Team Assignment

Global Sports Shoe Industry

The total sales of sports shoes in the main market, United States and Europe are

softening. In US, after three years of sales growth, declined slightly in year 2009. Sales also

fell slightly in European Big 5 countries, France, Germany, Italy, Spain and UK in the same

year. International market is still posting growth in overall sales in Canada rose 4.6% and

Japan's sales grew by 1% in year 2009 years.

A notable bright spot is that in each geographic region, sports shoes has overall

growth sales better than sportswear. Both in the US and European markets, consumers are

willing to pay premium price, the market spent more on sports shoes. This is the same for

European Big 5 countries. Female consumers are drivers for this trend in the worldwide

market, paying more than the average price.

While most consumers buy sports shoes but do not use as the purpose of it was

originally designed, it is used mostly for casual wear. This strength of this trend continues,

consumers around the world are still passionate about their way of life. However, this trend

is challenged by the new product line and some lingering economic pressure.

For the concept of `fashion inspired by sports', comes from specific sports and the

technology needs of the sports. Host of sports participation is divided into team sports (such

as soccer, rugby), wide range of fitness activities (swimming, jogging, work out) and outdoor

activities. Branding is the most important in both functions, fashion and performance.

The two sports shoes brands, Nike and Adidas have emerged as world sports wear

leader. Nike's global sales in 2008 reached US$18.63bn. Adidas is a German football expert,

is now a global brand produces a wide variety of sports clothing and footwear. This two

brands are stiff in competition in the market, they hire world-class sports stars to advertise

their products, usually with a well-made television ads on the infiltration of its brand and

establish a certain brand image, such as, Nike brand itself closely with love of young people

in basketball, organised youth basketball, influence itself and branding perfectly into the

young generations.

In Asia Pacific region, the global financial crisis has not only changed the pattern of

the world's financial industry, but also to the sports shoes industry, created not-so-small

surge to the industry. Over the years the Asia Pacific domestic sporting goods industry with

the formation of US brands like Nike & Adidas as the mainstream market, the pattern is

gradually disintegrated, a series of China brands, Li Ning, Anta, Olympic, are rapidly rising.

Sports brands in Asia Pacific region in year 2009 compared in market performance, it is not

difficult to find out that the sports shoes or in general sportswear industry is the back to the

trend.

Demand of Sports Shoes

In the eyes of today's "new generation", a pair of branded-name sports shoes seem

to be more important than a major branded-name sportswear. Wearing branded-name

sports shoes at any time give them dynamic, feeling "cool" and confidence. Nearly two-thirds

of the young people bought branded-name sports shoes.

The international well-known brands sport shoes are not cheap, but it is value for

money, excellent quality behind the high prices, excellent design, give the wearer a real

"sport to enjoy." Meanwhile, some well-known brands also have also launched some low-

end products to occupy a relatively low-priced and low-end market.

Comfortability and style is the primary consideration. Survey data show that when

consumers buy sports shoes, the first consideration is comfort, accounting for 78.4%;

followed by the shape and style, 73.7%; these two considerations was higher than other

factors. In addition, the branding and price are, 55.6% and 50.3%.

Young people today are more like sports, especially the ball games, this is a

manifestation of their nature, and exercise requirements are relatively high on the footwear.

Comfortability, air permeability, bouncing, wear resistance, are young consumers'

considerations. It is not difficult to imagine a pair of uncomfortable shoes to wear in the

sports arena able to show their athleticism. In this sense, comfortability of sports shoes is the

most important pre-requisite to attract consumers.

Overall style is also an important consideration when buying sports shoes. New,

fashionable, individuality has always loved and going after by the "cool" generation. The

design of branded-name sports shoes and general brand style is somewhat different, and

many styles of advanced design also highlights the consumers' extraordinary personality, a

lot like the character to meet the demonstrated needs of young people.

Branding is a comprehensive expression, which combines many factors, including

quality, grade, style, design, and others. Consumers may focus on branding when buying

sports shoes, in this comprehensive considerations, excellent brand represents superior

quality.

Price reflects the comprehensive value of goods. branded-name sports shoes have

many advantages, which reflected from its pricing. For young people whose financial

depends on their parents, they have to consider the price factor seriously, they must

consider between price and quality before making a choice.

Four Generic Strategies

Generic Competitive Strategies was first set out by Michael Porter of Harvard

Business School in his book Competitive Advantage: Creating and Sustaining Superior

Performance in year 1985. He is a strategic management expert. According to Porter, there

are three basic Generic Competitive Strategies: Cost Leadership Strategy, Differentiation

Strategy, Focus Strategy & Differentiation Focus Strategy.

Cost Leadership Strategy

Cost Leadership Strategy requires the active set up to achieve efficient scale of

production facilities, based on the experience of going all the way out to reduce costs, pay

close attention to cost control and management of costs, minimize research and

development, service, marketing & advertising and etc. Despite the quality, service and other

factors are also overlooked, but the theme throughout the strategy is to cost less than

competitors.

Implementation of cost leadership strategy usually requires a high market share, a

good supply of raw materials, ease of production and product design. Therefore, the

continuing need for company to purchase capital equipment and aggressive pricing to gain

market share.

Differentiation Strategy

The fundamental of Differentiation Strategy's effectiveness is by increasing the

customer and improve customer value. When customers sense the uniqueness of products

and services, there are always some customers are willing to pay a higher premium.

Company needs to implement strategies on product design and brand image, technical

characteristics, appearance features, customer service and distribution networks. Establish

own uniqueness in one or more factors can continue to maintain the enhancement.

Differentiation Strategy on customers brand loyalty and the result will be decline in

price sensitivity to gain competitive advantage and entry to structural barriers. Differentiation

Strategy requires company with a strong marketing capability and innovation.

Low Cost Focus Strategy and Differentiation Focus Strategy

Focus Strategy is to focus on how a specific for a service of the core competency to

build up competitive advantage, this can be a particular target on specific customer groups,

a product line, a market segment or region. This strategy is premised on companies to

greater efficiency, better results for a strategic object services, or achieve differentiation,

lower cost or ideally both.

Different generic strategies to implement the company's resources and ability to put

forward different demands, means that the organisational arrangements, control systems,

innovation systems, corporate culture and leadership style differences and even conflict.

Risk of "Stuck in the Middle"

A company if fails to choose only one generic strategy, select more than one

options, there is argument that when it fail to achieve them, the company will get "stuck in

the middle" without any advantage. Such company is often in a very bad strategic position.

"Stuck in the middle" company is bound to be low-profitable. Unless its industrial structure is

good, and its competitors are also in the same situation. However, a mature industry will

increase the gap between such company with those company with a Generic Strategy and

stuck in between other companies.

Such "stuck in the middle" will lose cost advantage to competitors, while on high

profitable business, the company unable to compete with those company differences to

achieve a comprehensive product company, we can only look for small market niches, to

survive in between markets. This type of company is is second-rate company, it failure is

due to ambiguous corporate culture, conflict in organizational structure, contradictory and

ineffective incentive scheme.

Choosing Among Generic Strategy Options

Company has to spend time and effort to choose the right Generic Strategy, as this

will affect the following decisions made. A company needs to make a decision on which

strategy to use and stay on it for long term. A company cannot try out a particular strategy

option. Porter has specifically gave warning on company which attempt to "hedge your bets"

by employing more than one strategy option.

The most important reason is every strategy work on different types of people.

Differentiation Strategy requires a very extrovert and creative ways, while Leadership

Strategy requires company processes leading to detailed internal splits. Therefore, when a

company choose among the strategy options, it is important to consider the company's

competency and strength.

Summary

Porter's competitive strategy are four basic types of systems is formed in accordance

with the scope of the product or market competition and methods of competition

(differentiation/low cost), if further market analysis of the company's operating conditions, e.g.

analysis of mass market or market segmentation of the company, would provide better

guidance for the company to decide which strategy to employ. Porter believes that a

company is to choose the best state of one of four generic strategies, in accordance with the

requirements of the selected basic strategy unswervingly to find the corresponding

advantages. Business will fail if decide to use all four directions to establish its own

competitive edge. The situation is “stuck in the middle”, the company will be at serious

disadvantage position. The basic point of choosing the generic strategy of company, can

best use of their advantages and the least conducive to competitor imitation.