hush puppies main report 1(1)

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case analysis


Hush Puppies is the family owned business of Ricardo Swett. This is the business of casual shoes and its retail outlets are in Chile. Hush Puppies in Chile had seen profits go up and sales blow up by an average of 30% per year since 1985. Hush Puppies had become the preferred brand of upper-class Chilean men by emphasizing excellence in design and by expanding a chain of up-scale retail shoe stores as well as a competent factory. Hush Puppies had become the most wanted brand of upper-class Chilean men and later expansion occurred into womens and childrens shoes. The general manager of Hush Puppies in Chile began to weigh up further expansion of the business in other Latin American markets. Ricardo was uncertain how fast the company should expand in these countries or whether efforts should be focused instead on promoting exports to North America or on consolidating the companys market position in Chile.

Company Synopsis:In 1980, Hush Puppies Chile began functions through the resolute attempts of three brothers, Alfonso, Ricardo and Juan Pablo Swett. Later in early-1960s, the three brothers figured NORSEG, a start-up corporation that supplied safety equipment to industrial and mining sites all the way through Chile. Over time, these procedures were organized as separate companies under the family-owned Costanera S.A.C.I. Holding Co.

Wolverine World Wide:Wolverine World Wide was concerned in expanding into Chile. This news was got by three Swett brothers in the spring of 1979 by their advertising agency, Veritas Ltd. Incorporated in 1954; Wolverine outlined much of its initial success in footwear market to its reliance on the production of casual pigskin shoes. Wolverine, pedestaled in Rockford Michigan, controlled a collection of footwear brands including Hush Puppies casual shoes, Wolverine work and outdoor boots, Bates uniform shoes and Brooks athletic shoes. During the 1960s and 1970s, Hush Puppies appeared as a most important brand with meticulous strength in the mens division.


Success in the U.S. was followed by international growth, to begin with in Canada and Europe. In the early 1980s, spurred by fears that the U.S. government might lift import quotas on low cost shoes from the Far East and Latin America, Wolverine shifted to pick up the pace its international expansion. Wolverine was appearing for an agent to import or manufacture Hush Puppies brand shoes in Chile under license. The Swett brothers commissioned market research studies in rejoinder to Wolverines initiatives and disclosed that the Chilean shoe market was dominated by formal, dressy products and that no companies successfully met the requirement for casual shoes. Bata Chile functioned first and foremost as a manufacturing company which sold the bulkiness of its output to small self-regulating stores all the way through the country. Bata also activated numerous dozen of its own retail stores throughout Chile and was reported to be thinking about additional growth. The brothers were predominantly noticed in the upper class market in Chile which, by experience from side to side international travel, was familiar with the Hush Puppies brand, quality and unique designs.

A shift to Retailing:The brothers make a decision near the beginning on that retailing made available the greatest alternative for acquiring Hush Puppies into Chile in working with Wolverine. After compromising with Wolverine, Hush Puppies Chile was given restricted rights to import Hush Puppies shoes and expand retail outlets in Chile. Anticipations were that the costs for the first five stores, including leasehold improvements, training, and inventories and so on, would total about $2.0 million. Of this amount, about $1.0 million would be borrowed. The residual $1.0 million symbolized a considerable risk to the brothers. The best Hush Puppies shoes would be imported from approximately the world with about 80% coming on or after the U.S. given the stratification of wealth in Chile, these consumers contrasted constructively with upper-middle and upper class U.S. consumers.


Stores were positioned in big, suitable locations primarily in the Santiago metropolitan area. The sales staff was broadly trained to improved recount to the upscale customers and were well compensated, reflecting the longing for permanence and professionalism. As agreed ahead by the brothers, Ricardo supposed responsibility as the general manager of Hush Puppies Chile. Alfonso was engaged in most important investment decisions and strategic planning for all family owned businesses as well as a number of day-to-day judgments making at Hush Puppies Chile.

A Move into Manufacturing:The bottom fell out of Latin American economies in 1982. In Chile, the GNP fell by 14% in 1982 alone. Between the 1982-1985, unemployment formally floated around 14%; unofficially, it surpassed 30%. During the same period, the Chilean Peso dropped by 300%, leading to a proportionate rise in import costs. In April 1982, the choice was made to move Hush Puppies Chile into shoe manufacturing. Both partners had the same opinion to make payment representative amounts of capital to make sure that manufacturing output met developed targets. In 1981, import quotas ended in the U.S. and Wolverine shifted uncompromisingly to shift production overseas. Under the joint venture agreement with Hush Puppies Chile, Wolverine would have right of entry to a new starting place of shoes made with low cost Chilean labor. In February 1983, a small new manufacturing facility was unlocked in suburban Santiago which comprised something like 10,000 square meters of manufacturing capacity, a two story decision-making office complex and factory retail outlet. Hush Puppies Chile and Commercial Puppies were both systematized with their personal board of directors, which included the three Swett brothers, as well as a small group of trusted, Western-educated managers from the working companies. Most directors served on two or three boards.


Speedy Growth:From 1985-1990 the Chilean economy established enjoying rapid growth. Brooks Athletic Shoes was possessed by Wolverine and had advantaged in the U.S. by the upsurge in interest in physical fitness. As on the whole sales picked up, Hush Puppies Chile and Commercial Puppies centered further on building and maintaining key brands. Hush Puppies Chile managers observed the company as market sloping as opposed to manufacturing oriented, thus differentiating the company from many Far East suppliers. In 1987, the company founded a most important advertising program titled the pleasure of walking which was predominantly appealing to increasingly health conscious upper and upper-middle class Chileans. Television advertisements were also expanded which focused on Hush Puppies as declarations of quality and style. During the late 1980s and early 1990s, Hush Puppies Chile won three annual Wolverine World Wide awards for the quality of its advertising campaign and marketing strategy. The companys approach to strengthen the Hush Puppies brand succeeded. By the end of 1987, the production of shoes reached 265,000 pairs, an increase of 18% over 1986. In 1988, production increased an additional 15% to 305,000 pairs; in 1989, shoe production was up 29% to 392,000 pairs.

A shift into Womens and Childrens Shoes:More endeavor was dedicated to product design and marketing to make stronger the companys arrangement in the womens shoe market. The womens product manager, Cardina Schmidt, believed that prior to 1990 the womens product line had not sufficiently satisfied the style and fashion demands of Chilean women. In order to construct Hush Puppies further appealing to women, high fashion shoes were imported from Italy, France and Argentina. Hush Puppies Chile also hired exclusive designers to develop its own collection of womens shoes. During this same period, the company also undertook a most important proposal in childrens shoes.


In early 1990, Hush Puppies for Kids were commenced, consisting of four different categories which varied according to the age of the child. Soft Puppies shoes were introduced for infants; Little Puppies were designed for children age one to three years; Young Puppies were introduced for children age four to eight years; and finally, Junior Puppies were designed for children age nine to fourteen years.

Amplifying the Athletic Shoe Position:In the U.S., Brooks was a comparatively weak brand, information not altogether lost on fashion-conscious Chilean adolescents, and L.A. Gear was emerging as the top brand for adolescents. The opportunity to market a more fashionable brand in L.A. Gear was clear and Alfonso approached the company in the summer of 1990. After considerable discussion, L.A. Gear agreed in the fall of 1990 to work with Hush Puppies Chile to bring the L.A. Gear brand to Chile. L.A. Gear shoes would be imported from U.S. inventories or directly from the shoes manufacturers in Korea and China thus sparing Hush Puppies any manufacturing threats.

Wolverines Manufacturing point Purchase:Costanera obtained the 30% of Hush Puppies Chile operations owned by Wolverine World Wide in December of 1991. In late 1989 and 1990, manufacturing facilities were enlarged over 30% in Chile in order to remain pace with flourishing demand. Plans called for production capacity to be increased by another 20% in 1991. At the same time, Wolverine was facing transforms in the business in the U.S. and was struggling to preserve capital. As a result, a buyout became an attractive option for both parties. The purchase of Wolverines 30% share of manufacturing was approximated to have cost Costanera approximately $3.6 million. Wolverine expanded its licensing agreement to Forus for twenty years. In addition, Forus pushed for and obtained the rights to manufacture and sell Hush Puppies brands in Bolivia,