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Why Reebok Failed in India

Reebok failed in India due to mismanagement and governance issues at its Indian operations. An audit found fake transactions, inflated revenues by retroactively increasing prices, and sales to unauthorized customers that were not recorded properly. This likely benefited some individuals. The former managing director and chief operating officer of Reebok India were arrested along with others for allegedly causing $870 million in losses through these irregularities. Reebok also did not keep up with competitors by failing to use innovative business strategies.

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2K views3 pages

Why Reebok Failed in India

Reebok failed in India due to mismanagement and governance issues at its Indian operations. An audit found fake transactions, inflated revenues by retroactively increasing prices, and sales to unauthorized customers that were not recorded properly. This likely benefited some individuals. The former managing director and chief operating officer of Reebok India were arrested along with others for allegedly causing $870 million in losses through these irregularities. Reebok also did not keep up with competitors by failing to use innovative business strategies.

Uploaded by

Arjun Singh
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© Attribution Non-Commercial (BY-NC)
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WHY REEBOK FAILED IN INDIA Here are the reasons due to which reebok did not survived in INDIA

:Reebok International Limited, a subsidiary of the German company Adidas since 2005,[4] is a producer of athletic shoes, apparel, and accessories. The name comes from the Afrikaans spelling of rhebok, a type of African antelope or gazelle. In 1890 in Holcombe Brook, a small village 6 miles north east of Bolton, United Kingdom, Joseph William Foster was making a living producing regular running shoes when he came up with the idea to create a novelty spiked running shoe. After his ideas progressed he joined with his sons, and founded a shoe company named J.W. Foster and Sons in 1895

Agencies probing the alleged Rs 870 crore corporate fraud in the operation of Reebok India have detected a systemic mismanagement in the business planning and running of the company reportedly done by some of its officials and employees.

The governance and operations in the company were mismanaged. The bills were inflated and not recorded correctly. So, the probe clearly indicates that it was not a corporate scam in the apparel manufacturing firm but it was non-adherence to the rules and guidelines of business procedures in the firm, sources privy to the probe said. A forensic audit ofReebok India Co. has found fake transactions with unauthorized customers, allegedly concocted to exaggerate the companys revenue and possibl y aimed at meeting targets. It also shed new light on a messy affair that is being investigated by both the Gurgaon Police and the Serious Fraud Investigation Office (SFIO), an arm of the ministry of corporate affairs. The audit also shows leakages in some transactions that seem to have benefited various individuals or other entities. However, it is silent on the exact gains derived by the main accused Reebok International Ltd, the parent of Reebok India, in 2005. In May this year, Adidas claimed it had uncovered a fraud of the magnitude of Rs.870 crore at the Indian operations of Reebok. Since then, 12 people, either former employees of Reebok India, including its former managing director Shubhinder Singh Prem and former chief operating officer Vishnu Bhagat (the two are the main accused), or associates like Mishra, have been arrested. In its original complaint to the Gurgaon Police, Adidas offered a break-up of the Rs.870 crore number: Rs.530 crore on account of so-called parallel accounting that inflated sales, which were not passed on to the company; Rs.147 crore in goods invoiced but not dispatched; Rs.63 crore in goods returned and pending inspection;Rs.0.9 crore on account of secret warehouse bills, Rs.14.82 crore in interest lost on a franchisee referral programme; and Rs.98 crore on account of payments to and from customers (dealers and distributors). eport also shows that Reebok India showed higher sales revenue by effecting retrospective increases in the price of goods already sold to dealers and distributors. This increased both the sales revenue and the accounts receivable (or amount due from dealers and distributors). These retrospective price increases netted the company around Rs.86 crore, according to the report. These sales transactions to the unauthorized buyers were off the books. The remaining goods were booked as sales returns in May without accounting for the goods sold to the unidentified buyers. Adidas chief executive officer Herbert Hainer would be visiting India to take stock of
the crisis surrounding the local unit of the German sportswear maker, Reebok India. The unit is embroiled in a controversy, following the exit of its senior management, including Adidas India MD Subhinder Singh Prem, amid allegations of commercial irregularities. Finally, former MD of Reebok India Subhender Singh Prem and ex-COO Vishnu Bhagat along with five other executives were arrested last evening for allegedly causing losses to the tune of Rs 870 crores to the company. The arrests were made

by the Special Investigation Team (SIT) of Gurgaon Police. On May 22, 2012, the Gurgaon Police had lodged an FIR against Prem and Bhagat, whose services were terminated by the company. The two were accused by parent company Adidas, of selling products but not depositing the recovered money in the company account. On the other hand, Prem and Bhagat had claimed that they were asked to carry out certain illegal and unethical actions by the Adidas Group, such as manipulating accounts, booking irrelevant expenses and cancelling large distributorships, to ensure that the market value of Reebok India falls, so that a significantly lower amount becomes payable to the exiting Indian joint venture partner. Reebok was also not increasing its sales as it didnt used innovative methods of doing business as compared to its competitors in the market like Nike and Puma.

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