Crocs Company Analysis
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Crocs, Incorporated
I. BACKGROUND
Crocs, Incorporated was founded by three Boulder, Colorado men looking to develop and market an innovative type of footwear. Crocs were originally intended as a boating/outdoor shoe, but by 2003 were regarded as an all-purpose shoe (Crocs Incorporated, 2007). The shoes are made of proprietary closed-cell resin and are designed for men, women, and children. Today, Crocs are available all over the world and on the Internet as well. The shoes sell in 11,000 United States shops, such as Nordstrom and specialty stores, and in 80 countries. Crocs gets most of its revenue from sales to customers younger than 18 years old and older than 30 (Hoovers North America, 2007).
II. STRATEGIC DIRECTION
A. Mission
There is no mission statement.
B. Goals/Objectives
increase in the number of retail stores selling our products
new product offerings
increased sales at retail locations owned by us and through our web stores,
and expansion of direct sales into new markets, including China, Brazil and India.
enhance and further develop production capacity and global infrastructure to
support the growth of the business and retail sales
further formalization of accounting standards and guidelines, improved
segregation of duties, hiring additional competent accounting managers and staff,
and improving information technology system controls
increase inventory positions primarily in core styles in order to meet
anticipated demands for the nine months ending JuneІ30, 2008 and, at the same
time, make available production capacity for new product lines for
delivery in the
quarters ending DecemberІ31, 2007 and MarchІ31, 2008
build brand awareness
expand into new footwear categories and expand accessory items that compliment the products.
C. Industry Ð- Standard Industrial Classification or North American Industry Classification System
The primary Standard Industrial Classification is 3021: Rubber and Plastics Footwear. This classification consists of “establishments primarily engaged in manufacturing fabric upper footwear having rubber or plastics soles vulcanized, injection molded, or cemented to the uppers, and rubber and plastics protective footwear” (Occupational Safety & Health Administration [OSHA], n.d.).
The primary North American Industry Classification is 316211: Rubber and Plastics Footwear Manufacturing. This classification consists of “establishments primarily engaged in manufacturing rubber and plastics footwear with vulcanized rubber or plastics soles, molded or cemented to rubber, plastics, or fabric uppers, and rubber and plastics protective footwear” (U.S. Census Bureau, 2007).
D. Market Structure
The market structure for Crocs, Incorporated would be that of monopolistic competition. Monopolistic competition is a market in which there are a large number of relatively small firms acting independently. These firms have product differentiation and the entry and exit of the market is relatively easy. Additionally, non-price competition is very important. This describes Crocs, Incorporated in that it has many competitors and high product differentiation.
III. INDUSTRY ENVIRONMENT Ð- PORTERS FIVE FORCES OF COMPETITION
A. Rivalry Among Competitive Firms
According to Hoovers, the three main competitors of Crocs are Deckers Outdoor Corporation, Nike, Inc. and Timberland Company. All of these companies manufacture shoes and apparels. The American Apparel and Footwear Association (AAFA, 2006), reported that in 2005 the US consumption of rubber and plastic footwear grew by three percent to 332 million pairs. The Census Bureau reported in 2005, that there were 62 companies just within the United States alone. Positive market growth and increase in number of companies make this industry highly competitive. Crocs Inc. also faces competition from companies that produce imitations of their popular products that put a strain on their market.
B. Barriers to Entry/ Potential Entry of New Competitors
This footwear industry as a whole has low barriers to entry according to the Standard & Poors Industry Survey (2007). Companies can contract the production of their footwear to low-cost independent manufacturers outside of the United States. This allows for lower initial capital investment as companies avoid expenses on acquiring machinery and production facilities. The threat of entry from new competitors is high, for this industry has seen positive growth. Apparel companies, retail stores expanding into their own brands, are some examples of the threats the existing footwear businesses will have to face. It is also a trend for apparel companies to expand their brand image to footwear and handbags.
C. Substitutes
Substitutes for footwear are leather shoes and socks. The fun of collecting shoes can be substituted with the fun of collecting handbags. Walking barefoot is another substitute for this industry.
D. Power of Suppliers
Some of the materials used by this industry are rubber, plastic, processing chemicals, dye, glue, packaging materials and shoe making equipment and machinery. Crocs uses, “croslite”, a closed-cell resin, as a primary raw material to make their shoes and other products. Croslite is made with elastomer resins with other inputs. According to their 2006 annual report, Crocs depends on two suppliers to buy elastomer resins. The trend in this industry has been to move production operations to countries with lower labor and material costs. The US imported 315 million pairs of rubber and plastic footwear in 2005 (AAFA, 2006). The suppliers of materials come from within the US as well as from many foreign countries like China and India. Suppliers have low power because of the high number of suppliers.
E. Power of Consumers
There are many companies providing different styles, designs and brands of shoes. There are also many substitutes for consumers to choose from. Consumers can easily switch brands and choose substitutes.