Caso Southern Shoes Company
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Caso Southern Shoes Company






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Caso Southern Shoes Company Document Transcript

  • 1. Case study 1: Southern Shoe Company In July 1991, Southern Shoe Company was a manufacturer of ladies’ wide-fitting, non- fashion, plastic shoes, and recent sales had fluctuated quite violently in a market that had demonstrated a very high level of bankruptcies amongst manufacturers. Southern Shoe Company became very concerned about both the short- and long-term prospects for the business and having traditionally been a manufacturing concern, was becoming aware that in order to safeguard the future, marketing principles should be brought to bear on the situation. The trouble was that the company didn’t really know what marketing was, nor how it could be introduced. So a firm of management consultants was called in to take a preliminary look at the situation. Some of the problems facing the consultants were as follows: • Should the company stay in manufacturing? • Should the company become a distributor? • Should the company manufacture in leather, plastic, or both? • Should the company diversify into retailing? The consultants started by carrying out a thorough programme of desk research in order to enumerate all the relevant major facts about the market, the consumer, competition, channels of distribution, industry practice and Southern Shoe Company’s own situation, vis-`a-vis the market. The purpose was to pinpoint the problems which needed to be overcome and the opportunities which needed to be exploited, in order that a series of fundamental decisions could be made regarding the future direction of the company. One of the first actions by the consultants was to quantify the market for ladies’ wide- fitting shoes. There were no published statistics and Southern Shoe Company had no idea how big the market was or where they stood in the market. Clearly, as this was a vital factor concerning any marketing decisions to be made by Southern Shoe Company, it was necessary to make some kind of estimate. The method used was to obtain information relating to the distribution of foot width for women. The Shoe and Allied Trade Research Association supplied the statistical parameters, which were the result of a survey which they had recently carried out. The relevant results of the survey were: Age range of women 16 and over 26 and over Mean joint girth 230mm 231mm Standard deviation of joint girth 11.8mm 12.1mm The joint width is 0.4 times the joint girth. From this information it was possible to obtain a set of distributions showing the percentage of women’s feet in joint girth ranges of one eight of an inch, together with the corresponding ‘last size’ ranges.
  • 2. Applying the distribution relating to women aged 16 and above to the 1990 production figure for women’s plastic footwear, a total of 13.52 million pairs, and using a last girth in excess of 8½ inches as the definition for wide fitting footwear, it was possible to estimate the total wide fitting market size as approximately 2.45 million pairs. Using further published information relating to purchases by type of footwear and the purchasing pattern of plastic footwear by different age groups, it was possible to arrive at the figure shown in Table 1 relating to 1990. Table 1: Purchases of footwear by different age groups Thus the total market for women’s wide-fitting plastic shoes was estimated at just under 2½ million pairs of which 1½ million pairs were for women in the life range of 35 and over. Estimates were then made for market growth up to 1994, as shown in Table 2. Table 2: Estimated market growth For the first time, Southern Shoe Company realized that the wide-fitting plastic footwear market was growing rapidly, from around 3.8 million pairs in 1992 to around 5.2 million pairs in 1994. It was also believed that the proportion of imported plastic footwear that was wide fitting was insignificant.
  • 3. A summary of other factors discovered by the consultants during their survey is as follows: Material and technical trends • There was continuing rapid growth in the use of polyurethene and poromerics in the manufacture of women’s shoes. • Southern Shoe Company had an excellent image in the trade for technical competence and had recently introduced flow-moulding machinery, which had lessened their dependence on individual machining operations and other hand operations. Supply Southern Shoe Company were in a specialist market with few competitors (about 17) and were estimated to hold about 18 per cent of the total market for women’s wide fitting plastic shoes. Branding – Fashion • Southern Shoe Company had two well-known brand names – Piccadilly and Sedate. • They also had a considerable ability to produce a wide variety of styles and fashions. Management Southern Shoe Company possessed great knowledge and experience of the footwear trade. There were many skills within the management structure which could be further co-ordinated and developed. Financial The Company accountant was young and competent and saw the need for tighter financial control. The company was financially sound. On the problem side, the following factors were considered by the consultants to be most relevant: Distribution channels Most major manufacturers had a degree of vertical integration with the retail trade. Southern Shoe Company had none, and were therefore more vulnerable in the long term to imports.
  • 4. Market trends Southern Shoe Company’s sales were going against the trends in the market.This is summarized in Table 3. Table 3: Southern Shoe Company’s sales trends compared with national market This seemed to show that there needed to be a major realignment of sales effort and pointed to a lack of direction and control. Fashion, branding, advertising • There was an increasing trend towards fashion. Southern Shoe Company were not accepted in the trade as manufacturers of fashion shoes and had a very staid image with the trade. Consequently, Southern Shoe Company tended to miss out on the younger sector of the wide fitting market. • Manufacturers were concentrating where possible on brand names. Southern Shoe Company’s sales of branded products were declining. • Virtually no advertising was done by Southern Shoe Company. Consequently, the above two problems seemed to be getting worse rather than better. The consumer Southern Shoe Company knew very little about the end user of their products. There had been no analysis of the wide fitting market, and they did not know who was buying their shoes. It would be difficult to begin a meaningful marketing programme until they knew which market segments they should be in. Management structure, planning and control Communication channels within Southern Shoe Company were blurred and there was virtually no business or marketing planning, either short or long term. This was reflected
  • 5. in the widely fluctuating sales and profits over recent years, which indicated a company controlled by, rather than controlling, events (see Table 4). Sales and profits were as shown in Table 5. Table 4: Communication channels – Southern Shoe Company Table 5: Southern Shoe Company – total sales and profits 1986–1990 Financial considerations The company was overstocked and there was insufficient liquidity, thereby tying up capital in non-profit making areas which could have been used to launch a properly- planned marketing campaign. Financial control could be greatly improved. Background information In the early 70s, the product mix comprised women’s footwear, mainly of leather, but also some synthetics, of the following types:
  • 6. Casuals Wide fitting shoes Slippers High heel courts School shoes Boots Evening shoes From early 1988 the company had chosen to specialize in the manufacture of ladies wide fitting shoes with uppers of plastic because it was not possible to continue profitably with the previous product and material mix. Plastic wide fitters appeared to be one area where the company could continue to operate profitably. The consultants submitted their initial report containing the information which is summarized above. There was clearly a need for Southern Shoe Company to become more marketing orientated and they agreed to meet the consultants to consider what should be done. Note for students Students might find it useful to act in the role of the consultants and consider what advice they would give to Southern Shoe Company following their initial report. This should enable them to bring out the many issues which they identified whilst studying the case.