In 2009, Crocs was in big trouble. After sales took off in the mid-2000s, it struggled to keep up with demand, reaching $847 million in revenue in 2007. When production finally caught up, it went overboard, ending up with mountains of shoes and no one to buy them just as the economic downturn hit. That made the company lose $185 million in 2008, which drew shareholder lawsuits and auditors who said Crocs might not be able to pay off its debts.

1. Yasser Elsedawy
Edoardo Cataldi
Marie Rose Egbreghts
Javier Higuera
Jianing Zhang
Management of Built Environment
Supply Chain Management

2. 1. INTRODUCTION
2. THE RISE OF CROCS
3. QUESTIONS
4. THE FALL OF CROCS
5. CONCLUSION

3. 1. INTRODUCTION
u COMPANY (values, goals and
timeline)
o Crocs is a US company founded in 2002 by
L. Handson, S. Seamans and G. Boedecker
that started producing fashionable and
comfortable clog shoes made from
crosliteTM compunding, then expanding its
product range .
o Their mission statement is “to bring profound comfort, fun and innovation to the feet’s
world”
o As soon as the three friends realized the idea could have been successful, they paid lot of
effort to make the brand globally recognized and their goal was to revolutionize the shoe
industry, make for retailers possible to place small orders and to fill further demand in-
season thanks to their supply chain’s flexibility.
o The clog shoe became an iconic product and Crocs could annoverate collaborations with
globally recognized institutions (Disney, etc.)

4. u TIMELINE:
THE BEGINNING
Three friends from Colorado
decided to start a business
selling a new design of shoes
one of them brought when
they went sailing in the
Caribbean. Crocs is how they
named the shoes.
Headquarter was settled in
Colorado.
CROSLITETM ACQUIRED
R. Snyder became
president.
Crocs acquired
Finproject, then
renamed Foam
Creations,which was
croslitetm
owner
CROCS WENT PUBLIC
Revenue: 355m $. Crocs
decided to went public
through NASDAQ stock
exchange, initial market
capitalization was $1
billion. Fur, EXO Italia
and Jibbitz acquired
STRUCTURING THE COMPANY
R. Snyder (Flextronics
executive) joined the
growing business as a
consultant. He will soon
become the CEO of a
company traded on NASDAQ
stock exchange.
Revenue: $1,2 million
RESPONSABILITIES
R. Snyder became CEO.
Crocs was getting more and
more structurated and
conscious of this they
wanted to launch
worldwide at the same
time
GROWTH CONTINUES
Market capitalization
turned $2,7 billion.
Revenue: $847 million.
Ocean Minded LLC
acquired
2002 2004 2006
2003 2005 2007

5. u PRODUCT RANGE
o Footwear for men, women, and children
o 4 products segments: Core, Active, Casual, Style
o Maximize comfort, maintain fashion
o Branded accessories such as wristbands, caps, socks and t-shirts
o Items such as kneepads (crosliteTM advantages)
Fully Injected: all the models which parts are obtained through the injection in
moulds; (Classic clogs and Flip). They represent the majority of the production
Semi Injected: the models that belong to this category have both components
made out of the injection in moulds and part made out of fabrics
Fabrics: models in this category are completely made out of fabrics, like any
other common shoes.
2. THE RISE OF CROCS

6. 2. THE RISE OF CROCS
u REVOLUTIONARY SUPPLY CHAIN:
Developing the Supply Chain: 3 Phases
u Phase 1: Taking over Production
u One of Crocs first moves was buying the manufacturer of their shoes, Foam Creations in 2004.
u Materials were shipped to a third-party company in Italy, who did the compounding and then the
colorized pellets were shipped back to Foam Creations plant in Canada, were the shoes were molded and
assembled. This was not the most efficient way of dealing with the production, as we will see in the next
phases.
u Phase 2: Global Production Using Contract Manufacturers
u In 2005, Crocs started producing in China using a large contract manufacturer. The Italian company was
still used for the compounding and then the colorized pellets were shipped to Canada and China. Crocs
added capacity through contract manufacturers in Florida, Mexico and Italy in order to enter the
European market, but soon they realized these companies were not flexible enough to meet their needs.
u Phase 3: Bringing the Global Supply Chain In-House
u Crocs realized the contract manufacturers outside of Asia were not able to implement the company’s
supply chain model, so the company decided to develop company-owned manufacturing operations in
Mexico and Italy.
u Crocs identified that having the compounding done only in Italy lead to inefficiencies in the supply chain
and loss of flexibility, so they decided to take control of the compounding activity creating facilities in
Canada, China, and Mexico able to do this process.
u Crocs decided to add warehousing operations to each factory since the arrangements with contract
warehousing were inefficient because the companies they contracted with did a good job only for a short
time and then lost interest.

7. -5
45
95
145
195
245
295
345
395
445
495
545
595
645
695
745
795
845
2004 2005 2006 2007
Revenue Gross profit SG&A expenses Operating income
Crocs experienced a exponential
growth since its very beginning.
Management choices turned out to be
a success for the company. From the
starting years in 2004 to when the
company went public in 2007 revenue
showed a +6277%
$m Revenue Gross profit Gross profit margin SG&A expense SG&A (%) Operating income
2004 13,5 6,4 47,0% 7,2 53,3% (1,6)
2005 108,6 60,8 56,0% 30,6 28,2% 26,9
2006 354,7 200,6 56,5% 97,2 27,4% 95,3
2007 847,4 497,6 58,8% 259,9 30,7% 237,8
$m
u CROC’S GROWTH

8. u COMPETITORS ANALYSIS
CROCS DECKERS NIKE TIMBERLAND INDUSTRY AVERAGE
Gross profit margin 56,5% 46,4% 43,7% 47,3% 24,5%
Pre-tax profit margin 27,2% 17,8% 13,1% 10,4% 3,2%
Net profit margin 18,2% 10,4% 8,7% 6,8% 2,7%
Return on equity 56,7% 16,1% 21,6% 19,5% 15,5%
Return on assets 34,1% 13,7% 14,4% 13,0% 3,4%
Return on invested
capital
51,1% 15,9% 18,4% 19,0% 4,7%
Inventory turnover 3,5 5 4,3 4,7 5,6
Receivable turnover 8 6 6,5 7,4 6,6
12 month earning per
share growth
239% (2,3%) 2,9% (31,5%) 50,0%

9. YOUNG
FORMAL
OLD
CASUAL
*
* Crocs tried then to enter a more formal market with the introduction of materials such as leather

10. 3. QUESTIONS
u 3.1 What are Crocs’ core Competences?
u 3.2 How do they exploit these competencies in the future? Consider the following
alternatives:
u a) Further vertical integration into materials
u b) Growth by acquisition
u c) Growth by product extension
u 3.3 To what degree do the alternatives in Question 2 fit the company’s core competencies,
and to what degree they defocus the company away from its core competencies?
u 3.4 How should crocs plan its production and inventory? How does the company’s gross
margins affect this decision? What could go wrong?
u * QUESTIONS HAVE BEEN ANSWERED TAKING INTO ACCOUNT THE PERIOD OF THE CASE STUDY (UNTIL 2007) IN ORDER FOR
THEM TO MAKE SENSE, SINCE THE SITUATION OF CROCS TODAY HAS CHANGED, LIKE YOU WILL SEE LATER ON IN THE PPT.

11. 3.1. What are Crocs’ core Competences?
u THE CROCS SHOE AND MATERIAL
• The original Crocs shoe design was a clog, with the most distinctive features being the
large ventilation holes and bold colors.
• The KEY of the design was the CROSLITE material;
• Extremely light and odor resistant
• Possibility to be produced in any color

13. 3.1. What are Crocs’ core Competences?
u REVOLUTIONARY SUPPLY CHAIN:
Standard Footwear Companies vs. Crocs
Standard Footwear Companies CROCS
• Companies estimate in advanced
what their customers would buy in
the next season;
Overestimations= Unsold stock, force to
have clearance sales
Underestimation= Empty shelves and
forego potential sales
• Difficult to make accurate
estimations since fashion is subject to
trends that can change abruptly.
• Model focused on customer needs;
when a customer needs a product
they will get it.
• Ability to make more of a product
during the season in order to take
advantage of an unexpected high
demand.

14. 3.1. What are Crocs’ core Competences?
u REVOLUTIONARY SUPPLY CHAIN:
Crocs’ Supply Chain Competencies
u Ability to react quickly to changes in demand.
u Production plants don't operate at full capacity, thus are able to increase the production
when needed to satisfy the demand; Fast and efficient response to meet a growing
demand.
u Ability to shift the demand between plants depending on which product needs to be
produced and the geographic position of the market that needs to be cover.
u Global supply chain with suppliers, manufacturing sites and distribution centers all around
the globe.
u Warehouse operations were added to each factory.
u Choosing production sites depending on the different imposed taxes; produce each
different product where is more convenient in monetary terms.

15. 3.1. What are Crocs’ core Competences?
u GLOBAL PRESENCE

16. 3.1. What are Crocs’ core Competences?
u EFFICIENT-POSITIVE RELATIONSHIP WITH RETAILERS:
Starting business with Small Retailers and adding Large Retailers at the correct time
Small Retailers Large Retailers
• Crocs started selling to small retailers, they
saw them as important to start building their
brand with a strong market presence.
• Small retailers were willing to accept more
risk with no imposed financial penalties for
stockout or shipment delays problems.
*Great conditions for a company that is
starting business
• After Crocs initial success in the small
retailers, large retailers approached them
instantaneously.
• After the market acceptance for the brand in
the small retailers, Crocs could negotiate
favorable terms with the different large
retailers.
*By mid-2007, around 75% of the whole
company revenue came from large retailers.

17. 3.1. What are Crocs’ core Competences?
u EFFICIENT-POSITIVE RELATIONSHIP WITH RETAILERS:
Small vs. Large Retail Customers: SPECIACIALIZE TREATMENT TO EACH ONE
Small Retailers Large Retailers
• To meet the needs of small retailers, the
product was first shipped to the company-
owned warehouse closer to them, where the
orders were packed and shipped directly to
them.
*Convenient arrangement for the small retailers
since they normally don’t have warehousing
capabilities to receive the products directly
from the factories.
• Large retailers have a different fulfillment
model; they own their own distribution centers,
so the orders were packed and shipped directly
from the factories to the distribution centers of
the retailers, from where each retailer will ship
to their different stores.
*A positive relationship with retailers was
established, resulting in additional benefits such
as Crocs being awarded its on retail space inside
the different shops.

18. 3.2-3.3 How do they exploit these competencies in the
future? And to what degree do the alternatives fit the
competencies? Consider:
u Further vertical integration into materials
Further vertical integration into materials could allow the company to improve the
efficiency of their supply chain.
To do so Crocs took control over compounding activity which was previously outsourced in
Italy (because at a first time management wanted to avoid supply chain interruption).
This allowed lower operating costs and increased the supply chain efficiency. In addition
moving compounding in-house provided IP protection for the croslite compound.
Management exploited this vertical integration for materials in order to locate themselves
in a revolutionary frame, allowing, through a faster material supply for the
manufacturers, their costumer to place smaller orders being able to increase the supply
as soon as demand would have increased. Small retailers benefitted the most from this.
It perfectly fits Crocs core competencies as all of them benefits from this.
As the nature and simplicity (in terms of expertise) in the processes for the
pellets, moving in-house will ensure both IP protection and a lower lead time.
This will not defocus the company’s core competencies at all.

19. u Growth by acquisition
Products and global presence will benefit from acquisition. Supply chain
strategy could benefit from one side and it could be badly affected from the
flexibility point of view at the same time, while the efficiency in the
relationship with retailers will not be affected.
Growth by acquisition could increase responsiveness and capacity (Foam Creations).
During the years Crocs made strategic acquisition. The main ones are listed below.
At the same time, this could imply a reduction in flexibility due to the larger product
variety some acquisitions led to (Fury)
In addition the different processes acquired companies had and threfore the time
needed to fit Crocs management decisions could disturb the entire supply chain.

20. u Growth by product extension
Product extension does not seem to be a sustainable solution, the main reason
behind it is the Crocs found its success in its core model (the clog), the sandal
was a success too but further product extension could let them to lose their
iconic status, which was the reason behind their success. Only global presence
will increase.
Growing by product extension represents the attempt to take a larger market
share. On the one hand it could bring to the efficiency maximization for the
production sites as new technologies and new opportunities could have been
exploited (semi-injection and fabric products), but at the same time their core
products could have lose their iconic status.
Entering new markets of course is a big opportunity, but Crocs had no expertise in
this as it was founded on a new technology. All the possible risks should be
analyzed before a product extension strategy.

21. u Summary
Drawback: Crocs management became focused on growth and integration but did
not prioritize the uncertainty of consumer demand
The Crocs shoe
and material
Revolutionary
supply chain
Global
presence
Efficient-positive
relationship with retailers
Further vertical
integration for
materials
Growth by
acquisition Not affected
Growth by
product
extension

22. 3.4. How should Crocs plan its production and inventory?
How does the company’s gross margins affect the decision?
What could go wrong?
u KEY POINTS
PRODUCE WHERE IT COSTS LESS:
u Crocs launched a planning production system which gave them the opportunity to
produce and have inventory on a global level. This global approach gives benefit to Crocs
because they can shift production to reduce the imposed taxes in their products and
exportation. They should continue to produce taking into account these matters and try
to find always the most favorable tax situation.
DON’T OVER-PRODUCE in order to AVOID HAVING HIGH LEVELS OF INVENTORY:
u Crocs have a favorable gross margin (58%, 2007 data), which is high compared both to
competitors and the industry’s average. Companies with higher margins can afford to
keep more inventories in stock, but Crocs should not let this interfere with establishing
a good global planning system, because in the long run over-producing could produce a
lot of cash problems to the company.

23. 3.4. How should Crocs plan its production and inventory?
How does the company’s gross margins affect the decision?
What could go wrong?
u POSSIBLE COMPLICATIONS AND CHALLENGES
IMITATORS:
u The market is starting to be flooded with Crocs imitators, which provide the same use and experience
to the customers at a much lower price. If Crocs does not position the brand strongly and does not
create loyal consumers, they could end up loosing a lot of their initial success.
DEMAND COULD DECREASE IN THE NEAR FUTURE:
u Crocs created their whole supply chain and production around the idea of being able to respond to a
higher demand, but does not have strategies to minimize the impact when this demand decreases.
Invested in various manufacturing sites and high amount of molds in order to increase the production
capacity of the company. If demand decreases they would have an excessive amount of production
capacity which will not be in use, which generates a big opportunity cost and could make the
company short on cash and generate a need to sell their assets.
CONTROL OF THE WHOLE SUPPLY CHAIN MAY NOT BE COSTLY EFFICIENT:
u Crocs took matters to their own hands in terms of production and distribution because in many cases
was unable to find the right companies to develop contracts. This generated a big investment in the
creation of various factories, each one of them with their own warehousing operations. This might
have generated and continue to generate an excess of costs, since in some situations and locations
there might be more efficient contracting options

24. 4. The Fall of Crocs: 2008
u After experiencing a big and significant rise on their
early years as a company, the situation went
downhill in 2008.
u Net income suffered a decrease of 235% in 2008. In
the last years it has had some minor increases and
decreases, but as of 2017 the net income continues
to be negative.
u Stock price suffered a decrease of 98% in 2008. In
the last years it has had some minor increases and
decreases, but has not been able to come close to
the numbers of the early successful years.

25. 4. The Fall of Crocs
Possibly Reasons
u 1. Lost of Demand
Crocs may have over flooded the market with the product by producing in a very aggressive way in a
short period of time. The appeal may have been loose because of this reason.
u 2. Unnecessary Acquisitions
Some questionable acquisitions like buying EXO Italia which specialized in making vinyl shoes or buying
Teva and Fury Hockey which specialized in producing sports-protection items.
u 3. Not focusing on Core Customers
The pursuit of wanting to appeal to everyone may have ended up forgetting about their real strong
consumers. The key to creating a successful brand is having a base of loyal consumers. At the beginning
Crocs had a considerable advantage because it had developed a unique kind of shoe, but with the
introduction of all the multiple styles, the company image changed, which resulted in a negative
impact on the power of the brand.
u 4. Not organized marketing strategy
In marketing, the company adopted a disorganized, unplanned approach of just spending according to
what they could afford. It depended purely on the sales, when they went up they would increase the
marketing spending, and when sales were not good they will not do any marketing campaigns. This
made no sense since sometimes when sales are not good is when you need to spend more in marketing
in order to revert the situation. They should have created a more detail and elaborated plan for their
marketing, instead of just directly depending on their sales.

26. 5. Conclusions
u Growth expanded but declined as demand for Crocs fell;
As we said Crocs management became focused on growth and integration but did
not prioritize the uncertainty of consumer demand.
Crocs management should also focus on making consumer demand forecasting a
strong priority. They should not just take for granted their past success.
u The company seemed to be focused on the short term, trying to make its presence
more and more structured, buying a lot of plants during their success years. While
on the one hand this allowed them to be more visible in the global market, on the
other hand it turned to be a low sustainable idea as the ROA decreased over the
years.
Of course this was an effective way to attract investors, and after a decreasing period
nowadays the company is starting to grow again and seemed to have learned from
their past mistakes.

27. 5. Conclusions
u As of 2018, Crocs seemed to be making a comeback with being the fastest reseller and among the fastest-
growing “mall brands” out of 10 struggling retail brands such as Ralph Lauren, Bebe, and Wet Seal.
u Crocs’ new approach on marketing with ads campaigns such as “Come as you are” featuring WWE
champion John Cena and movie star Drew Barrymore have shown to produce great results in boosting sells
and brand awareness.
u Crocs stock price has gone up more than 100% in the last year, which is a great sign that things are going
better for the company and investors regaining the trust that once existed. All this could be a result on
the management changes that Crocs has undergone in the recent years, which seemed to be providing
better results.

28. Sources
u http://corpdocs.gmianalyst.com/Sustain/sr_2013_108799.pdf
u http://investors.crocs.com/static-files/216c1c96-2700-41e9-8032-4bbf991187da
u http://archive.fortune.com/magazines/business2/business2_archive/2006/11/01/8392028/index.htm
u https://www.gurufocus.com/term/grossmargin/CROX/Gross-Margin-/Crocs-Inc
u https://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=401
u https://www.aol.com/2012/02/24/how-much-farther-can-crocs-go/
u https://seekingalpha.com/article/3973999-crocs-one-hit-wonder?page=2
u https://www.fastcompany.com/40455747/the-cult-of-crocs-can-the-brand-make-a-comeback-by-fighting-its-haters
u http://ries.typepad.com/ries_blog/2009/10/how-crocs-crashed.html
u https://www.scribd.com/document/254504919/Crocs-Case-Analysis
u http://tesi.cab.unipd.it/53914/1/Da_Pieve_Marco.pdf