Breathing Innovation into Shoes Case Analysis
Geox is an Italian shoe and clothing company that started in 1995. Its products are available through over 10,000 stores around the world. The founder of the company, Mario Moretti Polegato, has built a company by offering a world an innovative concept of “shoes that breathe.” The company’s brand-named shoe technology combines vented soles with breathable membranes that allow humidity and heat to escape while still providing protection from the elements. Product lines include casual and dress shoes for men and women, as well as children’s shoes. Geox has also adapted its technology for use in jackets and coats. Today, Geox holds the position of a second largest manufacturer of casual footwear market, but it is choosing the right strategy to improve its positions in other markets, renew its products while staying competitive.
Breathing Innovation into Shoes Case Analysis Essay Example
In order to set specific growth objectives for Geox, first, we need to evaluate the company’s current position. We used SWOT analysis to determine the company’s strengths, weaknesses, opportunities and threats.
Strengths: Patented innovative technology, constant focus on research and development Cross-market positioning for products Brand recognition A growing presence on international markets Vast distribution network Optimized production Weaknesses: High cost of research and development Patent protection costs
Opportunities: New-product development to attract new customers Expansion to new markets Diversifying the production to include sports footwear Partnerships
Threats: Highly competitive industry Other companies’ similar technology development Economy and demand fluctuations Instable political climate
Reaching the leading position in the casual lifestyle market Differentiating the product line Expanding to emerging markets Developing new products
Overall, first half of 2009 was successful, and currently the company has $133.9 million of free cash flow to reinvest in future growth.
1. Continue expansion to China
China is the second largest footwear consumer, following the US. And if the US footwear market is over saturated and highly competitive, which implies that in order to reach the customer, Geox would have to invest huge amounts of money in distribution and marketing. China, on the other hand, is an extremely attractive market that requires less investment and offers bigger outcomes.
Furthermore, 95% of the production facilities are located in China, which ensures relatively fast and inexpensive distribution to the retailers in the Republic. European plants contribute only 5% of the output of the production, so it would be efficient to relocate those plants to China.
2. Expand to other emerging markets
Such countries as India, Asia Pacific, Brazil and Russia are the other attractive markets for future expansion. They are some of the top footwear consumers, and rising incomes among the population of those countries ensure affordability, and therefore, the demand for Geox products. Thus, Geox is interested in future partnerships with department stores in those countries, as well as opening its own single-brand stores.
3. Focus on the casual lifestyle footwear
In order to keep the leading position and to secure high profits, the company has to progress in this direction and not to shift from it completely as it risks losing its loyal customers who are the main sources of profit.
Casual footwear is the biggest and fastest-growing product segment, and by 2009, Geox was second largest casual lifestyle sector operator with 31.9% percent increase over the previous year, which also makes it the fastest-growing company in this particular market. The leading casual footwear producer, Clarks, had experienced only 9.7% growth over the year. Therefore, there is an opportunity to get a bigger market share and take the dominating position in the casual lifestyle footwear market.
4. Find its own niche in sports footwear
Geox has all the resources to continue developing its sportswear line. Biggest competition, companies Nike and Adidas together control nearly 60% of the athletic footwear market. Their budgets are higher than those of Geox, and they put all of their resources towards promoting and distributing only products designed for sports and active lifestyle.
Eventually, in order to successfully enter the sport footwear market, Geox would have to find some support from athlete celebrities or well-performing sports teams to endorse its products. It does not necessarily have to be in the form of flashy marketing campaigns as it contradicts with company’s values, but it could be done in the form of sponsoring the events, teams, or single persons.
As both sportswear leaders are American companies and focus primarily on US athletes, Geox could partner with someone representing European sports. Innovation and breathability are company’s main strengths; so high-intensity sports like racing would be a perfect match.
5. Invest in the new product lines
Geox positions itself as a producer of innovative “breathable” products. Moreover, the company is aware that this is not enough to appeal to consumer, so it ensures that its shoes follow the fashion trends. For that matter, Geox employs the best Italian designers. So far, that has been a successful move that gained a lot of loyalty from more fashion-conscious buyers. Therefore, Geox could develop a new line for high-end formal wear. The other Italian brand and one of the competitors operating in that segment, Ferragamo, has shown a significant increase in sales and profits over the last few years, so there are a lot of opportunities in competing in this market. In order to do that, the company might need to develop a signature look, to add some other distinctive design features to the shoes, to develop a line of products on the cutting edge of both technology and fashion.
6. Continue research and development
Innovation is a key competitive advantage of Geox, so as the competition is aware of that, Geox has to constantly come up with something new and add more and more unique features to stay on top of the game.