Crocs

Case Study Analysis

Crocs

Question 1: How attractive is the footwear industry (i.e., on average profitability)

The attractiveness of the footwear industry is very eluding as it varies depending on the footwear market segment. Nevertheless, the general overall performance of the industry ROIC with a median of 4.7% seems to indicate that the footwear industry’s attractiveness is low medium. Why?

* First, the footwear industry is characterized by a low barrier to entry: This can be explained with the overwhelming presence of many footwear brands globally and locally that in most cases (depending on countries) tend to lead to brand erosion therefore customers switching costs tend to be low. Also, some countries have imposed regulations limiting imports from other countries to protect local brands (for instance Chinese shoes brands, counterfeit, and imitations). Another factor is that costs can be high and low depending on the type of footwear market.

* Second, rivalry among footwear firms tend to be high: The overall footwear industry is considered as relatively fragmented. Yet, in some cases for instance the profitability of the athletic footwear market which constitutes an oligopoly (Nike, Adidas and Rebook) is known to be high. With globalization and government protectionists’ regulations, competition is still moderate high as competition is based on a combination of price, designs and comfort. The footwear industry from a utility product has now become a fashion product. This requires R&D efforts with costs. Therefore, competition will be based on operational effectiveness.

* Third, the bargaining power of buyers is considered moderate: As mentioned, buyers switching costs are generally low. Buyers can easily play competitors against each other. However, in some cases due to the existence with brand loyalty. Therefore buyer power is considered moderate.

* Fourth, the bargaining power of suppliers is considered low: Footwear raw materials...