PROJECT REPORT

ON

EUROPEAN FOOTWEAR MARKET

&

MARKET ENTRY STRATEGY

PGDM- International Business

2009-11

1 | P a g e

Prepared By: MARKETING GROUP:

Allen Sangeeth (15) Harsh Shah (03) Sudeept Kumar Singh (33) Vishal Sharma (20) Prachiranjan Swain (14)

Guided by:

Prof Istvan ESZES Ph.D.

(ESSCA-Budapest)

Prof Sudipto Chakraborty

(ITM-Navi Mumbai)

TO WHOM SO EVER IT MAY CONCERN

This is to certify that Allen Sangeeth, Harsh Shah, Sudeept Kumar Singh, Vishal Sharma and Prachiranjan Swain, students of PGDM-IB (2009-11) from Institute for Technology and Management, Navi Mumbai has completed her Summer project (April’10 to July’10) under my guidance. They have successfully completed the following project:

EUROPEAN FOOTWEAR MARKET

&

MARKET ENTRY STRATEGY

I wish them all good luck in future.

Mr Sudipto Chakraborty

(College Project Guide)

2 | P a g e

ACKNOWLEDGEMENT

We would like to express our deep gratitude to our project guide István ESZES Ph.D.

Professor, Head of the Department ,Marketing Studies, Budapest Business School who is

responsible for molding our thinking to complete this project.

It is our great pleasure to express our sincere gratitude and thanks to our faculty guide

Prof. Sudipto Chakraborty, ITM Business School for his valuable guidance and help at every

stage of the project.

We are also thankful to all the faculty members of the ESSCA Business School,

Budapest for their kind and valuable cooperation during the course of the project.

.

3 | P a g e

CONTENTS

Page No

Executive summary………………………………………………...………………04

Objective.....................................................................................................................05

Footwear market in Europe..................…...................................................................05

Market size……………..…………………………………………………..05 Segmentation…………..…………………………………………………...06 Production……………..…………………………………………………...08 Trade channels……….…………………………………………………….10 Imports……………….…………………………………………………….14 Developing countries.……………………………………………………...16

Porter’s 5 forces analysis on European footwear market………………………….17

Market access requirements for EU…………………….………………………….18

How EU is protection of its local manufacturers……….………………………….20

Possible market entry strategy………………………….…………………………..22

Market entry strategy-Recommendation……………….…………………………..24

SWOT Analysis………………………………………….…………………………25

Mode of Entry…………………………………………….………………………..26

Major hurdles for successful implementation……………………………………...29

Conclusion…………………………………………………………………………30

Recommendation………………………………………….………………………..30

References…………………………………………………..………………………31

4 | P a g e

Executive Summary

Footwear is an active product in world-wide international markets. It is being delocalized from developed countries to the developing countries. The countries benefited from this process are Far East nations, in particular China, India, North African countries and the Central and Eastern European countries (CEEC). The “sleeping giant” for conventional shoes is India. It has a well-developed industrial infrastructure and competitive pricing. It has not yet reached its potential as an exporter of footwear. However, the shoes it does export are competitively priced and of increasing quality levels.

The European market for imports is wide and diverse. The market in each country has different characteristics; some are easier to operate in than others. Of the EU 15, Hungary as a primary target market and UK as the secondary emerged with the best potential for exports from India.India at present has technologically advanced footwear manufacturing companies which has the ability to compete in the international market, the biggest competitor being China. Leather being one of the most important raw materials for quality footwear, Indian leather industry is among the top 8 industries for export revenue generation, holding 10% raw material and 2% global trade. India is the biggest livestock producer in the world with capacity of 1.8 million sq. feet. Of leather production annually. 13% of global footwear production i.e. 16 billion pairs are made in India. India makes 2065 million pairs of different categories of footwear. India exports 115 million pairs of different categories of footwear in the international market. Hence India tends to be a promising exporter of footwear. India must sought partnership with European manufacturers and marketers to act as sub contractors. Another possibility is Licensee agreements with smaller international brands for the local market that will eventually lead to full exporting.

In this project we have gathered secondary data and have determined a market entry strategy describing the market entry of footwear to the European Union. The Competition is fierce due to bulk of cheap synthetic goods by the competitors like China; the focus of our product will be good quality at moderate price and value addition to the consumers. Initially we will sell through the local distribution network which includes, wholesalers, importers, under the contract terms. We also have to develop the relationship with the retailers in order to penetrate the market.

5 | P a g e

Objective Main objective is to study the European footwear market.

Identify the opportunity & deficiency of Indian footwear industry in Europe.

Identify the trade barriers and law for exporting into European countries.

Formulate a possible market entry strategy for footwear industry.

Consumption

1. Market SizeThe global consumption of footwear showed a steady growth between 2004 and 2007 but started to slow down in 2008 due to the global recession. Whereas the Asian and Brazilian markets continue to grow as a rising number of low-middle class people replaces their flip-flops by closed shoes. In 2008, the global footwear market was estimated at € 151 billion and 7.3 billion pairs, an annual average growth of 1.4%, compared to € 143 billion in 2004.

The main global markets were the EU (€ 49 billion, 2.1 billion pairs), USA (€ 47 billion, 1.5 billion Pairs), China (€ 19 billion, 2.4 billion pairs), Japan (€ 14 billion, 321 million pairs) and Latin America (€ 16 billion, 877 million pairs). In the USA, people spent € 140 (4.7 pairs) per capita in 2008, while the Chinese spent € 16 (1.8 pairs) and the Indians € 1.0 (0.16 pairs).The EU remains the largest single market for footwear in the world, representing one third of global market value.

6 | P a g e

EU consumption of footwear 2004 – 2008, € million / millions of pairs

Factors contributing to growth of European market

1. Growing economy of Eastern European countries.

2. Accession of new member states in European Union.

3. Emerging middle classes, higher aspirations, and disposable incomes in many Eastern EU countries will continue to provide opportunities.

4. Projected population increases in some of the EU countries will also act as a future stimulus to the footwear market.

2. Market Segmentation

Segmentation can be very useful in the EU market as there is a wide range of shoe-types, styles, colors that can be linked to different types of consumers. Along with differences in consumption

7 | P a g e

between countries, there are also differences in consumption by market segments. The most common segmentation methods for all EU countries are by user, by lifestyle or by price/quality.

• Segmentation by user

• Segmentation by lifestyle

A lifestyle is the way a person lives. Lifestyle patterns reflect the habits, attitudes, tastes, moral standards, employment and values that can define consumer segments. The research company GfK has identified eight different lifestyles which are Dreamers, Homebodies, Settled, Adventurers, Rational Realists, Open-minded, Organics and Demanding.

8 | P a g e

• Segmentation by price/quality

Production

Size of production

The EU is the primary source for designer footwear in the world and home to some of the world’s largest and most prestigious footwear brands. The significance of the Italian and French industries in particular, have created a worldwide reputation for quality and creativity. However, for many years much of the production has been outsourced.

Around 6% of global footwear production, or 863 million pairs, take place in the EU. This is now below the production levels in South America. Production in the USA and Central America is well under half of EU levels. The US footwear industry was hit hardest, producing just 40 million pairs now, down from 500 million pairs 20 years ago. In 2008, total EU footwear production valued € 18 billion and was down by an average annual 2.7% in value and 4.0% in volume since 2004.

Leather footwear accounts for 72% of the production value, up from 67%. Within leather footwear, parts had a significant volume share. Between 2004 and 2008, the volume of total leather footwear production averaged around 22%.

9 | P a g e

Other footwear was also dominated by footwear parts. Other footwear accounted for 65% of all volume, a small increase since 2004, and 25% of production value, an increasing share.

Textile footwear production was in decline, from approximately 8% of production in 2004 to 5% in 2008.

Rubber or plastic footwear production accounted for 3% of value but its volume share is now around 2%.

Trends

The EU industry is split between countries that take a very protectionist approach to the market (e.g. Italy, France), and those that hold a more open market perspective without the need for major tariff barriers.

Outsourcing in China, Vietnam and IndiaOutsourcing has been an ongoing trend for a number of years. Many of the leading (sports) footwear brands that originate in the EU have production facilities throughout the world, depending on the location of their main markets. The majority of larger production facilities have been outsourced to China, Vietnam and India in particular. Before anti-dumping duties were imposed in 2006, Asian countries could benefit from GSP tariffs (General System of Preferences) and trade incentives from WTO (World Trade Organisation). This has resulted in annual increase ratios of 10% in the Chinese and Indian footwear production.

Innovation and added valueAs footwear from China is much standardized and consumers want more choice, the recent buzzwords in EU footwear production are: innovation and added value.Some examples are:• The success of Geox footwear being breathable and comfortable.• Improving leather softening technology. The feel of a leather-made article is one of its great advantages over non-leather made products.• Developments in soles for comfortable walking such as the cushioning system of Camper.• Improvements in waterproof footwear.• Control of the coloring process to guarantee a consistent shade on a regular and reliable basis.

Attention to workmanshipManufacturers are realizing the point of difference that can be achieved by increasing attention to detail, particularly in the finishing of footwear. When there is significant global competition, the choice of supplier often is decided upon by small details in finishing.

Environmental challenges and opportunitiesEnvironmental concerns continue to move up the priority list for footwear producers. Meeting EU requirements for environmental legislation is expensive. It requires investment in new technologies.

10 | P a g e

Cost reduction in the supply chainAs well as collaborating on designs, there have been initiatives that are designed to reduce costs in the supply chain. For example, production plants for leather and textile chemicals are being merged, as each sector is relatively inefficient. But by merging them, each sector benefits from lower input costs.

Keep an eye on retailersAs important as maintaining a production base, is maintaining control over distribution. Producers have not only to compete with low cost producers, they also have to content with the growing power of major retailers, who are influencing the shape of the footwear market in ways not seen previously.

Wider sales network in the EUModern footwear makers aim to produce and distribute through a wider sales network such as hypermarkets and fashion retailers in their own country or in other EU countries. Compared toAsian suppliers, they have a competitive advantage by being closer to their clients, by being more responsive to fashion changes, and by being able to deliver fast.

Trade channels for market entry

The main distinction in the footwear market in terms of distribution or source of supply is between specialist distribution and non-specialist distribution.

In specialist distribution the product is handled by specialized importers/wholesalers or agents and retailers who primarily deal in different types of footwear. Large retailers often buy direct from foreign manufacturers.

In non-specialist distribution, footwear is just one of many products handled by the retailers in question. They buy from specialized importers/wholesalers or direct from foreign manufacturers. Non-specialist retailers include sports stores, clothing stores, department stores, super/hypermarkets, discounters, factory outlets drugstores and market stalls.

Typical distribution structure for Footwear in EU markets

11 | P a g e

• Most footwear is supplied in most EU countries through the specialized distribution route, which is from manufacturer to importer/wholesaler to retailer. This channel is most relevant for exporters from developing countries.

• Southern and Eastern EU countries continue to have many small footwear shops and market stalls. However, due to the growth of large retailers, their number is diminishing.

• In the Middle and Northern EU countries, many small footwear shops join a buying group that negotiates directly with (overseas) manufacturers. In addition, large German, French, Spanish and Swedish retailers operate International footwear or clothing chains. They have expanded their operations in the Eastern EU countries.

• In 2008, there were an estimated 52,000 footwear retail outlets in the EU. Footwear retailing has become more diversified. Consumers can nowadays buy footwear in many different ways, ranging from a footwear or clothing shop to a sports shop to a hypermarket, factory outlet or by the Internet. This makes the retail sector quite complex for exporters.

12 | P a g e

• As a result, from the recession, there has been a continuing growth of textile discounters and factory outlets. Recently they grade up to ‘convenience discounters’. Whereas in Eastern EU countries, clothing chains (H&M, Zara) operate their own factory outlets or second hand stores.

Main Distribution channels

Importers / wholesalersBy buying on his own account the importer takes title to the goods and is responsible for their onward sale and distribution in his country and/or in other EU markets.

AgentsIn your own country, there are buying agents. These are independent companies that act on the instructions of their principals and function as intermediaries between buyer and seller. They do not buy or sell on their own account. They work on a commission basis and represent one or more larger manufacturers/suppliers/retailers, although competition is avoided.

Buying GroupsThese groups act as purchasing agents and buy direct from manufacturers for their individual members (retail shops). Buying groups are promoting themselves as an organisation with their own marketing and brand. They also act as financial intermediaries between manufacturers and retailers.

Local suppliersFaced with rapidly rising production costs, manufacturers are increasingly assuming the additional role of importers. Like importers, they look for low-cost sources that produce footwear on a made-to-order basis. They sometimes buy in parts or buy some components. The main advantage is that this footwear can be made according to their own design, quality, private label and color specification.

International suppliers or fashion housesMost big brand suppliers have their headquarters in the USA or in the EU and act as suppliers/sales organisations of powerful international brands. These suppliers or ‘fashion houses’ have their own design, product development, marketing and purchasing departments. Their buyers operate all over the world and outsource their production mainly outside the EU, especially in China, India or in other (developing) countries.

Retailers – footwear specialists

Footwear chain stores: These specialist stores are usually part of a national or international chain store or franchised operation under the same name and a central management. Chain stores represented around one third of footwear sales in the Germany, UK, the Netherlands and

13 | P a g e

Belgium. The large chains operating in the EU footwear market are Deichmann (Germany), Vivarte (France) and Macintosh (the Netherlands).

Share in footwear sales by retailers in the main EU markets in 2008

Independent Footwear shops - BoutiquesBoutiques sell special footwear collections including higher quality leather goods. In recent years, the consolidation of large luxury goods groups has led to new fashion brands being launched into the market. Luxury fashion houses sell through exclusive boutiques, selling their entire brand portfolio and control them strictly under a central management system.On the other hand, mainstream fashion houses often sell to general boutiques that carry some brands aimed at their target group within a particular concept. These outlets sell a limited range of footwear, usually sourced from third parties, and they act more independently.

Retailers – non-specialists

Non-specialists have greatly developed their footwear sales in recent years, as footwear is seen as one of a range of accessories and not just for specialists. Many non-specialist retailers have considerable buying power and have also attracted customers with lower prices and longer opening hours.

Department storesThese stores are important in the footwear market. They often buy fashion driven footwear directly from importers or manufacturers and require that the supplier takes the risk if they do not sell. At the start of a business relationship, department stores place small orders, then if the item starts selling well, large orders follow.

Sports retailers

14 | P a g e

These are strongly represented all over Europe and are expanding in Eastern EU countries. Sports chain stores have grown along with the growth of out-of-town shopping centers. They carry the major sport footwear brands and their main target groups are recreational sportsmen or women. In 2007, Décathlon was the largest chain store operation with huge outlets throughout the EU (sized between 2,000 and 10,000 m²). Decathlon is followed by Sports World (UK),JD sports (UK), JJB Sports (UK), and Go Sport (France).

Hypermarkets, supermarkets and discountersThese have grown in importance and contributed to increased price competition in the whole market, with discounters selling at low prices. Like most department stores, they concentrate on fast-moving footwear for the whole family of relatively low price with a high turnover. Some large retail organisations such as Carréfour (France), Metro and Aldi (Germany), and Tesco (UK) have footwear manufactured in low cost countries under their own brand.

Street markets and factory outletsStreet markets are important especially for footwear in the economical segment and are well represented in Eastern and Southern EU countries. They sell stocks from manufacturers, importers and wholesalers and are not involved in importing. Women’s inexpensive and counterfeit footwear are mostly sold here.

Factory outlets are an example of vertical integration by manufacturers wanting to sell ‘out of date articles’ from unsold stock direct to consumers and are growing in importance in the EU. Factory outlets often sell footwear and leather goods.

Internet sales are growing strongly in this sector in most EU Member States and the Internet is a significant source of information and all analysts predict this channel become even more significant. Some interesting websites that are helping to drive this include http://www.spartoo.com and http://www.asos.com. They have achieved success by providing fashion advice as well as selling footwear.

Imports The EU is the world’s largest importer of footwear, importing 25% more than the volume

of USA imports. In 2008, EU footwear imports represented 3.1 billion pairs, valued at € 26.6 billion. Germany and the UK were the largest importing countries.

Footwear with leather uppers, formed nearly 59% of the value of EU imports (31% by volume), which grew from € 13.0 to € 15.8 billion between 2004 and 2008. Within this product group, outdoor footwear represented 95%. The next largest product group was footwear with plastic or rubber uppers, which accounted for 16% of the total EU imports (38% by volume), followed by footwear with textile uppers. Footwear parts (included within other footwear) accounted for 8% of imports in 2008, down from 11% in 2004.

15 | P a g e

Between 2004 and 2008, most EU countries increased their imports of footwear, especially the Eastern EU countries. Overall, total EU footwear imports rose in this period by an annual average 4.0% in value and by 6.3% in volume due to more imports of cheap footwear.

EU Imports of footwear 2004-2008, € million / million pairs

Source: Eurostat 2009

EU imports and leading suppliers for footwear with leather uppers 2004 - 2008, € million / millions of pairs, share in %

EU imports and leading suppliers for footwear with plastic/rubber uppers, 2004 - 2008, € million / millions of pairs, share in % of value

16 | P a g e

EU imports and leading suppliers for footwear with textile uppers 2004 - 2008, € million / millions of pairs, share in % of value

EU imports and leading suppliers for other footwear 2004 - 2008, € million / millions of pairs, share in % of value

Developing countries

In 2008, developing countries accounted for 43% (€ 11.4 billion) of the total value and 71% (2.2 billion pairs) of the total volume of all EU imports. Between 2004 and 2008, the DC share in EU footwear imports rose from 36% in value and from 62% in volume terms.

The volume supplies from developing countries were led by China, Vietnam, India, Indonesia, Brazil and Thailand. The top four importers (UK, Germany, Italy, France) accounted for 61% (50% by volume) of all EU imports from developing countries, up from 60% (down from 53% by volume) in 2004.

17 | P a g e

Imports by the Eastern EU countries were valued at € 606 million (323 million pairs) in 2008, 5.3% of the total by value and 14% by volume, with large increases by the Czech Republic, Romania, Spain and Denmark. On the other hand, Hungary, Bulgaria and Latvia registered falls.

EU imports from developing countries are expected to slow down in the next few years, due to the recession. EU countries that are particularly interesting for producers from developing countries are Germany, UK and Denmark, as well as some of the Eastern EU countries.

PORTER’S 5 FORCES MODEL

Threat of new entry: Moderate

For serious shoe manufacturers wishing to enter export markets, Europe provides the most potential market. If “Greater Europe” is considered, it is the biggest import market in the world. It is also the most diversified. Europe imports cheap quality low price shoes, and also the highest quality premium available, plus everything in between. Since European market is so vast, there is always a threat of new entry but its survival that matters and with the presence of such major players, it will be difficult for any small exporter to survive in the market.

Intensity of competitive rivalry: High

Every manufacturer has to have a target market and bring something innovative. Europe is a fashion driven country and always open for new and innovative models of footwear. Hence innovation becomes the competitive edge of any exporter.

Threat of substitute products: High

European consumers have become quality and price conscious. Their loyalty towards a product changes as soon as there is substitute product with same or better quality and cheaper price. Hence it’s skill of an exporter to retain loyal customers.

18 | P a g e

Bargaining power of consumers: Moderate

Consumers affect the pricing of the product to a certain extent but not entirely. The market fixes a price and consumers can’t bargain below that price or else they will have to compromise with the quality of the product. Hence bargaining power of consumer is moderate.

Bargaining power of suppliers: High

Contact with local European supplier is of high importance since there is a lot of competition in the market and local supplier can find easy substitute. Hence bargaining power of supplier is comparatively higher than that of the consumers.

Market access requirements for EUAs a manufacturer in a developing country preparing to access EU markets, one should be aware of the market access requirements of the trading partners and the EU governments. Requirements are demanded through legislation and through labels, codes and management systems. These requirements are based on environmental, consumer health and safety and social concerns. One needs to comply with EU legislation and have to be aware of the additional non-legislative requirements that trading partners in the EU might request.

PackagingDeliveries from developing countries generally have far to travel, so care must be given to the packaging of products, particularly with regards to changes in temperature, rough handling and theft. Leather shoes are usually packed in individual boxes per pair with 12 to 18 pairs in a carton. Cheaper plastic and textile shoes are often packed in plastic bags or in bulk. Importers want to know well beforehand how you are packing your shipment. Apart from the safety aspects and protection against damage, the focus of packaging is on environmentally friendly transport.

Environmental legislationThe new regulations on chemical substances affect footwear, and should be noted carefully. The new EU regulation on chemical substances, called REACH, has been in force since 2007.

Intellectual Property rightsThe EU Executive Agency for Competitiveness and Innovation (IPeuropAware project) deals with the Intellectual Property Rights.

Size markingDespite the attempt to unify footwear sizes by the International Standards Organisation (ISO) referred to as the Mondopoint shoe sizing system, there are still two size systems in the EU:

19 | P a g e

• The Continental European sizing system (or French sizing system), which is mainly used.• The English size system.

LabelingThere is an obligatory labeling for footwear, as described in the EU Shoe Labeling Directive 94/11/EC. These labels should inform about parts of footwear such as the upper, the lining, the insole sock and the outer sole and should be explained by means of agreed pictograms or by text. The directive also includes rules about the material used.

Anti-dumpingIn April 2006, the EU imposed provisional anti-dumping duties on leather footwear coming from Vietnam and China, rising over the months to 16.8% and 19.4%. These were extended in October 2006 and in October 2008 at 16.5% for Chinese leather footwear (including Macau) and 10% for Vietnamese, to last until 2010 with an extension until end of 2011.

Anti-fraud policyThe increase in the value and popularity of luxury brands has generated a significant rise in the level of counterfeiting. Some producers in Asia are able to replicate a footwear designer brand very easily. A growing number of consumers, particularly in difficult economic times, are prepared to buy counterfeit shoes, especially as their quality has improved.

20 | P a g e

EU’s protection of local manufacturers

Major problem for Footwear manufacturers is though different apart from competition. Since China & India has been major outsourcing partners of many European countries, EU has imposed a 10% anti-dumping duty on China & India specifically.Reasons for this duty are:

1. High margins charged by China.2. Low quality products from Chinese manufacturers.3. High quality of Indian manufacturers killing local player.4. China held almost 60% of the global production of footwear.5. European countries such as Bulgaria, Romania, Czech Republic, Algeria as well as

Turkey as becoming the recent favorites for outsourcing due to the cheap labor there.

In competition with Asian manufacturers European manufacturers are targeting emerging markets such as Russia (consumption Euro 4.4 billion), Brazil (consumption Euro 8.6 billion), Middle East (consumption Euro 1.9 billion) as well as China & India with consumption figures of 17.3 & 1.2 billion respectively. Moreover, European manufacturers have started a campaign of “origin marketing” to boost their marketing in Europe as well as overseas market. Eg. “I love Italian Shoes”, “Made in Spain” etc. are some of the campaigns to promote creativity, fashion ability, origin & craftsmanship at different points.

At the top of this, to compete with Asian manufacturers and share some of their costs, smaller European manufacturers have joined with colleagues, designers and trade associations. This provides a chance for smaller producers to reach new markets.

As an add-on, collaborating on designs have been an initiatives that is designed to reduce costs in the supply chain. For example, production plants for leather and textile chemicals are being merged, as each sector is relatively inefficient, but by merging them each sector benefits from lower input costs to compete with power costs of Asian manufacturers specially China & India.

To still be competitive in the market the Indian manufacturers can cash on upon following factors:

1. Indian Core Competency- Indian leather footwear manufacturers expertise in manufacturing high quality leather as well as other material shoes. Hence, Indian manufacturers can use their quality to compete in European market as they are already competing in other global markets.

2. Cheap Labor- Indian labor force is one of the cheapest in the world specially the unskilled or semi-skilled one which are generally used by Indian manufacturers. This can be used by them to compete in International markets by keeping costs lower than the competitors.

3. Direct Marketing Strategy- Since the manufacturer is directly contacting the retailers for sales of their footwear they have an advantage of marketing their products in the way they want to promote their products & brand.

21 | P a g e

4. Past Experience- Indian manufacturers are exporting to many international markets including some parts of Europe also. So they have a fairly good chance for increasing their market in Europe as they have previous experience in many markets & also have core competency.

22 | P a g e

POSSIBLE MARKET ENTRY STRATEGY:-

1) Importers/wholesalers

Most importers have a very wide range of customers with very diverse applications. If your product is in wide range then importer would be a good option. The importer has good knowledge of local market therefore the financial risk is reduced but there is lack of direct contact with retailers.

2) Agents

The agent is an independent intermediary between the (overseas) producer and importer/wholesaler, buying groups or large retailers on the other hand. The agent gets a commission from the producer. He is supposed to cover a specific geographic area. Sometimes agents make their own portfolio and sell from stock, thus acting in a similar way as a whole seller.

3) Buying groups Buying groups are individual dealers or retailers who join and co-operate as a single buying and marketing force. This channel may be of interest because here you can ask for higher price and goods will be sold at many retail outlets under a well recognized brand/label. Disadvantage is that decision making processes are slow so the process is time taking. In addition, high levels of after sales service as well as special conditions are often required in labeling and packaging.

4) Retail chain stores and department stores

Large specialized (e.g. Deichmann, Vivarte, Stylo, Shoezone) and non-specialized footwear retailers such as clothing chain stores (H&M, New Look), department stores (El Corte Ingles, M&S, Hema) and hypermarkets (Carrefour, Tesco, Metro) increasingly buy footwear direct from producers. Some retailers have their agents who look for something new in market and they are also looking for reliable suppliers. Retailers and departmental stores have become a dictator in market as they pose a high degree of market penetration in footwear market. They have their different buying policy. An advantage is that you can sell high volumes at a high selling price. But supplier has to be ready every time to deliver in bulk. A disadvantage is that it often is hard to establish a relationship with buyers as they often change or are hard to contact.

23 | P a g e

NOTE: Always try to think twice

Always consider carefully the (dis)advantages of working with importers/wholesaler, agents, buying groups or retail chains. You could work with a long list and narrow down to a short list. Also, consider that choosing one channel may exclude another channel. For example, agents (as opposed to importers) are very well protected under EU legislation. Once you are engaged with them, it would be very hard to bypass them and to deal directly with the clients with whom they have established a relationship. This also applies to buying groups. When supplying one particular buying group, this may prevent you from accessing other channels.

5) Direct sourcing

Attempting to reach the EU market directly by taking in account the customers preferences is risky. According to recent trend people are ready to buy the product online but they will prefer to buy from trusted source. This option is very risky financially.

24 | P a g e

MARKET ENTRY STRATEGY

Why we should enter with LEATHER product?

China, Vietnam & India are three main exporters of lower priced footwear to EU. We have advantage over other countries for following reasons.

Slowdown in Europe leading to customers to go for lower price footwear.

Chinese producers are facing serious problems due to rising labor cost, which has risen by around 40% since January 2008, and currency appreciation. Chinese products, which used to be cheaper by around 10% compared to the Indian products, are no longer cheaper.

Implementation of the European Union (EU) anti-dumping duty.

India’s expertise and skilled labour force in leather industry.

India has state-of-the-art manufacturing plants.  The footwear sector has matured from the level of the manual footwear manufacturing method to the automated footwear manufacturing systems. Footwear production units are installed with world class machines. 

Export of footwear from India increased manifold over the last four decades. Today, India’s footwear export is valued at US$ 1507.51 million, constituting 44.33% share in total export of leather & leather products.

25 | P a g e

SWOT ANALYSIS STRENGTH

26 | P a g e

High Growth

Ready availability of highly skilled and cheap manpower

Large raw material base

Policy initiatives taken by the Government

Capability to assimilate new technologies and handle large projects

Continuous emphasis on product development and design up gradation

THREATS

Major part of the industry is

unorganized

Limited scope for mobilizing funds

through private placements and

public issues (many businesses are

family-owned)

Difficulty in obtaining bank loans

resulting in high cost of private

borrowing

Stricter international standards

High competition from East

European countries and other Asian

countries

Lack of communication facilities and

skills

OPPORTUNITIES

Rising potential in the domestic

market

Growing fashion consciousness

globally

Use of information technology and

decision support software to help

eliminate the length of the

production cycle for different

products

Use of e-commerce in direct

marketing

WEAKNESS

Lack of warehousing support from the government

International price fluctuation

Huge labour force resulting in high labour charges

Lack of strong presence in the global fashion market

Unawareness of international standards by many players

TARGET MARKET

CONSUMERS TO TARGET

DEMOGRAPHICS - Men and Women of Age 18 to 55.

PSYCOGRAPHICS - Working women in most European countries tend to spend much on their outfit and related fashionable footwear. Housewives buy a wide range of footwear, from cheap to expensive shoes. Younger housewives tend to follow trends and in some countries do not object to buying copies of branded or designer footwear. Women generally spend more on footwear and usually have various pairs of shoes for different occasions. Women in most of the EU15 countries tend to have at least a pair of sneakers, ballerinas, pumps, boots, casual town shoes ('trotteurs' or moccasins), sandals or flip-flops and a pair of evening footwear in their wardrobe.

In addition to comfort, women regard style and fashion important. The classic icons of femininity (flowers, butterflies, charms, high heels, romantic inspiration) are played with by women of all ages. Especially in the UK, France and southern EU countries, women tend to express their ‘girl power’ more than before, but without losing touch with the soft and sensual. The life cycle of women’s footwear is shorter than those of men and children. This segment is usually driven by trends in fashion, which makes it faster moving.

Men’s footwear tends to be more expensive than women’s footwear, and they buy less pairs than women. Younger men, who are more fashion and brand conscious, and older men. Older men usually have footwear to wear at the office, one formal and one casual pair, as well as a pair of sports footwear. They tend to look for practical footwear that they can use for a long time. Many men regard comfort, style and quality more important than fashion. Recent designs in men’s shoes varies from round to elegant, tapered or pointed footwear, particularly in ankle-loafers and classic oxford shoes.

Mode of Entry

REATAIL CHAIN STORE AND DEPARTMENTAL STORE

The Market entry strategy which we have selected is through retail chain and departmental store. Being a new player in such a competitive market risk is very high. So to play a safe game we need to have a channel of distribution. Direct sourcing is also a option but customer of different country are difficult to understand. So to minimize risk a local mediator is needed who has a strong hold on local market.

Local retailers like Shoezone, Stylo, Vivarte, Deichmann, Kaiser etc are some of the strong retailers in Europe. And these retailers have their own agent who looks for better quality and new ideas in market. These retailers are also in search of reliable suppliers. And due to such a good penetration in European market they have dominance so we can sell our product on higher price

27 | P a g e

also but initially we will keep our prices low so that we can make our customer by giving good quality in low price. Plus after the global crises the consumers have started being price sensitive and they have started buying more stuff from Super/Hyper Markets and Departmental stores which fall under non – specialist retailers segment.

ENTRY SEGMENT

We would be entering the medium segment market which is the largest in the EU market and constitutes of 39% of total EU footwear sales in the year 2008. It includes trendy and comfortable footwear of a medium to good quality. Brands are important but not crucial for purchasing decisions, as consumers now want to pay the lowest possible prices. Footwear in the medium segment is sold by footwear specialists, non-specialists and online sellers.

Due to the recession, many consumers from the medium segment were trading down to the economical segment which partly explains a decrease of sales from € 19.7 to 19.4 billion between 2007 and 2008. While the fashion conscious consumer’s trade up to the fine segment. However, many people try to get the best value for money, due to the recession. In France, Italy, Spain and Portugal, consumers try to negotiate the price, sometimes with success, as luxury retailers want to get rid of older collections.

28 | P a g e

Branding strategy

Our company is going to have multi branding strategy, focusing on fashion leather shoes, dress shoes, fashion lady dress shoes, men leather shoes, casual leather shoes, winter boots, women leather sandals, women’s ballet flats etc.

Reasons

(1) Obtaining greater shelf space and leaving little for competitors' products,

(2) Saturating a market by filling all price and quality gaps,

(3) Catering to brand-switchers users who like to experiment with different brands

(4) Keeping the firm's managers on their toes by generating internal competition.

29 | P a g e

Major Hurdles for successful implementation

Indian Leather Shoe Manufacturers are bound to face a tough competition in EU as there are many renowned manufacturers with an established brand name & they are benefitted by being European brands as EU tries to promote them due to extensive competition from Chinese & Indian footwear industry.

EU footwear industry is divided into 4 major segments viz.1. Luxury- < Euro 3002. Fine- Euro 100-3003. Medium- Euro 25-1004. Economical- >Euro 25

Major competitors for Indian Footwear manufacturers in respective segments could be:1. Sergio Rossi, Jimmy Choo, Dolce & Gabanna, Prada & Gucci in luxury market.2. Bally, Burberry, MiuMiu, Boss, Chloe etc., local brands, clothing brands, non-branded in

Fine market.3. Kickers, Clarks, Converse, Dr. Martin, Uggs, Nike, Adidas, clothing brands private

brands, & non branded in medium market.4. Imitations of successful brands, private brands & non branded in economical market.

The major target segment identified is Medium Segment as it constituted 40% of total EU sales in 2007. It consists of fairly good quality footwear that matches to the latest clothing trend. Customers are brand conscious but this is not crucial in their purchasing decisions. Moreover, medium segment includes customers of all ages from teens to elders & footwear is sold by footwear specialists as well as by many non-specialist retailers & also by online sellers.

30 | P a g e

ConclusionEuropean Union being the largest importer of footwear has got tremendous export opportunities. The main problem is to understand that these member countries differ in their lifestyle, population, living standards etc. So the exporter needs to understand these problems in-depth before entering into the European market. During recent times due to recession these European countries are trying to cut its cost and innovate. After a detailed study and analysis of the European footwear market we tried to find out the best possible solution and product that a developing country like India can export into these countries. Keeping in mind about other competitors like China who are into the same segment of leather shoes, we tried to find out the deficiency and the way we can seize this window of opportunity to our advantage.

Recommendation On the basis of study of European footwear market few suggestions can be brought out.

Detailed study of the market before entry. Keeping in mind the environmental, consumer health and safety & social concerns in

mind before exporting. To recognize our own competitiveness and efficiency and to focus on technology &

innovation. To follow the European standards and regulations for exporters.

31 | P a g e

REFERENCEShttp://www.cbi.eu/marketinfo/cbi/docs/the_luggage_and_leather_accessories_market_in_hungary

http://www.powerhomebiz.com/vol136/shoe.htm

http://www.cbi.eu/marketinfo/cbi/docs/the_footwear_market_in_the_eu

http://www.ehow.com/way_5831822_strategic-economic-trends-shoe-industry.html

32 | P a g e