PACER Shoes faces declining market share due to increased competition. Its recent attempts to expand into casual segments confused loyal customers. The document evaluates three options: 1) launching the planned Pacesetter Plus, 2) re-launching the original Pacesetter, or 3) maintaining Pacesetter while carefully researching new segments. It recommends the third option of continuing Pacesetter, exploring segments through market research, and shifting to provide "athletic services" through partnerships. A plan of action includes communicating the Pacesetter Plus delay, market research, and expanding geographically through Asian partnerships.

1. Team No138 [PACER SHOES – WAY AHEAD]
PACER Athletic Shoes
The Strategic Makeover – 1995

2. Team No138 [PACER SHOES – WAY AHEAD]
Situation Analysis:
In 15 years of the firm, PACER Athletic Shoes, the production capability has increased by 1150%,
with revenue of $10 Million. The start-up company of 1970, a brain child of Henry Carson
(current CEO), was to cater to the professional runners, who appreciated the technical aspects
of their running shoes.
Pacesetter was a unique brand launched by the company, which was widely accepted by
professional runners and could satiate the requirement of the loyal customers. However, in the
onset of the 1990, with the athletic shoe market booming, PACER a small company with modest
revenues faced an onslaught from “giants” in the market. They lost out 10% of their customers,
in-spite of spending around $1.2 Million in marketing / advertising.
PACER’s latest move of upgrading their Pacesetter series, as well as their venture into exploring
the requirement of casual runners and walkers in 1993 backfired with loyal customers unable to
appreciate the company’s venture. The company took decisions, to launch upgraded /newer
products every season and also to tap unfamiliar segments, seemingly due to the relentless
market pressure from companies having higher revenues. Without proper market research,
support of all members, and plants not being equipped to handle such frequent design changes
resulted in quality issues and also eventual sales were way off projections.
Problem Analysis:
To charter a path of PACER Athletic Shoes of sustainable volume & profitability growth; taking
informed decisions about the targeting the right segments in the market and value creation for
its loyal as well as new customers.
Statement of Options:
1. Go ahead with the launch of Pacesetter Plus, whose trial as well as manufacturing
details have been worked out. Recommit to the plan of innovation every season.
2. Scrap the Pacesetter Plus launch; Re-launch original Pacesetter, as recommended by
Sarah (Vice President – PACER); customer loyalty for which was a big asset for the
company.
3. Maintain design & production of Pacesetter; the face of PACER Shoes. Phases of
innovation in products as well as expansion to newer segments / geography with
appropriate market research and adequate communication to customer. Focused
Differentiation as per Porter’s Generic Strategies can be used to gain competitive
advantage in this scope of the market.

3. Team No138 [PACER SHOES – WAY AHEAD]
Criteria for Evaluation:
1. Volume & Opportunity of Profitability
2. Market Share Growth
3. Company / Product Brand Image Clarity
4. Value Creation for the Customer
5. Customer Loyalty
6. Company Morale
Evaluation of Options:
1. With sticking to the committed launch of Pacesetter Plus, the company takes a plunge of
faith rather than an informed decision. The target segment of Pro-runners remains the
same, and with the loyalty factor fast evaporating amongst current users; growth in
customer acquisition is a distant probability.
The clarity of the Brand is somewhat diminished in the mind of the customer, and with
fragmented advertising the customers are yet to shed the image of a company making
technically superior shoes for Pro-runners and the company making comfortable shoes
for casual runners & walkers.
Though the target of the company is Value Addition through upgraded version of its
products, the perception of the customer is not encouraging due to unclear
communication strategy of PACER.
However, short term financial losses may be avoided by going ahead with the launch
and also the employee’s morale for the nearby future will rise with a successful launch.
2. Re-launching the Pacesetter is going a step backward into known territory. While this
option, gives the company and its loyal customers the comfort, whether or not it will
provide the volume & profitable growth in the dynamic market scenario remains a big
question.
Moreover, short term financial losses as well as downward spiraling employee morale
may be a reality.
Value Creation for the customer remains unchanged; the company may lose the
element of surprise over the “flashier” shoes manufactured by the big companies.
Without innovation, the company may only be able to survive the onslaught till a
specific period of time.
3. The Pacesetter is in a segment having high market attractiveness and relatively low
market share (Annexure – I), selective investment needs to be made to harvest the yield
of the product; as the “athletic shoe” is considered as a personal product of a Pro-

4. Team No138 [PACER SHOES – WAY AHEAD]
runner, and the product it yet in the “Growth-Mature” segment of its Product cycle
(Annexure – II); again selective investments is the order of the day for this segment.
It is imperative that the company realign its business from its “Athletic Products” to
probable “Athletic Services”. Proper targeted communication can help this reorientation
in the minds of the consumer, wherein PACER can be known as a development tool for a
Walker to motivate himself into a Casual Runner and further to elevate himself/herself
into a Pro Runner.
Growth in sales in different customer segments, also in different geographical segments
is critical for sustainable growth for the company. The plants in South Korea, can be a
stepping stone for a foray across the geographical boundaries (Blue Ocean Strategy for
the company).
The Pacesetter Plus will be deferred until a proper market research, with the enrolling
few notable Pro-runners to help with the re-designing of Pacesetter. The phased
innovation concept with Value Co-creation along with all stake holders may help PACER
to garner the customer mind share.
Recommended Option:
Viewing the above evaluation, it is best for PACER to continue with Pacesetter, along with
continued explorations of newer segments / newer geographies and new ways to communicate
clearly to both internal & external customers. Value co-creation along with all stakeholders,
especially Pro-runners along with the culture shift towards “Athletic Services” can be a game
changer for PACER.
Plan of Action:
1. Immediate communication to all internal customers for deferral of Pacesetter Plus
Launch; better now than being late, resulting into demoralizing losses. Also try to cut
down on financial losses.
2. Rope in 2/3 Design Leaders (Pro-Runners) for conceptualizing and suggestions for
improvement in the current Pacesetter.
3. Launch the Pacesetter Plus thereafter.
4. Do a market research to explore options in the Walker / Casual Runner segments;
identify the threat of substitutes, switching costs (both commercial & otherwise) for the
consumer and then make an informed foray in the segment. In a sort of backward
integration, it is better for PACER (athletic shoes manufacturer) to foray the Casual
Runner segment first & then move behind to Walker segment.

5. Team No138 [PACER SHOES – WAY AHEAD]
5. Rope in current customers (Universities) in design competitions to generate viable
options, and also create space in the mind of the new upcoming consumers (Casual
Runners / Walkers).
6. Initiate value chain engineering and enhance plant’s capabilities to handle different
designs through efficient systems.
7. Analyze the potential geographical areas wherein athletics as a culture is promoted;
Asian countries can be the launch-pad with PACER’s indirect contact in South Korea.
Acquisition of a local company / Partnership with a local company can be the way
forward.
8. Athletic Services, in the form of diversification in athletic socks and other accessories
can add to the bottom-line of the company.
Annexures
Annexure – I
GE Factorial Matrix – Depict
the positionofPacesetter
Annexure – II
Product Life Cycle- Brands of
PACERShoes