Flyknit Athletic Footwear Company

FLYKNIT ATHLETIC FOOTWEAR COMPANY

Contents

Executive Summary ...................................................................................................................................... 3

Situational Analysis ...................................................................................................................................... 3

Target Customer............................................................................................................................................ 4

Competition................................................................................................................................................... 5

Strengths, Weaknesses, Opportunities and Threats (SWOT). ...................................................................... 6

Macroeconomic analysis ............................................................................................................................... 9

Market Segmentation .................................................................................................................................. 11

Product ........................................................................................................................................................ 12

Price ............................................................................................................................................................ 12

Distribution ................................................................................................................................................. 12

Promotion .................................................................................................................................................... 13

Projections................................................................................................................................................... 13

Categorized budget information.................................................................................................................. 13

Conclusion .................................................................................................................................................. 14

References ................................................................................................................................................... 15

Research Nester. (2018). Athletic Footwear Market: Global Demand, Growth Analysis & Opportunity

Outlook 2023. Research Nester. Retrieved on August 22, 2018 from

https://www.researchnester.com/reports/athletic-footwear-market-global-demand-growth-analysis-

opportunity-outlook-2023/242 .................................................................................................................... 15

Tynan, Caroline, A. and Drayton, Jennifer. (2010). Market Segmentation. Journal of Marketing

Management,Vol 2(3). https://doi.org/10.1080/0267257X.1987.9964020 ................................................. 15

Grand View Research. (2018). Athletic Footwear Market Size, Share, & Trends Analysis Report By

Category (Running Shoes, Sports Shoes, Aerobic Shoes, Walking Shoes, Trekking Shoes), By Gender, By

Retail Channel, And Segment Forecasts, 2018 – 2025. Grand View Research. Retrieved on August 22,

2018 from https://www.grandviewresearch.com/industry-analysis/athletic-footwear-market ................... 16

List of Tables and Figures

Figure 1…………………………………………………………………………………P4

Figure 2…………………………………………………………………………………P8

Table 1…………………………………………………………………………………..P13

Executive Summary

FlyKnit Athletic Footwear Company is a newcomer in the athletic footwear industry and seeks to

grow into the largest market share holder in the industry. This is by exploiting existent gaps in

the industry; pricing and quality. The company seeks to ensure that all its products are made

from the best quality raw materials and priced accordingly to ensure that regular everyday

individuals will be able to purchase the shoes without necessarily straining their pockets. The

company will use intense marketing campaigns to gain an audience with the consumers and build

a strong customer base within its first years which it will continuously grow. The company’s

management will consistently update the firm’s strategies and policies according to internal and

external changes in order to enable the firm to keep up with trends in the industry. The

company’s main short-term goal is to attain a stable 10% market share by its fifth year in the

industry with the long-term goal being having over 50% market share by their fifteenth year and

being able to fully finance its operations within the country and expansion to foreign markets.

Situational Analysis

The global footwear market in recent years has grown exponentially and is expected to keep the

same trend and develop even more in the coming years. The industry was valued globally at

around $64.3 billion in 2017 with an expected average growth rate of about 5% from 2018

through to 2025 (Grand View Research, 2018). The general market shift from conventional

performance sneakers to be used in sports to more luxury brands wanting to get involved in the

market and diving head-first into the industry has been a major cause for the rather unexpected

growth of the industry. Sneaker sales in the past year rose by 10% (Stych, 2018) which signals

the rise of a new market that if exploited could bear rich profits.

It is with this aim that FlyKnit Athletic Footwear Company was born; to produce quality and

affordable athletic footwear for the everyday person. The industry has recently witnessed a

significant increase in the price of sneakers over the past couple of years (Elder, 2015). Despite

this happening the market still thrives due to the fanaticism and overall hype and excitement

surrounding the products. We therefore decided to come into the market to avail the same quality

products with a premium feel but a lower price point to appeal to consumers without the extra

dispensable income to spend on exorbitantly priced shoes. The nature of the sneaker market in

North America; being the largest market for athletic footwear as exhibited by its 30% revenue

share in 2017 (Grand View Research, 2018), makes it the perfect location for the company as the

already established sneaker culture will help in the company’s development.

The company will focus on stylish designs that will be versatile in that the consumers can wear

them both on the field as their primary athletic shoes and off the field as casual footwear. The

versatility, differentiation of the shoes from other companies and their availability at our

particular pricing point will be the main features that appeal to our target consumer audience

Target Customer

The traditional market that consumed athletic footwear was limited to people who were actively

involved in sports and fitness. With the recent paradigm shift in the market and with the

evolution of the products the industry’s potential has outgrown what people perceived of it with

more luxury and everyday designs of athletic footwear being conceptualized and produced each

day.

FlyKnit focuses on capitalizing on the expanding market potential by designing casual and

relaxed shoes that appeal more to the everyday consumer. The shoes will not focus on

performance but rather on comfort, quality and durability; the hallmarks of a great everyday

shoe. The designs will appeal more to the younger and trendier population considering how the

sneaker culture has peered into their daily lives through the influence of pop culture.

The rise of athletic footwear has encouraged men to be more outgoing in their shoe purchases

thus making them an untapped market for athletic footwear sales (Morley, 2017). Men are also

more involved in sports as compared to women and as a consequence more men will be inclined

to purchase athletic footwear. This however does not close out the women from being involved

in the market as they are conventionally more inclined to purchase more shoes. The company

will therefore focus majorly on the men followed by women and finally children.

Competition

The shoe industry, moreso the athletic footwear market, is intensely competitive with Nike

having the lion’s portion of the market share followed by Adidas and Puma in second and third

place respectively.

Source: Statista: The Statistics Portal. https://www.statista.com/statistics/278834/revenue-nike-

adidas-puma-footwear-segment/

There is an immense growth in the demand for athletic footwear due to factors such as increased

popularity of sports, rise in the amount of disposable income, increased awareness on matters

pertaining to health and fitness and many more (ResearchNester, 2018). This increase in demand

has fueled the increased competitiveness in the market. New firms are investing in the industry

with the hope of reaping the benefits due to come from the industry while the already existing

firms amp up their operations in an effort to maintain and improve their market share. This

improvement comes in the form of more designs of products, intensified marketing, competitive

pricing and higher quality products.

FlyKnit Athletic Footwear Company seeks to compete with the more established firms by

providing high quality products at a fraction of the price that the existent companies charge. This

will be established by using more efficient production methods that focus on optimizing resource

use, using more efficient and user-friendly distribution channels and powerful and informative

marketing to get through to consumers. Combining these strategies will enable the company to

eat into the other firms’ market share and gradually work its way to the top.

Strengths, Weaknesses, Opportunities and Threats (SWOT).

This is a strategy used to critically analyze the business with a view to maximizing on the

opportunities, both internal and external, in order to exploit its full potential. In involves an

intense scrutiny of the business operations and environment while looking for ways to increase

efficiency and maximize profits (Esita et al, 2014).

Strengths

The company has a strong management that is dedicated to accomplishing the firm’s objectives

and making it as profitable as possible. Competent management in an organization has proven to

be a major reason behind an organization’s success (Reh, 2018). It is therefore imperative that

the managers remain dedicated to ensuring consistent growth and development in the

organization.

The organizational policies and strategies have also been specifically designed for the company

rather than borrowing a leaf from other companies. Suiting the strategies to the company will

enable it to grow at its own pace and fully maximize the opportunities available at every level of

development. This will also ensure that the company does not strain its resources thus enabling it

to maximize its budget despite the constraints as it is a young company.

Weaknesses

The company is young and as such does not have a lot of experience in the market. Despite the

intense research carried out it is nearly impossible to truly know how to navigate the vast number

of situations possible in the industry. This will therefore give other already established firms a

competitive advantage. The lack of capital due to the firm’s young age is another weakness. This

will limit production capacity due to the lack of funds to purchase large amounts of raw material

and benefit from the economies of scale. It will also constrain the firm’s labor capability as they

will be limited to fewer workers.

Opportunities

The consistent market growth poses the greatest opportunity to FlyKnit Company. This is

because the growth in the market shows that there is a chance to increase sales due to the ever

increasing number of customers available. The competitiveness will also prove to be a challenge

to the company this forcing them to continually get out of their comfort zone and think out of the

box in order to stand out and effectively differentiate their products from the rest of the market.

The presence of free trade between America and most of the countries in the world also provides

an avenue through which distribution of the shoes to other countries around the globe will be

made much simpler. The shoes will also be made affordable due to the absence of extreme taxes

and tariffs thus compelling consumers to buy the shoes. This will increase the company’s market

share and drive the profits even higher. It will also create an avenue through which the company

can diversify production in future by creating more production plants in other countries with

even cheaper labor costs and where operations are less capital intensive. This will enable them to

drive the prices even lower while at the same time maintaining the same quality and premium

feel to their products thus handing them a competitive edge over the other firms.

Celebrity appeal and pop culture has fueled the sneaker hype over the past couple of years and as

such partnering with renowned artists and athletes will increase the products’ mass appeal. This

strategy will enable the company to advertise itself and insert itself into the conversation when

athletic footwear is brought up. These celebrities will also promote the product in their

appearances whether on television, print or radio thus increasing brand awareness and popularity

which are important to ensure the success of the business.

Threats

The major threat to the company is the presence of intense competition in the industry. The other

firms have already grounded themselves in the industry and established their brands creating a

fierce loyalty among their customers. Disrupting the status quo in the market will be extremely

difficult as it will necessitate proving that FlyKnit’s products are much superior to the other

firms and creating enough differentiation to warrant the consumers switching from their

conventional brands to ours. This will only be achieved by creating more innovative and trendy

designs, using high quality raw materials and properly pricing the goods. Marketing will also

play a huge role in disrupting the market’s current status as it will create awareness of the brand.

The threat of new competitors is however less concerning to the firm as we believe that our

business model and system is organized in a superior fashion when compared to other new

companies.

Macroeconomic analysis

This will enable the business understand its external environment and identify opportunities

brought about by the existence of these macroeconomic factors. We will utilize the PEST

Analysis in order to understand the political, economic, social and technological factors

surrounding the business that prove to be imperative in determining the success of the business.

This is because recognition on the importance of environmental factors in ensuring the long term

development and sustainability of a business is increasingly being encouraged in management

(Gupta, 2013).

PEST Analysis

Political

Environment

Economic

Environment

Technological

Environment

Social

Environment

Figure 1

Political environment

The government is the major determinant of how the country’s economy will fair and influences

policies on taxes, tariffs and trade agreements. America has a positive outlook on trade, both

internally and externally. The government’s taxation policies on companies aren’t too harsh and

as such FlyKnit will be able to operate at a profit while still paying its legal dues to the

government. The government’s free trade agreements with other countries will enable the

company to expand distribution to other countries through exports and even later on expand

production to these countries.

Economic environment

The country’s economy is growing at a constant rate which means that the company will not

suffer due to the country’s economic failure. This will also ensure that the company has

subsidiary services such as banking and financing availed to them easily and at friendly interest

rates. These services will aid in the growth of the company thus enabling it to become more

profitable and obtain more market share. America’s per capita income is also increasing which

mean that there will be an increase in the amount of disposable income available for individuals.

This will further improve the company’s growth due to the presence of an even larger market to

supply the shoes to. The country’s superior currency exchange rate to most other countries will

however prove to be detrimental to the business when it comes to exports as the products will be

too expensive in most of the countries they wish to export to. This limits the firm’s export

options and delays the opportunity to exploit foreign markets.

Social environment

There is a general trend of athletic footwear being more appealing and acceptable to the masses

therefore this will prove to be core in ensuring that there is a constant market for the company’s

products. The increase in awareness on issues pertaining to health and fitness has also played a

role in improving the status of athletic footwear in the country and increasing demand for the

products. The increase in popularity of sports and sport personalities in the country and globally

has driven the increase in demand for athletic footwear. FlyKnit will ride on the wave of these

factors to increase their popularity and increase market share.

Technological environment

The rampant growth of technology will enable the company to develop more efficient methods

of production that aim at optimizing resource usage. We will also be able to come up with more

innovative designs that will appeal to the masses. Distribution channels will also improve due to

the use of the internet to drive online sales in the country as well as globally.

Market Segmentation

This is the process of identifying distinct market groups that will enable the company to

specifically target the company’s marketing operations (Tynan and Drayton, 2010). It will make

marketing operations more efficient and cost-effective. FlyKnit’s consumer target will be

segmented according to:

1. Gender- male and female

2. Geographical- inside the country (particular state) or export market (particular country)

3. Psychographic- common product consumers and premium product consumers

Doing this will enable the company to design products for each of these distinct categories of

customers; it will also enable them to direct marketing efforts towards appealing to them. It will

also influence strategies such as pricing and distribution channels.

Product

We will introduce twenty designs when the company begins. These designs will be new and will

stray away from conventional sneaker designs with a view to differentiating the company’s

products from other firms. They will be targeted at the younger and trendier audience. We will

use different color schemes for the shoes in an effort to appeal to as many people as possible.

However most of the shoes will be produced in the basic colors: black, white and grey.

Price

The company will use penetration pricing strategy in an effort to attract as many customers as

possible. This will enable the company to build a loyal customer base over time due to their low

prices. Slight bumps in pricing will be enacted later on in the business after the establishment of

a loyal customer base and attaining a considerable market share.

Distribution

The main distribution channel to be used will be retail sales due to the availability of retail stores

around the country and the accessibility to consumers. The internet will also be used to drive sale

through the company’s website where customers will be able to order for shoes and get them

delivered to their houses. With time the company will focus more on internet sales as technology

is growing exponentially and with time online sales will be the primary means of conducting

business. This will include facilitation of online payment methods such as PayPal and Visa and

MasterCard.

Promotion

There will be annual audits conducted on employees and managers by a private and independent

performance auditing firm. The results of these audits will determine what employees and

managers are to be promoted and who are to be demoted or retrenched. The promotions will

come with added responsibilities and pay raises.

Promotion for the product and company will happen simultaneously and will be achieved

through aggressive media campaigns, both mainstream and social. We will however focus more

on social media marketing as it will enable us to get to a larger consumer audience while using

less capital for advertising purposes. Also the targeted audience is the younger generation that

mostly uses social media as opposed to mainstream media.

Projections

Sales in the first year are projected to be at 7000 pairs: 5000 through the retail segment and 2000

through the internet segment. This will be achieved by ensuring a vibrant marketing campaign to

create awareness of the brand’s existence. Sales are expected to increase by 30% in the first two

years and 50% in the following three years. If this takes place the company will have attained a

10% market share by the end of five years.

Categorized budget information

The company will be financed by the owners’ equity and bank loans in the first year after which

we will be able to finance operations from the retained profits. After the first five years the

company will go public and be able to attain further funding from the masses through purchase

of shares. The projected costs for the first year of operation are as follows:

Table 1: Categorized budget information

Cost

Amount

Raw materials

$2000000

Factory rent

$1500000

Labor

$900000

Warehousing

$400000

Distribution

$500000

Celebrity endorsements

$500000

Marketing

$600000

Miscellaneous

$600000

TOTAL

$7000000

The financing for the first year is as follows:

i) Owners’ equity $4000000

ii) Bank loan $3000000 (15% interest)

Within the first year the company is expected to be able to finance its activities through sales

revenue and retaining profits.

Conclusion

FlyKnit Athletic Footwear Company as a newcomer into the athletic footwear industry will bring

the much needed competition in the industry. Through its well planned strategies and dedicated

management the company will be able to gain a considerable market share within its first years

on inception and gradually grow, accommodating trends and changes in the market, into

becoming the largest market share holder in the industry. Ensuring quality product delivery at an

affordable price point is at the center of the establishment and they will consistently maintain

marketing efforts to ensure that they establish a loyal customer base.

References

Statista. (2018). Revenue From Footwear Segment of Nike, Adidas and Puma from 2010 to

2017(in Billion US Dollars). Statista. Retrieved on August 22, 2018 from

https://www.statista.com/statistics/278834/revenue-nike-adidas-puma-footwear-segment/

Research Nester. (2018). Athletic Footwear Market: Global Demand, Growth Analysis &

Opportunity Outlook 2023. Research Nester. Retrieved on August 22, 2018 from

https://www.researchnester.com/reports/athletic-footwear-market-global-demand-growth-

analysis-opportunity-outlook-2023/242

Tynan, Caroline, A. and Drayton, Jennifer. (2010). Market Segmentation. Journal of Marketing

Management,Vol 2(3). https://doi.org/10.1080/0267257X.1987.9964020

Reh, John, F. (2018). The Role and Responsibilities of a Manager. The Balance Careers.

Retrieved on August 22, 2018 from https://www.thebalancecareers.com/what-is-a-manager-

2276096

Morley, Katie. (2017). The End of the Go-To Shoe: Men Buying More Shoes Than Women.

Telegraph. Retrieved on August 22, 2018 from

https://www.telegraph.co.uk/news/2017/06/08/end-go-to-shoe-men-buying-shoes-women/

Edler, Brandon. (2015). Why Sneakers are Getting More Expensive than Ever. Complex.

Retrieved on August 22, 2018 from https://www.complex.com/sneakers/2015/03/why-sneakers-

are-more-expensive/high-prices-new-normal

Osita, C. Ifediora et al. (2014). Organization’s Stability and Productivity: The Role of SWOT

Analysis, an Acronym for Strength, Opportunities, Weakness and Threat. International Journal of

Innovative and Applied Research, Vol 2(9), 23-32.

Gupta, Abhishek. (2013). Environment and PEST Ananlysis: An Approach to External Business

Environment. International Journal of Modern Social Sciences, 2(1), 34-43.

Grand View Research. (2018). Athletic Footwear Market Size, Share, & Trends Analysis Report

By Category (Running Shoes, Sports Shoes, Aerobic Shoes, Walking Shoes, Trekking Shoes), By

Gender, By Retail Channel, And Segment Forecasts, 2018 – 2025. Grand View Research.

Retrieved on August 22, 2018 from https://www.grandviewresearch.com/industry-

analysis/athletic-footwear-market

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