Term paper on crocs

CROCS
Principles Of Management

Term Paper Report On
CROCS
Submitted by:
NAME ID
Rahat Md. Zawad Fattah 13-24313-2
Rahman Arifur 13-24187-2
Rahman, Zamiur 13-24320-2
Bristi, Farzana Afroz 13-24033-2
Nibir, Sazzadur Siraj 13-24198-2
Submitted to:
Musrat Mou
American International University – Bangladesh

Acknowledgement
we gratefully acknowledge the wonderful co-operation and help that we received from our
faculty Musrat Mou. She helped us to understand the topic and always inspired to make the term
paper a successful one.
I hope I would be able to meet up to his expectations.

Table Content
No Title
1 Introduction
2 Literature review
2.1 What is SWOT? Why SWOT analysis is important, and
how it affects strategic decision making?
2.2 What is BCG Matrix?
2.3 Explain Porter’s competitive five forces model?
2.4 Organizational Structure?
3 Findings and analysis
3.1 SWOT Analysis of crocs
3.2 BCG Matrix of Crocs
3.3 Porter’s five forces of crocs
3.4 Strategies of their marketing products (Corporate
level strategy, business level strategies and others)
3.5 Organizational structure of Crocs (Mechanistic or
Organic)
4 Recommendations
5 References

Executive summary
Crocs Inc. is an American shoe designing, manufacturing, distributing, and selling company
founded in 2002. The company deals in a product which is an extension of traditional footwear.
The most striking attribute is the fact that the US company markets plastic shoes which are
available in bright colors. In addition to light green, red, yellow and turquoise; consumers can
purchase more subtle colors. Up to 26 colors are available for the main models. Crocs come in a
variety of styles. They are usually manufactured in company-owned facilities, located in Canada
and Mexico, as well as outsourced contract manufacturers in Italy, Romania and China. Some of
the well-known brands are Styles Beach and Cayman. Crocs also expanded into fashion
accessories. It has launched a line of handbags that are also produced in a wide range of colors.
Crocs also recently entered the market with golf shoes (Ross & Ross 2008).
Crocs shoes are made of plastic foam, which is derived from ethylene-vinyl acetate and were
originally designed to be worn at the beach or boat. Since the invention, Crocs has been
successful beyond these activities and they are now brought in all sorts of daily activities.
Children, especially, are largely attracted by the colorful patterns and simple shapes. Despite the
childish appearance of the product, this method was then extended to adults and these shoes are
increasingly worn by movie and television stars.
We have reviewed trends in the footwear and apparel industry; closely examined the Company’s
strategic, Operational and financial situation, and diagnosed the reasons for its distress. We
recommend that Crocs implement a turnaround strategy with the following key features:
Specialized Executive Body: In any successful organization it is mandatory to have good or
specialized Executive body. But we found several management turnover couple of a year. To be
more professional and specialized, Crocs should have maintained their executive body over few
years.
High production cost: Crocs reserved merchandise inventory and their technology isn’t good
enough and they have many internal cost. If they overcome it they can provide a product in
minimal rate and earn more profit.
Customer Satisfaction: Customer satisfaction is the key to be more successful. If crocs can
increase their distribution channel, they can come closer to their customer.
Come up with varieties of products: Crocs can come with new fashion accessories.

1. Introduction
Crocs Inc. was established in 2002 in Colorado, USA by three friends named Lyndon duke
Hanson, Scott Seamans and George boedecker. They are the world leader in innovative casual
footwear for men, women and children. . Crocs offers several distinct shoe collections with more
than 300 four-season footwear styles. All Crocs™ shoes feature Croslite™ material, a
proprietary, revolutionary technology that gives each pair of shoes the soft, comfortable,
lightweight and odor-resistant qualities that Crocs fans know and love. Crocs fans “Get Crocs
Inside” every pair of shoes, from the iconic clog to new sneakers, sandals, boots and heels. Since
its inception in 2002, Crocs has sold more than 200 million pairs of shoes in more than 90
countries around the world. Love them or hate them is the crocs shoe’s tag line. They achieved a
huge success among the U.S footwear around 49.3B in annual sales which spit about 60-49%
between fashions athletic. Among them shoes representing 55%, sandals 25% and boots and
others 20%. The 1000 pairs made available at the site were sold out in three days. . The brand
celebrated reaching $1 billion in annual sales in 2011.

2. Literature review:
 2.1 What is SWOT? Why SWOT analysis is important, and how it affects strategic
decision making?
Answer: SWOT stands for Strength, Weakness, Opportunities and Threats. SWOT
analysis is a structured planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. A SWOT
analysis can be carried out for a product, place, industry or person. It involves specifying
the objective of the business venture or project and identifying the internal and external
factors that are favorable and unfavorable to achieving that objective. Setting the
objective should be done after the SWOT analysis has been performed. This would allow
achievable goals or objectives to be set for the organization.
 Strengths: characteristics of the business or project that give it an advantage over
others
 Weaknesses: are characteristics that place the team at a disadvantage relative to
others
 Opportunities: elements that the project could exploit to its advantage
 Threats: elements in the environment that could cause trouble for the business or
project

Importance and effects of SWOT analysis: SWOT analysis can be a great tool to help one
understand what is involved in making business decisions. SWOT analysis is a great way of
expressing relationships between components of business decision making. Actually these four
factors are the major players when it comes to business decision making. Each refers to things
that may be internal or external to the business, which might have significant impact on
achieving goals and objectives.Identification of SWOTs is important because they can inform
later steps in planning to achieve the objective. SWOT analysis may be used in any decision-
making situation when a desired objective has been defined. The decision makers should
consider whether the objective is attainable, given the SWOTs. If the objective is not attainable a
different objective must be selected and the process repeated. SWOT analysis may also be used
in pre-crisis planning and preventive crisis management. SWOT analysis may also be used in
creating a recommendation during a viability study/ survey. So, SWOT analysis is very
important for strategic decision making.

 2.2 What is BCG Matrix?
Answer: The BCG Model is based on the product life cycle theory that can be used to
determine what priorities should be given in the product portfolio of a business unit . To ensure
long-term value creation, a company should have a portfolio of products that contains both high-
growth products in need of cash inputs and low-growth products that generate a lot of cash. It has
2 dimensions: market share and market growth. The basic idea behind it is that the bigger the
market share a product has or the faster the product's market grows the better it is for the
company. Placing products in the BCG matrix results in 4 categories in a portfolio of a company:
1.Stars (high growth, high market share)
 Use large amounts of cash and are leaders in the business so they should also generate
large amounts of cash.
 Frequently roughly in balance on net cash flow. However if needed any attempt should
be made to hold share, because the rewards will be a cash cow if market share is kept.
2. Cash Cows (low growth, high market share)
 Profits and cash generation should be high , and because of the low growth,
investments needed should be low. Keep profits high
 Foundation of a company

3. Dogs (low growth, low market share)
 Avoid and minimize the number of dogs in a company.
 Beware of expensive ‘turn around plans’.
 Deliver cash, otherwise liquidate
4. Question Marks (=high growth, low market share)
 have the worst cash characteristics of all, because high demands and low returns due to
low market share
 if nothing is done to change the market share, question marks will simply absorb great
amounts of cash and later, as the growth stops, a dog.
 either invest heavily or sell off or invest nothing and generate whatever cash it can.
Increase market share or deliver cash.

 2.3 Explain Porter’s competitive five forces model?
Answer: Porter’s 5 forces model is one of the most recognized framework for the analysis of
business strategy. Michae; Porter introduced many important ideas in strategic management. One
of his major contributions was explaining how managers can a sustainable competitive
advantage. An important of doing this industrial analysis is done by using the five forces model.
This theoretical framework derived from industrial organization (IO) economics to determine
competitive intensity and attractiveness of a industry. It also describes the attributes of an
attractive industry and suggests when opportunities will be greater and threats less. These five
factors are:
1. Threat of new entrants: How likely is it that new competitors will come into the industry?
2. Threat of substitutes: How likely is it that other industries’ products can be substituted for our
industry product?
3. Bargaining power of buyers: How much bargaining power do buyers have?
4. Bargaining power of suppliers: How much bargaining power do suppliers’ have?
5. Current rivalry: How intense is the rivalry among current industry competitors?

 2.4 Organizational Structure?
Answer: Work specialization: The degree to which tasks in the organization are didided into
separate job with each step completed by different person. It means individual specialization of
employees.
Departmentalization: How jobs are group together is called departmentalization. Five common
departmentalization are
1. Functional: Grouping job by function performed.
2. Process: Grouping job on the basis of product or customer.
3. Product: Grouping job by product line.
4. Customer: Grouping job by type of customer and need.
5. Geographic: Grouping job on the basis of territory.
Chain of command: the continuous line of authority that extends from upper level to lower level
of the organization.
Span of control: the number of employees who can effectively and efficiently supervised by a
manager.
Centralization: the degree to which decision making is concentrated at a single point of the
organization.
Decentralization: organization in which decision making is pushed down to the manager who are
closest to the action.
Formalization: The degrees to which the organization is standardize and the extent to which
employee behavior is guided by rules and process.

3. Findings and analysis:
3.1 SWOT Analysis of crocs:
Strength:
3. Goodwill: Crocs is a brand that is well known and recognized around the world. They
have proprietary rights to the Croslite material, which gives them a competitive advantage
in the marketplace and Increases the popularity of their shoes.
4. Just in time inventory management: Where retailers could order only several weeks in
advance and order low amounts to deliver currently popular styles and colors quickly to
customers.
5. Has control over manufacturing and timing: The Company has control over manufacturing
and timing because it is not depending on other companies for manufacturing activities.
6. Brightly-colored: Crocs shoes are very bright colored.
7. Lightweight shoe: Crocs shoes are very lightweight. So it is very comfortable to wear.
8. Odor resistant shoes: Since Crocs shoes have some holes in it and it is made of a good
material, so it is odor resistant.
Weaknesses:
1. Relatively limited distribution channel: Crocs has limited distribution channel. So they
cannot operate their sales whole over the country.
2. Seasonal Usage: Crocs does not have a diversified product offering beyond footwear,
which causes revenues to be seasonal (since most of their footwear is worn in summer)
and also very cyclical.
3. Having no other various products: Company financial performance is highly concentrated
and dependent on footwear sales.

4. Ugly shoes: Crocs shoes are kind of ugly shoes. They are not very trendy. They are not
appealing at all.
5. Poor IT system: Crocs has poor IT systems and depends on manual processes which are
not efficient or scalable as the Company grows.
6. Management turnover: Lastly, Crocs has also experienced management turnover in the
past year; their CEO retired in February2010, they promoted John McCarvel from COO
to CEO (leaving the COO position unfilled) and their general counsel resigned in
December 2009. So this kind of turnover hampers the company’s activities.
Opportunities:
1. Expand their business: Crocs has the ability to expand through growth in direct to consumer
sales and internet sales. Given Crocs’ success internationally, they can continue expanding
abroad by reaching untapped markets.
2. Include products in addition to shoes: They can expand their business by including wide
range of products in addition to shoes. They can make various types of products to increase
sales.
3. Other investor’s willingness: In various current job segments, Companies and institutes are
willing to invest in croc gear. So that will be a great opportunity for crocs to expand their
business forward.
4. Sales of footwear in the United States expected to grow: 9.7 percent in U.S. population has
been increased over last decade. So it is a great opportunity to increase their sales in U.S.
Threats:
1. Competitors: Given that Crocs does not have patent protection on its proprietary Croslite
material, other Companies have been replicating the material or creating close substitutes,
which eliminates Crocs’ competitive advantage. So Competitors can easily copy the basic
elements of Crocs’ products with only minor modification.
2. Anti-Crocs sentiment in the market: there is anti-Crocs sentiment in the market, as
evidenced by the website “I Hate Crocs.com”31 which could reduce demand for its
products.
3.Suspicion: Due to the lack of advanced IT systems, Crocs is more susceptible to human
error or fraud.

3.2 BCG Matrix of Crocs
1. Best selling products of Crocs is medical shoes. Doctor & Nurse use it.it also used by
chamist.It is a star product of Crocs.
2. Clogs/Beach were.(? mark)
3. Sandle (Cash cow)
4. Rain boot or boot. (Dog)
1.Star(Medical Shoes) : We know that crocs made by cell-resin, Croslite that are order-resistant
and comfortable and totally safe from bacteria. This is the way it usually used by medical
/Pharmacist or chemist.
2.Question Mark(Question Mark) : Every time we found variation of this products. That means
it’s growth is high, but the ratio of growth we can’t see enough .So it’s sells amount is low. That
mean it’s market share is low.
3.Cash Cow(Sandle) : Crocs sandle has high market share or highest sale. But the growth is low.
People always use this product for rapid use.
4.Dog(Boot/Rain boot) : When people think they need boot, they try to buy lather product than
croslite product. So Boot stands on Dog stage. Because this product has low market share and
low Growth rate.

3.3 Porter’s five forces of crocs
Threat of New entrants
 Strong distribution network required: Weak distribution networks mean goods are
more expensive to move around and some goods don’t get to the end customer. The
expense of building a strong distribution network positively affects Crocs.
 Strong brand name is important: If the brand is strong and difficult to compete, then
new competitors will have to improve their brand value in order to effectively compete.
Strong brands positively affect Crocs.
 Patents limit new competition: Patents protect your key technologies and make it
difficult for new competitors. Patents positively affect Crocs.
 Customers are loyal to existing brands: It takes time and money to build a brand.
When new companies need to spend resources building a brand, they have fewer
resources to compete in the marketplace. These costs positively affect Crocs.
Threat of Substitutes
 Limited number of substitutes: A limited number of substitutes mean that customers
cannot easily find other products or services that fulfill their needs. If substitution is easy
and substitution is viable, then this weakens your power. Limited substitutes are a
positive for Crocs.
 Different kind of products: When products and services are very different, customers
are less likely to find comparable product or services that meet their needs. This is
positive for Crocs.
Bargaining Power of Customers
 Product is important to customer: When customers cherish particular products, they
are willing to pay more for that one product. This positively affects Crocs.
 Large number of customers: When there are large numbers of customers, no customer
tends to have bargaining leverage. Limited bargaining leverage helps Crocs.
 Limited buyer choice: When customers have limited choices they end up paying more
for the choices that are available. Limited buyer choices are a positive for Crocs.

Bargaining Power of Suppliers
 Low cost of switching suppliers: If it is easy to switch suppliers, then suppliers have
less bargaining power. Low supplier switching costs positively affect Crocs.
 Uniqueness of Supplier’s product: If the suppliers produce unique demandable
product and also have patent of that particular product, they will have the bargain power.
This is negative for Crocs.
Threats of Existing Rivalry
 Large industry size (Crocs): Large industries allow multiple firms and produces to
prosper without having to steal market share from each other. Large industry size is a
positive for Crocs.
 capability of competitors: Here it is important the number and the capability of your
competitors. If you have many competitors, and they offer equally attractive products and
services, that means they have substition power. it will weaken Crocs.

3.4 Strategies of their marketing products (Corporate level strategy, business level
strategies and others)
Crocs is one of the world’s best shoe makers. They achieved success by using very inexpensive
materials to make their shoes. And especially their clog designed shoes are the best and most
selling product they have.
Crocs is using the corporate level strategies to market their products. As per our research we
came to know that crocs basically use vertical integration. They utilize the additional suppliers of
resin. They also use additional in house to maintain a quality and minimize backlog. As a single
facility of their production accounts for 55% of footwear products. Again they have a strict limit
over their diversification of products. Crocs usually focuses on their high marginal products.
Crocs has improved their information system to handle rapid operations expansion and financial
controls. They always protect intellectual property rights and trademarks as they are one of the
best shoemakers. They have also developed stand-alone retail stores for brand recognition. And
also acquired a different brand to diversity.
After discussing all these things we can see that crocs is following some certain strategies to
market their products.it is basically corporate level strategy. Where all their goal is to market and
expand their market through some corporation tactics. But first they started their business
through mouth marketing where they don’t have to spend a lot of money before any model or
actors. And also their crostile is designed as a loveable kind hearted animated foamy friend of
feet.

3.5 Organizational structure of Crocs (Mechanistic or Organic)
Crocs has followed both mechanistic and organic organization structure. Mechanistic is a rigid
and tightly controlled structure on the other hand organic is highly flexible and adaptable
structure. You already know that crocs is founded in 2002 but within few years the company is
familiar to all. Achieve a huge market share in world market by their specialization on shoes.
Crocs is the company mainly produce shoes, sandals, clogs and boots. We see here the company
is highly specialized. Crocs has rigid departmentalization. They have a lots of outlet in whole
world under geographic department. They have target customers like children, men,women,
boys, girls. They have produced a lots of product in terms of seasons. They have chain of
command mainly centralization. Crocs has a goal set by top management employee just cope
with it. They have also open communication shared idea to each other for innovation of new
product. Without new product any company doesn’t survive. With open communication and
work place spirituality crocs achieve edge over from their competitors. Now we see that crocs
followed both structure properly and go ahead to achieve their goal.
4. Recommendations
Specialized Executive Body: In any successful organization it is mandatory to have good or
specialized Executive body. But we found several management turnover couple of years. To be
more professional and specialized, Crocs should have sequentially maintained their executive
body over few years.
High production cost: Crocs reserved merchandise inventory and their Technology isn’t good
enough and they have many internal cost. If they overcome it they can provide a product in
minimal rate and earn more profit.
Customer Satisfaction: Customer satisfaction is the key to be more successful. If crocs can
increase their distribution channel, they can come closer to their customer.
Come with new products: Crocs might come with new fashionable accessories.
Consider a strategic transaction. Finally, we recognize that a public company may not
have the wherewithal to make the kinds of distribution, systems, and marketing changes
that we suggest are necessary. With that in mind, we recommend that Crocs management
engage an investment advisor to consider the options of going private or of selling to a
strategic buyer. Although Crocs may find it easiest to implement the necessary changes
as a private company or subsidiary, the company does have the needed funds through
cash on hand and free cash flow to implement our recommendations as a stand-alone
company. Please see Exhibit 9 for a breakdown of the turnaround plan costs

5. References:
1. www.crocs.uk
2. www.ask.com
3. www.wikipedia.com
4. Reference Book “MANAGEMENT” (Stephen P. Robbins & Mary Coulter)

Term paper on crocs

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