Geox: Breathing

Innovation Into Shoes

Case Analysis
Presented by:
Stephanie Assal
Aia Noujeim
Jean Pierre Hawat
Eric Yamin
 F o un d e r an d C EO :
M a ri o Mo re t ti
P ol e ga t o
1952,  Crocetta del
Montello, Italy

• Passionate about his family’s winemaking

business
• Was attending a wine trade fair in Nevada
when he decided to go for a walk in the
desert
• After realizing that the rubber soles of his
shoes are making his feet too hot, he cut
 Ti me li ne

E arl y 1995 1999 2000 2004 2008 2009

1990
Idea of Manufacturers The company Geox Geox Geox uses Geox
breathable wouldn’t buy his patented its expands enters the its enters the
shoes was invention, so he ideas for to the Milan breathable golf shoes
born and started apparel and internatio Stock concept market
invented by manufacturing started nal market Exchange and enters
Polegato them for kids manufacturing with the sports
under the Geox breathable Polegato shoe
name, and later jackets maintainin industry
on extended to g 71%
woman and stake of
Company’s vision (to)
Geox is based on an innovative idea that
aims to ensure quality and well-being

Company’s mission (by)

It works on improving everyday life of its
consumers through breathable
innovations, ranging from shoes to
apparel
Core values

• Geox guarantees a production that’s “metal-

free” and treated with natural waxes
• The sole is made from natural rubber,
consisting of a vegetable material extracted
from the Hevea tree, 100% recyclable and
reusable
External analysis
 PESTEL Analysis

Political: Economical:

• Having Italy part of the EU helped with
coordinating means for Geox’s shops and
providing good customer service in other states
• Italy’s good relationship with China ensures that
Geox’s production via third party manufacturers
runs smoothly
• Although Geox was not planning on expanding to
USA yet, their good relationship with Italy will
benefit the company once it is agreed to be done
• The economic recession of 2009 was affecting the
sales of Geox
• The Fall/Winter collection collected a profit of
minus 13% than the previous year
• By 14 May 2009, the Geox market share had
dropped by 9%
 PESTEL Analysis

Social: Technological:

• Some consumers were shifting towards • Geox had an advantage of being producers of
competitors, especially that Geox had limited both breathable and fashionable shoes
shoe options • The company still invest in R&D
• Due to the recession, individuals were leaning • Technology and therefore patents are considered
towards cheaper alternatives as the core of Geox’s success
 PESTEL Analysis

Environmental Legal:

• The natural environment in China, where most of • The legal strengths of Italy are mainly constituted
Geox’s production happens, is poor due to the by the alignment of the investment regulations
increase in industrial waste with the European Union
• Increasing concerns regarding global warming • Italy’s good relationship with China allows Geox
have pushed Geox towards making more to import the manufactured goods with no
environmental friendly decisions over the coming difficulties
years • By 2008, Geox had approximately 50 patents
 Porter’s Five Forces Model

Rivalry among existing Threats of new entrants

competitors Two of the main factors that can deter new
Competitors of Geox can be split entrants:
into two
High capital requirement: Economy of scale:
• The cost of specialized High fixed costs with
Casual footwear: Sports footwear: machinery increase of production
Leading company Nike and Adidas • Cannot be used in the which will lead to a low
was Clarks Shoes were dominating production of other average cost for unit,
followed directly 60% of the market goods which cannot be
by Geox • High cost of afforded by small
maintenance companies

By 2009 Geox held over 50 patents

including process, equipment, machinery
and material.
 Porter’s Five Forces Model

Bargaining power of Threat of substitutes

buyers Geox mainly has two substitutes
• Buyer’s price sensitivity: buyers
of Geox are both retailers and
consumers who do not Shoes from low- Luxury shoes:
particularly look at the high price segments: But it is highly
Due to the unlikely due to
price since they’re getting
economic crisis the crisis
innovative features
• Bargaining power: it’s very
small since number of
customers is extremely high
 Porter’s Five Forces Model

Bargaining power of
suppliers

Prior to 2009: After 2009:

Geox outsourced most of their production Geox transferred all of
from China, Vietnam, Indonesia and Brazil their production to third-
(95% of production) party manufacturers
They owned two factories, one in Romania (Aokang, China)
and one in Slovak Republic (5% of
production)

In conclusion, suppliers can

influence Geox since they have a
high bargaining power
Internal analysis
 SWOT Analysis
Opportunities
Weaknesses
• High and expensive products • Expansion to new markets
• Market size (niche market) • Use of technology for
• marketing and manufacturing
Not fashion oriented
• Low marketing Budget
W • Diversify their products (new
O business segments)
• More acquisitions and
partnership
Strengths
• Patented innovation Threats
• Presence in the international S • New entrants that offer
market T similar products for less
• Various distribution network price
• Skilled team that works to • Threat of competitors
provide the best quality at a • Economic and political
timely manner conditions
 VRIO Analysis
Valuable Rareness Imitability Organization Result

Financials Competitive parity

Sustainable competitive
Brand Image advantage

Temporary competitive
Creativity
advantage
Temporary competitive
Machineries advantage

Innovation Sustainable competitive

advantage

Corporate Culture Sustainable competitive

advantage

Distribution Competitive parity

Porter’s Value Chain
Porter’s Value Chain
• Primary Activities
Inbound Activities
Transforming the raw
materials into finished
goods Outbound logistics
 Includes the activities that
deliver the product to the Service
customer by passing The pre-sale and post-
through different sale services will play an
intermediaries important role in
developing customer
loyalty.

Marketing and Sales

Operations Highlight the benefits and
differentiation that its
The process of
offering and how it is better
transforming the
than competitors
inputs to the final
product.
Porter’s Value Chain
• Secondary Activities

Procurement HR Management
The processes of Human resource
purchasing the inputs management evaluate
(equipment, machinery, different HR aspects,
raw material, supplies..) including- recruiting,
necessary for producing selecting, training,
the finished product. rewarding, performance
management and other
activities
Technology and Development
The technological
integration in production, Firm Infrastructure
distribution, marketing and The firm infrastructure
human resource activities denotes a range of
requires Geox to realize activities, such as- quality
the importance of management, legal matters
technology handling, accounting,
financing, planning and
strategic management
Finances
 Activity ratios

2004 2005 2006 2007 2008

Days sales 86 75 71 75 81
in
inventory
Operating 148 128 118 121 133
cycle
Net sales 1.72 2.16 2.39 2.35 2.14
to invested
capital
Number of 2605 2683 3072 3425 3851
employees
Financial condition ratio

2004 2005 2006 2007 2008

Current ratio 1.99 2.07 2.60 2.37 2.14

Quick ratio 1.22 1.18 1.51 1.33 1.06

Equity to assets 0.52 0.61 0.68 0.65 0.65

ratio

Debt to equity ratio 0.29 0.07 0.02 0.02 0.06

Interest coverage 22.76 155.97 431.01 458.47 58.93

 2004 2005 2006 2007 2008

Geox nke ADI G N A G N A G N A G N A

Profitability ratios

Operating 21.4% 13% 10% 22.6% 14% 11% 22.0% 14% 9% 22.3% 13% 9% 19.1% 13% 10%
margin

Net profit 15.5% 8% 5% 16.5% 9% 6% 15.9% 9% 5% 16.0% 9% 5% 13.2% 10% 6%

margin

Return on 36.2% 20% 20% 43.0% 21% 14% 40.5% 22% 17% 38.8% 21% 18% 30.0% 24% 19%
equity
(ROE)

Return on 22.0% 12% 7% 25.8% 14% 7% 29.2% 14% 6% 29.2% 14% 7% 26.4% 15% 7%
assets
(ROA)
 ROA X Equity multiplier

Profit margin X Total assets turnover

+ _

_ +
Case conclusion
Case conclusion
• The company invested heavily in the R&D facility
• Goal: Sports Shoes to become #1 in the market
• By 2009 company annual growth dropped because of the global recession
• Company decided to boost promotional activity
• Halving its capital expenditure (less store opening,
• Polegato was over confident about his sole creation, he only focused on the
technology and believed Geox will always make it because of this invention.
He relied heavily on his competitive advantage.
• 90% of the world used rubber soles and Polegato believes Geox had made all
other rubber soles obsolete. He believed he had no competitor.
Short-term strategies
Short-term strategies
• Continue boosting promotional activity
• Open less stores globally, focus only on markets where the global recession
hasn’t impacted it heavily (Asia).
• Continue focusing on innovative designs and ideas but as well put more
efforts into communicating it to the consumer. Educate the consumer on why
they need Geox; “Invest in one shoe that will provide you the uttermost
comfort while lasting you a lifetime.”
• Engage customers in Geox’s activities. The world has changed, and
consumers like to know all about the brand they are buying from. Use
influencers around the world to come and showcase what Geox’s mission is
all about. Soon the patents will expire and Geox’s competitive advantage will
no longer be in use. In order to gain loyal customers, and gain recognition in
the market, Geox must remind the market how it started, and its genuine
commitment to always providing consumers with the best of the best;
Long-term strategies
Long-term strategies

• Continue investing in R&D facilities but also create a

budget for the Marketing facility in order to enforce a
plan on engaging consumers with the Geox company.
• Recognize that now Geox might not have direct
competitors when it comes to “soles” and “innovation”
but later on once the patents expire it will. Focus on
creating a new competitive advantage.
• Geox’s competitors in sports shoes are Nike & Adidas.
Create new designs that appeal to middle and upper
class market and create a brand image around the idea
that it isn’t only functional but also stylish.
Recommendations
Thank You!

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