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TEACHING NOTES The footwear is a highly competitive and technology driven industry, where only those able to
innovate continuously themselves can be successful. Therefore, one of the major footwear
companies known for having paid so close attention to innovation and for being totally
technologically oriented is Geox S.p.A. Indeed, the company activity is based on several
technology patents1 allowing the development of innovative products from “Breathability” (or
“Respira”) that have made the company famous and unique worldwide, to water proof
(Amphibiox), light weights, eco-friendly materials (TUV certification) or side transpiration,
together with a very high level of comfort. In this sense, Geox has rejuvenated the footwear
industry starting challenging the historical perception of holes in shoes - the first step of the
Geox revolution and was able, afterward, to become very successful and leader of some
markets against its main global competitors such as Timberland, Clarks’ and ECCO. The
major achievement of the company was the ability to combine the offer of a unique and
innovative product to a wide range of consumers at an affordable price.
The aim of this case study is to analyse the footwear industry and resource and capabilities
that have made Geox, successful and able to gain a sustainable competitive advantage
worldwide. The main questions to which the case tries to answer are:
(1) “How’s the situation of the footwear industry in the worldwide, European, Italian and
most importantly Portuguese scenario?”
(2) “What is the company competitive advantage and is it sustainable?”
(3) “Why the company uses a franchising model as an entry-method strategy?”
(4) “Should the company rely on a master franchisee instead on a normal franchisee?”
(5) “Why the company chose to enter the Portuguese market?”
(6) “Should the company open a flagship store in Portugal”
1 The main patents cover the technology that allows to produce a waterproof rubber outsole and breathable at the same time.
2
Exhibit 1 – “Worldwide Footwear Industry values and forecasts 2015 – 2020” and “Top
footwear worldwide brand shares 2010 – 2015”. (Euromonitor International, 2016)
3
Exhibit 2 - The impact of technology on the footwear industry
Technology has played an important role in the footwear industry and, the newer and the
better materials and other footwear innovation were used the more the shoe style changed to
foster the consumer’s physical and status needs. The most important technological
developments concerned the shoe lasts, the materials for the sole and the shoe upper and the
machinery use to make shoes.
A shoe last is an aid model having a shape similar to that of a human foot and it is used in
shoemaking (Ma & Luximon, 2013)The design and manufacture of the last is at the core of
the shoe technology cause its design determines the style of the upper and other shoe
accessories. Therefore, the last influence not only the style but also the fit and comfort of the
shoes (Ma & Luximon, 2013). Different materials can be used to make the shoe lasts:
typically wood, metal or plastic. Before the First World War all the lasts were generally made
of metal, where the aluminium was the most commonly used followed by the iron. Those
materials are widely used in mass mechanized production, as they are stable, firm and
recyclable. But, during the war the large use of metal was the reason why the last started
being made of wood that is less heavy and has a lower contraction percentage (that may cause
differences between the right and the left lasts during manufacturing). After the Second World
War, the first commercial plastics (brittle thermoplastics) were introduced and around the 60s
plastic became a new lasts making material. Although plastic is heavier than wood and more
expensive, nowadays plastic lasts are the choice of most manufacturers thanks to its
advantages (Stable and firm in various environments; high precision; implanted easily; short
production cycle and long useful life; can be recycled and remoulded
Historically, shoe lasts were handmade especially the wooden ones. But, making a shoe last
by hand is a complex and difficult technique and requires lot of practice and experience.
4
Already with the introduction of the Gillman last making machine at the beginning of the 20th
century, the production of lasts got faster and even more in the 80s with the diffusion of
computer-aided systems. Systems like CAD (computer aided design), CAM (computer aided
manufacturing), CNC (computer numerically controlled machining) and last modelling
software are nowadays in widespread use for the mass production of lasts. Their machining
time is about five minutes, far shorter than the time required for manual production and the
major benefit is that last makers now can provide lasts in a digital format. The real benefits of
CAD/CAM in the shoe development process are in time and costs ‘savings with improvement
in quality. As well as providing to shoe designers and shoemakers more choice, better quality
of product, quicker time to market and lower costs (Paris & Handley, 2004). Even the
injection moulding with microprocessor control machine is considered one of the major
change in footwear. This machine automatically moulds a shoe bottom from thermoplastic or
polyurethane to the upper. The major benefit relies in the low labour and modest skills
required to operate the machine. But, the latest innovation in terms of shoe manufacturing is
coming from the 3D printers cause the footwear industry can actually embrace all the benefits
coming from this technology: from personalization to customization, to speed in production
and best-of-all greater affordability (Millsaps, 2015).
The evolution of the footwear industry has to be seen as well from the point of view of the
materials progressively used for the soles and the shoe upper to improve the quality and the
smell of people’s feet. In this sense, along the decades there was a progressive shift from
leather to rubber shoe sole and from microcellular EVA in cross-linked foam2 (as a solid
soling material) to vulcanised rubber3 (or “latex” rubber). Leather, synthetic leather, coated
leather, textile (natural or synthetic) and other shoe upper materials have seen as well slightly 2 Closed-cell foam is characterized by having a compact feel and resistance to water as well as higher tensile and tear strengths, thermo and vacuum-formable in order to eliminate abrasion. (Clark Foam Products Corporation, s.d.) 3 The term "vulcanised" refers to a manufacturing process - which is chemical in nature - that transforms rubber into polymer. (What does a vulcanised sole mean?, 2012)
5
changes along the years mainly due to the fashion trends of the different decades. In this
sense, Geox has rejuvenated the footwear industry starting challenging the historical
perception of holes in shoes - the first step of the Geox revolution. The rubber sole is
perforated and incorporates a special breathable and waterproof membrane, which lets feet
breathe but prevents water from penetrating. This allows a natural thermoregulation and
creates an ideal microclimate within the shoe. The membrane - The Geox revolution has been
made possible after extensive research resulting in the development of the membrane, made
of a special micro-porous material which expels sweat, in the form of water vapour, but
prevents water from penetrating. The process is made possible as the membrane’s
microspores are larger than water vapour molecules, but smaller than water droplets - keeping
water out and feet dry (Geox , s.d.). Further in time, the company brought in life other
innovation like waterproof materials, improving even more the traditional concept of
breathability with Nebula, developing special layers ensuring that feet are properly protected
all over, cushioning systems and more…
All these innovations and further researches on the Geox membrane have made possible the
creation of highly quality, flexible, stable and controlled in temperature shoes offering
consumers breathability, maximum comfort and lightness.
In conclusion, technology development has played and it is continuously playing an important
role in the footwear industry. The consequences were not only economical (time and costs
savings) but as well sociological (how technology improved people’s life and feet!)
6
Exhibit 3 – “EU footwear imports, top 10 countries, in € million” and “Footwear Exports by
EU countries 2014” (CBI, 2015 )
7
Exhibit 4 – “EU imports of footwear intra and extra EU (in € million)”.
Exhibit 5 – “Destinations of EU exports 2010 – 2014 (in € million)”. (CBI, 2015 )
2010 2011 2012 CAGR(2010)14 CAGR(2013)14TOTAL(EU)28 31.644(€ 35.701(€ 40.888(€ 6,6% 11,0%INTRA)EU(Trade 17.111(€ 20.061(€ 23.631(€ 8,4% 11,0%of#witch#from:Italy( 3.572#€ 3.802#€ 4.192#€ 4,1% 5,2%Germany 1.848#€ 2.295#€ 3.163#€ 14,0% 25,0%Belgium 2.269#€ 2.649#€ 2.883#€ 6,2% 10,0%Netherlands 1.672#€ 2.043#€ 2.628#€ 12,0% 14,0%Spain 1.270#€ 1.383#€ 1.598#€ 5,9% 7,9%
EXTRA)EU(Trade 14.533(€ 15.640(€ 17.257(€ 4,4% 10,0%of#which#from:China 7.296#€ 7.930#€ 8.249#€ 3,1% 6,1%Vietnam 2.099#€ 2.129#€ 2.774#€ 7,2% 26,0%India 1.147#€ 1.115#€ 1.348#€ 4,1% 14,0%Indonesia 933#€ 1.246#€ 1.256#€ 7,7% 3,3%Tunisia 483#€ 428#€ 409#€ :4,1% 2,4%Bosnia(&(Herzegovina 226#€ 254#€ 352#€ 12,0% 20,0%Cambodia 217#€ 302#€ 349#€ 13,0% 12,0%Morocco 262#€ 276#€ 315#€ 4,7% 1,7%Albania 175#€ 210#€ 295#€ 14,0% 25,0%Bangladesh 105#€ 142#€ 225#€ 21,0% 34,0%Brazil 389#€ 236#€ 202#€ :1500,0% 18,0%Thailand 246#€ 195#€ 172#€ :860,0% 15,0%
2014 SHARE*LATER*UPPERS*
CAGR*2014115
TOTAL*EU128 35.362*€ 60% 9,1%of#which:INTRA&EU)Trade 27.060*€ 56% 8,0%EXTRA&EU)Trade) 8.302*€ 73% 13,0%of#which#to:United#States 1.444#€ 84% 12,0%Switzerland 1.193#€ 80% 11,0%Russia 1.052#€ 84% 8,9%Hong#Kong 514#€ 86% 22,0%Turkey 468#€ 47% 16,0%Japan 414#€ 74% 8,9%China 333#€ 89% 32,0%Norway 245#€ 64% 4,8%United#Arab#Emirates 237#€ 83% 22,0%Canada# 219#€ 74% 11,0%
8
Exhibit 6 – “EU import of footwear by product 2010 – 2014”. (CBI, 2015 )
Exhibit 7 – “EU production of footwear 2014”. (CBI, 2015 )
2010 2012 2014 CAGR)2010*14
Change)2013*14
RUBBER)OF)PLASTIC)UPPERS_waterproof 455,€ 459,€ 506,€ 2,7% 4,4%_sports 1.010,€ 983,€ 1.162,€ 3,6% 13,0%_indoor 68,€ 59,€ 74,€ 2,2% 17,0%_other,outdoor, 5.747,€ 6.226,€ 7.374,€ 6,4% 14,0%TOTAL 7.280)€ 7.727)€ 9.116)€ 5,8% 16,0%LEATHER)UPPERS_sports 670,€ 688,€ 739,€ 2,5% 12,0%_indoor 125,€ 104,€ 110,€ ?310,0% 4,8%_other,outdoor, 16.173,€ 17.359,€ 19.029,€ 4,1% 5,9%TOTAL 16.968)€ 18.151)€ 19.878)€ 4,0% 6,6%TEXTILE)UPPERS_sports 1.867,€ 2.363,€ 3.601,€ 18,0% 25,0%_indoor 603,€ 572,€ 656,€ 2,1% 6,3%_other,outdoor, 3.035,€ 4.047,€ 4.508,€ 10,0% 6,3%TOTAL 5.505)€ 6.982)€ 8.765)€ 12,0% 1,0%WOODEN)SHOES)AND)OTHER)FOOTWEAR 333,€ 379,€ 432,€ 6,8% 9,7%PARTS)OF)FOOTWEAR) 1.576,€ 2.476,€ 2.717,€ 15,0% 7,1%TOTAL 31.662)€ 35.715)€ 40.908)€ 6,6% 11,0%
9
Exhibit 8 – “Average export price among the top 15 world exporters, 2014. (Vaz Teixeira, 2015)
Exhibit 9 – “Italian Market Value, € million, 2010 – 2014. (MarketLine , 2015)
Exhibit 10 – “Italian footwear market distribution, %share by value, 2014. (MarketLine , 2015)
10
Exhibit 11 – “The footwear unit price and share of H&M revenues 2005 – 2014. Source: Euromonitor International
Exhibit 12 – Europe footwear market distribution, % share value, 2014. (MarketLine, 2015)
Exhibit 13 – “Top 10 footwear player in 2014. (Euromonitor International , 2015)
Exhibit 14 – “Western Europe: footwear retail value sales by distribution channel 2004 and 2014. (Euromonitor International , 2015)
11
Exhibit 15 – “Italian sales of footwear by category: Value and Volume (2010 – 2015)” and “Portuguese sales of footwear by category: Value and Volume (2010 – 2015)”. (Euromonitor International, 2016) (Euromonitor International, 2016)
12
Exhibit 16 – Four tables reporting respectively for Italy and Portugal the company shares and
the brand shares in % retail value (retail sales price; so the list price recommended to the
retailer by the manufacturer) from 2012 till 2015. (Euromonitor International, 2016)
(Euromonitor International, 2016)
16
Exhibit 17 – Italian and Portuguese distribution of footwear by format in % retail value rsp
from 2010 to 2015. (Euromonitor International, 2016) (Euromonitor International, 2016)
17
Exhibit 18 – • Some of the latest Geox innovation in technology and consequent implication for the
shoes. Source: Own creation
• Geox List of trademarks. (Orbis , 2016)
• Geox List of Patents. (Orbis , 2016)
18
Status Trademark Type Reg. Date Source Trademark ID
1 NET BREATHING SYSTEM Word 31/12/2013 USPTO 85892030
2 [Not a word mark] Figurative 08/10/2013 USPTO 79118250
3 XAND Word 11/06/2013 USPTO 79123947
4 LACE-NO-LACE SYSTEM Figurative 16/10/2012 USPTO 79103727
5 NET Figurative 28/08/2012 USPTO 79071430
6 AMPHIBIOX Word 19/06/2012 USPTO 79094504
7 RESPIRA Word 27/03/2012 USPTO 79077976
8 [Not a word mark] Figurative 20/03/2012 USPTO 79096176
9 [Not a word mark] Figurative 10/08/2010 USPTO 79071431
10 GEOX Word 02/03/2010 USPTO 78425539
11 A AMPHIBIOUS Figurative 21/03/2009 OHIM 007167091
12 GEOX BREATHES Figurative 09/01/2007 USPTO 76415106
13 GEOX Word 27/07/2005 OHIM 003701059
14 STS SIDE TRANSPIRATION SYSTEM Word 03/01/2005 OHIM 003156429
15 GEOX SPORT Figurative 20/07/2004 USPTO 76411304
16 THE SHOE THAT BREATHES Figurative 03/02/2004 USPTO 76240427
17 GEOX BREATHES Figurative 18/12/2003 OHIM 002706323
18 GEOX SPORT Figurative 29/08/2003 OHIM 002706299
19 CUOIO GEOX Word 30/10/2001 USPTO 75756729
20 CUOIO GEOX Word 10/10/2000 OHIM 001245745
21 X GEOX Figurative 24/02/1999 OHIM 000467399
22 GEOX Word 11/06/1996 USPTO 74588613
23 [Not a word mark] Other - OHIM 011905701
24 STS SIDE TRANSPIRATION SYSTEM Word - USPTO 78253272
25 NET BREATHING SYSTEM Word - USPTO 79102991
19
Publication number Titles Publication date Publication number Titles Publication dateUS9032642(B2) Insert for vapor-permeable and
waterproof soles19/05/2015 EP1551244(B1) WATERPROOF AND BREATHABLE SOLE FOR SHOES 08/09/2010
US9033492(B2) Frame for glasses, masks for professional or sports use, and the like
19/05/2015 CO6150106(A2) ELEMENTO PERMEABLE AL VAPOR QUE SE VA A UTILIZAR EN LA COMPOSICION DE SUELAS PARA CALZADO SUELA PROVISTA DE DICHO ELEMENTO PERMEABLE AL VAPOR Y CALZADO PROVISTO DE DICHA SUELA
20/04/2010
CN102781272(B) Shoe with waterproof and vapor-permeable upper and sole
08/04/2015 ZA200900431(A) Vapor-permeable element to be used in composing soles for shoes, sole provided with such vapor-permeable element, and shoe provided with such sole
27/01/2010
US8991073(B2) Insert for soles, particularly for perforated soles made of polymeric material, and sole comprising said insert
31/03/2015 EP1332046(B1) WATERPROOF BREATHABLE LAYERED ARTICLE WITH HIGH MECHANICAL STRENGTH
16/09/2009
DE19918381(B4) Fastener for coats and jackets 19/02/2015 US7559157(B2) Vapor-permeable and waterproof sole for shoes 14/07/2009
EP2375927(B1) WATERPROOF AND VAPOR-PERMEABLE SHOE
11/02/2015 MA30586(B1) ELEMENT PERMEABLE A LA VAPEUR DESTINE A ETRE UTILISE DANS LA COMPOSITION DE SEMELLES DE CHAUSSURES, SEMELLE MUNIE D'UN TEL ELEMENT PERMEABLE A LA VAPEUR, ET CHAUSSURE MUNIE D'UNE TELLE SEMELLE
01/07/2009
US8943707(B2) Waterproof and vapor-permeable assembly insole and shoe manufactured with such insole
03/02/2015 CR10551(A) ELEMENTO PERMEABLE AL VAPOR QUE SE VA A UTILIZAR EN LA COMPOSICION DE SUELAS PARA CALZADO , SUELA PROVISTA DE DICHO ELEMENTO PERMEABLE AL VAPOR, Y CALZADO PROVISTO DE DICHA SUELA
27/01/2009
HRP20141052(T1) INSERT FOR VAPOR-PERMEABLE AND WATERPROOF SOLES
19/12/2014 DE202008014362(U1) Innensohle für Schuhe 22/01/2009
US8910353(B2) Locking device for laces, shoelaces, cords and the like, particularly adapted to close shoes, rucksacks, items of clothing and the like
16/12/2014 US7458288(B2) Apparatus for simulating the perspiration of the human body and for assessing the vapor permeability and comfort of an item of clothing
02/12/2008
MA35731(B1) Chaussure imperméable à l'eau et perméable à la vapeur?,en particulier mais pas exclusivement de type chaussure de sécurité ou chaussure de type similaire
01/12/2014 CA120704(S) SHOE 23/10/2008
EP2640209(B1) VAPOR-PERMEABLE SHOE WITH WATERPROOF AND VAPOR-PERMEABLE SOLE
19/11/2014 ITPD20070095(A1) 'PROCEDIMENTO PER REALIZZARE UNA CALZATURA IMPERMEABILE ALL'ACQUA E TRASPIRANTE AL VAPORE ACQUEO E CALZATURA OTTENUTA COL PROCEDIMENTO
17/09/2008
EP2298100(B1) Vapor-permeable shoe 10/09/2014 USD570581(S1) Footwear 10/06/2008
EP2238850(B1) Waterproof and vapor-permeable shoe
13/08/2014 US7378141(B2) Clothing ventilation device allowing the human body to breathe
27/05/2008
EP2250917(B1) Midsole structure, particularly for shoes, including shoes with a vapor-permeable sole, designed for use in sports activities
06/08/2014 US7367141(B2) Waterproof and breathable sole for shoes, and shoe manufactured with such sole
06/05/2008
EP2298099(B1) Insert for vapor-permeable and waterproof soles
30/07/2014 US7213351(B2) Waterproofed and breathable sole for shoes and manufacturing method thereof
08/05/2007
US8745892(B2) Waterproof and breathable sole for shoes
10/06/2014 SI1369048(T1) Shoe with permeable and breathable upper that covers at least partially an impermeable sole that is rendered breathable
28/02/2007
HK1167581(A1) METHOD FOR MANUFACTURING A WATERPROOF AND VAPOR-PERMEABLE SHOE AND SHOE OBTAINED WITH THE METHOD
06/12/2013 US7096604(B2) Mid-sole for waterproof breathable soles for shoes, and waterproof breathable sole comprising said mid-sole
29/08/2006
US8566991(B2) Method for manufacturing a waterproof and vapor-permeable shoe and shoe obtained with the method
29/10/2013 ITPD20050038(A1) ELEMENTO TRASPIRANTE DA UTILIZZARSI NELLA COMPOSIZIONE DI SUOLE PER CALZATURE, SUOLA REALIZZATA CON TALE ELEMENTO TRASPIRANTE E CALZATURA REALIZZATA CON TALE SUOLA
16/08/2006
US8387276(B2) Shoe with combined device for vapor permeation and forced air circulation
05/03/2013 SI1197158(T1) Waterproof shoe with sole or mid-sole molded onto the upper
30/06/2006
US8356425(B2) Breathable waterproof sole for shoes
22/01/2013 CR7649(A) SUELA IMPERMEABLE Y TRANSPIRANTE PARA CALZADOS
30/05/2006
US8286370(B2) Waterproof vapor-permeable shoe 16/10/2012 US6986215(B2) Waterproofed breathable sole for shoes and method for the manufacture thereof
17/01/2006
US8281501(B2) Vapor-permeable and waterproof sole for shoes, shoe manufactured with the sole, and method for manufacturing the sole and the shoe
09/10/2012 AT313278(T) WASSERDICHTER SCHUH MIT AN DEM SCHAFT ANGESPRITZTER SOHLE ODER ZWISCHENSOHLE
15/01/2006
US8276294(B2) Vapor-permeable element to be used in composing soles for shoes, sole provided with such vapor-permeable element, and shoe provided with such sole
02/10/2012 EP1266584(B1) Fabric for clothing and footwear items 14/12/2005
EP2238851(B1) Method for manufacturing a waterproof and vapor-permeable shoe
29/08/2012 SI1135039(T1) WATERPROOF AND MOISTURE-PERMEABLE SHOE AND METHOD FOR MANUFACTURE THEREOF
31/10/2005
US8245416(B2) Waterproof vapor-permeable shoe 21/08/2012 US6918695(B2) Apparatus for measuring the breathability and comfort of a shoe
19/07/2005
US8245417(B2) Vapor-permeable waterproof sole for shoes, shoe which uses said sole, and method for manufacturing said sole and said shoe
21/08/2012 US6904705(B2) Shoe with permeable and breathable upper that covers at least partially an impermeable sole that is rendered breathable
14/06/2005
US8205354(B2) Sole for shoes of the waterproof and vapor-permeable type, and shoe provided with said sole
26/06/2012 DK1135039(T3) Vandtæt og fugtgennemtrængelig sko og fremgangsmåde til fremstilling deraf
17/05/2005
WO2012072379(A1) WATERPROOF AND VAPOR-PERMEABLE SHOE, PROVIDED PREDOMINANTLY BY MEANS OF THE WORKING METHOD KNOWN AS 'AGO LASTING'
07/06/2012 US6874251(B2) Waterproofed vapor-permeable sole for shoes 05/04/2005
USD657119(S1) Part of sole 10/04/2012 ITPD20040325(A1) STRUTTURA DI SUOLA TRASPIRANTE ED IMPERMEABILE PER CALZATURE, CALZATURA
29/03/2005
WO2012041637(A1) VAPOR-PERMEABLE SHOE WITH WATERPROOF AND VAPOR-PERMEABLE SOLE
05/04/2012 US6823609(B2) Breathable shoe 30/11/2004
US8088698(B2) Fabric, particularly for items of clothing and shoes
03/01/2012 SI1089642(T1) VAPOR-PERMEABLE WATERPROOF SOLE FOR SHOES 30/04/2004
EP1701629(B1) WATERPROOF VAPOR-PERMEABLE MULTILAYER ARTICLE
05/10/2011 SI1164883(T1) WATERPROOFED VAPOR-PERMEABLE SOLE FOR SHOES 30/04/2004
UA95957(C2) VAPOR-PERMEABLE AND WATERPROOF SOLE FOR SHOES, SHOES MADE WITH SUCH SOLE, AND METHOD FOR MAKING SOLE AND SHOES
26/09/2011 UY27994(A1) SUELA DE CALZADO HIDROFUGA Y PERMEABLE AL AIRE , Y CALZADO FABRICADO CON DICHA SUELA
30/04/2004
UA95638(C2) VAPOR-PERMEABLE ELEMENT TO BE USED IN SOLES FOR SHOES, SOLE WITH SUCH VAPOR-PERMEABLE ELEMENT AND SHOES WITH SUCH SOLE
25/08/2011 US6681500(B2) Vapor-permeable waterproof sole for shoes 27/01/2004
WO2011045210(A2) WATERPROOF AND VAPOR-PERMEABLE SOLE FOR SHOES AND SHOE PROVIDED WITH SAID SOLE
21/04/2011 US6655048(B2) Breathable and waterproof sole for shoes 02/12/2003
US7823297(B2) Shoe with breathable and waterproof sole and upper
02/11/2010 CO4970762(A1) SUELA PARA ZAPATOS PERMEABLE AL VAPOR E IMPERMEABLE AL AGUA
07/11/2000
20
Exhibit 19 – Geox resources and capabilities. Source: Own creation
TANGIBLE INTANGIBLE ORGANIZATIONAL
Cash flow or liquid assets Brand Image Skills/Know How
Location Reputation Corporate culture
Distribution - Stores Technology & Innovation
Patents Value chain flexibility
Machineries & Raw Material
R&D, Product and Process Development and Product Portfolio Management
Brand Management, marketing and communication
People Management
Outsourcing
Distribution Management
Exhibit 20 – Geox R&D Expenses, € Thousands, 2007 – 2014. Source: Own creation, taking
into account the R&D expenses in the Geox Annual Reports from 2007 to 2014.
21
Exhibit 21 – “Estimated labour costs for the whole economy in EUR, 2015. (Eurostat , 2016)
Exhibit 22 – VRIO framework.
The tool was originally developed by Barney, J. B. (1991) in
his work ‘Firm Resources and Sustained Competitive
Advantage’, with the author stating that firm’s resources
must possess four attributes in order to become a source of
sustained competitive advantage. A resource or capability
that meets all four requirements can bring sustained
competitive advantage for the company.
22
Exhibit 23 –
• Geox Cash flow, 2013 – 2015. (Geox Group, 2016)
• Global Current Ratios: Geox, ECCO, Timberland and Clarks
• Global Liquidity Ratios: Geox, ECCO, Timberland and Clarks
1,641,56
1,99
2,502,402,52
2,142,37
2,60
2,07
3,122,87
2,432,55
2,25
2,65
1,83
2,31
2,031,91
1,62
1,26
0,821,071,01
2,472,422,65
2,302,30
2,59
2,142,242,14
31/12/2014th)USD
31/12/2013th)USD
31/12/2012th)USD
31/12/2011th)USD
31/12/2010th)USD
31/12/2009th)USD
31/12/2008th)USD
31/12/2007th)USD
31/12/2006th)USD
31/12/2005th)USD
Global)Ratios)GEOX)Current)ratio)(x) Global)Ratios)ECCO)Current)ratio)(x) Global)Ratios)TIMBERLAND)Current)ratio)(x)) Global)Ratios)CLARKS)Current)ration)(x))
0,730,61
1,08
1,461,471,60
1,08
1,351,53
1,20
1,771,57
1,381,53
1,37
2,65
1,83
2,31
2,031,91
1,62
1,26
0,82
1,071,010,86
0,991,13
1,021,19
1,050,880,930,92
31/12/2014th)USD
31/12/2013th)USD
31/12/2012th)USD
31/12/2011th)USD
31/12/2010th)USD
31/12/2009th)USD
31/12/2008th)USD
31/12/2007th)USD
31/12/2006th)USD
31/12/2005th)USD
Global)Ratios)GEOX)Liquidity)ratio)(x) Global)Ratios)ECCO)Liquidity)ratio)(x)) Global)Ratios)TIMBERLAND)Liquidity)Ratio)(x) Global)Ratios)CLARKS)Liquidity)ratio)(x)
23
Exhibit 24 – Geox Total and Kids’ share in the footwear market, 2015. (Geox Group, 2016)
Exhibit 25 – Geox International Business Model. (Anzivino & Lazzaro )
24
Exhibit 26 – Geox’s group structure. (Geox Group, 2015)
Exhibit 27 – Franchising Franchising has an old and long history. Although many may think its development began in
United States, the first example of franchising was traced in China. However, the term
franchising was used in a business sense at least as far back the Middle Ages (Dant &
Grünhagen, 2014). The word franchising comes from an Old French term “franche” meaning
“to make or set free” or “to invest with a franchise or privilege” and during the Middle Ages
the franchising was a right granted by sovereign powers for a variety of activities like the
rights to build roads, organizing markets and fairs, taxes collection or to maintain law and
order. To the grantee was given monopoly right for specific activities in a specific location for
a specific period of time in exchange of royalty payment made to the grantor.
Nowadays, franchising describes a contract between two parties: the franchisor and the
franchisee, where the franchisor conveys to the franchisee, the right to sell the franchisor’s
product or service using its name and trademarks in a specific location for a specific time
period, normally 10 years (Kotabe & Helsen, 2004), but with the franchisee being subject to a
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number of franchisor – imposed constraints (Davies, 2015). There are two type of franchising
model: the traditional (or product and trade-name) and the business format franchising. In the
traditional form of franchising, the franchisor, often a manufacturer, develops a product
and/or a trade name and licenses a franchisee to market its products and to use the specific
trademarks of the franchisor (Davies, 2015). Examples of companies using the traditional
format are automobile and gasoline dealerships and bottlers of soft drinks products like Coca
Cola and Pepsi. On the other hand, in the business format franchising the outlet itself is the
product. They sell more a “way of doing business” together with a comprehensive package of
services and an operating manual that specifies details like standards of quality control and
provisions of ongoing training, communication, and other operational supports (Dant &
Grünhagen, 2014). In other words, the franchisee carries a business.
But, what is important to understand is: “Why many companies choose this model?” And,
“What are the main benefits and disadvantages for the franchisee?” Moreover, “What are the
future trends of this model?”
The main answer to the first question is that franchising can and does provide a very effective
approach to business expansion (Fladmoe - Lindquist, 1996). And this statement is even
more true given the threefold advantages franchisors have choosing it as an entry model: (1)
limited resources, (2) administrative efficiency and (3) risk management. Indeed, because the
franchisee puts up both an initial fee and much of the initial capital investment, franchisors
are able to expand their markets without having to generate capital themselves (Fladmoe -
Lindquist, 1996). This give companies the opportunity to build up many units and achieve
faster brand name recognition and market share. Furthermore, the franchising choice it is also
a way for the company to monitoring the managers. This administrative efficiency
perspective, derives primarily from agency theory, suggesting that managers of company –
owned units are less motivated to perform efficiently than owners of franchised units because
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much of their compensation is a fixed salary (Fladmoe - Lindquist, 1996). Said that,
monitoring in order to have franchisees performing in line within the company’s standards is
fundamental. Finally, some franchisors will use the franchisees to “test the waters” of a
particular location, to understand the level of risk in that geographical location but without
themselves incurring significant up – front costs as first. The franchisors will try to reduce
their risk by using corporate ownership only in locations that are relatively more reliable and
will tend to franchise in locations that may have higher risk due to factors such as
geographical distance and cultural differences (Fladmoe - Lindquist, 1996). According to
Fladmoe and Linquist (1196) some fundamental capabilities need to be developed by the
companies to not incur some disadvantages. To take advantage of the administrative
efficiency managers need to develop distance management systems and cultural adaptability,
otherwise they will incur issues regarding the agent monitoring, service delivery and contract
condition content. The other group of capabilities concerns the ability of the franchisor to
operate in a foreign context (host country risk management). In order to perform efficiently in
the host country, the company needs to develop a host country policy evaluation to
understand the host country policies regarding the transfer and repatriation of dividends, fees
and royalties but also because the company may incur ownership and control’s restrictions
and consequently the protection of intellectual properties may become a fundamental concern.
Developing an exchange rate management system is also important because widely
fluctuating currencies may indicate weaknesses in a country’s economy that can adversely
affect franchise success (Fladmoe - Lindquist, 1996).
Having highlight, within the first question, the benefits and disadvantages of franchisors
willing to develop a franchise model, it is now time to answer the second question: “What are
the main benefits and disadvantages for the franchisee?”
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There are many reasons why an entrepreneur decides to rely on a franchisor. First of all, there
is a considerable low risk of failure due to the franchisor brand awareness, the more the brand
is known, the more is low the risk of failure. The franchise is also a more attractive
investment vehicle to the franchisee-investor (Selden, Caneff Gipson, & Parker, 2008).
Furthermore, the franchisor offers pre – opening and ongoing support through centrally
organized marketing and brand promotions, training both at the operational level and to the
human resources or franchisee’s staff, ongoing advice and guidance through store or territory
visits by managers. Of course, there are also some drawbacks: the franchisees are not
completely independent, those are required to operate their business following some
procedures and restrictions imposed by the franchisor, including the products or services
which can be offered, pricing and geographic territory (Beshel, 2010); not only the initial fee
but also royalties and advertising fees need to be paid to the franchisor; any problem the
franchisor will have can affect as well the franchisee; smaller profit margins and usually the
term (duration) of a franchise agreement is usually limited and the franchisee may have little
or no say about the terms of a termination (Beshel, 2010).
And finally: ““What are the future trends of this model?”
There are at least two trends the franchising industry is bringing and those are promising a
greater parity between franchisors and franchisees: (1) the increase of multi – unit franchising
and (2) the rapid global expansion of the franchising expertise. Multi – unit franchising has
not to be confused with master franchising that is when to a franchisee is granted the right to
multiple units from the outset (Dant & Grünhagen, 2014). On the contrary, multi – unit
franchising is when a franchisee owns, operates and controls more than one outlet of
franchise. This happens when single – unit franchisees in successful systems typically seek
additional units in order to grow their businesses, and qualification for expansion most often
based on the performance of existing units (Dant & Grünhagen, 2014).
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Exhibit 28 – Flagship stores Those are core stores for brand name retailers, they serve as a model for presenting the brand
lifestyle concept and traditionally are larger than standard outlets. Flagship stores, by
definition, have three characteristics: (1) they carry only one single brand of product, (2) they
are owned by the company and (3) they operate with the intention of building brand image
rather than solely to generate profit for the company (Moore, Doherty, & Doyle, 2008). The
strategic function of opening a flagship store is three-fold: it further introduces, reinforces and
enhances the retailer’s positioning and status in the market, it provides the retailer with the
retail space opportunity to develop and adapt new business propositions as well as entry into
new product categories and finally and most importantly, the flagship store function is to
strengthen, stimulate and support the relationships that exist between and among each retailer
and important groups (like distribution partners, fashion media and customers) in the country
of interest. The opening of a flagship store has also another important role to play in the
development of relationships between the company and the franchise partners. The store can
provide a venue for franchisee-franchisor instruction, information and education about new
business development, new product ranges, merchandising and display techniques as well as
changes to operating procedure (Moore, Doherty, & Doyle, 2008)
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Exhibit 29 – Geox general advantages and disadvantages of franchising and DOS stores,
specifically of Portugal
Exhibit 30 – Benefits and drawback of opening a flagship store
FLAGSHIP STOREBENEFITS DRAWBACKS.
! Introduces,.reinforces.and.enhances.the firm.positioning..and.status in.the.market.of.interest
! It.provides the.firm.with.the.retail.space.opportunity.to.develop.and.adapt.new.business.propositions.
! Strengthen,..stimulate.and.support.the.relationships.that.exist.between.the.company.and.important.groups.like.fashion.media.and.consumers.
!Play.a.role.also.in the.development.of.relationships.between.the.company.and.the.franchise.partners.
!HUGE.INVESTMENT.NEEDED
!RESULTS.UNCERTAINTY
• Possible.confusion.of.the.consumers.
• No.achievement.of.the.expected.brand.impact..
• Missing.functionality.
• Poor.traffic.flow.through.the.store
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Exhibit 31 – Critical success factors in flagship store sustainability. (Webb, 2009)
CRITICAL SUCCESS*FACTORS*IN*FLAGSHIP*STORE*SUSTAINABILITY*
PRIME&SITE&LOCATION
FULL&MERCHANDISE&RANGE
SUFFICIENT&SIZE
“THIRD&SPACE”&FACILITY&
STORE&DESIGN&
SUPERIOR&SHOPFIT&
HIGH&OPERATING STANDARDS
SUPERIOR&CUSTOMER&SERVICE&
EVENTS&AND&ENTERTAINMENT
UNIQUENESS
“WOW”&FACTOR
INTELLIGIBILITY&AND&NAVIGATION&