Podcast
Questions and Answers
What is the primary distribution channel traditionally used by athletic footwear manufacturers?
What is the primary distribution channel traditionally used by athletic footwear manufacturers?
- Private-label sales to specialty boutiques
- Wholesale sales to independent footwear retailers (correct)
- Online sales through social media
- Direct sales to consumers at trade shows
What is a common retail markup over wholesale prices for athletic footwear at premium retailers?
What is a common retail markup over wholesale prices for athletic footwear at premium retailers?
- 20%
- 60%
- 40%
- 100% (correct)
Which of the following regions has the least number of retail outlets for athletic footwear?
Which of the following regions has the least number of retail outlets for athletic footwear?
- Asia-Pacific
- North America
- Latin America (correct)
- Europe-Africa
What role do sales representatives play in the distribution strategy of athletic footwear manufacturers?
What role do sales representatives play in the distribution strategy of athletic footwear manufacturers?
Why do athletic footwear manufacturers operate their own websites?
Why do athletic footwear manufacturers operate their own websites?
How many retail outlets for athletic footwear are estimated to be in Europe-Africa?
How many retail outlets for athletic footwear are estimated to be in Europe-Africa?
Which distribution model allows manufacturers to sell their products directly to large retailers?
Which distribution model allows manufacturers to sell their products directly to large retailers?
What is a characteristic of retailers that carry athletic footwear brands?
What is a characteristic of retailers that carry athletic footwear brands?
What factor primarily influences overall production costs at footwear manufacturing facilities?
What factor primarily influences overall production costs at footwear manufacturing facilities?
What is the cost to ship pairs from a production facility to a distribution center in the same region?
What is the cost to ship pairs from a production facility to a distribution center in the same region?
Why might production not be concentrated in regions with lower wages?
Why might production not be concentrated in regions with lower wages?
What is the tariff cost for footwear exported from Asia-Pacific facilities to North America?
What is the tariff cost for footwear exported from Asia-Pacific facilities to North America?
What is one strategy companies might use to avoid import tariffs?
What is one strategy companies might use to avoid import tariffs?
What impact do exchange rate fluctuations have on footwear companies?
What impact do exchange rate fluctuations have on footwear companies?
What complicates the decision-making process regarding production facilities in different regions?
What complicates the decision-making process regarding production facilities in different regions?
What is the cost incurred when footwear is exported from Latin America to Asia-Pacific?
What is the cost incurred when footwear is exported from Latin America to Asia-Pacific?
What percentage of total branded sales are online sales expected to reach by Year 20?
What percentage of total branded sales are online sales expected to reach by Year 20?
What is the projected annual growth rate of the private-label segment during Years 11-15?
What is the projected annual growth rate of the private-label segment during Years 11-15?
Why is the private-label segment attractive to manufacturers?
Why is the private-label segment attractive to manufacturers?
Which statement about consumer demand in the athletic footwear market is correct?
Which statement about consumer demand in the athletic footwear market is correct?
What is a major driver of growth in private-label sales?
What is a major driver of growth in private-label sales?
What is the expected growth rate for private-label sales during Years 16-20?
What is the expected growth rate for private-label sales during Years 16-20?
How can manufacturers improve overall financial performance when producing private-label pairs?
How can manufacturers improve overall financial performance when producing private-label pairs?
What can happen if a company emphasizes online sales below the industry average?
What can happen if a company emphasizes online sales below the industry average?
What does the competitiveness of a company's strategy depend on?
What does the competitiveness of a company's strategy depend on?
Why should participants be cautious about following advice from former players of the game?
Why should participants be cautious about following advice from former players of the game?
What is the probability that past competitive efforts match current game conditions?
What is the probability that past competitive efforts match current game conditions?
What must happen before calculating each company’s competitiveness?
What must happen before calculating each company’s competitiveness?
What could lead to flawed thinking in business strategy planning?
What could lead to flawed thinking in business strategy planning?
What type of information should participants view with skepticism?
What type of information should participants view with skepticism?
How does the timing of decisions affect game outcomes?
How does the timing of decisions affect game outcomes?
Which aspect is NOT a factor in determining overall performance in the game?
Which aspect is NOT a factor in determining overall performance in the game?
What is the criterion for judging a company's brand advertising expenditures in a given region?
What is the criterion for judging a company's brand advertising expenditures in a given region?
How does celebrity endorsement affect consumer purchases of footwear?
How does celebrity endorsement affect consumer purchases of footwear?
Which factors contribute to the image rating of a footwear company?
Which factors contribute to the image rating of a footwear company?
What impact do companies with above-average current-year brand advertising expenditures have on their sales?
What impact do companies with above-average current-year brand advertising expenditures have on their sales?
What is the main reason for companies to invest in celebrity endorsements?
What is the main reason for companies to invest in celebrity endorsements?
How often are image ratings for footwear companies updated?
How often are image ratings for footwear companies updated?
What happens to image ratings during the annual updates?
What happens to image ratings during the annual updates?
What is a potential drawback of hiring celebrity endorsers without adequate advertising?
What is a potential drawback of hiring celebrity endorsers without adequate advertising?
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Study Notes
Athletic Footwear Distribution Channels
- Independent Retailers: The primary distribution channel for athletic footwear manufacturers.
- Approximately 60,000 retail outlets globally, with North America and Europe-Africa each having 20,000 and Latin America and the Asia-Pacific each having 10,000.
- Retailers typically carry 2-4 brands of athletic footwear, stocking only a limited selection of models and styles.
- Markups range from 40% at discount chains to 100% at premium retailers.
- Online Sales: A growing channel for manufacturers, accounting for 15% of total branded sales, expected to reach 25% by Year 20.
- Private-Label Sales: Attractive due to projected growth of 12% annually during Years 11-15 and 10% during Years 16-20.
- Driven by multi-outlet chains using lower-priced private labels to attract price-conscious customers.
- Manufacturers supply private-label pairs to retailers on a competitive-bid basis.
Manufacturing Location & Costs
- Production Costs: Influenced by base wages, overtime pay scales, fringe benefits, training, equipment, and production improvement options.
- Regional Production Costs: Significant variations in production costs across different geographic regions.
- Latin American and Asia-Pacific regions may have lower base wages & overtime costs, but other factors (e.g., fringe benefits, training, equipment, etc.) can offset this advantage.
- Export Costs: Influenced by tariffs, fluctuating exchange rates, and shipping costs.
- Shipping costs are higher for pairs exported to other regions compared to the region of production.
- Tariffs: Apply to footwear exported to different regions.
- Asia-Pacific to Latin America: $10 per pair.
- Asia-Pacific to Europe-Africa: $6 per pair.
- Asia-Pacific to North America: $4 per pair.
- Latin America to North America: $4 per pair.
- Latin America to Europe-Africa: $6 per pair.
- Latin America to Asia-Pacific: $8 per pair.
Exchange Rate Impacts
- Footwear companies are subject to exchange rate adjustments at two points:
- When buying raw materials (e.g., leather, rubber, fabrics, etc.).
- When selling footwear in foreign currencies, particularly for exports.
Factors Influencing Competitive Advantage
- Brand Advertising Expenditures: Companies spending above the regional average for brand advertising are judged competitively stronger.
- Celebrity Endorsements: Boost brand image, but require significant investment in advertising to maximize their influence.
- Image and Brand Reputation: Based on global average S/Q rating, global average market share, and social responsibility efforts.
Best Practices for The Business Strategy Game
- Avoid Predetermined Strategies: The success of any strategy relies on the specific decisions and actions of rivals.
- Be Skeptical of Outside Advice: Past experiences in other industries or from previous game participants may not be relevant due to changing competitive dynamics.
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