Footlocker, Oz: Strategic Macro Analysis Foot Locker,

Footlocker, OZ:

Strategic Macro Analysis

Foot Locker, Inc. is a New York headquartered sports product company with strong market presence in Australia. The leading resource for athletic shoes and apparel, with 4000 speciality stores in more than twenty countries across the globe in North America and Europe, as well as Australia and New Zealand, the company is well recognized by the globetrotting Australian consumer republic which finds trusted synchronicity in price point and brand identification wherever it travels. Subsidiary stores, Lady Foot Locker, Kids Foot Locker, Footaction, Champs Sports, and CCS all fall under the banner of the corporate conglomerate, augmented by its virtual direct-to-customer unit dedicated to sports gear distribution of catalog sales through retailer Eastbay at Footlocker.com. Footlocker is a member of the Australian Sporting Goods Association (Footlocker.au, 2010).

Responsive to the decline in sales prompted by the global economic crisis of 2008,-Foot Locker is posed to focus on improvement of profitability and sales by 2015 from $4.8 billion reported in the recent fiscal cycle, to $6 billion a year as part of the Company's new strategic plan made public in March of 2010 (Hoovers, 2010). The company recorded revenues of $5,237 million during the financial year ended January 2009 with a decrease of 3.7% compared to FY2008. The operating loss of the company was $103 million during FY2009, in comparison to $50 million in FY2008 with a net loss of $80 million in FY2009 versus $45 million in FY2008 (Datamonitor, 2009). Action items to the strategic plan include an integrated plan to optimize product buying, merchandising placement and sales tactics to enhance productivity per square foot, as well as fiscal mechanisms for increased earnings to income through targeted investments, and discretionary operations control toward realization of "to zero" levels of inventory turnover.

Longer term goals articulated in the strategic change to Foot Locker's prospectus include commitment to diversification in footwear and apparel offerings in an effort to attract a wider segment of the global customer base based on market research insights into trends in the international athletic products business internationally. A weakness in Foot Locker's current strategy where merchandise is concerned is that the company has traditionally limited purchase and concessions to vendor/distributors to the point that its concentrated supplier base has resulted in reduced bargaining power. At present, Foot Locker is the number one seller of Nike products in the United States, yet more than a quarter of company earnings are derived from national markets outside of the U.S., and performance of external markets represents the fastest growing option within the corporation's current direct sales share (Hoovers, 2010).

Macro-environmental analysis of the Australian athletic apparel industry reveals a strong outlook for Foot Locker, Inc., where there is no sign that interest in sports and related products will decline. From a business management perspective, the positive outlook is consistent where government openness to U.S. businesses, lower wages and broad discretionary purchasing power continue to result in perhaps the best possible scenario for a retailer that is affected negatively by these same factors in its home market. Consistent with the criteria to Porter's Five Forces illustrated in figure 1, where 1) competitive rivalry in an industry is mitigated by; 2) bargaining power of suppliers; 3) bargaining power of customers; 4) threat of new entrants; and 5) threat of substitute products, Foot Locker, Inc. Australia is a jewel in the crown of the U.S. retailer where competition is healthy in an environment where consumers still desire the credibility and quality of brand name products.

Figure 1

Figure 1. Porter's Five Forces (The Marketers, 2010).

While the competitive interests of supplier retail enterprise have become a persistent issue where brands such as Nike also serve their customers through direct retail, the strength of secondary source new entrants in the Australian national market must be able to import numbers competitive to absorb taxation and tariff in full cost pricing, and ensure guarantee of actual product.

Key success factors (KSF) to Foot Locker's overall global success as a leader in athletic apparel and footwear sales involve customer loyalty in longstanding corporate identity in association with top end merchandise brand recognition, and streamlined retail operations integration IT systems management of import-export distribution of supplier resources to established national markets supported by niche marketing in the high profile sports industry. In addition to the value added statement of reliability in service, merchandise availability and consistency in quality, experience in retailing has enabled Foot Locker, Inc. To offer the best price point with a guarantee. Reported performance by Foot Locker, Inc. including the Australian market in 2010 is illustrated in Chart 1, with annual figures in the Competitive Landscape (Appendix A).

Chart 1

Products and Operations

FOOT LOCKER, INC. 2010 Sales

$ mil.

% of total

US

3,425

71

International

1,429

29

Total

4,854

2010-Foot Locker Stores

No.

US, Puerto Rico, Guam & U.S. Virgin Islands

1,171

Europe

Canada