Team Assignment

Global Sports Shoe Industry

The total sales of sports shoes in the main market, United States and Europe are
softening. In US, after three years of sales growth, declined slightly in year 2009. Sales also
fell slightly in European Big 5 countries, France, Germany, Italy, Spain and UK in the same
year. International market is still posting growth in overall sales in Canada rose 4.6% and
Japan's sales grew by 1% in year 2009 years.

A notable bright spot is that in each geographic region, sports shoes has overall
growth sales better than sportswear. Both in the US and European markets, consumers are
willing to pay premium price, the market spent more on sports shoes. This is the same for
European Big 5 countries. Female consumers are drivers for this trend in the worldwide
market, paying more than the average price.

While most consumers buy sports shoes but do not use as the purpose of it was
originally designed, it is used mostly for casual wear. This strength of this trend continues,
consumers around the world are still passionate about their way of life. However, this trend
is challenged by the new product line and some lingering economic pressure.

For the concept of `fashion inspired by sports', comes from specific sports and the
technology needs of the sports. Host of sports participation is divided into team sports (such
as soccer, rugby), wide range of fitness activities (swimming, jogging, work out) and outdoor
activities. Branding is the most important in both functions, fashion and performance.

The two sports shoes brands, Nike and Adidas have emerged as world sports wear
leader. Nike's global sales in 2008 reached US$18.63bn. Adidas is a German football expert,
is now a global brand produces a wide variety of sports clothing and footwear. This two
brands are stiff in competition in the market, they hire world-class sports stars to advertise
their products, usually with a well-made television ads on the infiltration of its brand and
establish a certain brand image, such as, Nike brand itself closely with love of young people
in basketball, organised youth basketball, influence itself and branding perfectly into the
young generations.

In Asia Pacific region, the global financial crisis has not only changed the pattern of
the world's financial industry, but also to the sports shoes industry, created not-so-small
surge to the industry. Over the years the Asia Pacific domestic sporting goods industry with
the formation of US brands like Nike & Adidas as the mainstream market, the pattern is
gradually disintegrated, a series of China brands, Li Ning, Anta, Olympic, are rapidly rising.
Sports brands in Asia Pacific region in year 2009 compared in market performance, it is not
difficult to find out that the sports shoes or in general sportswear industry is the back to the
trend.
Demand of Sports Shoes

In the eyes of today's "new generation", a pair of branded-name sports shoes seem
to be more important than a major branded-name sportswear. Wearing branded-name
sports shoes at any time give them dynamic, feeling "cool" and confidence. Nearly two-thirds
of the young people bought branded-name sports shoes.

The international well-known brands sport shoes are not cheap, but it is value for
money, excellent quality behind the high prices, excellent design, give the wearer a real
"sport to enjoy." Meanwhile, some well-known brands also have also launched some low-
end products to occupy a relatively low-priced and low-end market.

Comfortability and style is the primary consideration. Survey data show that when
consumers buy sports shoes, the first consideration is comfort, accounting for 78.4%;
followed by the shape and style, 73.7%; these two considerations was higher than other
factors. In addition, the branding and price are, 55.6% and 50.3%.

Young people today are more like sports, especially the ball games, this is a
manifestation of their nature, and exercise requirements are relatively high on the footwear.
Comfortability, air permeability, bouncing, wear resistance, are young consumers'
considerations. It is not difficult to imagine a pair of uncomfortable shoes to wear in the
sports arena able to show their athleticism. In this sense, comfortability of sports shoes is the
most important pre-requisite to attract consumers.

Overall style is also an important consideration when buying sports shoes. New,
fashionable, individuality has always loved and going after by the "cool" generation. The
design of branded-name sports shoes and general brand style is somewhat different, and
many styles of advanced design also highlights the consumers' extraordinary personality, a
lot like the character to meet the demonstrated needs of young people.

Branding is a comprehensive expression, which combines many factors, including

quality, grade, style, design, and others. Consumers may focus on branding when buying
sports shoes, in this comprehensive considerations, excellent brand represents superior
quality.

Price reflects the comprehensive value of goods. branded-name sports shoes have
many advantages, which reflected from its pricing. For young people whose financial
depends on their parents, they have to consider the price factor seriously, they must
consider between price and quality before making a choice.

Four Generic Strategies

Generic Competitive Strategies was first set out by Michael Porter of Harvard
Business School in his book Competitive Advantage: Creating and Sustaining Superior
Performance in year 1985. He is a strategic management expert. According to Porter, there
are three basic Generic Competitive Strategies: Cost Leadership Strategy, Differentiation
Strategy, Focus Strategy & Differentiation Focus Strategy.
Cost Leadership Strategy

Cost Leadership Strategy requires the active set up to achieve efficient scale of
production facilities, based on the experience of going all the way out to reduce costs, pay
close attention to cost control and management of costs, minimize research and
development, service, marketing & advertising and etc. Despite the quality, service and other
factors are also overlooked, but the theme throughout the strategy is to cost less than
competitors.

Implementation of cost leadership strategy usually requires a high market share, a

good supply of raw materials, ease of production and product design. Therefore, the
continuing need for company to purchase capital equipment and aggressive pricing to gain
market share.

Differentiation Strategy

The fundamental of Differentiation Strategy's effectiveness is by increasing the

customer and improve customer value. When customers sense the uniqueness of products
and services, there are always some customers are willing to pay a higher premium.
Company needs to implement strategies on product design and brand image, technical
characteristics, appearance features, customer service and distribution networks. Establish
own uniqueness in one or more factors can continue to maintain the enhancement.

Differentiation Strategy on customers brand loyalty and the result will be decline in
price sensitivity to gain competitive advantage and entry to structural barriers. Differentiation
Strategy requires company with a strong marketing capability and innovation.

Low Cost Focus Strategy and Differentiation Focus Strategy

Focus Strategy is to focus on how a specific for a service of the core competency to
build up competitive advantage, this can be a particular target on specific customer groups,
a product line, a market segment or region. This strategy is premised on companies to
greater efficiency, better results for a strategic object services, or achieve differentiation,
lower cost or ideally both.

Different generic strategies to implement the company's resources and ability to put
forward different demands, means that the organisational arrangements, control systems,
innovation systems, corporate culture and leadership style differences and even conflict.

Risk of "Stuck in the Middle"

A company if fails to choose only one generic strategy, select more than one
options, there is argument that when it fail to achieve them, the company will get "stuck in
the middle" without any advantage. Such company is often in a very bad strategic position.
"Stuck in the middle" company is bound to be low-profitable. Unless its industrial structure is
good, and its competitors are also in the same situation. However, a mature industry will
increase the gap between such company with those company with a Generic Strategy and
stuck in between other companies.

Such "stuck in the middle" will lose cost advantage to competitors, while on high
profitable business, the company unable to compete with those company differences to
achieve a comprehensive product company, we can only look for small market niches, to
survive in between markets. This type of company is is second-rate company, it failure is
due to ambiguous corporate culture, conflict in organizational structure, contradictory and
ineffective incentive scheme.

Choosing Among Generic Strategy Options

Company has to spend time and effort to choose the right Generic Strategy, as this
will affect the following decisions made. A company needs to make a decision on which
strategy to use and stay on it for long term. A company cannot try out a particular strategy
option. Porter has specifically gave warning on company which attempt to "hedge your bets"
by employing more than one strategy option.

The most important reason is every strategy work on different types of people.
Differentiation Strategy requires a very extrovert and creative ways, while Leadership
Strategy requires company processes leading to detailed internal splits. Therefore, when a
company choose among the strategy options, it is important to consider the company's
competency and strength.

Summary

Porter's competitive strategy are four basic types of systems is formed in accordance
with the scope of the product or market competition and methods of competition
(differentiation/low cost), if further market analysis of the company's operating conditions, e.g.
analysis of mass market or market segmentation of the company, would provide better
guidance for the company to decide which strategy to employ. Porter believes that a
company is to choose the best state of one of four generic strategies, in accordance with the
requirements of the selected basic strategy unswervingly to find the corresponding
advantages. Business will fail if decide to use all four directions to establish its own
competitive edge. The situation is “stuck in the middle”, the company will be at serious
disadvantage position. The basic point of choosing the generic strategy of company, can
best use of their advantages and the least conducive to competitor imitation.