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CASE STUDY: NEW SHOE COMPANY (adopted from Proctor, T. (2005) Essentials of Marketing Research), Pearson Education.
CASESTUDY:NEWSHOECOMPANY (adoptedfromProctor,T.(2005) EssentialsofMarketing Research),PearsonEducation. TheNewShoeCompany,basedintheEnglishMidlands,isexperiencingafallin profits.The companymeasuresprofitsintermsoftheannualpre-taxreturnon capitalemployedearned bythecompany. Thesalesdirectorsaysthatfallingprofitabilityisareflectionofthecurrent slumpin themarket.Totaldemandinthemarketplaceismuchlessthanitwas 12monthsagoandthe companyhasstruggledtomaintainitsmarketshareat thepreviouslevelascompetitionhas intensified.CompetitionfromEuropean manufacturershasbeensharpenedbychangesinEU tradingregulations and Spanishmanufacturers,inparticular,havetakenadvantageoftheir lowercost structuretomakeinroadsintotheBritishmarket.Atthesametime,theNewShoe Company has failed to take full advantage of opportunities in Europe. It has not fully developeditsmarketnichingstrategywhereitcangainacompetitive advantage.Thesales directorblamesthefirm'slackofcompetitivenessonthe poorperformanceoftheR&Dteam andtheinabilityofthemanufacturing departmentstocontrolcosts. Thetechnicaldirectorclaimsthatthefirm'sproductsarecompetitivewithany thatare producedworldwide.Indeed,inherview,thefirm'sproductsarebyfar thebestavailableat thepriceoffered.Shepointstothelackofmarketingeffort expendedbythefirminthepast year, pointing to the necessity to keep the firm's name before the public at all times, especiallywhencompetitionisincreasinginstrength.Atthesametimesherecognisesthat marketing effort requires financing and that this was not adequately provided during the periodinquestion. The production director points out that the company has been able to lower its manufacturing costs substantially through the introduction of new technology into the manufacturingprocess.However,hepointsouttheaccountingpracticesadoptedbythefirm distort the true picture. Profitability, in his view, has improved, although this is not truly reflectedinthecompany'smanagementaccounts. The finance director feels that the drop in profitability is attributable to recent acquisitionsthefirmhasmade.Venturesintoretailinghavenotbeenasprofitableashadfirst beensupposed.Thismighttosomeextenthavebeenreflectiveofbadtimingonbehalfofthe company,giventhecurrentrecession,inmakingsuchacquisitions. Themanagingdirectorpointsoutthatthereclearlyisaproblemandthatperhapsone shouldpayparticularattentiontowhatcompetitorsaredoingandhowthefirmisresponding fromamarketingviewpoint.
Questions 1. Giventhelimitedinformationinthiscase,whatdoyouthinkcouldbethereal problemorproblemsinthisexample?
2. Dependingontherealnatureoftheproblemidentified,howmight researchhelpinthiscase?
