La Gear Case Analysis
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UNIVERSITY OF THE PHILIPPINES
In the Visayas
Cebu College
Gorordo Ave., Lahug, Cebu City
________________________________________________
In partial fulfillment
of the course requirements of
Management 173
Case No.2
L.A. Gear, Inc.
________________________________________________
Presented to
Prof. Gretchen Chaves
Presented by
Balingcasag, Honeylyn
Gabucan, Anya
Homecillo, Marie Grace
Mesa, Maria La Arnie
Laput, Wynn
February 9, 2010
I. SITUATIONAL ANALYSIS
INDUSTRY ANALYSIS
The athletic shoe market comprised about 50% of the US general footwear market. The domestic retail shoe market was expected to continue to grow at a rate of 5.5 percent until the end of 2000.
In the US, the two largest athletic shoe makers were Nike and Reebok with a combed 50% share of the market. Majority of their products are manufactured in countries outside the US such as the Asian, European, and South American countries. This caused the high mark-ups to the retailers and consumers which were nearly 100%.
The footwear industry was seasonal rather than cyclical. Fluctuations in sales and profitability were attributed to changes in advertising expenditures, price, product quality and overall market trends.
Barriers to entry such as dependence on heavy advertising, brand awareness and intensive R&D made entry to the footwear industry difficult. Companies spent large amounts to do advertising which were their means for promoting new styles and creating brand awareness. This made it difficult for the smaller companies which do not have enough revenues to produce effective marketing campaigns. Brand awareness was also a barrier to entry since consumers usually purchase based on “how they perceived the brand to perform or on its fashion characteristics”. Research and development demanded excessive capital from a company. Large budgets were allocated on R&D because this was how the company
UNIVERSITY OF THE PHILIPPINES
In the Visayas
Cebu College
Gorordo Ave., Lahug, Cebu City
________________________________________________
In partial fulfillment
of the course requirements of
Management 173
Case No.2
L.A. Gear, Inc.
________________________________________________
Presented to
Prof. Gretchen Chaves
Presented by
Balingcasag, Honeylyn
Gabucan, Anya
Homecillo, Marie Grace
Mesa, Maria La Arnie
Laput, Wynn
February 9, 2010
I. SITUATIONAL ANALYSIS
INDUSTRY ANALYSIS
The athletic shoe market comprised about 50% of the US general footwear market. The domestic retail shoe market was expected to continue to grow at a rate of 5.5 percent until the end of 2000.
In the US, the two largest athletic shoe makers were Nike and Reebok with a combed 50% share of the market. Majority of their products are manufactured in countries outside the US such as the Asian, European, and South American countries. This caused the high mark-ups to the retailers and consumers which were nearly 100%.
The footwear industry was seasonal rather than cyclical. Fluctuations in sales and profitability were attributed to changes in advertising expenditures, price, product quality and overall market trends.
Barriers to entry such as dependence on heavy advertising, brand awareness and intensive R&D made entry to the footwear industry difficult. Companies spent large amounts to do advertising which were their means for promoting new styles and creating brand awareness. This made it difficult for the smaller companies which do not have enough revenues to produce effective marketing campaigns. Brand awareness was also a barrier to entry since consumers usually purchase based on “how they perceived the brand to perform or on its fashion characteristics”. Research and development demanded excessive capital from a company. Large budgets were allocated on R&D because this was how the company