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CASE PRESENTATION-CROCS

TEAM ERIE UTA:

MALAVIKA RAVI- 15UTA21

MONIKA.S- 15UTA24

NIVETHITHAA.S- 15UTA31

SANJAY.R- 15UTA40

SHARAVANA BALAJI.S- 15UTA44

VYSHNAV DEVE.S- 15UTA59

NIVEDA.S- 15UTA62

INDEX

SL.NO TOPIC PAGE NO.

1. Executive Summary 3

2. Mission statement 3

3. Strategic Problems

4. Strategic Objectives

5. Five force model

6. EFE Matrix

7. Financial ratios

8. IFE Matrix

9. BCG Matrix

10. Grand Strategy Selection Matrix

11. Advantages and disadvantages of alternative strategies

12. QSPM

13. Recommended Strategy

14. Implementation Steps

15. Proforma Analysis

I. EXECUTIVE SUMMARY:

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Born in Colorado as a simple, comfortable boat shoe, today Crocs footwear can be found across the globe. It is headquartered in Niwot, Colorado. With distinct collections, Crocs offers colorful, lightweight comfort that lasts long. All Crocs shoes are uniquely designed and manufactured using the Croslite technology. Each pair of Crocs has the soft, comfortable, non-marking and odor-resistant qualities that Crocs customers know and love. For a long time Crocs was able to rely on its trusted success formula. It has acquired various firms such as Foam creations (2004), Jibbitz (2006), Bite footwear & Ocean minded (2007), Tidal Trade & Tagger (2008). However, sales are declining and forces from the environment ask for strategic changes. In the long run, changes in Crocs’ brand portfolio and new footwear products should attract new segments and increase the target market. They can enter into new markets by product development combined with market development and market penetration.

The analytical study comprises of internal audit, external audit which covers Crocs’ strengths, weaknesses, opportunities and threats. Few strategic management tools like Internal Factor Evaluation Matrix (IFE), External Factor Evaluation Matrix (EFE), Porter’s Five force Model, Grand Strategy Matrix, Boston Consulting Group Matrix (BCG) and Quantitative Strategic Planning Matrix (QSPM) were used to develop a strategic plan for Crocs to offset the problems. Also Financial Ratio analysis was performed which gives a clear idea about where the company stands based on the footwear industry average. Thus based on the above tools, we converge into Product development combined with Market development strategy. Further, a three year projected income statements on Optimistic, Pessimistic and Realistic scenarios were developed based on the above strategic assumptions.

II. MISSION STATEMENT:

Crocs Inc. Mission statement is “To bring profound comfort, fun and innovation to the world’s feet”.

Ocean Minded’s Mission statement is “To become the global leader in sustainable lifestyle footwear, apparel and accessories whilst ensuring that the four pillars of the Ocean Minded brand-Quality, Authenticity, Responsibility and Community-resonate throughout our company, products, associates and actions”.

III. STRATEGIC PROBLEMS:

Strategic problems are important external/internal issues which is a primary concern for the organisation which requires immediate action.

Infringement of intellectual property rights is a major strategic problem for Crocs. In 2007, many Croc-offs were seized in Philippines and Denmark.

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Low product development is another strategic problem as they do not cover all the segments of consumers in the market.

They have a weak distribution channel which gives them less than 10% of single customer accounts. Their sales growth rate has declined from 27% in 2011 to 12% in 2012.

IV. STRATEGIC OBJECTIVES:

The strategic objectives are the fundamentals for a strategic plan. These objectives can be classified into short term and long term objectives which is aligned with the organisations’ mission and vision.

Short-term objectives (less than a year):

Increase retail stores by 100. i.e. from 287 to 380 by the end of 2013 Give the employees more training and increase their efficiency and prepare them for

market development.

Long-term objectives (more than a year):

Protecting patents and shutting down crock-offs. The value of Crocs stock on the NASDAQ stock exchange should have a stable

growth in the forth coming years. Expand the product line by 2015. There should be an increase in the sales growth by 25% in three years by 2015.

V. EXTERNAL AUDIT:

INDUSTRY ANALYSIS- PORTER’S FIVE FORCE MODEL:

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INDUSTRY RIVALRY:

They are the competition among the existing firms. This explains how intense the competition between the rivals is.

Large industry size: 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: A large number of competitions will weaken Crocs.

On the whole Industry rivalry is powerful and has a huge impact on Crocs.

THREAT OF NEW ENTRANT:

Crocs can protect its technologies through patenting and it even has a strong brand name. The customers are loyal to existing brands and it makes it difficult for a new entrant to get successfully established in the market. On the whole threat of new entrant is less powerful and has a low impact on Crocs.

THREAT OF SUBSTITUES:

In actual there are no substitutes for this product category which makes Crocs more powerful and has a less impact on Crocs.

BARGAINING POWER OF CUSTOMERS:

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The purchasing attitude of consumers has a great impact on the firm.

Product is more important to customer: When customers desire for a particular product, they are willing to pay more. This positively affects Crocs.

Large number of customers: When there are large numbers of customers their bargaining power gets limited. This helps Crocs.

Limited buyer choice: When choices are limited customers end up paying more for their available choices which helps Crocs positively.

Overall, the bargaining power of customers is less compared to other factors.

BARGAINING POWER OF SUPPLIERS:

In Crocs case, the firm has the patent for Croslite the proprietary material which gives Crocs the desired comfort for the products. This reduces the bargaining power of suppliers. So, this is a very less powerful factor of all.

X. PROFORMA INCOME STATEMENT:

OPTIMISTIC FORECAST:

The optimistic rate for forecast is 27% as we have taken the highest growth rate for the revenues compared with the previous income statements and calculated the changes for each item on that basis.

OPTIMISTIC2013 2014 2015(in thousands)

Revenues 1423734 1804519 2287146Cost of sales 656456.5 836241.2 1065264Restructuring charges 0 0 0Gross profit 769591 974165.5 1233121Selling,general&admin expenses 543410.1 641396.6 757051.9Restructuring charges 0 0 0Asset impairments 5280 19771.91 74039.51Income(loss) from operations 245258.7 411508.2 690450.8Foreign currency transaction (gains)losses 5253.763 11040.81 23202.33Other income -4273.68 -6737.14 -10620.6Interest expense 1086.699 1410.889 1831.793Income(loss) before income taxes 246249.1 416622.8 704873.8Income tax expense 25985.6 47536.19 86959.29Net income 218733 364268.7 606637.6

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PESSIMISTIC FORECAST:

The pessimistic rate for forecast is 12% as we have taken the lowest growth rate for the revenues compared with the previous income statements and calculated the changes for each item on that basis.

PESSIMISTIC2013.0 2014.0 2015.0(in thousands)

Revenues 1260666.8 1414830.6 1587846.8Cost of sales 571717.6 634282.5 703694.2Restructuring charges 0.0 0.0 0.0Gross profit 689092.4 781030.0 885233.8Selling,general&admin expenses 523617.0 595523.2 677304.1Restructuring charges 0.0 0.0 0.0Asset impairments 3765.3 10055.2 26851.9Income(loss) from operations 163007.3 181779.2 202712.8Foreign currency transaction (gains)losses -1279.2 654.5 -334.9Other income -4657.5 -8001.6 -13746.7Interest expense 821.3 805.9 790.8Income(loss) before income taxes 154980.0 165023.3 175717.4Income tax expense 8442.1 5017.1 2981.7Net income 152950.5 178112.7 207414.5

REALISTIC FORECAST:

The realistic rate for forecast is 19% as we have taken the average growth rate of the previous income statements for the revenues and calculated the changes for each item on that basis.

REALISTIC2013 2014 2015(in thousands)

Revenues 1342200.2 1603756.6 1916282.8Cost of sales 614087.1 731778.3 872025.3Restructuring charges 0.0 0.0 0.0Gross profit 729341.7 874933.2 1049587.8Selling,general&admin expenses 533513.5 618247.2 716438.4Restructuring charges 0.0 0.0 0.0Asset impairments 4522.7 14506.8 46531.5Income(loss) from operations 204133.0 285073.1 398106.6Foreign currency transaction (gains)losses 1987.3 1579.7 1255.8Other income -4465.6 -7355.8 -12116.5Interest expense 954.0 1087.4 1239.3Income(loss) before income taxes 200614.6 276515.0 381131.5Income tax expense 17213.8 20860.0 25278.4Net income 185841.8 262954.0 372062.8

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Recommendation:

The mission statement of Ocean Minded talks about the accessories but in reality they do not sell accessories so they can reframe the mission statement and remove accessories because it is misleading the customers.

EXTERNAL FACTORS EVALUATION (EFE) MATRIX

KEY EXTERNAL FACTORS Weight (0-1)

Rating (1-4) Weighted Score

OPPORTUNITIESExpansion into developing countries 0.15 4 0.6Expansion into fashion industry 0.13 3 0.39New successful acquisitions 0.08 3 0.24Targeting middle class consumers 0.09 2 0.18Develop products for all the seasons 0.1 3 0.3

THREATSImitation of crocs in the name of crocs-off 0.15 4 0.6Negative publicity 0.1 2 0.2Intensive competition 0.13 3 0.39Saturated market in USA and Europe 0.07 2 0.14

TOTAL 1 3.04

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