races in the U.S.

Number of finishers in U.S. running events (1990–2015)

Distribution of race distances (2015)

Distance Number of Events Number of Finishers % of Total Finishers

5 K 16,500 7,643,600 45%

10 K 4,200 1,275,600 7%

Half-Marathon 2,700 1,986,600 12%

Marathon 1,100 509,000 3%

Others 5,800 5,700,000 33%

Total 30,300 17,114,800 100%

Source: Adapted from Running USA statistics, http://www.runningusa.org/statistics, accessed August 22, 2016.


517-

060

-1

5-

Exhi

bit 2

Fina

ncia

ls o

f Key

Com

petit

ors

for 2

014

and

2015

(mill

ions

of U

S$)

Com

pany

N

ike

A

dida

s Pu

ma

Und

er A

rmou

r N

ew B

alan

ce

Fisc

al p

erio

d 15

/5

14/5

15

/12

14/1

2 15

/12

14/1

2 15

/12

14/1

2 15

/12

14/1

2

Sale

s 30

,601

27

,799

18

,415

17

,646

3,

688

3,60

8 3,

963

3,08

4 3,

700

3,30

0

F

ootw

ear

18,3

18

16,2

08

9,10

2 8,

083

1,64

0 1,

557

678

431

- -

A

ppar

el 8,

637

8,10

9 7,

588

7,62

3 1,

355

1,33

9 2,

801

2,29

2 -

-

O

ther

s 3,

646

3,48

2 1,

726

1,93

9 69

3 71

2 48

5 36

2 -

-

Gro

ss p

rofit

14

,067

12

,446

-

- 1,

677

1,68

2 1,

906

1,51

2 -

-

Ope

ratin

g in

com

e -

- 1,

191

1,16

7 10

5 15

5 40

9 35

4 -

-

Net

inco

me

3,27

3 2,

693

727

690

40

78

233

208

- -

ROE

27.8

%

24.6

%

11.2

%

8.7%

2.

3%

4.0%

13

.9%

15

.4%

-

-

Sour

ce:

Ada

pted

from

NIK

E, IN

C. 2

016

Ann

ual R

epor

t and

Not

ice

of A

nnua

l Mee

ting;

AD

IDA

S G

roup

Ann

ual R

epor

t 201

5; P

uma

Ann

ual R

epor

t 201

5; U

nder

Arm

our A

nnua

l Rep

ort

2015

; and

“Fo

rbes

, Am

eric

a’s L

arge

st P

riva

te C

ompa

nies

—20

16 R

anki

ng, h

ttp:/

/ww

w.fo

rbes

.com

/com

pani

es/n

ew-b

alan

ce/,

acc

esse

d A

ugus

t 22,

201

6.

Not

e:

Nik

e’s F

isca

l Yea

r end

ed in

May

, and

oth

er co

mpa

nies

’ Fis

cal Y

ears

end

ed in

Dec

embe

r. N

ew B

alan

ce w

as a

priv

atel

y he

ld co

mpa

ny. F

inan

cial

figu

res o

f Adi

das a

nd P

uma

wer

e co

nver

ted

from

eur

o to

US$

usi

ng y

ear-

end

spot

exc

hang

e ra

tes (

FY20

15: 1

eur

o =

US$

1.08

87, a

nd F

Y201

4: 1

eur

o =

US$

1.21

41).



16

Exhibit 3 How ASICS Viewed Its Core Brand Positioning Relative to Major Rivals up to 2016

Positioning Map

Source: Company information.



17

Exhibit 4 ASICS Company Timeline with Major Milestones

1949 Onitsuka Co., Ltd. was founded

1950 First basketball shoes released

1960 Magic Runner marathon shoes, which kept blisters to a minimum, were released

1964 The Tokyo Olympic Games were held;

Onitsuka Co. was listed in the second section of Osaka Stock Exchange (TSE)

1974 Onitsuka Co. was listed in the first section of the TSE

1977 Onitsuka Co., Ltd., GTO Co., Ltd., and Jelenk Co., Ltd. merged to form

ASICS Corporation, and entered the U.S. market

1985 ASICS Institute of Sports Science was established

1986 First jogging shoes that incorporated GEL technology, Freaks α, were released

1992 Recorded loss due to impact of the Japanese economy downturn

1998 Launched a global campaign to expand running shoes business

1999 Began sponsoring the New York City (NYC) Marathon

2002 Relaunch of the Onitsuka Tiger brand

2003 Onitsuka Tiger was featured in the movie Kill Bill

2006 Overseas sales exceeded domestic sales for the first time

2007 Started sponsoring the Tokyo Marathon

2008 Motoi Oyama was appointed as the president of ASICS

2010 Announced AGP 2015

2015 Relaunch of the ASICS Tiger brand

Appointed as a Gold Partner of the 2020 Tokyo Olympic Games

Announced it would stop sponsoring the NYC Marathon after the 2016 race

2016 Announced AGP 2020, targeting 750 billion yen in sales in 2020

Acquisition of Boston-based fitness application Runkeeper




18

Exhibit 5 Marathon Finishers by Shoe Brand They Wore (2013)


Exhibit 6 Breakdown of Store Locations by Brand

ASICS ASICS ASICS Factory Outlet

ONITSUKA TIGER

ONITSUKA TIGER Factory Outlet

ASICS TIGER TOTAL

(As of Mar 31, 2016) Americas 6 69 0 0 0 75 Japan 6 20 27 4 1 58 EMEA 17 61 4 0 0 82 East Asia 448 35 70 1 0 554 Southeast Asia 2 1 1 1 0 5 Oceania 2 7 2 0 0 11 ASICS TOTAL 481 193 104 6 1 785

Note: The ASICS Tiger store was a pop-up. Haglofs brand stores and ASICS Walking stores were excluded from the table.

Nike Adidas

(As of May 31, 2015) (As of Dec 31, 2015) US Retail Stores: Concept stores 1,698 Factory stores 185 Concession corners 152 In-line stores 33 Factory outlets 872 Non-US Retail Stores: (including Reebok and multibrand stores) Factory stores 512 In-line stores 73 NIKE Total 803 Adidas Total 1,616

Source: Adapted from ASICS company documents; NIKE, INC. 2016 Annual Report; and ADIDAS Group Annual Report 2015.

Note: Adidas breakdown of concept stores, concession corners, and factory outlets included a number of Reebok and multibrand stores; however, Adidas Total did not include Reebok and multibrand stores. Nike figures did not include Converse or Hurley stores. NIKE in-line stores included employee-only stores.



19

Exhibit 7 ASICS Financials (FY2011/3–2015/12)

(Millions of Yen) 2011/3 2012/3 2013/3 2014/3 2014/12 2015/12

For the year: Net Sales 235,349 247,793 260,199 329,465 354,052 428,496 Sports shoes 175,057 182,807 192,729 251,827 282,790 346,080 Sportswear 43,685 46,838 49,460 57,198 54,215 61,606 Sports equipment 16,606 18,148 18,010 20,438 17,046 20,808 Cost of Sales 132,226 140,244 146,361 185,097 198,864 246,342 Gross profit 103,123 107,549 113,838 144,368 155,188 182,154 Selling general and administrative expenses

81,549 87,920 95,175 117,852 124,721 154,705

Operating income 21,574 19,629 18,663 26,516 30,467 27,449 Income before income taxes and minority interests

18,469 20,650 20,803 27,694 34,183 17,269

Net Income 11,046 12,618 13,773 16,108 22,286 10,238 At year-end: Total net assets 106,369 115,315 138,078 159,567 201,941 199,883 Total assets 200,790 212,344 244,725 317,528 355,837 343,468 Number of employees 5,607 5,906 5,937 6,585 7,484 7,263 Per share of common stock (Yen)

Net income 58.26 66.55 72.65 84.96 117.40 53.93 Cash dividends 10.00 12.00 12.00 17.00 23.50 23.50 Total net assets 524.91 569.39 685.1 834.68 1,058.94 1,045.02 Ratios (%):

Return on assets (ROA) 5.7 6.1 6.0 5.7 6.6 2.9 Return on equity (ROE) 11.1 12.2 11.6 11.2 12.4 5.1

Sales by Category (Millions of Yen) AGP 2015 Target 2015/12 Actual AGP 2020 Target Running 183,100 246,200 Running 400,000 Athletic Sports 92,700 90,600 Core Performance Sports 100,000 Training 70,000 Sport lifestyle 28,500 44,900 Lifestyle 90,000 Health/Comfort 32,000 Others 95,700 46,700 Others 58,000 Total 400,000 428,400 Total 750,000


Note: All figures have been rounded to the nearest million yen. The fiscal year ended December 31, 2014, was transitional due to a change in the year-end. The period included nine months of results for the Company and domestic consolidated subsidiaries with March fiscal year-ends and 12 months of results for overseas consolidated subsidiaries, which have December fiscal year-ends. Athletic Sports and Core Performance Sports included tennis, rugby, and volleyball. The AGP2015 target for apparel (across all categories) was 85 billion yen; but 2015 actual apparel sales were only 61.6 billion yen.



20

Exhibit 8 Characteristics and Motivation of Runner Segments

SKILLED EXPERTS

UNLIMITED COMPETITORS

PASSIONATE PLAYERS

SOCIAL EXERCISERS

HEALTHY RELAXERS

Sports are an important part of who I am. It is a way to develop new skills and to be an expert.

Sports are extremely important in my life. It is a rewarding way to stretch my limits and to achieve my goals.

Sports are an exciting way to completely let go and really enjoy the moment, preferably with others.

Of course you look after yourself with sports, but it’s also a fun way to have a great time with others.

To me sports are part of a healthy lifestyle. It’s good for my body and mind and helps me to relax.

RUNNING RUNNING RUNNING RUNNING RUNNING When I’m running I have a specifically developed program to help me focus on improving my running technique.

When I’m running I constantly want to improve my time. Just running for the sake of it is not for me.

Running is a great way to let go. When running I really enjoy the change of scenery and the environment.

I like to run with friends or a running club. It is often more a social thing. When my friends can’t make it, I often don’t go either.

It’s not that I’m a big running fan, it just helps me to relax and it is good for my health.


Note: Up to early 2016, the company viewed Skilled Experts and Unlimited Competitors as ASICS main target customers.

Exhibit 9 “Want It More” Campaign Ads




21

Exhibit 10 Pictures of ASICS, Onitsuka Tiger, and ASICS Tiger Shoes

ASICS high-performance running shoes—METARUN model (left), GEL-KAYANO22 (right)

Onitsuka Tiger—MEXICO 66 model (left), Nippon Made Isetan Limited version (right)

ASICS Tiger—GEL-LYTE model, Colette (left), Bape (right)




22

Exhibit 11 Visuals of Logos and Retail Outlets of Each Brand

ASICS logo and an ASICS directly owned retail outlet

Onitsuka Tiger logos and directly owned retail outlet

ASICS Tiger logo and pop-up retail outlet


Note: The ASICS Tiger store shown above was a pop-up store; virtually all ASICS Tiger products were sold through retailers.



23

Exhibit 12 Fitness Application Share of User Minutes by Brand (during 2015)

Fitbit72.68%

UnderArmour7.16%

UP by Jawbone

7.16%

Nike4.74%

Strava3.99%

Adidas3.76%

Asics0.69%

Source: Adapted from Maria Kelly, “In the Competitive World of Fitness & Nutrition Apps, Who’s Got What?” 7PARK DATA, March 24, 2016, http://blog.7parkdata.com/in-the-competitive-world-of-fitness-nutrition-apps-whos-got-what, accessed September 15, 2016.

Note: The pie chart shows the share of total minutes spent on each fitness app in the U.S. The Under Armour figure reflects the total of MapMyFitness, MapMyRun, MapMyRide, and Endomondo. The Adidas figure reflects Runtastic, and ASICS reflects Runkeeper. UP by Jawbone and Strava were independent apps. Fitbit was founded in 2007 in San Francisco, California, as a company offering a wireless wearable device that measured activities, such as steps walked, heart rate, and quality of sleep. The company was listed in the New York Stock Exchange in May 2015.

Exhibit 13 Images of Runkeeper’s Interface




24

Exhibit 14 Runkeeper’s User-Base Trends

Country breakdown (as of December 31, 2015)

US, 26%

Sweden, 7%UK, 7%

Netherlands, 5%

Brazil, 4%Australia, 3%Japan, 3%France, 3%

Canada, 2%Spain, 2%

Others , 39%

User expansion track record (2013–2015)




25

Endnotes

1 “Japan 2020: Asics up to Buy—Mass market offers steep brand value upside,” Goldman Sachs Equity Research, June 7, 2015, p. 23.

2 Haley Peterson, “The bizarre inspiration behind Nike’s first pair of running shoes,” Business Insider, July 6, 2015, http://www.businessinsider.com/nikes-first-running-shoes-were-made-in-a-waffle-iron-2015-7, accessed July 22, 2016.

3 “Japan 2020: Asics up to Buy,” Goldman Sachs Equity Research, p. 25.


5 Nike Fiscal 2016 Full Year Results, Divisional Revenues, http://investors.nike.com/investors/news-events-and-reports/investor-news/investor-news-details/2016/NIKE-Inc-Reports-Fiscal-2016-Fourth-Quarter-and-Full-Year-Results/default.aspx, accessed July 25, 2016.

6 Maria Christina Chougkaeva, “The Evolution of Adidas Originals and its success,” February 25, 2015, WordPress.com, https://3brandassadors.wordpress.com/2015/02/25/103/, accessed July 25, 2016.

7 Adidas Group, “History,” http://www.adidas-group.com/en/group/history/, accessed July 25, 2016.

8 Chougkaeva, “The Evolution of Adidas Originals and its success.”

9 Chougkaeva, “The Evolution of Adidas Originals and its success.”

10 “Adidas Group Annual Report 2015,” http://www.adidas-group.com/media/filer_public/e9/73/e973acf3-f889-43e5-b3c0-bc870d53b964/2015_gb_en.pdf, p. 3, accessed July 25, 2016.

11 “Adidas Group Annual Report 2015,” p. 112.

12 Taryn Luna, “New Balance takes on giants in soccer shoe market,” Boston Globe, February 20, 2015, https://www.bostonglobe.com/business/2015/02/20/new-balance-takes-giants-soccer-shoe-market/m4efYaWbeULxeGBQwV8wiJ/story.html, accessed September 12, 2016.

13 “History,” Puma website, http://about.puma.com/en/this-is-puma/history, accessed July 25, 2016.

14 “History,” Puma website.


16 “PUMA Annual Report 2015,” http://about.puma.com/damfiles/default/investor-relations/financial-reports/en/2015/GB_2015_ENG_Final_links_low-res-8932dbc11383cd85124e1ba63d86b5cc.pdf, pp. 5-7, accessed July 25, 2016.


18 “PUMA Annual Report 2015,” p. 87.

19 “Letter from the CEO,” Under Armour Annual Report 2015, http://files.shareholder.com/downloads/UARM/2499815060x0x880876/7D1585BA-87FA-4E66-93D3-6C17B3A57B1E/10-K_pef.pdf, accessed July 25, 2016.

20 “Financial History,” Under Armour website, http://www.uabiz.com/income.cfm, accessed July 25, 2016.

21 “Letter from the CEO,” Under Armour Annual Report 2015.

22 Kurt Badenhausen, “New Balance Challenges Nike and Adidas With Entry Into Global Soccer Market,” Forbes, February 4, 2015, http://www.forbes.com/sites/kurtbadenhausen/2015/02/04/new-balance-enters-global-soccer-market/#5deda69a33f4, accessed July 25, 2016.

23 Badenhausen, “New Balance Challenges Nike and Adidas With Entry Into Global Soccer Market.”

24 Sarah Vizard, “How New Balance is reinvigorating its brand to move away from its lifestyle image,” Marketing Week, October 13, 2015, https://www.marketingweek.com/2015/10/13/how-new-balance-is-reinvigorating-its-brand-to-move-away-from-its-lifestyle-image/, accessed July 25, 2016.

25 Vizard, “How New Balance is reinvigorating its brand to move away from its lifestyle image.”



26

26 Ben Fischer, “Street cred: Inside the New Balance-NYRR deal,” Sports Business Daily, December 14, 2015, http://www.sportsbusinessdaily.com/Journal/Issues/2015/12/14/Marketing-and-Sponsorship/NYRR-New-Balance.aspx, accessed October 4, 2016.

27 Hiroaki Miyahara, “ASICS aims for the third place, ambition of Japanese sport brand,” Diamond Online, February 5, 2014, http://diamond.jp/articles/-/47733, accessed August 3, 2016.

28 ASICS stores in the U.S. were closed in October 2015 as a result of a dispute with Windsor Financial Group, which had the exclusive rights to operate ASICS’ retail stores in the U.S. The closure included its flagship store in Times Square, which had opened less than a year earlier. “ASICS US closes last standalone store,” Inside Retail Asia, October 20, 2015, https://insideretail.asia/2015/10/20/asics-us-closes-last-standalone-store/, accessed August 4, 2016.

29 Greg Petro, “Lululemon, Nike And The Rise Of ‘Athleisure,’” Forbes, September 16, 2015, http://www.forbes.com/sites/gregpetro/2015/09/16/lululemon-nike-and-the-rise-of-athleisure/#2d832d764c1d.

30 Tracy Maple, “Lululemon’s direct-to-consumer sales increase nearly 16% in Q3,” Internet Retailer, December 15, 2015, https://www.internetretailer.com/2015/12/15/lululemons-direct-consumer-sales-increase-nearly-16-q3, accessed September 12, 2016.

31 Hiroko Tabuchi, “Products and Competition Stretch Market for ‘Athleisure’ Clothing,” New York Times, March 25, 2016, http://www.nytimes.com/2016/03/26/business/products-and-competition-stretch-market-for-athleisure-clothing.html?_r=0.

32 Petro, “Lululemon, Nike And The Rise Of ‘Athleisure.’”

33 Ruggero Roda, “ASICS – Made of Sports – New Campaign,” Running Shoes Guru, August 12, 2012, http://www.runningshoesguru.com/2012/01/asics-made-of-sports-new-campaign/, accessed September 15, 2016.

34 Neil Weiheimer, “Asics To Debut ‘Big’ Ad Campaign,” Footwearnews, February 19, 2015, http://footwearnews.com/2015/business/marketing/asics-spring-2015-campaign-13847/, accessed August 8, 2016.

35 David Gianatasio, “Asics Gets Down and Dirty, and Very Sweaty, in 180’s ‘Want It More,’ Campaign,” Adweek, February 19, 2016, http://www.adweek.com/adfreak/asics-gets-down-and-dirty-and-very-sweaty-180s-want-it-more-campaign-169779, accessed August 8, 2016.

36 Kazunori Kitagawa, “2020 Tokyo Olympic Gold Partners splash out on games,” Nikkei Asian Review, June 6, 2015, http://asia.nikkei.com/Business/Trends/2020-Tokyo-Olympic-Gold-Partners-splash-out-on-games, accessed October 4, 2016.

37 Minsi Chung, “Under Armour Buying MapMyFitness in $150 million deal,” Bloomberg.com, November 15, 2013, http://www.bloomberg.com/news/articles/2013-11-14/under-armour-to-buy-fitness-technology-company-for-150-million, accessed August 4, 2016.

38 Paul Sawers, “Inside Runtastic’s $239M Adidas acquisition,” venturebeat.com, August 28, 2015, http://venturebeat.com/2015/08/28/inside-runtastics-239m-adidas-acquisition/, accessed September 20, 2016.

39 Jason Jacobs, “Runkeeper and ASICS are joining forces,” blog post, Runkeeper website, February 12, 2015, https://medium.com/runkeeper-everyone-every-run/runkeeper-and-asics-are-joining-forces-eae4d7a510c5#.nmp1vc910, accessed August 4, 2016.

40 Yuyu Chen, “Under Armour: We’re beating Nike in connected fitness,” Digiday, April 7, 2016, http://digiday.com/brands/armour-beating-nike-connected-fitness/, accessed September 12, 2016.


Documents

ASICS: Chasing a 2020 Vision - files.transtutors.com · 517-060 ASICS: Chasing a 2020 Vision . 2 . ASICS, Onitsuka Tiger, ASICand S Tiger—all of which had the company’s signature