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Summary

The Geox footwear company, founded by Mr. Mario Polegato in 1995, became the worlds second largest manufacturer of shoes in the lifestyle market. Until the early 1990s, Mario was involved in his familys wine-producing and exporting business based in Italy. Polegato got the idea the shoes that breathes in the summer of 1992, at a wine trade fair in the arid American state of Navada. Then he came back to Italy and looked for the breathable soles in the local sports shops and he couldnt find them. So he used the laboratory of a small shoe manufacturing company owned by his family and tried to transform his idea into a product. Polegato immediately patented the new technology and tried to sell the invention to leading shoe companies in Italy. However none of them showed any interest. So he got into partnership with his friends and started making childrens shoes and later on started manufacturing shoes for adults. In 2000 the company expanded into the international market and boosted its sales through both exclusive and multi-brand channels. Also the company started Geox School in 2001. This was a training centre which prepared new recruits, providing training on company policy, the characteristics of Geox products and the business development needs of the group. Geox operated in a fashion-conscious industry, so he the best designers so that each new collection of shoes is created by them. In 2002 the company entered into the apparel market with a patented jacket that allowed air through at the shoulders. In December 2004 Geox was listed on the Milans stock exchange. In April 2009, Geox added to its sporting goods products and launched its product range, which Polegato claimed was in response to customer requests. Geox outsourced most of its production to factories in China, Vietnam, Indonesia and Brazil. Geox was affected by the recession in 2009 that lead to a 9% drop in shares value so the company took a decision not to open any new stores during 2009 in the US.

Key facts & issues


Brand name Geox was established by Mario Moretti Polegato in 1995. Consolidated sales for Geox as on 28th July, 2009 - $ 653 million. Geox entered apparel market in 2002. In 2009, after 14 years of operations, Geox became 2nd largest player in casual lifestyle footwear market. Presence in 68 countries 10000 multi-brand and 997 single brand (Geox) shops (77% franchise stores & 23% directly operated stores DOS). Geox developed the concept of shoe that breathes By using breathing membrane in sole of both rubber & leather footwear, which allows vapours to exit and keeps them water tight. It started with childrens shoes and then covered adult footwear. International sales started in 2000. 1st Oct, 2004 - Got listed on Milan Stock Exchange. 71 % stake remained with Polegato. 2008 Polegatos son, Enrico Moretti was appointed as Deputy Chairman of Geox. 2008 Net sales of 892.5 million (20 million pair of shoes & 2 million clothing), Net income of 118.2 million.

2009 Polegato was recognized as 469th richest person of World by Forbes ($ 1.5 billion). 2009 Geox entered into Golf (Sports) footwear market, introduced NET system technology. Also, Geox bought Diadora Italys famous sportswear brand. In 2007, global production of footwear reached 16 billion pairs, 63 % i.e. approx. 10 billion pairs contributed by China, followed by India, Italy, Thailand, Brazil, Vietnam. U.S. consumed approximately 1/3rd of total production of footwear, India & China considered as the attractive markets in future. In 2006, casual footwear was the largest and fastest growing segment, contributing 7 billion pairs. Market leader Clarks shoes, followed by Geox Geox Products were differentiated on basis of target consumer Children, Men and Women. Products were further categorized in 2 ways Classic (Elegant & Traditional) and Casual (Wearable & adaptable). Sports category in Geox was divided into running & gym and golf footwear. 95 % of production was outsourced by Geox, mainly to China, Vietnam, Indonesia and Brazil. 5 % of products were manufactured at Geox owned factories in Romania & Slovak republic. In 2008, Geox entered into strategic partnership with Belle Company (Largest women shoe retailer in China with 22% market share). Geox protected its inventions with patents (50), including patents for 3 original concepts breathing membrane in Leather sole shoes, Rubber sole shoes & apparels. In 2001, Geox School was opened for preparing new recruits & training them on companys working and characteristics, identification of needs and required developments. In mid-2009, Geox faced 9% drop in shares due to recession and 13% drop in demand of products for winters. Geox took remedial steps of boosting promotional activities and halving its capital expenditure by not opening new stores in U.S. 90% Geox sales were contributed by footwear and only 10% by apparels. The company targeted 50-50 % split in both categories in future as apparels have a higher profit margin of 24%.

Key Learnings
Step by step product diversification with same core feature, leading to lower risks Geox started with childrens school shoes, then started manufacturing casual and lifestyle footwear for both women & men. Later on, Geox entered into apparel market, still carrying forward the core feature of breathing membrane in its products. Similarly, Geoxs sports products also capitalized on breathing membrane concept. Company carried forward its core competency as the major competitive advantage. Protecting the inventions by patents Geox believed in protecting its ideas, research and developments by patents for sustainable competitive advantage. Ideas are the starting points for new inventions and its necessary to protect them for business

purposes. Constant innovation is needed to keep customers attracted towards your products. Technical aspect of Geox differentiated it from its competitors. Cost cutting The company used images of its products instead of celebrities for advertising its products. It reduced promotional costs and also helped in displaying the latest inventions of Geox. Focusing on a particular process Geox outsourced most of its production to countries like China, where the production costs were low and itself focused on research, designing and development of new products and management of sales. Recruitment & training practices Geox opened Geox school in 2001, which prepared new recruits for efficient and effective working in the company. Hence, there was a constant supply of talents which generated new ideas. Flexible business model When recession hit the company in 2009, Geox dropped its plan of opening new stores in US to reduce its capital expenditure. Hence, higher adaptability to cope up with external factors Geox focused on both international expansions as well as retaining its national leadership (Italy). This helps in managing the uncertainties of different markets, the company can perform better in one market if the results are bad in other. Careful choice of Strategic partners and companies for acquisitions Geox entered into strategic partnership with Belle in 2008, largest women shoe retailer in China, which assured Geox of opening 200 new points of sale in China within next two years. Hence, it helped Geox to make a good start in emerging footwear market in China. Similarly, Geox bought Diadora, famous but debt laden sportswear brand in Italy, in 2009. This helped Geox in strengthening its leadership position in China.

Q.1 What do creativity and innovation signify and entail? What are the key types of innovation? Creativity is the capability or act of conceiving something original or unusual. If we think about something new, it is called creativity, but it becomes an innovation only when it is implemented. So, Innovation is the implementation of something new. Creativity is subjective, whereas innovation is measureable or can be measured by our senses. Somebody has to take a risk and deliver something measurable for a creative idea to be turned into an innovation. An invention might be a product or device or method that has never existed before. So every invention is an innovation. But every innovation is not an invention; you can innovate with a new process, method, business model, partnership, route to market or marketing method. Innovations can be incremental or radical. Every improvement that you make in products or services can be seen as an incremental innovation. Most businesses and most managers are good at incremental innovation. Radical innovations involve finding an entirely new way to do things. As such they are often risky and difficult to implement. Larger organizations and most managers are poor at radical innovation. We need to constantly look for incremental as well as radical innovations. We need to develop creativity and turn it quickly into innovation.

There are 4 key types of innovations for an organisation

Product innovation Changes in the products or services which an organisation offers Process innovation Changes in the ways in which products and services are created or delivered Position innovation Changes in the context in which the products and services are framed and communicated to customers Paradigm innovation Changes in the underlying mental models which shape what the organisation does or what it is about.

Q.2 Analyse Geoxs innovative strategy in detail. What are features of this strategy that have made Geox shoes a success? What factors, other than product innovation, does Geox owe its competitive advantage to? The innovation in Geox products came from the different design of shoes that have membranes in their sales having tiny rubber holes to allow the circulation of air within the shoes. This innovative design was patented by Geox and became their key differentiating factor and USP of the product. Geox has invested in state of the art R&D facility to continuously keep improving their technology and patenting all their designs and innovations thus managing to keep their product differentiated from its competitors. While 90% of sales were via the shoes only Geox introduced the technology into fabrics as well and created a clothes line using that fabric. Also, along with being comfortable and innovatively designed, Geox did not compromise on style and kept the designs of the shoes trendy making the product more popular. Other Factors for Competitive advantage that Geox has: Production: Geox optimised production resources by outsourcing its production activities giving them flexibility. They carefully monitored the manufacturing activities to maintain high quality standards. Marketing: Geoxs marketing strategy differentiated them from its competitors as they focused on the innovative features of the shoes and advertised the shoe itself without using brand ambassadors, the focus is the shoe and its unique qualities. Also by not using any brand ambassador the company saved a lot of money which was invested in heavy promotion using billboards and postings. Pricing Strategy: Geox targeted middle to high income consumers and kept a price range for the same, but due to its unique design and technology the product was popular in all income groups. Wide distribution network: Geox maintained a very wide distribution network in both multi-brand and single brand stores which were franchises and directly operated stores.

Q.3 Assess the market environment of the industries Geox operate in. Who are Geoxs key competitors? What Strategies and options are available to Geox for sustaining its position in these industries? Geox operates in two industries i.e. Footwear industry and Apparel industry. Talking about the Footwear industry in which Geox operates, the global footwear market is experiencing a stable growth rate due to changing fashion trends. This market has exhibited sustainable development owing to driving factors such as rising demand for innovative designs, growing awareness about healthy and active lifestyle, rising population and disposable income levels, and rise in retail culture. The athletic footwear market is expected to grow at a CAGR of 1.8% from 2011 to 2018 to reach USD 84.4 billion by 2018. Non-athletic footwear is the largest market segment and is expected to grow at a faster CAGR as compared to the athletic footwear segment. Various fashion trends in the market such as demand for innovative designs and styles, and celebrity endorsement is driving the non-athletic footwear market. The global footwear market is segmented into Men, Women and Kids footwear. Mens footwear market is a leading segment with 52% market share of the overall footwear market. Kids footwear market is expected to grow at a CAGR of 3.7% due to the high demand of comfortable and designer footwear for kids. The major competitors of Geox are C&J Clarks Ltd, Nike and Adidas. In order to become the worlds biggest shoe maker, the company should enter into casuals and sports market. Also the following strategies Geox should adopt in order to sustain its position in the industry Product Innovation: The Company should continue researching, patenting and implementing new solutions. Consolidation of the leadership position achieved in Italy: Geox should open shops in high traffic city centres and key shopping malls and increase the market share and strengthen the brand through a greater use of corner shops and shop-in-shops. Geox should continue to launch quality signals, to make the shopping experience increasingly nice and different from its competitors, and to invest in marketing and R&D since they constitute sources of its sustainable competitive advantage. In this way, it will continue to build its brand both in Italy and abroad. In particular, innovation allows to create new opportunities in a mature market, and to fight against imitations.