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Vans Case Study

Essay by   •  October 23, 2013  •  Case Study  •  1,215 Words (5 Pages)  •  1,540 Views

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Situational Analysis

Vans is currently facing intense competition in both its retail and wholesale business units. Many large companies are financially sound to have marketing budgets that exceed the annual revenues of Vans. Nike has made several attempts to penetrate the skateboarder market, but has failed to gain acceptance from the skateboarding community. On the other hand, Adidas has enjoyed success by positioning themselves through DAS, a skate-shoe sub brand that is currently endorsed by many hardcore enthusiasts and professionals. Small competing companies like eS, Etnies and DC are being increasingly popular among skateboarding enthusiasts. In the recent years, DC has gained enough mainstream market recognition to become one of the top ten skate brands. Midsized companies like Sketchers have significantly penetrated most mall-based retailers in the female skateshoe segment. Another midsized-competitor Airwalk, has eliminated themselves from the competition as a result of their failed transformation into a billion-dollar megabrand. Vans is now in a position where they must restructure in order to experience incremental growth. The company must decide how to allocate their operations among six business-lines: Men's, Women's, and Kid's footwear apparel, entertainment, and hard goods.

Key Issue

By 2002, the skate-footwear market had grown to an estimated $800 million market. The rest of the athletic footwear market had suffered from stagnant growth, making this a golden opportunity for shoe-manufacturers to redeem their lost revenue by investing in this lucrative market of skate-footwear. In order for Vans to remain competitive, the company must restructure its business units in such a way that best correspond with its distribution and corporate strategies.

Alternatives

There are two approaches to restructure Vans in order to gain competitive advantage:

1. Retract from the market of core specialty skate shoes and further expand into other categories via second and third-tier outlets. (All categories besides Women footwear and Hardgoods)

2. Attempt to gain market share in the market of core specialty skate shoes and expand into the underdeveloped women's footwear market.

*Given both approaches, it is also recommend for Vans to develop movies, games, and music through its distribution channels for buzz-building.

Recommendation

The market of specialty skate shoes is not a desirable playing field for Vans. Many large and small competitors are outperforming Vans in this category because it is a part of their core competency. It is recommended for Vans to increase its budget into other more profitable footwear categories and possibly increase its role in the entertainment business to generate buzz.

Rationale

It is a common misconception for individuals to perceive Vans as a hardcore skate-brand for the professionals. In fact, Vans is actually more focused into amateur-use and casual-wear segments than its competitors. Categories such as skate-performance, skate casual, classics and sandals are all sold in second and third-tier outlets. If one is to analyze revenue statistics by combining the sales of both outlets, 90% of Vans' domestic wholesale business is composed of sales revenue from amateur footwear and casual wear. It is important to note that domestic wholesale business represents 56.6% of domestic sales, and 90% of this total comes from footwear for casual and amateur use.

On the other hand, the Pro Series line is only sold through the first-tier outlet. If 10% of Van's domestic revenue comes from independent skate shops, and all footwear categories (except Skate Casual) are sold via independent skate shops, how many percent out of this 10% would consist of specialty skate-wear?

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