Footlocker Inc Developing a Strategic Framework

Framework: Footlocker. Inc.

This paper aims at elaboration of important information about the selected company, Footlocker Inc. The industry economic characteristics include a company description, competitive standing, and competitive advantage in further sections. Further, Porter’s five forces and value chain analysis would also be highlighted, proceeding with its strategies.

Industry Economics Characteristics

In 2020, the global sports market was valued at $388.3 billion, with a growth rate of 3.4% compared to 2015 (“Global Sports Market”). The market even faced a downfall in 2019, mainly due to Covid-19. The US market share in 2018 in the same industry was 32.5% (“Market Size of the Global Sports”). North America is the largest region with this industry sale in 2020, with 35% of the market globally. Still, the trend towards fitness kept growing, and growth in emerging countries with an increasing need for urbanization promises an increment in the global sports market in difficult times. The Internet has played a critical function in helping the sales grow with sponsorships, working out at home, and internet-accessible devices at home. This is an additional economic characteristic shaping the market since with the infusion of technology, productivity, product development, and channel distribution are to be standardized for an efficient meeting of demand, generating quick sales, and reducing per-unit costs of production.

This industry reflects a high fragmentation level with several players in the market, naming Maruhan, Dallas, Cowboys, and New York Yankees, etc. (“Global Sports Market”). The top ten rivals comprised 2% of the total global market in 2019. A globalized approach is being adopted lately in the footwear market, especially to remain competitive. Globalization would provide reduced risks in terms of political restrictions across borders in various countries.

Company Description

Footlocker is a retail company that sells sports shoes and apparel. It has its headquarters in New York and has its business running in 28 countries. It has more than 2000 stores in the US and Canada. It has mainly two segments: Athletic Stores and Direct-to-Customers (“Footlocker. Inc”). The footwear and apparel clothing lines include kids, ladies, champs, and runner sidesteps. The sales take place through websites, stores, and mobile applications. The total sales that it earns from the US market are 70% of the revenue. Its major competitors are Nike, Adidas, The Finish Line, Dicks’s Sporting Goods, and Hibbett Sports.

Competitive Standing

Compared to its other rivals, Footlocker stands at the second position (“Footlocker Competitors”). The rating is calculated according to various factors such as CEO rank, pricing, product quality, gender rank, diversity, customer service, and culture, etc. The competitor that topped the ranking is Nike, and standing on the third is Adidas. Concerning its distinct categories, it stands fifth in the product quality category, fourth in pricing, fifth in customer service, second on CEO ranking, second in the company’s overall culture, and third on employee’s net promoter score. It is deduced that the company needs to work hard in product quality, pricing, and customer service to gain high-profit volumes and even a better market position.

Competitive Advantage

The retail model Footlocker follows almost the same as any other sports retailer; however, there are some additional competitive advantages that the company is emphasizing on. The street-wear trendy clothes give them a plus point over its competitors that are popular among customers for their forward fashion sense (“What is the Profit Model”). Another element that sets this firm apart from its competitors is its differentiation in various countries since it gets a chance to serve a diverse customer base. Selling huge quantities of clothes and footwear to people worldwide allows the firm to set competitive prices. Its e-commerce presence gives them one more benefit, and shipping could be done as fast as 5-6 working days. The overall online presence, including social media, lets the company connect with its customers to offer them new products and take feedback from them for further improvements.

Porter’s Five Forces

Supplier Power

The supplier power in Footlocker’s industry is high since it is highly dependent on raw materials. The backward integration provides the suppliers ease for forwarding integration. A small number of trusted suppliers might offer quality and durable materials so that differentiated attributes of the products are sustained.

Threat to Entry

In the sports apparel and footwear industry, newcomers always remain a threat of entry since the nature of the business requires less investment and many options in geographical locations to focus on. These factors reflect that low entry barriers are present in this market for the entrepreneurs of this industry with low capital necessities. If the product line fits the demands of various customers in suitable geographical locations, then the entry would be even easier, mainly because of more globalized companies these days.

Existing Rivalry

Footlocker has cut-throat competition among big brand names, which means that if Footlocker makes any move in the market, it will not go unnoticed. These few large names have a high market share, and there is no trouble in becoming a market leader. Since the fitness trend is increasing each day, the industry growth is expected to grow, and the competition would even strengthen. The costs of operating are fixed and are working at their full ability.

Threat of Substitutes

There are no clear substitutes for Footlocker’s sportswear. However, customers might want to switch to less costly brands in times of pandemic and economic difficulties. Consumer confidence might go down, and they might want to opt for other lesser-known brands. The demand for premium brands’ products like Footlocker might appear elastic in economic uncertainty; otherwise, there are no evident substituting sources.

Buyer Power

The buyer power for Footlocker is high since the customers generate the demand graph for a company. The switching costs are reduced when the customers are loyal to one brand, and the buyer demand for retailer’s products strengthens with increased knowledge of the products. The overall purchasing flexibility for Footlocker would soar high.

Value Chain Analysis

Economic Attributes Framework

Demand

The demand for the products might stay stable for Footlocker since its customers are not price-sensitive. They look for premium quality and are not affected by its pricing variations. However, it might be inferred that economic instability, such as pandemic times, might fluctuate their demand. The industry is mature in the US; the company has its presence in other geographical locations to easily generate sales. The demand would stay stable throughout the year despite pandemics’ advent since people are more encouraged to focus on fitness (Malviya and Mukherjee).

Supply

The suppliers are market the products to the retailers as they have high bargaining power, as mentioned above. Also, they can sell their products to the end consumer directly. The forward integration in the value chain is easier for the supply side. They can use different distribution channels for channelizing their products, such as the Internet and catalogs.

Manufacturing

The apparel industry has been labor-intensive, and for Footlocker, where street-wear and fast fashion products are needed to keep the customers attracted, the production is equally demanding. The manufacturing complexities and possibilities of errors could be reduced if technological interventions are considered. The machinery processes are standardized so that the same product quality is provided to each end customer.

Marketing

Creating high-quality and cost-effective products would not be enough to generate sales for Footlocker unless it makes valuable use of marketing. Advertising and promotional activities help push or pull its products with its differentiated products. To persuade the customers that it is offering better than its rivals, it needs to make true commitments. For that, coordination in all value chain departments is mandatory. Footlocker’s business objectives drive its marketing channelization and outlining its brand image in the market.

Investing and Financing

Integrating backward for a retailer like Footlocker is challenging since it requires financial investment (Sweeney 13). The designing of the products, distribution, and branding would require monetary capital to maintain the essential competencies throughout the value chain until the final product reaches the customer.

Company’s Strategies

Nature of Product and Service

The products of high quality for the sports apparel and footwear customer in Footlocker’s case; however, recently, it has been making amendments in its retailing style for differentiating it (Duffy). Nike’s products are displayed in one of its newly opened stores, another retailer for sports apparel. The interactive shopping theme has been introduced in brick and clicks model where Footlocker’s children and women categories are displayed. It shows that the company believes in differentiated service with an exclusive style of reaching customers.

Degree of Integration in Value Chain

The firm is conducting all the manufacturing operations by itself except that managing the services department, where it has been estimated that the web buying patterns have been on the rise during pandemic times. Handling more than 25,000 online orders per day has become challenging, so fashion-sourcing is now an emerging new concept (Cosgrove). For this, suppliers are contacted to cut costs. It seems that the firm might be searching for help in its distribution matters when it has to process a huge number of orders online.