Fluent Essays

case written reports should be a maximum of 1500 words in length. This word constraint does not include the title page nor any attached analytical exhibits. Meeting this word constraint will require concise, specific writing (and editing) and the creation and application of supportive exhibits. Analytical exhibits may be qualitative and quantitative. These are exhibits you develop and are not exhibits from the cases. Exhibits should be numbered and titled. Exhibits should be referred to in numerical order. Exhibits should not be generic in nature. Your name and the word count of the text portion should be noted on the title page. No other personal identification should be found in the body of the paper. Writing mechanics and structure are expected to be at a high level. Questions should be answered based exclusively on case information.Provide an external environmental analysis for the athletic shoe industry.Provide an internal appraisal for SoleFit Shoes.Identify & evaluate the value drivers that differentiate the SoleFit Shoe Company’s product offering.What is SoleFit’s economic value creation? How does this compare to their high-end competitors?Identify and explain viable strategic options and decision criteria that SoleFit management should consider. solefit_shoes_revised_case___1_.docx Unformatted Attachment Preview SoleFit Shoes The global athletic shoe industry saw continued significant revenue growth during the past fiscal year. The compound annual growth rate (CAGR) was 4.4 percent over the past five years. Projections suggest this number is forecast grow to 6.2 percent over the next five years. A continued shift toward healthy lifestyles is an important driving force. Additionally, sports shoes are increasingly becoming an essential fashion accessory among global consumers. The athletic shoe market is witnessing demand for trendy and comfortable footwear among all age groups. Footwear innovation, in materials, construction, function and style, has been driving the growth of the global footwear market. The U.S. continues as the largest market for athletic shoes, however, the Asian market is expected to exceed that of the United States in five years. SoleFit The SoleFit Shoe company values being socially responsible and environmentally conscious. SoleFit produces quality athletic shoes, in the United States, with sustainable materials and dedicates two percent of net profits to social entrepreneurship. This is primarily focused on increasing business opportunities and business education in less developed areas of the United States. The business has personal financing from the two founders, as well as private investments from two environmentally conscious entrepreneurs. No additional funding has been needed. The company is established as a Benefit Corporation. Profits, albeit modest, have grown each year since the company’s beginnings. Cash flow from operations has been positive for the last several years. Profits, other than that dedicated to social entrepreneurship, are entirely reinvested in the firm. They carry no debt other than trade credit. The Product: The SoleFit Athletic Shoe The SoleFit Athletic Shoe is made with sustainable and recycled materials that are durable enough to endure 1,000-1,200 miles of moderate sport usage (i.e., running and walking). This compares very favorably with typical mid- and high-range sports shoes lasting approximately 400 miles. Material costs are roughly 10\% higher for SoleFit due to current limited sources of supply. The upper is a breathable mesh fabric. The midsole was developed to balance stability and cushioning. The SoleFit standard shoe last is slightly wider than typical athletic shoes. The outsole, heel collar and heel counter are comparable to mid-range athletic shoes, which actually are more durable than high-end shoes. Eyelets extend further into the heel collar and into the toe box allowing for greater lacing adjustments and comfort. The shoes have a basic appearance for customers looking for functionality over style. The shoe comes in four colors and in standard American shoe sizes. There are shoes made for women and for men. They currently do not have children sizes. Customization, in color, appearance, and sizing, is available at an increased consumer price of ten percent. This increase goes directly to SoleFit with online sales or is split 50-50 with retailers. _____ This case was originally developed by Professor William Crittenden and Janelle Dinsmore (DMSB, 2019). © 2017, revised 2020. It is intended to be used for class discussion and is not the basis for secondary research. The shoes are handmade by individuals to ensure high levels of quality control and allowing for easier customization. Shoes are packaged in a canvas bag of recycled materials. Each pair is accompanied with an extra pair of insoles and directions for properly lacing athletic shoes, depending on use and type of foot (e.g., high instep, narrow heel). These complements increase costs of goods approximately one percent. Marketing & Distribution Due to capacity constraints, SoleFit athletic shoes are only distributed in the U.S. in select retail outlets in five states. Online purchases direct from SoleFit can be shipped anywhere in the world. Approximately thirty-five percent of SoleFit shoes are sold in retail outlets and the remainder are sold via the company’s online channel. Shipping, and return of standard product, is provided free of charge to consumers and retailers. The return rate is less than ½ of one percent. The standard model shoe is priced comparably to a high performance athletic shoe. Sales and marketing expenses are roughly four percent of revenue. SoleFit’s top line revenue was roughly $24,500,000 for the last fiscal year. Manufacturing Shoe making remains labor intensive. Most athletic shoes are produced on an assembly line. Yet, each SoleFit shoe is the responsibility of one shoemaker. This provide for both customization and high quality control. SoleFit shoes require gluing, yet use much more stitching than is common in comparable shoes. An advanced SoleFit shoemaker can average twelve standard pairs of shoes per day. Shoemakers with less than a year of experience typically top out at seven to eight pairs per day. The company currently employs fifty-two experienced shoemakers at one production facility. The SoleFit production & quality control processes can stretch manufacturing times. Shoes are typically shipped to retailers and consumers within two weeks of receiving an order. The average cost of goods sold is $67 a pair. Customization can significantly increase manufacturing time. Although dependent on the individual order, customization increases the average manufacturing cost 20\%. In aggregate terms, the ten percent increase for customization fully covers all expenses. Competition & Market Issues The most direct competitors are athletic shoes retail priced in the same premium range ($140-160). Mid- and lower price range also provided competition, yet not a similar levels. High-end shoes have a lower life span, yet tend to be more comfortable than average price ($100-120) and low-end ($80 and below) shoes. Higher-end performance competitors tend to have more advanced features and support technologies integrated into their products. These may be designed into the shoe upper, the midsole, the outsole, the insole & sock-liner, the heel counter and heel collar, and shoe tongue. Most major competitors subcontract some or all of their manufacturing overseas. There, high-end shoes cost roughly $30 to manufacture. Mid-range shoes average $23 in manufacturing cost. Additional costs associated with shipping, insurance and customs add approximately 22\% to foreign made shoes. U.S. based competitors have a distinct advantage in local shipping and customization. Marketing by major players averages 15\% of their net sales. The typical retail markup for athletic shoes is fifty percent. Competitors often lack the breadth and depth of social responsibility initiatives found at SoleFit. Further, some have encountered ethical supply chain issues. Several of the larger athletic shoe manufacturers have recently introduced, or plan to, shoes made with more sustainable and/or recycled materials. Social Responsibility Two percent of ShoeFit’s net profits is used for social impact. These monies principally fund business education seminars in underdeveloped, U.S. rural communities. In addition, contributions provide micro-lending in the U.S. and its territories (i.e., Puerto Rico, Guam, the Northern Mariana Islands, the U.S. Virgin Islands, and American Samoa). Depending on condition, product returns may be returned to inventory or given to a local nonprofit for distribution. SoleFit’s athletic shoe is produced in a single U.S. community where employment opportunities are lacking, to help provide a stable employment opportunity as well as education in the craft of shoemaking and in business. The U.S. location, the job training, employee benefit packages including full health-care, and the SoleFit production process adds approximately 40\% to their cost of manufacturing relative to competitors. Employee turnover at SoleFit Shoes is almost non-existent. This is very low compared to other U.S manufacturers across industries. The core of the brand is based on social responsibility and the ethical values of the company and the work they do. ... Purchase answer to see full attachment