Footwear

Footwear

 

Don't use plagiarized sources. Get Your Custom Essay on
Footwear
Just from $13/Page
Order Essay

]Performance Improvement Proposal:

The purpose of the plan is to prepare a formal and valuable proposal for one of the companies in the individual industry paper. This will require integrating the major concepts studied throughout this semester, and may include merging, acquiring, divesting, outsourcing, offering a new product or service, reengineering, adopting Quality, etc.

 

Please keep in mind that this assignment offers you an opportunity to demonstrate your creativity and initiative. I will not “give you an idea” (that is the hard part) and I will not ask you for constant updates. The plan should include specific information, such as market analysis, breakeven point, etc. The complete paper should be three pages.

 

Your proposal should flow something like this (define > design > deliver):

 

  1. Who are you?
  2. What is your product/service/enhancement?
  3. What problem are you solving?
  4. What is your assessment of the state of the overall market?
  5. What is your assessment of the state of the target market?
  6. What is your competitive position/advantage?
  7. How will the company produce your product and service?
  8. What management/organizational changes will be required?
  9. How much money do you need to start?
  10. How long will it take to break even?
  11. Do you have checkpoints and an exit strategy?
  12. Why should I believe your story?

 

Footwear Industry

Footwear has always been a significant segment of the fashion industry. Yearly, footwear companies across the globe invest huge amounts of capital in developing better and newer trends to keep the market growing. Key market players in this industry rely on e-commerce websites and convenient stores to increase sales for men’s and women’s shoes. The increasing popularity of e-commerce websites necessitates better opportunities for footwear companies to increase their sales and expand their customer base by having personalities and other advertisement agencies market their products. According to a report by the World Footwear Yearbook, about 22 billion pairs of footwear are sold across the world (Corbo, Pirolo & Rodrigues, 2018). Major trends in the fashion industry primarily shape the footwear industry, increasing demand for designer and trendy shoes among high-end clientele, sportsmen and women, and sports shoes among fitness buffs. The increased expansion of the footwear industry has been made possible by the burgeoning demand for trendy and new designs globally, along with a production shift towards more durable shoes. Consumers are now becoming more aware of the latest trends in footwear and have begun to demand only the best footwear in the market. At the same time, most consumers are looking at the shoe’s comfort since they cannot compromise the comfort of a shoe solely for the sake of design. Presently, the footwear industry is worth more than $386 billion and is expected to grow even further.

Industrial Overview

The footwear industry represents one of the world’s highly fragmented and competitive markets, with manufacturers settled all over the globe seeking low-cost labor and economies of scale factors to get higher returns. Targeting the final consumer, the industry’s key players are always looking for creativity and innovation on their products with the aim of satisfying customer needs (Singh, 2016). Being part of a complex industry with many players, product categories, market segments, and marketing strategies, firms must be ready to face some of the challenges that arise in the industry. The influence of demographic aspects, innovation breakthroughs, and trends are variables that both big and small companies must consider when it comes to marketing their products.

With the global footwear market being estimated at $386 billion in 2021, the market is estimated to register a CAGR of 3.9% by 2025. This market growth is primarily attributed to increased demand for comfortable and convenient footwear. More companies in the industry are now focusing on key parameters such as product developments, technical fabrications, and innovative designs to intensify product sales. The United States of America is one of the few countries with the largest footwear market globally, amounting to over 85 billion U.S dollars. The US footwear industry is comprised of sneakers, shoes, athletic footwear, sporting shoes, and luxury footwear. The US footwear market is projected to show a volume growth of approximately 6.2% by 2025, while the average person is expected to amount to 7.52 pairs in 2025. In terms of the competitive landscape, the footwear industry can be described as mature. Since few companies dominate the majority of the market share, the entry barriers are extremely high.

 

Leather shoes which are considered a premium product in the industry, occupy a larger market share. A recent survey by American Apparel & Footwear Association (AAFA) revealed that most people prefer leather shoes to sports shoes since they are comfortable, strong, and durable. The rapidly growing e-commerce market is one of the key drivers contributing to the dominance of leather shoes in the market. Most consumers prefer shopping footwear products online as they get the opportunity to compare different products and brands. Major brands such as Adidas America, PUMA, and Lee Cooper are strengthening their presence online by engaging consumers through different social media platforms (Adulyanukosol & Silpcharu, 2020). Asian countries are projected to be some of the fastest-growing markets, something that is attributed to an increase in consumer disposable income. Giant companies such as Nike and Adidas already have a strong presence in these regions, which is expected to boost market growth even further.

 

One key aspect that explains the increased growth in footwear over the past decade is the rising popularity of designer shoes among consumers. According to American Apparel & Footwear Association (AAFA), most men and teenagers prefer sneakers compared to any other type of shoe, particularly because of their comfort and affordability. With televisions being present almost in all households, watching different sports has become a recurrent pastime. This has led to increased admiration of sports shoes, leading to idolization, which is subsequently followed by purchasing the item. Since footwear represents a critical part of a sportsperson’s jersey, burgeoning sales in retail sports have contributed to the growth of the footwear industry (Silva et al., 2021). In 2020, North America, with a regional share of 35%, led the footwear market. This is credited to the increased popularity of four prominent games in the continent, namely baseball, football, hockey, and basketball. National leagues for these games have compelled prominent sportspersons to engage thoroughly in marketing campaigns. Some of the leading market players in the footwear industry include PUMA, Nike, Adidas, Skechers USA, Timberland, Under Armour, and Wolverine. Adidas, one of the popular brands globally alongside Nike Inc., has made a strong brand name by fully and partially sponsoring major events worldwide. Other brands have also started to follow a similar marketing technique and are reaping massive revenues.

The major stakeholders in the footwear industry are government, the general public, employees, and manufacturers. In this case, the government is the regulating body that ensures that all manufacturing companies adhere to the established policies in regard to quality and licensing. The general public represents the customers or consumers who buy products from the company. Employees are individuals employed in various companies with the role of helping these companies achieve their overall objectives. Manufacturers are the producers of different types of shoes; they include Nike, Adidas, and Timberland. The major problem facing the footwear industry is the presence of counterfeits. Most of these duplicates are cheap and only appear good in the initial stages; however, they are not made with the same rigorous quality; hence they wear out fast (Munny et al., 2019). The other constraint in the footwear industry is heavy duties and taxes. Most footwear is made in developed countries such as the USA and Germany, hence subjection to high taxation when being imported.

Porter’s Five Forces

There are several external factors that dictate the intensities and strengths of forces impacting companies in the footwear industry.

Competitive rivalry/competition (Strong)

The level of competition in the industry dictates how participants maintain their market share. In the footwear industry, the level of competition is quite high, particularly because of big brands in the market, the likes of Nike and Adidas. In recent years, more companies have been joining the market with the aim of having a share of the cake. The high levels of competition in the market explain why most companies are facing the problem of counterfeits. Any move taken by one of the key players in the market is immediately looked into and imitated by others. A good example is when Reebok launched its female shoe ware, other companies in the market, such as Nike and Adidas, copied the same aspects (Chaturvedi, 2015). Due to high levels of capital and entry barriers at the global level, there are few but highly competitive brands, among them being Adidas and Nike. Nonetheless, at the national level, there are several players due to market flexibility; a good example is Service and Bata in Pakistan. At the national level, the competition is not price-based; rather, it is a competition of having the largest range of products and services. Customer loyalty and brand image are crucial tools for promoting individual products.

Bargaining power of suppliers (low)

Due to the ease of availability, the footwear industry has many suppliers who can supply raw materials such as rubber, leather, and other much-needed raw materials used to make shoes. Most raw materials originate from textile companies and animals, something that makes them easily available. Since these raw materials are from animals and textile companies, there is little or no cost associated with switching suppliers since the quality will still be the same. Furthermore, most footwear companies only require suppliers to meet a minimum requirement for quality standards, something that many suppliers can achieve without much struggle. Therefore, the bargaining power of suppliers in the footwear industry is relatively low (Shang et al., 2019).  The other aspect that makes the bargaining power of suppliers weak or low is the fact that most major companies in the industry switch suppliers quickly without having to worry about the decrease in quality. For instance, Nike only requires cotton, rubber, and foam to make sneakers. Therefore, any supplier that meets the minimum quality standards is good to go.

Bargaining power of customers (low)

The footwear industry gives major brands in the market very strong powers, especially when it comes to setting o prices. High-end companies such as Adidas and Reebok set their price for most of their products. These brands have a reputation for quality products; therefore, their products are fast-moving and high in demand, which gives the company the monopoly to set prices. While most of their prices are considerate and vary depending on the type of shoe, these companies have fixed prices on most of their commodities. Other than differentiated products in the market, such as orthopedic, dance shoes, or athletic, substitutes are lower in quality (JAWOREK & KARASZEWSKI, 2020). Besides less sensitivity to prices due to brand loyalty and brand recognition, the industry lacks bulk buyers, another aspect that gives major players the power to set premium prices. Nonetheless, brands such as Nike and Adidas give incentives to their customers during seasonal sales. In other countries such as India, local brands such as Bata are necessitating substitutes of major brands such as Reebok and Nike and have gained a considerable market share. Hence, the bargaining power for consumers is low.

Threat of New entrants (Low)

Some of the leading shoe companies in the world, such as Nike and Adidas, have substantial capital invested in production, marketing, and distribution, something that new companies may find challenging. Due to the existence of large footwear companies in the industry, the threat of entrants is extremely low since most of them do not have the capital to maintain the monopoly standards set by these companies. Also, all apparel and shoe models are patented, making it difficult for new firms to copy-cat well-recognized designs. Furthermore, most of the lead companies in the footwear industry have attained economies of scale and outsource globally for affordable suppliers, making their production levels less costly. Some of these giant companies have also outsourced production centers in countries with low levels of labor costs, hence the high-profit margins being recorded. The footwear industry is also dominated by few strong brands, which have high numbers in many countries around the world, which raises the entry barriers (Mahdi et al., 2015). A good example is Nike, the company has been in operation for many decades, which has enabled the company to develop a strong brand name for itself, scaring new entrants that may wish to join the market. Furthermore, the industry lacks clear government regulations, creating room for further customer exploitation. Overall, there are low threats for new entrants.

The threat of Substitute products (Medium)

Substitutes pose a huge threat against leading brands in the market. Except for specialized footwear such as orthopedic or athletic shoes, other shoes can be substituted by sandals and other varieties of shoes. The cost of switching is also extremely low. Nonetheless, there are no or fewer substitutes for specialized shoes since they offer professionalism, safety, and comfort. Another alternative to shoes is going barefoot, something that cannot be considered as a substitute. Hence the level of substitution is moderate (Widyaningrum, 2020). The moderate availability of substitutes poses a moderate threat against giant companies in the industry since customers have affordable alternatives at their disposal. The low costs of switching further adds to the likelihood.

Conclusion

The increased expansion of the footwear industry has been made possible by the increasing demand for trendy and new designs globally, along with a production shift towards more durable shoes. This market growth is primarily attributed to increased demand for comfortable and convenient footwear. Some of the leading market players in the footwear industry include PUMA, Nike, Adidas, Skechers USA, Timberland, Under Armour, and Wolverine. More companies in the industry are now focusing on key parameters such as product developments, technical fabrications, and innovative designs to intensify product sales. Companies in the footwear industry are impacted by several factors, from fashion trends in certain categories to the macro-economic environment. That said, existing and new investors should pay close attention to margin trends, same-store sales, and inventory management. Firms that master and succeed in these areas tend to be best managed and, thus, remain competitive in the highly competitive industry. The other aspect that companies need to take into consideration is strong brand recognition, as strong brands tend to resonate with customers when faced with homogeneous products.

 

 

 

 

References

Adulyanukosol, A., & Silpcharu, T. (2020). Footwear Design Strategies for the Thai Footwear     Industry to Be Excellent in the World Market. Journal of Open Innovation: Technology,            Market, and Complexity, 6(1), 5.

Chaturvedi, S. (2015). Factors Influencing Preferences in Purchasing International Footwear        Brand. Global Journal of Enterprise Information System, 7(2), 18-24.

Corbo, L., Pirolo, L., & Rodrigues, V. (2018). Business model adaptation in response to an          exogenous shock: An empirical analysis of the Portuguese footwear    industry. International Journal of Engineering Business Management, 10,       1847979018772742.

JAWOREK, M., & KARASZEWSKI, W. (2020). The largest athletic apparel, accessories and     footwear multinational companies: economic characteristics, internationalization. Journal of Physical Education and Sport, 20(Suppl. 5), 3053-3062.

Mahdi, H. A. A., Abbas, M., Mazar, T. I., & George, S. (2015). A Comparative Analysis of         Strategies and Business Models of Nike, Inc. and Adidas Group with special reference to          Competitive Advantage in the context of a Dynamic and Competitive Environment. International Journal of Business Management and Economic             Research, 6(3), 167-177.

Munny, A. A., Ali, S. M., Kabir, G., Moktadir, M. A., Rahman, T., & Mahtab, Z. (2019). Enablers of social sustainability in the supply chain: An example of footwear industry         from an emerging economy. Sustainable Production and Consumption, 20, 230-242.

Shang, X., Shen, Z., Xiong, G., Wang, F. Y., Liu, S., Nyberg, T. R., … & Guo, C. (2019).            Moving from mass customization to social manufacturing: A footwear industry case study. International Journal of Computer Integrated Manufacturing, 32(2), 194-205.

Silva, R., Coelho, A., Sousa, N., & Quesado, P. (2021). Family Business Management: A Case    Study in the Portuguese Footwear Industry. Journal of Open Innovation: Technology, Market, and Complexity, 7(1), 55.

Singh, R. (2016). FACTORS AFFECTING BRAND LOYALTY IN THE FOOTWEAR INDUSTRY–A STUDY OF LUDHIANA DISTICT. international Journal of research-           Granthaalayah, 4(6), 139-149.

Widyaningrum, M. E. (2020). The Effect of Incentives and Leadership on Employees’     Motivation and Performance at the Indonesian Footwear Industry Development          Centre. International Journal of Innovation, Creativity and Change. www. ijicc.      net, 13(5), 728-738.

 

ORDER NOW »»

and taste our undisputed quality.