Five year strategic report on the management of Aero Footwear Company

Introduction

The shoe industry has not been left out from expanding into global markets as many other industries are also turning global. The footwear manufacturers have expanded their horizons in fighting for the worldwide market including those from the Americas and ASIA being part of this highly competitive market. The show industry has also been shaped by various economic conditions around the world which has seen consumers of the past few decades opting for shows which are of a less cost, preferring to but more casual and athletics shoes. This means that for the shoe manufacturers to remain competitive and to succeed in this century, they have not only to pay attention to the trends and preferences of customers and the conditions in the market, but they will also be forced to adopt new ways of lowering cost of their manufacturing process and adopt the price pressures.

This paper will provide a report on my experience of strategically managing aero footwear for a period of at least 5 years. I will provide a critical analysis of the main six decisions made each year and then presents my comments on the level of success achieved in comparison with the competitors. These decisions show company’s position of being a potentially successful player in the international market. The decisions also demonstrate an action plan aimed at achieving competitiveness in the organization in a period of five years.

Shoe industry analysis

Seven companies in the shoe industry are currently operation in various regions of the world such as Africa, Latin Europe and, North America and in Asia. The companies enjoy an equal share of market share volume. This means that they have equal and the same revenues, costs, market percentage and also the style of footwear. The same firms also have the same production cost and the same production capacity.

The most attractive shoe brand is the sportswear which has very a long term period showed a growth in sales and is also forecasted to also grow in the coming years. It is therefore important for all the companies in this industry to strategically plan for the direction in any case of takeover occurrence. The sale of footwear has been attractive in all the parts round the globe because it is attractive to the young and old generation. This factor is essential for promising a growth in various companies in the industry on their annual scale in the global market. each of the companies depending on the countries they are based in have their own global association team which sets the company’s standards in shoe designing and styling and also on the quality of the shoes in t modern day market. The quality of footwear has become a major concern facing the industry because consumers have the major factor of deciding and choosing which item to buy.

Aero Footwear Manufacturing Company over the past six years

In the analysis of the business position of Aero Footwear Manufacturing company was at the same level with the other companies in the industry. The major market segments the company was targeting were the Latin American, North American, Europe, Asia and Africa. The major decisions made focused on the marketing segment to pursues, product decision, the right price suitable for the company’s competitive strategy. It was also decided that when all the other strategies failed, it would only be necessary to use the strategy of promotion for the sake of achieving the company’s targeted strategies and market segment.

The vital competitive strategies according to Grant (1991) are product differentiation, targeting of a market niche and the strategy on the low cost. Low cost strategy is only met by reduction on cost control in an effective way and having an action plan showing effectively in the procedure to be undertaken ([1]Grant, 1991, pp 534).


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Decisions made and analysis

Decision I target on the market niche through differentiation and low cost leadership

In January 2011, the board members hold a meeting to decide on the right market segments. The chosen market segments were European- African and the North American region. The Latin American and the Asian Pacific region were chosen to undertake the low costs strategy. These market segments were to be pursued with a low cost strategy as well as product differentiation. The company was therefore venturing into the new different segments of markets by concentrating on Differentiation and Low Cost leadership. The process is known as market segmentation targeting. The Low costs leadership strategy is a process to be implemented in the Asia pacific region and in Latin American region which deals with the expectation of the customers S/Q r rating and the buying power expected from the buyers. This meant that the plant in Asia region was to come up with the right product category while the plant in the North America region was to come up with the differentiation strategy for the targeted market in the European –African and North American region.

One of the main competitive advantages of Aero Footwear production Company is its ability to undertake both the differentiation strategy and low cost leadership in the European –African market and the North American market segment. The adaptation of a differentiation strategy by a company means achieving its business success in the market because it is able to unique models of shoes especially the highly demand athletics shoes. Differentiation will also mean coming up with a brand name and building on it. Differentiation strategy can also adopt after sales services, quality improvements, CSR and developing new innovative designs. To achieve product differentiation, coming up with creative and unique product is the crucial thing in order to increase the profit margin of the company’s business , to ensure there is correct provision of volume sales and to create a top level brand loyalty for a long term duration ([2]Craig, and Douglas 1996, pp 70-77).

In the analysis of the success of this integrated or hybrid strategy has assisted Aero Footwear production Company in increasing its global competition. The company was able to perform better in terms of revenue earned from the sales as compared to the competitors using and relying on a single generic strategy. Aero Footwear production Company was able to quickly adopt the new technologies, learn new skills and the various environmental changes and to provide consumers with differentiated products at a low cost. Through differentiation, this company was able to charge consumers a premium price while the cost leadership enabled the company to charge consumers with the lowest competitive price.

The price of aero footwear compared to the competitors can be seen in the chart below:


 

SUMMARY OF YEAR 2011

----------

Revenue     EPS       ROE     Stock

Credit   Image

Company Name                 ($000s)     ($)       (%)     Price

Rating

---------------------           -------   ------   ------     ------

------   ------

Aero                           249291     1.75     10.9       16.68

B+         65

Matador Athletics             252877     2.95     17.7       37.22

A–         69

C Speed                         265243     2.89     18.3       38.56

A         66

Dandelion Sports             239137     4.00     23.3     58.71

A–         59

Energy Erupting             232193     3.27     19.5       44.42

A         66

F Company                     256063     3.10     18.5       40.61

A–        69

G Company                   296451     4.36     25.1       80.86

A         79

 


 

Decision II achieving customization and standardization

Standardization

With the anticipation of an increase in international market competition the management team of Aero Footwear production Company decided on standardization of the company’s foot ware. Standardisation would capture a set of footwear for a specific range of order. this process will involve the dissemination, development and implementation of a standard process with the aim of improving services, products , processes and applicability, promote technical cooperation, and for preventing trade barriers. This will help Aero Footwear Production Company be usefully in gaining competition in the global market, to create brand awareness and for the sake of cost benefits standardization ([3]Grant, 1991, 534)

Customization

Mass customization touches of various aspects of the company which include marketing department, management and the manufacturing department. Customization is a process which uses flexible manufacturing systems supported by the computer to produce the desired outcome. The management team of Aero Footwear production Company resolved to the decision of applying the customization strategy due to the targeted income from the various regions of European- African, North American region, The Latin American and the Asian Pacific. A second reason for the team coming up with this decision was due to the difference of preferences among customers. The expectation of the customization system was to combine the flexibility of individual taste with the low cost per unit of the processes of mass production. The strategy would also build on the recognition of the local brand, to gain success over the domestic shoe products from companies based in the targeted regions and also to fit into the requirements   given on safety, quality, domestic content and technical specification. A separate market is created due to the high cost of trade ([4]Cerruti, & Delbufalo, 2009, pp 427).

This decision became successful and applicable to the new global market because customers had the opportunity to participate in coming up with their unique designs of shoes thus adding value and pleasure and loyalty to the brand from the company. The ability to customize by to the customers will give the company added competitive advantage over it competitors. Aero Footwear production Company offers the custom foot wear through the internet with first the scanning of the client’s feet. The design needed by the client is then followed as well as colour and the signature the client wants to be imprinted in the shoe. This is an attractive aspect which will make clients admire the quality of the shoe and be ready to buy at a high value.

The use of customization and standardization will be on the athletic footwear which is every day needed by both the young and the old. The use of both strategies is with the expectation that either will be an annual growth of 7-9% in the global demand on this brand of footwear for those aged 11-15 years while for teenagers ranging from the age of 16-20 will be an increases of 5-&% annual growth among the four targeted regions. These projections are not uniform which can be seen in the table below:

Projected Growth Rates

 Asia-pacific & Latin AmericaNorth America & Europe Africa

Overall international market

 

Private label footwear

 

10% years 11-15

8.5% years 16-20

10% years 11-15

8.5 years 16-20

10% years 11-15

8.5 % years 16-20

    

Branded Footwear Markets

 

9-11% Years 11-15

7-9% years 16-20

5-7% years 11-15

3-5% years 16-20

7-9% years 11-15

5-7% years 16-20

From the data the actual growth in sale will be within the 2% points which varies from year to years as well as in regions . It can be said that in North America the sales growth will be grow by 5.2 % 6.25 in North America and 5.8% in Europe Africa. Other possibilities which may affect these speculations are intense competition from the rival companies dealing with footwear or it can be weak level of competition.

Coordination of competitive actions across borders key to gaining global competitive advantage

In order to achieve and sustain competitive advantage in a global market, it is important for the company’s managers to examine the diversity and the geographic scope of a company’s interlinked age and operations and also the extent of the interdependence and integration of the company. The most crucial aspect in a firm considering any global strategy are the spatial configuration of the company’s resources, capabilities, assets, and ability to manage the resources in an effective way.

The team managers of Aero Footwear production Company arrived at the decisions of developing configural advantage which will be effective in coordinating the competitive actions across the borders. This is a strategy which would go beyond the already assumed leveraging strategies needed to be employed on the domestic level which are already been decided.

The strategy of coordination of competitive actions across borders would go beyond the establishment of a market niche strategy, differentiation and cost leadership. These earlier decisions do not take into account the significant difference among the international markets being targeted by the company and also the spatial characteristics seen in the global landscape. these markets the European –African market and the North American market segment Latin American, the Asian Pacific region, European-African and the North American region are different markets which differ in terms of the characteristics of the desired benefits, customers characteristics, key competitors, nature of market infrastructure and strategies which differ from one market or region to another.

These differences will require various forms of modifications in the company’s competitive positioning so that the firms can be able to compete in an effective way. It is important also to note that the four markets w ill be interdependent of one another due to the flow of people, information, goods and services across these regional boundaries([5]Cerruti, & Delbufalo, 2009, pp 367). Aero footwear manufacturing company will have to evaluate the overall competitive advantages among these international markets in terms of weaknesses and strengths of the position in it has in each of these targeted regions. Theses assessments will also help in   know how the factors interact to influence resources deployment   across the globe.

The potential disadvantage of this decision in the Latin America and the Asia-Pacific region is on where to locate the production of the company. For the case of Asia- Pacific the plants will have to pay export tariffs for footwear of   $6 for every pair to the markets in Latin America and $4 per pair to   the markets in Europe- Africa. The tariffs also have to be paid in every export from the plants in Latin American to countries in Europe –Africa with an amount of $ 4 per pair and &8 per pair to the Asia- Pacific region.(Are you in need of business help?) Find your solution right here.

Advantage over global and local competitors

The competitive factors were also analyzed by the managers to establish the potion Aero Footwear Company was in comparison with the local competitors based in the four targeted regions. It was established that the major competitive factors such as the line breathe of the products, rebate offers, advertisings, S/Q rating and other were equal among the companies participating in the footwear industry. The choices of the consumers to choose another company to purchase their footwear depend on the geographic coverage of the footwear industry.

Based on the S/Q ratings, it was established by the team members that the other competitive factors such as   retail outlets and prices were also equal and based on this, it was evident that companies with lower S/ Q will be out competed by those with higher S. /Q ratings. The product line breath was also examined and measured by the amount of styles and models from the brands given by each of the companies. This decision helped the mangers to establish that through the competitive product value it can participate in more end use segments is aspects like tennis gold, basketball, walking and jogging in order to provide the customers with a wide variety of styles and shoe types which they can choose from.

Success of Aero footwear manufacturing company

The aero footwear manufacturing company is well placed in the market in having around 1500 shops and the managing manufacturing plants in the Asia and North America regions. These production facilities assisted the company in   maintaining and developing   the strategies of low costs leadership a different   market segments. The main footwear types which were decided upon from the company’s marketing strategy   were   the celebrities and top class athletes shoes. The common products in the four   global regions can operate as its own branding due to the flexibility of manufacturing based on the customization and branding strategies for developing private labels. The brands also perform well in the market segments of high quality.

Despite the company being a global business, it further has the advantage of being supported by investors which adds the competitive advantage of being able to experiment with the gained capital. Aero Footwear Company has the advantage of having low cost and premium products which enables the firm to well practice single competency. It can concentrate and switch in a particular strategy depending on the outcomes from a single strategy. Through the use of Information technology used by Aero Footwear, it is possible for the company to sell its products to a wider scope of consumers and also gives the opportunity to customers to participate in the designing of the shoe they want.

The internet also allows easy shipping and money transfers with the least possible cost. The challenges faced by the company include the risk of fluctuations in forex due to the basing of the manufacturing companies in the different regions of the world. Most of the investors to the company are external stakeholders whom the team are answerable to. High competition from other companies is especially on the provision of practise and training to their employees.

Reference

Cerruti, C. & Delbufalo, E., (2009) International Sourcing effectiveness in the fashion industry: the experiance of Italian industrial districts, International Journal of Globalization and Small Business, 3(4), pp.427-40.

Christopher, L.M., Juttner, U. & Peck, H., (2004) Creating agile supply chains in the fashion industry”, International Journal of Retail & Distribution Management, 32(8), pp.367-76.

Grant, R.M., (1991) Porter's 'Competitive Advantage of Nations': An Assessment. Strategic Management Journal, 12(7), pp.535-48.

Porter, M.E., (1998). The Competitive Advantage of Nations. Free Press. Craig, C. Samuel and Susan P. Douglas (1996), Developing Strategy for Global Markets: An Evolutionary Perspective," Columbia Journal of World Business, (spring), 70-81.

[1] Grant, R.M., (1991) Porter's 'Competitive Advantage of Nations': An Assessment. Strategic Management Journal, 12(7), pp.535-48.

[2] Craig, C. Samuel and Susan P. Douglas (1996), Developing Strategy for Global Markets: An Evolutionary Perspective," Columbia Journal of World Business, (spring), 70-81.

 [3] Grant, R.M., (1991) Porter's 'Competitive Advantage of Nations': An Assessment. Strategic Management Journal, 12(7), pp.535-48.

[4] Cerruti, C. & Delbufalo, E., (2009) International Sourcing effectiveness in the fashion industry: the experiance of Italian industrial districts, International Journal of Globalization and Small Business, 3(4), pp.427-40.

[5] Cerruti, C. & Delbufalo, E., (2009) International Sourcing effectiveness in the fashion industry: the experiance of Italian industrial districts, International Journal of Globalization and Small Business, 3(4), pp.427-40.

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