However, since 1996 when the company began selling casual shoes and focusing on the growth opportunity in casual boots, sales of the Duraflex work boot line
195 KB – 21 Pages
PAGE – 2 ============
Duraflex Euro( ). They have always relied on the boot market for the majority of their volume and in this market they compete with three other major competitors. Together, these four brands represent approximately 72% of the 5.0 billion market. The boots category includes four main sub – categories: Work boots, casual boots, field and hunting boots, and winter boots. Work boots is the largest sub – category and is geared to blue collar workers 1 who purchase these boots primarily for on – the – job purposes. Casual boots is the fastest growing sub – category, and is geared more towards white collar workers 2 and students who purchase these boots for week – end / casual wear and light work purposes. The four key competitors in the market are Badger, Duraflex , Steeler, and Trekker. Footloose Introduction 2 Case study 1 Blue c o l lar w or k e r s : w age ea rners w ho g ene r ally w ork i n m anu a l o r in d u s t r ial l a bour and often re q uire s p e c i al w ork c lo t hes or p r ot e c ti v e c lo t hi n g, w h i c h a r e r e pl a c ed appro x i m a t ely e v ery 6 m on t hs 2 W h ite c o llar w or k er s : s a lar ie d e m plo ye es w ho p erfo r m k n o w ledge w or k , s u c h as th o s e in prof e s s io n al, m a n age r ial or ad m i n i s t r ati v e p o s iti o ns © Deloitte & Touche (M.E.)
PAGE – 3 ============
Badger and Steeler are both well established as work boot companies, having a long history and strong brand recognition and credibility among blue collar workers. At the other extreme is Trekker, a strong player in the casual boot market but a very weak player in work boots. Duraflex , however, is a cross between the other competitors, having a significant share in both work boots and casual boots. Historically Duraflex had an even stronger position in the work boot sector. However, since 1996 when the company began selling casual shoes and focusing on the growth opportunity in casual boots, sales of the Duraflex work boot line have steadily declined. Also, around the same time Duraflex shifted its emphasis, Badger became a much more assertive competitor in the work boot market, increasing its market share to 43% in just three years. C om p e t i t o r prof i l es M a r k et S h a r e o f Wo r k a n d C a s u a l Boots b y C ompany (2013) 0% 10% 2 0 % 3 0 % M a r ket Sh a r e 40% 50% B a dg e r D u r a fl ex S t ee l e r T r e k k e r O t h e r 4 3 % 1 1% 1 6% 4 0 % 1 9 % 4% 5% 3 4% 17% W o r k bo o t s 1 1 % C a s u a l bo o t s 2 Case study © Deloitte & Touche (M.E.)
PAGE – 4 ============
C o n s ult a nt r o l e & da t a c o l l e c t e d In the fall of 2013, Badger launched a new line of aggressively priced work boots. The strong success of this line has caused management to re – evaluate their position in work boots. With limited additional resources, management must now decide if they should focus their efforts on competing with Badger in the work boot sector, or focus their resources on further strengthening their position with casual boots. In January of 2014 Duraflex hired a leading consulting firm to conduct research to help management in its decision making. To make an informed recommendation, the consultants realized they needed to collect information that would enable them to size the market and better understand competitive position. To begin with, the consultants developed a 20 minute quantitative telephone survey that was the consultants completed some internal cost and pricing analysis for work and casual boot lines. The market pricing analysis showed Duraflex competing at the premium end of the market for both its casual and work boot lines. 2 Case study © Deloitte & Touche (M.E.)
PAGE – 5 ============
Exh i b i t o n e Propensity to Buy Boots by Population Segment ( M a le Po p u l a t i o n 12 + ) 60% 2 5% 1 5 % 2 0% 3 5% 55% 1 0% 0 % 2 0% 3 0% 4 0% 5 0% 6 0% 7 0% B l u e C o ll ar W h i t e C o l l ar S t u d e n t B o u g h t w o r k b o o t s i n p ast y e ar B o u g h t c a s u al b oo t s i n past y e ar P o p u la t ion Av er a ge P r ice P aid f o r Bo o t s 1 1 . 0 M M 1 2 . 0 M M 7 . 0 M M 14 0 13 0 11 0 2 Case study © Deloitte & Touche (M.E.)
PAGE – 6 ============
Exhibit two 28 % Sho e S t o re 21 % Ot he r 16 % Ot he r 39 % Sa f e ty / W o rk 54 % Sho e S t o re 28 % Sho e S t o re 23 % A t hle t i c S t o re 35 % Sho e S t o re 22 % Sa f e ty / W o rk 16 % D ep t. S t o re 13 % Di sc oun t / O u t le t 15 % Di sc oun t / O u t le t 26 % Ot he r 14 % Appa r e l S t o re 6 % A t hle t i c S t o re 11 % Spo rt in g G ood s 13 % D ep t. S t o re 0 % 20 % 40 % 60 % 80 % 100 % D u r a f le x B adge r S t eele r Tr e kk e r Ch a nn el preference b y Br a n d Channel Sha re ( %) 21 % Ot he r 2 Case study © Deloitte & Touche (M.E.)
PAGE – 8 ============
Exhibit four 0 2 0 4 0 6 0 8 0 1 0 0 1 2 0 1 4 0 1 6 0 1 8 0 D u r a fl ex – C a s u a l D u r a f l e x – W o r k B ad g e r 21 % D e s ign 15 % Ma t e r i a l s 12 % Labou r 21 % Ma t e r i a l s 17 % Labou r 15 % Sale s & M k t g . 9 % Sale s & M k t g . 13 % D e s ign 22 % C ompan y M a r gin 15 % C ompan y M a r gin G ene r a l & Admin . 12 % R e t aile r Ma r g in 10 % G ene r a l & Admin . 8 % R e t aile r Ma r g in 12 0 e uros 17 0 e uros 10 % 32 % Ma t e r i a l s 19 % Labou r Sale s & M k t g . 10 % D e s ign 16 % C ompan y M a r gin 11 % G ene r a l & Admin . R e t aile r Ma r g in 14 0 e uros 6 % 6 % Retail Price of Selected Boots, Split by Price Component Ma r k e t p r i c e (D M ) 2 Case study © Deloitte & Touche (M.E.)
PAGE – 9 ============
Case study questions Work through these questions on your own, using the text and exhibits in the preceding slides. An 1. Ho w bi g is t h e work boo t m arke t (expre s sed in euros) ? Doe s Durafl e x ge t mo r e o f its reve n u e f r o m work bo o ts o r ca s ua l bo o ts? 2. Explain why B adge r is o ut performing Du rafle x in the w or k boot market. 3. What changes would you recommend to work boot strategy? Why? Would you recommend they introduce a sub – branded boot line? 2 Case study © Deloitte & Touche (M.E.)
PAGE – 10 ============
Answer Q1 1. Ho w bi g is t h e work boo t m arke t (expre s sed in euros) ? Doe s Durafl e x ge t mo r e o f its reve n u e f r o m work bo o ts o r ca s ua l bo o ts? T o f i n d t h e s i z e o f t h e ma r ke t , w e c a n u s e t h e f o l l o w i n g e q u a t io n : ( A ve r a g e Boo t s P r i c e) * ( % o f m a l e p opul a t i o n t h at b ou gh t w or k boo t s i n p ast ye a r ) * ( t o ta l p op u l a t i o n f o r t h e se g m e n t) * ( nu m b er o f p a ir s b ough t i n a y e a r ) Ex h i b i t O n e g i v es u s t h e p o pul a t i o n s f o r e a ch s e g me n t a n d t h e p e r ce n t a g es t h at bo u gh t boo t s . W e t h e r e f o r e n eed to f i n d t h e nu m b e r o f bo o ts s o l d a n d t h e a v e r a g e p r i ce o f ea c h p a i r . Fo r t hi s qu es t i o n , t h e c a n d i d at e w il l n e e d to ma k e s o me a ss u m p t i o n s . 1. A vera g e nu m b er o f b oo t s p u r c h a s ed p er u ser F or w o r k b o ots, w e k n ow that b l u e co l l ar w o r ke r s p u r c h a s e an a v e r a g e o f 2 p ai r s p e r y ear ( f r o m Int r od uct i o n, F o o tn ot e 1) W h i t e c o l l ar w o r ke r s an d st ude nts w ho buy w o r k bo ots p r o b a b l y u s e l ess ri g o r ous l y an d l e s s f r e q u ent l y , the r e fo r e p r oba b l y o n l y 1 p a i r per y e ar F or cas u al bo ots, w e c a n m a k e a r e as ona b l e as s u m pt i o n, k n o w i ng th at ca s u al b o ots a r e p u r c h a s e d p r i m a ril y for w ee k e nds an d li g ht w ear ( f r o m te x t) so t h e a v e r a g e n u m b er o f p a ir s s ho u l d b e n o m o r e th a n w o r k bo ots f r o m E x h i b i t 1 (i .e. 1 p a i r p er y e a r ) 2. Average price per pair of boots W o r k bo ots cost m o r e ( co m p a r e B l u e C o l l ar vs. St u d e nt) so th e a v e r a g e p ri c e s ho u l d b e h i g her t h a n 1 40 for a l l ( 15 0 i s r e a s o na b l e ) ; ca s ual s ho u l d b e l o w er t h an s tu d e nt ( 1 0 0 – 1 10 i s r e a s on a b l e ) . 2 Case study © Deloitte & Touche (M.E.)
PAGE – 11 ============
Answer Q1 1. Ho w bi g is t h e work boo t m arke t (expre s sed in euros) ? Doe s Durafl e x ge t mo r e o f its reve n u e f r o m work bo o ts o r ca s ua l bo o ts? T he t o t al m a r k et v a l ue w ill t h e n be t h e s u m , f or e a c h s eg m e n t , o f t he f ol l o w ing e qu a t i on : ( A ve r a g e Boo t s P r i c e) * ( % o f m a l e p opul a t i o n t h at b ou gh t w or k boo t s i n p ast ye a r ) * ( t o ta l p op u l a t i o n f o r t h e se g m e n t) * ( nu m b er o f p a ir s b ough t i n a y e a r ) ( 1 50 * 6 0%* 11 MM * 2 ) + ( 1 50 * 2 5% * 1 2 MM * 1 ) + ( 1 50 * 15% * 7 MM * 1 ) = 2 , 5 88 MM T he f ollo w i n g t a ble s h o w s a n o t h e r w ay t o s ee i t : P o pu l a t i on % B u yi n g W o r k Boots # P a i r s w o r k b oots b o ugh t / ye a r P r ice P er P a ir ( ) Se g me n t Size ( ) Bl u e C ol la r 11 . 0 MM 6 0 % 2 15 0 2 ,00 0 MM Wh i t e C ol la r 12 . 0 MM 2 5 % 1 15 0 45 0 MM St ud e n t 7 .0 MM 1 5 % 1 15 0 15 0 MM T ot a l 2 ,6 00 MM 2 Case study © Deloitte & Touche (M.E.)
195 KB – 21 Pages