Cape Shoe Company.(Instructor's Note)
Fishman, Eli ; Sterrett, Jack L. ; Kellerman, Bert J. 等
CASE OVERVIEW
The primary subject matter of this case concerns entrepreneurial start-up and strategic management and marketing issues. The objective is to provide students the opportunity to apply their research skills and knowledge regarding highly competitive industry and buyers to develop strategic management and marketing strategies. It is suitable for a senior-level course as well as students in an MBA program and can be taught in a 75 minute class session with two hours of preparation by students outside of class.
CASE SYNOPSIS
The Cape Shoe Company case focuses on an entrepreneurial start-up in the highly competitive shoe industry. Upon the closing of a Florsheim shoe factory in a region of the Midwest that was once home to a large number of shoe and apparel manufacturers, with the majority of these having closed over the previous 30 years due to lower cost of overseas production, and concerned about the continuing loss of shoe manufacturing in the U.S., an entrepreneur from Chicago with minimal experience in the shoe industry, visited a Florsheim factory prior to its closing by Florsheim. After deciding that the facility represented too valuable a resource to be abandoned, the entrepreneur subsequently purchased the shoe plant and named his new venture the Cape Shoe Company. Based on his concern about losing American manufacturing jobs, and the belief that he could produce a competitively priced product, his plan was to produce 100 percent Made in America shoes.
The interesting focus of this particular case and ensuing discussions is that the entrepreneur has made the decision to go forward with Cape Shoe Company and his 100 percent Made in America theme, although having yet to determine target market(s), competition, product differentiation, marketing channels, marketing strategies, etc. Regarding the rather unique nature of the Cape Shoe Company start-up, and current industry scenario, students virtually have a clean slate in which to begin discussions concerning recommendations on strategic management and marketing questions.
INSTRUCTORS' NOTES
The interesting focus of this particular case, Cape Shoe Company, and ensuing discussions, is that the owner/entrepreneur, Mr. Eli Fishman, has made the decision to go forward with Cape Shoe Company and his 100 percent Made in America theme, although having yet to determine target market, competition, product differentiation, marketing channels, marketing strategies, etc. Regarding the rather unique nature of the Cape Shoe Company start-up, and current industry scenario, students virtually have a clean slate in which to begin discussions concerning recommendations on five strategic points:
1. Students will identify specific industry target markets and provide appropriate recommendations and reasoning for Cape Shoe Company.
2. Students will identify industry competition and provide appropriate recommendations and reasoning for Cape Shoe Company.
3 Students will identify various ways in which industry products are differentiated and provide appropriate product line and differentiation recommendations and reasoning for Cape Shoe Company.
4. Students will identify various marketing channels for the industry and provide appropriate recommendations and reasoning for Cape Shoe Company.
5. Students will identify specific marketing strategies and provide appropriate recommendations and reasoning for Cape Shoe Company.
DISCUSSION TOPICS
1. TARGET MARKETS. Defining a market segment for Cape Shoe Company products is predicated on the extent to which a distinguishable consumer group would be responsive to Cape Shoe Company's 100 percent Made in America commitment. An immediate and obvious market is male industrial workers who, themselves, create American-made products and would be inclined to acquire U.S. made goods. The type of footwear identified with these individuals is work boots and shoes, particularly those with safety toes. Most factories and warehouse operations require their employees to wear steel toe footwear for protection. Possibilities would include a line of men's work boots and casual shoe lines--casual oxford, desert boot, loafer, and Wellington boot styles which can include steel toes for work or regular toes for casual wear. Women's boots and casual styles could follow.
Another reason for targeting the group is related to the cost of the shoes and boots. Since Cape Shoe Company's product is competing with lower labor cost foreign-made shoes and boots, it is necessary to tap into a market segment willing to pay for possibly higher cost U.S. made goods. Male industrial workers have traditionally been likely to spend more than women on individual shoe purchases.
Currently, work boots and shoes are also worn by style conscious young adults. Although styles are temporary, work boots, as fashion statements, have endured well over five years. The priority for the fashion conscious group is brand, and since Cape Shoe Company is not an established brand, it would be difficult to make a major break-through in the style market.
2. COMPETITION. There are different competitors within various industry categories. These categories consist of, (a) Branded vs. Unbranded; (b) Work vs. Style; (c) Higher Cost vs. Low Price; and (d) U.S. Made vs. Foreign Made. Higher Low Branded Unbranded Work Style Red Wing [check] [check] Timberland [check] [check] [check] [check] Caterpillar [check] [check] [check] Wolverine [check] [check] [check] Carolina [check] [check] [check] Justin [check] [check] [check] Brahma [check] [check] [check] [check] Texas Steer [check] [check] [check] [check] Cape Shoe Company [check] [check] [check] [check] U.S. Cost Price Made Foreign Red Wing [check] Timberland [check] Caterpillar [check] Wolverine [check] [check] Carolina [check] Justin [check] Brahma [check] Texas Steer [check] Cape Shoe Company [check]
Since Cape Shoe Company has not established a brand presence, it may be necessary to compete with the higher cost, American-made product on the basis of cost, features, and service.
3. PRODUCT DIFFERENTIATION. Once a target market strategy is established (work boot, higher cost, U.S. Made), it becomes necessary to formulate compelling reasons for individuals to change from their existing brands. Brand loyalties with respect to fit and durability are difficult to overcome. Styles in the work boot and shoe categories are not necessarily trendy or whimsical. Therefore, the dominant considerations could be comfort, service and, of course, cost. The comfort issue can be a primary focus.
Service is also critical to all ventures. As a start-up, service is easier to maximize since there are so few initial customers. However, over the long-term, Cape Shoe Company could position itself to offer exceptional service because all products will be made in the U.S. Unlike importers, who must depend on selling container loads of product shipped from the Far East, Cape Shoe Company could position itself to produce needed stock on short notice, without long overseas shipping delays.
A cost advantage over other U.S. made brands, in many cases, is a result of low overhead. As a new company, given the nature of their buyout "deal" with Florsheim, Cape Shoe Company should not be encumbered with a vast entrenched bureaucracy endemic to older and more established firms. Cape Shoe Company's lower overhead translates to lower costs which can be passed on to consumers.
4. MARKETING CHANNELS. A series of different approaches (industry research/analysis) could be undertaken at this point to determine appropriate channels and pricing. Subsequent discussion could focus on traditional channels, use of shoe representatives, commissions to be paid, margins, costs, and so on. For example, the traditional shoe marketing channel flows from the factory, through a commissioned sales rep, to a retailer to the final consumer. The factory margin is about 60 percent; the commissioned rep receives approximately 7 percent, and the retailer margin is another 66 percent. A pair of shoes with a $40.00 direct labor and material cost would retail for approximately $114.00.
In attempting to maintain the initial factory margin and bypassing the sales rep, the retail would be approximately $106.00 (7% less). This retail cost is approximately 15 percent less than branded shoes who use an extensive sales rep network and require higher factory margins.
Cultivating a saleable good requires a focus on style, quality, and cost. The product should have appealing design attributes. It should also embody innovative features and construction standards. And, it should be competitively priced. Each of these elements is measured by its effect on a specifically targeted market.
5. MARKETING STRATEGY. There are literally tens of thousands of independent shoe retailers in the U.S. These include family shoe stores, athletic shoe stores, women's shoe stores, comfort shoe stores, dress shoe stores, children's shoe stores, outdoor (hiking and climbing) shoe stores, etc. There are many clothing stores that sell shoes. Also, in many small communities, there are farm supply stores, construction material outlets, army-navy, and hardware stores that sell shoes.
The initial concern is locating retailers selling men's work boots and casual shoes. Since most of Cape Shoe Company's competitors are large companies, they maintain extensive websites. These websites include information on the location of independent retailers carrying their product. Retailers offering the product of Cape Shoe Company's direct competitors would be potential Cape Shoe Company customers.
After developing a list of potential retailers on a state-by-state basis, Cape Shoe Company could introduce the line to these customers. There are a couple of traditional means of accomplishing this introduction.
The first is setting up booths at national and regional trade shows attended by other shoe manufacturers and importers, and by shoe retailers. Booth fees and the costs of travel and manning the booth represent a substantial financial commitment.
The second conventional method for disseminating information about new shoe products is the hiring of shoe reps. Shoe reps travel a specific territory, going store to store with a bag of shoe samples. Shoe reps, called "Shoe Dogs" in the industry, are essentially traveling salespeople working on sales commissions averaging 4 percent to 7 percent of their gross sales volume. They generally represent several non-competing lines.
The reliability of Shoe Dogs can be suspect. They tend to focus on their existing lines where sales have been established. Having them promote a brand-new line will yield mixed results, at best.
Thus, as a new company with limited advertising and promotional means, it would be necessary to develop a more reliable and less expensive sales strategy. The answer could be a Shoe-Dog-in-a-Box program.
The elements differentiating Cape Shoe Company are its (1) sentiment; (2) features; (3) service, and (4) price. These qualities would be readily apparent to a shoe retailer, if appropriately displayed. The Shoe-Dog-in-a-Box is a vehicle in which Cape Shoe Company could reveal its product's distinctive character.
Using state-by-state store lists, each retailer could be called on the phone by a Cape Shoe Company in-house salesperson. These salespeople could introduce the brand by describing its purpose and its product line. Catalog and pricing information could then be forwarded to the retailer.
About a week after the retailer receives the catalog information, the salesperson could call to describe the Shoe-Dog-in-a-Box program. The Shoe-Dog-in-a-Box is a box that would be shipped to each retailer containing the following items:
1. Catalog and pricing information.
2. A pamphlet, "A Call to Action," describing Cape Shoe Company's history and purpose.
3. Four single shoes representing each type of shoe offered by Cape Shoe Company.
4. A Cape Shoe Company 6" boot cut in half, lengthwise, revealing its construction.
5. A single shoe in the size of the store owner for them to try on.
The Shoe-Dog-in-a-Box could be shipped to the retailer by UPS. A salesperson could then call a couple of days after the retailer receives the Shoe-Dog-in-a-Box. That gives the retailer a chance to review the literature, the different styles, the shoe construction and feel the comfort of the shoe in their size. The salesperson then could make a sales presentation with intent of securing an initial shoe order. The first order should perhaps consist of several different sizes enabling various store customers to try the shoe or boot. The salesperson could then arrange to have the Shoe-Dog-in-a-Box returned by UPS at Cape Shoe Company's expense.
The Shoe-Dog-in-a-Box program can possibly meet with far more success than the usual sales methods, and should be considered as an innovative way to approach the market. The effectiveness of the program would be based on a number of factors. First, having an in-house sales force assures better productivity monitoring. Second, having the samples available for a period of time enables store owners to take a long look at the shoes, as well as showing them to others. Third, retailers don't have to be annoyed by actual Shoe Dogs. And fourth, the program would be extremely cost effective.
SUMMARY
This particular case allows students to begin with a clear slate in terms of discussions to establish strategic directions and recommendations for an entrepreneur who has gotten as far as only having made the decision to purchase the assets of a closed shoe factory. In addition, according to the owner of Cape Shoe Company, at the time of purchase, the only other strategic decision that had been considered was to produce a 100 percent Made in America shoe. The owner had yet to decide on target markets, kinds, styles and brands of shoes to produce, how to ultimately differentiate his product(s) from competitors, channels in which to sell products, promotion strategies, pricing strategies, and so on.
This case, although brief, engages students to research and analyze an industry which is experiencing significant challenges, and causes students to draw on other lessons and experiences ultimately leading to viable recommended strategic directions for a start-up in an enormously competitive industry.
Eli Fishman, CEO, Cape Shoe Company
Jack L. Sterrett, Southeast Missouri State University
Bert J. Kellerman, Southeast Missouri State University
Peter J. Gordon, Southeast Missouri State University
