Crocs' supply chain strategy and core competencies analysis

Crocs: Revolutionizing an Industry's Supply Chain Model For Competitive Advantage Case Analysis

Company Background

What are Croc's core competencies?

Identification and Analysis of Alternatives

How do they exploit these competencies in the future? Consider the following alternatives

Further vertical integration into materials.

Growth by acquisition

Growth by product extension

To what degree do the alternatives in Question 2 fit the company's core competencies, and to what degree do they defocus the company away from its core competencies?

How should Crocs plan its production and inventory? How do the company's gross margins affect this decision?

Crocs, Inc. is a shoe designer, manufacturer, and retailer, which is based in the United States of America. The organization initiated its business in the year 2002. The core business of the organization was to sell plastic clogs, which had straps and were available in a number of solid and bright colors. The initiation of the business, it products and its commendable supply chain made it a tremendous business success story.

This paper analyzes the core competencies of the organization. In addition to that, it also highlights the strategies that the organization might adapt for the further enhancement of its growth and the decisions that it might make in relation to its inventory and production.

Crocs: Revolutionizing an Industry's Supply Chain Model for Competitive Advantage Case Analysis

Company Background

Crocs, Inc. is a shoe designer, manufacturer, and retailer, which is based in the United States of America. The organization initiated its business in the year 2002. The core business of the organization was ti sell plastic clogs, which had straps and were available in a number of solid and bright colors. The initiation of the business, it products and its commendable supply chain made it a tremendous business success story. (Stanford Graduate School of Business, 1-20)

The tremendous and bold strategic move of the organization enabled it to come out of the conventional red ocean by achieving both low costs as well as differentiation. The organization, as a result, entered the blue ocean. (Stanford Graduate School of Business, 1-20)

The organization was able to generate 847 Million dollars in terms of revenues and 168 million dollars in terms of profits in the year 2007, only six years after the launch of its products. After the generation of such huge amount and attainment of great success, the organization, unfortunately, move away from the blue ocean strategy and avoided the very basic foundations that led the organization towards great success. (Stanford Graduate School of Business, 1-20)

The organization kept on attaining tremendous rates of growth on the basis of its wide array of products. The success of the organization primarily depends on the formula of Croslite. Croslite is a light, low cost and flexible material, which is being used in the products of the organization. Another important critical success factor of the organization is its highly flexible supply chain. (Stanford Graduate School of Business, 1-20)

The supply chain of the organization is vertically integrated. This vertical integration enables the organization to fulfill the needs of the consumers in a more effective and fast manner. In addition to that, the organization does not stop its product range on a single product, instead it kept on producing various products that can be used for a number of purposes, such medical or collegiate. (Stanford Graduate School of Business, 1-20)

Question 1: What are Croc's core competencies?

The organization has a number of core competencies. Some of these competencies are discussed below:

Highly Responsive and Flexible Supply Chain:

Such a supply chain enabled the organization to produce and supply more products during the seasons in which sales are high. In case of a traditional supply chain the organizations can achieve a growth of about only 25% above the pre-booked orders during the high sales season. It, therefore, is impossible for an organization with a traditional supply chain to experience an explosive growth that is similar to that of Crocs. (Stanford Graduate School of Business, 1-20)

In addition to that, the ability to produce extra products during the selling season enabled the organization to enhance its production capacity. The organization added an extra production capacity of 1 million per month. Furthermore, it also went for redundant operations such as compounding and molding. These operations, as a result, enabled the organization to shift production to the areas where the demand was high, in an immediate manner. (Stanford Graduate School of Business, 1-20)

Global Capabilities:

The organization had the ability to draw on the strengths of various nations in performing a number of functions in relation to the production of its goods. The organization outsourced its manufacturing functions to highly flexible and low cost units in China. The organization could produce locally in Canada to address the demands of the Canadian consumers. (Stanford Graduate School of Business, 1-20)

Furthermore, the organization can also go for production in nations like Israel that have a duty free relation with the Canadian region. In addition to that, the organization could also use its proximity with the region of Mexico to fulfill the supply needs of the region of the United States of America. The global and highly flexible supply chain of the organization was the one of the most important competencies of the organization. (Stanford Graduate School of Business, 1-20)

Ability to Service Small Retailers:

Small retailers played an important role in the enhancement of growth and productivity of the organization. They contributed significantly to the revenue of the organization. In addition to that, they also created a marketing buzz of the organization and played an influential role in establishing the brand. In addition to that, they also provided the organization with the feedback and test marketing for the new products. (Stanford Graduate School of Business, 1-20)

Can do Culture and Product Design:

The can do culture of the organization, which motivated the employees to work up to their maximum potential and contribute effectively and efficiently to the profitability of the organization also contributed effectively to the growth of the organization. (Stanford Graduate School of Business, 1-20)

In addition to that, the unique and comfortable design of the product and a wide range of product variety enabled the organization to enhance its customer base in an effective and consistent manner. This, as a result, enabled the organization to achieve high levels of growth. (Stanford Graduate School of Business, 1-20)

Identification and Analysis of Alternatives

Question 2: How do they exploit these competencies in the future? Consider the following alternatives:

Further vertical integration into materials.

Growth by acquisition

Growth by product extension

In order to further exploit its core competencies the organization can opt for any of the following approaches:

Growth by Acquisition

Growth by acquisition will enable the organization to make innovations in the existing product line. In addition to that, the organization would also be able to extend its product line and explore new and productive areas for growth. In addition to that, acquisition would also provide the organization with an access to advanced and upgraded technological tools. (Burt, Starling and Dobler, 39-117)

This, as a result, would enable the organization to effectively meet the changing demands of the customers. Furthermore, acquisition will also provide the organization with an increased number of number or supply chains. This would lead towards an enhancement in the flexibility of the organization and would affect the production and distribution capabilities of the organization in a positive manner. (Burt, Starling and Dobler, 39-117)

In addition to that, the above mentioned approach would also enable the organization to get hold over a more efficient and skilled workforce. This as a result would increase the productivity of the employees of the organization and ultimately of the organization itself, which would help the organization in attaining tremendous and commendable levels of growth. (Burt, Starling and Dobler, 39-117)

Growth by Product Extension

The organization can also opt for enhancing its growth through product extension. This strategy would enable the organization to increase its sales revenue in an evident manner. In addition to that it would also enable the organization to explore new directions in which it can move its products. (Burt, Starling and Dobler, 39-117)

In addition to that, through the strategy of product extension the organization may introduce new product lines. The introduction of new product lines may enable the organization to diversify its risks and enhance its revenue in an effective and appropriate manner. (Burt, Starling and Dobler, 39-117)

Furthermore, the strategy of product extension has an influential and positive impact on the consumer base of the organization. This is because it enables the organization to attract a wide number of consumers who have varying tastes and preferences. (Burt, Starling and Dobler, 39-117)

This, as a result, increases and expands the potential target market as well as the market share of the organization. This strategy expands the supply chain of the organization and also enables the organization to have strong and reliable relations with its retailers as well. (Burt, Starling and Dobler, 39-117)

Question 3: To what degree do the alternatives in Question 2 fit the company's core competencies, and to what degree do they defocus the company away from its core competencies?

The approach of vertical integration may benefit the organization the most as it is most strongly aligned with the core competencies of the organization. This is because the organization already has a very supply chain and enjoys global capabilities of producing and distributing the goods. (Burt, Starling and Dobler, 39-117)

The process would enable the organization to use these capabilities to further enhance its growth. In addition to that, the strong workforce of the organization would also enable it to appropriately handle the supply and value chain by getting indulge into them and eliminating unnecessary elements from these chains. (Burt, Starling and Dobler, 39-117)

The only drawback that the organization might face due the process of vertical integration would be the reduction in the number of suppliers. This reduction in the number of suppliers would reduce the competition that exists between them and would have a deteriorating impact on the bargaining, negotiating and pricing power of the organization. (Burt, Starling and Dobler, 39-117)

The prospect of growth through acquisition is very time consuming and expensive as well. This is because the acquisition of another organization may require Crocs to invest huge amount of money on the transaction. But the long-term return, which may be provided by this strategy, is very high. (Burt, Starling and Dobler, 39-117)

In addition to that, after the acquisition of the enterprise, Crocs and its management would be required to perform a number of tasks so that they be able to reap all the possible benefits of the acquisition. These tasks may include alteration of infrastructure, reengineering of processes and training and development of the employees. (Burt, Starling and Dobler, 39-117)

The approach of product extension also aligns with the core competencies of the organization. This is because the organization has a large and flexible supply chain, which might enable the organization to produce and distribute the new product in an effective and easy manner. (Burt, Starling and Dobler, 39-117)

In addition to that, the organization also shares strong and reliable relations with the small retailers. These retailers will market the new product and will position this product appropriately in the minds of the consumer and hence enhance the potential target market for the organization. In addition to that, the retailers would also provide the organization will test marketing services and feedback in relation to the new product. (Burt, Starling and Dobler, 39-117)

The two important and evident drawbacks of this approach are the high time and money consumed on research, development and production of the new products and the deteriorating impact that the sales of the new product might have on the sales of the existing products of the organization. On the basis of these drawbacks the organization might avoid using the 'growth by product extension' strategy for the further enhancement of its growth and profitability. (Burt, Starling and Dobler, 39-117)

Question 4: How should Crocs plan its production and inventory? How do the company's gross margins affect this decision?

The organization shall plan its production and inventory on the basis of the demands and needs of the consumer. In other words, the organization must have high production and inventory during high sales seasons and low production and inventory during low sales seasons. (Staff of Cognizant 2-20)

This can be accomplished through the deployment of highly advanced technological equipment. As the advanced technological equipment enables the organization to effectively produce the number and range of products necessary to meet the needs and demands of the customers in an effective manner. In addition to that, the organization would also require an effective and flexible supply chain and a strong and skilled workforce. (Staff of Cognizant 2-20)

All of the above mentioned variables depend heavily on the gross profit of the organization. This is because the higher the gross profit, the higher would be the ability of the organization to incur all the expenses that would be required for the implementation of the above mentioned decisions in relation to the inventory and production of the organization. (Staff of Cognizant 2-20)

Conclusion

Crocs has a great potential for the further enhancement of its growth. Through the deployment of effective strategies for growth, the organization can attain higher rates of growth. In addition to that, another important factor that might enable the organization to enhance its growth is the effective decision making in relation to its inventory and production. Another critical success factor that the organization must keep under consideration is to abide by the basic values, which acted as the foundation for the growth and profitability of the organization.